An Aug. 29 graphic comparing different measures of national poverty was labeled incorrectly. According to the official measure, the poverty rate in 2003 was 12.5 percent. According to an alternative measure that considers factors such as variable cost of living and more accurate price inflation, the poverty rate in 2003 was 14.2 percent.
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Measuring the Economy May Not Be as Simple as 1, 2, 3
Another problem? Double counting. With a $10-an-hour clerical job at Howard University, Marilyn Bryant, 41, earns too much money to qualify for any federal assistance, yet is poor enough to live in the Thea Bowman House, which is heavily subsidized by So Others Might Eat. Her three-bedroom apartment rents for $349 a month, but her $400 weekly income is deceptive: A quarter of it is extracted from her paycheck as child support for her daughter, Natasha Carter, 15, who lives with her father. The Census Bureau still records Bryant's income as $400 a week, Michael said, but it also includes $100 of that in Carter's household income.
"I don't know how I do it," Bryant said. "I really don't."
For more than 20 years, the Census Bureau has been developing alternative poverty measures, many of which answer these criticisms, said Charles Nelson, the Census's assistant division chief for income, poverty and health statistics. But it is up to the White House budget office to change the official measurement, and successive administrations have declined to do so.
Scott Milburn, spokesman for President Bush's Office of Management and Budget, said "a consensus has yet to emerge in the scientific and policy communities on the critical statistical elements of a new methodology."
The Census Bureau on Tuesday will also update its count of the uninsured, and any change from the 2003 figure of 45 million likely will be slight. But recent studies by the Urban Institute and the Annandale-based Actuarial Research Corp. concluded the number is overstated by 4 million to 9 million people, largely because it includes Americans already enrolled in Medicaid and other federal health care programs.
Joseph Antos, a health policy analyst at the American Enterprise Institute, estimates that the true policy problem of the uninsured may center on about 20 million truly needy individuals. Out of the Census Bureau's 45 million, nearly 15 million report household incomes of more than $50,000 and could afford to buy at least catastrophic health plans. Another 4 million are already eligible for government programs but have not enrolled. Millions more actually receive government-funded health coverage.
From the conservative Heritage Foundation to the more liberal Brookings Institution, economists agree the government's basic measurement of consumer price changes is overstating inflation. As a result, tax collection has been depressed, since tax brackets rise with inflation. Government spending on programs like Social Security has been excessive, since such programs enjoy annual cost-of-living adjustments based on the current consumer price index. And labor contracts have been distorted by built-in inflation protections.
The Labor Department's standard consumer price index measures the cost of a basket of goods in urban areas as they rise over time. But since 2000, the department's Bureau of Labor Statistics has also tracked more realistic spending patterns, allowing for the substitution of products when prices spike. This "chained" CPI, for example, might substitute a pound of chicken for a pound of beef one month if steak prices have shot upward, said David S. Johnson, assistant BLS commissioner for consumer prices and price index.
Switching to this more sophisticated measurement from now through 2014 would cut $70 billion from Social Security payments while raising income tax collection by $83 billion, according to Brookings Institution economists. Yet Congress has made no effort to change the official inflation measurement, in part because lawmakers have no desire to slow the growth of either tax bracket increases or Social Security benefits.
"This is a political decision, and no one wants to make it," said Fritz Scheuren, president of the American Statistical Association.
More recently, a debate has begun over the nation's savings rate, which officially hovers just above zero. When Congress returns in September, the House Ways and Means Committee will try to put together legislation to raise personal savings through tax credits and other incentives. But according to David Malpass, chief global economist at Bear Stearns & Co., the United States is accumulating savings hand over fist. The country's pool of liquid savings grew by $1.5 trillion last year, he said, and U.S. households remain the world's largest creditor, with $37 trillion in financial assets.
The problem, Malpass said, is that the official savings rate measure does not consider economic gains from patents, innovation, capital gains or land appreciation.
"We may be throwing billions of dollars at a problem that isn't there," said Emanuel, who has advocated savings proposals.