New census calculation finds higher rate of poverty in U.S.
Updated 4:50 PM ET
WASHINGTON The ranks of America's poor edged up last year to a high of 49.7 million, based on a new census measure that takes into account medical costs and work-related expenses.
The numbers released Wednesday by the Census Bureau are part of a newly developed supplemental poverty measure. Devised a year ago, this measure provides a fuller picture of poverty that the government believes can be used to assess safety-net programs by factoring in living expenses and taxpayer-provided benefits that the official formula leaves out.
Based on the revised formula, the number of poor people exceeded the 49 million, or 16 percent of the population, who were living below the poverty line in 2010. That came as more people in the slowly improving economy picked up low-wage jobs last year but still struggled to pay living expenses. The revised poverty rate of 16.1 percent also is higher than the record 46.2 million, or 15 percent, that the government's official estimate reported in September.
Due to medical expenses, higher living costs and limited immigrant access to government programs, people 65 or older, Hispanics and urbanites were more likely to be struggling economically under the alternative formula. Also spiking higher in 2011 was poverty among full-time and part-time workers.
As a result, the portrait of poverty broken down by state notably changes. California tops the list, hurt by high housing costs, large numbers of immigrants as well as less generous tax credits and food stamp programs to buoy low-income families. It is followed by the District of Columbia, Arizona, Florida and Georgia.
In the official census tally, it was rural states that were more likely to be near the top of the list, led by Mississippi, New Mexico, Arizona and Louisiana.
"We're seeing a very slow recovery, with increases in poverty among workers due to more new jobs which are low-wage," said Timothy Smeeding, a University of Wisconsin-Madison economist who specializes in poverty. "As a whole, the safety net is holding many people up, while California is struggling more because it's relatively harder there to qualify for food stamps and other benefits."
Broken down by group, poverty was disproportionately affecting people 65 and older — about 15.1 percent, or nearly double the 8.7 percent rate calculated under the official formula. They also have higher medical expenses, such as Medicare premiums, deductibles and drug costs, that aren't factored into the official rate.
Working-age adults ages 18-64 saw an increase in poverty from 13.7 percent to 15.5 percent, due mostly to commuting and child care costs.
In contrast, the new measure showed declines in poverty for children, from 22.3 percent under the official formula to 18.1 percent. Still, they remained the age group most likely to be economically struggling by any measure.
Hispanics and Asians also saw much higher rates of poverty, 28 percent and 16.9 percent, respectively, compared with rates of 25.4 percent and 12.3 percent under the official formula. Their poverty levels rose after the government took into account safety-net programs such as food stamps and housing, which have lower participation among immigrants and non-English speakers.
In contrast, African-Americans saw a modest decrease in poverty, from 27.8 percent under the official rate to 25.7 percent based on the revised numbers. Among non-Hispanic whites, poverty rose from 9.9 percent to 11 percent.
Economists long have criticized the official poverty rate as inadequate. Based on a half-century-old government formula, the official rate continues to assume the average family spends one-third of its income on food. Those costs have actually shrunk to a much smaller share, more like one-seventh.
The official formula also fails to account for other expenses such as out-of-pocket medical care, child care and commuting, and it does not consider noncash government aid, such as food stamps and tax credits, when calculating income.
In reaction to some of the criticism, the government in 2010 asked the Census Bureau to develop a new measure, based partly on recommendations made by the National Academy of Sciences. It released national numbers based on that formula for the first time last year. This year's release features a 50-state breakdown on poverty, prompted in part by local officials such as New York City Mayor Michael Bloomberg who have argued that the official measure does not take into account urban costs of living and that larger cities may get less federal money as a result.
The goal is to help lawmakers to better gauge the effectiveness of anti-poverty programs, although it does not replace the Census Bureau's official poverty formula.
Among the findings:
-If it weren't for Social Security payments, the poverty rate would rise to 54.1 percent for people 65 and older and 24.4 percent for all age groups.
-Without refundable tax credits such as the earned income tax credit, child poverty would rise from 18.1 percent to 24.4 percent.
-Without food stamps, the overall poverty rate would increase from 16.1 percent to 17.6 percent.
"These figures are timely given the looming expiration of two key measures that account for part of these programs' large antipoverty impact: federal emergency unemployment insurance and improvements in refundable tax credits" such as the Earned Income Tax Credit, said Arloc Sherman, a senior researcher at the Center for Budget and Policy Priorities, a liberal-leaning think-tank. "Letting these measures expire at year's end could push large numbers of families into poverty."
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A few decades ago, we all saw companies attempting to become more competitive and increase profits by becoming "leaner and meaner"--implementing various efficiency and cost-saving measures. When done in a balanced and reasonable way, that's all fine and good--Capitalism 101.
The problem is that they didn't stop at being "balanced and reasonable"; they went to the extreme and fundamentally changed (actually, "distorted" might be a better word) the face of Capitalism. As more and more companies laid off workers and/or offshored jobs, requiring the remaining workers to become more productive (that, in itself, not being a bad thing), we began the "race to the bottom".
At first, the effects on the economy were minimal and even gave a temporary boost to overall economic indicators. Over time, however, it became obvious that we were seeing the Law of Diminishing Returns in effect as the economic balance of capitalism reached its tipping point. As more people were unemployed or underemployed (or perhaps even remaining in the same job while taking pay and benefit cuts), consumer confidence and spending began to take a dive. This could be most readily seen at the end of the year with reports of decreased holiday consumer spending.
In turn, companies felt it necessary to tighten their belts even further. CEOs who were thought to be able to better manage their companies received unheard of salaries and compensation packages, more and more workers were laid off and the trend continued--unfortunately into a downward spiral. Many CEOs who were so highly compensated turned out to be short-sighted and incompetent, actually on occasion tanking their companies. Yet they were still allowed to collect their Golden Parachutes and go on their merry way at no loss to themselves. Meanwhile, more and more workers continued to get laid off or take further pay cuts, eroding consumer spending even further.
And so it stands today. Companies have become so focused on the bottom line that they fail to see that, in the larger economic picture, they are only shooting themselves in the foot in the long run. They can only erode their own customer base so much before, eventually, there will be too few consumers able to afford their products or services for them to continue to make a profit.
Paradoxically, at the moment, many companies have record profits and Wall Street is doing relatively well. In terms of Capitalism 101, this may seem positive. However, Capitalism 105 (which requires a bit more thought than Capitalism 101) teaches that this trend cannot possibly continue forever if the benefits to Wall Street continually outweigh the benefits to Main Street. If this continues, in the long run the snake will eat its own tail. Or to put it another way, any species that "eats its young", so to speak, will eventually cause its own demise.
You are exactly the type of short-sighted bean-counter I was referring to and you completely missed my point. Try again.
How about a war on poverty!