The True Poverty Rate

I thought this was interesting.  I guess I never realized that poverty rate excludes anti-poverty programs, nor that frequent comparisons made by the Left that our poverty rates compare unfavorably to those in Europe are essentially completely disingenuous as they are comparing apples and oranges.

the only way anyone’s ever really found to reduce the number living in poverty is to give the poor money n’stuff so that they’re no longer living in poverty. But if we don’t count the money n’stuff that is being given to the poor then we’re not going to be able to show that giving the poor money n’stuff alleviates poverty, are we?

And that’s the point at the heart of this necessary correction to the US poverty numbers. The 15% number is not the number living in poverty. It is the number who would be living in poverty if it weren’t for all the money n’stuff we give to the poor. For when we calculate the poverty number we ignore almost all of what is done to alleviate poverty. We leave out all four of the largest anti-poverty programs in fact. We don’t count the money spent on Medicaid, we don’t count the EITC, we ignore the costs of SNAP and we completely overlook Section 8 housing vouchers. That’s hundreds of billions of dollars worth of spending on poverty alleviation right there and all of it is entirely ignored when calculating the poverty numbers. What’s worse, we could double the amount of money we spend to alleviate poverty and the number under the poverty line wouldn’t change by one single digit.

 

uspoverty2

 

 

These alternative measures are explained in WAY more depth here (pdf) by Bruce Meyer and James Sullivan

  • Finn Krogstad

    I am uncomfortable with adding government spending on that person to that person's income because am leery of any analysis that assumes that any government program works at 100% efficiency. With indirect support like Medicaid, it is highly unlikely that recipients wouldn't rather just have the money that government pays to hospitals, doctors and pharmaceutical companies. On the other had, direct cash payments must count the bureaucratic annoyance, invasive nosiness, unreliability and other factors against the money provided. I don't know if anybody has ever estimated how much they reduce the value to the recipient, so I suspect that all we can really say is that the value is greater 0% or nobody would sign up.

  • Maymount

    Don't forget that most of those uncounted benefits aren't taxed either... That free loaf of bread may cost $1, but I have to earn approximately $1.30 first and then subtract my taxes.

    Which isn't half as entertaining as the other poverty "measure", usually calculated as a percentage of median income. This is really just a measure of income "inequality". Imagine a mythical country where the median income is $1 million. Imagine all those "poor" people who only earn $250,000! At the other end of the spectrum, if everyone in the country earns $1/day then nobody is poor...

  • LoneSnark

    This is factually incorrect. If you doubled spending on anti-poverty programs, then the resultant reduction in the incentive to work would make the poverty rate worse.

    In fact, it is reasonable to say that were it not for all the money currently spent to fight poverty, the official poverty rate would be significantly lower.

  • timworstall

    "I don't know if anybody has ever estimated how much they reduce the value to the recipient"

    I can't recall whether it was Census or the Bureau of Labor that did look at this. But they did and made the obvious point that the recipients of aid in kind (health care, rent, food stamps) value them at less than the cost of their provision. It is indeed a known point.

  • kidmugsy

    There's a comparable dishonesty in some countries in calculating wealth distribution. You simply exclude the value to people of their entitlement to a state pension, but include the value of any private or occupational pension. Obviously there's room for debate about how, or even whether, to include other entitlements from Big Brother, but I'm darned if I can see any respectable reason to exclude pensions.

  • Zachriel

    Looks like the consumption poverty rate has dropped dramatically since the 1960s.

    LoneSnark: In fact, it is reasonable to say that were it not for all the money currently spent to fight poverty, the official poverty rate would be significantly lower.

    Higher than the rate in 1965? The data doesn't seem to support that.

  • Mercury

    "the only way anyone’s ever really found to reduce the number living in
    poverty is to give the poor money n’stuff so that they’re no longer
    living in poverty."

    That's just absurd and I hope you aren't endorsing this drivel.

    Millions of previously poor and now prosperous peoples of Singapore and South Korea,
    immigrant Jews in America etc. have demonstrated that the most successful path
    from poverty to riches has almost nothing to do with charity.

    It's a lot closer to the truth to say that the more (and more reliably) the poor receive money n'stuff the more likely they are to stay poor.

  • obloodyhell

    As long as the term "poverty" is defined in relative terms and not in absolute ones that reflect basic needs of life, present or absent, it is absolutely impossible to do anything about poverty except distribute it

  • obloodyhell

    }}} so I suspect that all we can really say is that the value is greater 0% or nobody would sign up.

    You can't even really say that. I could open up a kiosk, put up a sign that said, "Free bag of feces, Just sign up now!" and you just know some people would hop right in line. :-D

  • mlhouse

    THis is the demographic trick that all leftist, tax raisers play. In Minnesota, the Department of Commerce issues an annual "Tax Incidence Report". What this report claims to show is that the lowest quintile of residents are taxed at a higher rate than any other income group. That is, as a percentage of income, poor people are taxed more. The problem is, of course, for the lower economic groups they completely leave out all of their government aid and the EIC (the lowest quintile has a high NEGATIVE tax rate).

    In their most recent "study" they claim that the lowest decile of Minnesotans pay THREE TIMES the state and local tax rate than the average Minnesotan. This despite the fact they have NEGATIVE income tax rates and NEGATIVE property tax rates. You simply cannot make this crap up.

    You can look at the current report here:

    http://www.revenue.state.mn.us/research_stats/research_reports/2013/2013_tax_incidence_study_links.pdf

    It is sad that these idiotic reports are the basis of so many policy claims.

  • Zachriel

    LoneSnark: If you doubled spending on anti-poverty programs, then the resultant reduction in the incentive to work would make the poverty rate worse.

    That's your claim. You have to explain the data. The poverty rate was very high in 1965. Then there was massive spending on poverty programs. The result is a dramatic drop in the consumption poverty rate, with the official rate not changing.

  • Gdn

    They would. Some cities have had to outlaw them (bags of feces) recently.

  • nehemiah

    "I am for doing good to the poor, but I differ in opinion of the means. I think the best way of doing good to the poor, is not making them easy in poverty, but leading or driving them out of it. In my youth I traveled much, and I observed in different countries, that the more public provisions were made for the poor, the less they provided for themselves, and of course became poorer. And, on the contrary, the less was done for them, the more they did for themselves, and became richer."

    Benjamin Franklin

  • http://devilish-details.blogspot.com/ mesaeconoguy

    But there has been marked stagnation and degradation in inner city conditions, for the people it was most designed to "help."

    The Great Society was a spectacular failure.

  • Zachriel

    mesaeconoguy: The Great Society was a spectacular failure.

    According to the data above, it was a success. A third were in living in poverty, now only a few percent. Without assistance, less than 15% would today be in poverty.

    Did you want to address the data above?

  • http://devilish-details.blogspot.com/ mesaeconoguy

    Unfortunately, the information above is wrong.

    More accurately, it is incomplete.

    In order to fully assess the astronomical failure of the Great Society, you need to consider numerous other metrics:

    Underperformance and near total collapse of government-run public schools, especially in inner cities

    Out-of-wedlock births among inner city minorities

    Collapse of the inner city family (as correctly predicted by Patrick Moynihan, and for which he was attacked), and subsequent erosion of economic mobility of inner city minorities

    &c.

    All compared, of course, with the trillions spent in the “War on Poverty,” and other programs.

    Do you want to talk about these things? Or do you wish to leave your head jammed up your ass, cherry-picking incomplete information?

  • Zachriel

    mesaeconoguy: Unfortunately, the information above is wrong. More accurately, it is incomplete.

    So not wrong, then.

    mesaeconoguy: Out-of-wedlock births among inner city minorities

    You seem to be waving in the general direction, but not addressing the point, which was the poverty rate. Perhaps you are saying that the number of people in poverty is reduced, but that the remaining poor are much worse off, that there are two Americas. Hard to tell.

    Start with the data provided, and make sure your hypothesis fits.

  • http://devilish-details.blogspot.com/ mesaeconoguy

    You seem to be avoiding my point.

    Would you like to address the failure of the Great Society, statistically, and otherwise?

  • http://devilish-details.blogspot.com/ mesaeconoguy

    Would you like to talk about this?

    http://en.wikipedia.org/wiki/Cabrini%E2%80%93Green

    Or maybe this?

    http://www.soc.iastate.edu/sapp/PruittIgoe.html

    Shouldn’t the Great Society have fixed these, and many other, collectivist projects? Shouldn't they be shining examples of your "success"?

    Would you like to see pictures of them now?

  • http://devilish-details.blogspot.com/ mesaeconoguy

    What about this?

    http://reason.com/24-7/2013/10/10/former-detroit-mayor-kwame-kilpatrick-ha

    Is this another shining example of your collectivist success?

  • Zachriel

    meseconoguy: You seem to be avoiding my point.

    We provided an explanation of the data provided in the original post, suggested a possible reading of your position that is consistent with the data in the original post, but you just seem to keep trying to change the subject. That usually indicates lack of a valid argument.