Poverty in the USA
The shocking data published by the US Census Bureau on 13th September 2011 revealed that 15.1% of the population were under the poverty threshold in 2010. This has only added to the angst felt by President Obama as he struggles on several fronts to steady his ailing campaign for re-election. However, when the Eurozone is teetering on collapse, the Republicans remain recklessly obdurate on the deficit, and economic growth falters, we all expect the figure to force some hard rhetoric before being swiftly swept under the carpet.
Perhaps it isn’t an immediate concern, but such a high level of poverty is unacceptable - especially in a “developed” nation such as the USA. Setting aside the moral arguments to act against poverty, it is in all Americans’ best interests economically to reduce the figure. A greater poverty rate suggests more Ameirans are claiming benefits. And as we all know after weeks of furious debates between the Republicans and Democrats, Washington is spending well beyond its means. Therefore spending cuts or tax hikes are likely to ensue in order to correct the balance, leading to a lowering of all individuals’ living standards.
Beyond the government, poverty is damaging to the long-term productivity of the economy. Poor health and sub-standard education are usually part and parcel of poverty because households are unable to afford healthy foodstuffs, or move to areas with better quality schooling. Consequently, the quality of labour falls as individuals have less “human capital” and suffer from illness more often. And since the poverty rate is so high, this loss of productivity represents a large proportion of the future workforce.
The simplest solution to many of President Obama’s problems is sustainable job creation. This involves attracting investment based on the USA’s long-term advantages rather than temporary or near-sighted factors such as low interest rates or subsidies. Acting on poverty now will help towards making the USA’s labour force more desirable to businesses and investors. Besides, reducing poverty is a must if the government are to make spending more sustainable in the future as this would reduce stress on Medicaid and incease revenues.
Although Obama has recently unveiled his new plan to stimulate job-creation, it suffers from being overtly short-sighted. Just like Obama’s previous stimulus package, I don’t believe that the new plan will produce enough jobs to justify it’s massive bill. Instead, if Obama was to channel spending towards reducing the poverty level by improving the quality of schooling in deprived areas, funding training for the long-term unemployed, encouraging healthy living and providing some childcare support so that households can increase their earning potential.
Moreover, the total benefit of improving the supply-side of the economy will far exceed the initial government investment as there is no lack of possiblie funding. Internationally, venture capital firms have raised enormous sums and are looking to invest in countries with a positive long-term outlook. My proposed plan would reduce some uncertainty surrounding taxes as a large factor of increasing spending currently, Medicaid, would be restrained and revenues would rise due to greater earnings. Moreover, the USA’s workforce remains more highly skilled than in emerging economies. In addition to its (comparative) political stability, the new American model would prove particularly potent.