Why the Very Poor Have Become Poorer

According to the Census Bureau, the percentage of Americans living in poverty is higher today than it was in the late 1960s. Last year I argued in these pages that these “official” poverty statistics are extremely misleading.1 When the United States first explicitly defined an official poverty line in 1969, it was supposed to be adjusted every year to ensure that it represented a constant standard of living. However, two problems arose and were never fixed.

First, the Consumer Price Index, which was supposed to be used to adjust the poverty line for inflation, turned out to have flaws that made it rise faster than the cost of living. Second, the official measure uses pretax money income to measure families’ economic resources; but anti-poverty measures enacted since then, such as the expansion of food stamps and then the Earned Income Tax Credit (EITC), made low-income families’ total economic resources increase faster than their pretax money income. As a result of these problems, roughly half the families now counted as officially poor have a higher standard of living than families with incomes at the poverty line had in 1969.

In $2.00 a Day: Living on Almost Nothing in America, Kathryn Edin and Luke Shaefer argue that what they call “extreme” poverty roughly doubled between 1996 and 2012. If they are right—and I think they are—the reader might wonder how I can still claim that poor families’ living standards have risen. The answer is that inequality has risen even among the poor. Half of today’s officially poor families are doing better than those we counted as poor in the 1960s, but as I learned from reading $2.00 a Day (and have spent many hours verifying), the poorest of the poor are also worse off today than they were in 1969. $2.00 a Day is a vivid account of how such families live. It also makes a strong case for blaming their misery on deliberate political choices at both the federal and state levels.

Continue reading...