My Descent Into Abject Poverty; Or, How To Have Enough Money To Be "Poor"

If you read some of the usual propaganda about the plight of the elderly poor in New York City, it will bring a tear to your eye.  Or, at least, that's the intent.  For example, City Comptroller Scott Stringer is just out (March 21) with a big report titled "Aging With Dignity: A Blueprint for Serving NYC's Growing Senior Population."   We learn that some 20.0% of New York City seniors (over 65 years old) lived "below 100 percent of poverty" in 2015; and another 10.3% lived "between 100 and 149 percent of poverty."  In the housing category, things get even worse.  Some 38.8% of seniors who own their homes in New York City are said to be "rent-burdened" (funny term for homeowners) in the sense of spending more than 30% of their income on housing cost.  Among renters, a whopping 59.7% are said to be "rent-burdened."  The source for these numbers is given as the American Community Survey, i.e., the U.S. Census Bureau data that are the source for the usual reports about the "poverty rate," as well as other things like claims about "income inequality."

For something even more heart-rending, try this 2015 piece from, titled "Aging in New York City: City Wrestles with Poverty Among Seniors."  Excerpts:

“The percentage of seniors living in poverty is staggering, ” says NYC Department for the Aging Commissioner Donna Corrado. “Too many older New Yorkers make difficult choices about purchasing food, medicine and paying their rent.” . . . .  How seniors can make ends meet is a question the whole country is grappling with. . . .  Although national poverty rates for seniors declined from 12.8 percent to 9.5 percent from 1990 to 2012, in New York City, the poverty rate among older adults increased by 15 percent during that period, rising from 16.5 percent to 19.1 percent, according to DFTA. 

Of course, all this talk about "poverty" and lack of "income" derives from the Census Bureau data.  Regular readers of this site will recognize that these Census statistics on "poverty" are completely arbitrary and fake.  For a few useful prior posts, try here and here.  The best way of looking at them is that they are just a big scam to gin up hugely inflated numbers of people claimed to be in "poverty," in order to play on the sympathies of the taxpayers and get support for increased funding for "anti-poverty" programs, none of which ever raise a single person out of "poverty" as defined.  The key sleight-of-hand is defining "poverty" solely in terms of current-year "cash income" -- a category that in many instances has little or no relationship to the amount of resources a person or family may have available to spend.  Since most people live mostly off their income most of the time, you can easily come to think of "income" as a good proxy for living standards; and thus, you become easy to deceive.  The fact is that, while "income" may be a useful proxy for living standard in many cases, there are many other cases where "income" is not a good proxy at all for living standard.  For an obvious large category, think college students.  Retirees are another large category, but the reasons may not be so obvious to you.

Anyway, over the past weekend I got a draft of my 2016 tax returns from my accountant (don't worry, we got an extension).  Of course, it was a big, fat pile of paper, some 96 pages of draft returns -- 78 for the IRS and another 18 for New York State/City.  (What, you thought this "poverty" thing was simple?)  The shocking news was right near the front, on the second page of the 1040:  based on our "income" as reported, by Census Bureau definitions, Mrs. MC and I lived "in poverty" during 2016.

How could this possibly be?  Wasn't the Manhattan Contrarian a high-income partner of a big law firm just a few short years ago?  How is it possible to fall so far, so fast?

First, disabuse yourself of the idea that this has anything whatsoever to do with living standard.  In fact, our living standard has not changed one bit.  We live in the same place.  We eat the same food.  (Manhattan restaurants!)  Sometimes we travel.  We pay all the bills.  We give substantial amounts to charity.  One of our daughters had a wedding -- in Manhattan -- during 2016.

So what's the secret?  In our case, the overall picture is a little complex, but one big thing stands out:  We have enough money that we can afford to be "poor"! 

Does that somehow seem not to make sense?  Then you haven't been paying attention.  Poverty, or non-poverty, by official definitions, turns on one and only one thing, which is current-year "cash income."  If you consider how this works for retired people, you will quickly realize that the people who saved more, who have more available to spend, and who in any real sense are better off, are actually more likely to turn up as "in poverty" than the people who saved less.  Think it through.  Suppose you have retired and you didn't save much, or maybe you did save some, but only in the form of tax-advantaged retirement savings, like 401(k) or IRA plans.  You are basically out of money, except for the retirement plans (if any).  You need something to live on.  The first thing you will do is start collecting your Social Security.  That counts as "income"!  If you worked most of your life regularly at a middle class or better job, that income alone could well be sufficient to raise you out of "poverty."  Or, if you have 401(k)s or IRAs, you can start drawing on them.  In most cases, that's "income" too!  Again, if you are trying to maintain your prior standard of living without other savings, you will need to withdraw sufficient funds from these plans that you will probably get lifted out of "poverty."

But suppose instead that you saved some substantial amount of money not in the form of tax-advantaged 401(k) or IRA plans.  Spending this money is one hundred percent not "income."  It just doesn't count, period.  Meanwhile, there are very good reasons not to collect Social Security until you reach the age of 70, and not to withdraw from 401(k)s and IRAs until you reach the age of 70.  First of all, those things count as "income," and you have to pay taxes on income.  Duh!  Why would you volunteer to pay income tax when you don't have to pay any tax?  Second, both Social Security and tax-advantaged retirement assets continue to grow through age 70 as long as you don't use them.  If you can hold off on collecting your Social Security benefit for the five years from age 65 to 70, the monthly amount will grow by some 40%.  This is not a difficult decision.  You just need to have enough money set aside to avoid drawing on the sources that count as "income."  Or, to put it another way, you need to be rich enough to be poor!

Now that you have absorbed this information, go back and re-read those heart-rending tales from the beginning of this post.  For example, did you feel sorry for those "rent-burdened" elderly New Yorkers who spend "more than 30% of their income" on housing cost.  Well, Mrs. MC and I spent more like 500% of our (completely arbitrary) 2016 "income" on housing cost.  Please, don't feel sorry for us.  And then there's that sham about the "poor" elderly New Yorkers "mak[ing] difficult choices about purchasing food, medicine, and paying their rent."  There are undoubtedly elderly New Yorkers in this situation, but the idea that the supposed 20% "poverty" rate is a real measure of their numbers is ridiculous and insulting.  

Without doubt, somewhere in the 20.0% of elderly New Yorkers who are counted as "in poverty" in the official statistics, there are numerous instances of real hardship.  But how many?  Is it most of the 20%, or half, or maybe only a tenth or less?  Unfortunately, there is no way to tell from the official numbers.  That failing is completely intentional, and gives advocates infinite room for fraudulent use of the statistics, as illustrated in the examples at the beginning of this post.  

Finally, consider that subset of "poor" elderly New Yorkers who live in Manhattan.  In a post back in 2013, I asked whether it was even possible to live in Manhattan and be in real "poverty."  After all, there is literally no place to live in Manhattan where the market rent alone does not exceed the official poverty level for the number of people living there.  Therefore, if you live in Manhattan, by definition, the resources -- whether your own, or handouts from the government, or from someone else -- that are spent in a year to support you, exceed the so-called "federal poverty level."  In at least tens of thousands of cases of people deemed "in poverty" by the Census statistics, those spent resources are large multiples of the federal poverty level.  Many "poor" families in Manhattan receive government benefits that cost the taxpayers well into the six figures.  This is particularly true of families that live in public or "affordable" housing, which by itself, in prime areas of Manhattan, is worth $50,000 and up in annual taxpayer subsidy.  So the following statement is assuredly true:  to the extent that there are elderly "poor" people in Manhattan who suffer real hardship -- in the sense of having to "make difficult choices about purchasing food, medicine, and paying their rent" or struggling to "make ends meet" -- that is one hundred percent a consequence of the poor design and implementation of the existing government handout programs.  How our government can spend $50,000 in a year to support a family in subsidized housing in Manhattan, and another $40,000 per year to provide Medicaid for that family, and still more for free phones and EITC and other assistance, and still leave that family in "poverty" and without enough cash to "purchase medicine" or "make ends meet," is completely beyond me.        

OK, enough of this for now -- I have to go apply for food stamps!