Lies, Damned Lies, Poverty Statistics

The U.S. is the richest country in the world, but has the most poverty of any industrialized democracy

By David Brady

Sunday, August 28, 2005

Note to Editors:
David Brady is an assistant professor of sociology at Duke

Durham, N.C. -- Each August, we Americans tell ourselves a lie. On Aug. 30, the Census Bureau will release the official poverty rates for 2004. Pundits, politicians, the press and the president will almost certainly rehearse empty remarks on why poverty is higher or lower than last year, and attribute this failure or success to things that really have nothing to do with poverty’s true causes. This entire episode is profoundly dishonest.

This dishonesty is not because U.S. poverty is insignificant. Twelve and a half percent of the U.S., or nearly 36 million people, are "officially poor." But better estimates put those numbers closer to 18 percent, or 48 million people. U.S. poverty is nearly twice as high as that of Canada and the U.K and about three times as high as that of many European countries. The U.S. is the richest country in the world, but has the most poverty of any industrialized democracy.

The dishonesty is not the fault of government statisticians like 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. Unfortunately, President Johnson’s administration substituted the "economy food plan" which was about 25 percent lower, and made it the official measure. By doing so, they purposefully set the line low so they could "win" the War on Poverty. 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, aware of these problems, presents alternatives and pushes Congress to revise the official measure. Unfortunately, it has never been revised – though one such attempt occurred in an episode of "The West Wing."

The dishonesty is not due to social science. Most international poverty researchers use a relative measure. Even Adam Smith and Friedrich Hayek observed a person is poor relative to the living standards and customs of a time and place. Some skeptic might regurgitate the unoriginal response that the U.S. poor are rich compared to people in developing countries. But the American poor don’t live in developing countries. Heck, if one plays with comparisons to previous centuries or Africa, it is easy to say that there are no poor people in the U.S. The poor are poor relative to what it takes to make ends meet and participate as citizens in contemporary U.S. communities. As Michael Harrington wrote, "To have one bowl of rice in a society where all other people have half a bowl may well be a sign of achievement and intelligence. … To have five bowls of rice in a society where the majority have a decent, balanced diet is a tragedy."

State-of-the-art measures embrace relative poverty. First, we estimate the median income after considering all taxes and assistance. Then, we define poverty as living in a household with less than 50 percent of that median. With this measure, the Luxembourg Income Study, the most sophisticated international poverty research outfit, estimates that 17 percent of the U.S. would have been poor in 2000, not the official 11.3 percent. To see how this affects policy, look at the debate surrounding President Bush’s push to privatize Social Security. We hear, "the U.S. has conquered elderly poverty." Sure, the elderly live more securely than in the 1960s, and Social Security certainly has reduced elderly poverty. But, according to the Luxembourg Income Study, 24.7 percent of the elderly were poor in 2000, not the official 9.9 percent.

The dishonesty of official poverty is not even entirely the responsibility of politicians. Though guilty of an unwillingness to revise the official measure, I’ve never heard a politician intentionally misrepresent poverty statistics. In contrast to budget debates, for example, political commentary on poverty statistics seems quaintly sincere.

The dishonesty is really the fault of us, the American people. Only on rare occasions do we even bother to acknowledge the poor. Most of the time, we contentedly believe that only a few people are poor, and those undeserving poor have themselves to blame.

This, of course, is a lie. But when we are told a lie many, many times, and obvious evidence, if we bothered to look at it, shows it is false, we are equally responsible for perpetuating the dishonesty.