Nicholas Kristof is elated. Of course, there lies the problem with elation found in the overly emotional. It’s not always grounded in reality.
To see why, consider what has the New York Times columnist overjoyed. It’s the $1.9 trillion so-called “American Rescue Plan” that President Biden has signed into law. It seems Ktistof thinks “this time is different.” The spending will apparently be transformative.
In Kristof’s words, “one of the great moral stains on the United States” is that there’s child poverty in the world’s richest country. Supposedly Biden’s signature will “scrub at that stain.” Kristof cites a study that says the spending means “child poverty could fall by half. By half!” Kristof’s idealism is admirable, particularly considering he’s lived on this earth for 61 years, but at some point reason must intrude. So let’s be reasonable.
For one, it’s not unreasonable to point out that the U.S. won the so-called “War on Poverty” roughly 245 years ago. Yes, the U.S. won the “War on Poverty” when it became the United States.
How is the above assertion true? We know it’s true as a consequence of the migrations of people. There’s no purer signal of where poverty is losing than the one indicating where people take their talents. For 245 years the world’s strivers have risked it all to get to the United States. Crucial about the arrivals is that the vast majority of them were intensely poor upon arrival.
Did they come here for a safety net? Plainly they didn’t. One didn’t exist for the longest time as is. Only rich countries can cushion the down times, but applied to the still poor U.S. it didn’t matter. It didn’t because the poor, “huddled masses” flocking to the U.S. weren’t coming here for security provided by others. In truth, they were coming to erase their poverty. They knew that if free to produce, that they could achieve great things.
American industrialist Andrew Carnegie wrote to his relatives in Scotland that if he’d stayed there he likely would have spent all his days as a weaver. Not in the U.S. Opportunity was limitless. That’s the why behind the arrival of people from all over the world for nearly 245 years. The U.S. won the “War on Poverty” long ago precisely because it was a country founded on the notion that people who came here would be personally and economically free.
People create the resources that lead to wealth, and that places poverty in the rear-view mirror. An end to poverty can’t be decreed as Kristof naively presumes; rather poverty’s end is a consequence of enterprising individuals being matched with freedom.
Of greater importance, if poverty’s vanishing were as simple as spending as Kristof believes, it would have been fixed long ago. Indeed, the impoverished, huddled masses that reached the U.S. became extraordinarily rich as Kristof alludes. All this wealth creation filled the U.S. Treasury with endless dollars, not to mention that investors around the world are only too happy to lend their wealth to the U.S. Treasury on account of it being backed by the richest, most productive people on earth. This is what enabled a new “War on Poverty” in the 1960s that was a non sequitur. See above. Once again, the U.S. was populated by the poor in the 18th, 19th, and 20th centuries who rapidly became well-to-do as a consequence of being able to produce without government fetters. Wealth is created by people. Enterprise is what erases poverty, not wealth redistribution.
Needless to say, the political class in the U.S. has long arrogated to itself a not insubstantial percentage of the production of the world’s most productive people. This has enabled endless wealth redistribution that has been billed as a “fight” against poverty. Logically it’s never worked. And it hasn’t because moving money from one set of pockets to another may fill otherwise empty pockets, but it won’t end what is a condition of a lack of productivity.
If it did, America’s poorest cities would have long ago become some of its richest. We know this because presidents going back to LBJ have been hoovering up staggering sums from working Americans in order to place them in the hands of the poor. Yet nothing changes. Well, of course not. Really, what was Kristof thinking in writing with a smiling but straight face that Biden’s signature and the movement of $1.9 trillion would somehow lift half of America’s poor children from poverty?
What Kristof missed is that money goes where it’s treated well. In other words, money flows to where there’s economic activity. No doubt it’s true that Congress can drop billions into the poorest U.S. locales, no doubt it’s true that the poor in those locales might for a time have more money to spend, but rare is the business that expands based on a helicopter drop from government. Rarer is the entrepreneur or business that will relocate to near-term stimulation of the depressed that only takes place insofar as the already stimulated are briefly relieved of some of what they created.
Translated, the money that’s redistributed by government from the stimulated to the depressed on the way to more spending generally doesn’t remain where it’s spent. See the previous paragraph. In reality, local businesses bank their near-term windfall, only for the money to flow to where it’s once again treated well.
It cannot be stressed enough that if poverty were about money, then it would have been wholly erased long ago given the trillions spent on its mitigation. Admirable as Kristof’s idealism is, it’s just that. Nothing more. The perfect world he envisions cannot and will not be created by the stroke of a pen.
Reprinted from RealClearMarkets