Collapse in Living Standards in America: More Poverty By Any Measure
15 million unemployed, homelessness has increased by 50 percent in some cities
by Christine Vestal - Global Research, July 14, 2010
More than 15 million Americans are unemployed, homelessness has increased by 50 percent in some cities, and 38 million people are receiving food stamps, more than at any time in the program’s almost 50-year history.
Evidence of rising economic hardship is ample. There’s one commonly used standard for measuring it: the U.S. Census Bureau’s poverty rate. It guides much of federal and state spending aimed at helping those unable to make a decent living.
But a number of states have become convinced that the federal figures actually understate poverty, and have begun using different criteria in operating state-based social programs. At the same time, conservative economists are warning that a change in the formula to a threshold that counts more people as poor could lead to an unacceptable increase in the cost of federal and state social service programs.
When Census publishes new numbers for 2009 in September, experts predict they’ll show a steep rise in the poverty rate. One independent researcher estimates the data will show the biggest year-to-year increase in recorded history.
According to Richard Bavier, a former analyst for the federal Office of Management and Budget, already available data about employment rates, wages, and food stamp enrollment suggest that an additional 5.7 million people were officially poor in 2009. That would bring the total number of people with incomes below the federal poverty threshold to more than 45 million. The poverty rate, Bavier expects, will hit 15 percent — up from 13.2 percent in 2008, when the Great Recession first started to take its toll.
Still, the U.S. Census Bureau’s new numbers will offer only a partial picture of how the nation’s sputtering economy is affecting the poorest Americans — a problem state officials and the Obama administration want to address.
Overestimating food costs
The current formula for setting the federal poverty line — unchanged since 1963 — takes the cost of food for an individual or family and multiplies the number by three, under the assumption that people spend one-third of their incomes putting meals on the table. While the formula may have been a good way to estimate a subsistence cost of living in the early 1960s, experts say food now represents only one-eighth of a typical household budget, with expenses such as housing and child care putting increasing pressure on struggling families.
In addition, the official measure fails to account for regional differences in the cost of housing, it doesn’t include medical expenses or transportation, and at $22,000 for a family of four, the poverty line is considered by many to be simply too low.
Equally worrisome for policy makers is the Census Bureau’s failure to consider in-kind federal and state aid in calculating income. The existing formula counts only pre-tax cash income, leaving out such benefits as food stamps, housing vouchers and child-care subsidies, as well as federal and state tax credits for the working poor.
As a result, the nation’s official poverty count is unaffected by the billions spent on safety-net programs. Yet it remains by far the most frequently used measurement of how well governments are taking care of their most vulnerable citizens.
Conservatives have consistently argued that if safety-net programs were taken into account, the poverty rate would be much lower. At the same time, advocates for the poor have argued that poverty counts would be much higher if the cost of housing, child care and other expenses were factored in.
Nearly two decades ago, Congress asked the National Academies of Science (NAS) to revisit the official poverty measure and come up with recommendations for a new measure that would satisfy critics on both ends of the spectrum.
This past March, the Obama administration said it would use the NAS 1995 guidelines to update the federal government’s poverty calculation and promised to unveil the first new “supplemental poverty measure” in September of 2011.