From WSJopinion: The official poverty estimate by the Census Bureau not only overstates the level of poverty, but it distorts the policy debate, write Phil Gramm and John Early
, the Democrats’ rosy promise wouldn’t be recorded in the official Census Bureau poverty numbers, because the income numbers used to calculate the official poverty rates don’t count refundable tax credits as income to the recipients. No matter how much money the government pours into any of these tax credits, it will never raise the official income measure given the way the census defines income. The omission of refundable tax credits from the official poverty rate calculation isn’t unique.
The administration has made a lame effort to deflect attention from this structural flaw in the official poverty measure by referencing a so-called supplemental poverty measure. This is one of many experimental efforts to measure poverty using a different method from the official one. This experimental measure shows that poverty for children fell by 4.5 percentage points, from 9.7% in 2020 to 5.2% in 2021.
The official poverty estimate by the Census Bureau not only overstates the level of poverty, but it distorts the policy debate. Politicians use the overstated poverty numbers as a rationale for additional transfer payments. The new transfer payments aren’t counted as household income, so there is no improvement in the official poverty rate. This process is repeated over and over.
The financial burden of federal transfers rose to more than $4.5 trillion annually in 2021. Even before the recent increases, the level of benefits had reduced the percentage of work-age adults in the bottom quintile who actually work from 68% in 1967 to 36% in 2017. At the current level of means-tested benefits, the labor-force participation rate has now fallen in the second and middle quintiles of income earners.
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