Poverty, by America
Matthew Desmond
I thought I knew something about poverty in America, but it turns out I knew nothing. I don’t know why I had this illusion. I did live on about $500 a month while writing my first novels in south Minneapolis, and I met plenty of struggling people traveling with a carnival for two summers. I think most of us have our own preconceived notions about poor people, but they don’t come from direct experience but from a set of assumptions we get from the news, TV, movies, and books. And like many such assumptions, most turn out to be false.
…poverty is the dream killer, the capability destroyer, the great waster of human potential.
Desmond’s main point is that poverty is not just a lack of money – more fundamentally, it’s a lack of choice. And where people lack choice, they become desperate and ripe for exploitation. Poverty is not just a problem for the poor, it’s a problem for all of us. Because the sad truth is that we all all benefit from poverty in many invisible ways – whether from lower prices, safer neighborhoods, or higher profits from our investments.
Consider these facts in the book.
In 2015, Walmart tried to raise its wages from $9 to $12 an hour. Investors worried about lower profits and dumped the stock. Not only did Walmart cancel the raise, but investors sent a powerful message to other companies – don’t raise your wages or we’ll tank your stock.
Payday lending institutions give companies a license to steal from the poor. The Annual Percentage Rate in many states runs over 500% a year, trapping people in a never-ending cycle of spiraling interest, extra charges, and fees. Traditional banks also profit from the exploitation. They make loans that keep payday companies in business, and so they share in the profits – as do those of us who own bank stocks.
When President Clinton replaced traditional welfare with Temporary Assistance for Needy Families in 1996, the states were charged with distributing the funds – and they steal them for other programs. In 2020, poor families received only 22 cents of every budgeted dollar of TANF funds.
Landlords make more money per tenant in poor neighborhoods than middle-class and upscale neighborhoods. Why? Because mortgages and property taxes are cheaper in poor areas, but their rents are only slightly lower. Poor people are often desperate for housing and may have bad credit or an eviction in their past, and landlords take advantage of this by jacking up the rates.
We subsidize affluence more than we do poverty. We allow corporations to offshore income and cheat on their taxes. We give them loans, grants, and lucrative government contracts, and we bail them out when they fail.
The top 20% of Americans get six times the tax breaks than the bottom 20%.
Most of us receive more from the federal government than we pay in taxes. In 2018, the average middle-class family received $7,100 more in benefits, among them, disability and unemployment checks, home mortgage and other tax deductions, and benefits received from employee-sponsored health plans (which employers deduct from their federal income taxes).
Whether you get a tax break or a welfare check, the result is the same – cash in the bank. We view tax breaks as acceptable and welfare checks as shameful, but in the end, they are one in the same.
If you include all the tax breaks and government payments that Americans receive, we all end up paying about the same percentage in taxes: poor and middle-class families pay 25% and rich families pay around 28%.
American families who receive government assistance spend a larger share of their income on housing, food, entertainment, alcohol, and tobacco than other families.
So do we have any solutions for this devastating social problem – one that leads to crime, addiction, homelessness, broken families, and deaths of despair? Desmond suggests many practical ways to attack poverty, but perhaps none is so important as having a realistic view of the problem and the role we all play in it. To list those solutions would take up too much space in this short review, so I’ll leave you with a relevant quote from the end of the book.
“Every person, every company, every institution that has a role in perpetuating poverty also has a role in ameliorating it. The end of poverty is something to stand for, to march for, to sacrifice for. Because poverty is the dream killer, the capability destroyer, the great waster of human potential. It is a misery and a national disgrace, one that belies any claim to our greatness. The citizens of the richest nation in the world can and should finally put an end to it. We don’t need to outsmart this problem, we need to outhate it.”