Rethinking poverty in America

Reading this post from The Money Illusion a week ago has me thinking. Has America won the war on poverty, but refused to acknowledge the success?

The Money Illusion argues:

After-tax and transfer data is better than income, and consumption data is still better. Liberals are focusing on “inequality” when they should be focusing on poverty level consumption (as they were in 1973.) That’s the real problem.

The constant banter by the left that the right hates the poor is necessary for the liberals in our country to maintain a narrative. But, if as the article mentions, there really are very few poor in our country as measured through consumption, what will Democrats toss out to win races?

Before you swear I’m wrong, take time to read that post and the sources. He links how he found the concept from The Conversable Economist. Then he goes to the source, a report from The Brookings Institute. That report measures poverty through consumption instead of by income.

(And woot! There’s no way to minimize my argument by claiming The Brookings Institute is a right-wing think tank. I love it when that happens.)

From The Brookings Institute’s study:

The results in this paper contradict the claim that poverty has shown little improvement over time and that antipoverty efforts have been ineffective. We show that moving from traditional income-based measures of poverty to a consumption-based measure, which is arguably superior on both theoretical and practical grounds—and, crucially, accounting for bias in the cost-of-living adjustment—leads to the conclusion that the poverty rate declined by 26.4 percentage points between 1960 and 2010, with 8.5 percentage points of that decline occurring since 1980.

The report perfectly supports my personal theory that we’ve redefined poverty in this country. Those living below the proverbial “poverty level” are supplemented through transfer payments such that they are not consuming in poverty. Around 2007 we hit the sweet spot and basically eliminated poverty as measured by consumption in these United States.

Pretty amazing, huh? And a very common-sense approach to the definition of poverty. And a really great reason to be pleased as a nation.

So the next time you hear someone spout off on the selfishness of the rich, remember the rich have transferred enough money to the poor to raise them out of poverty.

Comments

  1. What an interesting article. This is a thought provoker for sure.

  2. J. Strupp says:

    I would agree that the consumption-based measure is more accurate than the income-base measure. We should be taking into account transfer payments in the official poverty statistics. The real problem is that neither measure takes into account the general increase in living standards due to economic growth. If you indexed the poverty level to economic growth in some way (as Social Security does for example) poverty levels are much higher than the study suggests. Now if you’re saying that absolute poverty is near zero, then I would agree.

    But regardless of how you measure poverty, you seem to be arguing that Social Security benefits, Section 8, Medicaid, SNAP, etc. have led to the significant drop in poverty over the past half century. If Congressional Republicans had their way, you can bet that these would be the first programs going up in flames. It isn’t difficult for liberals to maintain the narrative. They just have to stand back and let the GOP be the GOP.

  3. Oh, but that is an assumption on your part, Mr. Strupp. Can you not be content with your admission that, “absolute poverty is near zero?”

    Remind me. Why are we arguing?

  4. ????

    I should be content because we’ve almost eliminated absolute (extreme) poverty in this country? Kind of setting the bar low isn’t it?

  5. This Side says:

    Guys like Strupp will not be satisfied until they eliminate the wealthy (except the ruling class) in this country.