Sunday, March 14, 2010

Redefining poverty

This seems like a big deal:
This week, the Obama administration announced it will create a new poverty-measurement system that will eventually displace the current poverty measure. This new measure, which has little or nothing to do with actual poverty, will serve as the propaganda tool in Obama’s endless quest to “spread the wealth.”

Under the new measure, a family will be judged “poor” if its income falls below a certain specified income threshold. Nothing new there, but, unlike the current poverty standards, the new income thresholds will have a built-in escalator clause: They will rise automatically in direct proportion to any rise in the living standards of the average American.

The current poverty measure counts absolute purchasing power — how much steak and potatoes you can buy. The new measure will count comparative purchasing power — how much steak and potatoes you can buy relative to other people. As the nation becomes wealthier, the poverty standards will increase in proportion. In other words, Obama will employ a statistical trick to ensure that “the poor will always be with you,” no matter how much better off they get in absolute terms.
I hadn't heard this before and did some googling to see if the column's author, Robert Rector, was out to lunch. Turns out the Obama Administration did in fact make some changes to how the poverty rate is calculated as reported by both the Washington Post and Christian Science Monitor.

While both articles seem a bit short on details as to how the poverty rate is to be recalculated, they do highlight the fact that it is likely to produce new statistics which show an uptick in the poverty rate. I'm therefore inclined to give Rector, who is hardly a slouch on the topic of poverty, the benefit of the doubt as to the changes being implemented.

Think about that. Why on earth would an administration favor a new poverty formula which portrays the country as even worse off? It's not as if presidents typically brag about increases in the poverty rate under their watch. It's even more puzzling when one considers that poverty is fairly starkly defined as "the condition of not having the means to afford basic human needs such as clean water, nutrition, health care, education, clothing and shelter." This may explain why many people's conception of poverty looks like this:

A pronounced increase in poverty, therefore, is a pretty damning indictment. What we find, however, is that in absolute terms the poor are actually surprisingly well-off:
  • Nearly 40 percent of all poor households actually own their own homes. On average, this is a three-bedroom house with one-and-a-half baths, a garage, and a porch or patio.
  • Eighty-four percent of poor households have air conditioning. By contrast, in 1970, only 36 percent of the entire U.S. population enjoyed air conditioning.
  • Nearly two-thirds of the poor have cable or satellite TV.
  • Only 6 percent of poor households are over crowded; two-thirds have more than two rooms per person.
  • The typical poor American has as much or more living space than the average individual living in most European countries. (These comparisons are to the average citizens in foreign countries, not to those classified as poor.)
  • Nearly three-quarters of poor households own a car; 31 percent own two or more cars.
  • Ninety-eight percent of poor households have a color television; two-thirds own two or more color televisions.
  • Eighty-two percent own microwave ovens; 67 percent have a DVD player; 73 percent have a VCR; 47 percent have a computer.
So, again, given the awfulness of true poverty and seeming improvements in the plight of the poor, what could possible motivate the Obama Administration to embrace a poverty formula which worsens the picture? Rector provides the following explanation:
In honest English, the new system will measure income inequality, not poverty. Why not just call it an “inequality” index? Answer: because the American voter is unwilling to support massive welfare increases, soaring deficits, and tax increases to equalize incomes. However, if the goal of income leveling is camouflaged as a desperate struggle against poverty, hunger, and dire deprivation, then the political prospects improve. The new measure is a public-relations Trojan horse, smuggling in a “spread the wealth” agenda under the ruse of fighting real material privation — a condition that is rare in our society.

True, the new Obama measure will not, at present, alter benefits or expand eligibility for welfare programs. But the new measure does establish a new philosophy of poverty. For the first time, the government is planning to define poverty as a problem that can never be solved by the American dream: a general rise of incomes of all Americans across society over time. By definition, poverty can now be solved only by the dream of the Left: massive taxes on the upper and middle classes and redistribution to the less affluent. In effect, the Obama poverty measure sets a new national goal of class warfare and income redistribution.
I suspect this is correct. Any rise in poverty redounds to the benefit of the political left, which is able to cite such misfortune as both a justification for increases in government power as well as an indictment of the capitalist system which spawned such misery. Indeed, it's useful to reflect on the incentive structures at work, with prosperity and economic vibrancy often at odds with the interests of those who seek to use government as a means of promoting a particular vision of social justice.


Anonymous said...

In 1980 the federal min wage was $3.10hr. Today's equivalent, using 3-4% annual inflation, would be $8-10hr. If you made 12k a year in 1980 (good money back then), you would have to be making 39K, still using 3-4% annual inflation, to make the equivalent. That's why it needs to be redefined.

Colin said...

Using an inflation calculator -- -- we see that $3.10 in 1980 is equivalent to $7.97 in 2009. Federal minimum wage is currently $7.25.

$12K would be $30,839 -- not $39K.

Furthermore, poverty, as I said in the post, is a very specific condition: not having the means to afford basic human needs such as clean water, nutrition, health care, education, clothing and shelter.

Changes in inflation have nothing to do with that. The fact that the minimum wage -- a classic job destroyer -- hasn't quite kept pace with inflation has no bearing on why poverty should be redefined.