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A public policy blog from AEI
Bruce Meyer of the University of Chicago and AEI, and James Sullivan of Notre Dame last week released their report on consumption poverty in the United States for the year 2016. The takeaway from the report is positive: The rate of consumption poverty, which measures how much people consume, and therefore better captures the extent of deprivation and material poverty in the United States, continues to decline, falling to an all-time low of 3.0%. Improvement in the consumption poverty rate speaks to the effectiveness of various in-kind and tax benefits afforded to low-income Americans, such as the Supplemental Nutrition Assistance Program (SNAP), the Earned Income Tax Credit (EITC), and housing benefits, all of which help to shore up the material well-being of America’s struggling families.
Read the report:
One quote from Dr. Sullivan discussing the results of his report caught my eye: “Relying on the official poverty rate, many have concluded that we have lost the ‘War on Poverty,’ but improved measures of poverty show that we have actually made tremendous progress,” he said. This is true to a large extent: The Official Poverty Measure (OPM), which takes into account only pre-tax and pre-benefit cash income, falls short of measuring the progress made in alleviating the effects of poverty, progress which is at least partly owed to various government programs and benefits. Through these programs, the United States has made great strides towards raising the living standards of our poorest citizens.
But we still can’t declare victory because (as has been said often) the goal of antipoverty programs is to help people escape poverty through earnings — and we have not been successful at that, and our most recent experience has been especially discouraging.
The Obama administration’s first choice in addressing poverty was to increase government benefits, including subsidized health care coverage for a larger share of low-income Americans, increased SNAP benefits, and significant extensions in unemployment insurance (UI) benefits. Between 2009, when most of these expansions took place, and 2014, when several key benefits including expanded UI expired, the consumption poverty rate went from 4.0% to 3.9%, while the OPM actually increased from 14.3% to 14.8%. Looked at it in that cold way, a five-year period of enhanced government anti-poverty measures yielded no improvement.
It was not until the economy finally began to move that the real progress was made, with faster growth in 2014 spurring a steady decline in both measures of poverty. Increased employment, as always, is the best way to improve the conditions of Americans, rich, poor, or somewhere in between.
A careful assessment of the consumption poverty rate and OPM should lead us to recognize the opportunity afforded to us in this moment: The percentage of the population living in extreme deprivation is at an all-time low, meaning that we can now turn our national efforts and resources toward the problem of mobility, and do so at a time of almost full employment.
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