POVERTY 101 --what needs to be understood by all.

[bobbolink]

The Poverty Measure: Why It’s Outdated, and Why It’s Important
by Claire Lorentzen 09-27-2010

“The poor quality of our official poverty statistics should be a matter of pressing national concern. America deserves better and I think in this time of economic crisis urgently needs better.” – Henry Eberstadt from the American Enterprise Institute speaking at a Brookings Institution panel on September 16 about the newly released Census data on poverty and income in 2009


On September 16, the day that the Census Bureau released its 2009 statistics on poverty and income claiming that 43.6 million Americans live below the poverty line, I attended a Brookings Institution panel on how to interpret this newly released data. The heated discussion kept on coming back to measurement, and why how we measure poverty is crucial to our understanding of economic depravity in America and the policies we enact to reduce it. Then, why, I asked, is our official poverty measure so outdated?

To answer this question, we must first ask:

What’s so wrong with our official poverty measure?

Our current poverty measure’s outdated way of defining the poverty threshold and incomprehensive definition of resources are the source of its major flaws. Over the past several decades, the way that our official measure defined these two components has not changed, yet the reasons that people are poor, and the way that the poor are using their resources has changed significantly. The poverty threshold is defined solely around one necessity that a family must provide for: food. However, the measure ignores all of the other expenses that a family must meet. When this threshold was established in 1964 based on the cost of a subsistence food package, Americans, on average, were spending one-third of their income on food. Today, food takes up approximately one-eighth of a family’s income. This is mostly because food prices have fallen over time relative to other family expenses, such as housing costs, which have generally risen over time. This change is also a reflection of an increased number of other expenses that the poor face such as increased medical care costs, transportation etc.

Secondly, for the current official poverty measure, pre-tax cash income is calculated in order to see if an individual or a family is below the poverty threshold. This is the only factor taken into account in its resource measure. When the measurement was developed, the poor were not nearly taxed at the rate they are today. Also, credit cards and their associated debt were non-existent. Evident by these changes, an after-tax income measurement of resources would be a more accurate measurement of the resources available to a given individual or family. One that takes into account non-income based resources such as food stamps, medical-care benefits, and childcare subsidies.

It is important to also note that the current measure makes no adjustments for geographic location. Certain areas of our nation are much more expensive to live in than others, but the official poverty measure does not recognize this reality.

What are some alternatives?

While the official poverty measure does provide useful information about cash income, using multiple measures of poverty would give our government and our nation a much more comprehensive view of economic deprivation in America. As we speak, a proposal for the Census Bureau to run a Supplemental Poverty Measure (SPM) is waiting for Congress as part of the 2011 budget proposal. The SPM will calculate income in a much more comprehensive way by taking into account taxes, in-kind benefits, work expenses (such as transportation), and out-of-pocket medical expenses. It will also calculate the poverty threshold based on average expenditures on food, shelter, utilities, and clothing.

If the proposed SPM is successful, we will see, for the first time in the U.S., a form of a relative poverty measure ingrained in an absolute measure. This is where the most heated controversy around this proposal lies. The existing official poverty measure uses absolute purchasing power to set the poverty threshold. The Obama administration has proposed the use of a comparative purchasing power measure, which is a measure of how much one can buy relative to other people, in determining ones’ resources. As a result, poverty would only be able to be reduced if incomes of the poor rise faster than the incomes of everyone else. Some, such as Robert Rector at The Heritage Foundation, argue that with this type of measure, economic growth has no impact on poverty because the wages of those at the bottom of the income distribution will rarely rise faster than the incomes of those in the middle. Instead, with a comparative purchasing power measure, one is measuring income inequality and not poverty; and many Americans fail to care about income inequality.

Others, such as Henry Eberstadt and other economists at the American Enterprise Institute, argue that even the SPM is completely missing the point. It is measuring the wrong thing. Instead of income, we should be looking at consumption. If we care about economic deprivation, reflected in one’s living standards, then, we should really be measuring living standards, or how much we consume. Since 40 percent of Americans spend more than they earn (according to the Consumer Expenditure Survey), “If we really want to know about plenty and poverty in America, we should be monitoring consumption, spending patterns, and the like,” claimed Henry Eberstadt. In fact, in 2009, expenditures for the lowest quintile of American households were over twice as high as their reported pre-tax income. By solely measuring income, we overlook the immense debt that much of our country is in.

Regardless of the approach(s) to poverty measurement you favor, it is clear that our government’s official approach to poverty measurement and the poverty rate figures that it generates are not only incomprehensive, but also seriously flawed and misleading. This year alone our government will spend $900 billion on aid to low-income families. If it can’t even measure poverty properly; how will it know how to most efficiently distribute our money, how will we ever make strides in combating economic deprivation in America?

Claire Lorentzen is the online editorial assistant at Sojourners.
http://blog.sojo.net/2010/09/27/the-poverty-measure-why-its-wrong-and-why-its-important/

MODS... Sojourners wants their information shared. Please honor that. This is important information that most Dems don't understand.

[Newest Reality]

1. K&R

[bobbolink]

2. Thanks! This is a hard concept to grasp, and I appreciate the clarity of this article.

I hope that ALL DUers will avail themselves of this important information!

Thanks! :hi:

[sandnsea]

3. If you include govt benefits in the formula

the poverty rate will drop to a very minimal figure. I don't quite understand why you think that's beneficial to your cause.

I also question the data that this article was based on, because I don't know any families who spend as little as 1/8 of their income on food. That certainly isn't true of low income families, unless the writer used people who rely on food stamps as their primary data point. Families with a two earner low income are buried with food costs. It's much easier to get help for medical care for the kids than it is to get adequate help to feed kids.

I don't know where this is going but it doesn't look good to me.

[w8liftinglady]

4. thank you...gee,Texas is MAYBE realizing there is a problem...

Unfortunately,will the "haves" care...that's the question.



http://www.star-telegram.com/2010/09/28/2502457/tarrant-county-poverty-income.html


Reverberations of the recession echoed across Tarrant County last year as incomes dropped, the poverty rate rose and even the institution of marriage declined, according to a broad spectrum of census data released Tuesday.

While Texas has been widely considered to be a top bet for riding out the downturn, folks in Tarrant County and the rest of the state absorbed some painful economic blows, according to the 2009 American Community Survey conducted by the U.S. Census Bureau.

In Tarrant County, the median household income slid from $56,251 in 2008 to $53,726 in 2009, the new figures show. Nationally, the median income dropped 2.9 percent to $50,221, while in Texas it fell 2.4 percent to $48,259, according to the data.

The nation's poverty rate rose from 13.3 percent to 14.3 percent in 2009, but the rise was even larger in Tarrant County, where it jumped from 12.2 percent to 14.7 percent. It climbed even more among Tarrant blacks (from 18 percent to 24.5 percent) and Hispanics (from 19.5 percent to 25.2 percent). In Dallas County, the poverty rate rose to 19 percent from 17 percent in 2008.

The poverty level in 2009 was set at $21,954 for a family of four.

"This data reflects the economic decline across the country with work hours down and income stagnant or declining," said Steve Murdock, a Rice University sociology professor and former Texas state demographer. "It verifies the pervasiveness of the economic downturn, and Texas has not been immune."

The hard times in North Texas have been illustrated by other statistics, as the jobless rate has risen, city budgets became strained and home foreclosures soared.

But the decline in family income hits home. It's probably the most significant since the Great Depression, Murdock said. "It is obvious that the economy is down, and people are suffering the consequences," he said.

The downturn's far-reaching human impact has been readily apparent at the Fort Worth-based Texas Food Bank Network, a coalition of 19 food banks across the state.

"Food banks are the canary in the coal mine for the economy," said JC Dwyer, the network's public policy director. "We've seen a 45 percent increase in the number of clients over the last four years and we've seen a 14 percent increase in poundage we've put out from June 2009 to June 2010."

Donations have risen, but demand still surpasses supply, Dwyer said.

"Folks have been stepping up, but everything we get is going out. We distributed around $20 million of food this summer alone," he said.

From fiscal 2009 to 2010, which ended June 30, the Tarrant Area Food Bank saw a 42 percent increase in families being served by social service agencies it distributes food to, spokeswoman Andrea Helms said.

Families served rose to 44,286 from 31,234, she said. In fiscal 2010, the program distributed 11,000 tons of food, compared to 8,800 the year before, and 7,000 in fiscal 2008.

[bobbolink]

6. You're not out of the woods yet... "getting it" is one thing... giving a damn is a whole other thing

And, the thing is.... what they are quoting as "poverty level" is just as flawed as the "unemployment rate".

Unfortunately, anyone who reads at all knows about the flaws with the "unemployment rate" figure... VERY few understand how flawed the poverty level figure is.

That is why I am trying to get people to understand this.

I hope you will read it and pass it on... EVERYONE needs to grasp this.

[w8liftinglady]

45. absolutely.We need to continue to "remind" them until they can't deny it any more

[blindpig]

5. k&r

Got to keep up appearances, minimize the down side of this "ownership society". Wouldn't want to embarrass the Owners, and god forbid they have to pony up some of their ill-gotten gains in recompense for their deprivations.

[Uncle Joe]

7. Kicked and recommended.

Thanks for the thread, bobbolink.

[bobbolink]

11. Thanks for reading it, and I hope you pass it on.

:hi:

[hfojvt]

8. I am not sure why you would want more people to be considered poor

Also, I think that this line is wrong "When the measurement was developed, the poor were not nearly taxed at the rate they are today."

In the past there was no such thing as an earned income credit. Not in the 1960s. The closest I can come to tax information in the past is here http://www.msnbc.msn.com/id/29861648


"People in the lowest fifth, or quintile, had an effective tax rate of 4.3 percent, partly because tax law changes in the past ten years removed many low-income people from the income tax rolls entirely. They pay only payroll taxes.

The lessening of the tax burden on the lowest quintile is a big change from 1979. That year, according to CBO, people in lowest income group (the bottom fifth of the income distribution) paid an effective federal tax rate of 8 percent."

Kinda sad to see Republican anti-tax memes even sneaking into articles about the poor.

[bobbolink]

9. HAHAHAHAHAHA!

You're funny.

[ThomCat]

20. More people ARE poor than are recognized as poor.

This is about getting accurate ways of knowing who is poor, instead of just assuming that that the true number of people in poverty is relatively few, as people do today.

In all things, always start with accurate information.

This article is pointing out that we have not had accurate information, and is about the debate about how we might get (more) accurate information. Did that go over your head?

[hfojvt]

21. so we are gonna get more accurate information

by accepting the bullshit thesis that poor people are taxed more now than they were in 1964? Did THAT go over YOUR head?

[Name removed]

22. Deleted message

Message removed by moderator. Click here to review the message board rules.

[maryf]

25. +1000 and don't forget the regressive sales tax

many have to pay, and the hidden taxes, like on utilities, phones, etc.

[bobbolink]

26. *I* pay sales tax for the fucking "Open Space" parks, and can't use their fucking rec center!

We poor folk pay taxes for it, but only the RICH, and I do mean RICH can afford to use it!

THAT is why I am so ANGRY with this ignorance that poor people don't pay taxes!

And that is just ONE example, and it is done by DEMS!

:nuke:

[maryf]

28. this will get some flack from some, but cigarette tax is very unfair to the poor...

who end up having to buy the least healthy brands too boot as the tax makes the cost so high...I don't want to see anyone smoke, but this unfair tax is also like trying to tell people what to do...

[bobbolink]

29. It may be unfair, but its much worse to be paying tax on groceries, when you are under the poverty

line and supposed to be EXEMPT from taxes, and ignorant people keep INSISTING that you don't pay taxes!

Can you tell I have finally had it??

:nuke:

[maryf]

30. On groceries?? you mean food?

I think that is disgusting and doesn't happen here, though there is tax on paper supplies, and other basic necessities...which really the poor pay more on as they can't buy in large economic quantities...it is so expensive to be poor...

[bobbolink]

31. Yes, groceries. As in buying bread, milk, cereal, etc.

I'm not talking about prepared food, which I think is taxed everywhere, which is also WRONG.

But GROCERIES!

Yet, the party that USED to be for the poor insists that poor people DON'T PAY TAXES!

IGNORACE REIGNS.

[maryf]

37. That's beyond egregious...

if you use food stamps, do they tax? And as Leona Helmsley said...only the little people (read poor) pay taxes...bitch that she was, she had that right....

[bobbolink]

38. Of course. The tax comes up automagically.

So, the government money pays for the food stamps, which pays the local taxes.

Go figure.

HOWEVER, it is also important to remember that for each one dollar the federal government spends on food stamps, $1.76 comes back to the economy. THAT should be shoved under everyone's nose!

[maryf]

42. Healthcare for all heck Foodstamps for all too!!!

the taxing boggles my mind!

[bobbolink]

44. I'm surprised you didn't know that... I assume that means your county doesn't have tax on groceries.

In Colorado, I think Denver is one of the few counties without a tax on groceries.

AND... DENVER IS A STRICTLY DEM COUNTY.

:nuke:

[maryf]

54. Our STATE doesn't have a tax on groceries

Nor our counties. I thought food was sacrosanct? Sheesh, human needs have to be made readily available to all, taxing the most important need is beyond the pale.

[bobbolink]

58. It would be interesting to know how many counties nation-wide tax groceries.

It is the norm in Colorado.

[hfojvt]

52. nobody said that poor people do not pay taxes

the question is whether poor people pay more taxes than they did in 1964. The median state sales tax rate was 3.25 in 1970, 4 percent in 1980 and 5 percent in 1990 where it remains today. In 1964 the tax brackets were

married couple single
0 to 1,000 14% 0 - 500
1 - 2,000 15% 500 - 1,000
2 - 3,000 16% 1,000 - 1500
3 - 4,000 17% 1500 - 2,000
4 - 8,000 19% 2,000 - 4,000

In 1963, the poverty line was $1,580 for a single person, and the standard deduction was 10% of AGI. So a person at the poverty line would be paying $212.52 in income taxes. The social security tax rate was 3.625% so they are paying another $57.28 in FICA taxes. $212.52 + 57.28 = 17% of his/her income plus 3% in sales taxes = 20% tax rate in 1964 for a single person at the poverty line.

Now, the poverty rate in 2009 was $10,830, just a little less than my AGI of $10,859.17 in 2008. Taxes would be $188 less an EIC of $69. Leaving a net of $119. This year, you would also have to subtract $400 for the Obama tax credit, so they would get a refund of $281 (plus whatever got withheld from their checks). But let's ignore that since it is apparently only temporary. Then FICA taxes at 7.65% and sales taxes at 6% (including local option). $119 is 1.1% of income + 7.65 + 6 = 14.75% today.

Since 20% is higher than 14.75%, I conclude that the statement that the poor are taxed at a higher rate today is FALSE.

This is even truer if the poor people have children. The poverty rate for a family of two is $14,570. A person at that income would pay zero federal taxes (and perhaps get a refundable child tax credit ($14,570 - $8,000 (head of household) - $7,000 (two exemptions) = 0 for taxable income. I am not sure what the exemptions were in 1964.) Then he/she would get an EIC of $2,853 which is much more than the FICA taxes of $1,114.6 that person is paying. So a family of two pays federal taxes of negative $1,738.4. or maybe even $2,738.4 if the child tax credit is refundable (and I think it is, but I am not gonna look up form 8812). I am quite certain that a poor family of two was paying much more in taxes in 1964.

[maryf]

27. dupe

self deleted

[bobbolink]

49. One more galling thing about the taxes and "liberals"

That Open Space tax I was talking about? It is a sales tax, which, for anyone paying attention, hits poor folk harder. And, yes, that Open Space tax is added to FOOD, also.

I have tried and tried to talk to these environmentalists who lobby heavily for this tax, to explain why it is bad to fund it this way, but they disdainfully refuse to hear it. They simply don't care that it hurts poor folk.

Yet, now, they can't understand why poor people are angry enough to just quit with everything.

Each special interest group is only out for themselves and doesn't care about other groups, so that is a big win for those in power. Keep us fighting each other.

Until ALL groups decide we are all in this together, there is no point in complaining about the RW. We are complicit.

[maryf]

55. We are complicit

amen.

All needs for all, food, housing, health care...

we are all in the same boat, (except for those in the flag ship) some in the luxury suites, some in steerage and we have a huge leak and have to stop it or all are sunk; we need to first get those people out of steerage, too many are drowning...

[bobbolink]

35. I'll say it again... when YOU avail yourself of the information that has been posted here on DU

many times, maybe you will not act quite so smug in your disdain.

Got it?

[awoke_in_2003]

24. Any break that EIC gives you...

is quickly gobbled up with the extra people (children) needed to qualify. The poor should be paying ZERO taxes- fuck the mega rich.

[hfojvt]

53. they are paying zero taxes, actually less than zero if they have children

Nowadays, thanks to the $1,000 child tax credit, even some non-poor are paying zero income taxes. And the 7.65% they pay in FICA taxes is a lower percentage then the same couple would have paid in income taxes in 1964.

[truedelphi]

60. You are forgetting some of the major "tweaks" that have been put in place

When I first started working, if you hadn't been working and then got a job, there were special concessions built into the tax code (I think you income averaged the two years, and that was your income.)

So someone in school in say 1975 and then getting a job in 1976 making 21K could report an income of 10.5 K. Which is important to do - because when you first start working, you have a lot of catching up to do - buying furniture, a car, etc, as opposed for instance to living in a college dorm or shared housing.

Now that ability is gone.

And although the earned income deduction is important to the single head of household person, one thing most economists miss when discussing the tax code is this one - in many places in today's world, owning a house is an impossibility on a worker's salary.

So if one spouse makes 42K and the other makes 10K, they might never own a house if they live in the SF Bay area, or NYC area. As a result, they lose the mortgage deduction even though their rental costs may exceed many times what most home owners in the area are paying. But that 52K puts them well above the place where they can declare the earned income deduction.

We really need a much fairer tax distribution. The fact that the RW folks still insist that "investors" deserve to pay only 15% is one of the craziest things I have heard. The investment class and the financial types are the ones that destroyed this nation's economy. They should have to pay something for having done that. I'd feel differently if they were creating jobs, but they are destroying jobs.

[Dappleganger]

10. K&R Thank you for posting this.

I appreciate the heart that Jim Wallis has for those who are brushed aside as a "statistic."

[bobbolink]

17. Yes, he is one of the few voices who is reliable. Sad, isn't it?

[Liberal_in_LA]

12. K&R

[Odin2005]

13. K&R, posted on Facebook.

[bobbolink]

14. Thanks! That is what they want you to do... Great!

:pals:

[Bluebear]

15. K/R , , ,just because people are invisible statistically doesn't mean they aren't there

[bobbolink]

16. and getting angrier.....

[Fumesucker]

18. K&R for the truth..

[bobbolink]

32. Thanks! Its the truth, but obviously not something that most "progressives" think is important to

know.

:(

[felix_numinous]

19. Kick for visibility~

Thank you for posting a great article and link. I am somehow not surprised that the method of calculating the poverty line is outdated. With real social programs unraveling,it does not look good. at all. One wonders what the true numbers are.

[Bluebear]

23. and again

[bobbolink]

46. Thank you for taking it seriously. Much appreciated!

:hi:

[Swamp Rat]

33. k&r

[bobbolink]

64. Thanks swampy!

:hi:

[a la izquierda]

34. K & R & up on the ol' Facebook

where I'm sure it'll draw disparaging comments from my idiot family members.
My father-in-law, a Republican of the older era, always said: people making under $x (can't remember the exact amount, but it was around $20K) should pay no taxes, because they cannot afford any loss of income). He was right on that (though it clearly goes way, way beyond that).

[bobbolink]

36. Thank you for putting it on Facebook! That's what Sojo asked people to do.

And, I'm sure you are strong enough to deal with the snark.

AFter all, its a daily thing for us poor folk... but that is only the very beginning of what we have to deal with.

:hi:

[a la izquierda]

39. yeah, it's just words to me...

hope you're hanging in there :)

[bobbolink]

41. Not for a lot longer.

Not that it matters.

Which means I have nothing left to lose.

[woo me with science]

40. Some very good points here. nt

[walldude]

43. K&R.. and bookmarked..

[bobbolink]

63. Thank you. I appreciate that you bookmarked.. this isn't easily understood, and we must be

ready to lobby congress about these changes!

:hi:

[foxfeet]

47. K&R

[Panaconda]

48. K&R n/t

[Lifelong Protester]

50. Latecomer K & R for visibility

I think our government has been manipulating data for a long time to keep up an appearance that we are all doing 'OK'. I personally believe we are slipping closer and closer to third world status, by which I mean an ever growing gap between the 'haves' and 'have nots'.
couple that gap with the soon to be coming fights over resources like food and clean water (scarcities brought about courtesy of climate change which we also can't get off the dime on) and we are looking at some seriously dangerous times coming our way.

[undergroundpanther]

51. Those who have

find it too easy to look away.Fear,fear of losing,sharing the old hierarchical system of lies still playing that zero -sum bullshit..
Like those who have fortunate lives, often disdain people less fortunate.They go pretending as if we had complete control over our lives.It's called the just world hypothesis .By a belief in 'free will' they negate coercion,misfortune,and they ignore a billion will mitigating things that influence every decision a person makes flawed or not,that denial is how the fortunate have the most 's can justify having more than most of us... because if it was all by chance and luck they'd have no basis for taking so much from others..and we would not let them abuse us with poverty ,engineered scarcity,and deprivation.

[TBF]

56. Very important OP - dems especially seem to

want to bury this topic. In this country we talk about "personal responsibility" as if we are playing in an equal system (which we are not by any definition of the word...). People tend to look down on those who are impoverished, even though they refer to them as "down on their luck". Recognizing, of course, that it is not ability or motivation propelling them in society - but most often dumb luck that they actually have a job at any given time. And then they look down on others. So, we are aware at some level of both the presence and the inequality of poverty, yet we do nothing.

:kick:

[Forkboy]

57. K&R

Thank you.

[avaistheone1]

59. k&r bobbolink

[Greyhound]

61. K&R for truth.

You only brought one out in this thread, you must be slipping.:hi:

Telling poor people that they have no idea just how poor they are and how much worse it could be is doubly ironic coming from nominal Democrats.
:kick: & R

[bobbolink]

62. Hah!

There are those who think I've been slipping for a very long time, now. :rofl:

"Telling poor people that they have no idea just how poor they are and how much worse it could be is doubly ironic coming from nominal Democrats."

May I quote you on that?!

I don't even know where to begin responding to that.... the discounts know no bounds, and the suffering and death just don't matter.

But far be it from us to discuss the "ethics" of *that*!

:hi:

[Greyhound]

66. You can quote me any time, this is my blanket permission.

Hope you're OK at present, things are wrapping up here, again.
:pals:
:kick:

[G_j]

65. kick

[Tsiyu]

67. Poverty is silently killing us

but it's like the Great Big Giant Elephant in the room that everyone pretends is just a tiny gray mouse.

This article spells out how our leaders do the same.

How would you measure or quantify poverty to reflect the reality "on the ground?" Consumption, purchasing power, family income? Something to think about.

Thanks for posting this...

:kick:

[bobbolink]

68. And that is the problem. We have been willing to die silently.

Its time we changed that.

There are many people who are very angry with me because I have decided to go out fighting.

It beats the complicit alternative.

Thank you for your insightful remarks... you made my day! :yourock:

[Tsiyu]

69. and you just made my day

Keep on keeping on.

You make people THINK and sometimes it hurts to to become aware.

So they lash out at you for not accepting their platitudes and lack of real thought on the issue - their way of not facing living in a world where they are complicit in treating humans as refuse.

But more and more people are facing what you've lived. Sad that people have to suffer themselves before they catch a clue, but that's how humans are.

I am always glad to see your posts; screw the angry ones. they are just afraid and ignorant.

And BTW















No, :yourock: