No wonder the economy remains weak: a new U.S. Census Bureau report on income, poverty and health insurance coverage indicates that median wages in 2010 were about 7 percent below the peak level in 1999, and more Americans lived in poverty last year than ever before recorded. Iowa’s poverty rate rose over the last decade, hitting 10.2 percent in 2010. That figure translates to about 310,000 of the state’s 3,046,355 residents living in poverty.
The report’s findings bolster the case for spending more on social programs and undercut the argument for business tax credits as a job creation strategy. In addition, the new census figures show how badly the 1996 federal welfare reform failed to address poverty in this country.
The U.S. Census Bureau’s full report on “Income, Poverty and Health Insurance Coverage in the United States: 2010” is here (85-page pdf file). These graphs illustrate some of the key findings. From a press release summarizing the report:
*Real median household income in the United States in 2010 was $49,445, a 2.3 percent decline from the 2009 median.
*The nation’s official poverty rate in 2010 was 15.1 percent, up from 14.3 percent in 2009–the third consecutive annual increase in the poverty rate. There were 46.2 million people in poverty in 2010, up from 43.6 million in 2009–the fourth consecutive annual increase and the largest number in the 52 years for which poverty estimates have been published.
*The number of people without health insurance coverage rose from 49.0 million in 2009 to 49.9 million in 2010, while the percentage without coverage–16.3 percent–was not statistically different from the rate in 2009. […]
*Since 2007, the year before the most recent recession, real median household income has declined 6.4 percent and is 7.1 percent below the median household income peak that occurred prior to the 2001 recession in 1999. […]
*The poverty rate in 2010 was the highest since 1993 but was 7.3 percentage points lower than the poverty rate in 1959, the first year for which poverty estimates are available. Since 2007, the poverty rate has increased by 2.6 percentage points.
*In 2010, the family poverty rate and the number of families in poverty were 11.7 percent and 9.2 million, respectively, up from 11.1 percent and 8.8 million in 2009. […]
*The poverty rate increased for children younger than 18 (from 20.7 percent in 2009 to 22.0 percent in 2010) and people 18 to 64 (from 12.9 percent in 2009 to 13.7 percent in 2010), while it was not statistically different for people 65 and older (9.0 percent).
Similar to the patterns observed for the poverty rate in 2010, the number of people in poverty increased for children younger than 18 (15.5 million in 2009 to 16.4 million in 2010) and people 18 to 64 (24.7 million in 2009 to 26.3 million in 2010) and was not statistically different for people 65 and older (3.5 million).
The good news is that Iowa’s poverty rate is about a third lower than the national average of 15.1 percent. The bad news is that Iowa is one of 32 states in which the poverty rate increased during the last decade. If you click through to that map, you’ll see that two of the states posting the sharpest increases in the poverty rate were Indiana and Mississippi. How sad that those states’ longtime governors, Mitch Daniels and Haley Barbour, were recently considered heavyweight potential Republican presidential candidates.
But I digress.
Census Bureau data show that while the “Great Recession” put millions of Americans below the poverty line, the poverty rate was rising even during several years of economic growth during the last decade. Erica Williams of the Center on Budget and Policy Priorities commented,
The rise in poverty between 2001 and 2007, along with the rise in income inequality and the decline in real median incomes of non-elderly households, were among the signs that the benefits of economic growth did not filter down to many in the middle and the bottom of the income ladder.
Unemployment benefits kept approximately 3.2 million Americans out of poverty during 2010. That figure highlights the need for Congress to extend those benefits for the long-term unemployed, including the “99-ers” who have been out of work for 99 or more weeks. Some economists believe a double-dip recession is becoming more likely, and the poverty rate may continue to rise even if the jobless recovery keeps limping along. Danilo Trisi, Arloc Sherman and Matt Broaddus explain why:
Forecasters project stubbornly high unemployment over the next few years; the Congressional Budget Office, for example, predicts unemployment rates above 8.0 percent through the end of 2014. In addition, history suggests that poverty may remain high longer than unemployment does: as noted, in the last three recessions, the poverty rate did not begin to fall until a year after the annual unemployment rate began to decline. If this pattern holds true, poverty will not start to decline until 2012 at the earliest, given the failure of unemployment to improve in 2010, and poverty may not return to pre-recession levels for a very long time.
Exacerbating this grim outlook, various federal initiatives enacted to promote job growth and ease poverty and hardship during the recession have expired or are scheduled to expire soon. For example, the [Temporary Assistance for Needy Families] Emergency Fund, which supported (among other things) roughly a quarter-million subsidized jobs for low-income parents and youth, expired in September 2010, and federal unemployment benefits for jobless workers who have been looking for work for more than half a year (currently serving 3.6 million such workers) are scheduled to expire at the end of December.
At the state level, legislators have implemented some of the harshest cuts in recent history for many of the nation’s most vulnerable families. In 2011, a number of states cut cash assistance deeply or ended it entirely for many families that live far below the poverty line, including many with physical or mental health problems.
Thankfully, Iowa is not one of the states that cut assistance to low-income citizens through the federal welfare program called Temporary Assistance for Needy Families (TANF). However, Iowa policy-makers could have done more for those living in poverty, given that the state closed out the 2011 fiscal year with an estimated surplus of $483.2 million. Although Iowa has a regressive tax structure, Governor Terry Branstad twice vetoed an expansion in the Earned Income Tax Credit, which would have helped the working poor.
The rising poverty rate nationwide suggests that President Bill Clinton was wrong to push for welfare reform during the mid-1990s. The bipartisan achievement Clinton championed during his re-election campaign weakened the safety net, as this chart book shows. Click through for the graphics. Excerpt:
Under the 1996 welfare law, which replaced [Aid to Families with Dependent Children] with the TANF block grant, states receive fixed federal funding each year in exchange for greater flexibility in using that funding. Unlike AFDC, therefore, federal TANF funding does not decrease in good economic times when cash assistance caseloads fall or rise in hard economic times when cash assistance caseloads increase. […]
Because the $16.6 billion annual federal TANF block grant was never adjusted for inflation, it has lost significant value over time. States receive 28 percent less in real (inflation-adjusted) dollars than they did in 1997, a year when the unemployment rate averaged just 4.9 percent. State minimum required contributions to TANF have declined even more. To receive their full TANF block grant, states only have to spend on TANF purposes 80 percent of the amount they spent on AFDC and related programs in 1995, and that “maintenance of effort” requirement isn’t adjusted for inflation, either. […]
As TANF cash assistance caseloads have dropped, so has the amount of TANF spending used for this purpose. Federal and state TANF spending on basic assistance declined from $13.9 billion in 1997 to $9.3 billion in 2009, the most recent year available. […]
The declines in the TANF caseload, combined with broad state flexibility in the use of federal and state TANF funds, freed up substantial resources that states have used to fund other services. In 2009, states used just 28 percent of TANF funds to provide basic assistance, compared to 71 percent in 1997. […]
In most years, the AFDC caseload rose and fell to reflect changes in the number of jobless single mothers. Beginning in 2002, however, the two trends diverged: the number of jobless single mothers started rising, whiles the number of families receiving TANF kept falling. While TANF caseloads have increased modestly more recently, the gap between the number of jobless single mothers and the number of families receiving assistance remains very wide. […]
Unfortunately, TANF has proven far less effective at lifting families out of deep poverty – that is, incomes below half the poverty line – than AFDC did, mostly because fewer families receive TANF benefits than received AFDC benefits. (The erosion in the value of TANF benefits also contributed.)
Poverty may be rising, and the median income may be falling, but the Bush tax cuts did the trick for the wealthiest citizens. The top 1 percent now receive about 25 percent of all U.S. income. Current Republican protocol demands that these people be called “job creators,” but politicians who repeat that talking point never explain why the windfall for the top 1 percent didn’t create an employment boom.
President Barack Obama’s new jobs bill calls for extending a payroll tax cut for employees and various tax breaks or incentives for small businesses. Congressional Republicans might agree to the business tax plans while opposing the infrastructure spending Obama favors. Trouble is, tax rates aren’t keeping employers from hiring.
As President Obama faced an uphill battle in Congress to win support even for portions of the plan, many employers dismissed the notion that any particular tax break or incentive would be persuasive. Instead, they said they tended to hire more workers or expand when the economy improved. […]
“You still need to have the business need to hire,” said Jeffery Braverman, owner of Nutsonline, an e-commerce company in Cranford, N.J., that sells nuts and dried fruit. While a $4,000 credit could offset the cost of the company’s lowest-cost health insurance plan, he said, it would not spur him to hire someone. “Business demand is what drives hiring,” he said.
Indeed, the industries that are hiring workers now – like technology and energy – are those where business is strong, in contrast to the overall economy. Administration officials and some economists, of course, say they believe the president’s plan, if adopted, could help increase demand more broadly. The proposed payroll tax cuts for individuals should spur consumer spending and in turn, prompt companies to hire more people.
But the plan also includes incentives for companies to hire more workers, including a payroll tax cut for businesses and a $4,000 tax credit for those employers that hire people who have been out of work for six months or more.
To the extent these measures could be used, many employers said they would most likely support people whom companies were planning to hire anyway.
Bottom line: Obama’s proposed tax cuts won’t create enough jobs to bring down unemployment, and by extension won’t stop more Americans from slipping into poverty. If you see any grounds for optimism, please tell me where, because I doubt next year’s census report on poverty and income will be any better than the current one.