Rethinking poverty for National Poverty Awareness Month

January is National Poverty in America Awareness Month. It is an opportune time for both policymakers and the public to reflect on the progress that the country has and hasn’t made helping people escape poverty. 

There are two ways to look at poverty in America. The first, and most obvious, is material deprivation. By this measure, the nation is doing a pretty good job. 

According to the Census Bureau’s official poverty measure, about 11.5 percent of Americans—37.9 million people—lived in poverty in 2024. The supplemental poverty measure, which better accounts for the cost-of-living among other factors, showed a slightly higher 12.9 percent poverty rate. But those numbers almost certainly overstate the actual level of material privation in this country. For instance, an analysis from the Congressional Budget Office that more fully accounts for “in-kind’ (i.e., non-cash) social welfare benefits suggests a poverty rate as low as 3.5 percent. 

This shouldn’t be a surprise. After all, the federal government spends a lot of money fighting poverty: more than $1.1 trillion annually on more than 130 programs. State and local governments spend an additional $800 billion. For nearly $2 trillion, we should expect some results. 

That is not to say that every program is working well. The current system is overly bureaucratic, untargeted, and wasteful. It is often poorly designed and disincentivizes work, marriage, and savings. It is certainly ripe for reform. But, however inefficient, it has succeeded in reducing many hardships associated with poverty. 

There is, however, another way to look at poverty: the poverty of opportunity. The poverty of opportunity considers the ability of people to escape poverty altogether or to enable their children to do so; the capacity to become self-sufficient, to control their own destiny, and to rise as far as their talents will take them. 

This type of poverty is both more widespread and more intractable in this country than material poverty. Poverty of opportunity includes issues like access to high quality education, the adequacy of health care, the availability of jobs, housing affordability, treatment within the criminal justice system, and so on. 

Unlike material poverty, these are not issues that can be fixed by simply throwing more money at the problem. Instead, policymakers need to fundamentally rethink how to approach poverty. 

This means giving parents more choice and control over their children’s education, breaking-up the higher education cartels, and making it easier for those without a college education to find work. It means reducing the cost of housing by eliminating exclusionary zoning and other regulations that drive-up costs and reduce mobility. It also means reforming health care by harnessing the power of innovation and markets to both improve quality, lower costs, and extend coverage. And, it means breaking the back of inflation, reducing federal debt, and ensuring the conditions for sound economic growth that will bring jobs and opportunities. 

Obviously, policymakers need to ensure that Americans’ basic needs are met.  But as The Economist once noted:

If reducing poverty just amounts to ushering Americans to a somewhat less meagre existence, it may be a worthwhile endeavor but it is hardly satisfying….Any praise for the efficacy of safety nets must be tempered by the realization that, for one reason or another, these folks could not make it on their own. 

National Poverty in America Awareness Month is a reminder that despite this country’s best efforts to fight poverty, there is still much to be done. It’s time to get to work.