Examiner Editorial: Poverty is back, and it’s hardly a coincidence

Poverty is about to return as a major campaign issue. On Monday, The Associated Press reported that demographers expect the poverty rate to jump nearly two points to 15 percent, the largest single-year increase since the government began keeping track.

The new figure will be released next week and is expected to show about 45 million Americans were living in poverty last year. That this is happening under the most liberal president ever is worth noting. It’s axiomatic among liberals that Republican policies — specifically the push for lower taxes and less government spending — create poverty. This does not square with the historical record.

The previous record for a single-year increase in the poverty level occurred in 1980, under President Jimmy Carter. His successor, President Ronald Reagan, was routinely accused of inducing poverty by cutting taxes and domestic spending. For instance, a common liberal trope in that era — still kept alive by some — was to blame homelessness on Reagan’s unwillingness to prosecute alleged violations of the Community Reinvestment Act. The reality, however, is that personal income grew by 8.1 percent under Reagan and the poverty rate reached an all-time low by the time he left office.

That our current economic woes trace back to a housing bubble created by government-mandated mortgages going to millions of people who could never repay them makes President Barack Obama’s predicament bitterly ironic. The Community Reinvestment Act of 1977 was intended to ease mortgage standards for minorities and low-income Americans, but it’s now notorious for its unintended consequences.

In an attempt to alleviate poverty and address homelessness, Congress changed the Community Reinvestment Act in the 1990s to loosen mortgage standards and increase access to affordable housing. Easy credit sent housing values soaring through the next decade until the mortgage market collapsed and took the rest of the economy with it. The result is poverty at record levels and a new flood of newspaper reports of homeless people living in sprawling tent cities.

Obama didn’t cause the economic collapse, but he should learn the lesson here: When government distorts markets to deal with perceived social inequality, it inevitably produces unintended consequences.

Often, those consequences harm most the very people who are the intended beneficiaries. “The most important anti-poverty effort is growing the economy and making sure there are enough jobs out there,” Obama said at a news conference last week.

If Obama really believes that, he’ll prove it by reversing course and moving to reduce government spending, regulation, debt and taxes. If he refuses, more Americans will find themselves in the poorhouse.

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