Author Topic: Poverty by America by Matthew Desmond  (Read 3165 times)

Morning Glory

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Poverty by America by Matthew Desmond
« on: July 14, 2023, 12:38:46 PM »
I think this book would be interesting for a lot of people on here as it covers a lot of topics that I remember discussing on the forum over the years. The main premise is that the reason for the gross wealth inequality in the US as opposed to other countries is that rich people (and their lobbyists/political allies) want it that way.  I initially wanted to do a more detailed analysis but procrastinated too long and have already returned my copy to the library, so I'm going on memory but here are some of the main points. Please feel free to chime in if I missed something.

-our government gives out a lot of welfare/handouts but most of them go to people who don't really need it (e.g. mortgage interest deduction, mega backdoor Roths, 529's, etc.). The way they are given as a "deduction" or "credit" makes them more socially acceptable than if they were given as a monthly check that can only be used for food and requires drug testing etc.
-we fund a lot of antipoverty programs but they don't really address the root causes of poverty (things like the EITC which benefits major employers by allowing them to keep wages artifically low)
-a lot of federal antipoverty funding is wasted by states or skimmed off by unscrupulous "nonprofits"
-private opulence/public squalor: when a critical mass of rich people stop using a thing they no longer support funding for it so it becomes less nice and then middle class people will borrow money to emulate the rich so they don't have to use it and then use of it becomes stigmatized because it is seen as only for the poor. this has happened with public transportation in most of the US and is beginning to happen with public schools in some areas.
-legacy of racism/redlining-explains why some of the most "liberal" cities have some of the most restrictive zoning which leads to the greatest deficiencies in affordable housing.

The thing I liked most about the book is that Desmond actually proposes some solutions to bring people out of poverty on a more permanent basis.
-fund the IRS to go after wealthy tax dodgers-he states this alone would at least be enough to bring everyone up to the poverty line
-eliminate credits/deductions that only help the wealthy. Hold politicians accountable when they claim that there is no room in the budget to help the poor.
--target anti-poverty programs more broadly and eliminate hard cutoffs so that they become more popular with working poor and lower middle class voters-this is already happening with programs like the ACA and some of the Covid stimulus programs.
-eliminate some zoning restrictions to bring back "missing middle" housing and empower low income folks to come up with their own solutions like co-ops.

LaineyAZ

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Re: Poverty by America by Matthew Desmond
« Reply #1 on: July 15, 2023, 07:15:14 AM »
This is a great summary.  I have the book because I read "Evicted" by the same author.  Desmond's writing is so persuasive and understandable because he intersperses real-life examples with current data.  I agree that including some policy solutions at the end of his book is very effective and welcome.

I can't remember if he points this out, but the change in 1996 when the U.S. government decided to award federal dollars in the form of "block grants" to the states vs. direct to individuals has been a massive failure, IMO.  ("Ending welfare as we know it" was the political tagline)  The result:  Just look at the Mississippi welfare fund scandal.  Very easy for a handful of state administrators to mis-use and deny aid to those who need it. 
https://en.wikipedia.org/wiki/Mississippi_welfare_funds_scandal

Also I recently saw an interview with Maryland governor Wes Moore.  He was asked "if poverty was a choice?"  He answered (paraphrasing), Yes, it's a choice made by our society.  He went on to elaborate but I was glad to hear a politician speak that fundamental truth. 

StarBright

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Re: Poverty by America by Matthew Desmond
« Reply #2 on: July 15, 2023, 09:33:00 AM »
Thanks for posting!

I've added it to my hold list at the library.

englishteacheralex

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Re: Poverty by America by Matthew Desmond
« Reply #3 on: July 15, 2023, 09:45:39 AM »
Ohhhh I've been wanting to read this. Thanks for the reminder.

dividendman

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Re: Poverty by America by Matthew Desmond
« Reply #4 on: July 15, 2023, 01:44:36 PM »
<snip>
-eliminate credits/deductions that only help the wealthy. Hold politicians accountable when they claim that there is no room in the budget to help the poor.
<snip>

This point is so hard to implement because so many people think they'll be rich someday... so they want to benefit from those breaks once they get to the promised land.

Really all deductions help the rich more than anyone since they work off the end (highest marginal rate) of taxes. Credits help the poorest, especially refundable credits.

Morning Glory

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Re: Poverty by America by Matthew Desmond
« Reply #5 on: July 24, 2023, 05:52:40 PM »
This article illustrates the effects of racism and the private opulence/public squalor cycle that he discussed in the book:

https://www.cnn.com/2023/07/22/business/public-pools-extreme-heat/index.html

I also forgot there was a chapter about predatory banking and even how normal banks fund our "free" checking accounts by charging exorbitant fees for things like overdrafts that are mainly paid by the people with the lowest incomes.

I just finished "Evicted" so I understand more about the housing situation now too. Yikes.

Sanitary Stache

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Re: Poverty by America by Matthew Desmond
« Reply #6 on: August 17, 2023, 02:17:39 PM »
I am currently reading this book.

One thing I am processing is that tax advantaged retirement savings accounts are part of the welfare system.  This whole idea that everyone is a welfare recipient, but have found ways to look at tax deductions and exemptions are something other than a welfare program.

Some welfare programs are discussed in terms of only applying to the 'needy' while other welfare programs are only for the already wealthy.

In the book at one point Matthew Desmond makes clear that rebalancing the welfare system to eliminate poverty will reduce the amount of government welfare that goes to the wealthy.  Finding tax cheats is a revenue source that is easy to get behind, but reducing welfare benefits for the wealthy is harder when we find ourselves among those wealthy.  It is not a recommended solution in the book, but I wonder if anyone would give up their tax advantaged retirement savings account in order to eliminate poverty in our country.

Chris Pascale

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Re: Poverty by America by Matthew Desmond
« Reply #7 on: September 10, 2023, 12:06:23 PM »
I have a YT vid saved to my list for this.

Another really good book is "$2.00 a Day."

Luke Warm

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Re: Poverty by America by Matthew Desmond
« Reply #8 on: October 05, 2023, 12:14:09 PM »
I just finished this book. It's up there with 'Invisible Women' as far as must reads.

VanillaGorilla

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Re: Poverty by America by Matthew Desmond
« Reply #9 on: October 07, 2023, 11:58:45 AM »
Wow, this has been a wild ride. Great recommendation, thank you! I'm halfway through the book and there's a lot of excellent points about predatory lending practices, historical redlining, lending discrimination, and the like.

However, I'm finding that he intersperses very real problems with very clear potential solutions with strange ad hominem attacks that aren't logical or very solvable.

Around page 101 he makes an incredibly strange argument that can be summed up as follows.

Say you have a family in poverty who pay $0 in taxes, and receive $5k in EITC. They have received $5k from the government.

Say you have a rich family who owes $150k in taxes. However, due to student loan interest deductions, mortgage interest deductions, 401k deductions, and similar tax law, they owe $100k. Desmond argues that this family has received $50k from the government.

Desmond's argument is that the rich family received 20x as much money from the government, therefore the rich family is consuming governmental resources that the poor family would otherwise benefit from.

He's conflating a reduction in taxes with income received. Which is disingenuous - the rich family paid 100k in taxes, the poor family paid -5k in taxes. Saying the rich family got a 50k handout from the government is simply not true. He's arguing for a more progressive tax structure, which is a totally reasonable argument, but trying to justify it as the rich being rich due to government handouts.

This same thread continues throughout the book - for example on page 132 he goes on a reddit-esque tirade about Peter Thiel's Roth IRA.
Quote
"The government is spending far too much underwriting the portfolios and and estates of the American aristocracy"
Sure, one can easily argue against mortgage interest deductions, or federally subsidized 30 year mortgages, or federally granted student loans, or against preferential tax treatment for retirement accounts, or argue for higher capital gains tax rates, or whatever. However, he's attacking a ton of policies that historically have benefitted - and arguably created - the American middle class. Homeownership has historically been the biggest creator of wealth for the middle class, and that's in large part due to government policies encouraging homeownership. Desmond seems to get so caught up in his fervor to abolish poverty that he's willing to significantly hurt the middle class in an effort to hurt the upper class.

He resorts to similarly opaque arguments against landlording. Around page 64 he suggests that landlords have a moral obligation to not treat their investment as an investment, that somehow a property owner should not maximize their economic return. That's vaguely noble, but impossible to legislate. If I chose to rent out my house tomorrow, what would Desmond suggest I charge in rent? Just carrying costs? How does an individual choose was a morally acceptable return on property would be? He also suggests that all landlords should treat their business as a "side hustle" (his words) and anybody trying to support themselves entirely off investment properties is morally suspect - which is utterly ridiculous.

His economic analysis of landlording is overly simplistic as well - he and a colleague did an analysis and found that apartments in low income areas cashflow more than apartments in high income areas; his conclusion is that landlords of the poor are exploiting their tenants more than landlords of the rich. However, cashflow isn't a proxy for total return - in high income areas property appreciation often drives return far more than cashflow. He offers few solutions to this supposed widespread usury by landlords, and I'm struggling to come up with solutions. Government owned housing hasn't worked very well, historically. Ditto rent controls. Suggesting that housing prices are a moral problem seems at adds with all serious economic theory. I suppose he's a sociologist, not an economist.

He suggest increase public housing, government subsidies for first time homeowners, down payment assistance, and tenant-owned co-ops. All admirable, but massively challenging to implement at scale and far from a guaranteed result.

These sorts of emotionally charged explanations for poverty with no clear or viable mitigation makes it hard to read this book as a serious driver for societal change.

His suggestions range from the obvious and implementable (which I hugely support):
  • Regulate predatory banking practices like overdraft fees, payday loans, check cashing, racist mortgage lending
  • Enforce tax law, going after big businesses and wealthy individuals that skirt their tax liability via arguably illegal strategies
  • Encourage adoption of existing federal programs by pushing for education around benefits that people are not taking advantage of
  • Increase the minimum wage, abolish sub-minimum-wage practices (ie servers, tip-based income)
  • Encourage worker organization ie unions, give workers more bargaining power

To the vague and completely non-pragmatic:
  • Keep landlords from settings rents to market prices
  • Abolish tax cuts that don't benefit the lower class (mortgage interest, student loan interest, retirement contributions)
  • "Tax the rich"


To the tired arguments that have been made a million times:
  • Flat sales taxes hurt the lower class

I'll continue reading but I would currently rate this book maybe 3/5 stars. The co-mingling of realistic concerns with completely specious arguments makes it hard to take seriously as policy suggestions.
« Last Edit: October 07, 2023, 12:12:34 PM by VanillaGorilla »

Sanitary Stache

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Re: Poverty by America by Matthew Desmond
« Reply #10 on: October 08, 2023, 12:17:11 PM »
@VanillaGorilla your take aways are relevant to the thoughts I have been circling since finishing this book.

How could someone who pays 100k in taxes be receiving government assistance? How could that be? Aren’t the tax payers the people funding the government?

I keep trying to figure out why we even have taxes in the first place. Another book I am reading. “A Brief History of Equality” by Thomas Piketty argues that an older book called “The Great Divergence” says higher tax rates to fund militaries in Western Europe was a major factor in Europe gaining colonial advantage over China and the Ottoman Empire. High taxes are needed to gain global superiority. Thomas Piketty is also arguing that higher taxes are what lead to the reduction in inequality that arose with the creation of the middle class following WW1. I’ve been trying to read about why we have an income tax and it’s based on wars and social programs. That is basically what the taxes pay for. Wars and social programs.

Desmond’s argument seems more like taxes are what society agrees are owed, and society has agreed progressive taxes are the law, therefore any tax avoidance measure is government assistance.

Tax avoidance is government assistance. I can easily see it with the electric car and solar panel tax credits in the IRA and earlier. I can see it with the Child Tax Credit and I can see it in any kind of itemized deduction.  I am questioning the standard deduction at this point. The more I think about tax avoidance measures the more I can see how they are government assistance. It doesn’t get me away from thinking that there is a difference between tax avoidance government assistance and cash payment government assistance.

Even though I think  there is a difference between tax breaks and cash payments, it isn’t difficult for me to see how tax breaks result in less money available for redistribution by the government. For that matter any lowering of taxes results in less available for redistribution. So if the argument is that cash payment government assistance is the way to eliminate poverty, then any measure that reduces government receipts makes abolishing poverty harder.

 No matter how I think about this, I come to the idea that tax revenue needs to be higher, but how to determine who pays? I already know who should pay. The ultra rich vultures.

I think Desmond is trying to argue that anyone not in poverty does contribute to keeping poverty around. I don’t remember Desmond  saying that tax advantaged retirement savings are the cause of poverty. But I did seem to get that message. The argument about employer sponsored health insurance led in that direction.

I don’t really know yet what I think is the best way to redistribute wealth. Ask I know at this point is that there needs to be a limit on how much wealth can be accumulated. Once taxes are able to control the maximum wealth accumulation of a household, then we will have found the maximum appropriate amount of government receipts.

VanillaGorilla

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Re: Poverty by America by Matthew Desmond
« Reply #11 on: October 08, 2023, 05:00:44 PM »
I'm coming to the conclusion that the entire book is factually suspect.

From the official website
Quote
Money Income: Income Used to Compute Poverty Status

Money Income does not include:

Capital gains or losses
Noncash benefits (e.g. food stamps and housing subsidies)
Tax credits
So the very programs that Desmond champions as routes to reduce poverty throughout the book are not included in the official poverty statistics that he cites to claim that poverty in the US is not decreasing! However, many studies show that poverty has been decreasing in this country.

So the fundamental premise of the book - laid out in chapter 1 - that poverty in the US has been relatively flat for the last many decades, is arguably entirely false.

For example, from https://www.nber.org/papers/w26532,
Quote
We evaluate progress in President Johnson's War on Poverty relative to the 20 percent baseline poverty rate he established for 1963. No existing poverty measure fully captures poverty reductions based on these standards. We fill this gap by developing an absolute Full-income Poverty Measure (FPM) whose thresholds are established to obtain this same 20 percent official poverty rate in 1963 while using a fuller measure of income and updating thresholds each year only for inflation. While the official poverty rate fell from 19.5 percent in 1963 to 10.5 percent in 2019, our absolute FPM rate fell from 19.5 to 1.6 percent. This reflects increases in full income throughout the distribution, with real median income more than doubling between 1963 and 2019, together with the expansion of government transfers and tax benefits not fully captured by the official measure. It is also broadly consistent with the expectations of President Johnson and his Council of Economic Advisers, including Robert Lampman who predicted in 1971 that poverty based on these absolute standards would be eliminated by 1980. However, we also show that reductions in relative poverty since 1963 have been far more modest, falling from 19.5 to 16.0 percent in 2019.

Obviously, it's easy to spin any tale you desire through sufficient statistical analysis, but it's enough to make me very dubious of Desmond's claims.

I'm trying to figure out what Desmond's actual metric for defining poverty is, and he's not very explicit about it. This review suggests that he's citing a source where poverty is defined as the lower quartile of incomes. If that's true, then it's mathematically impossible to eliminate poverty, as there is never a way to bring the lower quartile of the US population to zero.

I am quite disappointed that Desmond didn't put more rigor into his thesis. I worry that he's actually making meaningful policy change harder to come by since all he's presenting is strawman arguments that don't hold up to scrutiny. All that's left is social exhortations encouraging people to be more inclusive and accommodating to others, which strikes me as about as useful as bringing reusable bags to the grocery store - a nice gesture, but nowhere near enough to bring about meaningful change.

Sanitary Stache

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Re: Poverty by America by Matthew Desmond
« Reply #12 on: October 09, 2023, 05:27:46 AM »
This article talks a little more about measuring the poverty level with respect to Desmond’s argument.
https://www.vox.com/future-perfect/2023/3/10/23632910/poverty-official-supplemental-relative-absolute-measure-desmond

The idea that poverty hasn’t fallen Im does bear more scrutiny.

I am looking for more language to describe poverty. I started using the term “traumatic poverty”. I think “relative poverty” or any poverty description based on income alone is seriously lacking. Poverty in my mind is more than an income, it is insecurity, going without not by choice, lack of choice. Maybe a reduction in freedom though I don’t know if akin to bondage is accurate.

Chris Pascale

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Re: Poverty by America by Matthew Desmond
« Reply #13 on: February 25, 2024, 01:35:10 AM »
Just heard an interview of this guy on the Ezra Klein podcast. https://www.youtube.com/watch?v=s8d1nFYVvNg

Very well done, and I'll soon listen to an older talk on his book "Eviction."


Sanitary Stache

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Re: Poverty by America by Matthew Desmond
« Reply #14 on: March 04, 2024, 06:41:57 AM »
Listening to the podcast now.

They are talking about Covid public assistance policy being easy to get. especially the ACTC. Not just poor people got this. Other cash for job loss went in large amounts to the already rich. Cynically, giving money to the already wearily to preserve their wealth is an easier thing to do than giving money to the poor to keep them from being poor.

Another thought they discuss. Giving people money but not expanding relevant markets just makes things cost more. Housing, food, consumer products. I think this is a recognized driver of inflation. That helps hold poor people in their poor position. If the wealthy somehow didn’t spend the money they got on stuff they already had, then poor people could then afford those things. I think this works if wealthy people don’t junk their shit when the “upgrade” and rather give it to other people. A repair market would need to exist for this to work better. I now have two friends who repair my broken junk. Complicated junk. And do it at poverty wages.

The drastic reduction in poverty rates with the Covid assistance always strike me a “poverty line” measurement. All of a sudden people have income over the poverty line so they aren’t poor. But poverty is about more than monthly or yearly income. Covid policies that distributed food and stopped evictions and secured jobs were just as valuable.