There Is More Than One Way to Measure Poverty

Posted on by Emily Stahly

Back in 1980, 13 percent of people were living below the federal poverty line, and 13 percent had standards of living that qualified them as poor. Fast forward to today, and the poverty rate has stayed about the same at 13.4 percent—but fewer than 3 percent of Americans have a poor standard of living. How can that be?

To understand, we need clear definitions of our terms. The federal poverty rate is based on pre-tax income of a household and is adjusted for inflation and family size. In 2017, the poverty threshold for one person was $12,060 and increased by about $4,000 for each additional household member. The consumption poverty rate, on the other hand, measures what “families are able to purchase in terms of food, housing, transportation, and other goods and services” and includes savings, access to credit, and welfare benefits, according to the authors of a recent report from the American Enterprise Institute (AEI).

The authors of the report explain that when measured based on consumption and standard of living for the poor, the poverty rate has been steadily declining since 1980 and was 2.8 percent in 2017. The fact that the consumption poverty rate has fallen relative to the federal poverty rate is a positive development. It means that a growing percentage of people whose income place them below the federal poverty line are materially better off—that is, able to consume at a higher rate—than those who were in poverty in 1980. This improvement in standard of living for those with low incomes is due in large part to public assistance programs.

While we should not declare we are “solving” poverty through the provision of welfare benefits, we should recognize that public assistance has played a role in significant progress in alleviating the effects of poverty by providing things like food and housing assistance. The ultimate goal, however, is to help move people who currently depend on welfare for a decent standard of living toward economic independence.

It is critical that Missouri identify and then pursue policies that help people out of poverty and equip them to support themselves and their families without government assistance. Breaking cycles of poverty would allow the state to focus efforts and resources on the 2.8 percent of people at the very bottom of the economic ladder while reducing welfare expenditures overall and saving tax dollars in the long run.

 

Patrick Ishmael Discusses the Future of Health Care on KWMU-St. Louis

Posted on by Patrick Ishmael

On Thursday, December 6, Show-Me Institute Director of Government Accountability Patrick Ishmael appeared on KWMU-St. Louis Radio’s St. Louis on the Air to discuss the future of health care in America.

In a wide-ranging discussion, Patrick and two other panelists—a physician and a former health insurance executive—debated the potential effects of increased government involvement and the constructive potential of the free market in health care policy.

To listen to the entire show, click here.

 

You Gotta Spend Money to… Spend Money?

Posted on by Patrick Tuohey

We’ve all heard the phrase, “you have to spend money to make money.” Thanks to some reporting by Brian Robbins and Jacob Kirn of the St. Louis Business Journal, we know that in Missouri we spend money just to spend money.

According to their November 29 piece, St. Louis and Kansas City spend a combined $99 million annually just in staff and overhead of various organizations to promote their respective regions. Not all of this is taxpayer money; some of it is from chambers of commerce, regional councils, and economic development corporations. But much of the effort probably results in publicly financed incentives such as abatements, tax-increment financing, tax credits, and the like. In short, we spend money to give away money.

For example, these were the organizations that put together the infamous taxpayer giveaways meant to lure the second Amazon headquarters to the Show-Me State. The bids were unsuccessful, but someone had to foot the bill for putting together the proposals.

To add insult to injury, Robbins and Kirn point to a study of economic growth in 200 U.S. cities by the Milken Institute. It shows that we appear to be getting little return on our investment. In the areas of job growth, wage growth, and high-tech GDP, St. Louis ranks 152nd, 142nd, and 99th, respectively. Kansas City does little better at 91st, 83rd and 96th, respectively.

Missouri needs to reform its tax credit and economic development incentive policies to make sure that over-eager cities aren’t handicapping themselves with expensive and apparently fruitless efforts. We’re spending money just to spend money, and we have little to show for it.

Private Schools and the Making of Americans

Posted on by James V. Shuls

There is a strange notion going around that public schools are the only place, or the best place, to inculcate students with the values of citizenship. David Labaree, a professor in Stanford’s School of Education, made this claim recently in his piece, Public Schools for Private Gain: The Declining American Commitment to Serving the Public Good. By his assessment, citizens are made by bringing children together in public schools; and by this very act of congregating together, we somehow teach children what it means to be an American. As Labaree puts it in his description of the 19th-century common-school movement that laid the foundation for our modern public education system, “The key characteristic of the new common school was not its curriculum or pedagogy but its commonality.”

That simply is not the case.

In his 1953 book, “Educational Wastelands,” Arthur Bestor, an advocate for strong liberal arts education in public schools, argued:

The school is not creating a democratic structure of intellectual life merely by gathering all the nation’s children within its walls. It becomes an agency of true democratization only if it sends them forth with knowledge, cultural appreciation, and disciplined intellectual power—with the qualities, in other words, that have always distinguished educated men from uneducated ones.

Bestor’s argument is that what we teach in schools matters more than simply gathering children together.

I was reminded of Bestor’s comment as I watched the children of The Classical Academy de Lafayette (including my own) on KSDK News. The school was featured because the students memorized the Gettysburg Address last month in commemoration of the 155th anniversary of Lincoln’s speech. You can watch the full video of the students reciting the Gettysburg Address here.

Listen to the words of the address and listen to the comments by Katy McKinney, the school’s director. I think you will see that it is quite possible for any school, even a private school, to instill a virtuous character in students and to teach them what it means to be a citizen.

There are many arguments against school choice, but it is time we put this one to bed. We do not need enforced conformity to teach students what it means to be an American. 

Medicaid Is Stifling Economic Growth in Missouri

Posted on by Elias Tsapelas

Stop me if you’ve heard this one before: Medicaid costs in Missouri are expected to increase drastically again next year. This yearly refrain will continue again into State Fiscal Year (SFY) 2020, as indicated by the recently released state department requests for next year’s budget. The exploding cost of Medicaid is something my colleagues have written about extensively, especially since the passage of Obamacare in 2010. The scale and importance of the program for our state’s fiscal health certainly warrants continued attention.

Medicaid is the most expensive program the State of Missouri administers, and the share of the budget that the program occupies only continues to grow. In SFY 2000, Missouri spent 18.4 percent of its budget on the Medicaid program. For this year’s SFY2019 budget, Missouri will spend more than 37 percent. These totals include federal and other funds, but the impact on state General Revenue doesn’t look any better.

The state’s General Revenue is funded mostly by individual income and sales tax collections. Each year, Missouri’s budget is put together based on an agreed-upon assumption of how much the revenue collections will change for the year. When a single state program grows rapidly, it prevents lawmakers from allocating funds to other worthy public policy priorities when the economic outlook is good, and it also limits options for response when there is a downturn.

To understand Medicaid’s effect on the budget, consider this: In the ten years between SFY 2008 and SFY 2018, state General Revenue collections increased by $1,464.7 million (or 18.3 percent). In that same time period, the General Revenue cost of Medicaid increased by $770.3 million. So in effect, over the past decade nearly 53% of all tax revenue growth in Missouri has been consumed by the growth in cost of the Medicaid program.

Sadly, it looks as if this story will continue into SFY 2020. According to the department requests submitted by the MO HealthNet Division of the Department of Social Services, the Medicaid program is expected to need an additional $302 million in General Revenue next year. What does such an increase mean?

First, note that the projected increase for next year ($302 million) is nearly 40 percent as large as the total increase from SFY 2008 to SFY 2018.

Second, even if the only cost increase Missouri had to worry about in its entire budget this year was for Medicaid, state revenue collections would still have to increase by 3.2 percent in order to keep up. And Missouri has only met or exceeded that rate in five of the previous ten years.

As next year’s legislative session approaches for Missouri’s policymakers, the continued growth of the state’s Medicaid program is certain to remain a major concern for our elected budget preparers. Current and future public spending priorities will have to be continually pushed aside until the program can be reformed and the costs controlled. With regard to the future of our state’s budget, Medicaid reform cannot come soon enough.

Medicaid budget graph

Tony Messenger on St. Louis Soccer Stadium

Posted on by Patrick Tuohey

If you aren’t a regular reader of Tony Messenger’s column in the St. Louis Post-Dispatch, please take a moment to read his latest piece about the proposed soccer stadium in St. Louis. In it, he writes,

The current St. Louis soccer stadium proposal is hands down better than the last one, in that the ownership group . . . are seeking significantly less from city taxpayers than the previous effort. [New York-based journalist Neil] DeMause agrees with that.

“The latest plan is arguably less onerous for the public than lots of other stadium projects out there — and certainly better than the previous soccer proposal for St. Louis,” deMause says. “But that’s damning with faint praise, because the median in stadium deals is ‘pretty awful.’”

St. Louisans were told last year that the deal before them was the best they could hope for. It wasn’t. There is no reason to believe this latest deal is the best, and every reason to think we can do better.

Patrick Tuohey Responds to WXOS’s Bernie Miklasz on MLS Stadium Deal

Posted on by Patrick Tuohey

When ESPN Radio host Bernie Miklasz took to the air to attack David Hunn’s St. Louis Post-Dispatch story on the effort by St. Louis leaders to subsidize an MLS stadium, he showed a deep lack of familiarity with economic development subsidies. Perhaps because of this misunderstanding, he was very dismissive. And it may be too much to expect a sports commentator to be completely impartial about an opportunity to bring a major league sports franchise here. Ironically, however, while Miklasz called for an “honest discussion,” he didn’t invite us on his show to have that discussion, nor did his producer respond to our subsequent request to be on his show.

So we did the next best thing: We created a response video to show what that honest discussion might have looked like. Enjoy.

Together, Let’s Build A Better Missouri. Support Show-Me Institute.

Posted on by Show-Me Institute Staff

2018 was a year of change in Missouri. Lawmakers passed much-needed tax cuts for families and businesses, expanded education options for Missouri students, cut burdensome red tape, and fought back against big government through labor and transparency reform. But there’s still more work to be done. Let’s keep the momentum going in 2019! This year please make your tax-deductible donation to the Show-Me Institute. All contributions to the Show-Me Institute are tax-deductible. Click here to donate. 

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