Real Poverty is Coming…

The Census Bureau recently released a report on poverty and the reporting on it in the media was predictable. The mantra was the “rich get richer”, “the gap between the rich and poor widens”, etc… Instead of an analysis of the cause of poverty, and how we could all be headed to real poverty, we heard the typical emotional arguments about the unfairness of some people doing better than others. Here is my analysis.

Let’s start with the definition of poverty: “state of being poor: the state of not having enough money to take care of basic needs such as food, clothing, and housing.” In most of the world this definition applies but in America, most people in poverty have plenty to eat, drink, and have a place to live, have a TV, cable, iPods, computers, cell phones, and a car. So how can this be poverty as compared to the rest of the world? This is not poverty this is income redistribution and an effort to foster class envy. It is also unsustainable, and if not corrected could be the beginning of the end of our way of life as we know it.

The democrats are notorious for stoking envy but the republicans are not exempt. The reason the opportunity class is shrinking is because the federal government is taking the wealth through taxation. The median income is down to around $50,000 per year, the lowest it’s been in a very long time.  Every dollar the federal government takes from the productive people to give to people in “poverty” the less money is available to be put to productive use in the economy. The people in poverty are getting what would be equal in value to a productive person bringing home $38,000 in wages. Is this poverty? We need to bring back real poverty so people have an incentive to climb out of it. We should feed people who can’t feed themselves and provide a basic roof over their heads but everything else must go.

Who defines poverty? The government and that is the problem. The government has a self-interest to increase its tentacles to ensure its survival and growth. It needs to be stopped or we will all be in poverty. Before you say, poverty doesn’t seem that bad, the poverty we will all encounter will not be what we see today. It will include a collapse of the financial system, food shortages and absolute chaos which will generate more calls for a government “solution” which is exactly what we don’t need. We need to collapse the central government.

The generations of people in poverty are mostly people that have failed out of the education system, depended on government for their subsistence for generations, are disproportionately black and minority, and are the most vulnerable to a struggling economy. They are squeezed out by the educated in society which are mostly white. That is where the dishonesty and racial politics rears its ugly head.

Poverty is the result of poor choices not race or some other demographic. Most people in poverty failed out of school, had children out of wedlock and in their teenage years, and have an attitude that someone else is to blame. Every one of the causes of poverty is subsidized by the central government for political reasons. The public education system is broken; the government undermines family, and the culture, and pays the poor for bad choices. Until we call it what it is we will continue to have the poor.

If we don’t reduce the power of the central government we will all become poor but not the poor we see today. We have a choice to make and little time to make it. What we need is a return to self-reliance and the greatness we achieved through freedom and free markets. The federal government is subsidizing the cause of poverty and it must be stopped by returning to our founding principles…  

Government Subsidies

The federal government has been subsidizing industries for many years and they are often the target for elimination but rarely are the critics successful but why? Let’s look at the industry that is the biggest target for eliminated subsidies; big oil.

The three major categories that big oil receives subsidies for are the strategic oil reserve, farm equipment subsidies, and low income fuel assistance programs, totaling 2.5 billion a year. Oil companies are subsidized by the federal government to put aside a specific amount of oil into the Strategic Oil Reserve to ensure in the case of a crisis our government has access to a large enough inventory to manage a crisis. Farming subsidies are probably the oldest of all federal subsidies. As part of that subsidy, oil companies receive just under a billion dollars to supply farmer’s fuel at a reasonable price. The Low Income Fuel subsidy that helps low income families heat their house in the winter represents about $500 million a year.   

So when we talk about subsidies for “Big Oil”, these are the three biggest subsidies the oil companies receive. The average person hears subsidies to big oil and they believe it is simply money that goes in the pocket of big oil companies but the pockets it is going into is DOD (government), Farmers, and Low income citizens. That is why these programs survive. If they were truly just tax breaks going into the executives of big oil they would have been stopped long ago. Most people don’t have the attention span to listen to the entire argument so it is easy for politics to be injected into the arguments. So “Big Oil” remains the bad guy “screwing” the tax payer but are they?

I am against federal government subsidies. The venture capital market is the best avenue for investment in promising technology, products, drugs, etc… If an idea or product is viable it will attract private capital. The “renewable energy” business is the perfect example of why I am against federal subsidies. My biggest concern is the federal government picking winners and losers. What expertise do these bureaucrats have to make that decision compared to private capital? If windmills (which is an ancient and ineffective technology) are a viable energy source- why wouldn’t it attract private capital? Because private capital looks at all of the factors including longevity and ROI which they have determined not to risk their own capital. So why risk the tax payer’s capital? What does the country have to gain? Sustainable energy? Really, if that was the case why then not invest private capital?

The companies most likely to get federal subsidies are companies that donate to political candidates. It gives them access and unfair advantage. It is also important to remember that it is easy to spend other people’s money when the people’s money you are spending is not aware of how it’s being used. Private capital ventures have to guarantee a return or they will not attract new investors.

The market is the best mechanism to flush out future products and industries. Subsidies are attractive to politicians because it gives them power to control. That is not why we have a federal government. The founders knew that the federal government’s role was to ensure foreigners did not attack us, and that commerce was consistently practiced between the states. The constitution was the law and the courts were the referees. Everything else was up to the states and people. We need to move closer to the founding intent…