Whereof One Can Speak 🇺🇦

Nothing special, one post at a time since 2012

Tag Archives: Government Benefits

The Percentage of Poor People: A Correction

Posted on by

A couple days ago, I shared a NY Times article that claims the percentage of poor people in the US hasn’t changed much in 50 years, despite the fact that we have lots of government anti-poverty programs now. Dylan Matthews of Vox quickly responded to the Times article. He argues that it all depends on how we measure poverty, a claim that Matthew Desmond, the author of the Times article, rejected. From Vox:

To come up with a poverty measure, one generally needs two things: a threshold at which a household becomes “poor” and a definition of income. For instance, in 2023, a family of four is defined by the government as officially in poverty in the US if they earn $30,000 or less. That’s the Official Poverty Measure’s threshold….

But what does it mean to earn $30,000 or less? Should we just count cash from a job? What about pensions and retirement accounts? What about Social Security, which is kind of like a pension? What about resources like the Supplemental Nutrition Assistance Program (SNAP) that aren’t money but can be spent in some ways like money? What about health insurance?

These aren’t simple questions to answer … but I think it’s fair to say there’s a broad consensus among researchers that income should be defined very broadly. It should at the very least include things like tax refunds and SNAP that are close to cash, and simpler to include than benefits like health insurance.

That’s why there’s also near-unanimous consensus among poverty researchers that the official poverty measure (OPM) in the United States is a disaster. I have … never heard even one expert argue it is well-designed. I was frankly a little shocked to see Desmond cite it without qualification in his article.

Its biggest flaw is that it uses a restrictive and incoherent definition of income. Some government benefits, like Social Security, Supplemental Security Income (SSI), and Temporary Assistance to Needy Families (TANF), count. But others, like tax credits, SNAP, and health care, don’t count at all. So many programs designed to cut poverty, like SNAP or Medicaid or the earned income tax credit, therefore by definition cannot reduce the official poverty rate because they do not count as income.

The Census Bureau now publishes a supplemental poverty measure (SPM), which uses a much more comprehensive definition of income that includes the social programs the Official Poverty Measure excludes. It also varies thresholds regionally to account for different costs of living….

Using the Official Poverty Measure, poverty hasn’t changed much since 1970. From the Times article:

As estimated by the federal government’s poverty line, 12.6 percent of the U.S. population was poor in 1970; two decades later, it was 13.5 percent; in 2010, it was 15.1 percent; and in 2019 [before COVID], it was 10.5 percent. To graph the share of Americans living in poverty over the past half-century amounts to drawing a line that resembles gently rolling hills.

For 2021, the last year for which the government has released official numbers, the rate was 11.6%, only 1% less than in 1970.

However, researchers using the updated Supplemental Poverty Measure calculated the poverty rate people between 1967 and 2020. They found that 25% of Americans were poor in 1967 (roughly twice as many as the Official Poverty Measure calculated), but — taking into account income from government programs created since 1967 — the percentage had dropped to 11.2% by 2019.

One odd thing about these numbers is that the official poverty rate, which is supposed to be obsolete, and the new, improved rate were almost the same for 2019 (10.5% vs. 11.2%). That’s even though the old calculation doesn’t include income from government programs and the new calculation does. Maybe that’s a statistical fluke, because the official rate is calculated very strangely. As Mr. Matthews explained in an earlier Vox article, “The Official Poverty Rate Is Garbage. The Census Has Found a Better Way”:

It’s worth dwelling on this for a second. The way we measure poverty is based on a 51-year-old analysis of 59-year-old data on food consumption, with no changes other than inflation adjustment. That’s bananas.

Yes, the official government calculation was devised in 1963 based on an estimate of what people ate in 1955. A few things have changed since then.

I conclude from all this that, using the best measure of poverty we have now, the one that takes into account income from government programs, the poverty rate has been cut in half in the past 50 years. (The government releases both sets of numbers these days, although which numbers are reported is another story.)

On the other hand, there are a lot more of us now. In 1967, when there were 197 million of us, a poverty rate of 25% meant America had 49 million poor people. In 2021, there were 332 million of us, so a rate of 11.2% meant the number was still 37 million.

Should there be almost 40 million Americans living in poverty today? According to the Times article, which I still recommend, there wouldn’t be that many if there wasn’t so much exploitation, so many people being taken advantage of, especially poor people, in the labor, housing and financial markets. Or if, for example, Republican senators and one “Democrat” (Joe Manchin of West Virginia) hadn’t refused to keep the expanded Child Tax Credit in effect after it expired at the end of 2021. That change in the law is said to have lifted 3 million children out of poverty. President Biden wants to restore the expanded credit in his 2024 budget but will have to overcome the usual opposition from politicians who claim to support family values.

Student Loan Forgiveness: Bad Assumptions, Bad Arguments

Posted on by

I went to college when you could do it relatively cheaply. More recently, a close relative took out loans and paid them off. Yet I find myself strangely pleased that President Biden is giving many former students financial assistance. If you happen to disagree (or if you don’t), here are perceptive comments on the matter from two columnists. First, Paul Waldman of The Washington Post. Then Jamelle Bouie of The New York Times.

One can make reasonable arguments against the student loan forgiveness plan President Biden announced this week. But the outright fury of the response in some quarters, and the absurd bad faith and hypocrisy being mobilized against this plan, have been a wonder to behold. And it is revealing fundamental things about the people taxpayers think the government ought to help.

To watch the reaction, you’d think this is the first loan forgiveness program in human history. You’d also think it’s absolutely vital to determine whether every last recipient will be morally deserving of this assistance, and whether any good people anywhere might fail to qualify for it. The more you examine these arguments — not only from Republicans but also journalists and a few Democrats — the weirder they seem.

At the most basic level, loan forgiveness isn’t novel or even unusual. Our bankruptcy system allows people to discharge loans every day — yet perversely, the law makes it extraordinarily difficult to get released from student loan debt even if you’re bankrupt. Some well-known people have used the bankruptcy system to eliminate their debts [including a former president, six times].

The government, furthermore, bails out people, companies and industries all the time when it decides that doing so is worthwhile. In the Great Recession we bailed out banks, insurers and auto companies. D____ T____ handed out tens of billions of dollars to farmers hit by his pointless trade war. Pandemic relief distributed hundreds of billions of dollars in forgivable Paycheck Protection Program loans to businesses.

Some of those forgiven loans — remember, taxpayer money, from truck drivers and waitresses — even went to the same Republican members of Congress who now rail against forgiving student debt, as the White House eagerly pointed out. If you’re a struggling blue-collar worker, are you mad that Rep. Marjorie Taylor Greene (R-Ga.) had $183,000 in loans forgiven, or that Rep. Markwayne Mullin (R-Okla.) had $1.4 million forgiven, or that Rep. Matt Gaetz (R-Fla.) had $482,000 forgiven?

If not, why does student loan forgiveness make you mad?

This leads to one of the most bizarre arguments against this program: Sure, it helps some people, but what about people it doesn’t help? What about people who never went to college, or who already paid off their loans? Why should they chip in to help these other people?

That argument could be raised against almost every government program in existence. This is the nature of paying taxes and having a government: Your money goes to all kinds of things that don’t benefit you directly or that you don’t like. You pay to maintain national parks you might not visit, and to find cures for diseases you’ll never contract. You support schools even if you don’t have kids. You build roads in states you don’t live in. You support wheat farmers even if you’re on a gluten-free diet.

How many people complaining about loan forgiveness have campaigned against the mortgage interest deduction? It costs taxpayers tens of billions of dollars every year, and its recipients — homeowners who itemize their deductions — are disproportionately wealthy. Where are all the cries of “How does this help people who rent, or people who already paid off their mortgages???”

The flip side of that argument is one we’re also hearing, that some people who will get this assistance might not truly need it. Journalists are searching for supposedly undeserving recipients, no matter how small their numbers. What if there’s an engineering major who just graduated and hasn’t gotten a job yet, but next year she’ll be working at Google? My God, are we going to forgive her loans when in 10 years she could be a billionaire?

The answer to that question is, who cares? Seriously. As a taxpayer (and as someone who, yes, took out student loans and paid them off), I don’t mind if some people get relief who might do fine without it, because tens of millions of lives could be transformed by this policy. The question is how much good the program as a whole does, not whether it helps someone somewhere who doesn’t really need it. The overwhelming majority of recipients will be middle class and because it gives extra to Pell Grant recipients, people from poor families get the most help.

Finally, some people warn that the program could worsen inflation, because it will put money into the economy. The truth is that the effect on inflation will likely be minuscule, but you could raise the same objection to literally anything the government spends money on.

For instance, earlier this summer, the House passed an $839 billion military spending bill for the 2023 fiscal year — that’s one year, not over a decade. Will pumping that much money into the economy be inflationary? And if so, should we just stop funding the military?

The fact that this question probably sounds ridiculous to you is revealing: Nobody ever worries about the inflationary effect of military spending, because people make that kind of objection only to policies they don’t like.

And that’s what’s at the heart of the objections to Biden’s loan forgiveness: Most of those making them are perfectly happy to have the government help some people, just not these people. And if that’s your argument against student loan forgiveness, you haven’t shown why the program is bad; all you’ve done is reveal yourself.

Unquote. Now from Mr. Bouie’s newsletter (no link available):

The Republican response to President Biden’s student loan forgiveness program is to try to turn the issue into a culture war…. Republicans would say that they are simply speaking up for those Americans who won’t benefit from the program. But they’re working under faulty assumptions.

First, a few details on the program itself. Under the plan, Biden will direct the federal government to forgive up to $20,000 in federal student loans for recipients of Pell Grants (which are awarded to students from low-income families), and up to $10,000 in loans for other eligible borrowers. It is restricted to individuals with incomes of up to $125,000 a year and households with incomes of up to $250,000 a year.

If every single recipient earned $124,999, it would lend credence to the Republican argument that this is some kind of war on working-class and blue-collar Americans. But they don’t. In fact, the biggest beneficiaries of Biden’s policy are exactly the people Republicans claim to represent with their rhetoric. As my newsroom colleague Jim Tankersley notes, “the people eligible for debt relief are disproportionately young and Black. And they are concentrated in the middle band of Americans by income, defined as households earning between $51,000 and $82,000 a year.”

If you want to haul freight for a living, you’ll need a commercial driver’s license, which means you’ll need training, which means you’ll need school. This schooling can cost thousands of dollars, and students can pay their tuition with federal student loans. So, too, can people who need training to work as medical technicians or home care workers or physical therapists or restaurant workers, among many other trades and professions.

Millions of people with blue-collar jobs owe thousands of dollars in federal student loans, and they may not have the income needed to pay them off. Biden’s plan helps them as much or more than a graduate of a four-year college with debt on the ledger. It also helps the millions of Americans who took out loans, attended college, but for one reason or another could not complete their degrees and are in the worst of all financial worlds as a result.

Like the “welfare queen,” the lazy, profligate and irresponsible student loan borrower of Republican rhetoric is a myth. And the point of the myth, as I said earlier, is to spread cultural resentment.

The fact of the matter is the Republican Party does not have anything to offer the millions of working- and middle-class Americans who labor under the burden of student debt. For all the talk of “populism,” the party is still hostile to the social safety net, opposed to raising the minimum wage, hostile to unions and worker power and virtually every economic policy intervention that isn’t tax cuts and upward redistribution from the many to the most fortunate few.

To debate the reality of student debt relief is to make that more than clear to the public at large. Republicans, then, are trying to make this a debate over culture, to try to reduce issues of class to a question of aesthetics, with traditional blue-collar workers on one side and the image of an ungrateful and unproductive young person on the other. And they’re hoping, as always, that you won’t notice.

Unquote. 

That should be the Republican Party’s epitaph: THEY HOPED YOU WOULDN’T NOTICE.

%d bloggers like this: