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Obama's Rose-Colored Glasses: Growth Has Little or Nothing to Do with Jobs or Reducing Poverty

Faced with the bad, but hardly surprising news, that poverty has increased in the US on his watch, to a record level not seen since before President Lyndon Johnson launched the War on Poverty in 1965, President Obama is declaring that the answer to poverty and joblessness is economic growth.

He's wrong, but, as they say on NPR's "Marketplace" program, "But first, the numbers."

According to new figures from the Census Bureau, the poverty rate in America in 2009 jumped to 15%, up from 13.2% of the population in 2008. That would be one in seven of us, or about 45 million people living below the poverty line of $22,000 for a family of four. Now, obviously, things are pretty tough for people who are earning a lot more than that. It's not easy getting by with a family of four on $35,000, especially in some parts of the country, so the real poverty rate is probably a whole lot higher than 15%, but let's not quibble. The point is that we now have the highest rate of poverty that the country has seen since the mid-'60s.

Obama's rosy view of economic growth is at odds with realityObama's rosy view of growth is at odds with reality

Obama is claiming that growing the economy is the answer for these people. As he put it at a White House news conference, "The most important anti-poverty effort is growing the economy and making sure there are enough jobs out there...If we can grow the economy faster and create more jobs, then everybody is swept up into that virtuous cycle."

The problem with this answer is that economic growth doesn't guarantee jobs, and it also doesn't guarantee that any jobs created, or already there, will pay better wages.

Economic growth is a term that refers to the size of the nation's Gross Domestic Product (GDP), which is the sum total in dollars of all the goods and services that are "produced" in the country. It can rise, as it has for the past year, even as joblessness increases and poverty worsens. This is because companies can increase production while not hiring more workers, by working existing workers harder, for example.

Furthermore, gross domestic product is calculated by adding together total consumer spending, total government spending, total business spending, and the value of net exports. Think about that. The military budget is part of the GDP calculation! So is debt payments by corporations. Neither of these huge outlays has anything to do with creating jobs. Well, okay, the military spending does produce some jobs, but given the outrageous prices the military pays for everything, the number of jobs produced per million dollars of military spending is pretty small (how many worker/days does it take to make a million-dollar toilet seat?).

So the president's claim, that promoting economic growth is going to help the poor, is bogus. Growth helps investors. It helps business owners. But it doesn't necessarily help the poor.

To help the poor you need programs of income support, and you need jobs, but the way you get the poor employed is to hire them--now!--with government money.

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