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A Project of The Annenberg Public Policy Center

Bachmann Botches Poverty Stats

Rep. Michele Bachmann was wrong on two counts when she claimed today’s poverty rate is “only slightly below where it was in 1964” and that the small improvement in the rate “came with a $20 trillion price tag.”

First, the official poverty rate in 1964 was 19 percent, and it was 15 percent in 2012.

Second, Bachmann ties the rate to a $20 trillion expense that includes noncash benefits for food, housing and low-income medical care programs as well as Earned Income Tax Credits – all things that are not included when calculating the official poverty rate.

Bachmann made her comments on the 50th anniversary of President Lyndon B. Johnson’s State of the Union Address that famously included his declaration of  a “war on poverty in America.”

Johnson, Jan. 8, 1964: Unfortunately, many Americans live on the outskirts of hope — some because of their poverty, and some because of their color, and all too many because of both. Our task is to help replace their despair with opportunity. This administration today, here and now, declares unconditional war on poverty in America.

Among a host of initiatives, Johnson said there was a need to “distribute more food to the needy through a broader food stamp program,” to “modernize our unemployment insurance,” “extend the coverage of our minimum wage laws” and “provide more housing for our poor and our elderly.”

In a press release issued by Bachmann on the 50th anniversary of Johnson’s address, Bachmann noted that when Johnson signed the Economic Opportunity Act less than eight months later, he made these remarks:

Johnson, Aug. 20, 1964: We are not content to accept the endless growth of relief rolls or welfare rolls. We want to offer the forgotten fifth of our people opportunity and not doles.

That is what this measure does for our times.

Our American answer to poverty is not to make the poor more secure in their poverty but to reach down and to help them lift themselves out of the ruts of poverty and move with the large majority along the high road of hope and prosperity.

Bachmann argues the subsequent War on Poverty “did not accomplish these goals.”

Bachmann, Jan. 8: What followed was five decades of government expansion and spending on new programs that have largely been ineffective. Today, the poverty rate is only slightly below where it was in 1964, and it came with a $20 trillion price tag.

According to the U.S. Census Bureau, 19 percent of Americans were living in poverty in the U.S. in 1964 when Johnson made his speech, and — contrary to Bachmann’s claim that it is “only slightly below” that today — it was 15 percent in 2012.

The above chart shows the U.S. Census Bureau poverty rates by year. The peaks in the chart inevitably correspond with economic recessions, though the rates after the mid-1960s never went higher than 15.2 percent (which was reached in 1983 immediately after the 1981/1982 recession).

Bachmann also erred when she tied the rate to “a $20 trillion price tag.” That figure comes from Robert Rector, a senior research fellow at the conservative Heritage Foundation, in a piece that originally appeared in the Wall Street Journal under the headline, “How the War on Poverty Was Lost.” In that article, Rector explains that he arrived at that figure by tallying the cumulative spending by the federal government (in constant 2011 dollars) on “more than 80 means-tested welfare programs that provide cash, food, housing, medical care and targeted social services to poor and low-income Americans.” (Rector did not include Social Security or Medicare benefits.) The figure includes refundable tax credits like the Earned Income Tax Credit.

But the Census Bureau makes clear on its website that the official poverty definition “uses money income before taxes and does not include capital gains or noncash benefits (such as public housing, Medicaid, and food stamps).”

In other words, the $20 trillion figure cited by Bachmann includes billions spent by the federal government each year on noncash benefits like food stamps and public housing, which are not a part of Census’ poverty calculation, and, therefore, could not possibly have an impact on the poverty rate that the congresswoman cites as evidence of the failure of the war on poverty

Those exclusions are just one reason some have sought an alternate definition of poverty.

“The same formula has been used to measure poverty for almost 50 years, and many agree that this official measure is flawed,” the Urban Institute wrote in a recent report on poverty.

The official poverty measure was developed in the early 1960s by Mollie Orshansky, an economist with the Social Security Administration. She roughly based the threshold on the cost of an “economy food plan” developed by the USDA, and multiplied that number times three (assuming that families spend about a third of their budget on food). She made her calculations using pre-tax income, as that was what was available in Current Population Survey data.

In a recently released 53-page report, “The War on Poverty 50 Years Later: A Progress Report,” the White House Council of Economic Advisers says that measure has “not aged well.”

Council of Economic Advisers, January, 2014: Today, for example, the value of the two largest non-health programs directing aid to the poor—the EITC [the earned income tax credit] and SNAP [what some refer to as food stamps] —are entirely ignored by the official measure, making it impossible to assess the success of these tools in fighting poverty.

In 2011, the Census Bureau developed the Supplemental Poverty Measure, which “creates a more complex statistical picture incorporating additional items, such as tax payments, work expenses and in-kind benefits in its family resource estimates.” It generally factors in the cost of food, clothing, shelter, and utilities by families. It also takes into account such things as geographical differences in the cost of living.

The Council of Economic Advisers calculated an “anchored” version of this supplementary measure, which also sets thresholds based on expenditures for necessary items and then adjusts for inflation in each year. According to its measure, “The percent of the population in poverty when measured to include tax credits and other benefits has declined from 25.8 percent in 1967 to 16.0 percent in 2012.”

Those figures diverge markedly from the official Census Bureau figures because they include the value of refundable tax credits (such as the Earned Income Tax Credit and the child tax credit) and noncash benefits like housing and food aid. Those programs have led to “real progress in the War on Poverty,” the report states, though the authors quickly acknowledge, “there is more work to do.”

We take no position on the government’s efforts to combat poverty, but Bachmann was wrong to say that the poverty rate today is “only slightly below where it was in 1964” and to tie that rate to a “$20 trillion price tag,” which includes aid that is not accounted for in the official poverty rate she cited.

— Robert Farley