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August 30, 2005

Growth Misconduct

The Washington Post reports today that the US poverty rate rose for the fourth consecutive year last year, to 12.7 percent.  That is, one out of eight Americans now lives in poverty. 

At the same time, median incomes stagnated in 2004, and the number of people nationwide who have no health insurance grew by 800,000.

Without any apparent irony, the Post reports that...

[t]he increase in poverty came despite strong economic growth

So what, exactly, does "strong economic growth" mean if poverty increases, middle-income folks see their incomes stagnate, and more people end the year uninsured.  Yes, I do know the answer to this -- GDP grew, the economy added jobs, and so forth.  But if the Census data are any indication, these trends did little or nothing for those at the bottom half of the economic ladder -- those who were most in need of economic boost.  It seems like these trends -- poverty, median incomes, and the like -- are far more important to people's lives than accounting conventions like GDP. 

Just by way of comparison, the poverty rate in Washington and Oregon has averaged 11.7 percent over the past 3 years; in Idaho it's been 10.5 percent; in Montana, 14.3 percent; and California, 13.2 percent.  We'll be looking more closely at Northwest trendlines as soon as updated data becomes available on the Census website.

Update: Some similar thoughts on the subject from The Washington Monthly weblog.

Posted by ClarkWD | Permalink


...and a Duke Uni professor says the way we calculate poverty is all wrong:


[ " ]

One reason for the discrepancy is the way the government sets the official poverty level. The current poverty level was set by statistician Molly Orshansky, who constructed the formula for the official measure in 1963. With data from 1955, Orshansky multiplied the Department of Agriculture's "low-cost food budget" by three, assuming food amounted to one-third of a family's expenses.

"She developed this poverty line purely for research, never intended it for policy and quickly repudiated it," Brady said.

Unfortunately, President Johnson's administration substituted the "economy food plan" which was about 25 percent lower, and made it the official measure, he said.

"They purposefully set the line low so they could 'win' the War on Poverty," Brady said.

The measure neglects taxes and government assistance, has been adjusted only for inflation and, as a result, ignores the enormous changes in families since 1955. The Census Bureau has pushed Congress to revise the official measure, but it has not been revised.

Part of the problem is that state-of-the-art measures embrace relative poverty; that is, they take into account a person's poverty based on the society in which they live, Brady said.

[ " ]

Posted by: Dan Staley | Aug 30, 2005 12:52:03 PM