Fighting words from mere policy wonks to a Nobel Laureate of course but we're afraid it's true, Angus Deaton is going badly wrong in his analysis of US poverty. The claim is that there are those in the US suffering the sort of poverty, that $1.90 a day type, we more normally associate with what Donald Trump described as "shitholes."
This is not true. What is true is that there have been a number of reports, books, screeds, making the assertion but they don't stand up to analysis.
The first that Deaton mentions is Philip Alston's UN report on the subject. One of us corresponded with him to discuss his report and we didn't get any useful answers, just "gosh this measuring poverty thing is difficult, isn't it?" Or, as one of us put it elsewhere:
Just to emphasize this when they talk about child poverty (para 25) we’re told that 18 percent of children live in poverty, 13.3 million. Then in paragraph 29, we’re told that food stamps (SNAP) lift 5 million out of poverty, the EITC another 5 million.
So, the number of children “living in poverty” is not 13.3 million, is it — it’s 3.3 million. That comes out to just 4.5 percent of children “living in poverty,” after the effects of just two of the things we do to reduce poverty.
In their own report, the U.N. is detailing how their claims of the number in poverty in the U.S. are entirely wrong – codswallop in fact.
The measurement of poverty being used is how much poverty would there be if government wasn't doing something. This is not a good measurement of how much poverty there is after government has done its - no doubt wasteful, not very effective but still extant - work.
Deaton also references the Edin and Shaefer work. Our opinion is that this was deliberately constructed to be misleading. For they look at cash income only. Our $1.90 a day figure is consumption, not cash income. Not only does the E&S "work" not include what government does to alleviate poverty, as above, but it also fails to account for consumption from savings.
Imagine, for example, that you were laid off from a job this Friday, start the next one in 10 days on the Monday but one and don't claim unemployment in the meantime. By their measurement system you are on less than $2 a day cash income over that period and thus absolutely poor.
This is a nonsensical method of measuring poverty - except, of course, if you were more interested in a polemic which showed there was absolute poverty in the US.
We thus return to our long articulated insistence. In terms of that $1.90 a day absolute poverty defined by the World Bank there is no such poverty in the US today. It simply does not exist. Any policy based upon the idea that it does is therefore going to be wrong.
Just one numerical example. The average, among those who receive anything at all from the program, food stamp allocation is $29 per week per person. 45 million people receive this slightly more than $4 a day. Food stamps are not included in either of the above two mentioned poverty calculations, neither the UN one nor the Edin and Shaefer. There is no $1.90 a day poverty in the US.