Does America Require Poverty to Function? A Hard Look at Capitalism and Inequality

America is one of the wealthiest nations in the world, and yet, it has some of the highest poverty rates among developed countries. In a candid conversation between Jon Stewart and sociologist Matthew Desmond, author of Poverty, by America, this contradiction is explored with intellectual clarity and moral urgency. The exchange raises a provocative question: Does the American economic system require poverty to function?

Desmond doesn’t claim that poverty is an inevitable byproduct of capitalism. Instead, he suggests something even more unsettling: many Americans benefit from poverty without realizing it. From artificially cheap labor and housing markets to regressive tax structures and weak labor protections, the poor often subsidize the lifestyles of the more affluent.

The Hidden Cost of Inequality

America’s poverty is not simply a failure of will or policy; it’s an ecosystem that rewards those who benefit from others’ deprivation. As Desmond points out, the U.S. government spends billions on programs like Medicaid, food assistance, and housing subsidies—critical lifelines for millions. Yet, it also spends far more on subsidies for the affluent, from tax breaks on mortgage interest and 401(k) contributions to under-enforced tax laws that favor the wealthy.

In fact, Desmond cites a shocking statistic: the top 20% of earners receive more in government support—around $35,000 per year—than the bottom 20%, who receive around $26,000. This isn’t a bug in the system; it’s a feature.

Tax Justice: A $1 Trillion Oversight

Much of the potential to end poverty lies not in new spending but in simply collecting what’s owed. According to Desmond, if the top 1% of earners paid the taxes they already legally owe, the government would gain an estimated $175 billion per year—almost exactly what it would take to lift every American above the poverty line.

To put it in perspective: ending poverty in the U.S. would cost around $177 billion annually, less than 1% of America’s GDP. Yet every year, tax evasion and avoidance, particularly among the wealthy, costs the government nearly $1 trillion.

This is not about raising taxes, Desmond emphasizes—it’s about enforcing existing laws. The system is designed not only to be lenient to the rich, but also to shift scrutiny onto the poor.

The Illusion of Welfare for the Poor

A common refrain in political discourse is that poor people are “living off the government,” implying that they are the primary beneficiaries of social programs. But that view ignores the massive subsidies flowing to corporations and wealthy families—through tax loopholes, capital gains preferences, and deregulatory advantages.

Desmond urges us to stop thinking of “welfare” as food stamps or housing vouchers alone. Government policy flows both down and up, and in America, it flows disproportionately upward.

This reframing matters because it changes the question. It’s no longer “Can we afford to end poverty?” but rather, “Can we afford not to?”

COVID-19: A Brief Glimpse at What’s Possible

The pandemic response showed what’s possible when the political will aligns with human need. Through expanded unemployment benefits, eviction moratoriums, and enhanced child tax credits, the U.S. made one of the most aggressive attempts in recent history to fight poverty.

The result? Child poverty dropped by 44% in just six months. Evictions fell to record lows. But as the emergency measures expired, these gains vanished—along with public attention.

Why was such transformative progress allowed to evaporate? According to Desmond, part of the answer is silence. Americans didn’t mobilize. We didn’t insist that these temporary solutions become permanent. In our collective quiet, millions of children slipped back into poverty.

Working-Class Struggles: Above Poverty, Still Suffering

Even Americans who don’t fall below the poverty line often feel squeezed. Wages have stagnated for decades, while housing, education, and healthcare costs have skyrocketed. These families pay their taxes but often feel they receive little in return.

That sense of being neglected creates a dangerous feedback loop: “resource guarding”—a reluctance to support public programs because of a perception that someone else is getting a better deal. It pits the working class against the poor, while wealth quietly concentrates at the top.

This illusion—that there is not enough to go around—is deeply entrenched. Yet Desmond’s research shows otherwise. The problem isn’t scarcity; it’s distribution.

Empowering the Poor: Beyond Charity to Justice

Desmond argues that poverty persists not because we don’t know how to end it, but because we haven’t prioritized empowering the poor. That means more than just cash assistance. It includes:

Worker power: Supporting labor unions and collective bargaining.

Housing reform: Breaking up exclusionary zoning and speculative real estate markets.

Banking reform: Ending predatory practices from payday lenders and high-fee financial services that target the poor.

These aren’t radical ideas. They’re structural reforms that would shift power, not just income.

A New Labor Movement: Sectoral Bargaining

One particularly innovative solution Desmond discusses is sectoral bargaining. Instead of organizing workers company by company—like one Starbucks or Amazon warehouse at a time—this approach organizes entire industries. Workers in hospitality, logistics, or healthcare could vote to bargain collectively, and government would help set universal standards across the sector.

This is already common in many European countries, where labor is treated as a stakeholder in the economy—not an expendable cost.

Valuing Labor Like We Value Capital

America lavishes tax breaks on investment income while taxing wages at higher effective rates. Capital gains are treated with reverence; labor, with suspicion. This imbalance fuels inequality and undermines democracy.

Desmond proposes a simple but powerful idea: Put workers on corporate boards. Let them help decide how profits are distributed, how working conditions are shaped, and how businesses evolve.

It’s a model used in Germany and other advanced economies. The result? Greater equity without sacrificing productivity.

Conclusion: Poverty Is a Choice, Not a Destiny

Matthew Desmond’s core message is stark but hopeful: America’s poverty is not inevitable—it is a policy choice. It persists because we allow it, and because it serves certain interests.

We can end it. We have the tools, the data, the resources, and the precedent. But it requires confronting the systems that reward inequality and stepping into a fuller sense of civic responsibility.

As Jon Stewart quips during the interview, maybe the real solution is that the poor need better lobbyists. But the truth is, they need something more powerful: a society that chooses justice over indifference.

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