The poverty threshold is an amount of money that is required to meet a certain minimum standard of living. That is, it is computed by determining what amount of money it takes to live in an apartment and eat at a certain minimum level. The government’s definition of poverty is not tied to an absolute value of how much an individual or family can afford, but is tied to a relative level based on total income received. For example, the poverty level for 2011 was set at $22,350 (total yearly income) for a family of four, and $10,890 for a single person. Here is the table:
|48 Contiguous States
(source: US Dept of Health and Human Services)
Currently, 12.6% of the US population, or 37 million people, are below this poverty threshold. So, could we fix this problem by merely giving every person below the poverty level a million dollars? The answer is no. The reason for this, is that as we pour money into the poor community, those people will by things, thus placing an inflated demand for products like food and housing on those communities. Additionally, no one will go to work, because they are all millionaires. The only way for businesses to produce the goods that are under such high demand is for wages to increase to the point where the nouveau riche will stop the buying spree long enough to go to work. These two factors will cause prices to rise until the supply/demand curve stabilizes at a new price level- a price level that is much higher than it was before we handed out the money.
This is why a war on poverty where the wages of the rich are confiscated and given to the poor can never be successful.
Not only that, but let’s face it: The United States doesn’t have a poverty problem. We are the only country in the world where the poorest portions of the population own cell phones and televisions. According to Nielson, 96.7% of American households own a television. Cellular ownership is high as well: 94% of Americans own a cell phone. Tell me again why my money needs to be confiscated so that someone else can get a free cell phone and television.