The unintended consequences of the war on poverty

Conventional wisdom suggests that a rise in federal expenditures designed to help low income groups should produce some reduction in poverty and thus some reduction in measured income inequality. This passage is taken from Vedder, Gallaway, and Sollars (1988). Ideas of this sort took a prominent place in national public policy debates in the 1960s. Neither economic growth nor a surfeit of income transfers seemed capable of making significant inroads into the incidence of poverty. The first anti-poverty legislation, The Economic Opportunity Act of 1964, was based on the notion of structural poverty. Perhaps this explains why, when he signed that legislation, Pres Lyndon B. Johnson proclaimed, that the days of the dole in America are numbered. Far from disappearing, as the president's statement suggested, the data from the early years of the "War on Poverty" suggest that the dole was flourishing.