A slight correction on US poverty levels

Tom links up to a post with this graph about US poverty levels.


The thought is that since the war on poverty began there's been no decrease in poverty: thus the war on poverty doesn't reduce poverty, perhaps it even confirms it?

There's certainly the possibility of welfare dependency however, US poverty line statistics are such a mess that that's perhaps not the best explanation possible. What has really changed since the mid 1970s is that we've changed the way we measure the effects of trying to alleviate poverty.

Unlike the rest of the world the US does not measure poverty after all the things we try to do to alleviate it. UK poverty statistics, for example, give us the number of people still in poverty after we've given them money, cheap housing, tax credits and all the rest. US poverty statistics however used to do this but no longer do.

The reason is that the US numbers include the market incomes of the poor plus the direct cash transfers they get as welfare. They do not include Section 8 (our housing benefit), Medicaid, Food Stamps nor the EITC (tax credits to us). The EITC for example costs $80 billion a year, raises 5 million above the poverty line on its own (just the Federal one, most States have one as well on top) but none of the effect of that is in that graph.

When did the EITC start? In the mid-1970s. When did all the move from straight cash welfare, which is included in those poverty figures, to goods and services in kind, which are not included, begin? In the early 1970s: exactly when we see poverty flatlining.

It all sounds a bit odd, I agree, but there is a real answer to the question "How come the US spends hundreds of billions a year on alleviating poverty and doesn't seem to alleviate much poverty?". The answer is that no one is counting the poverty alleviated by spending hundreds of billions of dollars a year.

Strange but true.