Category: Effective Compassion

Blog author: jcarter
posted by on Friday, December 27, 2013

povertycureForbes contributor Jerry Bower recently interviewed Fr. Robert Sirico about the documentary film series PovertyCure:

Jerry: “Let’s talk a little bit about PovertyCure. Where did this idea come from? What was the original conception of PovertyCure?”

Fr. Sirico: “From the inception of the Acton Institute, which was now 24 years ago, we have always been concerned that economic education–a real understanding of how a market functions–will first and foremost help the most vulnerable, so we’ve done various things over the years to attempt to demonstrate or teach or model that for people. And a number of years ago we were talking about what really helps the poor… Obviously, what helps the poor is access to work. But as we looked into the good intentions of so many people, we see that a lot of them just think that solidarity with poor people means giving them things, and from our understanding of how markets function (and from our understanding of human beings), you really find that human beings themselves are the producers of their own wealth and of their own way out of poverty. What we try to do, and what we have now I think beautifully accomplished in this DVD series, is show–very often from the mouths of the poor and also experts–how wealth is created, and the nature of people even in the middle of their poverty to be creative and produce more than they consume. That’s what’s called wealth: When you produce more than you consume.”

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cow-faceDuring the Spanish Civil War, an American farmer named Dan West served as an aid worker on the front lines. His mission was to provide relief to weary soldiers, but all he was allotted to give them was a a single cup of milk.

This meager ration led West to wonder if more could be done. “What if they had not a cup,” thought West, “but a cow?”

The “teach a man to fish” philosophy behind that question inspired West to found Heifer International, an organization that provides farm animals to needy families and communities in developing countries. It’s an appealing model (like many Americans, my family has made donating a farm animal a holiday tradition) but does it work? Is giving an animal an effective option for helping the poor?

Developmental economist Bruce Wydick agricultural economics professor Chris Barrett studied the impact of farm animal donations:
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minimum_wage_custom-8614e5bd8d516fbadd22d4a09fff441a70ba1596-s6-c301. Both sides of the debate believe they are arguing in defense of the poor. Most people who support or oppose minimum wage laws and/or increases share a common objective — helping the working poor. Because both sides have noble intentions, the merits of the debate over minimum wage laws and minimum wage increases should be based on empirical evidence that it will actually help, rather than harm, the poor.

2. Economists disagree about the effects of small increases in minimum wages. It’s true that economists disagree about the effects of the minimum wage on employment and the living standards of minimum wage earners. But almost all of the disagreement is about relatively small increases (less than 20%). Almost all economist agree that significant increases to the minimum wage or attempts to bring it in line with a “living wage” (e.g., $12-15 an hour) would lead to significant increases in unemployment. (President Obama’s proposal would only increase the federal minimum wage by $1.75 an hour.)

3. The primary argument for minimum wage increase is that is increases the value of the worker’s labor. — The efficiency wage theory of labor holds that higher real wages improve labor productivity by reducing worker turnover and the associated costs of hiring and training new workers, by reducing the incentive for workers to unionize, and by increasing the opportunity cost of being fired—thereby giving the worker incentive to be more productive. Under this view, small increases to the minimum wage will have no deleterious employment effects.

4. The primary argument against minimum wage increases is that it discriminates against those who have low-skills. Milton Friedman once described the minimum wage as a requirement that “employers must discriminate against people who have low skills.” As Anthony Davies explains, “the minimum wage prevents some of the least skilled, least educated, and least experienced workers from participating in the labor market because it discourages employers from taking a chance by hiring them. In other words, workers compete for jobs on the basis of education, skill, experience, and price. Of these factors, the only one on which the lesser-educated, lesser-skilled, and lesser-experienced worker can compete is price.”

5. The minimum wage redistributes wealth from the low-skilled poor to the more skilled working poor and middle class. Many supporters of minimum wage increases mistakenly believe that increases in wage rates are transfers of wealth from employers and investors to the workers. But as Anthony Davis explains, the money to pay for the increased wage must come from at least one of four places: higher prices for consumers, lower returns to investors, lower prices to suppliers, or a reduced work-force. Empirical research has shown that the primary effect of minimum wage increases is reduced employment, which essentially transfers the wealth (in unearned wages) from the less skilled to the more skilled working poor and middle-class teenagers.
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caremergencyYesterday I began a series of posts which attempts to explain why the working poor tend to make terrible financial decisions and how they think about money differently than other economic classes. In my initial post I wrote,

Imagine that instead of having to deal with consumption smoothing decisions, at most, several times a year, you had to deal with them several times a month, or even several times a week. Now also imagine there is no workable solution that will actually smooth the short-term consumption problem and the best that you can hoped for is a temporary fix that delays having to deal with the issue.
That is what it’s like to be the working poor.

Several people have asked me to explain more what I meant, so before moving on I wanted to provide a more in depth example.

Let’s again begin by looking at the decision-making process of the middle-class. Imagine that you want to buy a home. Your household income is $51,404 a year (the median household income in the U.S.) and the house you’re interested in is on the market for $152,000 (the avg. home price in the U.S.). At what point do you buy the house?

There are several ways the average American may answer, but the one response you will almost never hear is, “You should buy the house only after you’ve saved the $152,000 needed to pay for it.”

While most people would agree that it would be prudent to apply a down payment, the idea that you’d pay the entire amount at once – even if you had $152,000 in cash – would strike most people as peculiar if not absurd. Instead, we borrow money for a mortgage that will allow us to pay a set amount each month for 15 to 30 years. Because we are willing to spread our payments out into the future we will pay a lot more than the $152,000 (at 5% for 30 years, the total would be $293,748.79). But we consider that a reasonable accommodation for getting what we want right now.

That is an example of how most of us take the concept of consumption smoothing for granted.
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workingpoorAfter reading a comment thread in which her online friends were complaining about poor people’s self-defeating behavior, Linda Walther Tirado wrote an articled titled “Why I Make Terrible Decisions, or, Poverty Thoughts,” which chronicled her struggles with near abject poverty.

I think that we look at the academic problems of poverty and have no idea of the why. We know the what and the how, and we can see systemic problems, but it’s rare to have a poor person actually explain it on their own behalf. So this is me doing that, sort of.

Tirado’s article went viral. A literary agent contacted her, and after a few readers emailed offers to contribute to a book project, Tirado started a GoFundMe page. Her initial goal was $10,500; she raised more than $60,000.

But there was a problem with her story: it wasn’t true.

As Angelica Leicht of the Houston Press discovered, Tirado doesn’t fit the mold of the working poor: She went to a fancy boarding school, speaks both German and Dutch, works as a political consultant, and is married to a Marine. Tirado eventually clarified that her piece was “taken out of context, that I never meant to say that all of these things were happening to me right now, or that I was still quite so abject. I am not.”

While the article seemed to confirm what many people already believed, for those who are actually poor – or at least once were — the article likely didn’t resonate. It doesn’t even live up to the title’s claim of an explanation for why those in poverty “make terrible decisions.”

The fact is that the working poor do tend to make terrible financial decisions — and not just because they lack resources. The working poor think about money differently than other economic classes. I’d like to take a crack at explaining why that’s the case.
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An exceedingly honest woman called into an Austin, Texas, radio talk show, KLBJ, to discuss why she chooses not to work. She, her husband and three children rely on tax dollars for shelter, utilities and food. She admits that her parents did not work either, and that free money and programs were offered all the time. And what’s wrong with that?

Transforming Welfare: The Revival of American Charity

Transforming Welfare: The Revival of American Charity

By offering private alternatives to the failed welfare state, this collection of essays hopes to contribute to the restoration of an ethic that can be the foundation of a truly free and humane system of social assistance.
$4.00

Blog author: jcarter
posted by on Wednesday, November 20, 2013

Untitled 3Hawaii is consistently ranked as one of the states where most Americans want to live. But for many residents, the island life is more nightmare than tropical dream. The high cost of living and lack of affordable housing contributes to Hawaii having one of the highest rates of homelessness in the country.

The state government has attempted to address the crisis in ways that are sometimes as creative as they are disturbing. Earlier this year, the state legislature voted to establish a program that would pay for a one-way ticket to send homeless residents to the mainland. The program was dubbed a “return-to-home” program despite the fact that more than half of the homeless population being lifetime residents or people who lived in Hawaii a minimum of 20 years.

But that program created by the state’s lawmakers seems downright compassionate compared to how one individual state lawmaker is addressing the problem. State Rep. Tom Brower (D.) roams the streets of his district armed with a sledgehammer and smashes any shopping carts he finds that are used by the homeless:
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snapMichael Tanner of the Cato Institute released a recent policy analysis that raises important questions about whether or not we should completely re-conceptualize how to provide food for the truly disadvantaged. In “SNAP Failure: The Food Stamp Program Needs Reform” Tanner argues The Supplemental Nutrition Assistance Program (SNAP) is currently crippled by high administrative costs, significant fraud and abuse, and weakening of standards. Tanner notes that SNAP breeds greater dependence on government, and, even worse, seems to have negligible long-term effectiveness in eliminating food deficiencies for the truly disadvantaged.

The statistics are overwhelming. Using primarily government data, Tanner observes that the poverty is politicized in Congress through the framing of food stamps as fulfilling two separate goals—“improved levels of nutrition” and “strengthening the agricultural economy.” This created the “bipartisan” support that has exploded funding and served the interests of both political parties. Everybody wins, except for the poor. According to Tanner, “Since 2000, spending on SNAP increased from just $17 billion per year to more than $78 billion in 2012, a greater than fourfold increase.” The increase in spending cannot even be blamed on the recession. According to Congressional Budget Office (CBO) estimates, 35 percent of the program’s growth from 2007 to 2011 was not a result of economic factors in the country.

The factors that have created the expansion include:
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poor-taxDuring the government shutdown billionaire philanthropists Laura and John Arnold gave $10 million to the National Head Start Association to keep the program for low-income children running. Mr. Arnold made it clear, however, that he did not believe this was a permanent solution, as “private dollars cannot in the long term replace government commitments.”

But some people thought Arnold’s generosity itself undermined the government’s power. As The Nation’s Amy Schiller said, “The entire shutdown is undergirded by a fantasy of a world in which the government’s power is vastly reduced and private citizens step into the breach with better, more innovative ideas for solving social challenges.”

It’s not that they are against all philanthropy — only the public donations that undermine the government’s monopoly on power. As John Daniel Davidson explains:
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WIPFSTOCK_TemplateToday at Ethika Politika, John Medendorp, former editor of Calvin Seminary’s Stromata, reviews Jordan Ballor’s Get Your Hands Dirty for my channel Via Vitae. He writes,

Although Ballor’s book is very accessible, the reading is by no means “light.” I would call it “engaging heavy reading.” While the concepts are clear and the analogies riveting, Ballor has a way of putting so much into a sentence that it can take some time to work through his ideas. I found myself time and time again putting the book down for a few minutes to digest a thought, or re-reading a paragraph to make sure I followed the contours of his thought. There is a lot here, and it is thought provoking. Whether one agrees with all of Ballor’s ideas or not, he offers clarifying insights into many aspects of Christian social thought and action. Even where I disagreed with Ballor, I found his writing helpful for articulating my own positions.

A few basic assumptions underlie Ballor’s work, assumptions that would not surprise anyone familiar with Christian tradition. Central to Ballor’s thesis is the fact that human beings are created in the imago dei, the image of God. Like God, we are naturally oriented to love. Like God, we are naturally creative and industrious. Like God, we are naturally inclined to give of ourselves for the sake of others. Of course, because of the fall of humanity into sin, these naturally inclinations and orientations have been corrupted and twisted by evil. Nevertheless, there remains a natural order of things, inherent in creation and revealed in Scripture, towards which we as responsible human persons ought to strive: love for our neighbor, care for creation, industry, community, procreation, responsible use of resources (in all senses), and mutual recognition and respect of one another’s humanity.

One particularly poignant theme that Ballor strikes home again and again in the book is the nature of human beings as social persons in community, and the corresponding responsibility that we have to that community, which always was, but increasingly (and obviously) is global.

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