Today, the Census Bureau released new data from the Research Supplemental Poverty Measure (SPM) that showed that more Americans are likely in poverty than is reflected by the official federal poverty line. The SPM estimates for 2011 show a poverty rate of 16.1 percent, or roughly 49.7 million people, which is higher than the official poverty rate of 15.1 percent, or 46.6 million people.
First introduced last year, the SPM attempts to make a more holistic appraisal of household well-being by incorporating greater detail on real household expenses and additional resources available to households through government programs. The SPM also takes into account individuals’ residence type (renters, homeowners, homeowners with a mortgage), and regional differences in consumer prices.
With this inclusion of more detailed data on government assistance, the SPM allows for some interesting back-of-the-envelope calculations on the poverty-fighting effects of these programs. Figure 1 shows what the poverty rate would be under the SPM in the absence of various government programs. These hypothetical poverty rates hold all other variables constant and assume no behavioral change from the absence of each program.
As the figure shows, these programs keep millions of Americans from falling into poverty. Clearly, Social Security has the largest impact, but this figure actually understates the program’s true effect because it is the average across the entire population. Looking only at the population 65 years old and older, excluding Social Security from households’ incomes would put 16.2 million seniors below the SPM poverty line, moving the SPM poverty rate for the elderly from 15.1 percent to 54.1 percent. Similarly, when looking only at children, refundable tax credits, such as the Earned Income Tax Credit (EITC), keep 4.7 million children above the SPM poverty line. Without these tax credits, the SPM child poverty rate would rise from 18.1 percent to 24.4 percent.
As Congress debates how to address the looming “fiscal obstacle course,” today’s release is a stark reminder of what is at stake. Budgetary decisions have real world consequences. Lawmakers must remember that the choices they make are not simply reconciling numbers in the federal ledger; for millions of Americans, these decisions are the difference between meeting their family’s basic needs and falling into poverty.