Clifford F. Thies
is the Eldon R. Lindsay Professor of Economics and Finance at
Shenandoah University. He received his Ph.D. in economics from
Boston College.
Professor Thies is a contributor to six books and author or
coauthor of more than six dozen articles in such scholarly
journals as The Independent Review; Eastern Economic Journal;
Explorations in Economic History, Southern Economic Journal;
Review of Quantitative Finance and Accounting; Journal of
Economic History; Review of Austrian Economics; Journal of
Economics and Business; Financial Review; Journal of Real Estate
Finance and Economics; Small Business Economics; and Journal of
Money, Credit and Banking.
The release of a
supplemental poverty measure by the
Census Bureau is being touted
in the media as indicating the government is not doing enough to
ameliorate poverty in the country.
The number of poor people, as officially measured, is at an
historical high, 47 million. The number of poor people, per the
supplemental measure, is even higher, 50 million. But, the
problem isn't that the government isn't doing enough. Rather,
the problem is that the government is already doing too much.
The official poverty line is equal to three times the cost of
food in 1963. Over time, the poverty level, by family size and
composition, is simply adjusted for inflation. The official
measure has the great advantage of being simple and at least
approximately in line with what most people considered to be
poor back in 1963.
For example, the official poverty line roughly corresponded to
the average amount of money people said a family needed “to get
by” when queried by organizations such as the Gallup Poll.
Using this definition of poverty, and historical statistics, it
could be seen that the percentage of people who were poor by the
1963 standard was falling dramatically going into the 1960s.
But, from the 1960s until the past few years, the percentage of
people who are poor has merely fluctuated. And, during the past
few years, it has gone up.
As to whether this recent movement is merely cyclic or the start
of a new trend is a very important question.
A big problem with the official poverty line is that it does not
reflect the impact of non-cash aid to low-income people, such as
food stamps and housing subsidies; and, it does not reflect the
impact of taxes paid by low-income people.
Back in 1963, the Social Security payroll tax was 3.625 percent.
Today, the Social Security and Medicare payroll tax is 7.65
percent.
Non-consideration of non-cash assistance and of taxes has been a
bone of contention for years. These are routinely discussed in
college textbooks, were included in a National Academy of
Science review, and were incorporated into some exploratory
analysis conducted by the Urban Institute. A couple other issues
with the official measure seem unexceptional.
