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How "Poor" are America's Poor?
Introduction
Next week the United States Census Bureau will release its
annual report on "poverty" stating, as it has for many years, that
there are some 31 million to 32 million poor Americans, a number
greater than in 1965 when the War on Poverty began. Evidence
mounts, however, that the Census Bureau's poverty report
dramatically understates the living standards of low income
Americans.
Here is a sample of facts that will not be mentioned in next
week's poverty report.
* 38 percent of the persons whom the Census Bureau identifies as
"poor" own their own homes with a median value of $39,200.
* 62 percent of "poor" households own a car; 14 percent own two
or more cars.
* Nearly half of all "poor" households have air-conditioning; 31
percent have microwave ovens.
* Nationwide, some 22,000 "poor" households have heated swimming
pools or Jacuzzis.
"Poor" Americans today are better housed, better fed, and own
more property than did the average U.S. citizen throughout much of
the 20th Century. In 1988, the per capita expenditures of the
lowest income fifth of the U.S. population exceeded the per capita
expenditures of the median American household in 1955, after
adjusting for inflation.
1
Better Off Than Europeans, Japanese
The average "poor" American lives in a larger house or
apartment than does the average West European (This is the average
West European, not poor West Europeans). Poor Americans eat far
more meat, are more likely to own cars and dishwashers, and are
more likely to have basic modern amenities such as indoor toilets
than is the general West European population.
"Poor" Americans consume three times as much meat each year and
are 40 percent more likely to own a car than the average Japanese.
And the average Japanese is 22 times more likely to live without an
indoor flush toilet than is a poor American.
The Census Bureau counts as "poor" anyone with "cash income"
less than the official poverty threshold, which was $12,675 for a
family of four in 1989. The Census completely disregards assets
owned by the "poor," and does not even count much of what, in fact,
is income. This is clear from the Census's own data: low income
persons spend $1.94 for every $1.00 in "income" reported by the
Census. If this is true, then the poor somehow are getting $0.94 in
additional income above every $1.00 counted by the Census. Indeed,
the gap between spending and the Census's count of the income of
the "poor" has grown larger year by year till, now, the Census
measurement of the income of poor persons no longer has any bearing
on economic reality.
Ignoring Billions of Dollars
A key reason that the Census undercounts the financial
resources of the "poor" is that, remarkably, it ignores nearly all
welfare spending when calculating the "incomes" of persons in
poverty. Thus, as far as the Bureau is concerned, billions of
dollars in in-kind benefits to poor Americans have no effect on
their incomes. Out of $184 billion in welfare spending, the Census
counts only $27 billion as income for poor persons. The bulk of the
welfare system, including entire programs that provide non-cash aid
to the poor, like food stamps, public housing, and Medicaid, is
completely ignored in the Census Bureau's calculations of the
living standards of the "poor." The missing welfare spending that
is excluded from the Census Bureau poverty reports comes to $158
billion, or over $11,120 for every "poor" U.S. household.
The Census Bureau's poverty reports should be replaced by a new
survey that counts income and assets accurately. With accurate
counting, the number of poor persons would be shown to be only a
small fraction of the Census Bureau's current estimate of 31.8
million.
Behavioral Effects of Welfare
However, the fact that there are fewer Americans living in
material poverty than the official Census poverty report indicates,
does not mean that the War on Poverty has been a success. Welfare
spending seriously diminishes work effort and earned income. The
largest effect of increased welfare spending is not to raise income
but merely to replace self- sufficiency with dependence. Welfare
also undermines family structure. In 1965 the black illegitimate
birth rate was 28 percent; today it is 64 percent. Properly
measured, the number of persons in material poverty has shrunk
since 1965, but at the unnecessary cost of producing a burgeoning
underclass. The current welfare system has created entire
communities where work is rare, intact families virtually unknown,
and dependence on government a way of life passed on from
generation to generation.
How the Census Bureau Understates
Income
The most comprehensive survey of welfare spending is provided by
the nonpartisan Congressional Research Service (CRS) of the
Library of Congress. The CRS tracks state, local, and federal
welfare spending in 75 "means-tested" programs, which are programs
with benefits restricted to persons with low or limited
income.
2 The CRS figures include
programs targeted to low income persons such as Aid to Families
with Dependent Children (AFDC), food stamps, and public housing. By
contrast, the CRS does not include programs available to the
general population, such as Social Security.
In fiscal 1988, the CRS recorded $173 billion in means-tested
welfare spending at all levels of government.
3 There was an additional $11.2 billion in
Medicare spending on poor persons that year which was not included
in the CRS total.
4 The CRS means-tested
figures plus Medicare benefits for poor persons yield a total
welfare spending of $184.2 billion in 1988.
During the presidency of Ronald Reagan, Americans were inundated
by media reports of draconian cuts in welfare spending. But, the
CRS data show otherwise.
5 Today,
welfare spending is at an all-time high. Adjusted for inflation,
welfare spending at the state, local, and federal levels rose
consistently through the 1980s. As Table 1 shows, welfare spending
in constant 1988 dollars rose from $156.6 billion in 1980 to $184.2
billion in 1988. The total comes to $5,790 for every poor person in
the U.S., or $23,160 for a family of four.
The Missing Billions
The Census Bureau considers a household as "poor" if its income
falls below a specified "poverty income threshold." In 1988 the
poverty income threshold for a family of four was $12,675. That
year, the Census Bureau estimates there were 33.3 million people
who were poor before receiving welfare benefits; after receiving
welfare benefits the number of poor persons fell to 31.9
million.
6 In other words, according to
the Census Bureau, $184 billion in welfare spending reduced the
number of poor persons in the U.S. by only 1.4 million, or $131,570
in spending for each person lifted out of poverty. How is this
possible?
The answer is simple: In counting the incomes of poor persons
the Census Bureau actually excludes almost all welfare assistance.
Some 75 percent of welfare spending in the U.S. is in the form of
"non-cash" assistance. Yet the Census Bureau ignores all non-cash
benefits in determining the income of poor persons. Non-cash
programs such as food stamps, public housing, energy assistance,
school lunch and breakfast programs, and the Women, Infants, and
Children's (WIC) food program are excluded from the Census Bureau's
poverty calculations entirely.
Thus, the Census Bureau counts most persons receiving non-cash
welfare as poor even if the total value of the welfare assistance
received greatly exceeds the poverty income thresholds.
Example: In 1988, many indigent elderly couples in New York
state received income support from the Supplemental Security Income
program and public housing assistance worth, on average, $12,290.
These couples also received Medicaid benefits costing an average of
$7,548. Despite the fact that they received welfare benefits with
an average value of $19,838, compared to the official poverty
income threshold in 1988 of $7,704 for elderly couples, the Census
Bureau counted such elderly persons as "poor."
7
Example: In Massachusetts in 1988 a welfare mother with three
children could receive welfare benefits in the form of AFDC, food
stamps, public housing, Medicaid, and school lunch and breakfast
programs costing the taxpayers $18,765 per year. The poverty income
threshold for such a family that year was $12,092. But the family
would still be counted as poor by the Census Bureau.
Contradicting Itself
The misleading income figures used in the Census Bureau's
annual poverty reports even contradict other Census data. Each year
the Census Bureau undertakes a detailed survey of family
expenditures to determine spending on rent, food, clothing,
transportation, medical care, entertainment, and other items. While
the Census Bureau poverty survey estimated that the average annual
income of the poorest 20 percent of U.S. households in 1986 was
$5,904, the Bureau's Consumer Expenditure Survey showed that these
same households were spending an average of $11,477 that year. Thus
the Census Bureau found that low income households spent $1.94 for
every $1.00 of income reported in the Bureau's own income
estimates.
8 A small part of this
discrepancy might be explained by some retired or temporarily
unemployed individuals spending their savings. But a major part is
due to excluded welfare income.
Underestimating the Welfare State
Table 2 analyzes the discrepancy between CRS and Census Bureau
figures on welfare spending. According to CRS and other government
sources, welfare spending was at least $184 billion in 1988. But
the Census Bureau counted only $27 billion in welfare assistance
when measuring household income. Part of this difference can be
explained by welfare spending on persons in nursing homes and other
institutions. These Americans are not included in the population
surveyed by the Census in compiling its incomes and poverty data.
Excluding welfare spending on persons in institutions, total
welfare spending still equalled at least $155.6 billion, so the
total funds "lost" by the Census Bureau poverty reports amounted to
$128.7 billion in 1988.
Why the "Poor" Will Always Be With
Us
The Census Bureau not only counts the number of poor persons in
the U.S.; it also calculates the "poverty gap." This is the total
amount of government assistance that would be needed to raise the
income of all poor Americans up to the poverty income threshold. In
1986, the last year for which data are available, the poverty gap
-- before persons received any welfare benefits -- was $64.9
billion.
9 After taking welfare
benefits into consideration, the Census Bureau put the poverty gap
at $48.8 billion.
10 Thus, according to
the Bureau, $126.2 billion spent on non-institutionalized persons
in 1986 shrank the poverty gap by just $16.1 billion. Every $1.00
reduction in poverty, in other words, required at least $7.80 in
welfare spending.
Besides the exclusion of non-cash aid in measuring the impact of
government assistance, two other factors help explain why enormous
welfare spending appears to make such a small dent on poverty.
First, up to 10 percent of all cash welfare spending is diverted to
administrative costs. Second, the government distributes up to half
of all welfare spending to persons who have low incomes but are not
below the poverty line.
The implications of these figures are sobering. The total
pre-welfare poverty gap in 1990 is approximately $70 billion. Given
the Census Bureau's current methods of measuring income, if the
government expanded the existing welfare system, which provides 75
percent of benefits in non- cash assistance and targets nearly half
of all aid to non-poor persons, it would require a staggering $546
billion in welfare spending -- or 46 percent of the total federal
budget -- to eliminate "poverty" in the U.S. As long as the Census
Bureau continues to count poverty with its current methods, the
U.S. inevitably will have a large number of "poor" persons every
year for the foreseeable future.
Examining "Poverty" in America
In addition to the serious deficiencies of the Census Bureau's
measurement of income, the government's view of what constitutes
"poverty" would be surprising to most Americans. Government data on
the possessions of officially poor households starkly contradict
the general public understanding of what it means to be "poor."
Example: Nearly a third of all "poor" American households
have microwave ovens.
11
Example: Sixty-two percent of "poor" households own a
car, truck or van. Fourteen percent own two or more cars.
12
Example: According to government figures, over 22,000
"poor" households have a heated swimming pool or a Jacuzzi.
13
Today, officially "poor" households are more likely to own
common consumer durables such as televisions and refrigerators than
the average family in the 1950s. In 1930, nearly two-thirds of U.S.
households did not own a radio; over half had no form of
refrigeration. Among the poor today, less than one percent lack a
refrigerator.
14
Seventeen percent of U.S. households in "poverty" have automatic
dishwashers, well above the rate for the general West European
population in 1980.
15 Among America's
"poor" there are 344 cars per 1,000 persons.
16 This is roughly the same ratio as exists
for the total population of the United Kingdom. A poor American is
40 percent more likely to own a car than the average Japanese; 30
times more likely than the average Pole; and 50 times more likely
than the average Mexican.
17
Housing Conditions of the "Poor"
According to the 1987 U.S. Census Housing Survey, 38 percent of
poor households own their own homes, with a median value of
$39,205.
18 Nearly 50 percent of
officially poor households are air conditioned.
19
The homes of these households, whether owned or rented, also are
on average quite spacious by historic or international standards.
By American standards, "crowded" housing means more than 1.5
persons occupy each room. Less than 2 percent of "poor" U.S.
households were "crowded" in 1987, according to this definition,
and only 7.5 percent of poor households had more than one person
per room.
20
On average, officially poor U.S. households have 0.56 persons
per room, which means they have more space than that available to
the average American household in 1970, and the average West
European household in 1980.
21 By
contrast, the average Japanese lives in a home with 0.8 persons per
room, the average Mexican lives in a house with 2.5 persons in a
room, while the average citizen of India lives in a house with 2.8
persons per room.
22
Nearly all officially poor U.S. households, moreover, are
equipped with basic modern plumbing, including running hot and cold
water, indoor flush toilets and indoor baths. While 30 percent of
all Americans were without indoor toilets, in 1950, less than 2
percent of poor Americans lacked them by 1987.
23 As Table 7 shows, America's poor are less
likely to lack indoor plumbing than the general population in
Western Europe. The average Japanese is 22 times more likely to
lack an indoor toilet than is an American officially classified as
"poor."
The houses and apartments of America's "poor" are in far better
condition than generally assumed. The median age of such housing
units is only seven years greater than the median age for the
overall U.S. housing stock.
24 The
overwhelming majority of this housing is in sound condition.
According to the 1987
American Housing Survey of the U.S.
Census, only 2.4 percent of housing units owned or rented by
households deemed "poor" had significant structural defects such as
crumbling foundations or missing roof material.
25 Some 9 percent of poor households reported
being uncomfortably cold at least once during the previous winter
due to inadequate insulation, inadequate heating capacity, or
equipment failure.
26 This was roughly
double the rate for the general population.
Food Consumption Of Low Income
Americans
On a per capita basis, low income households in 1988 spent 80
cents on food for every $1.00 spent by the median American
household.
27 And out of every food
dollar spent by low income persons, 32 cents was spent in
restaurants.
28
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US household wealth reaches high of $77 trillion
Associated Press
Posted on December 9, 2013 at 2:02 PM
Updated
Monday, Dec 9 at 4:02 PM
WASHINGTON (AP) — A surging stock market and a steady recovery in home prices drove Americans' wealth to a record last summer.
The nation's wealth rose 2.6 percent from July through
September to $77.3 trillion, the Federal Reserve said Monday. Household
wealth has been rising gradually since bottoming at $57.2 trillion in
2008. Early this year, America finally regained all the wealth it had
lost to the Great Recession.
Rising personal wealth has been a pillar of the slow
but steady U.S. economic recovery. When Americans feel richer, they
typically spend more and fuel economic growth.
Household wealth, or net worth, reflects the value of
homes, stocks, bank accounts and other assets minus mortgages, credit
cards and other debts.
From July through September, rising stock prices
boosted Americans' net worth by $917 billion. Higher home values added
$428 billion more.
The Fed's figures don't go beyond September. But stock
prices have continued to rise since last quarter ended, which means
household wealth has, too. Since Oct. 1, the Standard & Poor's 500
stock index has risen nearly 6 percent. Home prices in many areas have
continued to rise, though more slowly than they did earlier in the year.
The Fed's report also showed that Americans are willing
to borrow more. This suggests that many are growing more confident in
their jobs and in the broader economy.
When adjusted for inflation, net worth remains about 1
percent below its pre-recession peak. But the gains in stock and home
prices during the current October-December quarter will likely lift
inflation-adjusted household wealth to a record.
Read More Here
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CBS News 
