The problem with poverty in America

The problem with poverty in America

What the 3,335 person Forks, Washington of Twilight fame has in common with New York City is roughly 25% of the population living in poverty.

World wide there currently seem six main ideas for approaching poverty:

• Jobs in the city paired with reducing urban housing costs
• Increase manufacturing
• Infrastructure projects
• Jobs servicing the rich
• War
• Basic income guarantees

Jobs in the city

Approximately 60 to 66 million Americans live in rural areas, representing about 19% to 20% of the U.S. population. In 2023, the percentage of South Koreans living in rural areas was 18.54% and for France 18.22%. In 1970, 25% of Americans lived in rural areas.

So rural population in America is not very different from other countries or America of last century.

However births minus deaths in non metropolitan areas tells a different story:

If net migration is reduced or stopped then non-metropolitan America will add declining population on top of all of its other problems.

So jobs in the city paired with reducing urban housing costs is less of a concrete solution to anything and more of an economic necessity depending on how things go.

Increase manufacturing

Let’s ignore the difficulty of increasing US manufacturing output and the amount of time it would take even if successful. Even as manufacturing output increases, it will be difficult to keep the number of employees from shrinking or staying the same with lower salaries.

That’s because of the rise of cobots.

Humans are mostly cheaper than robots and cobots, but the ever decreasing cost of automation severely limits the use of manufacturing for reducing poverty.

Infrastructure projects

This idea could work but the road blocks are political. First with the country effectively in tax revolt it will be difficult to achieve a massive increase in infrastructure work.

Second agreeing on what infrastructure and where would be very hard. You see this with California’s high speed rail where the more obvious coastal route was a non starter because political forces wanted an inland route.

Third depending on how you measure poverty infrastructure projects might actually increase it.

Giving out money during Covid dramatically reduced poverty if you measure poverty by the ability to make ends meet. If infrastructure projects are funded from the same pool that includes direct handouts then you are robbing Peter to pay Paul.

Jobs servicing the wealthy

From a 2022 report the reworking of our economy is already under way:

However unique to America in 2025, international tourism is steeply declining.

The problem with this idea is again politics. In a world of haves and have nots servicing the haves, the latter will be increasingly hostile to the industries of the former. For instance if the haves do tech the have nots will be against research funding.

War

Putin’s attempt at making war profitable and reducing poverty through a combination of paychecks and body bags seems to be coming to an unsuccessful conclusion.

The war is killing too many to continue and weaning from a military economy is difficult:

Military spending rose to 6–8 percent of GDP and began to account for up to 40 percent of the budget, creating a war rent effect. That in turn fueled inflation, as military demand collided with limited production capacity and a shortage of imports.

Arguably “defense” spending could be different. Projects like Golden dome and whatever Palantir is doing could go on indefinitely.

This spending still has political problems. Military spending has trouble hiding behind a veneer of “free markets” to justify itself.

The military industrial complex is communist by nature. An industry that protects a world order for big business is one thing; a military industry that is the main big business is another.

Basic income guarantees

Trump will soon announce a replacement for current Chair Jerome Powell, and has named Kevin Warsh as one of his top candidates for the job. According to Warsh

We need a new Treasury-Fed accord, like we did in 1951 after another period where we built up our nation’s debt and we were stuck with a central bank that was working at cross purposes with the Treasury. That’s the state of things now

Currently the federal reserve purely considers the state of high net worth individuals, HNWI, in its market manipulations. By raising interest rates the fed can crush labor whenever workers attempt to increase their wages. By directly investing in financial markets the fed can maintain a “Greenspan put” that guarantees risk-less profits for the wealthy.

The result of those policies and others like reducing HNWI taxes is ever increasing wealth inequality. So Kevin Warsh is correct that the federal reserve is broken, but his solution is to shrink the fed:

Well, I’ll tell you where they were, in 2021, they bought 54% of all the debt issued by the Treasury Department. More than half of the net issuance was bought by the friendly Federal Reserve. And that was not a crisis year. It was a boom year. That’s the sign of an institution that went past its remit, that outstayed its welcome, that decided that the crisis maybe is continuing in some sense and thereby sowed the seeds of what we have in front of us now, which I would describe as a major inflation problem that I will describe.

Basic income guarantees require a government as dedicated to low net worth individuals, LNWI, as it currently is for HNWI. Instead of simply removing all the Bizarro world bureaucracy and mechanisms created for HNWI success, new sane world equivalents would have to be created.

Some of these sane world equivalents, like social security, already exist. Without them the industries that created HNWI would not be able to exist. In places like China, where no social safety net exist, neither do proper consumption economies, because everyone must save at all times for an uncertain future.

Warsh is right that the fed is broken, but he’s wrong in thinking that shrinking government will unlock a better economy. The US economy is being held hostage by economic fear; fear the government needs to fix.

LNWI are unable to find better jobs or spend more because they are trapped in crappy fear induced gig or 5 day (instead of 4 or less) jobs.

HNWI are unable effectively innovate because deregulation has made them FOMO on the latest rigged economy scam.

America doesn’t need smaller government, it needs better government that does more than to endlessly regurgitate old failed economic models.