Surprise! Money is a great cure for poverty and its many ills

By: - October 20, 2015 5:00 am


New and powerful report indicates we’ve been making things much too complicated

It may be hard to believe in today’s world of trickledown, dog-eat-dog, “Trump-o-nomics,” but it was just a few decades ago that a conservative Republican president proposed something that would, today, be widely disparaged as radical socialism. In 1969, Richard Nixon gave a televised address to the country in which he proposed to establish a minimum, federally-funded family income.

Nixon called his proposal a “Family Assistance System” and he proposed to replace the nation’s alphabet soup of income support programs with a simple, basic amount that the federal government would guarantee to all families with dependent children who met certain criteria. This is from the speech:

Under this plan, the so-called ‘adult categories’ of aid—aid to the aged, the blind, the disabled—would be continued, and a national minimum standard for benefits would be set, with the Federal Government contributing to its cost and also sharing the cost of additional State payments above that amount….

Its benefits would go to the working poor, as well as the nonworking; to families with dependent children headed by a father, as well as to those headed by a mother; and a basic Federal minimum would be provided, the same in every State.

What I am proposing is that the Federal Government build a foundation under the income of every American family with dependent children that cannot care for itself—and wherever in America that family may live.” (Emphasis supplied).

There were many legitimate critiques of the details of Nixon’s proposal from all points on the political spectrum, but, at its heart, the proposal contained one critically important insight that we would do well to revisit and revive in 2015 – namely the power of money to combat poverty.

Simply put: the best way to fight poverty and its many ill effects is to make sure people – especially children — have enough money to live a decent life.

For all of his faults, Nixon understood that it was absurd for the richest nation in the history of the world to have impoverished children and that the simplest and most efficient way to combat the problem was to make sure their families had enough cash on which to live.

The power of money

Nixon’s insight was brought home once again recently as the result of a powerful new study of children in North Carolina. This is from a recent article in the Washington Post entitled “The remarkable thing that happens to poor kids when you give their parents a little money”:

Twenty years ago, a group of researchers began tracking the personalities of 1,420 low income children in North Carolina. At the time, the goal was simple: to observe the mental conditions of kids living in rural America. But then a serendipitous thing happened.

Four years into The Great Smoky Mountains Study of Youth, the families of roughly a quarter of the children saw a dramatic and unexpected increase in annual income. They were members of the Eastern Band of Cherokee Indians, and a casino had just been built on the reservation. From that point on every tribal citizen earned a share of the profits, meaning about an extra $4,000 a year per capita.

For these families, the extra padding was a blessing, enough to boost household incomes by almost 20 percent on average. But for the fields of psychology, sociology and economics, it has been a gold mine, too. The sudden change in fortunes has offered a rare glimpse into the subtle but important ways in which money can alter a child’s life. The dataset is so rich that researchers continue to study it to this day.”

As the Post story goes on to note, the results for the kids were striking.

Not only did the extra income appear to lower the instance of behavioral and emotional disorders among the children, but, perhaps even more important, it also boosted two key personality traits that tend to go hand in hand with long-term positive life outcomes.”

The traits were conscientiousness and agreeableness – both of which correspond closely with success and happiness later in life. The change was actually most notable amongst kids who had been the most deficient.

Basically, the authors’ best thinking (something that would also seem to be common sense) is that the boost in family income lowered family stress and contributed mightily to lifting the wellbeing of their children.

As Professor Noah Smith of Stony Brook University put it in his own column examining the study:

Children whose families got the money ended up having better job outcomes at age 25. Examining surveys of these families, [the authors] hypothesize that much of the improvement comes from more harmonious family relations. Parents are happier because they have more money, leading to less fighting within the family. This lowers stress on kids, making them healthier, happier and better-behaved, and leading to a more productive adulthood.”

As Professor Smith also reports, the study of Cherokee kids coincides neatly with a 2014 study by neuroscientists that has actually discovered a close relationship between family income and the brain structure of children. As Smith pithily and grimly summed it up: “More money, bigger-brained kids.”

What all this means

Of course, as even a few moments’ reflection by anyone who has ever wrestled with poverty (or near poverty) confirms, all of this makes a lot of sense. While there are always exceptions, as a rule, not having to worry where one’s next meal will come from makes life a lot easier and better.

Moreover, it doesn’t matter particularly where that money comes from. As the millions of Americans lucky enough to live on inherited wealth can no doubt attest, having money is much better than not having it. While there can certainly be negative consequences that ultimately result for some people from not having to work (sloth, fraud, substance abuse, etc…), the fact remains that when the basic choice is between grinding poverty and having enough to get by, the negatives associated with receiving income that one “didn’t have to work for” are hard to find.

The implication of these findings for public policy ought to be clear: the simplest, most efficient and best thing that state and federal leaders can do to combat the scourge of poverty and its devastating long-term impact on children is to craft and enact policies that lift the incomes of the poor.

This doesn’t mean that we need a rapid expansion of casino gambling – indeed there are other studies that speak to many other negative impacts of casinos in and around the places in which they are located.

What it does mean, however, is that we would do well to use all public tools at our disposal to put more cash in the pockets of people who lack it. Whether the path to this outcome is a macro-fix like reconsidering Nixon’s minimum family income proposal or, more likely, a set of specific income-boosting policies like a dramatic increase in the minimum wage, universal health insurance coverage and a reversal of North Carolina’s recent, ill-considered elimination of the state Earned Income Tax Credit (something that even longtime John Locke Foundation contributor Professor Mike Walden of N.C. State recently endorsed), is not terribly important.

The key is to recognize the plain and simple power of having money and the devastating negative impacts (for everyone) of consigning a huge proportion of our population to a life without it.

As Professor Smith concluded:

Improving the condition of poor children is not only good for them, it’s also good for society. Children who are more emotionally stable and better behaved engage in less crime and less violence in schools and out, making the country a safer place to live. So we shouldn’t see poverty alleviation as merely a mission of mercy. It would make the U.S. better for all Americans.”

Even Richard Nixon could see that.

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Rob Schofield
Rob Schofield

Editor Rob Schofield oversees day-to-day newsroom operations, authors regular commentaries, and hosts a weekly radio show/podcast.