In modern politics, many believe that the government plays the role of Robin Hood. Through progressive taxation and spending, proponents believe that government reduces poverty while making everyone pay their fair share. The pages that follow will empirically evaluate the effectiveness of state government as Robin Hood.
In the mid-1990s, the federal government eliminated the largest welfare program, replacing it with a system of block grants to the states. In essence, the federal government admitted its failure in administering welfare and looked to the states to serve as laboratories of reform in the eff ort to reduce welfare and poverty. The results have exceeded proponents hopes.
Likewise, states also serve as laboratories of democracy in fiscal policy. Some states maintain relatively low levels of taxation and spending, while others have much larger and ambitious state governments. Empirical evidence indicates that these varying policies have had real, measurable impacts on state poverty rates. Nationwide, both general and childhood poverty rates dropped during the 1990s. Some states reduced poverty much more than others did; however, there are other states that in fact suff ered increases in poverty rates during the 1990s, despite the booming national economy and the general success of welfare reform.
Myriad individual-level and state policy decisions infl uence the number of people living below the poverty line in a given state. Nevertheless, this paper addresses the broad question: which are better at reducing poverty big government states or small-government states?
Using data from the U.S. Census Bureau, the pages that follow demonstrate that low-tax and -spending states enjoyed sizable decreases in poverty rates during the 1990s. High-tax and -spending states, meanwhile, suffered increases in poverty rates. Th is study grades each state with regard to reducing both general and childhood poverty rates during the 1990s.
Private-sector job growth is the most eff ective antipoverty program. Citizens and policymakers who seek to reduce poverty and improve the lot of the poor should embrace policies promoting as much private-sector growth as possible.