Poverty by Any Other Name Is Still Poverty

PenniesLast September the Census Bureau released the 2009 poverty statistics, which showed that 14.3 percent of Americans are living in poverty. At 43.6 million people, this number has not been this high during the 51 years that the U.S. has published poverty rates.  Additionally, also published last September, the American Community Survey (ACS), which offers additional demographic and geographic information about poverty levels, revealed that in Illinois, 13.3 percent of the population is living in poverty. Another 6 percent of Illinois families are experiencing ‘extreme poverty’, surviving on $11,025 a year for a family of four.

Both the Census Bureau’s and the ACS’s estimates are calculated using the official poverty measure, a formula created in the mid-1960s based on the cost to feed a family. Yet, advocates, government agencies, and social service providers alike have pushed for a new, more accurate way to measure poverty. 

Since 1979, the Census Bureau has published a variety of experimental poverty measures using expanded definitions of income and alternative methods to account for inflation.

The Annual Social and Economic (ASEC) Supplement released annually by the Census Bureau, is one such alternative measure. The most recent statistics, published this month, revealed that 23.7 percent of Americans lived in poverty in 2009, a number almost 10 percent higher than the official poverty measure. This ASEC data takes into account government benefit transfers (e.g., public assistance, medical assistance, etc.) in its calculation and shows that without public benefits the poverty rate would be much higher.

In the meantime, last May the Census Bureau announced that it will introduce a Supplemental Poverty Measure (SPM) starting in the fall of 2011. The SPM will have many advantages over the official measure in that it will include factors such as family structure, public assistance, child support payments, and homeownership in its analysis. The Bureau is working hard at developing and testing different measures and it recently posted the following key findings from its initial research using the SPM:

  • The SPM poverty rate for all persons is 15.7 percent as opposed to 14.3 percent for the official rate.
  • The SPM poverty threshold is $24,869 whereas the official poverty threshold is $21,834.
  • The SPM calculates that 16.1 percent of the elderly are living in poverty. When out-of-pocket medical expenses are taken into consideration, the percentage drops drastically to 8.7 percent, indicating that medical expenses are a huge factor for the elderly.
  • The Earned Income Tax Credit (EITC) and food assistance (SNAP) appear to be effective at reducing poverty among children. According to the SPM calculation, the EITC reduces child poverty by 4 percent and SNAP reduces child poverty by almost 3 percent.

The SPM will be especially useful in evaluating the effectiveness of anti-poverty policies such as EITC. It will not replace the official poverty measure, which means that eligibility for government benefit programs will still use the outdated and incorrect official poverty measure thereby precluding many  from receiving the benefits they need. It also appears that the ACS and perhaps the ASEC will also continue to be published. Ultimately, however, it is important that the SPM, which will present a clearer picture of poverty, becomes the official measure so that policymakers can better serve the ever increasing number of families living in poverty with the hope of one day eliminating poverty entirely.  

This blog post was coauthored by Kelly Ward.


They Say It's Over, We Say It's Not: Illinois Poverty Rates Still Up

Poverty in the Nation

Two weeks ago, the Census Bureau released data on the national poverty rate. As was discussed in our previous blog, the number of people in poverty in 2009 is the largest in the 51 years for which poverty estimates are available. There were 43.6 million people in poverty in 2009, up from 39.8 million in 2008, and the nation's official poverty rate in 2009 was 14.3 percent, up from 13.2 percent in 2008.

This week, the American Community Survey (ACS) data was released. The ACS is a sort of mini-census conducted annually that polls roughly three million homes per year. This survey provides demographic, social, economic, and housing data for states, congressional districts, counties and other localities. In other words, it provides much more data on what is happening at local levels.

According to the ACS, thirty-one states saw increases in both the number and percentage of people in poverty between 2008 and 2009. Poverty rates from the 2009 ACS for the 50 states and the the District of Columbia ranged from a low of 8.5 percent in New Hampshire to a high of 21.9 percent in Mississippi.

Poverty in Illinois

The percentage of Illinoisans living below the poverty line rose dramatically over the last decade. In 1999, the poverty rate in Illinois was 10.7 percent. The 2009 data show that 13.3 percent of Illinois residents were living in poverty last year.

The Heartland Alliance for Human Rights and Human Needs analyzed the 2009 data for the region. The Illinois fact sheet developed by Heartland Alliance reveals that the Illinois poverty rate in 2009 was 13.3%, an increase from 12.2% in 2008. Moreover, the Illinois child poverty rate in 2009 was 18.6%, an increase from 16.8% in 2008.

Other poverty measures in Illinois showed that median household income fell from nearly $60,000 in 1999 to just under $54,000 last year, a 10-percent decrease. The proportion of the population in "extreme poverty"--that is, living on less than half the federal poverty guideline--rose 18 percent over the same period, with 140,000 new Illinoisans joining the ranks of the extremely poor. Six percent of the state's population now lives below that threshold, which comes out to $11,025 per year for a family of four.

Recession Over?

Although the National Bureau of Economic Research, the organization that determines when economic downturns begin and end, recently reported that the Great Recession ended in June 2009, it acknowledged that economic conditions since then have not been favorable or that the economy has returned to operating at normal capacity. The effects of the recession, which began in December 2007, lasted 18 months, and was the longest and deepest downturn for the U.S. economy since the Great Depression, will continue for years.

Experts agree that the number of people in poverty could have been worse if the Recovery Act had not expanded benefits and federal support for programs like P-12 education, Medicaid, TANF, the Child Tax Credit, the Earned Income Tax Credit, and SNAP/Food Stamp programs. This federal support created jobs, helped both employed and unemployed low-income families make ends meet, kept some of them out of poverty, and allowed them to contribute to local economies by spending their paychecks and benefits in their communities, thereby supporting state budgets during dire financial times. Unfortunately, these important social safety net programs are in jeopardy due to the impending expiration of the Recovery Act and the ongoing massive state budget shortfalls, which are fueled by unwillingness in most states to raise necessary tax revenues. If federal and state politicians do not rise to the task, more people could fall into poverty and less money will be spent in local economies, which could trigger another recession.

Number of Americans in Poverty Highest in 51 Years

Homeless WomanToday the Census Bureau released the 2009 poverty data which shows that the number of people in poverty in 2009 is the largest number in the 51 years for which poverty estimates are available. There were 43.6 million people in poverty in 2009, up from 39.8 million in 2008 — the third consecutive annual increase. The nation's official poverty rate in 2009 was 14.3 percent, up from 13.2 percent in 2008. The data also show that nearly 21% percent of children, or roughly 15.5 million, were in poverty in 2009 versus 19% in 2008, or approximately 14.1 million in 2008.

Living in poverty means deprivation and hardship. For a family of four, life at the poverty level means trying to provide children with a roof over their heads, clothing, adequate health care and a nutritious diet on an annual income of $21,947.

The 2009 poverty data grimly illustrates the heavy toll that the recession has taken on the American people. The increase in poverty is made even more painful by the fact that it follows an economic recovery that utterly failed to reduce poverty--indeed, it was the first economic recovery on record where the poverty level at the peak of the recovery (2007) was actually higher than it was in the previous recession (2001).  

The unprecedented increases in poverty and child poverty are consistent with other data that show the severity of the current recession. For example, the unemployment rate in the United States doubled between 2007 (when the recession began) and 2009, going from 4.6 to 9.3 percent.  Also during this time, the number of Americans receiving food stamps increased by 33 percent, to over 35 million people.

The 2009 poverty data calls for two policy responses. First, Congress should extend or make permanent several key pieces of the Recovery Act aimed at low- and moderate-income households that otherwise will expire this year. Second, Congress should not extend the Bush tax cuts for the wealthy that are due to expire this year.

Continuing Recovery Act Provisions

The 2009 poverty data demonstrate the need to continue several provisions of the Recovery Act that help low- and moderate-income people make ends meet and begin to rebuild assets, while also stimulating the economy through consumer spending:

  1. The Temporary Assistance for Needy Families (TANF) emergency contingency fund (ECF) must be extended for one year. This fund has created 240,000 jobs in 37 states, making it the most successful direct job creation initiative since the Great Depression. It will expire at the end of September unless Congress takes action.

  2. The 2009 improvements to the Child Tax Credit due to expire at the end of the year must be made permanent. This credit provides assistance for parents in helping to defray the costs of having a child such as child care costs. The Recovery Act allowed low-income working families to count more of their earnings below $13,000 in calculating the value of their Child Tax Credit. These improvements have a dramatic effect for low-income families--for example, a parent working for the minimum wage and raising two kids saw her credit increase from $250 to $1,725. These changes will expire at the end of the year unless Congress takes action.

  3. Similarly, the 2009 improvements to the Earned Income Tax Credit (EITC) due to expire at the end of the year must be made permanent.  The EITC supports low- and moderate-income working people by providing a refundable tax credit.  These credits were expanded to help families deal with the recession. Specifically, the Recovery Act provided a temporary increase in the EITC for taxpayers with three or more qualifying children. The maximum EITC for this new category is $5,657. The Recovery Act also temporarily increased the beginning point of the phase out range for the credit. Since these credits help 13 million children currently living in poverty and millions of working families, Congress must ensure that these changes are made permanent.

  4. Extra weeks of unemployment benefits for the long-term unemployed will expire on November 30, and it is clear that they too need to be extended.

The Bush Tax Cuts for the Wealthy

The unprecedented level of poverty in the U.S. is further evidence that the Bush tax cuts for the wealthy should not be extended beyond the end of this year, when they are scheduled to expire.

The income gap between rich and poor--now at its widest since the Great Depression--was exacerbated by the Bush tax cuts. Households in the bottom fifth of the income spectrum received tax cuts averaging $29, while the top 1 percent of households received tax cuts averaging $41,077.

In addition, a recent report by the non-partisan Congressional Budget Office (CBO) concluded that extending the Bush tax cuts for the wealthy was the worst available policy option for stimulating the economy since wealthy people are much more likely to save their tax cuts than spend them. The CBO found that creating a temporary jobs tax credit or extending unemployment insurance benefits would generate three to five times more economic growth and create four to six times more jobs than extending the Bush tax cuts for the wealthy.

The increase in poverty and child poverty between 2008 and 2009 is further evidence that the Bush tax cuts for the wealthy should not be extended.

Note: On September 28, the American Community Survey data will be released. This data will provide more specific information about poverty levels in each state including, among other things, how median income differs by race/ethnicity, gender, family structure and education in each state and how that compares to the national average. Look for our blog’s analysis of this data as soon as it is released.

This blog post was co-authored by Dan Lesser.