THE Census Bureau reported yesterday that the poverty rate in America held stable between 2011 and 2012, at about 15 percent. According to the official measure, poverty today is higher than it was in 1973, when it reached a historical low of 11.1 percent.
To many, this dismaying fact suggests that taxpayers waste billions of dollars a year fighting a war on poverty that has been largely lost. As Representative Paul D. Ryan, Republican of Wisconsin, said earlier this year, “We have spent $15 trillion from the federal government fighting poverty, and look at where we are, the highest poverty rates in a generation, 15 percent of Americans in poverty.”
But this position is wrong, for two reasons. The first is that the official measure is misleading — it measures only cash income, and it does not count benefits from many programs that help the poor. If they were counted, the rate would be closer to 11 percent.
Consider the Supplemental Nutrition Assistance Program, commonly known as food stamps, which was first put into nationwide use in the 1960s. The immediate benefits are easy to calculate: a dollar of SNAP subsidies spent on food frees up a dollar for low-income families to spend on rent, utilities or other needs. When SNAP benefits are counted as income, they lift almost four million people above the poverty line.
And SNAP benefits not only reduce food insecurity and poverty this year; they also reduce poverty in the next generation. Recent research that tracked children into adulthood found that families’ access to food stamps improved their infants’ health and birth weight. Children who benefited from the program later posted better health, higher educational attainment, less heart disease and, for women, greater earnings and less reliance on welfare as adults.
The earned-income tax credit is also ignored in calculating the poverty rate. Yet this program offers working low-income families with children about $3,000 a year. When these tax refunds are counted, they reduce the number of people in poverty by about 5.5 million people.
Social Security benefits are counted in the official measure, but their large antipoverty effect receives little attention. Without these benefits, the elderly poverty rate would have been more than 44 percent, instead of the actual rate of less than 9 percent.
The next time critics of the safety net claim that we fought a war on poverty and poverty won, remind them that without these and other programs, poverty would be much higher.
But, says the critic, if all these programs have such broad effects, why has the poverty rate stayed so frustratingly stable? That’s the second flaw in the conventional wisdom.
All things being equal, such programs, whether we count them or not, should have reduced the official poverty rate across generations. But all things have not been equal. Although these programs help the poor, poverty remains high because inequality of economic outcomes has increased sharply since the 1970s.
Before income inequality took off, the poverty rate fell more rapidly with G.D.P. growth. But while the economy grew by 2.8 percent in 2012 and corporate profits went up as a share of national income, the earnings of full-time workers, median household income and the poverty rate barely changed.
Antipoverty programs do help, but their recipients don’t move forward because they no longer benefit much from that other great poverty-ameliorating factor, economic growth.
That’s not to say that growth is no longer necessary for reducing poverty. But in our gilded age of inequality, growth alone is insufficient.
A few changes would make a difference. First, a poverty measure that incorporated all anti-poverty policies would show that the safety net is more effective than critics say, and would show how painful cuts to those programs could be.
In fact, the Census Bureau has already developed a supplemental measure that reveals the importance of these programs to low-income families. But when it is released next month, it will receive far less attention than the official rate from policy makers and the press.
Second, more benefits from growth must reach the poor, and the best way to do that is through matching robust antipoverty measures with policies that lower the unemployment rate and increase wages. During the full employment years of the late 1990s, even low wages rose in step with productivity, and poverty fell more sharply than it had in a generation. A minimum-wage increase helped then, and an increase now would help again.
Lowering poverty means both recognizing the successes of safety net programs we now have and devising new policies that can spread the gains generated by economic growth. If we don’t, then we will continue to face poverty rates that are unacceptably high, and wonder why we can’t do anything about them.