New formula to give fresh look at U.S. poverty

By Amy Goldstein
Washington Post Staff Writer
Wednesday, March 3, 2010

The Obama administration Tuesday embraced an alternative way of defining what it means to be poor, stepping gingerly into a long-running debate over whether to revise the method that has been used to measure poverty for decades.

Under a "Supplemental Poverty Measure" announced by the Commerce Department, the government is augmenting, but not replacing, the formula that determines how many people are considered to be in poverty, taking into account a wider range of expenses and income to try to create a truer portrait of which Americans are financially fragile.

The old definition, developed in the mid-1960s using data from a decade earlier, was based on the cost of food and a family's cash income. The new one, acknowledging that food has become a smaller share of poor families' costs, will also consider expenses such as housing, utilities, child care and medical treatment. In gauging people's resources, the new method will include financial help from housing and food subsidies, in addition to money from jobs and cash assistance programs.

The way poverty is defined is at once arcane and politically volatile, because the number of people who are considered poor has broad implications for the nation's economic self-image and the way billions of federal dollars are distributed for Medicaid, welfare, food stamps and other aid programs.

While they are adopting a second formula, administration officials are largely sidestepping that political minefield by deciding to retain the old one as the basis for the official federal poverty line -- the threshold underlying eligibility rules for assistance programs.

Instead, the second formula "provides us a different angle on who is in economic need," said Rebecca M. Blank, Commerce's undersecretary for economic affairs, who had advocated for more than a decade before joining the administration for a different way of thinking about who is poor. The formula is to be used by the government for the first time next year in an annual Census Bureau report that includes the poverty rate.

The rate will be calculated by both methods.

"It's been hard to make progress this far," said Arloc Sherman, a senior researcher at the left-leaning Center on Budget and Policy Priorities, one of the constituencies across the ideological spectrum that have griped for years that the poverty definition was out of date.

The alternative definition is derived largely from a recommendation on how to measure poverty that the National Academy of Sciences issued 15 years ago. Blank, whose responsibilities include the Census Bureau, was part of the academy panel that made the recommendation.

She said in an interview that federal officials have not tried yet to calculate whether the new definition will increase or decrease the number of Americans who qualify as poor.

Two years, ago, New York City became the nation's first jurisdiction to adopt its own way of measuring poverty, also based on the academy's work.

A report issued Tuesday by New York's Center for Economic Opportunity shows that its new approach produces a higher poverty rate.

For 2008, the report found, the city's poverty rate was 22 percent under the new formula, compared with slightly less than 18 percent using the official federal definition.

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