The Poor Count

Determining precisely who are the poorest Americans would seem to be a simple enough things to do. But like many bureaucratic tasks, counting up the official poor is fraught with political complications. Last October the issue became front-page news when The New York Times suggested that the Census Bureau might raise the poverty level, boosting the threshold that establishes who counts as officially poor from $16,600 to $19,500 for a family of four. Actually, the Times was wrong (the bureau doesn't even have the power to change the level). But even the false assertion that the poverty level might be raised sparked a fair amount of debate.

Based on a flurry of editorials written after the story, it is clear any eventual raise of the poverty level--a change long overdue--will be highly politicized and controversial. The conservative response follows a general tack: Ignore the growing gap between rich and poor, but trumpet the increasing affordability of all sorts of consumer goods. In The Wall Street Journal op-ed pages, W. Michael Cox and Richard Alm, co-authors of the recent book Myths of the Rich & Poor, observed that two-thirds of poor families owned microwave ovens in 1996, while three-quarters owned VCRs. Other editorials touted similar figures, citing a 1998 Heritage Foundation report that magnanimously observed that poor people's living situations have improved since the Dickensian squalor of nineteenth-century tenement housing.

But as Chauna Brocht of the Economic Policy Institute explained in a letter to the Journal, omitted in this emphasis on the declining prices of consumer electronic goods is the growing share of a low-income family's budget spent on expensive necessities, such as health care, housing, and transportation. Sure, poor people own many of the products we now consider part of the average American household, but despite our booming economy, lots of families are having a tough time finding affordable housing or paying for medical care without insurance coverage.

More critically, the Census Bureau poverty calculations are almost arbitrarily abstract. The agency takes a 50-year-old government approximation of a cheap annual food budget, multiplies it by three, and then adjusts for family size and inflation. Everyone who earns less income than the amount derived from the above equation--which in 1998 meant $16,600 for a family of four--lives below the poverty line.

The formula was devised in 1964 by Social Security Administration analyst Mollie Orshansky, who used data collected in the 1950s. She figured the average family spent a third of its budget on food, and anyone who couldn't afford a nutritionally adequate diet could be reasonably described as poor: a useful calculation during the Johnson administration, perhaps, but not the most precise measurement today.

There are other problems. Critics note that the agency only considers people's income, excluding many government benefits that help people with very low incomes make ends meet, such as refunds from the Earned Income Tax Credit, food stamps, or housing subsidies. On the flip side, the bureau doesn't account for drastic changes in everyday economics. While the price of food has actually gone down over the past 50 years, poor families now have to spend larger portions of their budget on housing and child care.

This is too bad because the poverty numbers are typically the most widely followed income statistics in the country, which is why a more accurate measurement of poverty is important. Gary Burtless, a Brookings Institution economist, explains it would give policy makers information on the effectiveness of their decisions. Do we need to spend more on affordable housing? Is welfare reform helping poor women with children escape poverty? Despite the fact that we really can't answer these questions using the current measure, any changes are a long time off. Poverty figures determine eligibility for some federal programs, such as Head Start and food stamps, and politicians are cautious about having to automatically spend more money on the poor. But some proponents of a revision, including Burtless, believe compromise changes could be implemented that wouldn't increase the number of people counted as poor, but would still better explain who is poor and why.

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