HOW POOR ARE the poor? Many experts think that the amount of real hardship in the United States is understated because the crude measure of poverty used in official counts is far less than the income needed to provide a family even a very modest standard of living. Others, however, argue that poverty is overstated because the official income statistics do not take account of the billions of dollars that the government spends on non-cash benefits such as food, medical aid and housing.
A new report from the Census Bureau addresses the latter issue--how many fewer people would be counted as poor if non-cash benefits were counted as income? Studies of this sort are not new, but the Census report performs the useful function of showing how poverty counts would vary if different ways of valuing non-cash benefits were employed. One interesting finding from the study is that even if the highest possible valuation were placed on government benefits, there would still be many millions of people with less than a poverty-level income.
For example, using a method that assumes that medical benefits have an income value equal to their cost--an assumption that amounts to saying that because many of the poor are chronically sick or disabled they are richer because of it--poverty would decline by over 40 percent. That would mean that in 1980--before the Reagan program cuts-- there were about 17 million poor people. By a more reasonable method of valuing non-cash benefits, about 22 million were still poor. The major beneficiaries of non-cash benefits are the aged--almost 2 million old people may be lifted from poverty because of these programs.
Census Director Bruce Chapman describes the study as simply a technical analysis and says that he was making no policy recommendation with respect to changing the present definition of poverty. It is true that the study doesn't--and can't--tell policy- makers how best to define poverty. One obvious problem is that many needy people don't get any government benefits, and the amounts that others receive vary greatly according to where they live and who they are.
There is, however, one important message for policy-makers implicit in the study. It is this. Even before the recent budget cuts, millions of people were very poor. Government programs did a great deal to alleviate the worst sort of poverty. The recent budget cuts took $4.5 billion in benefits from lower-income people so that many of the poor are now considerably poorer. The administration is now seeking $6 billion more in cuts that, according to CBO, would come from these households. Further cuts in food, medical, housing and other kinds of aid will cause severe hardship for millions of people, many of them elderly. As Congress considers next year's budget, it has to think about that.