The Census Bureau recently released its annual report on poverty in the United States. It was widely reported that the number of people officially defined as poor rose by 1.7 million, raising the poverty rate from 11.7 percent of the population to 12.1 percent. None of the stories I read called attention to another Census report released the same day calling into serious question the way we now measure poverty.
Even many economists probably don't know that the "official" measure of poverty was developed in the 1960s as a sort of "back of the envelope" exercise. The woman who came up with it certainly never meant for it to be taken as a definitive measure. Nevertheless, it has survived to the present day, increased only by the rise in the Consumer Price Index each year.
Liberals have long criticized this method, saying (rightly) that the official poverty measure bears no relation to any meaningful concept of true poverty. The problem is that all of their suggested "improvements" would have the effect of substantially raising the poverty rate. One of their goals, of course, is to justify increased welfare spending and bigger government.
Unfortunately, the whole notion of poverty is extremely subjective. The original definition was based on food consumption, which then took about a third of a low-income family's budget. Now it's about 20 percent, but in the meantime many new needs have emerged that one can reasonably argue have become necessities of life.
Two hundred years ago, Adam Smith recognized that our concept of adequate living standards will change over time. Today's luxuries become tomorrow's necessaries. "By necessaries," he said, "I understand, not only the commodities which are indispensably necessary for the support of life, but whatever the custom of the country renders it indecent for creditable people, even of the lowest order, to be without."
Smith noted that a linen shirt would be considered necessary in his time even though the ancient Greeks and Romans got along fine without linen at all. So, too, many items that did not exist even in the recent past are often considered necessary for life today, even by the poor.
Bruce Bartlett is a former senior fellow with the National Center for Policy Analysis of Dallas, Texas. Bartlett is a prolific author, having published over 900 articles in national publications, and prominent magazines and published four books, including Reaganomics: Supply-Side Economics in Action.
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