Poverty line to be redefined

The government is creating a supplemental poverty measure to get a clearer picture of family needs and expenses.

It differs significantly from the official measure, which is considered to be outdated but still will be used to determine eligibility and funding. How the formulas work:

  • Official measure: Counts cash only. Expenses are based on three times the cost of a 1960s food budget, adjusted for inflation. It produces a poverty threshold for 2008 of about $22,000 for a family of two parents and two children.
  • Supplemental measure: Based on income after taxes and expenses. Counts food, clothing, shelter, utilities and other expenses for a family in the bottom third of incomes. Also counts the value of benefits such as food stamps, housing subsidies and tax credits. Figures aren’t ready, but the government expects the threshold to increase some.

Source: Census Bureau

Millions of livelihoods and billions of dollars – including school-lunch programs, Medicaid and subsidized housing – depend on the income calculation known as the poverty line.

Yet the government knows, and has known for decades, that it uses a seriously flawed formula for determining who is poor in America.

“I think there’s almost universal agreement, on the right and on the left, that the current measure is really bad,” said Ron Haskins, co-director of the Center on Children and Families at the Brookings Institution in Washington.

That’s why federal officials are experimenting with a new measure, one that will be unveiled to the public as a “supplemental poverty measure” when the Census Bureau releases its annual poverty report next year.

The supplemental measure won’t replace the official one, which still will be used to determine state funding and program eligibility. But supporters hail the new measure as an important step away from an antiquated formula that ignores far more information than it considers.

“We don’t live in Mayberry anymore,” said Lisa Hamler-Fugitt, executive director of the Ohio Association of Second Harvest Foodbanks. “It’s about time that Congress and the government put their noses to the grindstone to see what poverty looks like, and to see what it takes to lift more Americans into the middle class.”

The current poverty measure is based on a low-cost food budget from the 1960s that assumes that a family spent about one-third of its income on meals. For nearly a half-century, the formula has been adjusted for inflation but nothing else.

That means family income is calculated without counting the value of now-widespread benefits such as food stamps, housing assistance and the Earned Income Tax Credit.

On the flip side, significant expenses such as child care, housing and out-of-pocket medical costs also aren’t considered.

The new measure aims to take it all into consideration.

“People can argue around the edges, but I’ve never found anyone who thinks the old one is better,” said Robert Michael, a professor at the Harris School of Public Policy at the University of Chicago.

Michael, a native of southeastern Ohio, led a National Academy of Sciences panel that proposed a new poverty methodology in 1995. He’s not surprised that, for the next 15 years, there was more argument than action.

Politics stave off serious overhaul, said Haskins, who moderated a panel discussion – including Michael, Census officials and other experts – yesterday in Washington.

“Roughly speaking, Democrats and liberals would like the poverty line to be higher, and Republicans and conservatives would like it to be lower,” he said. “Well, the Obama administration has decided to crack the ice. Not break the ice, but crack it.”

Michael said the plan for the supplemental measure shouldn’t be too threatening to politicians worried about the effect on their local food-stamp loads.

The official measure still will determine eligibility for anti-poverty programs. The supplemental measure is supposed to provide more detail about wages, expenses and whether public spending nudges low-income families out of poverty.

Hamler-Fugitt said she thinks the supplemental measure will drive many thorny discussions.

“This has significant implications,” she said. “We need to be prepared for what the findings tell us.”

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