Why a Poor Child is Poor

By: 
Al Jacobs

If you desire to explore poverty in all its forms, there’s no better source of information than Columbia University in New York City. Established in 1754 on the grounds of Trinity Church in Manhattan, Columbia is the oldest institution of higher education in New York and the fifth-oldest institution of higher learning in the United States.

And to pursue each element of poverty most extensively, you’ll be directed to Columbia’s Center on Poverty and Social Policy (CPSP). It’s there you’ll acquire an understanding of poverty and the role of social policy in reducing poverty and promoting opportunity, economic security, and individual and family wellbeing.

How convenient it is that an article by several CPSP officials, titled “How tax policy keeps poor children poor,” just appeared in a major Southern California newspaper. Apparently child poverty in the U. S. is related to the Child Tax Credit, a federal law allowing families to deduct annually up to $2,000 from their taxes for each child under 18, and if the credit exceeds the taxes owed, the family gets a refund for the balance. However, as the article states:

“The Child Tax Credit is the single largest federal expenditure made to benefit children. But 23 million children are ineligible for the full Child Tax Credit because their parents earn too little to qualify. In other words, a program meant to aid children is leaving behind those who need it most. Extending the full Child Tax Credit to low-income families would cut the child poverty rate … we know what is needed to make significant progress in the fight against child poverty. Simple fairness demands that the full Child Tax Credit be available to all children.”

As you might guess, there’s no shortage of persons or groups devoted to assisting “children in need.” All you need do is Google those three words and your computer will overflow with organizations designed to help in every way possible. The nonprofit foundation Save the Children believes “child sponsorship has the power to drive change that ripples throughout children’s lives, their families, and entire communities.”

Click onto their Sponsor Now link to discover how “Girls and boys are counting on you to support our mission and donate to children in need.” However, if the pictures of the forlorn youth displayed don’t sufficiently motivate you, you may switch to the Children International website. There you’ll learn “Your monthly gift of $36 will give your sponsored child access to life-changing benefits, like medical care, educational support, life skills, and job training before graduation. As a sponsor, you’ll be able to see your impact firsthand through letters and photos from your child.”

And how prevalent is the need? This you’ll discover by logging into the site of the Children’s Defense Fund. Their most recent report reveals “about 13 million American children are living in homes with incomes below the poverty line, depriving many of a decent education and proper nutrition, and putting them at risk of homelessness and violence.”

As they further state, “No child should have to worry where her next meal will come from or whether she will have a place to sleep each night in the wealthiest nation on Earth. Yet more than one child in five lives in poverty and faces these harsh realities every day. But you can make a difference. We’re working to give every child what they need to thrive and reach their full potential. Your support can make a big difference in the lives of children who are struggling. Please give today.”

Apparently one of the most effective methods of latching onto contributions for any purpose is with the phrase “For the Children.” The number of institutions using this approach seems to be limitless, and without a doubt, the amounts of money collected in this fashion must be mammoth.

It’s my suspicion, nonetheless, the sums actually going in some fashion to truly benefit children are miniscule. My familiarity with certain charitable groups, as to how their funds are collected and distributed, leads me to believe most children’s benevolent organizations are little more than blatant scams designed to enrich their operators.

At this point I must confess I’m somewhat confused by the term child poverty. I’m familiar, of course, with the dictionary definition of poverty: “The state of one who lacks a usual or socially acceptable amount of money or material possessions.” This makes perfect sense when applied to an adult, but I can’t bring myself to visualize how it relates to a child. What amount of money or material possessions is usual or socially acceptable for a seven-year-old?

Though it seems long ago, I’m visually travelling back to my childhood. I see myself in the second grade at Webster School, St. Paul, Minnesota. The year is 1937 and the nation is immersed in the depths of the Great Depression. Neither my classmates nor I show any signs of personal prosperity. Our clothing is mostly worn and modest – though no blatant patches are visible. Any coins in our pockets are not displayed. Our lunches, usually consisting of homemade sandwiches with an apple thrown in, are all carried in the standard brown bags. Whatever jobs our fathers may have – if they’re actually fortunate enough to have a job – are ignored as a topic of conversation. Yet despite an obvious dearth of material abundance, I observe no displays of abject poverty … nor do I believe any of us feel particularly deprived. We’re getting by as best we can; I believe most of us view the future with hope and trust.

I’m trying to recall a circumstance where, as a child, I actually experienced poverty … and one such event comes to mind. Every Saturday several of my schoolmates and I attended the movie matinee, where we watched a double feature, interspersed with a short serial such as Flash Gordon or Zorro.

Admission cost 10¢, and my mother always saw to it I had a dime. One day, perhaps about 1940, when we went to purchase our tickets, we learned a tax had been imposed, so we needed 11¢ – and being a penny short, I didn’t get into the theater. I missed the movie that week; it’s the only time I recall experiencing child poverty. Does this now entitle me to qualify as an expert on the subject?

It cannot be denied millions of Americans live insecure lives. Although the official U.S. unemployment rate is low, the paltry incomes of a large portion of the adult working population enable many to do little more than just scrape by. It’s reported nearly half of all citizens who incur a financial emergency of $400 are unable to meet it without distress. Thus, if the head of household is perennially short of cash, it follows the children will be equally deprived.

This, however, doesn’t constitute child poverty – unless somehow the plight of the parents is relegated to the child, and this would only be so if parents are not responsible for their progeny. When that day arrives I’ll hope to be living in a different universe.

A final comment: This nation’s welfare systems are misunderstood; in reality they’re enormous. The federal government operates over 90 means-tested programs providing housing, food, cash, medical care, and targeted services to poor and lower-income Americans. Approximately 50 percent of means-tested welfare spending goes to low-income families with children, defined as those with pre-welfare incomes below 200 percent of the federal poverty level. For a family of four this is just short of $50,000.

But despite the massive spending and generous benefits available to low-income families, the U.S. Census Bureau reports nearly 18 million American children are living in poverty. How can this be? It’s that the Census counts a family as “poor” if its income falls below the official poverty income threshold, and in this calculation, of the roughly $402 billion spent on cash, food, housing, and medical care, the Bureau may only count 3 percent, or about $11.9 billion, for purposes of measuring child poverty.

As you see the numbers are rigged so to intentionally understate the true benevolence of the American taxpayer. Why this is so I don’t know; I can only guess it’s a contrivance to induce our lawmakers to enact ever more funding bills for the child poverty enthusiasts.

Al Jacobs, a professional investor for nearly a half-century, issues weekly financial articles in which he shares his financial knowledge and experience. Al can be contacted at al@abjacobs.com.

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