Census data on poverty show results of economic policy gone wrong

The headline number in last week’s release of Census Bureau data on poverty was pretty good. It was widely noted that the rate dropped significantly for the first time since 2006, with especially sharp declines among children and Latino families.

A peek under the hood, however, reveals the dismal realities of the modern U.S. economy. Other than the population over 65 and under 18, wages and economic mobility are frozen solid. The national safety net is barely keeping up with need. And years of austerity politics — cutoffs of unemployment benefits, premature termination of low-income assistance programs, resistance in some regions to bringing healthcare coverage to low-income residents via Medicaid — have kept millions of Americans mired in near-poverty or in economic stagnation.

The median household income of $51,939 last year was almost identical to the figure for 2012, but 8% lower than it was for 2007, just before the Great Recession, and 8.7% lower than its peak of $56,895, reached in 1999.

This is what a massive failure of government economic policy looks like.

It represents the abandonment of the American middle class in favor of the wealthy, and with future economic growth hanging in the balance. It prompts Jared Bernstein, a fellow at the Center on Budget and Policy Priorities and former chief economist for Vice President Joe Biden, to ask “why, for so many households, economic growth has become a spectator sport.”

According to the Census Bureau’s annual statistical report, “Income and Poverty in the United States,” the answer has much to do with income inequality. In recent months, alarm over the disproportionate flow of wealth to the upper reaches of the income curve has been sounded by economic analysts at Standard & Poor’s. The census statistics underscore the steepness of the trend: From 1990 through 2013, the median income of the lowest 20% of income earners fell from $12,381 to $11,651, or 5.9%, in inflation-adjusted terms. The median income of the top 20% rose from $150,553 to $185,206, a gain of 23%, and that of the top 5% rose from $239,739 to $322.343, a gain of 34.5%.

In that period the share of all income collected by the top 5% rose from 18.5% to 22.2%; that of the lowest fifth fell from 3.8% to 3.2%, maintaining just the merest finger hold on America’s bounty. To the extent U.S. households have been able to move even slightly up the income ladder or avoid being pushed down a few rungs, it appears to be the result of the rise in two-income couples and an increase in the earnings of women.

The median annual earnings of men employed full-time and year-round have scarcely budged from about $50,000 since about 1972. Those of women have risen from about $29,000 to $39,000. If there’s good news in these dreary numbers, it’s that the ratio of women’s earnings to men’s has risen from about 60% in the early 1970s to 78% now.

The numbers point us to the question: Can government really move the needle? Conservatives often hunt for a moral component in poverty — if poor people could only take more responsibility for their lives, they argue, things would get much better. That’s the notion lying at the heart of the “opportunity grant” proposal that House Budget Committee Chairman Paul D. Ryan (R-Wis.) floated in July.

Low-income families seeking government relief would sign a “contract outlining specific and measurable benchmarks for success” — finding and keeping a job, say, or staying off drugs (Ryan didn’t go into details). There would be unspecified incentives for exceeding the benchmarks and sanctions for failing, as though what people need to extricate themselves from poverty is a carrot and a stick.

The Census Bureau findings don’t paint the same picture of the poor. Chronic poverty is relatively rare, the bureau found. Only about 3.5% of the population was living in poverty throughout the entire 36-month span from 2009 through 2011. But 31.6% had “at least one spell of poverty lasting 2 or more months.” That implies a population struggling to get ahead, and being regularly knocked down by economic circumstance, such as a dearth of jobs or the arrival of unexpected and devastating expenses.

Critics have asserted that the official poverty rate overstates the condition because it doesn’t account for public assistance. In response, the Census Bureau a few years ago brought forth an alternative estimate, known as the Supplemental Poverty Measure. The bureau incorporated not only non-cash government transfers — food stamps, housing assistance and heating subsidies — but also expenses such as income and payroll taxes, child care and other job-related spending, and out-of-pocket medical costs.

The results suggested that poverty rates had fallen faster since the 1960s than anyone had expected. But they also showed that poverty has been greater in recent years than the conventional measure indicates — the official poverty rate in 2012 was 15%, the SPM rate was 16%, according to the most recent data available. In other words, the social safety net still is struggling to keep up with need.

The SPM is especially useful in helping us gauge the impact of specific threads of the safety net. The data show that Social Security is the single most powerful anti-poverty program in America — if its benefits were eliminated, the rate would have risen in 2012 from the SPM’s 16% to 24.5%. Among those 65 and older, in a world without Social Security the SPM poverty rate would have risen from 14.8% to a Depression-level 54.7%.

Think about that the next time you hear a well-fed fellow at a conservative think tank assert that cutting Social Security retirement benefits is just what the country needs.

Also striking is the effect of relieving the poor of the burden of medical expenses. The SPM shows that eliminating medical out-of-pocket expenses reduces the poverty rate from 16% to 12.6%. That’s important, of course, because it’s the goal of the Affordable Care Act.

The Census Bureau’s latest figures on health insurance coverage, also released last week, don’t account fully for 2014 Affordable Care Act enrollments because they only run up to the first weeks of 2014. But from what we know already about the significant drop in the number of uninsured, the act may be second only to Social Security in its effect on poverty.

Yet there are policymakers in Washington who still want to roll back the Affordable Care Act and cut Social Security benefits. They don’t see how foolish it was to cut unemployment insurance and reduce stimulus spending. The Census Bureau has documented the results of federal policies gone wrong, but the rest of Washington doesn’t seem to be listening.

Michael Hiltzik’s column appears Sundays and Wednesdays. Read his blog, the Economy Hub, at latimes.com/business/hiltzik, reach him at mhiltzik@latimes.com, check out facebook.com/hiltzik and follow @hiltzikm on Twitter.