Budgeting Scolds Are Gaslighting Struggling Americans
The affluent often blame poverty on bad budgeting skills, claiming the poor just need to be taught financial literacy. But working-class people require living wages and a functioning safety net, not condescending lectures about money management.
Last week, Ohio Senator Jon Husted condescendingly blamed his constituents’ poverty on bad budgeting skills. But research shows the exact opposite: working-class people know the value of a dollar and are way less likely to overspend than the rich. (Kevin Dietsch / Getty Images)
Speaking on a conservative podcast last week, Senator Jon Husted confidently asserted that low-income people can’t handle daily challenges and lack basic budgeting skills. “People living in poverty are just not very experienced at navigating the real world, right?” said Husted, a Republican representing Ohio who is facing a November election, likely against former Senator Sherrod Brown.
“I remember talking to one young lady who said, ‘Well, I don’t really know how money works at a grocery store,’ because she grew up and has lived all of her adult life using SNAP [Supplemental Nutrition Assistance Program] cards to buy groceries,” Husted continued. “So you literally have to teach people how to budget.”
Husted’s comments drew criticism from Brown and others. Deservedly so. But his statements reflect an attitude held by far more people than one out-of-touch politician. Husted’s condescension about poor Americans permeates the government and many nonprofit organizations. In these environments, it’s common to hear that people endure poverty not because they don’t have enough money but because they don’t manage their money properly. This myth is often packaged as a call for “financial literacy.”
The US Department of the Treasury has an entire commission devoted to financial literacy. The Congressional Research Service has issued a report claiming that “African American and Hispanic adults, women, lower-income adults,” and “adults with less formal education” all lack financial literacy. Missing from the report was any acknowledgment of the decades of stagnant wages and intensifying inequality, generations of racial discrimination in housing policy, and other structural factors that disadvantage these groups.
The International Federation of Accountants claims that a lack of financial literacy perpetuates poverty. Nonprofit organizations create four-week training courses to teach homeless families about money management. These are hardly outliers; it’s typical for organizations to pat themselves on the back for teaching budgeting skills to the poor.
Only one problem: the poor are often already fastidious money managers. I have spent many years working with low-income people, most recently in a law school clinic where we represent tenants facing eviction, and I can attest that nearly every client we have is remarkably precise with their budgeting. They have to be. It is the only way home health care workers, food service workers, and people living with disabilities can survive on incomes far below any reasonable definition of a living wage.
The Poor Outperform the Rich in Financial Choices
Our clients know to the penny what to expect on their utility bills, where to find the cheapest rice, beans, and pasta, and which health clinics are most likely to give out samples of prescription medicines.
While the Treasury Department defines financial literacy as understanding “investment diversification,” our clients are experts at knowing the last day they can pay rent without incurring late fees and which food pantries are within walking distance of the bus line.
(Speaking of food pantries, Husted’s alleged conversation with a SNAP recipient who has never paid cash for food is almost certainly fabricated. SNAP benefits fall far short of covering the cost of even low-priced meals, so even recipients of the maximum benefit still pay out of pocket for food each month.)
No need to take my word for it. Studies have shown that low-income people outperform the rich in many financial decisions. “The poor are more attuned to the cost of everyday experiences,” writes University of Chicago professor Anuj K. Shah. “They think of money even in situations where many other people do not.”
The research points to a broader irony. When behavioral economists study how people evaluate financial trade-offs, it is wealthier subjects who make irrational choices — overpaying for convenience, misjudging the value of a discount relative to what it could actually buy. Low-income people, by contrast, carry a constant awareness of what money means in practical terms: a tank of gas, a week of groceries, a copay. The rich, then, are worse at managing household budgets than the poor, a paradox that makes the premise of “financial literacy” programs aimed at addressing poverty look not just patronizing but backward.
US Bureau of Labor Statistics data shows that, compared with wealthier households, households receiving means-tested assistance spend a far smaller share of their income on entertainment, alcohol, and tobacco. So it is not surprising that, when safety-net benefits are increased or guaranteed income funds are distributed, low-income people reliably use the extra funds to cover basic necessities like housing, food, and health care.
Which leads to an obvious conclusion: it is Senator Husted and other proponents of gaslighting financial literacy programs who need a lesson in “navigating the real world.” In Husted’s Ohio and across the country, people deserve living wages and a robust safety net, not condescending lectures.