Poor America

Douglas Besharov in todays WSJ ($):

"That's what makes a new data series by the Census Bureau, "The Effects of Government Taxes and Transfers on Income and Poverty: 2004," so significant. Developed after nine months of meetings between outside experts and senior government officials from the Census Bureau and other federal agencies, it allows us to get a better view of the resources available to low-income Americans.

First, the series gets a better fix on "market income" poverty -- poverty before taxes and means-tested transfers like cash welfare. (Although the Census Bureau counts it separately, Social Security, like pensions, is included as market income since it is "earned" during one's working years.) Now we can use the correct inflation adjustment, count the income of cohabitors and coresidents, and include the implicit income of home ownership. (The last mostly affects the elderly.) Finally, adding in government estimates of unreported income results in a market income poverty rate of about 7.9%, not the official rate of 12.7%. Second, as suggested by the name of the new data series, government transfer programs also reduce financial need. Taking into account welfare payments, food stamps and housing assistance (noncash benefits are presently not counted) results in a poverty rate of about 5.1% -- and even this excludes the value of Medicaid for the poor, roughly $2,000 per person.

Even with these calculations, about 15 million people are below the poverty line and millions more just above it. But the broader point must not be lost: Millions of low-income Americans are living better lives than they did before. Period."