New Obama Poverty Measure Lowers Poverty Rates in Most States and Among Children

November 03, 2011

On Friday, November 4, the Census Bureau is holding a webinar on the Obama Administration’s proposed “supplemental” poverty measure. The webinar is in advance of the release of new research on the measure on Monday.

Media stories about the Obama measure have generally focused on the likelihood that it would produce a national poverty rate in recent years that is modestly higher than the outdated official poverty rate. Conservatives like Robert Rector and Robert Samuelson have seized on this to claim that the measure is part of a liberal plot “to promote income redistribution.”

Alas, no. In fact, Obama’s new poverty measure, like so many of the Administration’s proposals, gives up too much to conservatives — without actually getting their support in return — and does too little to advance progressive priorities. For reasons I have detailed in a 2010 report and at a Brookings forum, it is at best a centrist compromise proposal that leans right, not a progressive initiative. While the Obama poverty measure is based on recommendations made by the National Academy of Sciences in 1995, those recommendations left a lot of wiggle room for policymakers, including on fundamental issues such as where to actually set the poverty threshold. However, on these issues, the Administration has consistently adopted a conservative reading of the NAS recommendations.

As a result, in most states, the Obama poverty measure, at least as currently conceived, would result in lower poverty rates (and poverty thresholds) than the current official measure. The table below compares state poverty rates using the official measure with those using the Obama poverty measure. (The rates are from tables on the Census website that were prepared by Trudi Renwick, the Chief of the Poverty Statistics Branch at Census). As the table shows, state poverty rates under the Obama measure would be lower in 34 states and higher in 16 states and the District of Columbia. 

State Poverty Rates Under Official and Proposed Supplemental Poverty Measure, 2009
    Poverty Rates in 2009  Difference -Obama SPM Minus Offical Poverty Rate (Percentage Points)
    Official Federal Poverty Measure Obama Supplemental Poverty Measure
States with Less Poverty Under Obama Measure Mississippi 23.2% 17.0% -6.3
West Virginia 16.0% 11.3% -4.6
Kentucky 17.1% 13.2% -3.9
New Mexico 19.6% 15.8% -3.8
Arkansas 19.1% 15.9% -3.2
Iowa 10.9% 7.9% -3
Montana 13.5% 10.5% -3
Kansas 13.9% 11.1% -2.9
Missouri 15.6% 12.8% -2.8
South Dakota 14.3% 11.6% -2.7
North Carolina 17.0% 14.3% -2.6
North Dakota 11.0% 8.4% -2.6
Tennessee 16.7% 14.3% -2.4
Idaho 13.9% 11.6% -2.3
Oklahoma 13.0% 10.8% -2.2
Maine 11.6% 9.6% -2
Ohio 13.5% 11.5% -2
Michigan 14.2% 12.4% -1.8
Lousiana 14.3% 12.8% -1.6
Indiana 16.4% 14.8% -1.6
Vermont 9.6% 8.3% -1.3
Rhode Island 13.2% 12.2% -1.1
Alaska 12.1% 11.0% -1.1
Alabama 16.8% 15.9% -0.9
Nebraska 10.0% 9.1% -0.9
Texas 17.4% 16.5% -0.9
Washington 11.9% 11.2% -0.7
Pennsylvania 11.2% 10.5% -0.6
Minnesota 11.1% 10.7% -0.5
Wisconsin 11.1% 10.7% -0.5
Wyoming 9.3% 9.0% -0.4
Oregon 13.7% 13.3% -0.4
Utah 9.8% 9.5% -0.3
South Carolina 13.8% 13.8% -0.1
States with More Poverty Under Obama Measure Arizona 21.3% 21.6% 0.4
Georgia 18.5% 18.8% 0.4
Illinois 13.3% 13.8% 0.5
Virginia 10.8% 11.7% 0.9
Delaware 12.4% 13.9% 1.5
New York 15.9% 17.6% 1.7
Colorado 12.4% 14.8% 2.4
Connecticut 8.6% 11.1% 2.5
New Hampshire 7.9% 10.4% 2.5
Massachusetts 10.9% 13.6% 2.7
New Jersey 9.5% 12.2% 2.7
Nevada 13.1% 17.2% 4
Maryland 9.7% 14.0% 4.3
Florida 14.6% 19.5% 4.8
District of Columbia 18.0% 23.1% 5.1
Hawaii 12.6% 18.0% 5.5
California 15.5% 22.4% 7
Source: Table 3, State Poverty Rates Official vs. SPM – Geographically Adjusted with the Rent Index, Renwick (2011).

It is particularly striking that the biggest declines in poverty rates under the Obama measure would occur in many of the poorest states. Among the 10 states with the lowest per capita GDP, six are also in the top 10 of the states that would see the largest decline in poverty rates under the Obama measure. If, as Rector and Samuelson claim, the Obama measure “promotes income redistribution”, it is regressive rather than progressive in federal fiscal terms—redistribution from a majority of mostly smaller and poorer state economies to a minority of mostly larger and wealthier ones.

This result is largely produced by two flawed elements of the Obama measure: 1) it adopts a poverty threshold that is far too low as a measure of what is needed to live a minimimally decent life today (only $23,854 for a family of two parents and two children in 2009, according to the Administration); and 2) it adjusts this threshold for geographic differences in housing costs in a way that allows the poverty thresolds for many states and sub-state areas to actually fall below the outdated federal poverty threshold. 

Rector and others have focused on the overall increase in the poverty rate the measure would produce at the national level. But this increase is very small: less than one percentage point in 2009, according to the most recent research on the Census website. And, this (less than) 1%, unlike the other, more well-off 1% in the news these days, has not exactly been reaping outsize economic gains at the expense of everyone else for several decades.

Moreover, as with the state numbers, underlying this modest overall increase are much larger shifts in poverty for certain demographic groups. Most notably, poverty would increase among married couples and home owners—the number of people below poverty in both groups would increase by more than 4 million. At the same time, poverty would decrease for children (nearly 3 million fewer children below the poverty line) and renters (nearly 1.8 million fewer renters). Here again, the redistribution implied by this—taking from renters and children no longer considered poor to give to married couples and homeowners who now are—doesn’t appear to be particulary progressive. The problem, of course, isn’t that the home owners and married couples will now be labeled as poor aren’t really struggling; rather, it’s that there isn’t much evidence that the children and renters who will no longer be considered poor are really doing any better.

Finally, it is also worth noting that the small increase in overall poverty under the Obama measure may prove to be ephemeral. The Obama poverty threshold is linked to trends in consumer expenditures on housing, utilities, food and shelter at the 33rd percentile of the expenditure distribution. Between 2008 and 2010, average expenditures on these items by families in the second quintile of the income distribution have declined by nearly $500, which implies that the Obama threshold could actually decline in value compared to the official poverty measure over the next several years. 

The Administration has said that its new poverty measure is a work in progress. If it is, they could improve it by ensuring that no state or area ends up with a sub-minimum poverty threshold. They would also be wise to stop trying to come up a single, perfect measure of poverty that satisfies both liberals and conservatives–an unattainable goal–and adopt multiple measures that recognizize the multidimensional nature of poverty and the minimum amount of income that most Americans know working families really need to make ends meet. 

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