Record Severe Poverty II

“These young adults who lived with their parents had an official poverty rate of only 8.4%, since the income of their entire family is compared with the poverty threshold,”  “If their poverty status were determined by their own income, 45.3% would have had income falling below the poverty threshold for a single person under age 65.” 

 The Census Bureau has released estimates of poverty in 2010. Coverage focused on the headline poverty rate which is horrible enough. Much worse, 6.7% of people in the USA suffered severe poverty, that is lived in households with income less than half the poverty line. This is the highest severe poverty rate on record (the series only goes back to 1975 -- I don't know why). 

Look at Table Five.


I blame welfare reform. Yes the severe recession and slow recovery is a major factor, but the 2010 ratio of the severe poverty rate and the poverty rate is 0.444 which is also the highest on record. That ratio is a crude way of looking at the effect of welfare reform.

Like the poverty rate, the severe poverty rate goes up in recessions, goes up when inequality increases and goes down when per capita income grows. However, the pattern is very different with a long term trend of increasing severe poverty and no correspond trend of the headline poverty rate.

I think it is clear that this can be explained with two acronyms AFDC and TANF. In 1975 the economy was in bad shape, the poverty rate was 12.3 % which is not vastly lower than the 2010 poverty rate of 15.1%. The severe poverty rate was 3.7 % less than 56% of the current rate. The fraction of people in poverty but not severe poverty was 0.301 in 1975 much lower than it is now.

During the period of high inflation, the real value of welfare benefits declined. This explains at least part of the increase in severe poverty. In 1983 the poverty rate peaked at 15.2% and the severe poverty rate peaked at 5.9%. Compared to 1983 a smaller fraction of people are in poverty but a larger fraction of people are in severe poverty. I think that welfare reform is the only plausible explanation.

If the ratio of number in severe poverty to number in poverty were the same as in 1983 the severe poverty rate would be less than 5.9%.

This post is an update of my post about the 2009 severe poverty rate (I admit to cutting and pasting as if such an admission were necessary). The political debate has not taken the record severe poverty rate into consideration. Quite the opposite. As far as I know, no politician dares discuss reversing welfare reform.



I think the still widely accepted conclusion that welfare reform was a great success is based on two gross and obvious errors.

First the matter was considered to have been decided by 2000. Only specialists reconsidered the analysis of welfare reform with any data not collected during the amazing boom of the late 90s.

Second a huge amount of attention is focused on the poverty rate and almost no one ever looks at the severe poverty rate. It is as if people think that it doesn't matter how poor one is once one is under the poverty line. This is more extreme than not caring about income distribution.

But it is accepted as a fact that welfare reform worked like a charm. Evidence which isn't more than 11 years old, and the fact that $11,000 < $21,000 are ignored.

It's almost as if most people had no clue what it is like to be poor so that they don't even know that the poor are much poorer than they used to be.

States Harming People Most in Need

By Stephen Lendman

In 1996, the Personal Responsibility and Work Opportunity Reconciliation ("welfare reform") Act (PRWORA) passed. Until then, needy households got welfare payments (since 1935) through Aid to Families with Dependent Children (AFDC), a program protecting states by sharing costs of increased caseloads during hard times.

Thereafter, Temporary Assistance for Needy Families (TANF) set five year time limits, allocating fixed block grants to states to administer at their own discretion, putting needy people at risk during economic downturns when little or no additional federal funding is forthcoming.

TANF also requires recipients to work or be trained to qualify, even during hard times like now when skilled workers can't find jobs, let alone single mothers with young children needing them as caregivers in their most formative years.

During today's dire economic times, budget strapped states are implementing harsh cuts, harming vulnerable residents most, including families with children on TANF.

On May 19, a new Liz Schott/LaDonna Pavetti Center on Budget and Policy Priorities (CBPP) study highlights the problem, titled "Many States Cutting TANF Benefits Harshly Despite High Unemployment and Unprecedented Need."

Deep cuts will affect 700,000 poor families, including 1.3 million children, about one-third of all households on TANF. Moreover, those numbers will rise, perhaps precipitously, as states keep slashing social benefits, hitting vulnerable residents hardest.

Already they're cutting cash payments or ending them entirely, including for "many families with physical or mental health issues or other challenges." As a result, poor ones are getting poorer. In addition, work-related aid, including child care, is being reduced, making it harder for working parents to retain jobs, needing someone home looking after their children.

TANF cuts so far made include:

-- monthly cash benefit cuts in California, Washington, South Carolina, New Mexico, and the District of Columbia; for example, South Carolina pays the equivalent of 14% of poverty wages for a family of three, severely impacting poor families;

-- time limits for receiving benefits have been reduced; for example, California and Arizona (among others) cut theirs, and some states may limit payments to 18 months, down from the federally enacted five year maximum; and

-- TANF-funded supplementary aid is being cut; for example, Michigan is slashing its (partly TANF funded) Earned Income Tax Credit by two-thirds; in addition, other states weakened "make-work-pay" policies by reducing or eliminating them altogether.

Overall, "(s)tates are terminating or reducing benefits for some of the most vulnerable families, most of whom have very poor labor market prospects."

At issue is less federal aid, leaving them no choice but to apportion lower amounts gotten, on the way perhaps to nothing as Capitol Hill debates ways to end social benefits entirely to provide more funds for bankers, war profiteers and other corporate favorites.

In fact, Democrats and Republicans are hammering vulnerable Americans, including those already at or below the poverty line, showing no concern for growing millions in need.

For example, in 1994-1995, AFDC served 75 out of 100 impoverished families with children. In 2008-2009, only 28 of every 100 got aid, the ratio varying by state.  Seven, in fact, help 10 or less families out of 100 impoverished ones when all of them most need it.

In 1996, however, when TANF was established, assurances were given for a TANF Contingency Fund during hard times. That was then. This is now after resources were exhausted in December 2010, and 2011 allocations are too meager to matter. The 2009 Recovery Act included TANF Emergency Fund aid, not renewed after September 2010.

Moreover, Congress "level-funded" TANF from inception, providing no adjustments for inflation or other factors, including extra help during hard times.

As a result, budget-strapped states have cut back severely, reducing matching funds and using federal grants for other purposes.

Nationwide in July 2010, TANF benefits for a family of three averaged less than half the poverty line, and below 30% in over half the states. The median amount paid was $429, 28% of poverty wages. Compared to 1996, TANF benefits declined by over 20% in inflation adjusted dollars.

In 2011, they dropped more given skyrocketing food, energy and other costs, as well as several states implementing more cuts. Effective February 1, Washington reduced benefits by 15% a month, from $562 to $478. South Carolina cut them 20%, from $270 to $216. New Mexico slashed 15%, from $447 to $380.

Effective July 1, California dropped 8%, from $694 to $638 and will impose additional cuts up to 15% for "child-only" cases, those with "no adult in the assistance unit" that, up to now, got aid for 60 months or longer.

Effective April 1, The District of Columbia slashed 20% for families getting aid for 60 months or longer, from $428 to $342. In addition, Mayor Vincent Gray proposed more cuts, up to 40% (including the April one) by October as well as total elimination of benefits by 2013.

Watch for states across the country to propose similar measures as Washington heads for ending social benefits altogether, what Democrats and Republicans plan but won't explain.

A Final Comment

On May 28, New York Times writer Robert Pear headlined, "Administration Opposes Challenges to Medicaid Cuts," saying:

On May 26, "(i)n a friend-of-the court brief (to) the Supreme Court, the Justice Department said that no federal law allowed private individuals to sue states to enforce" mandated Medicaid rates, "sufficient to enlist enough providers" to assure recipients access care "to the same extent as the general population in an area."

Acting Solicitor General Neal Katyal's brief said suits "would not be compatible" with the ability of Health and Human Services officials to assure states comply, despite low payment rates in many areas preventing recipients from accessing care. Nonetheless, he said Medicaid equal access provisions are "broad and nonspecific." Moreover, federal health officials, he argued, are more qualified than judges to decide policy objectives, including cutting costs.

At issue before the Court is Douglas v. Independent Living Center of Southern California (January 2011). Legislators approved payment cuts to providers. They sued in federal court, winning in the US Court of Appeals for the Ninth Circuit on grounds they conflict with Medicaid law, arguing if cutbacks are approved, mandated care can't be provided. The Supreme Court agreed to hear multiple appeals together on the same issue.

Although Medicaid law doesn't explicitly allow lawsuits, Ninth Circuit judges said beneficiaries and providers could sue under the Constitution's Supremacy Clause (Article VI, Clause 2), establishing all its provisions, US treaties, and federal statutes "the supreme law of the land."

As a result, payment reductions violate federal Medicaid law, threatening access to vital healthcare for poor recipients needing federal/state aid to provide it.

California appealed to the Supreme Court, Obama's Justice Department arguing for denial of what federal law mandates. As a result, consumer advocates are outraged. So is Washington and Lee Professor Timothy Jost saying:

"I find it appalling that the solicitor general in a Democratic administration would assert in a Supreme Court brief that businesses can challenge state regulations under the supremacy clause, but that poor recipients of Medicaid cannot challenge state violations of federal law."

In a separate friend-of-the court brief, Michigan and 30 other states argued that "(a)llowing 'supremacy clause lawsuits' to enforce federal Medicaid laws will be a financial catastrophe for" all of them.

Jointly funded, states manage Medicaid for qualified low-income families and children, pregnant women, the elderly, blind and disabled. In total, about 60 million Americans receive it, including one in three children, four in 10 pregnant women, and 70% of nursing home residents.

Since taking office, Obama waged war on working households and America's poor, proposing fiscal austerity for needy millions, including vital healthcare only government can provide them.

Now he's battling them in court to strip more than Congress already denied besides new legislation perhaps to end all social benefits, phased out incrementally by repeated cuts. Obama calls it "shared sacrifice." Working Americans call it cruel, heartless, unfair, and outrageous, especially from a Democrat promising change.

Stephen Lendman lives in Chicago and can be reached at Email address removed. Also visit his blog site at sjlendman.blogspot.com and listen to cutting-edge discussions with distinguished guests on the Progressive Radio News Hour on the Progressive Radio Network Thursdays at 10AM US Central time and Saturdays and Sundays at noon. All programs are archived for easy listening.

http://www.progressiveradionetwork.com/the-progressive-news-hour/ .