Welfare and Poverty

[Free Trade is managed by the invisible hand.]

Rule of thumb tells us that changes in the business cycle effect poverty even in the absence of poor support programs. This is important to remember when talking about the effect that anti-poverty programs have had on the poverty rate from 1965-1987. Thus before I can state "the war on poverty effectively reduced poverty by 11%!" I must account for the extraneous variable which would be the business cycle.

The business cycle can best be expressed by GDP, and this is because it is the most widely used measure when dealing with the health of our economy. Thus changes in GDP should reflect Changes in the business cycle and in turn effect the poverty rate, unemployment rate, wages and so forth.

Before the 1960's the poverty rate was dropping by 1% each year, but after the war on poverty started the rate began to decrease by 2-3% each year. Eventually this rate began to bottom out in 1974, and the poverty rate has never gotten any lower. In fact after individual benefits began to level out we find that the poverty rate only decreased by a few percent when the economy was doing well, but began to increase at a more dramatic rate after reagan cut funding for programs.

Thus in the end we find that poverty is reduced during boom times, but without substantial efforts to reduce poverty it is obvious that the economic boom may not make up for the difference. Thus I think our government should increase spending on poverty in order to aid the economy in reduction, but also minimize the impact of downturns in the business cycle.
By the way don't try to bring out the correlation does not equal causation crap, because I accounted for the extraneous variable. Thus it can be expressed as Correlation Implies Causation. In short, the war on poverty is strongly corelated with reducing poverty levels by half. The (correlation does not equal causation fallcy does not work here, as it does not apply to data that includes the extraneous variable)