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Federal formula for poverty figures may understate hardship

WASHINGTON — It's not 1932 all over again. But new poverty figures to be published in September are expected to look grim.

More than 15 million Americans are unemployed, homelessness has increased by 50 percent in some cities, and 38 million people are receiving food stamps, more than at any time in the program's almost 50-year history. Evidence of rising economic hardship is ample. There's one commonly used standard for measuring it: the U.S. Census Bureau's poverty rate. It guides much of federal and state spending aimed at helping those unable to make a decent living.

But a number of states have become convinced that the federal figures actually understate poverty, and have begun using different criteria in operating state-based social programs. At the same time, conservative economists are warning that a change in the formula to a threshold that counts more people as poor could lead to an unacceptable increase in the cost of federal and state social service programs.

When Census publishes new numbers for 2009 in September, experts predict they'll show a steep rise in the poverty rate.

According to Richard Bavier, a former analyst for the federal Office of Management and Budget, already available data about employment rates, wages and food stamp enrollment suggest that an additional 5.7 million people were officially poor in 2009. That would bring the total number of people with incomes below the federal poverty threshold to more than 45 million. The poverty rate, Bavier expects, will hit 15 percent — up from 13.2 percent in 2008.

Still, the U.S. Census Bureau's new numbers will offer only a partial picture of how the nation's sputtering economy is affecting the poorest Americans — a problem state officials and the Obama administration want to address.

The current formula for setting the federal poverty line — unchanged since 1963 — takes the cost of food for an individual or family and multiplies the number by three, under the assumption that people spend one-third of their incomes putting meals on the table. While the formula may have been good in the early 1960s, experts say food now represents only one-eighth of a typical household budget, with expenses such as housing and child care putting increasing pressure on struggling families.

In addition, the official measure fails to account for regional differences in the cost of housing, it doesn't include medical expenses or transportation, and at $22,000 for a family of four, the poverty line is considered by many to be simply too low.

Equally worrisome for policy-makers is the Census Bureau's failure to consider in-kind federal and state aid in calculating income. The existing formula counts only pre-tax cash income, leaving out such benefits as food stamps, housing vouchers and child-care subsidies, as well as federal and state tax credits for the working poor.

Credit score fall

The credit scores of millions more Americans are sinking to new lows. Figures provided by FICO Inc. show that 25.5 percent of consumers — nearly 43.4 million people — now have a credit score of 599 or below, marking them as poor risks to get credit cards, auto loans or mortgages under new tighter lending standards.

fast facts

Credit score fall

The credit scores of millions more Americans are sinking to new lows. Figures provided by FICO Inc. show that 25.5 percent of consumers — nearly 43.4 million people — now have a credit score of 599 or below, marking them as poor risks to get credit cards, auto loans or mortgages under new tighter lending standards.

Federal formula for poverty figures may understate hardship 07/11/10 [Last modified: Sunday, July 11, 2010 11:09pm]

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