Last week's Census Bureau report on income, poverty and health insurance in 2011 was filled with worrying data points: rising income inequality, median incomes down 1.5 percent, one in six Americans in poverty. Still, a few measurements exceeded expectations. The official poverty rate fell 0.1 percent to 15 percent, far better than analyst predictions of 15.5 percent. Overall, 46.2 million people were living below the poverty line in 2011 ($22,811 for a family of four with two children), including 16.1 million children.
46.2 million sounds like a lot, and it is. But it is important to keep in mind that without government programs, the poverty rate would be much worse. Because the Census Bureau hasn't changed the way it measures poverty since the Johnson administration first launched the War on Poverty in 1964, transfer payments like SNAP (food stamps) and the federal earned income tax credit (EITC) aren't included in the official measure. By the Census Bureau's own reckoning, including those programs in the official definition would reduce the number of people in poverty by 3.9 million and 5.7 million, respectively. Removing Social Security, which is already included, would add 21.4 million people to the official figure. Removing unemployment benefits adds another 2.3 million.
The alternate definitions in the graph above give a rough idea of how much government programs work to reduce real poverty in the United States, but such analysis remains contentious. The government still calculates the poverty threshold based on whether a household spends more than a third of its income on food. Expenses like health care and education, which have grown much faster than the rate of inflation, are not taken into account. Neither are transfer payments like Medicare, Medicaid, Pell grants or housing subsidies. (Researchers at the right-wing Heritage Foundation have suggested that poverty is practically nonexistent because 99 percent of poor families own a refrigerator, and 98 percent own a television.)
Other government programs designed to combat poverty have lost their critical counter-cyclical function. As Iwrote back in April, the 1996 reform that turned the New Deal-era Families with Dependent Children (AFDC) into the transitional Temporary Assistance for Needy Families (TANF) destroyed that program's ability to expand during economic downturns. The graph below shows how welfare lost its counter-cyclical function once it became a block-grant program, compared to SNAP, which remains an open-ended federal program. Neither program is factored in to the official poverty rate.
Some researchers have tried to circumvent these problems by looking at patterns of consumption, rather than money income or government transfers. A new paper by Bruce Meyer of the University of Chicago and James Sullivan of Notre Dame for the Brookings Institution uses poor families' consumption, including noncash benefits and government-provided health care, to show that poverty declined by 12.5 percentage points between 1972 and 2010.
That's a significant departure from the official poverty rate, which was 2 percentage points higher in 2010 than in 1970, despite real GDP per capita doubling and trillions spent on antipoverty programs. If Meyer and Sullivan's research proves to be accurate, it would confirm that those trillions of dollars, far from being wasted, have lifted millions out of poverty.