The Right Strategy To Deal With Obamacare

Washington is currently aghast at the chutzpah of Congressional Republicans advancing various strategies to restrict or eliminate Obamacare.  The Republican initiatives run from the Cruz/Lee defunding gambit, to the efforts to get rid of some of the more obnoxious aspects of the law like the medical device tax, to other efforts to delay for a year or perhaps more the so-called "individual mandate."  I think that anything and everything that can be done to get rid of this disastrous government power grab should be encouraged, so I don't mean to be too critical.  But as usual, nobody is advancing what I think is the best idea.  Although I generally don't offer strategic advice to the Congressional Republicans, I'm going to make an exception this time.   

The Republicans should be always and everywhere, and as loudly as possible, screaming from the rooftops to all young people that this is a fraud and a scam directed at them, intended to take their hard-earned money away at the least-wealthy point in their lives, for nothing in return, and transfer the money to people wealthier than they are.  No young person should sign up for health insurance through the exchanges.  Actually, if the Republicans had any sense they should be organizing a boycott.  

But instead the Republicans seem to be completely pussyfooting around this one, and I don't get it.  There hasn't been one word of actual sense spoken about healthcare in this country for several decades, and this is a fantastic opportunity to get that conversation going.  Why?  Because the only way that healthcare or any other industry works is that consumers bear the costs and risks of their decisions.  That has not existed in healthcare in this country for a long time, but suddenly Obamacare makes it so greatly to the financial advantage of a large swath of the population to take on a big piece of the risk themselves that they will be crazy not to do it.  Why is that not a good thing?  Given the ridiculous financial burdens that Obamacare seeks to load onto low-earning young people, if they behave rationally we could shortly see the number of uninsured in the country shoot up.  That would mean that Obamacare would promptly be revealed as failing in its principal stated goal of getting "insurance" for everyone.  Meanwhile, there would suddenly be a huge cohort of massively price conscious shoppers for medical care.  Imagine: you might even be able to get a hospital to tell you how much a treatment will cost before they perform it!   

I have previously characterized the government's promotion of Obamacare to the young as "the most massive organized fraud in world history."  How could it possibly be wrong to point that out?  And remember, the government is gearing up to spend unbelievably huge amounts of money on obviously false and fraudulent advertising to get the young to sign up -- the AP has identified at least $684 million in state and federal budgets for the project.   There would be no need to spend a dime if this was to people's financial advantage. 

What are the possible objections to my proposal?  

From the Progressive/Democrat side, the main idea seems to be that it is immoral for the government to allow people to take on any material risk in their lives.  Even if you believe that a world where all risk is socialized can actually work, I don't see that as any justification for this kind of huge fraud.  Sorry. 

Another justification I have seen is that the "individual mandate" is now the law and so Republicans should not be seen as undermining a duly enacted law or advocating civil disobedience.  Here's the problem with that:  the "individual mandate" is not the law.  The Supreme Court struck it down.  Here's a link to the Supreme Court opinion.  I don't think I am misreading it.  The only part of the individual mandate that is still the law is the tax penalty for failure to obtain the insurance.  Oh, and the law disables the IRS from actually enforcing that penalty.   So I don't see why anybody should be deterred from advocating a boycott by the supposed "individual mandate."  If anything, the Republicans should be loudly pointing out that the individual mandate has been struck down and that the tax penalty is far less than the amount you will save by not signing up.

Looking for an actual intelligent objection to my proposal, the best I can find is from the usually thoughtful Megan McArdle at Bloomberg.  Megan says that "Republicans have been skating a thin line" between predicting that "people can game the system by going without insurance and then buying it when they get sick" and "encouraging it."  Megan says that Republicans are "wrong" to even get close to this line.  Why?

After March 2014, this is going to be a pretty dangerous game to play. You will only be able to enroll in an exchange policy during open enrollment at the beginning of each year. Now, this would actually work for a lot of conditions- -- even necessary surgery can often wait nine months, and while I really wouldn’t recommend it, it probably wouldn’t actually kill you to wait six months to get into a diabetes treatment program. But if you get into a car accident in April, the next 10 months of expensive treatment will be on your dime.

Sorry Megan, but I strongly disagree.   I don't see it as at all a fair characterization of what young people may do as "gaming the system" when the government is trying to strong-arm them into paying double or triple the fair price for health insurance, and also has a stupid rule that allows you to buy so-called "insurance" after you get sick.  The whole idea behind free-market capitalism is that people are allowed to behave rationally and are rewarded for it.  That's what distinguishes a functioning economic system from a Cuba or a North Korea.  

So how big is the risk for a young person that you take a pass on the insurance and then you have a bad accident or medical problem and go many months before you can sign up?  The answer is, no worse than things are today for the supposed 47 million uninsured.  If the accident happens, you show up at the hospital, get treated, and then don't pay.  Go bankrupt if necessary.  If you have no meaningful amount of assets, it's their problem, not yours.   I'm not saying this will be pleasant, but the tradeoff is a one or two percent chance of going through an assetless bankruptcy versus overpaying by thousands per year for medical insurance for a decade or two.  It's time to embrace a little risk!

Here's the most important part of my proposal:  When you find yourself in an unsustainable Ponzi scheme, you want it to collapse as soon as possible.  With Obamacare, the essential question is, is it going to be a painfully slow Ponzi scheme like Medicare/Medicaid that is taking at least 70 and maybe as much as 100 years to get to collapse, or can we get it to collapse in just a few years?  We want the death spiral absolutely as fast as possible!  If only young people will boycott it, that could happen.

Nomination For The Worst Possible Public Policy: "Affordable Housing" In Manhattan

I've previously written (back in January) that so-called "affordable housing" has to be, among the various government programs intended to assist the less-well-off, "the most expensive possible way to help the smallest number of people."  

And yet additional "affordable housing" initiatives seem to have the full support of just about everyone around here.   Fresh evidence came last week when still-Mayor Mike Bloomberg announced final agreement on the so-called SPURA project for the Lower East Side.  (SPURA stands for Seward Park Urban Renewal Area.)  According to a report in our local paper The Villager on September 19, Bloomberg, in announcing the new project that is now supposed to rise, said, “It’s a changing point of New York for the good, it really does have the support of everyone."  Then he said, “If anyone is opposed, raise your hand or forever hold your peace," and apparently no one did.  I guess it's unanimous!  Except for me, of course.

If you have ever entered Manhattan via the Williamsburg Bridge, you have seen SPURA -- a vast wasteland of parking lots on the south side of Delancey Street that has sat vacant for decades.  It's hard to imagine a clearer demonstration of the abject failure of government as housing developer.  Here is a picture of the site that I took this afternoon:  

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SPURA site looking Southeast from Norfolk St. near Delancey St. 

Here's another view looking more due East.  You can see the approaches and one of the towers of the bridge toward the left of the picture. 

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SPURA was created way back in the 60s during the heyday of the urban renewal era.  Politicians thought they could cure poverty by building public housing.  You can see in the pictures some of the projects that actually got built around that time.  But by the late 60s, the project-building era was running out of gas.  They knocked down multiple square blocks of buildings that were deemed to be substandard, or "slums," and then just left the parking lots there for decade after decade.

The new development will supposedly contain 900 new apartments, half of which, or 450, will be "permanently affordable."  Back to that in a moment. 

Meanwhile, something else has happened.  On the north side of Delancey Street there was a neighborhood more or less the same as the neighborhood on the south side of Delancey, in other words a "slum" at the time, but the government geniuses never got around to knocking it down.   Most of the old buildings are still there, with some new mixed in.  Gradually, this became a desirable neighborhood.  Today, you might even call it chic.  I'll throw in a few pictures to demonstrate.  For example, just about 50 feet north of Delancey Street on Norfolk Street is a condo called the Blue, built in 2007. Picture:

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According to data at streeteasy.com, there are 5 recorded sales at this building in the last 180 days, with an average price of $2,171,000.  There is one current listing, valued at $1,596 per square foot.  This would mean that a two-bedroom apartment would go in the range of $1.25 - 1.5 million.   Streeteasy says that rental listings in the building average $64 per square foot per month, which would be in the range of $5000 - $6000 per month for a two-bedroom apartment.  

Walk up Norfolk Street one short block to Rivington Street and you will find, for example, trendy clothing boutiques: 

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The very hot Schiller's Liquor Bar restaurant: 

The equally hot THOR ("The Hotel On Rivington") Hotel: 

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As to SPURA, they haven't yet announced any specific prices of the so-called "affordable" apartments in the new development, but let's take some ballpark numbers.  If a poor family is going to qualify for a two-bedroom apartment for close to free, that will amount to an annual subsidy of about $60,000.  If a middle class family qualifies for a similar apartment for, say, $2000 per month, that will amount to an annual subsidy of about $40,000.  Of course the City will not lay out this cash, and the subsidies will not appear in its budget or on its balance sheet.  But the subsidies are absolutely real, because one of the options is that the City could rent out the apartments at market rate to someone else, take the cash, and then instead of handing out an apartment, pay the qualifying family all -- or more likely some part -- of the money. 

And if you consider this alternative, you will quickly realize how little an "affordable housing" program accomplishes despite expending a vast amount of resources on a very small number of people.  For the poor family, by providing them the apartment the City government has given up $60,000 it could have had by renting it to someone else, and it has still left the family in "poverty" as measured by official statistics, when it could have given the family cash of $25,000, thus removing it from poverty, and have had $35,000 left for other programs.  If you wanted, you could then remove a second family from poverty and still have cash left over. 

A $40,000 annual subsidy to a middle class family makes even less sense.  How can we justify giving that kind of subsidy to a family that by definition is not even poor, even as other families are poor and are not receiving help? 

But then, here in Manhattan, it is completely unanimous that this is a good idea.  That is, except for me. 

Food Stamps And The Brezhnev Doctrine

Many readers may not be old enough to personally remember Leonid Brezhnev, the block-headed super-thug who was dictator of the Soviet Union during its long period of stagnation and decline from 1964 to 1982.   Here is a picture:

When Brezhnev is remembered at all, it is for the so-called Brezhnev Doctrine, by which he asserted that any country once turned Communist must never be allowed to go back to capitalism.  He may have been dumb, but he had sufficient instincts to sense that once any part of the empire was lost it could start a cascade and the whole house of cards could collapse very quickly.  In the end, that's exactly what happened.

A very similar but so far nameless doctrine applies to the world of government programs, where the principle is that no program must ever suffer an actual spending cut.  Without doubt the defenders of all government spending are motivated by the same instinct that motivated Brezhnev -- once any cut is made and seems successful, the house of cards is in real trouble.  And thus we see seemingly insignificant and clearly necessary cuts subject to hysterical defense down to the very last dollar. 

This phenomenon is currently playing out in regard to the food stamp program, otherwise known by the official acronym of SNAP.   Prior to the Obama years, food stamp spending tended to go up in recessions and down in recoveries.  But during the five years of the Obama "recovery," food stamp spending has somehow exploded from about $40 billion to about $80 billion per year, with the number of recipients nearly doubling to about 48 million.  Causes of the explosion include the government's aggressive promotion of food stamp dependency, along with lifting of prior restrictions and limits on eligibility.  I have previously covered this issue here.

Now enter the congressional Republicans with a budget proposal to bring about a small reduction in food stamp spending.  As reported at The Hill, the House last week passed a Republican proposal to "cut food stamps by $39 billion."  Of course that's $39 billion over  ten years, less than $4 billion per year.  So we're talking about getting back maybe a tenth of the explosion of the last five years, going from $80 billion per year back to maybe $76 billion.  This is supposedly to be accomplished by re-imposing some of the restrictions previously in place.  For example, the Wall Street Journal reports on September 21 that the 2009 Obama "stimulus" eliminated a 20 hour per week work requirement, and that Obama also eliminated a three month time limit for employable and able-bodied adults, leading the number of employable adults on food stamps to grow by 164% from 2007 to 2011; those restrictions would now be at least partially reinstated.  Nobody is even talking about going after some of the even more outrageous aspects of the program, such as that home equity in unlimited amount and retirement savings accounts in unlimited amount do not count toward food stamp eligibility.  After all, we wouldn't want to restrict our entitlements to just non-millionaires. 

Anyway, cue the hysterical forces seeking to prevent even one dollar of federal spending from ever being cut.  NPR refers to the approximately 5% cut as a "slash"; the Atlantic Wire calls the proposed cuts "massive"; Think Progress says the bill will affect "millions of the most vulnerable people in the country."   From among many crazed reactions, consider this one from one Albor Ruiz in the New York Daily News on September 22:

The bill will leave nearly 4 million Americans hungry, and 210,000 children without school lunches. Apparently, the GOP leaders believe that’s not their problem.  “We’re looking at a hunger crisis unlike any we’ve seen in Food Bank’s 30-year history,” said Margarette Purvis, president and CEO of Food Bank For New York City.  The sheer meanness of the Republicans’ action becomes clear once you know that, nationally, nearly 48 million people — 1.8 million in New York — rely on SNAP. Over 92% of them are children, the elderly, disabled or working families below the poverty line.  Coming at a time when one in five children (16 million) suffer hunger, a record-high, the bill would deprive millions of Americans from a proven lifeline to keeping food on the table.  “I find that idea repugnant and repulsive,” said an irate Rep. José Serrano (D-Bronx), who added that the cuts represented “one of the cruelest visions of government that we have seen in generations.”  Repugnant, repulsive and needlessly cruel, these cuts would be disastrous for New York City.

It's like there's no end to the invective:  "devastating," "sheer meanness," "repugnant," "hunger crisis," "repulsive," "cruel," "disastrous."  All this over a 5% cut, almost all of which is intended to come from able-bodied, employable adults who were not even eligible for the program at all until just a few years ago?  Brezhnev would be proud!

Although not so over-the-top in the rhetoric department, even far more dishonest in my opinion was the lead editorial of Friday September 20 in the New York Times.   Here's what they have to say:

In what can be seen only as an act of supreme indifference, House Republicans passed a bill on Thursday that would drastically cut federal food stamps and throw 3.8 million Americans out of the program in 2014.  The vote came two weeks after the Agriculture Department reported that 17.6 million households did not have enough to eat at some point in 2012 because they lacked the resources to put food on the table. It came two days after the Census Bureau reported that 15 percent of Americans, or 46.5 million people, live in poverty.

The evidence cited by the NYT in favor of its argument is completely fraudulent.  As previously discussed by me here, the DOA did not report "that 17.6 million households did not have enough to eat at some point in 2012" or anything like it.  The report instead found that 17.6 million households, or 49 million individuals, were "food insecure" at some time in 2012, as determined by an affirmative response to the proposition: "We worried whether our food would run out before we got money to buy more."  That question was completely cynically contrived to get a "yes" answer from most or all food stamp recipients, since the program by its design requires recipients to manage a limited budget throughout a month.  If the food stamp program serves 48 million people, and still leaves all or almost all of them  in "food insecurity," (or as the NYT would say, without "enough to eat") shouldn't it be completely scrapped and replaced with something that works, instead of cut a lousy 5%?  Similarly, the Census Bureau "poverty rate" statistic is a total fraud, as previously covered by me many times, including here and here.    To give just one example of the massive dishonesty, included in the government's supposed 46 million in "poverty" are almost 300,000 here in Manhattan, many of whom are observably getting in excess of $100,000 per family per year in in-kind government handouts (housing, Medicaid, food stamps, cell phones, parking spaces), all of which are counted at zero in the poverty statistics.

The question I have about the NYT is, are they intentionally perpetrating the fraud, or have they themselves been taken in by others?  Those are the only two possibilities, and neither is good.  As a partial answer, I would point out that it is not possible to read the DOA's "food insecurity" report and come away thinking that they are saying that the 17.6 million households did not have "enough to eat."

Anyway, from their perspective, the advocates are right to fight for every dollar of government spending, because when the first chips of the edifice start to fall, the whole thing could go quickly like a house of cards, just like the Soviet Union. 

More On The Government's "Sick Game" With J.P. Morgan

I'm getting a little behind on the news here, but I can't let pass the latest government settlement with J.P. Morgan Chase. 

Back on July 1, commenting on a string of huge settlements between large banks and various federal prosecutors and regulators, I said this: 

Basically, any Federal agency that wants its name in the paper can pick one of the big banks and go out and get at least a few hundred million.  Sorry, but this is a very sick game of government aggrandizement with funds provided by the taxpayers through the backdoor.

Well, the settlements keep coming fast and furious, and they get more and more preposterous.   The latest is a settlement of J.P. Morgan with the SEC for $920 million over the so-called "London whale" trading losses.  A September 20 report from Bloomberg on the settlement can be found here.  The underlying event is that a J.P. Morgan trader in London took some huge positions that led to big losses in April and May 2012.  Reports have put the losses in excess of $6 billion.  At the current run rate, that is about equal to one quarter's net income for the bank.

You are probably asking, so what?  J.P. Morgan's trading controls weren't up to snuff and a guy placed some big bets that he shouldn't have and they lost a bunch of their shareholders' money.  Why is that of concern to anyone but their shareholders? 

The answer is that somewhere along the way, the government made everybody's business its business, and most particularly so if you are a big bank.  Do you think there were no consequences to taking those big bailouts? 

Still, now that the government is involved, shouldn't its actions at least make a little sense?  Here's the concept for this one:  J.P. Morgan has been directed by the all-knowing regulators to have trading risk perfectly under control at all times.  Instead they went out and lost $6 billion, causing not only a loss to shareholders, but also putting the government at slightly enhanced risk of future bailouts.  So we're really going to teach them for having lost that much money.  We'll make them lose even more money! We'll add on a $920 million fine!  That'll show 'em! 

The Bloomberg article, quotes Paul Miller of FBR Capital Markets as saying: "The regulators were embarrassed,that's why the fines are so big."  So this has nothing to do with any actual violations of the law, and certainly not with making the bank safer -- it actually makes the bank less safe.  Instead, the criterion is "embarrassment of the regulators."  We ordered you to eliminate all risk from your operations and you dissed us!  Of course, these are the people who missed Madoff.  You'd think they would be beyond embarrassment by this point.

Two New Yorks: Rich And Poor In Chelsea

Our recently anointed Democratic candidate for Mayor, Bill de Blasio, is making the "tale of two cities" and the "crisis of income inequality" the principal themes of his campaign.  Here he is quoted at The Daily Beast a couple of days ago:

The Bloomberg administration managed to ignore the inequality crisis. He claimed he wanted a third term to address the economy, yet very few policies were put in place to address the economic suffering that people are going through. So, yeah, I will be very focused on fighting inequality. That to me is the job of a mayor.

So I want to return to our look at two hypothetical families of four in the Chelsea neighborhood, just a few blocks from where I live.  Both live in comparably sized two bedroom apartments.  One has a cash income from employment of $100,000, which officially puts them at about the top 20% of the income distribution.   This family rents its apartment for $4000 per month, $48,000 per year, which is at the low end of what a two bedroom goes for in this neighborhood.  The other family has little or no cash income and is officially in poverty.  It lives for little or no rent in one of the low income public housing projects in the area, say the Robert Fulton Houses along 9th Avenue between 16th and 19th Streets. 

Now consider this question: If well being is measured by access to physical goods (housing, food, clothing, medical care, etc.) as opposed to the arbitrary government measure of "cash income," which of these two families is better off?  The answer is remarkably close and could go either way.

The "rich" family pays about $25,000 in income taxes and $48,000 in rent, leaving $27,000 for everything else.  The "poor" family gets the $48,000 apartment for free and pays no income taxes.  Its food stamp allowance is about $660 per month (almost $8000 per year) and its cell phones are free.  But they do have a problem of no cash to spend on anything.  Or do they?

Actually, there are many ways to get your hands on some cash if you are poor.  Method number one is welfare, now known as TANF.  That is time limited to 5 years, but it's a start.  Then there is social security disability.  You may qualify for disability, or maybe one of your kids does.  For example, a learning disabled kid is entitled to an SSDI check.  Over 6 million children ages three to 21 received checks for disabilities according to 2010 data here.  (According to NYCHA data here, 41% of NYCHA tenants receive some form of a monthly check for social security, SSI, veteran's benefits, a pension, or other.)  Next comes the Earned Income Tax Credit.  That requires a modest amount of work, such as a part-time job with the City sweeping the parks, or a job at McDonald's.   With a 20 hour a week minimum wage job, you'll earn about $7500 for the year, and then you'll get another about $5000 - 6000 from the EITC.  Then of course there is off the books income of various sorts, and unrecorded cash contributions from the father(s) of the kids.  Obviously not all of the poor people have all of these sources of cash, but the majority clearly have one or more.   

Do we have any way of knowing that all or almost all of the poor have access to substantial amounts of cash?  One way is by observation of the low income housing projects.  Thus I took a walk yesterday over to the Robert Fulton Houses.  Here I have arrived at the main entrance:

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I've never been able to find any government in-kind distribution program to provide the poor with air conditioners.  (There is a program to pay the electricity bill for cooling, but that's different.)  So do some or most of the poor people living in RFH have air conditioning?  Here is a picture taken on West 18th Street looking at the northernmost of the three big RFH buildings between 18th and 19th:  

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Other than one apartment there on the 11th floor, it looks like every apartment has one or more air conditioners.  But this was a cool very late summer day, so the 11th floor people may have removed the air conditioners from the windows for the season.  Anyway, now looking south at the two big buildings between 16th and 18th Streets, it's the same thing -- hundreds of air conditioners:

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Another question:  Do the poor people living in RFH have enough cash to buy cars?  In fact, the buildings are surrounded by parking lots with spaces reserved for tenant parking.  Here is a view of one of the lots:

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And here's another lot across the street:

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A reserved parking spot in this neighborhood goes for at least $500 per month, $6000 per year, for someone paying cash.  Very few people with cash income of only $100,000 per year can fit that in their budget.

A few other comparisons:

(1) Medical care.  The "rich" family likely gets medical insurance through work, but must make some contribution to the premium, plus there will be some deductible and some co-pays.  That's likely a couple of thousand per year.  The "poor" family gets Medicaid.  New York State pays in excess of $10,000 per beneficiary per year for its Medicaid program, so by the measure of the cost to the taxpayers, the poor family gets medical benefits worth in excess of $40,000. 

(2) Leisure time.  The majority of families earning at the $100,000 level have at least two income earners, and at least one full (or more) time earner.  The poor family has at most one part-time earner.  That's a big difference in leisure time, advantage to the poor family.

(3) Taxes.  The "rich" family pays $25,000 in income taxes, and its landlord pays real estate taxes on the building.  The "poor" family pays no income taxes, instead getting an EITC credit, and RFH pays no property taxes. 

So which family is better off?  By the government's official measure of "cash income," it's $100,000 for the rich family and $7500 for the poor family, a disparity of a factor of over 13 in favor of the rich.   By the measure of access to physical goods and services the poor family very likely comes out ahead.  If you value the Medicaid at what the government pays for it, then the poor family gets at least $48,000 for the apartment, $40,000 for Medicaid, $6000 for the parking space, $8000 for the food stamps, $2000 for the cell phones, $6000 for the EITC, and of course there is the $7500 for the minimum wage job at McDonald's.  That's a total of $117,500 (before getting to any off-the-books cash or SSDI, which would be additional), compared to $75,000 after tax for the "rich" family. 

But the rich family does have one very valuable thing that the poor family does not:  its independence.  And with its independence goes hope for the future.  If they work hard and continue to strive, the $100,000 family could well find itself in five or ten years earning $200,000 and moving up to a much nicer apartment and maybe even getting that parking space, plus saving up a nest egg.  The poor family is trapped in place.   If they make the mistake of earning more observable cash, their rent will be increased by 30% of the increased earnings (that's how it works at NYCHA), and then they start taking away the other benefits as well.  The worst possible thing a single mom of this family could do would be to marry a man with a middle class income, which would disqualify the family for the food stamps and the cell phones and the Medicaid and increase the rent through the roof.  So the poor family is virtually forced to remain in a situation where its measured cash income will keep it well within the poverty level.    

Thus the way actually to allow the poor family to become better off is to decrease the benefits, and/or put time limits and caps on all of them.  Got that, de Blasio? 

Is It Possible To Live In Manhattan And Be In "Poverty"?

Here in famously expensive Manhattan, there is virtually no such thing as an available unsubsidized apartment that does not cost more than the entire Federal Poverty Level income for the smallest family that can fit in that apartment.  So just about everyone in Manhattan lives in a home whose rental value alone exceeds FPL.  The obvious conclusion from that is that there can be no such thing as poverty in Manhattan.  Right?  

Not so fast!   According to the Census Bureau the official poverty rate for New York County (basically the same thing as Manhattan) is 17.6% for the most recent 2007-11 data.  That's actually higher than the 14.5% rate for all of New York State.  With a population exceeding 1.6 million, Manhattan supposedly has about 285,000 people in "poverty."  Yet essentially all of them live in apartments whose annual rental value alone exceeds FPL.  What are we missing?  The answer is highly relevant to understanding the so-called "crisis of income inequality."

The answer is not that there are terrible neighborhoods, slums, where the housing is falling down and poor people are forced to live. We don't have slums in Manhattan any more, at least not slums in the sense of places where the housing is inexpensive.  Harlem and the Lower East Side have both become desirable neighborhoods while nobody was looking.  A search of the very comprehensive Streeteasy data base reveals just one apartment for rent in Manhattan for under $1000 per month.  It's a very small (400 sq. ft.) walk up studio in Harlem only suitable for one person, for $950 per month.  That's $11,400 per year, as against FPL for a single person of $11,490.    Every other Manhattan apartment on Streeteasy has a rent above FPL.  This Manhattan Rental Market Report for August 2013 shows that Harlem is still the least expensive neighborhood to rent an apartment, but the average price for a studio there is now $1481, or $17,772 per year, which is well above FPL for a family of 2.

No, the answer is that the people deemed to be in poverty do not pay full price, or anything close to it, for their Manhattan apartments.   There is a dizzying array of subsidies and handouts available to people to get them into housing in Manhattan if they can define themselves into poverty.  There is low income public housing, Section 8 vouchers, and "affordable housing" and "income restricted" housing of many sorts.  Critical to the entire enterprise is the fundamental proposition that nothing about the apartment you live in counts as income for purposes of determining your income or poverty status.  Obviously, if a the value of a Manhattan apartment, measured by the market rent that everyone else pays for a comparable apartment, counted as part of "income," then it would be impossible for anyone in Manhattan to be counted in poverty.   

Thus, a few blocks from where I live we have the neighborhood of Chelsea, where the cheapest 2 bedroom apartment you can find on the market goes for about $4000 per month.  The neighborhood also has several large public housing projects, where residents are almost all deemed to be in poverty, and pay nothing or next to nothing for their 2 bedroom apartments.  In a very real sense they are receiving income of at least $48,000 per year in the form of the housing -- far above the FPL.  None of it counts in the official measures of income or poverty.

Compare the lives of two families of four living in Chelsea in 2 bedroom apartments.  One earns about $100,000 per year.  It pays about $25,000 off the top in income taxes.  Then $48,000 for the apartment.  Transportation to work is several thousand per year.  Cell phone service is another couple of thousand.  No food stamps or clothing allowances.  This is a very tight budget.  The family across the street in poverty gets the $48,000 apartment for free. Food stamps pay for the food.  The cell phones are free.  Medical care is free.  In measured income statistics, the difference between these two families is $100,000 and zero, enormous income inequality.  In actual consumption, the difference between them is not very large at all.

The so-called "crisis of income inequality" is all over the news right now, from the de Blasio mayoral campaign, to many, many articles from the left-wing punditry.  Try this one today from E.J. Dionne of the Washington Post if you can stand it.  Not one of these people uses remotely honest data to measure poverty or income inequality.