- Here is the fundamental and irremediable flaw with America’s official poverty rate: It measures the wrong thing.
- It assumes that annual income is the yardstick for determining living standards.
- In truth people’s living standards are always determined by annual consumption.
Today marks the 50th anniversary of LBJ’s announcing his “war on poverty.” What went wrong? What, if anything, went right? What would a real war on poverty look like in 2014? National Review Online hosted a symposium of experts to answer these questions. The following is AEI's Henry Wendt Chair, Nicholas Eberstadt's response.
According to official US government figures, there has been no progress whatever in reducing the prevalence of absolute poverty in our country for nearly half a century. For the year 2012, the Census Bureau counted 15.0% of the total US population as having incomes below the fixed and unchanging official federal poverty line, which is adjusted only for inflation. Back in 1966, America’s “poverty rate” by that same measure was reported to be 14.7%.
(The poverty index used for such readings was devised during 1964, at the very start of the War On Poverty, was publicly unveiled in early 1965, and ever after has been the main government calculation deployed to track our country’s performance against want.)
If these statistics accurately reflected conditions in the real existing America, they would be cause for alarm, outrage, and maybe even something much like political revolution, considering the enormous increases in per capita income and per capita wealth the nation enjoyed over that same period. But these figures are nonsense-numbers, generated by an obviously cracked algorithm. Which is why no one in Washington (or in numerate reaches of the academy) really takes them seriously.
Here is the fundamental and irremediable flaw with America’s official poverty rate: it measures the wrong thing. It assumes that annual income is the yardstick for determining living standards, whereas in truth people’s living standards are always determined by annual consumption--expenditures, asset draw-downs, gifts, non-cash transfers and all the rest.
Income levels are a miserable predictor of consumption levels for the bottom ranks in America today. According to the Bureau of Labor Statistics, the annual spending power of the poorest quintile in the US income distribution is well over twice annual pre-tax reported income—and that mismatch has been gradually widening since at least the early 1970s. (And we don’t even bother to estimate total consumption for the poorest quintile, including things like Medicaid and other public non-cash transfers.)
If we had a decent set of official poverty metrics and social indicators, we would know that the sort of material deprivation that afflicted a troubling portion of our society back in the early 1960s has been essentially eradicated--and was in fact eradicated some time ago--but that disturbing pathologies are spreading new forms of misery in our land nonetheless.
Our government officially declared war on poverty in January 1964. That long war has been the occasion of many tragedies. One of them is that we have permitted our long and expensive campaign to redress material want to be guided with a broken compass—and have begrudged the relatively trivial outlays that could have allowed us to get a better statistical sense of our bearings.
Nicholas Eberstadt holds the Henry Wendt Chair at the American Enterprise Institute