Is Poverty Rate Rise As Bad As It Looks?

Is Poverty Rate Rise As Bad As It Looks?

BY JOSEPH GUINTO
INVESTOR'S BUSINESS DAILY

The sluggish economy helped push the nation's official poverty rate up for the second straight year, sending 1.7 million more people into the ranks of the poor and providing sure fodder for Democrats who claim President Bush has mismanaged the economy. But while the official numbers reported by the Census Bureau Friday edged up, other nonofficial measures used for the first time showed either no increase or a lower overall rate of poverty than what the bureau reported.

The brighter nonofficial numbers didn't stop Democrats from using the report as ammunition against Bush. Several presidential rivals said the official data prove Bush's tax cuts haven't helped the nation's lowest earners. "The single largest state in America . . . is now the state of poverty," said Sen. Joe Lieberman, D-Conn. "That's a national scandal."

The fine print in the report could actually serve to blunt such criticism. Responding to critics and a charge from the National Academy of Sciences, the Census Bureau for the first time included 15 alternate measures of poverty with its official measure. "Alternative measures of income and poverty, which consider taxes and the value of noncash benefits, present a more mixed picture of the nation's economic situation," said Dan Weinberg, chief of the Census' housing and household economic statistics unit.

Defining Poverty

The bureau said the official poverty rate grew from 11.7% in 2001 to 12.1% in 2002. A total of 34.6 million people were classified as poor in 2002, a 1.7 million rise. And it reported the official measure of median household income fell 1.1% to $42,409 annually. But six of the 15 alternative measurements of poverty showed no change or only a fractional increase in the poverty rate between 2001 and 2002.

Nine other measurements showed an increase in the rate. All nine of those measures also pegged the poverty rate much lower than the Census Bureau's 12.1%. They instead ranged from a low of 7.5% to a high of 11.6%.

The 15 alternative measurements attempted to account for "noncash benefits" that low-income individuals often receive. Those include food stamps, housing subsidies and other government assistance provided to the nation's lowest earners. Some think tanks, economists, and business groups have suggested for years that not including noncash benefits in the official data skewed the poverty picture.

Officially, Census determines who is poor by totaling a family's pretax income and measuring that against an estimate of what basic necessities cost in any given year. The poverty threshold for a family of four in 2002 was $18,392 in annual income. For individuals it was $9,183. Public aid programs like Medicare aren't added to that income level, though. Worse, neither is some investment income, including capital gains from equity sales. Census evaluates households based only on their current income in any given year.

That means the agency does not officially account for assets accumulated in prior years, including savings accounts, stock-market gains, real estate and other holdings. As a result, some defined as being poor may actually be far from it. A major study of poverty rates by the Heritage Foundation, a Washington think tank, found that in 1995, 41% of people in poor households owned their own homes and that in 1998 nearly 200,000 people classified as poor owned homes that were worth more than $300,000.

"If poverty is defined generally as lacking adequate nutritious food for the family, clothing and a reasonably warm and dry apartment to live in . . . then there are few poor persons remaining in the U.S.," said Heritage's Robert Rector. "In fact, numerous government reports indicate that most 'poor' Americans today are better housed, better fed and own more personal property than average Americans throughout most of this century." Even the official numbers released Friday weren't all negative.

Child poverty showed no significant change from 2001. It was 16.7% in 2002, well off its 1993 high of 22.7%. The poverty rate for those 65 and older also showed no major change, remaining at 10.4%. At the same time, women's earnings increased for the year. Women who worked full time gained 1.8% in earnings over 2001. And men working full time, all year, saw a 1.4% increase in earnings. But overall incomes still fell 1.1% in 2002, the third straight year of decline after seven straight increases during the 1990s.

Even so, the Census Bureau's report found that the rate of income lost during the 2001 recession was less than the rate of decline in any recession since 1969. Poverty experts say slight increases in poverty and declines in income are typical during recessions and slowdowns as unemployment increases and overtime hours and bonuses are cut. "The highest point in the poverty cycle and the lowest point in income tend to come in the year after a recession," Weinberg said.

1 posted on 09/27/2003 7:22:59 AM PDT by meowmeow

Oops - I think I screwed something up here. Anyway, good article from IBD. Not that the dems will let facts get in the way of their screeching.