Poverty: It's Worse Than You Think

No, I'm not talking about actual poverty in that title.  I'm talking about the poverty scam, by which the government creates fake numbers to deceive the public into believing that a large percentage of the population lives in a state of physical suffering and deprivation despite a trillion dollars a year of government anti-poverty spending.

Last week, along with my excellent summer research assistant, I interviewed a Census Bureau official to get some more detail on the methodology by which the government's "poverty" numbers are compiled.  The official who agreed to be interviewed was the Chief of the Poverty Statistics Branch.    This is the person in charge of preparing the "poverty" portion of the government's reports on income and poverty, for example this one covering 2013.  I won't name names here, but the name can be found easily with a little Googling.

Throughout the government reports -- that 2013 report linked above being a good example -- they refer to the thing they are measuring as "economic well-being."  But the more you learn about what they do, the more you realize that, at least in the bottom rungs, these reports have little or nothing to do with economic well-being.  They have only to do with one concept, "cash income," a completely artificial construct of their creation that has been designed so that government spending can never cause the poverty rate to go down.  The whole game is systematically to exclude so many things that the poverty rate will remain high no matter what resources the people may have available to support themselves.

Thus, we verified that in calculating "poverty," they systematically exclude all government in-kind benefits, from housing to food stamps to Medicaid to energy assistance.  And they systematically exclude negative tax payments, like the EITC.  And they systematically exclude capital gains.  And they systematically exclude scholarships.  And loan proceeds.  And support from family members.  But those things were already obvious.  Not so obvious were these things:

  • They have no idea whether they are capturing much or any of the vast amounts of off-the-books and illegal income in this country.  They take whatever answer a person gives as to his or her household income, without any sort of follow up or double check.  Various estimates put the size of the U.S. underground economy in the range of $2 trillion,  or about 12% of the economy.   Here is such an estimate from a University of Wisconsin study in 2011.  If even a small fraction of that amount goes to the population reporting itself "in poverty," it would hugely swing the numbers.  I can't imagine that any but a very small fraction of the underground economy is counted by the Census in its measure of "poverty."
  • They make no effort of any kind to take existing assets into account.  In the surveys that determine "poverty" status, they don't even so much as ask about savings or home equity or business ownership.

We were referred to a recent report, issued January 2014, titled "Dynamics of Economic Well-Being:  Poverty, 2009-2011."  This report contains some information that emphasizes once again that the thing they are calling "poverty" has little or nothing to do with your conception of "poverty."

The "Dynamics" report comes out of a survey called the Survey of Income and Program Participation, which is a different survey from the American Community Survey and Current Population Survey that are the usual basis for the government claims as to "poverty."  Unlike the ACS and CPS that just take people's answers to questions on a one-time basis, the SIPP seeks to track a sample of some 25,000 people over a multi-year period.  Here are their first two "highlight" conclusions:

  • Over the 36-month period from January 2009 to December 2011, 31.6 percent of the U.S. population was in poverty for at least 2 months, an increase from 27.1 percent over the period of 2005 to 2007.
  • The percentage of people in poverty all 36 months from 2009 to 2011 was 3.5 percent, an increase from 3.0 percent over the period of 2005 to 2007.

Read that and you realize that what they're talking about has to be something completely different from what you think about as poverty.  Sure some people live paycheck to paycheck and get laid off from their job and are in a real spot.  But the large majority with brief periods of no paycheck have resources to fall back on, in many cases substantial resources.  31.6% of the population is a huge number that can't possibly have any real relationship to actual hardship.  Are they really counting actors between movies as "in poverty" for two months?  College kids with non-paying summer jobs?  Does the interval between your last paycheck from work and your first social security check count as "poverty" even if you have a million dollars in the bank?  These numbers cannot make sense unless the answers to those questions, and a lot more similar ones, are yes.

And along the same lines, please check out William Benson Huber's op-ed in today's New York Post, finally casting some light on the food insecurity scam.   Huber points to the endless "public service" ads by an organization called Feeding America claiming that one in five American children don't have enough to eat.  As previously pointed out many times on this blog (for example, here), such numbers come from the thoroughly fraudulent Department of Agriculture "food insecurity" surveys, that have nothing to do with hunger or even food deprivation.  As Huber points out, the actual number of American families that have any member miss even one meal during a year is only one out of one thousand.  So what is Feeding America up to with its endless ads?

Well, the motive here isn’t remotely altruistic. Forbes magazine lists Feeding America as the fourth-largest nonprofit in America.  And, as Paul Roderick Gregory notes in a Forbes column, the group’s “CEO earns over a half million dollars.  Its corporate sponsors represent America’s largest agribusiness companies, food processors and retailers (Conagra, Food Lion, General Mills, Kelloggs, Kroger, Pepsico and Walmart).”  If you make or sell food, you want to inculcate brand loyalty at the youngest age possible. And to get the public thinking we’re still not spending enough on food — never mind that 35 percent of poor kids are obese.

Yes, it's far, far worse than you think.