The Heritage Foundation

Executive Memorandum #339 on Regulation

August 31, 1992

August 31, 1992 | Executive Memorandum on Regulation

How the New Census Report Dramatically Overstates Poverty inAmerica

(Archived document, may contain errors)

8/31/92 339


Thisweek the United States Census Bureau will release its annual report on income and poverty. The report will show that the current recession has thrown millions out of work and lowered family incomes. 11iis unem- ployment and the suffering it causes are real. But the Census Bureau also will report, as it has for many - years, that there are over 30 million"poor"pers o ns in America. This picture of chronic, pervasive American poverty is a myth; it is caused by obvious deficiencies in the way the Bureau measures income and defines the poor. . According to the Census Bureau there an almost as many poor people today as wh e n the War on Poverty began in do mid- 1960s. This piqure of unremitting poverty is perplexing because welfare sonding grew enor- mously throughout the 1970s and 1980s, even after adjusting for inflation. Such spending reached an all-time high in 1990, the last year for which complete figures are available. In that year, before the current recession began, welfare spending reached $226 billion, or five times the amount spent when the Great Society's War on Poverty began in 1964, after adjusting for inflatio n . Erroneous Picture. How can welfare spending expand fivefold while the number of poor Americans remains nearly unchanged? The answer is simple: the Census Bureau poverty count is grossly inaccurate. The Census Bureau undercounts incomes, excludes assets, and creates an erroneous picture of the living standards of low-in- come Americans. Key facts missing f1rom the Census report are: * Nearly 40 percent of the persons identified as"poor"by the Census Bureau own their own homes. The median value of homes ow ned by poor persons in 1989 was $43,562, or 58 percent of the median value of all homes owned by Americans in that year; * Nearly three-quarters of a million"poor"persons own homes worth over $100,000; 75,000"imme'persons own homes worth over $300,000;

* 6 2 percent of "poor" households own a car, 14 percent own two or more cars. Nearly half of all"Poor"house.- holds have air conditioning; a third own microwave ovens, * "Pooe' Americans live in a larger houses or apartments, cat In.ore meat,.and are more li kely to own cars and dishwashers than is the general population in Western Europe.

# The average intake of protein, minerals, and vitamins is nearly the same for poor and middle-class children. P= children today are in fact supernourished, growing up to be one inch taller and ten pounds heavier than the GIs who stormed the beaches oi Normandy in World War H. These facts am taken from detailed but unpublicized surveys gathered by the Census Bureau itself and other government agencies. Yet they are ignored b y the Census Bureau's official p overty reporL There is a huge gap between the "poor" as defined by the Census Bureau and what most ordinary Americans consider to be poverty.

For most Americans "poverty" means destitution, an inability to provide a famil y with food, clothing, and rea- sonable shelter. Only a small number of the over 30 million "poor"persons fit such a description. In fact@ numerous government reports indicate that most "poor" Americans today are better housed, better fed, and own more pe r sonal property than average Americans throughout most of this -century. In 1990, after ad- justing for inflation, the per capita expenditures of the lowest income one-fifth of the U.S. population exceeded the per capita income of the average American hous e hold in 1960. The Bureau counts as "poor" any household with a cash income less than the official poverty threshold, -which was $13,942 for a family of four in 1990. The main problem is not only that the Census Bureau ignores all assets, but it also omits nearly all government welfare benefits poor families receive in counting income. In fact, the government's own data show that low4ncome householders spend $1.79 for every $1.00 of income, counted by Census. In 1990 federal, state, and local governments sp e nt $226 billion on welfare programs or roughly dime times the amount needed to raise the incomes of all Americans identified by the Census Bureau as poor above the offi- cial poverty income thresholds. But the Census Bureau, in calculating the number of p o or persons, counted only $32.5 billion of this aid as income for low-income households. Excluded from the Census Bureau reports are en- tire programs of public assistance for the needy, such as food stamps, public housing, and Medicaid. For the pur- pose o f its calculations, such huge public assistance programs might as well not exist. Officially, at least, they have no impact on poverty. But the missing welfare spending excluded from the official data on poverty totals $193.5 billion, or 3.5 percent of th e total U.S. economy. The missing funds which are spent on the poor, but not counted by the Census Bureau, amount to $13,330 for every "poor" household. Creating Dependence, Destroying Fandlies. Clearly there is far less material poverty than the Census Bu - reau reports. But the low levels of material poverty, as measured in income, assets, or public assistance, should not be viewed as victory for the War on Poverty. Studies reveal that the biggest effect of current welfare spend- ing is not to raise income but merely to replace self-sufficiency with dependence. In the 1950s, before the War on Poverty programs were launched, nearly one-third of poor families were headed by adults who worked full time, throughout the year. In 1990, only 15 percent of poor fam i lies had full-time working heads of household. Half of poor, non-elderly adults do not work at all. A second consequence of welfare has been the destruction of families. In 1990, even using the Census Bureau's erroneous methodology which exaggerates the n u mber of the poor, the poverty rate for married couple families was just 5.6 percent. For married couples with a full time worker it was just 2 percent. By contrast, the poverty rate of female-headed families was a staggering 32.2 percent. The number of fe m ale-headed families below the poverty level has increased dramatically since the onset of the War on Poverty. In 1959, 28 percent of poor families with children were headed by women. Last year, 60 percent of poor families with children were headed by sing l e mothers. Similarly, in the 1960s the black illegitimate birth rate was 25 percent, while today nearly two out of three black children are born out of wedlock. If the Census Bureau's methods were corrected to measure accurately the assets, cash income, a n d welfare benefits of low-income households, the result would show far fewer persons in material poverty than claimed by current official statistics. But even the corrected figure still would conceal the real tragedy of America's wel- fare system: million s of children who grow up without fathers, millions of parents lacking the work ethic and dignity, and entire generations robbed of real dreams and hopes for the future.,

Robert Rector Senior Policy Analyst

For fivther information: Robert Rector, Kate Walsh O'Beime, and Nlichael McLaughlin, "How Poor are America's Pow?" Heritage Foundation Backgrounder No. 791, September 21, 1"0.


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