Third Draft: April 4, 2004 Government Programs and Social Outcomes: The United States in Comparative Perspective Timothy Smeeding Center for Policy Research, Maxwell School Syracuse University and Luxembourg Income Study Prepared for the Smolensky Conference “Poverty, the Distribution of Income and Public Policy” University of California- Berkeley, December 12-13, 2003 The authors would like to thank Lee Rainwater, Kim Desmond, Joseph Marchand, Mike Eriksen, and Kati Foley for their help in preparing this manuscript. Also thanks go to John Quigley, Gary Burtless and Lee Rainwater for many helpful conversations and to Gene Smolensky for longer term inspiration and guidance. The author thanks the Luxembourg Income Study sponsors for their support. The conclusions reached are those of the author.2 I. Introduction The United States has a long tradition of measuring income poverty and income inequality and weighing the effectiveness, successes, and failures of government policies aimed at poverty reduction. In our own way, we have created a unique set of social polices that support widely held values and provide both stories of success and failure in reaching goals of poverty reduction and improved social outcomes for all Americans. But still our idiosyncrasies leave many questions to be answered. One can ask, in fact, have Americans left ‘No Child Behind’? And the answers depend very much on to whom one asks and where one looks. One can find claims that the 1996 Welfare Reform Act is a major ‘accounting’ success story, with the AFDC/TANF (Aid to Families with Dependent Children/Temporary Assistance for Needy Families) caseloads falling from over 5.0 million units in 1994 and 4.5 million in 1996 to 2.0 million cases (and less than 5.0 million persons) by June 2003, less than one-third of the 6.9 million units that benefit from the SSI program, which is up from 5.9 million recipients over this same period (U.S. Department of Health and Human Services 2003; Social Security Administration Office of Policy 2003; Smeeding 2001). The question of whether and to what extent this dramatic change in caseloads has provided better outcomes for those who have entered or left each program is also widely debated. And even in areas where the case for policy success seems overwhelming, e.g., the dramatic decline in poverty among the aged over the last half century, there is still room for serious policy debate over the remaining poor elders and their future prospects for better conditions under impending Social Security reform. For the most part, these examinations of domestic policy are inherently parochial, for they are based on the experiences of only one nation in isolation from the others. The estimation3 of cross-nationally equivalent measures of poverty and the comparison of programs that support these groups, provide an opportunity to compare the design and effectiveness of American social policy and antipoverty policy with the experiences of other nations. The Luxembourg Income Study (LIS) database, which undergirds this paper, contains the information needed to construct comparable poverty measures for more than 30 nations. It allows comparisons of the level and trend of poverty and inequality across several nations, along with considerable details on the programs and polices that in large part produce these outcomes. In this paper we use cross-national comparisons made possible by the LIS to examine America’s experiences in fighting poverty in the face of substantial and growing inequality in a cross-national context. In so doing, we compare the effectiveness of United States anti-poverty policies to those of similar nations elsewhere in the industrialized world. If lessons can be learned from cross-national comparisons, there is much that can be learned about antipoverty policy by American voters and policymakers. While every nation has its own idiosyncratic institutions and polices, reflecting its values, culture, institutions, and history, wide differences in success and failure are evident from the comparisons which follow. Previous research has shown that the United States has one of the highest poverty rates of all the 30 rich countries participating in the LIS, whether poverty is measured using comparable absolute or relative standards for determining who is poor, and despite the fact that (with the exception of tiny Luxembourg itself), the United States is the richest of all nations on earth (Rainwater and Smeeding 2003; Smeeding, Rainwater, and Burtless 2001).1 While all nations value low poverty, high levels of economic self-reliance, and equality of opportunity for younger persons, they differ dramatically in the extent to which they reach these goals. Most nations have remarkable similarities in the sources of social concern within4 each nation—those of births outside of wedlock and lone parent families; older women living alone; high unemployment; immigration pressures; low wages; and the sustainability of social expenditures in the face of rapid population aging. They also exhibit differences in the extent to which working age adults mix economic self-reliance (earned incomes), family support, and government support to avoid poverty. This paper is designed to examine these differences in greater detail. We begin by reviewing international concepts and measures of poverty, as they relate to the main measures of income and poverty used in domestic United States discourse. In so doing, we examine basic differences in aggregate measures of well-being and social expenditure, while also identifying a number of criteria that we can use to examine the success and failure of antipoverty policy in a cross-national context. Next, we present cross-national estimates of both absolute and relative well-being for several subgroups of the population, including the elderly and different types of families with children. Measures of both poverty and inequality are presented and the comparative results are noted. After examining the level and trend in poverty rates, we explore some of the factors that are correlated with national poverty rates and examine the effectiveness of government programs aimed at reducing poverty and equalizing opportunity. Specifically, we examine the effects of work, education, family structure, and social policy in achieving these outcomes. In examining these findings, we use the criteria of adequacy, self-sustainability, and cost