Bill Gates on poverty

by on March 15, 2014 at 1:03 pm in Current Affairs, Economics, Law, Web/Tech | Permalink

Should the state be playing a greater role in helping people at the lowest end of the income scale? Poverty today looks very different than poverty in the past. The real thing you want to look at is consumption and use that as a metric and say, “Have you been worried about having enough to eat? Do you have enough warmth, shelter? Do you think of yourself as having a place to go?” The poor are better off than they were before, even though they’re still in the bottom group in terms of income.

The way we help the poor out today [is also a problem]. You have Section 8 housing, food stamps, fuel programs, very complex medical programs. It’s all high-overhead, capricious, not well-designed. Its ability to distinguish between somebody who has family that could take care of them versus someone who’s really out on their own is not very good, either. It’s a totally gameable system – not everybody games it, but lots of people do. Why aren’t the technocrats taking the poverty programs, looking at them as a whole, and then redesigning them? Well, they are afraid that if they do, their funding is going to be cut back, so they defend the thing that is absolutely horrific. Just look at low-cost housing and the various forms, the wait lists, things like that.

As you would expect, the interview is interesting throughout.  For the pointer I thank Samir Varma.

Wesley Fryer March 15, 2014 at 1:14 pm

Thanks so much for sharing this article!

dearieme March 15, 2014 at 3:04 pm

Mr Gates goes to Washington?

RR March 15, 2014 at 3:07 pm

I thought he is from Washington!

dearieme March 15, 2014 at 3:21 pm

Different Washington.

Fritz Wolfe March 15, 2014 at 1:22 pm

Interesting that we worry so about gaming the system when the poor are the recipients of our tax money but not so much when corporations or the one-percenters game the system. Those, of course, are legitimate tax breaks, tax breaks that corporations or the one-percenters “earned” or “need” to create jobs or to simply compete.

Anti-Ummm March 15, 2014 at 1:51 pm

Agreed. Corporate welfare is just as bad as waste in the poverty remediation sectors.

Charles D March 15, 2014 at 1:58 pm

Did Bill Gates say any of those things that you’re (apparently) attributing to him? Or is it just that, every time someone wants to talk about anti-poverty programs, they must begin with an protective incantation against “The One Percent?”

KPres March 15, 2014 at 2:36 pm

Because they’re already paying more than their fair share for the government services they receive? Any “gaming” will only being them closer to even.

john personna March 15, 2014 at 2:46 pm

I don’t think Gates’ logic is off. If we want nice things, we have to pay for them. So either we tax people with money as we have been doing since 1930, or we return to a pre-1930 definition of poverty. Our choice.

JonFraz March 16, 2014 at 3:08 pm

The pre-1930 world no longer exists: we cannot “return” to anything in it. Time runs just one way, and that way moves us ever farther from what is past.

bon_supp March 15, 2014 at 3:44 pm

Could someone offer a few empirical studies of the poor “gaming the system”? It is mentioned regularly but I am curious how common it is and the magnitude of the problem compared to the overall budget / economy / other incentives.

Thanks!

Seth March 16, 2014 at 10:49 am

Here’s one re: social security disability: http://www.econtalk.org/archives/2012/04/autor_on_disabi.html

JonFraz March 16, 2014 at 3:13 pm

SSDI has become a de facto income support program for people who have been permanently dumped from the work force. SSDI shouldn’t be in that role, absolutely not, but what are we going to put there? The outsourcing boomlet has run its course, true, but the technological elimination of jobs grows greater every year. We need to start thinking about this: what are we going to do with all the “obsolete” people? We have to do something (I personally favor a public works program as I believe “money for nothing: is morally corrosive), or else we will face a social and economic collapse that will make the Fall of Rome look like genteel quarrel at a garden party.

JosieB March 16, 2014 at 8:36 pm

Well, it was reported last year that 20 to 25 percent of EITC checks are sent to claimants with fraudulent Social Security numbers. I don’t know who the con artists are, but my guess is they aren’t members of the upper classes. I think EITC is a good idea, but when legislators talk about expanding the program, I wish they’d also talk about verifying recipients with some basic cross-referencing.

Marie March 18, 2014 at 8:58 am

Why would you think they were members of the lower class?
That’s not gaming, that’s pure criminal fraud, and sounds to me like the kind of skill set you get with credit card fraud.

naum March 15, 2014 at 1:24 pm

Lopped off the 1st part of that answer…

“In general, on taxation-type things, you’d think of me as a Democrat. That is, when tax rates are below, say, 50 percent, I believe there often is room for additional taxation. And I’ve been very upfront on the need to increase estate taxes. Particularly given the medical obligations that the state is taking on and the costs that those have over time. You can’t have a rigid view that all new taxes are evil. Yes, they have negative effects, but I’m like Krugman in that if you expect the state to do these things, they are going to cost money.”

john personna March 15, 2014 at 1:55 pm

Someone replaced the robber baron with a nice guy.

Keith March 15, 2014 at 2:08 pm

Robber baron? He made millions of people more productive with his company’s products and made millions of investors rich. How was that not nice?

john personna March 15, 2014 at 2:25 pm

Breaking Windows by David Bank is a pretty good history. Not only did MS strong arm partners to maintain the monopoly, they paid the Windows and Office tax internally. All was in service of getting MS on every desk, and then extracting rents from every desk.

You need some deep history in computer science to understand the better alternatives, for user benefit and productivity, every step of the way.

john personna March 15, 2014 at 2:35 pm

If you don’t know, Digital Research had the original slot to provide IBM with an OS. When they blew off a meeting(!) Gates said he could do it.

His key robber baron move was to charge IBM and every successive licensee a price per “PC” sold, regardless whether DOS/Windows was loaded on it. Thus when IBM tried OS/2 or anyone else contemplated an innovative alternative, they’d STILL be paying full freight to MS.

Thus no one but deep pockets IBM even tried a new OS as a manufacturer installation. Apple survived as a niche, as did a few you load ‘em UNIXes, and then Linux.

prior_approval March 15, 2014 at 2:22 pm

Well, at least someone who contributes vast amounts of money to education – much of it the form of Microsoft licenses. Which is amusing, considering that someone like Torvalds can’t get a tax write off on ‘donating’ multiple millions of licenses to educational users worldwide.

A virtual robber baron is much closer to reality – once one accepts the premise that Gates is ‘donating’ something.

AlanW March 15, 2014 at 7:13 pm

The Gates Foundation donates a hell of a lot more than software licenses.

byomtov March 16, 2014 at 12:24 am

I actually don’t think you get a tax deduction for donating a software license. You certainly don’t get the retail value.

Normally, as I understand it, a donation by a business of goods it normally sells entitles it to a deduction of the cost of the goods, not their selling price. How that works in software I don’t know.

Brett March 15, 2014 at 2:10 pm

You have Section 8 housing, food stamps, fuel programs, very complex medical programs. It’s all high-overhead, capricious, not well-designed. Its ability to distinguish between somebody who has family that could take care of them versus someone who’s really out on their own is not very good, either. -

It’s a nice idea, but the problem is that political issues keep getting in the way. You have the high-overhead, complex bureaucracies because half of the politicians hate the very idea of having a program to help the poor and barely tolerate it only if it comes with a whole list of eligibility requirements that need enforcers and the bureaucracies that hire them. You get fragmented programs because the few times something more consolidated comes up, it gets voted down for being socialistic – you end up just adding in stuff piece by piece. And of course, once programs and their respective bureaucracies are there, changing them heavily becomes difficult because it’s inherently disruptive, with people losing their jobs and possibly losing assistance programs they’ve built their lives around.

I’d be as happy as can be to sweep the whole thing away and replace it with a tripartite system of universal health insurance, a basic income stipend, and a severe disabilities/assistance program, but that’s not happening.

Brett March 15, 2014 at 2:11 pm

Sorry, I forgot to add “and said politicians and their backers get hysterical over fraud even when it’s incredibly rare, passing around stories about welfare cheats and exploiters”.

Jay March 17, 2014 at 1:43 pm

TLDR; Blame Republicans, blah blah. Please have an original thought and get back to us, especially after the current hot-button issue was passed by an all-D congress and created one heck of a bureaucratic mess without any help from the R’s. If the R’s are blocking every “improvement” along the way, they’re really bad at it.

Merijn Knibbe March 15, 2014 at 2:24 pm

The real danger is that redesigning these programs will enable technocrats to game the rules and fabricate more poverty. Much more poverty. Real, grinding, health deteriorating poverty. Which is what happened and still is happening and is meant to happen in Greece – don’t underestimate the conscious darkness of these policies. The things which Bill mentions disaprovingly are except for the gaming exactly what we *want* to see. We don’t want to see hungry people! Even a system which can be gamed (and it sure can be gamed, I’m in fact quite apt at this when I put my mind to it. I’ve got a steady job but you don’t have to be poor to game the system, you’re chances of gaining are in fact higher when you’re not poor) is better than none. About Greece (http://www.eurointelligence.com/):

“Nick Malkoutzis shows us the social impact of the crisis in Greece in figures. While the real impact is elusive to our eyes and most evident in living rooms, offices, factories or hospitals, there are some indicators to show the sheer extent of it: 34.6% of the population live at risk of poverty or social exclusion (2012 figure), household’s disposable income contracted 30% since the crisis began, with about a third of households indicating that they are behind payments and 40% saying they will not be able to meet commitments this year. The Public Power Corporation is disconnecting around 30,000 homes and businesses a month due to unpaid bills; unemployment has risen 160% so that now 3.5m employed people have to support 4.7m unemployed or inactive. Only 15% of the 1.4m unemployed currently receive financial assistance from the state; there is no safety net for self-employed, who make up 25% of the work force. Social transfers have been cut by more than 18%, health care cuts of 11.1% between 2009-2011 are the largest in the OECD while there was a significant rise of HIV infections, tuberculosis, still births. For 48.6% of families pensions are the main source of income, expected to be cut even further. The €700 pension has been reduced by about 25% since 2010 and is due to be halved over the next few years”.

That’s poverty by design.

Benjamin Cole March 15, 2014 at 3:03 pm

Bill Gates is an expert on poverty…okay. What if Bill Gates said defense spending had gone nuts…would people listen?

Dan Weber March 15, 2014 at 3:52 pm

Bill Gates spends his own money to reduce global poverty, so he has made himself an expert in it.

If you were spending 20 billion on nachos, you would rapidly become a world expert in nachos.

CMOT March 16, 2014 at 11:31 am

Microsoft’s, and Bill Gate’s, success came from producing just-good-enough products and then ferociously out-competing everyone else in the market. It’s never been obvious how that skill set how that would translate into philanthropic success. And the truth is, it hasn’t.

A close look at the actual results of the Gates Foundation reveals a striking finding: practically all of the initiatives they have launched have failed. It’s only successes have come when it partnered with pre-existing campaigns. But even then the success of those campaign seems to be inversely proportional to the Gates Foundation’s management role.

MD2 March 16, 2014 at 12:22 pm

“A close look at the actual results of the Gates Foundation reveals a striking finding: practically all of the initiatives they have launched have failed. It’s only successes have come when it partnered with pre-existing campaigns.”

Fine, but let’s remember that these are difficult initiatives, and the ones where there aren’t pre-existing campaigns are probably the REALLY hard ones. To their credit, the Gates Foundation funds rigorous evaluations of most, if not all, of their programs, so they at least know when things aren’t working, or don’t have evidence of working.

It may be a case of too-early-to-tell, and it may also be that even widespread failure wouldn’t be far from the expected success rate. But you’re welcome to continue not trying, and the Gates Foundation will at least give it a shot.

Mbutu O Malley March 17, 2014 at 12:04 pm

Only the government is allowed to fund ambitious projects with a high likelihood to fail. If someone does it as a result of a philanthropic endeavor than they’re obviously incompetent.

Marie March 18, 2014 at 9:07 am

Bill Gates is the leading U.S. expert on gaming the system, though.

Jane the Actuary March 15, 2014 at 3:28 pm

Very short comment: when discussing poverty, we really have to have a decent vocabulary to distinguish between people’s material well-being, and the ability/inability of people to provide for themselves, without government subsidies of one kind or another. Right now, we lack this, partly because the term “dependency” has a negative connotation and is thus unusable to describe the latter situation.

http://janetheactuary.blogspot.com/2014/01/we-won-war-on-poverty-really.html

Helen DeWitt March 15, 2014 at 4:24 pm

I pay a property tax in Vermont which is apparently allocated to education. I have a doctorate from Oxford and know distinguished faculty at maybe 20 highly regarded institutions of higher education; I know 10ish languages to wildly varying degrees of competence; I have a smattering of various programming languages; I’m what I’m told counts as a critically acclaimed novelist, which means I have some kind of understanding of publishing; I know how to buy and sell on eBay and how to use a PayPal account and how to set up a website.

I don’t especially mean to pick a bone with Vermont over the money. But I meet so many people whose livelihood depends on providing services to seasonal visitors (if the leaves or snow are bad, they’re stranded); people who explain that they “never put any pressure” on their children to go to college; people who are baffled by PayPal and eBay and setting up a website. I can’t help feeling Vermont would get more value out of me if it required me to make some of this locally scarce knowledge more widely available. And to state the blindingly obvious, I’m no Bill Gates.

I’m in a pretty dodgy financial situation myself at the moment (a single stalker can sadly run a mere critically acclaimed novelist aground) – and I am not at all sure that I am not eligible for food stamps, Medicaid, what have you. But a tax on, a redistribution of expertise would be infinitely more helpful.

Cliff March 17, 2014 at 2:11 pm

wtf? You want the government to make you teach people how to use Paypal?

a Michael March 15, 2014 at 8:05 pm

What does he mean by “gaming the system”? If he means that food stamps should only be used by people who really can’t afford food otherwise (rather than by anyone who qualifies for it), then who should take the mortgage deduction? Only people who can’t afford to own a home without it? I think he’s right that the system is broken, but it goes well beyond what we consider poverty programs. There’s student loans, untaxed employer-provided health care, farm subsidies, and the list goes on. Is anyone who uses these programs gaming the system, too?

Tarrou March 16, 2014 at 11:17 pm

I don’t know what he means by “gaming the system”, but it happens, and a lot. A common one I see at university is students whose parents put them on food stamps rather than pay the meal charges, because it’s “free”. So we quite literally have silver-spoon kids with fully paid up college tuition, mommy and daddy picking up the rent, the cable, the phone and the lease on the brand new Mustang on food stamps, because they have no income. And they don’t. Doesn’t mean they don’t have money.

The Anti-Gnostic March 17, 2014 at 6:57 pm

Report it. This is pure fraud. Or just name the university and I’ll report it. Because I can assure you the DOJ will be all over a scam like this perpetrated by upper class families. They also tend to be the ones yammering the loudest about causes I find repugnant so I’d get a deal of schadenfreude out of it.

Axa March 16, 2014 at 12:09 pm

“When the sun shines, electricity is going to be worth zero, so all the money will be reserved for the guy who brings you power when there’s no wind and no sun.”

I think this is the most simple explanation for the economics of renewable energies I’ve seen. I wonder if Bill Gates is really a lucid thinker or the editor helped a little.

Floccina March 17, 2014 at 10:00 pm

It is not so much the gaming as the overhead.

Ed March 18, 2014 at 6:23 am

Although he makes a decent point about anti-poverty programmes, I’d like to address the last part about bureaucrats. It’s not the job of any bureaucrat to do this. Only an elected politician can make a decision like redesigning an anti-poverty programme wholesale. Many bureaucrats do have good ideas about how to change programmes, but they would be going outside their remits were they to implement their ideas.

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