Congress debates flawed, outdated poverty formula

In January of 1964, in his first State of the Union Address, President Lyndon B. Johnson presented Congress with a formidable challenge. "This administration today, here and now, declares unconditional war on poverty in America," Johnson proclaimed. "Our aim is not only to relieve the symptom of poverty, but to cure it and, above all, to prevent it."


Forty-four years later, the country has fallen far short of Johnson’s mark. Despite long-standing efforts to tackle the problem, the percentage of Americans living beneath the poverty level is the same today as it was in 1975. Now, a growing group of lawmakers and economists says the failures derive not only from an insufficient commitment to the poor, but also from a flawed formula for identifying them.


Appearing before a House panel late last week, experts testified that the decades-old poverty measure — based primarily on food costs — fails to consider other necessities of contemporary life. The experts are calling on Congress to modernize its yardstick.


"[T]he lack of an accurate, credible and relevant poverty measure has itself become a major impediment to combating poverty effectively," Douglas Nelson, who heads the Annie E. Casey Foundation, a Maryland-based community support group, said Thursday before the House Ways and Means Subcommittee on Income Security and Family Support. "If we want to solve the poverty challenge, step one is to get our heads around the true scope, dimension and dynamics of the problem."


The debate comes at a time when the nation’s financial anxieties seem to escalate by the hour. Gas has moved well above $4 per gallon; a mortgage crisis is pushing thousands of Americans from their homes daily; the cost of staple foods like milk and eggs has skyrocketed in the last year. Just this week, reports revealed that overall inflation jumped 1.1 percent in June — the second highest one-month leap in a quarter-century. Though the economic downturn has drawn national headlines for its effects on middle-class Americans, the nation’s poor are likely to fare far worse. If ever there were a time to have a clear picture of who’s struggling, experts say, it is now.


The current poverty formula, created in 1963, was based on a Department of Agriculture strategy allowing struggling families to purchase groceries during emergencies. The formula assumes that food costs consume one-third of a family’s after-tax income — an assumption that continues today, though food now constitutes closer to a seventh of family income. The resulting calculation — currently $21,200 for a family of four — is used to determine eligibility for a number of federal and state programs.


But experts say the formula is flawed in two fundamental ways. First, by focusing on food costs, it fails to take into account that housing, transportation, health care, child care and other expenses have become essentials of modern life. Second, it’s calculated using only cash income, and therefore fails to capture the in-kind benefits available to lower-income people. Food stamps, Medicaid, housing assistance and the earned income tax credit, for example, are not considered.


"It is not too strong a statement to say that, 45 years after they were developed, the official poverty thresholds are numbers without any valid conceptual basis," said Rebecca Blank, a senior fellow at The Brookings Institution.


Rep. Jim McDermott, D-Wash., chairman of the Ways and Means subcommittee, has now sponsored legislation to revamp the long-standing formula, replacing it with a measure pegged to real expenditures on food, clothing, shelter and utilities. The bill would adjust the poverty level by region, to reflect the very different costs of living around the country — something the current formula does not do.


Republicans oppose the McDermott bill, saying that it doesn’t count enough benefits as income and that it would go too far to increase the number of folks qualifying as poor. Rep. Jerry Weller of Illinois, the top-ranked Republican on the panel, said the proposal would guarantee that poverty would never be eliminated.


"That’s like advancing the football five yards," he said, "but moving the goalpost another 20 yards further away."


Weller also voiced concerns that the proposal would cost too much. That claim was rejected by Democrats and several economists, who maintained the social cost of doing nothing far exceeds the cost of intervention.


There’s evidence that some change is necessary. Roughly 37 million Americans, or 12.3 percent of the population, live below the federal poverty level, according to the latest tally from the U.S. Census Bureau — the same percentage reported in 1975. For minorities, the numbers are gloomier: More than 24 percent of African-Americans and more than 20 percent of Latinos live in poverty. Among single mothers with children, the rate stands at a bleak 37 percent.


In the absence of federal action, New York officials have taken it upon themselves to update the federal poverty measures. Just this week, former Democrat-turned-Republican New York Mayor Michael Bloomberg, who later resigned from the GOP in June 2007, unveiled a new poverty model similar to the McDermott bill. "If we are serious about fighting poverty," Bloomberg said in a statement, "we also have to start getting serious about accurately measuring poverty."


But New York officials warned House lawmakers Thursday that such efforts are not feasible for every locality — most of which lack the resources of New York. "Local efforts cannot substitute for federal action," said Mark Levitan, director of poverty research at New York City’s Center for Economic Opportunity.


And funding isn’t the only barrier to the adoption of a new poverty gauge. Rep. Artur Davis, D-Ala., pointed out that all the money in the world won’t solve the problem unless enough lawmakers make the poor a priority. Without that political will, he said, nothing will be done.


"It’s not a resource question, ultimately," Davis said. "It’s a question of what we want to do."

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