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Defining Poverty Up

National Review

November 21, 2023

Thirty years ago, the late Senator Daniel Patrick Moynihan (D., N.Y.) wrote a seminal essay titled “Defining Deviancy Down.” He argued that Americans had “become accustomed to alarming levels of crime and destructive behavior” such as soaring out-of-wedlock childbearing behind increased welfare dependence. Policy-makers responded to Moynihan’s call, and the bipartisan 1994 crime bill (which Moynihan supported) and 1996 welfare-reform law (which he opposed) contributed to rapid improvements in crime rates and welfare dependence. By 1997, columnist Michael Barone credibly argued that, of gains on both fronts, “The Good News Is the Good News Is Right.”

The U.S. also saw significant progress in reducing poverty for key groups, with the poverty rate for black children falling in the wake of welfare reform to the lowest level on record by 2000. That progress was all the more remarkable since the country’s official poverty measure (OPM) failed to count major anti-poverty benefits, including growing tax credits designed to “make work pay,” as then-president Bill Clinton put it. But unlike the reform laws it enacted a generation ago, Congress has yet to fix that glaring flaw.

That failure has distorted reality by making poverty in America seem worse than it really is, bolstering liberal calls for increased government benefits. Now, instead of simply counting current benefits to reveal an improved picture, some poverty experts have developed a scheme that yields the opposite result.

In Moynihan’s terms, they are literally defining poverty up.

The experts in question are members of a National Academies of Sciences panel who published a report earlier this year titled “An Updated Measure of Poverty: (Re)Drawing the Line.” The authors proposed that the Census Bureau’s supplemental poverty measure (SPM) “should be elevated to the nation’s headline poverty statistic,” displacing the current official poverty measure. On the plus side, the SPM counts more anti-poverty benefits, including food stamps and the low-income shares of the Earned Income Tax Credit and Child Tax Credit. But the SPM includes three even greater downsides, which together would artificially elevate and radically redistribute poverty in America.

First, the SPM raises the national poverty guideline (often called the poverty line, which marks the income level where poverty ends) well above the level used by the OPM. Even worse, as my AEI colleague Kevin Corinth has shown, the SPM’s poverty guideline would grow rapidly over time, defining more American families as “in poverty” each passing year:

Projected poverty guideline for family of four, defined based on the Official Poverty Measure and Supplemental Poverty Measure, 2023-2033

(Kevin Corinth/American Enterprise Institute)

As the figure above shows, if the SPM were made the nation’s principal poverty metric, by 2033 a family of four would need $51,650 in income to escape poverty, or 34 percent more than the $38,500 required under the OPM. That growing gap is because the SPM is a relative-poverty measure like those commonly used in Europe. It constantly raises the apparent poverty line as overall incomes rise, making poverty nearly impossible to eliminate. In contrast, the OPM is an absolute-poverty measure, measuring whether families have enough resources to meet basic needs.

Additionally, elevating the SPM would automatically increase spending on anti-poverty benefits — without Congress acting. As Representative Jason Smith (R., Mo.), the chairman of the House Ways and Means Committee, noted in a recent hearing, many welfare programs today base eligibility on the OPM guideline; switching to the higher SPM thresholds would automatically yield greater benefit payments to millions of households. Drawing on Corinth’s work, Smith said the result would be “an estimated $124 billion in new welfare spending over the next decade.”

The final flaw involves how the SPM would redistribute poverty around the U.S. Because the SPM adjusts for wide-ranging local housing costs, it would also dramatically relocate poverty and thus also federal anti-poverty funding. As the map below from Corinth’s testimony displays, the SPM would redistribute poverty and federal anti-poverty funds away from states such as Mississippi, New Mexico, and Kentucky and toward higher-cost states like California, New Jersey, and Maryland.

Percentage-point difference between the supplemental poverty rate and official poverty rate, 2017-2019

(Kevin Corinth/American Enterprise Institute)

Representative Brad Wenstrup (R., Ohio) flatly rejected that idea, saying: “I’m finding it hard to understand why we should take federal dollars away from states with rural populations and lower costs of living to bail out states like California who continue to implement policies that artificially raise the cost of things like housing and energy.”

In the end, a representative of one of those rural states, Representative Terry Sewell (D., Ala.), denied that elevating the SPM was under consideration by the Biden administration, calling it a “conspiracy theory.” Let’s hope she’s right. Congress should act to finally give taxpayers credit for the anti-poverty benefits they already provide. But it should reject proposals defining poverty up just to bolster liberal calls for ever-growing government benefits.