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Report

The government’s official poverty data miss an increasing share of antipoverty spending

American Enterprise Institute

Key Points

  • Despite its many well-recognized flaws, the Census Bureau’s Official Poverty Measure (OPM) remains one of the most cited measures of economic well-being in the US. Crucially, the OPM does not consider major—and rapidly growing—government transfer programs and tax credits when determining an individual’s income and thus overestimates the number of Americans who are officially “poor.”
  • Recent proposals by leading Democratic policymakers to expand the types of public assistance programs not counted as income under the OPM would, if realized, worsen the already serious disconnect between the official poverty rate and the real level of material well-being of low-income households.
  • Policymakers should instruct the Census Bureau to count currently uncounted benefits, such as refundable tax credits and means-tested food, housing, and health care assistance, as income under the OPM. Doing so would provide a more accurate picture of the effectiveness of current antipoverty spending and policy, the real needs of low-income households, and the merits of proposed new benefits.

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Introduction 

When the Census Bureau announces the latest round of official poverty data on September 10, around 12 percent of US residents—one in eight or about 40 million people overall—will be reported as living “in poverty” according to official US government statistics.1 Like every year around the release of these data, some politicians will take credit for improvements during the recent past, tying positive changes to new laws or programs they supported. Others will wring their hands at the high number of individuals remaining “in poverty,” deride the effectiveness of the other side’s efforts, and call for changes they believe would lift more families “out of poverty.” Reporters will dutifully take down each side’s words, noting the millions of children, working-age adults, and retirees still living “in poverty,” according to the latest data.

And it will all be objectively wrong.

As this report details, the current official poverty measure (OPM) includes widely recognized flaws that severely compromise its utility as both a measure of the number of Americans in poverty and a yardstick for judging the merits of policies designed to reduce poverty. Crucially, the current official measure ignores a growing share of spending devoted to reducing the plight of the poor, effectively overstating poverty in the US.

If not addressed, the disconnect between the real conditions facing low-income households and what is reported in the OPM will only continue to grow—possibly dramatically—given calls by Democratic presidential candidates for rapid increases in benefits that may not be counted under the OPM. Unless the OPM is adjusted, these new benefit proposals would not reduce “official” poverty—or they could even result in its apparent increase if the new, uncounted benefits discourage work among low-income households and thus reduce earned income counted under the OPM.

Fortunately, changes to fix the OPM have been understood for decades and do not need to be dramatic or overly complicated. They can and should start with counting current antipoverty benefits. Doing so would better reflect the actual resources low-income families have at their disposal. And it would better reflect both actual need and the effectiveness of current policies and programs aimed at the poor. Finally, that better understanding would provide a stronger base to judge the merits of new proposals designed to assist especially low-income Americans, among others.

Read the full report.

Notes

  1. US Census Bureau, “Census Bureau to Announce Findings for 2018 Income, Poverty and Health Insurance Coverage and Supplemental Poverty Measure,” August 27, 2019, https://www.census.gov/newsroom/press-releases/2019/iphi-announcement.html; and US Census Bureau, “Poverty Drops for Thirds Consecutive Year in 2017,” September 12, 2018, https://www.census.gov/ library/stories/2018/09/poverty-rate-drops-third-consecutive-year-2017.html.

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