Patrick Semansky/AP Photo
Representative Alexandria Ocasio-Cortez speaks with reporters, December 18, 2019, on Capitol Hill in Washington. AOC has introduced a bill that would retool the federal government’s definition of poverty to better align with the actual cost of living in different areas of the country.
Representative Alexandria Ocasio-Cortez (D-NY) has proposed a bill to redefine American poverty that the House Committee on Education and Labor may vote on now that Congress has returned from its winter recess. The Recognizing Poverty Act, H.R. 5069, calls on federal agencies to reevaluate the “resources needed to afford basic goods and services” in the United States for the first time since 1963. Agencies would use an updated formula to assess the poverty line that includes “new necessities” like internet access and consider the varying cost of living in different states and metropolitan areas.
The current poverty line is drawn at annual incomes equal to or less than $12,490 for an individual and $25,750 for a family of four, regardless of where someone lives. By this standard, 38.1 million people are living in poverty with an additional 93 million more “living close to poverty,” according to the most recent Census Bureau data from 2018.
Ocasio-Cortez’s bill does not set new income levels, but she said to The Hill that the individual poverty line could rise as high as $38,000, more than three times the current level. This would vastly increase the number of Americans classified as poor from the latest measure of 11 percent. For context, the “Fight for $15” demands a $15-an-hour minimum wage that translates into an annual salary just above $30,000, which would be well under AOC’s suggested poverty line.
The legislation would not be the first time that the federal government has recognized that the current poverty metrics may not accurately measure individual financial struggles. The Obama administration’s Affordable Care Act makes its premium tax credit available for households earning up to four times the poverty line.
“The problem is that America is at the wealthiest point we’ve ever been and yet we are at one of our most unequal points,” Ocasio-Cortez told The Hill last September. In 2019, she also endorsed presidential hopeful Senator Bernie Sanders (I-VT), whose campaign centers on American inequality, often calling out the three billionaires in the U.S. with more wealth than the bottom 50 percent of Americans.
The current poverty levels were developed by Social Security Administration statistician Mollie Orshansky in 1963, when food costs were about one-third of a household’s budget, according to The Economist. Today, child care and food are the largest costs, but the income and poverty-level equations have not been updated to reflect this change. The current poverty rate is also conservative compared to other developed nations’. The U.S. levels recognize poverty when people earn about 26 percent or less of the nation’s median income, according to The Economist, while in the U.K., it’s measured starting at earnings of 60 percent or less of the median income.
But progressive Democrats are not the only ones in Washington seeking to revaluate the poverty rate in the world’s richest country. Since the 2017 tax cuts, the Trump administration has been searching for ways to minimize the country’s safety net for low-income people.
The Office of Management and Budget proposed changing how inflation is factored into measuring poverty, which would gradually alter the number of people counted as living in poverty but in the opposite direction. This inflation rate calculation, using Chained Consumer Price Index for All Urban Consumers (chained CPI), would also decrease how many people could qualify for government assistance programs like the Supplemental Nutrition Assistance Program (SNAP, sometimes called food stamps), Medicaid, and Supplemental Security Income. All of these programs, in addition to Social Security, helped keep tens of millions of Americans out of poverty.
Chained CPI has already been employed in the 2017 tax law to calculate the inflation adjustment for the change in tax brackets. This has given the Trump administration a foothold to extend chained CPI to federal poverty calculations.
In June 2019, Prospect reporter Kalena Thomhave wrote, “This simple change could reverberate across the lives of the poor, making them even poorer and putting the health of seniors and people with disabilities at risk. Though the difference would initially be slight, it won’t seem small for the affected population.” According to the Center on Budget and Policy Priorities (CBPP), after ten years, Trump’s reform would result in hundreds of thousands of people losing access to government assistance programs, in addition to about 40,000 children who would lose access to WIC, the Special Supplemental Nutrition Program for Women, Infants, and Children.
Neither Trump’s nor Ocasio-Cortez’s policy proposals are necessarily popular. No president garners support by abandoning the poor and slashing social programs. And no politician wants to be responsible for an increased poverty rate. It would be difficult even with Democratic control of both houses of Congress to update the poverty rate equation with 21st-century metrics, because it would force a new conversation about what incomes accurately classify America as poor versus working-class, especially compared to today’s ultra-rich. What AOC is trying to do is force that conversation from the fringes to the center of the debate, to focus on what working people actually need in assistance to survive.
