From the Washington Post: Why Poverty Doesn't Rate. (HT: Greg Mankiw) This article gives an excellent presentation of why official poverty numbers dramatically overstate poverty in the United States.
Among low-income households in the United States, the gap between reported income and reported spending has widened gradually since the 1960s and now has taken on chasm-like dimensions. In the early 1960s, the poorest quarter of U.S. households spent 12 percent more than their annual incomes. In 1973, spending by America's poorest fifth surpassed their income by almost 40 percent. And in 2004, spending by the poorest fifth of American families exceeded income by a whopping 95 percent; in effect, spending was nearly twice as much as income.
These patterns might be due to easy access to credit, with many consumers maxing out their credit cards or engaging in other unsustainable borrowing. (Curiously, however, recent credit surveys suggest that the net worth of poorer Americans has been rising, not falling.)
.....
These criticisms of the official U.S. poverty rate should not be confused with indifference to the plight of America's disadvantaged and poor. Indeed, the opposite is true. In the richest society humanity has ever known, material deprivation still afflicts too many Americans. We cannot expect to make progress, however, without adequate and accurate information. Advocates of social and economic justice in the United States should be in the front ranks of those demanding more accurate assessments of U.S. poverty. Without a clearer sense of where we stand, how we got here and where we are headed, most initiatives aimed at reducing poverty in the United States will be needlessly ineffective.
Thanks for bringing this article to my attention. It is good to be reminded that we cannot just trust what the government says to be correct.
Posted by: Johnny Brooks | Sep 06, 2006 at 01:55 AM
Your welcome. Nailing down exactly what poverty is can be a slippery issue.
Posted by: Michael Kruse | Sep 06, 2006 at 07:20 AM