[House Hearing, 110 Congress]
[From the U.S. Government Publishing Office]

                       THE ECONOMIC AND SOCIETAL
                            COSTS OF POVERTY



                               before the

                      COMMITTEE ON WAYS AND MEANS
                     U.S. HOUSE OF REPRESENTATIVES

                       ONE HUNDRED TENTH CONGRESS

                             FIRST SESSION


                            JANUARY 24, 2007


                            Serial No. 110-2


         Printed for the use of the Committee on Ways and Means

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                      COMMITTEE ON WAYS AND MEANS

                 CHARLES B. RANGEL, New York, Chairman

FORTNEY PETE STARK, California       JIM MCCRERY, Louisiana
SANDER M. LEVIN, Michigan            WALLY HERGER, California
JIM MCDERMOTT, Washington            DAVE CAMP, Michigan
JOHN LEWIS, Georgia                  JIM RAMSTAD, Minnesota
RICHARD E. NEAL, Massachusetts       SAM JOHNSON, Texas
MICHAEL R. MCNULTY, New York         PHIL ENGLISH, Pennsylvania
JOHN S. TANNER, Tennessee            JERRY WELLER, Illinois
XAVIER BECERRA, California           KENNY HULSHOF, Missouri
LLOYD DOGGETT, Texas                 RON LEWIS, Kentucky
EARL POMEROY, North Dakota           KEVIN BRADY, Texas
MIKE THOMPSON, California            PAUL RYAN, Wisconsin
JOHN B. LARSON, Connecticut          ERIC CANTOR, Virginia
RAHM EMANUEL, Illinois               JOHN LINDER, Georgia
EARL BLUMENAUER, Oregon              DEVIN NUNES, California
RON KIND, Wisconsin                  PAT TIBERI, Ohio
BILL PASCRELL JR., New Jersey        JON PORTER, Nevada

             Janice Mays, Chief Counsel and Staff Director

                  Brett Loper, Minority Staff Director

Pursuant to clause 2(e)(4) of Rule XI of the Rules of the House, public 
hearing records of the Committee on Ways and Means are also published 
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                            C O N T E N T S



Advisory of of January 17, announcing the hearing................     2


Sigurd R. Nilsen, Ph.D., Director, Education, Workforce, and 
  Income Security, U.S. GAO......................................     7
Harry J. Holzer, Ph.D., Professor at Georgetown University and 
  Visiting Fellow at the Urban Institute, Georgetown University 
  Public Policy Institute........................................    34
David R. Jones, President and Chief Executive Officer, Community 
  Service Society of New York, New York, New York................    37
Ron Haskins, Ph.D., Senior Fellow, Economic Studies and Co-
  Director, Center on Children and Families, The Brookings 
  Institution....................................................    41
Jane Knitzer, Ph.D., Director, National Center for Children in 
  Poverty, New York, New York....................................    50

                       SUBMISSION FOR THE RECORD

Child Welfare League of America, statement.......................   104
Eberstadt, Nicholas, American Enterprise Institute, statement....   110
Legal Momentum, New York, NY, statement..........................   118
MacGregor, Theo, and Jerrold Oppenheim, joint statement..........   120
Schlimm, Richard, Wisconsin Community Action Program Association, 
  Madison, WI, letter............................................   126
Zero To Three Policy Center, statement...........................   129

                       THE ECONOMIC AND SOCIETAL
                            COSTS OF POVERTY


                      WEDNESDAY, JANUARY 24, 2007

                     U.S. House of Representatives,
                               Committee on Ways and Means,
                                                    Washington, DC.
    The Committee met, pursuant to notice, at 10:07 a.m., in 
room 1100, Longworth House Office Building, Hon. Charles B. 
Rangel (Chairman of the Committee) presiding.
    [The advisory announcing the hearing follows:]

                                                CONTACT: (202) 225-1721
January 17, 2007

                 Chairman Rangel Announces a Hearing on
               the Economic and Societal Costs of Poverty

    House Ways and Means Committee Chairman Charles B. Rangel today 
announced the Committee will hold a hearing on the economic and 
societal costs of poverty. The hearing will take place on Wednesday, 
January 24, in the main Committee hearing room, 1100 Longworth House 
Office Building, beginning at 10:00 a.m.

    In view of the limited time available to hear witnesses, oral 
testimony at this hearing will be from invited witnesses only. However, 
any individual or organization not scheduled for an oral appearance may 
submit a written statement for consideration by the Committee and for 
inclusion in the printed record of the hearing.


    There are 37 million Americans living in poverty, an increase of 
over 5 million since the year 2000 (after prior years of steady 
decline). The average weighted poverty threshold in 2005 (latest data 
available) was $15,577 in annual income for a family of three and 
$19,971 for a family of four. Poor Americans suffer various hardships, 
including reduced access to economic and educational opportunities, 
substandard housing, inadequate diet, greater levels of crime 
victimization, and diminished health. Less recognized, however, are the 
costs poverty exacts on society as a whole. Nevertheless, studies 
indicate that poverty reduces our Nation's economic growth and directly 
increases crime, health and other expenses absorbed by all Americans. 
The Committee's hearing will examine the nature and extent of these 

    In announcing the hearing, Chairman Rangel said, ``We have a clear 
moral imperative to address poverty. It is a stain on our Nation's 
legacy to have one of the highest child poverty rates in the 
industrialized world. But we also should be driven by self-interest. 
Poverty is a drag on our economy, and it causes or worsens a variety of 
other costly social problems. Simply accepting, or even ignoring high 
rates of poverty is likely more expensive for our Nation than any 
comprehensive effort to address the problem.''


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    Chairman RANGEL. The Committee will come to order. This 
morning we are going to have witnesses to share with us the 
impact of poverty on our economy and how it relates to future 
economic growth.
    We have 37 million Americans in poverty, millions more only 
one step away from poverty. It just seems to some of us that if 
we are going to grow our way out of debt, we cannot be impeded 
by the fiscal consequences of poverty, lack of education and 
unemployment. We have experts who come here not with bleeding 
hearts, but trying to share with us what the costs of poverty 
are now, as well as their projected costs, so that we can try 
to find out whether, from an economic point of view, it would 
make sense to make some initial investments to stop the 
    I would like to recognize the ranking Member, Mr. McCrery, 
for whatever remarks he would like to make.
    Mr. MCCRERY. Thank you, Mr. Chairman. Again, I have 
prepared remarks that I will submit for the record, and I will 
summarize those as we will ask the witnesses to summarize their 
    Certainly all of us agree that too many of our citizens in 
the United States are living in poverty, and we all want to 
reduce that number or have that number reduced. The question 
is, how do we do it?
    In the 1996 Welfare Reform Act, we included a very strong 
work requirement that was successful in moving literally 
millions of people into work, and the result of that was a 
dramatic reversal in the growth of the rate of poverty. We also 
included in that legislation an emphasis on marriage and 
encouraging folks to get married to have children, and those 
two items, work and marriage, seem to be the most important 
indicators of preventing poverty.
    So, while we look at programmatic changes at the Federal 
level, I hope that this Committee will continue to look at the 
importance of work and family, work and marriage when it--as it 
relates to the reduction of poverty.
    Thank you, Mr. Chairman.
    [The prepared statement of Mr. McCrery follows:]

            Prepared Statement of The Honorable Jim McCrery,
        a Representative in Congress from the State of Lousiana

    I think we would all agree that too many Americans today live in 
poverty. At the same time, we have made great strides in reducing 
poverty over the past ten years, and it is important to learn from our 
    Poverty rates fell in 2005 after rising in the years following the 
2001 recession. Today's poverty rates--both overall and child poverty--
are below the levels seen throughout all of the 1980s, and most of the 
1990s. But with 37 million Americans still poor in 2005, it is 
important to ask what works to reduce poverty, and what doesn't, and 
what should we be doing to make further progress.
    From the mid-1960s through the mid-1990s, the Federal government 
spent literally trillions of dollars on programs designed to reduce 
poverty. While these programs offered many poor Americans cash and 
other assistance, the overall poverty rate, after declining in the late 
1960s, generally stabilized at between 12 and 14 percent.
    Republicans, and many Democrats, now realize that promoting work 
and healthy marriage are the key steps to reducing poverty.
    The evidence suggests the pro-work reforms in the 1996 welfare 
reform law, coupled with generous work supports like the Earned Income 
Tax Credit, and a strong economy, have spurred record numbers of poor 
parents to go to work and lift their families out of poverty.
    Since the 1996 welfare reforms, child poverty has fallen 13 
percent, and over 1.4 million children have been lifted from poverty. 
Poverty has declined sharply among blacks and Hispanics, and in 
families headed by single mothers. By 2001, our Nation recorded the 
lowest poverty rate in U.S. history for black children. That number--30 
percent--was still far too high, but it was a remarkable improvement 
from 41.5 percent in 1995.
    While poverty rose somewhat following the 2001 terrorist attacks 
and recession, today's rate remains below levels throughout the 1980s 
and most of the 1990s. And that's using the ``official'' definition of 
poverty--which ignores tens of billions of dollars in tax credits, 
welfare, food, and housing benefits millions of poor families receive. 
In fact, numerous studies, based on solid Census Bureau data and taking 
into account all the income poor households receive, suggest the 
``real'' poverty rate is closer to 5 percent, instead of today's 
``official'' poverty rate of nearly 13 percent. That is likely the most 
accurate picture of the persistent poverty rate, as well. The fact is, 
most poor families in America don't stay poor for long, which is 
important in the context of how can we best help poor parents lift 
their incomes and improve their children's prospects.
    But despite the remarkable progress we have seen on the work side 
of the equation, we have seen less progress in building strong, married 
families. That is exactly what we need to make long-term progress 
against poverty, and especially among families that are most likely to 
be in poverty year after year.
    In 2004, a record number of babies--nearly 1.5 million--were born 
to unmarried parents. Despite recent progress, today almost one-half of 
first unwed births are to teenagers. The odds that these children will 
be poor are extraordinarily high. For example, a recent study found 
that a child born to an unmarried teen mother who has not finished high 
school is nine times more likely to be poor than if the mother is a 
married adult who has finished high school. Overall, nearly four in ten 
children are born to unmarried mothers today; in some communities the 
share of unmarried births is 70 percent or more.
    That's why Republicans reprogrammed some welfare funds last year to 
support faith-based and other private groups interested in promoting 
more healthy marriages and stronger families. These programs provide 
voluntary services and supports for teens, couples, and parents 
designed to inform them about the benefits of marriage--for them and 
their children. If these efforts are successful, young families will 
have dramatically improved chances of getting out of poverty and into 
the economic mainstream.


    Chairman RANGEL. Thank you.
    I would like to concur because sometimes poverty and 
unemployment is an impediment to the institution of marriage, 
and so I want to work with you on that aspect of the problem.
    We have an outstanding panel this morning. Dr. Sigurd 
Nilsen is the Director of Education, Workforce, and Income 
Security for the United States Government Accountability Office 
(GAO); Dr. Harry Holzer, a Professor at Georgetown University 
at the Public Policy Institute; my long-time friend, David 
Jones, President and CEO of the Community Service Society of 
New York (CSS)--who, I would like to report, coordinates his 
statistical data from many institutions in New York; and I am 
working with him, with Columbia Teachers College, with New York 
University, and any other institutions that would want to 
coordinate the data that we have.
    Also joining us is Dr. Ron Haskins. Dr. Haskins, is Senior 
Fellow, Economic Studies and Codirector of the Center on 
Children and Families at the Brookings Institution. Also, Dr. 
Jane Knitzer, Director, National Center for Children in Poverty 
(NCCP) in New York.
    As you may know, all of you will have 5 minutes to 
summarize your testimony. That would give us an opportunity to 
ask questions that are on our minds, and all of your testimony, 
your written testimony, will be entered into the record without 
    [The prepared statement of Mr. Weller follows:]

 Prepared Statement of The Honorable Jerry Weller, a Representative in
                  Congress from the State of Illinois

    Today's hearing reviews a critical topic--poverty. Even as our 
Nation has made progress in reducing poverty through welfare reform and 
other pro-work policies, too many children and families live in poverty 
today. So it is important to consider what has worked, what has not, 
and what more we need to do to prevent more children from growing up in 
    We have seen that pro-work Republican welfare reforms reduced 
poverty following the 1996 welfare reform law, which encouraged more 
work and less welfare dependence. Through 2005, the most recent year 
available, the overall poverty rate fell 7 percent, child poverty fell 
13 percent, and over 1.4 million children left poverty. Poverty 
declined sharply especially among African Americans and Hispanics, and 
in families headed by single mothers.
    Previously, we saw how massive government spending didn't solve 
poverty. The U.S. spent literally $5 trillion on welfare, food, health, 
and housing for the poor since President Johnson declared war on 
poverty in the 1960s; yet progress against poverty generally stalled 
after 1970. A key lesson is that massive government spending alone 
won't eliminate poverty.
    One reason why spending alone won't eliminate poverty relates to a 
key cause of poverty--the decline of marriage and increased number of 
nonmarital births. The steady decline of marriage in the past 
generation has greatly contributed to higher poverty, especially among 
children. As Robert Rector of the Heritage Foundation put it in 
testimony before this committee in 2005, ``Nearly 80 percent of long 
term child poverty occurs in broken or never-married families. Each 
year government spends over $200 billion on means-tested aid to 
families with children; three quarters of this aid flows to single 
parent families.''
    A recent report by the nonpartisan Congressional Research Service 
(``Children in Poverty: Profile, Trends, and Issues,'' January 16, 
2007) drives home this point in terms of the number of children raised 
in poverty today due to changing patterns of marriage and childbearing 
in the past generation: ``(I)n 2005 the child poverty rate was 17.1 
percent, but had family composition in 2005 been the same as in 1960, 
the overall adjusted child poverty rate would have been 12.4 percent; 
instead of the observed 12.3 million children being counted as poor in 
2005, the number of poor children estimated by this method would have 
been 8.9 million, or 3.4 million fewer than the number observed.''
    To put this into perspective, in the decade following work-based 
welfare reform about 1.4 million children have been removed from 
poverty; if we were able to restore past patterns of marriage and 
childbearing, the effect in terms of removing children from poverty 
would be roughly two and a half times as great.
    I am struck by the similarities between the report released at this 
hearing about the costs of child poverty and another report released in 
2005 about the costs for children associated with changing family 
structures. This report by Paul Amato of Penn State University (``The 
Impact of Family Formation Change on the Cognitive, Social, and 
Emotional Well-Being of the Next Generation,'' Fall 2005) compares 
family structure and adolescent well-being, by various measures 
including repeating a grade, delinquency, violence, smoking, and 
attempted suicide: ``The results are striking. Adolescents living with 
single parents consistently report encountering more problems that 
those living with continuously married parents. Thirty percent of the 
former reported that they had repeated a grade, as against 19 percent 
of the latter. Similarly, 40 percent of children living with single 
parents reported having been suspended from school, compared with 21 
percent of children living with continuously married parents. . . . The 
increase in risk associated with living without both parents ranged 
from about 23 percent (for being involved in a violent altercation) to 
127 percent (for receiving emotional therapy).'' (p. 86)
    Clearly, we won't be able to solve child poverty without reversing 
the decline in marriage and ensuring more children live in stable, 
married households.
    Despite these high hurdles, it is important to note that most 
poverty is temporary. Most of the poor are not ``trapped'' in poverty 
for long. One out of three U.S. households experienced poverty in at 
least one year of a recent 13-year stretch. But only one out of 20 
families was poor in at least 10 years, and only one out of 60 stayed 
poor in all 13 years. So the ``permanent'' poverty rate is less than 2 
percent, even though the ``official'' annual poverty rate is about 13 
    A related set of issues involves how we measure poverty, which 
includes several obvious flaws.
    First, current methods of measuring poverty effectively ignore tens 
of billions of dollars in taxpayer benefits meant to reduce poverty. In 
effect, this makes families appear poorer than they really are, 
inflating the number in poverty. If such benefits and associated income 
available to poor households were counted as income, studies suggest 
the ``real'' poverty rate would drop to as low as 5 percent, instead of 
today's official poverty rate of nearly 13 percent.
    A second flaw involves the use of income data, as opposed to data 
about how much households spend--which some argue is both more reliable 
and a better indicator of child wellbeing. One study (Bruce D. Meyer 
and James X. Sullivan, ``The Well-Being of Single-Mother Families after 
Welfare Reform,'' Brookings Institution, August 2005) found that 
``First, consumption is probably measured with less error than income 
for poor families, and is more strongly associated with other measures 
of well-being such as health and housing conditions. Second, there is 
overwhelming evidence that income is underreported by these mothers and 
that the underreporting, especially of income from welfare and other 
transfer programs, has increased in recent years.'' The study notes 
that in 2004 spending by the poorest fifth of American families 
exceeded income by 95 percent--in effect, spending was nearly twice as 
much as income for this group, which included many families officially 
counted as poor, but whose spending patterns suggest they may not be.
    We know what works and what doesn't to reduce poverty. Recent 
research confirms Republican policies of promoting full-time work and 
healthy marriage are the strongest weapons against poverty--both of 
which are far more effective than even doubling welfare benefits, or 
example. Republicans stand ready to work to strengthen the progress we 
have made reducing poverty through promoting work and marriage. But we 
will resist those who would simply spend more on welfare benefits or 
ease access to welfare checks without work or other measures of 
personal responsibility. Such misguided efforts will not only fail to 
reduce poverty, but they threaten to undo the progress we have made 
under welfare reform. Worst of all, such efforts will lead to more 
dependence, more poverty, and ultimately worse outcomes for children.


    [The prepared statement of Mr. Porter follows:]
  Prepared Statement of The Honorable Jon Porter, a Representative in
                   Congress from the State of Nevada

    Good Morning, Mr. Chairman. I am pleased that the committee is 
holding today's hearing on the economic and societal costs of poverty. 
I share your concern that poverty is a major issue of concern to the 
United States and the world.
    As leaders we have a moral responsibility to reduce poverty. We 
also have a responsibility to reduce poverty responsibly. As Congress 
continues to address this issue that we see everyday in our districts, 
we need to recognize the importance of a vibrant business community and 
a robust educational system. If we fail to utilize these sectors of our 
society in providing tools to the impoverished, we have failed. We 
cannot treat the symptoms of poverty alone. We must treat the syndrome 
    Again, Mr. Chairman, thank you for calling this hearing today on 
this most important issue. I look forward to the testimony of our 
witnesses and am hopeful that we can work together in addressing this 
important issue.


    We will start with Dr. Nilsen.


    Dr. NILSEN. Chairman Rangel, thank you, Mr. McCrery and 
other Members of the Committee. I am pleased to be here today 
to discuss a report requested by Chairman Rangel, that is being 
issued today from GAO, that summarizes the findings from recent 
economic research on the linkages between poverty and economic 
    While the empirical research is limited, recent studies 
point to the negative association between poverty and economic 
growth consistent with the theoretical literature's conclusion 
that higher rates of poverty can result in lower rates of 
economic growth. For example, one study found that economic 
growth is slower in U.S. metropolitan areas characterized by 
higher rates of poverty when compared with metropolitan areas 
with lower rates of poverty. Another study using data from 21 
wealthy countries found a similar negative relationship between 
poverty and economic growth.
    In the United States, poverty can impact economic growth by 
affecting the accumulation of human capital. Research has shown 
that accumulation of human capital is one of the fundamental 
drivers of economic growth. Human capital consists of the 
skills, abilities, talents and knowledge of individuals as used 
in employment. Therefore, schooling at the secondary and higher 
levels is a key component for building an educated workforce 
that is better at learning, creating, and implementing new 
    Health is another important component of human capital, as 
it can enhance workers' productivity by increasing their 
physical capabilities, such as strength and endurance, as well 
as their mental capacities, such as cognitive functioning and 
their reasoning ability. Improved health increases workforce 
productivity by reducing incapacity, disability and the number 
of days lost to sick leave.
    The accumulation of human capital can be diminished when 
significant portions of the population have experienced long 
periods of poverty or were living in poverty at a critical 
developmental juncture. For example, research has found that a 
slowdown in human capital development is most heavily 
concentrated among youth from impoverished backgrounds. When 
individuals who have experienced poverty enter the workforce, 
their contributions may be restricted or minimal while others 
may not enter the workforce in any significant way.
    In addition, the economic literature suggests that poverty 
can affect economic growth due to its association with crime, 
violence and social unrest. It is suggested that when citizens 
engage in unproductive criminal activities, they deter others 
from making productive investments or their actions force 
others to divert resources toward defensive activities. The 
increased risk due to insecurity can unfavorably affect 
investment decisions and, hence, economic growth in areas 
afflicted by concentrated poverty.
    In addition, people living in impoverished conditions 
generate costs for the Government, which spends billions of 
dollars on programs to assist low-income individuals and their 
    Economic research suggests that individuals living in 
poverty face an increased risk of adverse outcomes, such as 
poor health and criminal activity, both of which may lead to 
reduced participation in the labor market. Health outcomes are 
worse for individuals with low incomes than for their more 
affluent counterparts. Lower-income individuals experience 
higher rates of chronic illness, disease and disabilities and 
also die younger than those with higher incomes. While 
mechanisms by which poverty affects health are complex, 
research suggests that adverse health outcomes are due in part 
to more limited access to health care as well as more exposure 
to environmental hazards and engaging in risky behaviors.
    For example, research has shown that increased availability 
of health insurance, such as Medicaid for low-income mothers, 
led to a decrease in infant mortality. Likewise, exposure to 
high levels of air pollution from living in urban areas close 
to industrial areas or highways can lead to acute health 
    In conclusion, maintaining and enhancing economic growth is 
a national priority that touches all aspects of Federal 
decision-making. Our report highlights that economists have 
long recognized the strong association between poverty and a 
range of adverse outcomes for individuals, and empirical 
research has also begun to help us better understand the impact 
of poverty on our Nation's economic growth. The 
interrelationships between poverty and various adverse social 
outcomes are complex, and our understanding of these 
relationships can lead to vastly different interventions to 
address each specific outcome. Furthermore, any such 
interventions could take years or even a generation to yield 
significant and lasting results, as the greatest impacts are 
likely to be seen among children.
    Nevertheless, whatever the underlying causes of poverty may 
be, economic research suggests that improvements in the health, 
neighborhoods, education and skills of those living in poverty 
could not only have impacts far beyond individuals and 
families, but lead to improving the economic well-being of the 
Nation as a whole.
    Mr. Chairman, this concludes my prepared statement. I would 
be happy to answer questions.
    Chairman RANGEL. Thank you so much.
    [The prepared statement of Dr. Nilsen follows:]




























    Chairman RANGEL. Dr. Holzer.


    Dr. HOLZER. Mr. Chairman, thank you very much for inviting 
me today to speak to the economic costs of poverty to the 
United States. I would like to share with all of you some 
recent findings from a paper that I coauthored with several 
colleagues for the Task Force on Poverty of the Center for 
American Progress; and this paper attempts to estimate the 
economic costs of child poverty to the United States 
Essentially, we try to put dollar figures on all of the costs 
that Dr. Nilsen just emphasized.
    Like Dr. Nilsen, we focus on several mechanisms by which 
poverty reduces economic success in the United States. When 
children grow up in poverty, they are more likely as adults to 
have low employment and earnings, reflecting their lower skill 
levels and their lower productivity in the workforce. They are 
more likely to engage in crime; they are more likely to have 
poor health later in life. Their reduced productivity generates 
a direct loss of goods and services to the U.S. economy.
    The crime that they engage in imposes monetary and other 
personal costs on their victims, as well as costs to the 
taxpayers for administering an enormous criminal justice 
system. Their poor health generates illness and early mortality 
that requires large health care expenditures, impedes 
productivity and ultimately reduces the quality and quantity of 
life for poor people.
    Now, in each of these three areas--productivity, crime and 
health--we reviewed a range of rigorous research studies that 
estimate an average statistical relationship between growing up 
in poverty and each of those outcomes--earnings, crime and 
health. We had to make a number of critical assumptions that 
folks might quibble with, but wherever possible, we tried to 
make conservative assumptions in order to generate lower bound 
estimates for this total cost.
    Our results suggest that the costs to the United States 
associated with childhood poverty total about $500 billion per 
year, or the equivalent of nearly 4 percent of Gross Domestic 
Product (GDP). More specifically, we estimate the childhood 
poverty each year reduces productivity and economic output by 
about 1.3 percent of GDP, poverty raises the costs of crime 
each year also by about 1.3 percent of GDP, and poverty raises 
health expenditures and it reduces the value of health by about 
the equivalent of 1.2 percent of GDP.
    If anything, these estimates almost certainly understate 
the true costs of childhood poverty to the U.S. economy. For 
one thing, we omit the costs associated with poor adults who 
did not grow up poor as children. There was no way to 
incorporate those estimates. Our estimates ignore all of the 
other costs that poverty might impose on the Nation besides 
those associated with those specific three factors--low 
productivity, crime and health. There are other costs, such as 
environmental costs and such as the suffering of the poor 
themselves, that we didn't incorporate into our estimates.
    What does all of this imply for public policy? Well, the 
high cost of childhood poverty to the United States suggests 
that investing significant resources in poverty reduction might 
be more cost effective over time than we previously thought.
    Of course, determining the cost effectiveness of each 
policy requires careful evaluation research in a whole variety 
of areas. However, a range of policies, including high-quality 
pre-kindergarten programs, various school reform efforts, 
higher access to higher education for the poor, expansions of 
the Earned Income Tax Credit (EITC) and other supports for the 
working poor, job training for poor adults, higher minimum 
wages, more collective bargaining, special efforts for 
disadvantaged youth, marriage promotion and faith-based 
initiatives all might potentially be involved in this effort. 
Given the strong evidence that already exists on some of these 
factors, like high-quality pre-K programs and on the EITC, some 
investments through these mechanisms seem particularly 
    At a minimum, the costs of poverty imply that we should 
work hard to identify cost-effective strategies of poverty 
remediation, and we should not hesitate to invest some 
significant resources when these strategies are identified. 
Some have already been identified. In the meantime, we should 
also experiment with and evaluate a wide range of other 
promising efforts.
    Thank you.
    [The prepared statement of Dr. Holzer follows:]

       Prepared Statement of Harry J. Holzer, Ph.D., Professor at
   Georgetown University and Visiting Fellow at the Urban Institute,
             Georgetown University Public Policy Institute

    Mr. Chairman,
    Thank you for inviting me to speak today on the economic costs of 
poverty to the United States.
    I'd like to share with all of you some recent findings of a paper I 
coauthored with several colleagues for the Task Force on Poverty of the 
Center for American Progress.\1\ The paper attempts to estimate the 
economic costs of child poverty in the U.S.
    \1\ See Harry J. Holzer (Georgetown University and the Urban 
Institute), Diane Whitmore Schanzenbach (University of Chicago), Greg 
J. Duncan (Northwestern University), and Jens Ludwig (Georgetown 
University and the National Bureau of Economic Research. ``The Economic 
Costs of Poverty in the United States: Subsequent Effects of Children 
Growing Up Poor.'' Center for American Progress, January 2007.
    Most arguments for reducing poverty in the U.S., especially among 
children, rest on a moral case for doing so--one that emphasizes the 
unfairness of child poverty, and how it runs counter to our national 
creed of equal opportunity for all.
    But there is also an economic case for reducing child poverty. When 
children grow up in poverty, they are more likely as adults to have low 
earnings, which in turn reflect low productivity in the workforce. They 
are also more likely to engage in crime and to have poor health later 
in life. Their reduced productive activity generates a direct loss of 
goods and services to the U.S. economy. Any crime in which they engage 
imposes large monetary and other personal costs on their victims, as 
well as the costs to the taxpayer of administering our huge criminal 
justice system. And their poor health generates illness and early 
mortality that requires large health care expenditures, impedes 
productivity and ultimately reduces their quality and quantity of life.
    In each case, we reviewed a range of rigorous research studies that 
estimate the average statistical relationships between growing up in 
poverty, on the one hand; and one's earnings, propensity to commit 
crime and quality of health later in life, on the other. We also 
reviewed estimates of the costs that crime and poor health per person 
impose on the economy. Then we aggregated all of these average costs 
per poor child across the total number of children growing up in 
poverty in the U.S. to estimate the aggregate costs of child poverty to 
the U.S. economy. We had to make a number of critical assumptions about 
how to define and measure poverty, what level of income to use as a 
non-poverty benchmark, and which effects are really caused by growing 
up in poverty and not simply correlated with it.\2\ Wherever possible, 
we made conservative assumptions, in order to generate lower-bound 
    \2\ We define the effects of poverty to be all those associated 
with growing up in poor environments, including the effects of being 
raised by parents with low incomes, attending poor schools and living 
in poor neighborhoods. We also use families with incomes at twice the 
official poverty line as the benchmark with which to compare those 
living in poverty.
    Our results suggest that the costs to the U.S. associated with 
childhood poverty total about $500B per year, or the equivalent of 
nearly 4 percent of GDP. More specifically, we estimate that childhood 
poverty each year:

      Reduces productivity and economic output by about 1.3% of 
      Raises the costs of crime by 1.3% of GDP; and
      Raises health expenditures and reduces the value of 
health by 1.2% of GDP.

    If anything, these estimates almost certainly understate the true 
costs of poverty to the U.S. economy. For one thing, they omit the 
costs associated with poor adults who did not grow up poor as children. 
They ignore all other costs that poverty might impose on the Nation 
besides those associated with low productivity, crime and health--such 
as environmental costs, and much of the suffering of the poor 
    \3\ Our estimates include the value of lost earnings to the poor 
themselves, but not other nonpecuniary costs associated with poverty, 
except for estimates of the value of morbidity and early mortality to 
the poor.
    What does all of this imply for public policy? The high cost of 
childhood poverty to the U.S. suggests that investing significant 
resources in poverty reduction might be more cost-effective over time 
than we previously thought. Of course, determining the effectiveness of 
various policies requires careful evaluation research in a variety of 
areas. But a range of policies--such as universal pre-kindergarten (or 
pre-K) programs, various school reform efforts, expansions of the 
Earned Income Tax Credit (EITC) and other income supports for the 
working poor, job training for poor adults, higher minimum wages and 
more collective bargaining, low-income neighborhood revitalization and 
housing mobility, marriage promotion, and faith-based initiatives--
might all be potentially involved in this effort. Given the strong 
evidence that already exists on some of these efforts (like high-
quality pre-K and the EITC), some investments through these mechanisms 
seem particularly warranted.
    At a minimum, the costs of poverty imply that we should work hard 
to identify cost-effective strategies of poverty remediation, and we 
should not hesitate to invest significant resources when these 
strategies are identified. In the meantime, we should also experiment 
with and evaluate a wide range of promising efforts.


    Chairman RANGEL. Thank you so much.
    Now we hear from David Jones, President and CEO of the CSS 
of New York.
    Thank you for being with us.


    Dr. JONES. Thank you, Mr. Chairman and Members of the 
Committee. I am Dave Jones, President and CEO of CSS, an 
independent not-for-profit organization, virtually one of the 
oldest in the Nation at 160 years. We have been solely 
committed to the issues of poverty in the city of New York 
during that time.
    Our legacy includes the creation of the Nation's first free 
lunch program and organizing some of the courses that led to 
the creation of the Columbia School of Social Work as well, 
much to the advantage of tourists, the first public baths and 
the Hospital for Special Surgery in the city, New York. CSS has 
always come to the aid of people in need in the city. Thank you 
for allowing me to report what is going on in the city of New 
York from our research.
    Before I start, I would like to commend Congressman Rangel 
for focusing on this issue. He has been a lifelong supporter of 
people in need in the city.
    Almost 42 years ago, the 88th Congress took the 
extraordinary step of supporting Lyndon Johnson's antipoverty 
agenda. That council report, the Council of Economic Advisers, 
in 1965 said they thought they had the means to break poverty 
for good, to end it for the next generation of Americans. I 
appear before you today to report that at least from New York 
City's vantage, it is not happening, that we have to 
reinvigorate our efforts if we are going to break a cycle that 
seems, if anything, more entrenched than it was before.
    My focus today, obviously, is on New York. It has 8 million 
people. It has unique challenges, but some of the research, I 
think, is illustrative of other areas of the Nation.
    CSS research has revealed that 170,000 young people, ages 
16 to 24, are out of school and out of work; they are 
disconnected. This is a population that rivals many cities in 
America. The majority of these youth are black and Latino with 
this predicament most pronounced in the Latino community.
    In a related study, we examined New York City joblessness. 
That study revealed that nearly 40 percent of black men, 16 to 
24, in New York City are completely severed from the workforce 
and labor market. As Members of the Committee recognize, this 
is not unemployment; this is actual job holding in this 
category of individual.
    Our findings go on. In our latest yearly assessment of 
poverty in New York City, we have identified single mothers 
falling behind yet again in terms of being a growing segment of 
families in poverty despite a major economic recovery in the 
city of New York.
    Following that, the latest CSS survey of low-income New 
Yorkers, the largest such survey in America, finds that while 
nearly 60 percent of low-income people are working, they are 
reporting significant problems, from losing their apartments to 
forgoing health care to having food crises.
    That survey led us to collaborate with a local union, Local 
32BJ of the Service Employees International Union, to look at 
security guards in New York. Of 63,000 security guards, 
virtually none of them get a wage of more than $10 an hour, we 
couldn't find one that had health insurance, and most of them 
report having problems staying in an apartment in any one year.
    I think rather than wringing our hands about it, our city 
has done something about it. Under Congressman Rangel's 
prodding, the mayor created a construction opportunities group, 
which started reserving some of the jobs for young men and 
women in the categories we are talking about. The City Council 
in the city of New York has put $20 million to try to do 
workforce development activity, and the mayor has put together 
a panel, on which I am honored to serve, which has put forward 
$150 million to deal with the problems of chronic poverty in 
the city of New York.
    This can't be done by a city or locality alone. It is going 
to take very aggressive activity by the Congress, and I think 
we have to start crafting interventions that can have some 
immediate impact. Some of them involved doing some rigorous 
skill-based work of developing further kinds of job corps 
settings and a renewed commitment to career and vocational 
    We have to do interventions that will bring young people 
who were totally out of the economy into it, and we have to do 
even more. This particular Committee has to look at the EITC 
and consider whether we may draw more young people into that 
purview by expanding the low-income tax credit to include 
childless adults between 18 and 24.
    Again, I think the description of that panel nearly 40 
years ago was right. I think we can do it, but it is going to 
take an extraordinary focus to get it done, and I think it has 
enormous consequences of what kind of Nation we are putting 
    Thank you.
    [The prepared statement of Dr. Jones follows:]

  Prepared Statement of David R. Jones, President and Chief Executive
   Officer, Community Service Society of New York, New York, New York

    Good morning, Chairman Rangel and members of the Committee. I am 
president and CEO of the Community Service Society of New York or CSS, 
an independent, not-for-profit organization. Throughout our more than 
160-year history, we have been committed to improving the life chances 
of New Yorkers living in poverty.
    Our legacy of achievement includes such innovations as setting up 
the prototype for the free school-lunch program; starting the first 
shelter for homeless men; organizing the Society for the Ruptured and 
Crippled, now New York City's Hospital for Special Surgery; and 
organizing courses in social work that evolved into the Columbia 
University School of Social Work.
    Thank you for inviting me to share with you my thoughts on poverty 
in our Nation, in particular what we have witnessed in New York City.
    Let me begin by commending you, Congressman Rangel, for your 
exemplary service to our Nation, the passion you bring to this 
institution, and your lifelong commitment to those in need. We stand 
ready to assist you and this committee in any way we can to strengthen 
our national resolve to address poverty.
    Forty-two years ago the 88th Congress took the monumental step of 
supporting President Lyndon Johnson's anti-poverty agenda. It was a 
hopeful time, as is evident in the 1965 annual report of the Council of 
Economic Advisers that stated: We have the means to break the bonds 
that tie today's children to the poverty of their parents. With proper 
measures, we could eliminate poverty in the next generation.
    I appear before you today to suggest while some progress has been 
made, we must return to the task at hand and reinvigorate our efforts 
on behalf of the poor. My focus today is on the dimensions of poverty 
in New York City, what we are facing on the ground. And, while the 
magnitude of the challenge we face is unique due to the sheer size of 
our city, I know that similar conditions exist in urban communities 
across the country.
    In 2005, CSS issued a report that revealed 16 percent of young 
people in our city, ages 16 to 24 years old, are neither enrolled in 
school nor employed.\1\ These nearly 170,000 young people--a number 
that rivals the total population of Providence, Rhode Island--are what 
researchers have deemed ``disconnected,'' separated from any 
opportunities that could lead to a life of self-sufficiency and 
    \1\ See Out of School, Out of Work . . . Out of Luck? New York 
City's Disconnected Youth at http://www.cssny.org/pubs/research/
    The report found that the city's Black and Latino youth--
particularly young men--are twice as likely as Whites and Asians to be 
out of school and out of work. This predicament is most pronounced in 
the Latino community, where four in ten young men are disconnected.
    Low-income young men of color are being left out of the city's 
growing prosperity. And therein lies the problem: Growing the economy 
is not enough to correct this situation. The presence of so many 
disconnected young people of color not only endangers families and 
communities. It also jeopardizes the city's economic growth.
    We need a comprehensive policy to address the needs of disconnected 
youth. It must reflect the realities of today's economy, penetrate 
populations of young people who are outside of mainstream institutions, 
and provide targeted investments with measurable outcomes. Ultimately, 
the goal must be to create a well-defined path to economic security for 
these young people.
    And we need a second chance policy specifically to reach out to 
young men and women who have dropped out. For those with deep 
educational deficits, this will not be a cheap, quick fix. Short-term, 
superficial training programs don't make up for 12 years of inadequate 
education. It will require a more focused approach, with a series of 
steps from rigorous skill development in a Job Corps type setting, a 
renewed emphasis on vocational and technical education, to transitional 
jobs in public service or emerging sectors of the economy.
    Our attention must also focus on individuals who can find no place 
in our labor market. CSS released a report in 2004 that revealed the 
magnitude of Black male joblessness in New York City that reverberated 
through the media and city government.\2\ The report found that nearly 
half of all Black men were jobless in 2003.
    \2\ See A Crisis of Black Male Employment: Unemployment and 
Joblessness in New York City, 2003 at http://www.cssny.org/pubs/
    And as the members of this committee know, joblessness is not the 
same as unemployment. Our jobless figures account for all Black men of 
working age, including those who have dropped out of the job market, a 
growing group that the government's unemployment statistics ignores.
    Since that initial finding, the situation has improved somewhat. 
Our latest figures show nearly 40 percent of the city's Black men are 
jobless, a number that is still unacceptable.\3\ That's about 250,000 
people, more people than in many of the cities and small towns or 
counties represented by members of this committee. Clearly, in addition 
to engaging Black men in the labor market, we must also re-commit to 
nondiscriminatory practices and government oversight and enforcement 
    \3\ See Unemployment and Joblessness in New York City, 2005 at 
    This isolation from opportunity is not limited to Black men. Our 
most recent annual examination of poverty in New York City revealed 
that single mothers heading households comprise a larger share of 
families in poverty.\4\ It is another example of why there is not an 
easy fix or a one-size-fits-all solution that can be applied across the 
spectrum of crises we are encountering.
    \4\ See Poverty in New York City, 2005 at http://www.cssny.org/
    CSS is also confronting the problems of the working poor. Working 
poor ought to be an oxymoron, but in fact it is an ever-expanding group 
of Americans.
    We conduct an annual survey of New York City's low-income 
residents, aptly named ``The Unheard Third'' since one-third of the 
city's residents live in or near poverty. As far as we know, this is 
the only regular survey of low-income opinion and attitudes in the 
Nation.\5\ It gives us vital information for our work since we get 
direct feedback from our primary constituency.
    \5\ See http://www.cssny.org/research/unheardthird/index.html.
    Our latest survey found that nearly 60 percent of low-income New 
Yorkers were working, nearly half working full time. A report CSS 
produced and commissioned by the Service Employees International Union, 
Local 32BJ, on New York City's private security guards, reinforced our 
survey data on the working poor.\6\
    \6\ See Shortchanging Security: How Poor Training, Low Pay and Lack 
of Job Protection for Security Guards Undermine Public Safety in New 
York City at http://www.cssny.org/pubs/research/poverty.html.
    New York City's 63,000 private security guards provide the first 
line of defense for tenants and visitors in office buildings as well as 
retail stores, schools, and religious institutions. Almost 95 percent 
are non-union. Over eight in ten are male and mostly men of color. The 
median hourly wage for guards in the New York City area is only 55 
percent of the median for all workers in the New York metropolitan 
area. Most labor without a single day of paid sick leave and few 
receive health benefits on the job. The result is a workforce with low 
morale and high turnover.
    What we have learned from the aforementioned example is that unions 
continue to play an important role in securing livable wages and 
benefits and raising workplace standards to the benefit of workers and 
employers. The absence of unions leaves hard-working men and women with 
little protection from the often-arbitrary actions of employers and the 
unpredictable nature of market forces.
    We also need to reward legitimate, steady work. The Earned Income 
Tax Credit has been one of our most successful policies in making work 
pay and especially in drawing more low-income parents into the labor 
force and enabling them to rise out of poverty. But the EITC leaves out 
exactly the group with the highest rates of joblessness. The Earned 
Income Tax Credit should be extended to childless adults ages 18 to 24, 
comparable to that available to parents of two children.
    To their credit, our city's elected leadership has reacted 
responsibly to what CSS, and other organizations, have identified as a 
crisis in our city.
    Mayor Bloomberg recognized the possibilities for employment in the 
city's burgeoning construction industry. But it was Chairman Rangel who 
induced the mayor to create the Commission on Construction Opportunity. 
And we have seen the results of the commission's work: a new High 
School for Construction Trades, Engineering, and Architecture that 
opened last fall; and 40 percent of construction industry 
apprenticeships earmarked for formerly excluded groups and 
individuals--an unprecedented agreement with the city's trade unions.
    The New York City Council, under the leadership of former Speaker 
Gifford Miller and continued by Speaker Christine Quinn, has piloted 
the New York City Works program--a citywide effort to stem the tide of 
joblessness by identifying prospects for employment, providing job 
preparation, and connecting individuals to work. So far, nearly $20 
million has been earmarked for this program.
    Likewise, Mayor Bloomberg's Commission for Economic Opportunity, on 
which I served, is a significant milestone for our city.\7\ The 
commission took a targeted approach, focusing on three distinct groups 
of the poor in New York City: working poor adults, young adults ages 16 
to 24, and children age five and under. The mayor has committed $150 
million to develop policies that address their immediate needs and 
create avenues for sustained mobility throughout the course of their 
    \7\ See http://www.nyc.gov/html/om/pdf/ceo_report2006.pdf.
    This is a start. With the proper political will, we can turn hope 
into reality. Imagine an America where poverty is not accepted as a 
permanent condition. I am encouraged that the 110th Congress will, 
without the rancor of partisan rhetoric, see fit to build upon the 
tremendous legacy of the men and women who served in this institution 
four decades ago. Our finest hour has yet to come but the clock is 
ticking. As was expressed in 1965: we do have the means to break the 
bonds that tie today's children to the poverty of their parents.
    I can provide copies of our reports or survey findings to the 
members of the committee or the committee staff. And I'll be happy to 
answer questions about our experiences in New York City and the 
implications across urban communities throughout our Nation.
    Thank you.


    Chairman RANGEL. A long-time staffer and friend of this 
Committee and well-known author, Dr. Ron Haskins, who is now 
the Codirector of the Center on Children and Families with the 
Brookings Institution. Welcome back to your Committee.

                      BROOKING INSTITUTION

    Dr. HASKINS. Thank you so much, Mr. Chairman and Ranking 
Member McCrery and Members of the Committee.
    Before I came to Washington, I used to think the name of 
this Committee was the ``Powerful'' Committee on Ways and Means 
and only when I got here did I find out that ``powerful'' was 
just how you are regarded by other people. So, it is a great 
privilege to be here, and I greatly appreciate your invitation.
    I also want to congratulate the Committee for starting with 
poverty. I think poverty is a very serious problem. I spend 
most of my life now studying poverty and inequality and social 
mobility, and I am extremely pleased that the Committee is 
going to, not just in this hearing but in subsequent hearings, 
perhaps develop a legislative agenda, hopefully bipartisan.
    This Committee, of course, was really the source of the 
1996 welfare reform bill, which has had dramatic impacts on 
poverty. I think you could argue that it is the most effective 
thing we have ever done at the Federal level, and it was, in 
the end, a bipartisan bill even though many of the prominent 
members of this Committee did not support it, it has been quite 
successful; and I hope that that same outcome can be achieved 
this time, that this Committee can work together and create an 
antipoverty strategy.
    I would like to make three brief points about the report. 
First, it is a superb report--I am referring now to the Holzer 
report. It is a superb report. All of the authors are extremely 
prominent professionals and scholars, and I think there could 
be other people who can pick a nit here and there, as Harry 
said, but I think all experts that study this material would 
agree that poverty is a serious problem, that it does have 
long-term impacts on the economy; and if we could reduce 
childhood poverty, there would be positive impacts on the 
    I doubt anybody would argue very much with $500 billion. I 
think it is a reasonable outcome.
    I would like to point out two things that are very 
important. First, the $500 billion figure does not include the 
cost of anything that we would do to eliminate poverty. We 
already spend well over $600 billion on means-tested programs. 
So, we would have to spend more, presumably, unless we can make 
those programs more efficient, to actually reduce poverty. So, 
we should not think that we are going to suddenly realize a 
windfall of $500 billion if we could eliminate childhood 
poverty, because it is going to cost something.
    Secondly, do not think that the implication of this report 
is that if we gave a bunch of money to people, that poverty, 
childhood poverty, would be reduced. The logic of the report 
is, not only do poor people need more money, but they have to 
change in every other way to make them more like nonpoor 
people. The parenting behaviors have to change, the 
neighborhoods have to change, the schools have to change; and 
in my estimation, this puts us right back where we started. 
This Committee and other Members of Congress and members of the 
private sector, like Mr. Jones, still have to figure out what 
we should do to reduce poverty.
    In that regard, I think we actually have learned something. 
If members would like to look at Chart 3 in my testimony, I 
think this will give you a very good clue about what we have 
learned and about the strategies that we should pursue.
    First, I want to call your attention--these are three bar 
graphs in two sets, one set for 1990 and one set for 1999. 
These bar graphs are--it is a broad measure of poverty, but it 
is one that is used by the Census Bureau, so there is no tricky 
stuff here.
    Dr. HASKINS. Notice each--the bar graph in each set; these 
are moms who were never married, the most likely to be poor, 
the least likely to have a high school education. In 1990, 
their market poverty rate--think of it as life in the state of 
nature--was 50 percent. Half of them were poor and their 
children were poor.
    In 1999 it was 39 percent, and that figure went down 
specifically because of earnings, probably a net increase of 2 
million mothers in the labor force, granted, working minimum-
wage jobs, but earning enough to take themselves and their 
children out of poverty.
    Now look at what happens when you add government programs. 
When you add the cash programs and the cash in kind, not 
including the tax programs, poverty drops to 37 percent in 
1990, but it still drops quite considerably in 1999. Then when 
you add the tax benefits, especially earned income tax 
benefits--and other benefits as well, but especially the EITC--
it has no impact in 1990 because of the low levels of work. 
However, because of the high levels of work in 1999, poverty 
still goes down even further to 25 percent.
    So, think of this: 25 percent, 37 percent, why? For three 
    First, we used the market. We insisted that people have 
market incomes. Government is not going to do anything.
    Secondly, individual responsibility, in this case work. We 
insisted that people do the responsible thing, namely quit 
welfare and go to work. It is not good to be on welfare, you 
should work. We sent very clear signals that were originated 
from this Committee that people had to go to work.
    Third, we supported them once they began to work with 
government programs, especially EITC but also child care, to 
some extent food stamps, which we changed very substantially in 
    In short, this is a deeply bipartisan approach. For 
Republicans, there is personal responsibility, the Republicans 
like to emphasize. For Democrats, there is a crucial role for 
Government. I would say to this Committee that whatever you do 
to attack poverty, that you need to focus on these three 
bulwarks of any antipoverty strategy, and especially on more 
work. I suggest some things in my testimony about how we could 
do that, especially marriage, and especially education and, in 
particular, preschool.
    Thank you, Mr. Chairman.
    Chairman RANGEL. Thank you. Thank you.
    [The prepared statement of Dr. Haskins follows:]

        Prepared Statement of Ron Haskins, Ph.D., Senior Fellow,
   Economic Studies and Co-Director, Center on Children and Families,
                       The Brookings Institution

    Chairman Rangel, Ranking Member McCrery, and Members of the 
    My name is Ron Haskins. I am a Senior Fellow at the Brookings 
Institution and a Senior Consultant at the Annie E. Casey Foundation. I 
also spent 14 of the interesting years of my professional life working 
for this Committee and I am very grateful to have this opportunity to 
testify during today's hearing on poverty and the economy.
    The report by my friend Harry Holzer and his colleagues that you 
are releasing today is a challenging and exceptionally interesting 
product of sophisticated social science methods.\1\ I suspect that 
economists and other experts would challenge some of the assumptions 
underlying the report and might come up with slightly different results 
than those reported by Holzer. But I think the conclusion that if we 
eliminated childhood poverty we would save on the order of $500 billion 
a year because of increased labor, reduced crime, and reduced need for 
health care is reasonable. Regardless of the exact level of savings, 
nearly every expert would grant that eliminating poverty would produce 
economic benefits and that the benefits would be substantial. In short, 
I applaud this report, especially because it gives us yet another 
reason to do everything possible to reduce poverty.
    \1\ Harry J. Holzer and others, ``The Economic Costs of Poverty in 
the United States: Subsequent Effects of Children Growing Up Poor'' 
(Washington, D.C.: Center for American Progress, January 2007).
    I would, however, like to emphasize a cost that is not part of the 
calculations made by Holzer and his colleagues. Even if we reduce 
childhood poverty and prevent some of the costs childhood poverty 
imposes on the economy, whatever actions we take to end poverty would 
themselves have substantial costs. Thus, even if $500 billion is an 
accurate estimate of the costs of childhood poverty, we would need to 
spend money to reduce childhood poverty in order to reduce its long-
term costs. In 2005 we spent well over $600 billion on programs for 
poor and low-income individuals and families\2\ and yet the child 
poverty rate was 17.6 percent.\3\ It's anyone's guess how much more we 
would have to spend to greatly reduce the current child poverty rate.
    \2\ Congressional Research Service, Domestic Social Policy 
Division, Knowledge Services Group, Cash and Noncash Benefits for 
Persons with Limited Income: Eligibility Rules, Recipient and 
Expenditure Data, FY2002-FY2004, CRS Report for Congress (Washington, 
D.C.: Author, March 2006).
    \3\ Carmen DeNavas-Walt, and others, U.S. Census Bureau, Income 
Poverty, and Health Insurance Coverage in the United States: 2005, 
Current Population Reports, P60-231 (Washington, D.C.: Government 
Printing Office, 2006), Table B-2.
    Further, the report tells us little about the causes of poverty, or 
more important for this committee, how it could be reduced. My concern 
here is directed especially to those who think that poverty is a random 
event that strikes indiscriminately, that our economy or our schools 
are the primary causes of poverty, or that the only difference between 
the poor and the middle class is money. The poor are poor in large part 
because they make decisions that greatly increase the likelihood that 
they will be poor. Yes, many of the poor begin life with 
disadvantages--lousy neighborhoods, bad schools, single-parent 
families--that are difficult to overcome. But both research and 
experience show that many people born with disadvantages manage to 
overcome them.
    Another complication arises. I think Professor Holzer and his 
colleagues would agree that in order to realize the gains to the 
economy they calculate would require changes in the behavior of both 
poor parents and poor children. Indeed, the underlying implication of 
their analysis is that the savings they estimate can only be achieved 
if we can figure out a way to boost poor children into an entirely 
different developmental trajectory than the one that currently limits 
their potential. We can have a big argument about whether it is 
possible to achieve this kind of impact on children, but virtually 
every student of poverty thinks that just giving money to poor parents 
would not be enough. Professor Susan Mayer of Northwestern University, 
in a remarkable study cited by Professor Holzer and his colleagues, 
found that influencing child outcomes requires more than just money. 
The title of her book, What Money Can't Buy, hints at her message that 
``once basic material needs are met, factors other than income become 
increasingly important.'' \4\
    \4\ Susan E. Mayer, What Money Can't Buy (Cambridge: Harvard, 
1997), p. 148.
    This point is worth emphasizing. The nature of Professor Holzer's 
analysis is to compare productivity, crime, and health of children from 
poor families with children from non-poor families.\5\ It is inherent 
in the logic of their analysis that any differences they find in the 
labor force productivity, health, or criminal behavior of children from 
poor and non-poor families cannot be attributed just to family 
differences in income. The authors are admirably explicit about this 
    \5\ Actually, the comparisons in the study are between poor 
children and children from families at twice the poverty level (about 
$30,000 for a family of three in 2006). Thus, the full savings they 
estimate would not be achieved unless we could develop policies that 
brought the families of poor children to twice the poverty level.

        [Our estimates] include not only the effects of low parental 
        income, but also of the entire range of environmental factors 
        associated with poverty in the U.S., and all of the personal 
        characteristics imparted by parents, schools, and neighborhoods 
        to children who grow up with them or in them. . . . Of course, 
        in defining poverty this way, we also assume that the entire 
        range of negative influences associated with low family incomes 
        would ultimately be eliminated if all poor children were 
        instead raised in non-poor households. (p. 6)

    I think we have some fairly good ideas about how to influence 
children's development, but no intervention has shown that it is 
possible to have these sweeping effects on the child's home, 
neighborhood, and school environment. In short, I would not expect to 
be designing interventions any time soon that will enable us to capture 
a major portion of the $500 billion Professor Holzer estimates is lost 
to our economy every year because children are reared in poverty.


    Rather than chase a goal that is far out of our reach to eliminate 
child poverty, a more modest but potentially more effective set of 
strategies lies close at hand. Figure 1 portrays the results of an 
analysis performed by Isabel Sawhill, my colleague at Brookings. Based 
on Census Bureau data for 2002, the analysis systematically varies 
factors correlated with poverty and then, based on the magnitude of 
each factor's correlation with poverty and on data from a random sample 
of Americans, estimates how changing that factor would change the 
poverty rate.\6\ The figure shows the impact on poverty of assuming 
everyone works full time, of increasing the frequency of marriage to 
match the rate that prevailed in 1970, of assuming everyone completed 
high school, of reducing family size so that no family had more than 
two children, and of doubling cash welfare. As you can see by the 
height of the bar graphs, the most effective way to reduce poverty 
would be to increase work levels; the second most effective way would 
be to increase marriage rates. Increasing education, reducing family 
size, and doubling cash welfare are much less effective in reducing 
    \6\ Adam Thomas and Isabel Sawhill, ``For Richer or for Poorer: 
Marriage as an Antipoverty Strategy,'' Journal of Policy Analysis and 
Management, 21(4): 587-599; Ron Haskins and Isabel Sawhill, ``Work and 
Marriage: The Way to End Poverty and Welfare'' (Welfare Reform and 
Beyond Brief #28), Washington, D.C., Brookings, September 2003.


    This analysis, like the study being released today by the 
Committee, is based on statistical manipulations of data and not what 
actually happens when something in the environment (such as work or 
marriage rates) changes. But, thanks in large part to this Committee, 
the Nation has conducted a huge experiment that shows what happens to 
poverty rates when more people work. In the welfare reform legislation 
of 1996, welfare rules were dramatically changed so that mothers on 
welfare had to look for work or have their cash benefit reduced or even 
terminated. In addition, mothers were confronted with a 5-year time 
limit. In part because of these new rules, the mid- and late-1990s saw 
the largest increase ever in work by females heading families. As many 
as two million poor mothers left or avoided welfare and found jobs. 
Figure 2 shows what happened to child poverty during the period of 
increased employment by single mothers. Child poverty declined for 
seven consecutive years beginning in 1993, falling by nearly 29 percent 
over the period. Black child poverty fell even more, by about 32 
percent, reaching its lowest level ever. Even after some mothers lost 
their jobs during and following the recession of 2001 and child poverty 
increased, it peaked in 2004 (it declined again in 2005) at a rate that 
was more than 20 percent below its mid-1990s peak.\7\
    \7\ Ron Haskins, Work over Welfare: The Inside Story of the 1996 
Welfare Reform Law (Washington, D.C.: Brookings, 2006), Chapter 15.
    In line with the prediction of the Sawhill analysis, these results 
present a vivid demonstration that poverty can be reduced by people 
making the right decisions--in this case the decision to go to work. 
Congress and President Clinton encouraged work; many poor mothers went 
to work; child poverty dropped.
    Another decision that people make that greatly increases their odds 
of living in poverty is the decision to have a baby outside marriage. 
Children in female-headed families are four or five times more likely 
to be poor as children living with their married parents.\8\ The 
Brookings analysis referred to above shows that if we had the marriage 
rate we had in 1970, we could reduce poverty by well over 25 percent. 
The analysis does not assume any higher levels of employment or any 
government spending above the level that actually occurred in 2002. The 
analysis proceeded by randomly matching single men and single women 
with the characteristics (including employment and income) they 
actually had in 2002. The matches, based on age, education, and race, 
proceeded until enough virtual marriages had been created to equal the 
1970 marriage rate. Clearly, the decision to marry by millions of young 
adults could have a major impact on poverty rates. As it is now, the 
decision not to marry and to have babies outside wedlock contributes 
greatly to the high level of poverty in America, especially the poverty 
level among children.
    \8\ According to tables from the U.S. Census Bureau, in 2005 the 
poverty rate among children living in married-couple households was 7.4 
percent; the rate for children living in households headed by females 
was 38.0 percent. Thus, the poverty rate among children in female-
headed households is 5.1 times greater than among children living with 
a married couple.
    Dropping out of high school is yet another individual decision that 
has a major impact on poverty. As Figure 1 shows, we could reduce 
poverty by about 15 percent if everyone would simply finish high 
school. Of course, if more youth went on after high school and achieved 
2-year or 4-year degrees, the impact of education on poverty would be 
even greater.
    So far, I have emphasized work, marriage, and education because not 
only are these effective levers to manipulate to fight poverty, but 
they are all primarily under the control of individuals. The major 
lesson from welfare reform is that increased personal responsibility is 
vital to reducing poverty. No matter what we do as a nation to fight 
poverty, increased levels of responsible decision-making by individuals 
should be at the heart of our strategy. If we can increase the number 
of parents who decide to work, if we can encourage young people to 
marry before having children, and if we can help young people complete 
high school or even achieve additional years of schooling beyond high 
school, we will greatly reduce poverty and realize the economic gains 
predicted by the Holzer report.
    I am emphatically not arguing that we should create a brave new 
world in which disadvantaged individuals must slog it out in a low-wage 
economy without help from government. Government has a vital role to 
play. But government is already doing a lot. Members of this Committee 
undoubtedly hold a wide range of views about how much government should 
do to help the poor and what particular actions government should take 
to fight poverty. But since roughly the 1980s, the legislative and 
executive branches of the Federal government have dramatically shifted 
the focus of American social policy. As Kate O'Beirne testified before 
this Committee during the 1995 hearings on welfare reform, the 
watchword of the old welfare system seemed to be ``Spend more, demand 
less.'' \9\ But the welfare reform legislation of 1996 has brought 
dramatic change. Now low-income families are expected to work, but when 
they do the Federal government meets them in the labor market with a 
host of work-conditioned benefits including the Earned Income Tax 
Credit (EITC), a partially refundable child tax credit, child care, a 
worker-friendly food stamp program, and Medicaid coverage. In the bad 
old days, a poor mother who left welfare for low-wage work could 
actually lose money--and lose her family's Medicaid coverage as well. 
Now she can get up to $4,500 in cash from the EITC, she might qualify 
for the refundable part of the child tax credit, she could qualify for 
around $1,500 in food stamps, her children are covered by Medicaid as 
long as she has low earnings, and there's a very good chance her child 
care would be covered.
    \9\ Haskins, Work over Welfare, p. 126.


    Figure 3, based on data taken from the Ways and Means Green Book, 
shows how successful the policy shift to mandatory work combined with 
federal work supports has been.\10\ The figure compares progress 
against poverty among children living with their unwed mothers in 1990 
(the first set of graphs) and in 1999 (the second set of graphs). The 
first bar shows that before any government transfer programs, the 
poverty rate based just on market income was 50 percent in 1990 but 
only 39 percent in 1999. The 1999 market poverty rate was more than 20 
percent lower than the comparable rate in 1990 because so many more 
unwed mothers were working in 1999. The second bar shows what happens 
when non-tax transfers from cash welfare, food stamps, and housing are 
added to family income. These programs took a big bite out of poverty 
in 1990, causing it to fall from 50 percent to 37 percent. But the same 
programs also had a major impact on poverty in 1999, despite its lower 
initial level, causing it to fall from 39 percent to 30 percent. When 
tax benefits, notably the EITC, are added to income, there is virtually 
no impact on poverty in 1990. But in 1999, the EITC and other tax 
benefits brought poverty down by another 5 percentage points or 15 
percent. As can be seen by comparing the last bar in each set, the 
combined effect of government programs in 1990 was to bring poverty 
down by about 25 percent, from 50 percent to 37 percent. But the impact 
of government programs in 1999 was even greater, reducing poverty by 
over 35 percent--despite the fact that increased incomes from work by 
mothers had caused the market poverty rate to be 20 percent lower. It 
would be difficult to imagine a clearer demonstration that the new 
federal strategy of requiring personal effort and then rewarding it 
with work-contingent benefits is functioning just the way this 
Committee and Congress hoped it would.
    \10\ Committee on Ways and Means, 2004 Green Book (Washington, 
D.C.: U.S. Government Printing Office, 2004), table H-21.
    The beauty of what has happened to work and poverty in America over 
the past decade is that our current approach to fighting poverty is 
deeply bipartisan. For Republicans there is the reliance on personal 
responsibility and the market; for Democrats there is the use of 
government programs to provide work incentives and boost incomes. If 
the Members of this Committee base their decisions on how to fight 
poverty on the lessons of the past, they will build their policies on a 
foundation with three bulwarks that would make the policies inherently 
bipartisan: jobs in the private sector (even if they are low-wage), 
work requirements to spur individual responsibility, and government 
programs that support work (``make work pay'').
    My Brookings colleague Isabel Sawhill and I have just completed 
work on a paper that is part of a larger Brookings project designed to 
bring attention to critical issues of foreign and domestic policy that 
should be addressed by candidates during the 2008 presidential 
campaign.\11\ Our paper is based in part on an issue of the journal The 
Future of Children that Brookings and Princeton University publish 
twice a year. Our next issue contains eight specific recommendations, 
made by some of the Nation's leading scholars, about policies to fight 
poverty. Here are brief descriptions of four proposals for fighting 
poverty that meet the criteria of building on the low-wage economy, 
spurring individual responsibility, and supporting work:
    \11\ Ron Haskins and Isabel Sawhill, ``What a Winning Presidential 
Candidate Should Do About Poverty and Inequality'' (Washington, D.C.: 
Brookings, forthcoming).

      Raising work levels is a proven strategy for reducing 
poverty. Yet the only federal program that has strong work requirements 
is Temporary Assistance for Needy Families. The Federal government 
should work with states and local housing authorities to increase the 
incentives for work in both the food stamp and housing programs.
      Simulations like the Sawhill analysis cited above show 
that increasing marriage rates could have a major impact on poverty. 
However, there is only modest evidence that programs such as marriage 
education will increase marriage rates or strengthen families. 
Fortunately, the Bush administration has funded a series of scientific 
studies, now being conducted by highly qualified research companies, to 
examine a range of marriage programs working both with young unmarried 
parents and with young married parents. In addition, the Administration 
has recently funded over 120 marriage programs around the Nation. The 
Ways and Means Committee should follow the progress of these research 
and demonstration programs and from time-to-time conduct hearings to 
examine the findings. If the programs are effective in building strong 
families and boosting children's development, they should be expanded.
      A large number of poor and low-income men, especially 
minority men, continue to have serious problems in the labor market and 
to exhibit low rates of marriage, high rates of impregnating their 
unmarried partners, low rates of paying child support, and high rates 
of crime and imprisonment. The primary government program for these 
young men is child support enforcement, which uses all available 
means--including incarceration--to force them to pay child support. A 
reasonable approach to helping these young men would be to use both 
prison release programs and interventions implemented through the Child 
Support Enforcement program to provide incentives for work. In 
addition, Congress should provide funds for a few states to experiment 
with large-scale demonstrations of the effects of providing these young 
males with a large income supplement comparable to the EITC;
      The intervention program that has the best evidence of 
having long-term impacts on children's development is high-quality 
preschool.\12\ Evidence from model programs shows that preschool can 
reduce placements in special education and retentions in grade, boost 
school graduation rates, reduce delinquency and crime, reduce teen 
pregnancy, and increase college attendance, among other effects. But 
there is little or no evidence that large-scale programs like Head 
Start can produce these long-term effects. More than forty states now 
spend their own money on preschool programs, indicating a high level of 
state commitment to preschool. Congress should offer additional funding 
to a few states that agree to coordinate all their child care and 
preschool funding, to focus on boosting school readiness, to cover all 
poor 4-year-olds (or both 3- and 4-year-olds), to use highly qualified 
teachers, and to submit their programs to third-party evaluations. 
Although model programs show what can be accomplished, we do not yet 
have the knowledge to implement effective large-scale programs.
    \12\ Ron Haskins, ``Putting Education into Preschools,'' in Paul E. 
Peterson, ed., Generational Change: Closing the Test Score Gap (Lanham, 
Maryland: Rowman & Littlefield, 2006); Jens Ludwig and Isabel Sawhill, 
``Success by Ten'' (Washington, D.C.: Brookings, forthcoming).

    I believe the Ways and Means Committee should be commended for 
opening its agenda for the 110th Congress by examining poverty. We have 
learned a lot about fighting poverty in the past decade. If we build on 
what we have learned, and especially if we conduct large-scale 
demonstrations of new ideas based on the bipartisan principles outlined 
above, I think it is possible to further reduce poverty and to realize 
some of the savings to the Nation's economy so impressively documented 
in the Holzer report.


    Chairman RANGEL. Now we will hear from Dr. Jane Knitzer, 
Director of the NCCP, from New York.
    Thank you for being with us.

                      CHILDREN IN POVERTY

    Dr. KNITZER. Thank you, Mr. Chairman and Members of the 
Committee. My name is Jane Knitzer; I direct the NCCP at 
Columbia University, located in Congressman Rangel's district, 
and I personally am a constituent.
    I am going to highlight seven take-home messages from 
demographic analyses, neuroscience and economic research that 
have profound implications for shaping policies to promote 
future productivity.
    One, we are talking about a large part of the future 
workforce, 39 percent of America's children, 28 million 
children, live in low-income families.
    Two, most low-income children already have parents who 
work, 55 percent of them full-time, full-year, but they do not 
earn enough money to support a family. It takes twice the 
poverty level, even minimally.
    Three, the younger the child, the greater the risk of 
poverty. Forty-three percent of children under 6 live in low-
income families compared to 35 percent of adolescents. We know 
from research that experiencing poverty in early childhood is 
the most harmful to children.
    Four, economic hardship has been repeatedly linked to 
adverse health education and other outcomes, even in children, 
the kind that you just heard described in adults. By age 4--and 
it starts really early. By age 4, poor children are 18 months 
behind developmentally and by age 10, they have not caught up. 
These children have more mental health problems, they are more 
likely to drop out of school and become part of the disengaged 
    Five, money matters for children's outcomes. Increased 
income has been linked with better school readiness and 
achievement and with reduced behavior problems, some of it, in 
our welfare research findings. Families with more money can 
invest in more resources to promote cognitive development, and 
they are less stressed and depressed, which impacts how 
children develop socially and emotionally which, in turn, 
relates to how well they become workers.
    Six, the earliest relationships matter more than we ever 
understood. Neuroscientists are teaching us that the earliest 
relationships, starting in infancy, shape the hardwiring of the 
brain, which in turn shapes later learning, the ability to 
manage emotions and even the immune system.
    A study called Adverse Childhood Experiences has linked 
problems in childhood with increased cardiovascular problems, 
hypertension, diabetes, et cetera, done by the Kaiser 
    Seven, according to economists as well as brain science, 
investing in high-quality early childhood experience has long-
term, major economic payoff, and I think everybody has 
mentioned that. So, I won't go into that. My testimony gives 
examples and the Committee on Economic Development has been 
doing a great deal of analysis of this.
    So, the take-home messages that are critical, for future 
productivity, we need to make work pay for families now, not 
just for adults; but adults are parents, and what happens now 
is that as families earn more and lose the work support 
benefits, they fall back into poverty.
    We have developed a tool, the Family Resource Simulator, at 
NCCP that tracks this in 12 States across the country. As they 
earn more, do the American thing, work harder, they lose 
benefits. Some earn twice as much and they end up with very 
little disposable income. This does not set a good model for 
their children.
    Two, make sure that all low-income young children enter 
school with the skills they need to learn whatever setting they 
are in, and regardless of the work status of their parents. 
Right now, 17 percent of children are actually in State-funded 
preschool programs. The vast majority of children are in child 
care settings, but child care is largely seen as a work support 
for parents, not essentially a productivity support for the 
next generation. We must invest in quality child care that 
includes the same access to high quality early learning 
    Three, we need to invest in infants and toddlers and their 
families, particularly those where the relationships are at 
risk. We must expand programs like Early Head Start. We are now 
serving 62,000 children in the United States of America in 
Early Head Start, even in the face of the brain science.
    Finally, for the highest-risk children, particularly those 
in poverty and extreme poverty, we need to consistently make 
both parenting supports and work supports a focus. Right now, 
we focus on work and not the parenting supports that these 
higher-risk families need. We often talk about children and 
adults separately. We need to focus policies on families, 
particularly for the highest risk.
    I thank you very much, and I would be happy to respond to 
any questions.
    Chairman RANGEL. Thank you.
    [The prepared statement of Dr. Knitzer follows:]

 Prepared Statement of Jane Knitzer, Ph.D., Director, National Center 
              for Children in Poverty, New York, New York

    Thank you, Mr. Chairman and members of the committee for this 
invitation to testify today. I am the Director of the National Center 
for Children in Poverty (NCCP). NCCP is a public interest organization 
at Columbia University's Mailman School of Public Health, with offices 
in Congressman Rangel's Congressional District. NCCP's mission is to 
promote the health, economic security, and well-being of America's most 
vulnerable children and families. NCCP uses research to identify 
problems and find solutions at the state and national levels.
    My remarks today focus on what we need to do for the next 
generation now to ensure the future productivity of our economy. To set 
the stage, I will provide some key facts about child poverty, highlight 
why child poverty matters for the future of the economy, and share 
lessons from research about new strategic ways to address child poverty 
and to ensure a productive future workforce. I will conclude with some 
broad recommendations based on NCCP's research on how best to improve 
family economic security and increase the odds that poor and low-income 
children will become productive earners.

Child Poverty in America, 2007
    Child poverty is widespread. Overall, 39 percent of America's 
children--more than 28 million children--live in low-income families, 
that is with income below twice the poverty level. This puts them at 
risk of not making it in the global economy, not having the educational 
skills they need, not being healthy both mentally and physically, and 
not being effective parents when they become adults.
    Nationally, 18 percent, or nearly 13 million children are poor by 
official standards. Half of these children are in families with incomes 
at or under $10,000.
    Another 21 percent of children live in families with incomes 
between 100 and 200 percent of poverty. Although not poor by official 
standards, these families face material hardships and disadvantages 
that are similar to those who are officially poor. Missed rent 
payments, utility shut offs, inadequate access to health care, and 
unstable child care arrangements are common. These families are but one 
or two crises away from official poverty (National Center for Children 
in Poverty, 2006).
    Most low income children have parents who work. As the recent GAO 
report finds, the majority of the parents of these children work--55 
percent of children in low-income families have a parent who works 
full-time, 52 weeks a year. The problem is they do not earn enough 
money to support a family, even when they work more. They are held back 
by low-wage jobs that provide few benefits and few prospects for 
advancement, even when they have a high school degree or even some 
college. Three quarters of low-income children have parents with at 
least a high school diploma, but this no longer guarantees economic 
success (National Center for Children in Poverty, 2006).
    Research shows that it takes an income of about twice the poverty 
level to provide even basic necessities for a family, $40,000 for a 
family of four, not the official $20,000, and, depending upon the local 
cost of living, it can take even more. It takes a full-time job at more 
than $19 an hour to produce an annual income of $40,000, or two full-
time jobs at nearly $10 an hour (Cauthen, 2006).
    Not having enough money reduces the odds that children will have 
access to the kinds of resources and experiences that are essential for 
children to thrive and to grow into productive adults. Too often they 
lack access to the things that higher-income parents routinely provide 
for their children--high quality health care, stimulating early 
learning programs, good schools, money for college as well as books and 
other enriching activities. Instead, low-income parents struggle with 
more basic choices: When the money runs out, is it heat or the medical 
bills? Is it good child care or unstable arrangements that cost less? 
Is it keeping young children indoors and out of unsafe parks, risking 
    The younger the child, the greater the risk of poverty. 20 percent 
of children under age 6--1 in 5--live in poor families; 16 percent of 
children age 6 or older live in poor families. In half the states, more 
than 20 percent of children under age 6 are growing up in poverty, 
whereas only 13 states have a child poverty rate for children up to age 
18 that is as high. The pattern is the same for low-income children: 42 
percent of children under age 6 live in low-income families, whereas 33 
percent of adolescents live in such families. Research tells us that 
experiencing poverty in early childhood, along with persistent poverty, 
is the most harmful to children.
    States' poverty and low-income rates vary considerably. There is 
considerable state variation in the rate of children in low-income 
families. In the states represented on this committee for example, the 
percentage of low-income children varies from 24 percent to 44 percent 
of all children in the state. This suggests the possibility of a 
combined state and federal policy agenda providing incentives to states 
to implement poverty reduction strategies.

Why Child Poverty Matters for Future Productivity
    Economic hardship has been linked to a myriad of adverse 
educational, health and other outcomes for children that limit future 
productivity. Low-income children face elevated health, educational, 
environmental and family risks that jeopardize their successful 
transition to adulthood, with African American, Latino and American 
Indian children facing compounded risks (Shonkoff, 2000). For example:

    Good health is the foundation for healthy development. Low-income 
children are more likely to be in fair or poor health (Centers for 
Disease Control analysis of 2001 National Health Interview Survey--
NHIS) and to lack access to quality health care. Low-income children 
are not as likely as their well-off peers to receive preventive health 
care and their parents are less likely to receive guidance about child 
development. Three percent of low-income families report receiving 
advice and education from their physician compared to more than half 
for more affluent families (Young, 1996). Even with Medicaid and the 
State Children's Health Insurance Program (SCHIP), 11 percent of poor 
children lack access to health insurance, and for the first time in 
more than a decade, the number of uninsured children is increasing 
(See: www.statehealthfacts.org).

    Researchers repeatedly document that there is a direct linear 
relationship, in the aggregate, between family income and children's 
achievement. Higher family income leads to higher academic achievement 
(Gershoff, 2003; Lee & Burkham, 2002).
    Less well known is that the achievement gap is real and significant 
from children's earliest years. Both math and reading scores are 
negatively related to poverty at kindergarten entry and for the most 
part, poor children either do not catch up or the gap worsens. A review 
of national data sets on preschool and child care shows that at age 4 
years, poor children are 18 months below the developmental norm for 
their age group. By age 10, that gap is still present. Of particular 
concern is that there is a dramatic difference in early language by 
income. By the time children from middle-class families are in the 
third grade, they know about 12,000 words. Children in low-income 
families with undereducated parents have vocabularies of 4,000 words 
(Klein & Knitzer, 2007).

Mental Health
    Healthy social and emotional development is a core ingredient of 
successful adulthood. But low-income children are disproportionately 
exposed to circumstances that pose risks to such development.
    Low-income children, especially young children, are more likely to 
be exposed to parental depression and other parental adversities 
including substance abuse and domestic violence. These risk factors 
have been linked with an array of short and long term consequences for 
children, including depression, acting out behavior, and significant 
school problems.
    For older children, the toll poverty takes is reflected in higher 
rates of diagnosable disorders, along with learning problems (Knitzer & 
Cooper, 2006) that frequently translate into school drop out and 
sometimes child welfare and juvenile justice involvement. Two-thirds of 
youth with mental health problems drop out of high school (Wagner, 

What Research Says Can Help
    It is widely accepted that high quality education is a major 
pathway out of poverty. But research also points to two other critical 
ingredients that promote future productivity.

Adequate Family Income
    Too often, discussions about children and poverty focus only on the 
risks associated with poverty--low educational achievement, social and 
behavioral problems, and poor health--and then the policy solutions 
follow suit. While it is critically important to address these 
problems, it is equally important for children's growth and development 
to address poverty itself. In short, money matters.
    More than a decade of research shows that increasing the incomes of 
low-income families--without any other changes--can positively affect 
child development, especially for younger children (Cauthen, 2002). 
Experimental studies of welfare programs offer some of the strongest 
evidence to date about the importance of income. For example, welfare 
programs that increase family income through employment and earnings 
supplements have consistently shown improvements in school achievement 
among elementary school-age children; other studies have also shown 
links between increased income and improved school readiness in young 
children (Dearing, McCartney, & Taylor, 2001).
    In contrast, welfare programs that increase levels of employment 
without increasing income have shown few consistent effects on 
children. Moreover, findings from welfare-to-work experiments show that 
when programs reduce income, children are sometimes adversely affected 
(Cauthen, 2002). Other studies have shown links between increased 
income and reductions in acting out disorders in low-income children 
and youth (Costello, Compton, Keeler, & Angold, 2003). And it's not 
just the amount of income that matters but also its predictability and 
stability over time; research has shown that unstable financial 
situations can have serious consequences for children as well (Cauthen 
2002; also Wagmiller, Lennon, Kuang, & Aber, 2006).
    Research suggests that income, controlling for other factors, 
affects children primarily through two mechanisms. The financial 
investments that parents are able to make in their children--both to 
meet basic needs as well as to invest in materials, activities, and 
services that are developmentally enriching--are critical for child 
development. The inability to make such investments helps to explain 
why poverty negatively affects children's cognitive development. 
Likewise research shows that low levels of family income negatively 
affect children's social and emotional development by increasing levels 
of parental stress and depression and by affecting parenting behavior.

Healthy Relationships in the Early Years
    Developmental research has for two decades pointed consistently to 
the importance of parents and to other ``protective'' relationships 
(Luthar, 2003) for all children of all ages. It also teaches us that 
the more risk factors, whether demographic (single parent family, low 
maternal education) or environmental (parental substance abuse, 
community violence), absent effective interventions, the more likely 
children are to experience poor long-term negative outcomes.
    Recent neuroscience research has dramatically deepened these 
understandings and focused attention on what happens in the earliest 
years. There are three core take home messages that have especially 
profound implications for how we design programs and use public dollars 
to improve school outcomes and future productivity of children and 
youth. All findings point in the same direction--a strengthened focus 
on young children.\1\
    \1\ For further information, see the National Scientific Council 
for the Developing Child Web site: www.developingchild.net.
    The earliest experiences shape the hard wiring of the brain. Early 
experiences and relationships interact with genetics to shape the 
``architecture'' of the brain. How the early brain develops impacts 
later learning, the ability to mange emotions and even the immune 
system. Depending upon the early experiences, that architecture is 
either sturdy or fragile. When it is sturdy, children are more likely 
to grow up and be productive, when it is not, they risk problems not 
just as children, but also into adulthood.
    The active ingredient in early brain development is relationships. 
When relationships with primary caregivers (including families, but 
also child care providers, home-visitors and teachers) are 
appropriately nurturing, stimulating and stable, young children thrive. 
When they are not, young children show signs of early learning, 
language and social and emotional challenges. At the extremes are the 
infants, toddlers and young children who experience ``toxic stress,'' 
that is, exposure to persistently harmful environments, inconsistent 
caregiving, abuse and abandonment. Research documents how these 
experiences frequently leave life long scars (Luthar, 2003).
    Once brain circuits are built, it becomes harder to change them. 
That is why adults who learn a language as adults even if fluent 
continue to have an accent. It is harder to change a four year old than 
a baby, and harder to change an adolescent than a four year old. It is 
also much more costly. Children who do not develop the skills to 
succeed in the early grades, particularly the social and emotional 
skills, are more likely to end up as problem learners and later 
dropouts (Raver & Knitzer, 2002). Estimates are that between one-
quarter and one-third of children are at risk of early school failure. 
The potential health costs of poor early experiences are also high. 
Children who experience high levels of stress, as adults, turn out to 
be at much greater risk for cardiovascular diseases, diabetes, 
hypertension and substance abuse (Fellighetti, Anda, & Nordenberg, 

What Economists Say About the Return on Investments in the Earliest 
    Economic analyses of three high-quality intensive early childhood 
demonstration programs that have followed children as they became 
adults reinforce the rationale for increased, strategic early childhood 
investments.\2\ While the program specifics differed, each of the 
programs: began early in children's lives; had clearly focused goals 
that emphasized the whole child; maintained sustained contact with the 
children--often including through their transition to elementary 
school; had teachers who were well educated, trained, and compensated; 
had small class sizes and high teacher-child ratios; and, involved and 
supported parents intensively (Galinsky, 2006).
    \2\ Longitudinal studies of three model projects serving low-income 
children and families--the High/Scope Perry Preschool Project, the 
Abecedarian Project, and the Chicago Child-Parent Centers--have 
followed participants into adulthood, comparing their adult earning and 
other outcomes with those of randomly chosen or comparable non-
participants (Reynolds, 2002; Schweinhart, 2004; and Ramey, 2000).
    By early adulthood, participants generally had: higher IQ's and 
mathematical ability; higher academic achievement; reduced need for 
special education, lower grade retention rates, fewer school drop outs. 
At age 21, those in one preschool program studied were more than four 
times more likely than non-participants to be enrolled in a 4-year 
college degree program; were less likely to be unemployed and more 
likely to have higher earnings; had lower juvenile and adult crime 
rates; were less likely to depend on public assistance, and less likely 
to be a teenage parent.
    Economists are examining the implications of these findings to 
address the problem of lower skills and motivation among disadvantaged 
children, their diminished productivity as adults, as well as their 
costs to society. One study estimates that by age 21, participants in 
its preschool program earned an average of $20,517 more than non-
participants, and that the public saved a net of $19,097 on grade 
retention, special education, child welfare, juvenile and adult justice 
expenditures (Reynolds et al., 2004).
    Other analyses found that disadvantaged children from ages 8-13 
with low levels of parental investments (time, activities, and family 
resources) without preschool had a 29 percent chance of graduating from 
high school. With preschool, the chance of high school graduation rose 
to 53 percent (Heckman & Masterov, 2004).
    The implication is clear. If we address poverty in the earliest 
years--when it is in fact most widespread in this country--and apply 
the lessons from this research on investments in the early years, we 
stand the greatest chance of changing in a positive way what happens to 
a child in a poor or low-income family and subsequently, that child as 
an adult.

The Policy Implications
    I would like to conclude with some broad recommendations that our 
research at the National Center for Children in Poverty indicates must 
shape the future policy dialogue about how to improve outcomes for the 
close to 40 percent of children who live in low-income families.
    Ensure that families have enough resources to raise their children 
in ways that will promote future productivity. For the next generation 
to thrive, we need to make sure that parents have enough money to raise 
their children, whether it be through income, refundable tax credits, 
benefits, or some combination of all the above, as well as 
opportunities for increased education.
    We need to make work pay for children and families now in order to 
promote future productivity. This is a different rationale than is 
usually offered for investments in the current workforce. But given 
that research findings show the positive impact of increased family 
income on children, it is an important one. Many low-income families 
qualify for ``work support'' benefits (e.g., earned income tax credits, 
Medicaid, child care assistance) that can help make up the difference 
between low earnings and a basic family budget. But these benefits are 
means-tested, so as earnings increase--particularly as they rise above 
the official poverty level--families begin to lose eligibility even 
though they are not yet economically self-sufficient. The result is 
that working and earning more may not leave a family better off. In the 
worst case, higher earnings can actually lead to a family doing worse 
financially. A tool developed by the National Center for Children in 
Poverty, the Family Resources Simulator (www.nccp.org/modeler/
modeler.cgi), provides concrete examples of this phenomenon.
    With the help of work support benefits, a single-mother of two in 
Chicago can cover the cost of basic necessities for her family by 
working full-time earning about $15,000 a year. But as she earns more, 
the family loses its food stamps and child care subsidy, benefits less 
from the Earned Income Tax Credit, begins to incur premiums for public 
health coverage. The result? The family is no better off financially at 
$36,000 in earnings than it was at $18,000 (Cauthen, 2006). So what 
message does this send to children? They see their parents working hard 
and not getting ahead. This should not be the American way.
    Ensure that every low-income child has access to quality early 
education and care and for poor or otherwise at risk children access to 
comprehensive programs like Early Head Start from birth through age 3.
    We need to make sure that all low-income children enter school with 
the skills that they need to learn, whatever setting they are in and 
regardless of the work status of their parents. The states are moving 
to increase funding for pre-k, but the reality is that overall, low-
income young children still have significantly less access to any 
formal early childhood program than their more affluent peers (a 
pattern that has not really changed over the years) and only 17 percent 
of 4-year-olds have access to state-funded pre-k. In fact, most 
children are in some kind of child care setting, but child care is seen 
as a work support, not a next generation productivity support. Thus, 
although over 30 states include child care as part of their delivery of 
pre-k services, when parent's employment status changes, children lose 
eligibility, and lose the relationships that they have come to count 
on. Only 20 states certify eligibility for child care for one year. Yet 
we know that continuity of relationships reinforces positive brain 
    We need to invest in a new set of intentional, integrated policies 
to promote healthy brain development in children from birth to three 
that are designed with brain science in mind, starting with an 
expansion of Early Head Start. We lose too much time if we what until 
four. It is shocking, when juxtaposed against brain science that we 
have a national Early Head Start program that is serving only 62,000 
children, even though we have research that shows that for most of the 
children enrolled, Early Head Start improved parenting practices and 
behavioral and cognitive outcomes. We also know that when children in 
Early Head Start continue with high quality child development and early 
learning programs, they maintain their gains and the achievement gap is 
reduced. Yet as 3-years-olds, half of the Early Head Start sample were 
not in programs that supported the gains of the first two years. This 
is not smart investing, given what we know from brain science.
    For the highest-risk children, particularly those in poverty and 
extreme poverty, we need to consistently make both parenting and work a 
focus of our policies, right now, rather than just work or just 
children. For example, there has been important attention in workforce 
and TANF policies to ``barriers to employment''--low education, poor 
work histories, substance abuse and domestic violence, and, in reality, 
if not in law, mental health issues. These ``barriers to employment'' 
are also ``barriers to effective child development'' and hence to 
future productivity of the children. The children in these families are 
at special risk; they are the most likely not to have health care, to 
have developmental delays that are not identified, and not to be 
enrolled in formal early childhood programs. But TANF does not require 
attention to the children in the families as part of a family plan.
    Similarly, as part of a broad poverty reduction strategy, we need 
to make it possible for states to use current entitlement dollars in 
ways that actively promote healthy development. Right now, states have 
to engage in fiscal contortions to pay for what science says is needed. 
For example, maternal depression, which cuts across class and race, is 
an anchor risk factor, negatively impacting behavior, cognitive 
functioning and language development. Studies show that rates of 
depression in low-income mothers are very high--in the 40 percent 
across multiple studies.
    However, parents of poor children can only access treatment if they 
are Medicaid-eligible. The average eligibility rate for working parents 
is 65 percent, for non-working parents, 42 percent. State eligibility 
rates for non-working parents (those who are most likely to have 
unaddressed health and mental health problems) vary. In five states the 
eligibility rate is under 20 percent of the Federal poverty level 
(FPL); in 26 states it is between 20 and 50 percent of the FPL, in 9 
states it is between 50 and 100 percent of the FPL, and in the 
remaining 9 states, it is between 101 percent and 200 percent of the 
FPL. (Forthcoming NCCP report).

    The policy challenge is large. It is to reassess our work support 
policies through a lens that integrates a stronger focus on children, 
and to strengthen our child focused policies to have a stronger focus 
on families. Before we lacked the science and the economic analysis to 
justify attention to children before they become costly problems to 
society. But now, we have data that says we can reduce the societal 
costs of child poverty across generations if we are smarter about 
making different kinds of up front investments in our public policies.
    I very much appreciate this opportunity to testify before you and 
NCCP would be happy to work with the Committee staff to provide any 
additional information that might be useful.

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kindergartners (Living at the Edge, No. 3). New York, NY: National 
Center for Children in Poverty, Columbia University Mailman School of 
Public Health.
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for investing in young children (Invest in Kids Working Group Working 
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Children in Poverty, Columbia University Mailman School of Public 
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high-risk children and their mothers. Applied Developmental Science, 
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tells policymakers about strategies to promote social and emotional 
school readiness among three- and four-year-old children. New York, NY: 
National Center for Children in Poverty, Columbia University Mailman 
School of Public Health.
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Age 21 cost-benefit analysis of the Title I Chicago child-parent 
centers (Discussion Paper No. 1245-02). University of Wisconsin-
Madison, Institute for Research on Poverty, Table 5A.
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through age 40: Summary, conclusions, and frequently asked questions. 
Ypsilanti, MI: High/Scope Press.
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science of early childhood development. Washington, DC: National 
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    Chairman RANGEL. Let me thank the panel. None of you have 
any differences about the negative impact that poverty has on 
our society. I hope that you would help us by reaching out to 
your colleagues suggest to us what kind of programs you think 
should be given priority.
    When we created the Empowerment Zones, as some of you know, 
we asked the communities to get together with local and State 
governments and the private sector to come up with a plan; and 
at this point, those discussions should include social agencies 
when they ask what they would do in their community to deal 
with this problem? What impact they think this would have in 
their community?
    It is unfortunate that poor people don't carry the type of 
stigma of emergency and national security and those things as 
others do. Hurricane Katrina is a classic example of this. We 
are now dealing with this from an economic viewpoint, a 
national security viewpoint. Certainly, we are concerned that 
poverty and its continuation could have a negative impact on 
the strong economic growth we will need if we are going to try 
ever to get our great Nation out of debt.
    Mr. Jones, we hear a lot about the great economic recovery 
we are going through now, and that one would believe that 
unemployment is down to 4.5. Your report indicates it is over 
40 percent. Could you share with us the reason why we have this 
disparity in the reports?
    Dr. JONES. Well, I don't think this is new news, certainly 
to the people on this panel, that basically unemployment looks 
at people who are actively seeking work. What we have in New 
York and I think we have in other urban areas is a number of 
different cohorts of people who are not in the workforce for a 
variety of reasons.
    We are just finishing another examination of--actually, a 
qualitative examination of why people are out of work, and we 
are starting to get a very wide range of reports back.
    One of them that was a shock is, there are a lot of people 
who are out of work, particularly the African-American men, who 
are reporting health-related problems. They are guys my age who 
basically start to have--who did heavy labor and have never 
been out of work, basically they never had a lot of skills and 
suddenly they run into a problem of having a bad back. So, you 
have this whole cohort of particularly African-Americans with 
limited skills, men who can't participate in the workforce 
because they don't have skills to do anything but heavy labor 
and no employer in New York can bear the health care costs of 
taking an employee who has those. That is one.
    The other is we have an enormous problem of dropouts in the 
city of New York. About--more than 50 percent of young people 
never graduated, less than 10 percent of African and Latino 
males ever get a Regents degree, which is sort of the lowest 
level you need to really go on, and many of them just can't 
compete in the low-wage workforce. They are trying, which is 
interesting--we hear again and again, these people--these young 
people are not trying to sit around; they just can't find a 
door open.
    Another cohort has to be admitted, which is the problem 
of--under the Rockefeller drug laws in New York, a lot of young 
people made mistakes early on, and in New York particularly for 
black and Latino young men, once that happens, you are 
basically never going to work again.
    I was somewhat hopeful that if we took work as the solution 
for welfare reform, we would certainly want to beat up our 
former prisoners, but that doesn't seem to be the way it is 
going; and they are not working, they are becoming a real drain 
and damage to the communities they are in. Those are just some 
of the things.
    This is a complex issue, but that 40 percent is reality. 
The 4.5 percent is basically people actively trying to get work 
and doing it the right way, but we have a real problem in New 
York, and we think it is a real urban problem at the very 
    Chairman RANGEL. I am working with the Conference of 
Mayors, and they will be compiling the cost to the cities for 
that 40 or 50 percent that we are talking about.
    Dr. Haskins, what number did you use in terms of the moneys 
that we are now expending for the poor, that you said has to be 
considered when we talk about reducing poverty? What was that 
    Dr. HASKINS. According to the CRS, State and Federal 
dollars on programs that are means tested, it is over $600 
billion. It was $583 billion in 2004.
    Chairman RANGEL. Now, it is my understanding that that 
reflects the inflated medical costs, at least half of it does.
    Dr. HASKINS. I don't think it is quite half, but it is 
substantial, and that is the biggest increase.
    Chairman RANGEL. Okay. I would like----
    Dr. HASKINS. There are many other areas as well.
    Chairman RANGEL. You have spent your life in this thing, 
and after marriage and health care, you must have some ideas on 
what it takes to stop poverty at some stage. Maybe it is before 
the kid gets to kindergarten; maybe it is at that stage that 
something is done.
    You are right, it is complex, and it takes into 
consideration a lot of other issues besides throwing money at 
the problem. We need you at the table, as well as economists, 
to find out what return we are going to get on our investment, 
because quite frankly, if we can just give money to the poor to 
keep them from having crime and going to the hospital and 
imposing a large cost on the economy, that is the way to handle 
    If, however, our job is to make certain that we are saving 
some money and get productive people into the labor force as we 
move into a global market, then we have to look at the problem 
in terms of what this Committee would want to do. We must 
determine what can we do to work together to resolve this 
problem and make certain that we never run away from the 
individual responsibility, or the community's responsibility, 
to say one size doesn't fit all, and to not expect the Federal 
Government alone to bring a solution to the problem, but 
instead to be a part of that solution.
    So, I wish all of you in some way would share with us what 
you would do, because someone had suggested earlier asking the 
mayors if they assumed this was their responsibility. Mayor 
Bloomberg is going out of his way to see what role can the 
private sector play with these kids that obviously are not 
going to succeed in the public school system as we know it. 
These institutions are not job preparation facilities. They 
prepare students to get into universities, and if they don't 
make it, there is no door left to the kids in the street as it 
relates to getting back on board into the education system or 
labor force.
    In other words, unlike me as a high school dropout, I had a 
second chance through the GI Bill (P.L. 346, Chapter 268). 
There are no second chances out there for these kids, and it 
would seem to me that if we can find some way where they don't 
need a second chance and get it done the first time--it may be, 
in my opinion, that the private sector that knows how to go 
into developing countries and doesn't ask for degrees and 
General Equivalency Diplomas, but just is able to know what 
they need in order to be successful; that as the mayor got 
together with the developers in the city of New York and the 
unions, it turns out that with the baby boomers retiring and 
with the Irish and Italians who have had locks on the jobs, 
their kids going to school, it turns out there is a labor 
shortage in the construction trades. So, it came at the right 
    I would like to believe that the Verizons and the cable 
companies have ways to develop high wage producing occupations 
if we can initially help these kids get into these jobs.
    So, I want to thank all of you and hope that you do send 
some papers in to me. Don't be surprised if in a more informal 
setting we ask you to come to develop something, always 
remembering that the major problem that we are going to face in 
this Congress is, we have to be fiscally responsible, and at 
the same time make certain that we stop things from 
hemorrhaging so that it causes more damage in the future than 
if we did make the investments now.
    You have been a terrific panel. I would like to yield to 
Mr. Stark--I am sorry, Mr. McCrery.
    Mr. MCCRERY. Thank you, Mr. Chairman.
    Dr. Haskins, let's explore for just a minute this question 
of current Federal and State programs designed to assist poor 
families and poor individuals. You use the figure of $600 
billion a year right now that State and Federal Governments are 
spending on income-related programs. Mr. Stark pointed out that 
over half of that is medical care, and that is correct, a 
little over half of that figure is medical care, whether it is 
Medicare, Medicaid or charity hospitals or whatever it might 
    Then the second-highest category is cash which--there are a 
number of ways that we give cash to low-income people, whether 
it is the earned income credit or direct cash payments under 
Social Security Insurance or other programs, or welfare; and 
then the next highest is food and then housing.
    Well, I think we have just ticked off the main elements of 
being poor. How do you define being poor? Well, if you don't 
have a roof over your head, if you don't have housing, if you 
don't have food on your table, if you don't have access to 
health care, you are poor. So, the money that Mr. Stark talked 
about is important. That is an important expenditure for the 
poor, just as is housing, just as is food and, yes, cash. The 
total of all that is about $600 billion this year that the 
Federal and State governments are spending, no small sum. I 
think most people in this country would be surprised to learn 
that we are spending that much on income-related programs.
    Now let's talk about some of the things that you mentioned 
as being most important, Dr. Haskins, in reducing poverty. 
Could you review the progress that has been made in reducing 
poverty since the 1996 Welfare Reform Act?
    Dr. HASKINS. Yes. I think the key to understanding it is 
that most of the progress was made among female-headed 
families, which is where the probability of being poor is four 
or five times as high as in a married-couple family. So, if the 
Nation is going to make progress against poverty, that is a 
very good place to focus and that is what we did.
    The Census Bureau data shows absolutely clearly that these 
mothers, and I say maybe an increase of 2 million left welfare 
and got jobs, mostly in the low-wage economy; their average was 
about $7.50 or $8 an hour. If you look at the Census Bureau 
data, you can see every year between 1993 and 2000 their earned 
income from welfare, defined as housing, food stamps and cash, 
decline, and every year their earnings and EITC increased; and 
if you put them together, they were better off by about 25 
percent. As a result of that, of course, the kids, fewer of the 
kids were poor. Their mothers worked and took their kids out of 
    So, child poverty had a sustained 7-year decline, again 
based primarily on earnings, not on government benefits, and in 
fact, the biggest benefit, EITC, doesn't even enter into these 
calculations because of our rules, the way we compute poverty. 
Child poverty declined, poverty in female-headed families 
reached by far its lowest level ever, and black child poverty 
reach its lowest level ever. Even after 4 consecutive years of 
increase from 2000 to 2004, because of the recession, child 
poverty is still 25 percent below where it was in 1993 when the 
decline started.
    Mr. MCCRERY. Are there still many families on welfare in 
this country where one or both parents don't work?
    Dr. HASKINS. Yes. Mostly it is one parent. The States 
reported to Department of Health and Human Services (HHS)--the 
States kind of dispute this data, but they reported that about 
60 percent of the families who were still getting cash welfare, 
keeping in mind that that is down by over 60 percent, but of 
the ones still remaining, about 60 percent, according to the 
States, did nothing.
    This is completely against the spirit and the letter of the 
bill that we passed in 1996. The deal was, half of them are 
always going to be engaged in work or work preparation, and the 
States didn't do it. That is why I think that this Committee 
and the Congress responded, and HHS wrote a tough regulation 
that is now causing all kinds of difficulty out there.
    Mr. MCCRERY. So, how did Congress respond to that? How did 
Congress respond to that declining number of welfare recipients 
put in the workforce?
    Dr. HASKINS. Congress asked HHS to define the categories, 
who worked, that were laid out but not defined in the 1996 law 
and then to have regulations about how we would actually count 
those various activities--I believe there were 12 of them--and 
that the States would have to report better data. In other 
words, they are tightening it up to make sure that the States 
are actually doing what they promised to do in 1996.
    Of course, there was a big complaint, especially over the 
data reporting requirements; and that is all a big issue right 
now. I think it would be great for this Committee to have 
hearings and look into this in some detail.
    Mr. MCCRERY. Then, Dr. Haskins, we passed the Deficit 
Reduction Act (P.L. 109-171) which put new work requirements 
for the States for their welfare loads; isn't that correct?
    Dr. HASKINS. Well, that is what I was referring to. 
Actually, what the act did was tell HHS to define work, because 
a lot of stuff was being counted as work that wasn't work, and 
then to get better data to make sure the States were actually 
doing it.
    That was the general strategy of the reconciliation bill.
    Mr. MCCRERY. Thank you.
    Chairman RANGEL. Thank you.
    Mr. Stark.
    Mr. STARK. Thank you, Mr. Chairman. I heard testimony from 
Dr. Haskins this morning about increasing the marriage rates to 
the level of 1970, yet in 1970, the poverty rate was 15 
percent, and 6 years earlier immediately before President 
Johnson's Great Society, the poverty rate was 22 percent with a 
marriage rate that is higher than today.
    In the 1990s, the poverty rate decreased and the marriage 
rate did as well. So, it is hard for me to believe that the 
marriage rate alone would have any impact on poverty. It seems 
to me marriage promotion is simply something that works in 
theory, such as when academics randomly match single men and 
women in virtual marriages, sort of like playing grand theft 
auto on the Brookings' computers. I think it is interesting but 
it is right up there with abstinence training and a bunch of 
these wacky issues that don't mean much in the modern 
    I would like to ask Dr. Knitzer if she could expand in her 
testimony on the importance of early childhood education, on 
children's health care and the problems created by the 
Temporary Assistance for Needy Families program (TANF), when 
people actually may increase their income some and then lose 
vital assistance, which makes them actually more poor than when 
they started. I think that is something that bears pointing out 
to the Committee.
    Dr. KNITZER. I think that it is really important to think 
about two different types of challenges that we face through 
the children's lens. One is, there are a lot of families who 
just need either higher wages or benefits that don't disappear 
as they start to earn more money and need stable income. We 
also know that instability of income, volatile incomes, is not 
particularly good for outcomes for children.
    On the income side, there was a very interesting 
experiment, by chance, on a reservation in North Carolina. They 
had been tracking the mental health of children there, and that 
is when the casinos came in, and many of the families had an 
increase in money because of that, and the mental health issues 
and the school performance of the children improved. That was 
just a natural experiment; that was because of increased money.
    So, we have to really pay attention to what money can do.
    The second, I think, really powerful set of learnings--and 
this is about the earliest relationships; and, for example, in 
those 60 percent of TANF families who aren't working, we have 
to take a look at those women. Many of those women have been 
traumatized. They experienced major depression, substance 
abuse, domestic violence. Unless we help them deal with those 
things both as adults and as parents, they are not going to be 
on a successful pathway to work; and I think that we know that 
both the health of the adults and the children in poverty is 
significantly worse.
    The other thing that is striking, when you compare the 
health access of poor children to more affluent children, is 
that they don't have as good preventive care and their parents 
don't get as much developmental guidance.
    So, we also know that it takes not just early education but 
health, social emotional competence, all domains of 
development, physical skills, to produce a healthy child. The 
early learning, there have been remarkable strides in starting 
at 4, but as I said, for the poorest families, 4 is too late.
    We have to focus on the relationships.
    Mr. STARK. Thank you very much.
    Thank you, Mr. Chairman.
    Chairman RANGEL. I have talked with the ranking Member, and 
we recognize those that are on the lower tier are not getting a 
chance to question. So, I want you to know, in the future, we 
will try to work out something where we can start off with the 
lower tier and try to compensate for that.
    Meanwhile, because of the difference in the number of 
people that are here, I will be calling on two of the majority 
to one in the minority to try to work that out. Mr. Herger?
    Mr. HERGER. Thank you, Mr. Chairman.
    Dr. Haskins, we had some comments that came up that perhaps 
marriage doesn't matter, and I would like to refer to a study 
from CRS which reported on its Children in Poverty: Profile, 
Trends, and Issues, January 16, 2007, that says, quote, ``In 
2005, the child poverty rate was 17.1 percent, but had family 
composition in 2005 been the same as in 1960, the overall 
adjusted child poverty rate would have been 12.4.''
    So, instead of 17.1, it would have been 12.4. Instead of 
the observed 12.3 million children being counted as poor in 
2005, the number of poor children estimated by this method 
would have been 8.9 million, or 3.4 million fewer than the 
number observed on page 19.
    Also, there is a Heritage study that indicates that nearly 
80 percent of long-term child poverty occurs in broken or 
never-married families, and that each year the Government, as 
you have mentioned, spends several billions of dollars on 
means-tested aid to families with children which--three-fourths 
of this aid flows to single parents and families.
    Dr. Haskins, has there been a trend towards more child-
bearing outside of marriage? Has this changed in recent years? 
Doesn't the significant impact of marriage and child-bearing 
decisions on poverty suggest that there is a large behavior 
component to poverty in the United States?
    Dr. HASKINS. Yes. We have about one out of four American 
children at any given moment living in a single-parent family. 
Their poverty rates are four to five times as high as kids in 
married-couple families, and if it is a non--if it is a single-
parent family created by a nonmarital birth, the probability of 
poverty is even higher.
    Since we passed the legislation in 1996, although the rate 
of increase in nonmarital births has leveled off, if you look 
at the graph, it clearly levels off, but it is still 
increasing. So, it is increasing at a much lower rate. I would 
call that progress; you have to slow it down before you can 
turn it around, and this plays a huge role in poverty, yes.
    I would like to say your question bears a relationship with 
Mr. Stark's question. I would like to first say that marriage 
is not a wacky idea, as most members of this Committee, I 
think, would recognize from their own personal lives, but 
secondly this analysis that we did at the Brookings Institution 
is exactly like the analysis you cited from the Congressional 
Research Service (CRS). By the way, our estimate was that 
marriage rates from 1980, if they prevailed today, or actually 
2002, would reduce poverty 27 percent--their estimate was 28 
    Dr. HASKINS. There are a number of other academic studies 
by scholars all over the country, certainly not conservative 
scholars, who come up roughly the same as us. There is no doubt 
that if we did nothing else except increase marriage rates, 
poverty would drop, and it would drop substantially. There is 
no doubt.
    Mr. HERGER. Well, would you conclude from that that we 
should, as a Congress, be--at least be taking, attempting to do 
what we can to increase this, increase marriage? What steps 
have been taken in recent years, starting with the 1996 welfare 
reform law, to strengthen families and promote more marriages?
    Dr. HASKINS. There were several provisions--I count about 
10 or 11--that were directed especially at nonmarital births, 
such as causing young ladies who have babies outside marriage 
to live at home and to go to school. Otherwise, they would not 
qualify for welfare benefits.
    There was a huge debate about other provisions like the 
family cap and not giving cash to moms under 18 that was 
eventually removed on the Senate floor. There were a number of 
other provisions in the bill as well.
    Marriage was one of the goals, and the States were free to 
spend on marriage. Frankly, there was nothing mandatory in the 
bill to increase marriage rates per se.
    Some States have undertaken activities. I would say we have 
two or three or four times the number of activities going on at 
the State level, often involving churches and private 
organizations, nonprofit organizations, that attempt to either 
strengthen existing marriages or promote marriage upon young 
couples who have babies but are not married.
    So, there is a lot more going on. They have not been well 
evaluated. We don't know if they are successful, but there 
certainly is a lot more going on now than there was in the 
    I mentioned several things in my testimony that I think we 
should do. The Congress has done things such as reduce the 
marriage penalty, and I think we could do more things like 
that. I think the most important thing is that the 
Administration has paid for large-scale demonstrations to find 
out if you can promote marriage and if that impacts on 
children's development, very much in accord with the report. It 
would be very consistent with the thrust of this report.
    So, there is a lot going on, and we should do more.
    Mr. HERGER. Thank you, Dr. Haskins.
    Chairman RANGEL. Thank you.
    Mr. Levin.
    Mr. LEVIN. Listening to this, I often wonder what we are 
arguing about. Truly. I don't think anybody questions the 
impact of marriage rates on poverty. The question is, is 
Congress or any other Government agency in a position to impact 
the marriage dynamic within our society? Mr. Haskins, you 
yourself say in your testimony that there is only modest 
evidence that the programs have any impact. At the same time, 
we have testimony here--I just read one piece of it--only 
62,000 children are in national Early Head Start programs.
    So, we have some fairly strong evidence that doing things 
like that will have some impact; and, somehow, we get polarized 
and you all on the Republican side start talking about marriage 
programs. Well, we are not----
    Mr. MCCRERY. Will the gentleman yield?
    Mr. LEVIN. Sure.
    Mr. MCCRERY. It wasn't we who brought up terms like 
radical--Mr. Stark is the one who--whacky, ideas like that, Mr. 
Levin. It wasn't us.
    Mr. LEVIN. He wasn't talking about----
    Mr. MCCRERY. He wasn't talking about marriage and impact on 
poverty? I believe he was.
    Mr. LEVIN. He was talking about programs of the Federal 
Government that attempt to impact on the rate of marriage. I 
heard--look, we have talked about this. We are good friends. I 
heard your opening remarks with the emphasis in those opening 
remarks, and I don't understand why we fall into this kind of 
polarization. I don't understand it.
    Dr. Haskins, you and I have talked about this, and we 
talked about welfare reform. Look, we have a shortage of data 
as to what has happened to people who have left welfare, who 
have gone to work and how many of them remain in poverty. We 
don't really know this.
    We know that a substantial number of them are working in 
minimum wage and, therefore, are likely to be still in poverty, 
which doesn't mean that it isn't wise for them to move from 
welfare to work.
    Then we get into arguments as to whether we should raise 
the minimum wage so that people who have moved from welfare to 
work, by working, work their way out of poverty; and we get 
into arguments about whether we should provide them training so 
they can move up the economic ladder.
    So, we can just fall into this pit of polarized talk, if 
you want, but we are not challenging the economic benefits in 
terms of the poverty rate for those who are married and those 
who are not.
    So, let me just ask the panel, do you want to comment on 
this discussion? Anybody want to say a word? Dr. Holzer and 
then Dr. Nilsen? Briefly, because there is just a minute left.
    Dr. HOLZER. I think the issue of wage levels is very 
important and has not been mentioned in this panel before you 
raised it. The average wages of less-skilled workers in our 
economy for the last 30 years, adjusting for inflation, have 
been declining for men with a high school diploma. They have 
been declining even more for men without a high school diploma. 
So, lots of people grew up--lots of children grow up in 
families with one or two parents with even a full-time worker 
and they are still in poverty because the wages their parents 
earn are not sufficient to get them out of poverty.
    Even marriage--we focus on marriage, and those of us who 
agree that marriage certainly matters for the poverty rate--I 
don't understand. It is very hard to raise marriage rates 
dramatically without improving the marriageability of a lot of 
these young people, especially the young men. Their 
attractiveness as marriage partners is going to be very low if 
their earnings are going to be very low.
    In fact, a lot of these young people, especially the ones 
that David Jones described, very early in life they looked down 
the road and they see a lack of opportunity for earning of 
higher wage; and their incentives to take school seriously and 
to take the labor market seriously and stay out of trouble, 
those incentives diminish.
    As we talk about all these issues, as we talk about 
marriage and schooling, I think it is very important to keep in 
mind what is going to improve the ability of these young people 
to earn higher wages, to see those higher wage opportunities. 
How can we link not only skill-building opportunities but link 
those skills to jobs that actually exist in the labor market 
that pay above poverty level wages and maybe how can we even 
improve the number of jobs in different sectors of the economy 
that give young people this opportunity.
    Mr. LEVIN. Thank you.
    Dr. KNITZER. To shift the frame for a minute, we know that 
it takes twice the poverty level for a family to provide basic 
necessities to their child so they can thrive. So, if we want 
to shift and say what does it take for the next generation to 
thrive, that is what we should be aiming.
    If you are talking about a family with two parents, it 
takes $19 an hour if one parent is working and two parents at 
$10 an hour to get to that $40,000 level. So, we have to really 
be quite concrete about with we are talking about.
    That is two comments on the economic side.
    The other thing I want to say----
    Chairman RANGEL. The gentleman's time has expired, and we 
have so many people who have to be heard. Thank you so much.
    Dr. McDermott.
    Mr. MCDERMOTT. Thank you, Mr. Chairman.
    The great hope and promise of the United States is 
certainly the American dream; and everybody in this room, 
practically speaking, has been a beneficiary of it. We know 
that millions of people haven't.
    I commend the Chairman for bringing this issue up right 
after the State of the Union message. It is an issue that we 
will deal with in the Income Security and Family Support 
Subcommittee and hope that, with the Chairman's support, we can 
go some distance with it, because it is an issue that faces 
this country.
    I have been talking with Mr. Weller about trying to find 
the common good, because poverty isn't Democrat or Republican. 
It is people. Whether you are talking about food or clothing or 
shelter or sense of personal security, that is not a political 
party issue.
    We basically need to begin to deal with this. There are 
really three fundamental questions we have to ask.
    One is, does work provide the opportunity and mobility that 
we expect? Dr. Haskins talks about we got everybody off welfare 
and now they are working. Well, are they getting out of 
    The second one is, do we have adequate access to job 
training to succeed in this globalized economy?
    Finally, can we provide an adequate lifeline to people when 
they fall out of the workforce in order to bring them back in?
    Now I would like to start with the issue that we just heard 
about. We know real wages have declined, despite the economic 
expansion. The President's talk last night--witnesses said here 
today the first time in the history that poverty grew for four 
straight years during an economic recovery.
    Now the first slide shows that these are the people--these 
are the children in families where somebody is working, and 
they are still in poverty. That largest section up there, if 
you look at it, that section right there, is the section of 
people whose parents--one-third of the parents are working full 
time. The kids are in poverty. The other third up there is 
people whose parents are working part-time, and then you have 
the third who are the slackers. They are not doing anything. 
They are just sitting around, can't get into the workforce.
    So, that is where these poverty--these kids that are living 
in poverty are from.
    The second thing is that we know that education has a 
tremendous impact on personal income. Forty-seven percent of 
the kids living in poverty have a parent that didn't finish 
high school. There is a direct correlation between levels of 
education and how you do, and we know that that also has to do 
with kids' health care. If the parents have education, they 
also know more about health care and take care of their kids so 
they go to school healthy and well-fed and so forth.
    The third slide we have measures ourselves against the rest 
of the world. Now this is the slide that shows you how much we 
spend on programs for poverty, and you will see the United 
States is right down here. We spend practically nothing. Only 
Mexico spends less per capita on the poverty section of our 
society. It again directly correlates the lowest rates of 
poverty are in the countries that spend the most money--Sweden, 
Norway, Netherlands--and then you get to the United States way 
out here with Mexico.
    My question is to--Dr. Haskins said we don't need more 
money, so there is no sense in asking him, but if we could end 
the Iraq war 1 month early and had $8 billion, where would the 
members here put it? What would be your priority for spending 
$8 billion in the present circumstance? You could start, Dr. 
Holzer, Mr. Jones, and Ms. Knitzer and then go back to----
    Dr. HOLZER. One comment on the spending, I think you are 
right, that I think the right way to think about how much we 
    Chairman RANGEL. Let me say, we won't have time for a lot 
of comments, because the gentleman has 26 seconds left, but we 
are going to yield to your expertise but please take into 
consideration the time restrictions we have. Thank you.
    Dr. HOLZER. I will say simply then, directly in response to 
your question, I would spend a good chunk of that money on 
education, not just pre-K but K through 12, high-quality career 
and technical education, apprenticeship programs linking young 
people to good jobs, as well as things like expansion of the 
EITC to folks that have low earnings capacity.
    Dr. JONES. I clearly join Dr. Holzer, but I would also talk 
about the disconnected youth. I think this is a national 
problem. If you are talking about marriage problems and why 
young men aren't marriageable, if they are not working, not in 
school, we have to find intense programs to start to move them 
into some kind of work readiness and income production.
    Mr. MCDERMOTT. Dr. Knitzer? Dr. Haskins doesn't want to 
spend money.
    Dr. KNITZER. I would focus part of it on Early Head Start 
and part of it on health, in addition to what we just said, but 
Early Head Start because it helps parents and children build 
new kinds of relationships, including dads, that leads to other 
good things, including marriage.
    Mr. NILSEN. I just want to say, I agree with the comments 
here, dividing the money up between those which will have more 
immediate impacts like skilled training and those investments 
that will have a longer term payoff like investing in the 
health care of children.
    Mr. MCDERMOTT. Thank you.
    Chairman RANGEL. Mr. Haskins.
    Dr. HASKINS. I would spend several billion of it doing 
large-scale experiments that would provide an EITC-like wage 
mechanism that would apply especially to men so you wouldn't 
have to have a dependent child. I think you boost the men's 
reward for work, and it would have exactly the same effect that 
it had for women.
    Mr. CAMP. Thank you, Mr. Chairman. Thank you for having 
this hearing.
    I would note that the last slide that my colleague showed 
was really the spending of the percent of GDP, and the United 
States has a very large GDP, so the percentage of spending is 
actually quite large in terms of poverty.
    My question is really based on trying to get the accurate 
information; and the question I have is, Dr. Haskins, what kind 
of income and benefits get counted or get excluded in 
determining official poverty rates?
    Dr. HASKINS. Primarily two categories, anything that is in 
kind, such as housing and food stamps, that is 60 or so 
billion, and anything through the Tax Code. So, that includes 
EITC and the child tax credit. So, it is well over $100 
    Mr. CAMP. So, these items are not counted as benefits to 
individuals when calculating poverty rates, even though they 
are taxpayer-provided benefits?
    Dr. HASKINS. Correct.
    I would point out to you, Mr. Camp, that the Census Bureau 
was well aware of this and they developed several alternative 
definitions of poverty which are really spectacular. If you 
look at those definitions, you will see that the actual poverty 
rate is often 10 percentage points--not percent--percentage 
points lower, which is about 50 percent if you include all 
these other benefits.
    Mr. CAMP. So, the, quote, unquote, official poverty rate is 
at what level?
    Dr. HASKINS. Right now, the overall rate is something like 
13 percent or 17 point something.
    Mr. CAMP. You are saying that the U.S. Census Bureau's 
research says that if taxpayer-funded benefits were counted in 
determining the poverty rate, what level would it be at?
    Dr. HASKINS. Not just for children, but the overall poverty 
rate would be about 50 percent lower. For children, it would be 
not quite that much.
    Mr. CAMP. So, it would be significantly lower than the 
statistics we are given in this Committee?
    Dr. HASKINS. Right, the official poverty rate. Correct.
    Mr. CAMP. Well, then if Congress followed through on Dr. 
Holzer's recommendation, I would agree it is a very worthy 
study to increase EITC. That would have no effect on the 
poverty rate, since it is not counted anyway.
    Dr. HASKINS. Which is precisely why the Census Bureau does 
these alternative measures although I do think it would have 
some effect. You know why? The same reason I think we ought to 
have an EITC for males, is their work ethic would increase and 
their earnings would count. So, there would be some effect but 
much less than you would have if you counted the whole thing.
    Mr. CAMP. Well, I appreciated your testimony and the figure 
you had about showing the comparison between poverty rates and 
actually the government policy we have--we had and the fact 
that requiring work and having work-related or work-contingent 
benefits has actually dramatically reduced the poverty rates 
between '90 and '99. I think that was a very helpful approach.
    So, Dr. Knitzer, I realize you said money matters, and it 
sounds as though money does matter, but the way the money is 
spent matters more, and that when there are work-related 
benefits and a work requirement, do you agree with the data 
that shows that poverty rates declined between '90 and '99, 
children particularly?
    Dr. KNITZER. What I meant was that having resources matters 
for child development outcomes. Having families having 
resources matters. There are clearly problems with poverty 
measures. They undercount benefits. They undercount taxes. 
There are lots of problems with that, and we are all aware of 
that. That is why we talk about twice the poverty level, 
because that is what research shows is necessary for a child to 
    Mr. CAMP. Thank you.
    Dr. Haskins, it seems as if we are trying to make important 
policy in this area that we would need the most accurate 
information before us. Why do we have one arm of the 
Government, the Census Bureau, saying we need to include these 
benefits yet the, quote, official rate does not? Is there any 
explanation for that?
    Dr. HASKINS. I think I can give you a political answer. 
There are billions of dollars of government benefits that are 
dependent on the official poverty rate. If we change the 
official poverty rate, it would have disproportionate impacts 
on less politically powerful States.
    Everybody on this Committee is well aware of what happens 
when Congress gets into a formula fight about how the money is 
going to be distributed. I really think that is the primary 
    Mr. CAMP. Thank you.
    Thank you very much, Mr. Chairman.
    Chairman RANGEL. When was the last we updated the 
definition of poverty as you and Mr. Camp described it?
    Dr. HASKINS. I must have missed your first word. There is a 
question there?
    Chairman RANGEL. Yes. When? When was the last time the 
definition of poverty was updated as you and Mr. Camp discussed 
    Dr. HASKINS. I would not use the word ``updated.'' The 
Census Bureau has something like 12 or 13 years ago heard all 
these criticisms. In fact, the National Academy wrote a 500-
page book about all the problems and recommendations about 
poverty. What they did----
    Chairman RANGEL. Let me frame the question this way: The 
definition that you gave of what poverty is today, when was 
that created? When was that defined as poverty?
    The reason I ask the question is because it was created 
sometime in the '90s and I assume--'60s, rather--that there has 
been a lot of changes since then. If that is so, we hope you 
will help us in trying to get a definition that would be more 
appropriate as we deal with the lives and the communities and 
the economy of our great Nation.
    Dr. HASKINS. The official poverty rate was developed, I 
believe, 1965. Since then, the Census Bureau, because of all 
these problems, has developed the alternative measures. 
Primarily, I believe they started that in the '80s, and some of 
their data series go back to the '80s. So, you can see the 
poverty rate by a lot of different definitions.
    Chairman RANGEL. Yes, but you professionals should not 
accept that, and the Congress should not have you dealing with 
different definitions. We all are trying to find out the best 
data we have available, and we are going to help you to get it.
    Dr. HASKINS. Mr. Rangel, I would agree to join you to 
change the definition of poverty, but, honestly, I don't think 
it will pass the Congress, because it will have a huge impact 
on how money is distributed among the States.
    Chairman RANGEL. Well, then if we can't do it, then we 
can't use poverty as a definition, now can we? We are not 
talking the same language. Everyone will use the figures most 
favorable to whatever their point is.
    Dr. HASKINS. People always cherry-pick their data. That is 
nothing new.
    Chairman RANGEL. All right. We will try to get away from 
    Mr. CAMP. Mr. Chairman, I have the Census Report 2004 that 
calculates poverty in different ways. It might be helpful. I 
would like to have unanimous consent to place that in the 
    Chairman RANGEL. Without objection.
    Mr. CAMP. Thank you.
    [The information follows:]
























    Chairman RANGEL. Mr. Neal is not here. Mr. Lewis is here, 
Mr. McNulty, then Mr. Becerra.
    I called his name first, Mr. Lewis, and then----
    Mr. LEWIS OF GEORGIA. Thank you very much, Mr. Chairman.
    Let me thank members of the panel for being here this 
    We are about a year and a half out from Katrina. I would 
like to know--I don't think the President of the United States 
last night in the State of the Union mentioned Katrina at all. 
When you saw hundreds and thousands of Americans struggling to 
survive in New Orleans a year and a half ago, what came to your 
mind? Was it race or poverty? What happened in New Orleans, 
could it have happened in any other American city? Could it 
happen in New York or Boston or someplace else?
    Dr. JONES. I think for us in New York there is no question. 
We knew that a catastrophe of this sort in New York would lead 
to very much the same thing. People were asking why people were 
carrying things on their back out of their homes. There is no--
when we survey people of how much income reserves they have in 
their whole household, most of them report they have less than 
$100 in total reserve. Their furniture is it. So, I didn't see 
the outcome being much different for--at least as I looked 
through New York and some of its neighborhoods. There is no 
cash in these neighborhoods. There are no reserves. Any kind of 
disaster like that will wipe people out immediately. There is 
no backstop.
    Mr. LEWIS OF GEORGIA. Other members of the panel?
    Dr. KNITZER. Yes. I think it really focuses on the 
importance of the development of assets and individual 
development accounts and children's development accounts and 
building up the reserves of some of these families.
    These are families, even at the low-income level, twice the 
poverty level, who are one or two crises away from this. When 
you don't have any public transportation, as New Orleans didn't 
and the South didn't, it is very difficult for these families 
to survive.
    Mr. LEWIS OF GEORGIA. Other members?
    Dr. HOLZER. Even before Katrina, poverty rates in New 
Orleans were very high, employment levels were low. A lot of 
the issues, a lot of the costs that we have been talking about 
were there. It just means that those families were so much more 
vulnerable when the disaster occurs.
    I think it also indicates that even in many cities around 
the country predisaster they need to increase the employment 
levels; and once we include some employment and earnings and 
skills, presumably assets would rise and people would be less 
vulnerable to these potential catastrophes.
    Mr. LEWIS OF GEORGIA. Other members of the panel would like 
to comment?
    Mr. Jones, let me just ask you, does the unbelievable 
economic condition of many African American males in our large 
urban centers and maybe in rural areas prompt them not readily 
to get married because they cannot support a family?
    Dr. JONES. Again, I am more of a practitioner than a 
    Mr. LEWIS OF GEORGIA. People get married, I believe, 
because they fall in love and they get married. I am not so 
sure the Government should be in the business of trying to 
force people to get married if you are not in love.
    Dr. JONES. This is my personal sense. I am very nervous 
about trying to legislate morality. I have worked in the 
corporate sector. I have worked for one of the largest law 
firms in America. I have worked in Government. I see morality 
being about level across groups. It is a little more difficult 
when you don't have any money, but for suddenly us to start 
imposing our value system because people are poor is a little 
insulting, to say the least.
    If you read the history--and we do; I go back 160 years--
this is very similar to the discussion of the Irish in New York 
and the condemnation by the Herald Tribune that they weren't 
quite human because they didn't seem to marry and they drank a 
lot. Don't do this again just because these groups happen to be 
on their uppers and they don't have enough reserves.
    So, I am very concerned more about that 170,000, 200,000 
young men and women who have no jobs, no skills and no 
education who are being pumped into New York and other 
societies and then we start wondering about a lot of single 
parents because there is no incentive to marry someone who is 
not working and not in school.
    So, there--I think there is a lot of stuff here that it 
can't be just dictated here. I would rather focus on the things 
that we can work on, which is getting people skills, education 
and support, rather than getting into their morality.
    Mr. LEWIS OF GEORGIA. Thank you.
    Thank you, Mr. Chairman.
    Chairman RANGEL. Mr. Becerra.
    Mr. BECERRA. Thank you, Mr. Chairman; and thank you all for 
your testimony.
    Let me ask a quick question; and, Mr. Jones, perhaps you 
can answer this best.
    Minimum wage, we are talking about--I am over here----
    Dr. JONES. I am sorry. I am not good--my kids make fun of 
me because I can't track.
    Mr. BECERRA. The minimum wage, $5.15 an hour today, hasn't 
been increased in 10 years. It is by far the lowest it has been 
since the 1960s. What effect would an increase to the modest 
amount of $7.25 an hour by 2008 or '09 have on those 37 million 
people who we say are living in poverty?
    Dr. JONES. This is where it gets a little separate from New 
York. I can say what we have seen as we have moved toward 
minimum wage, it does have a boost, particularly on that 
category of workers--when we have--start looking at security 
guards at 63,000, you started to see inching up of their wage 
rate. It does have an impact.
    What seems to be a very little for us can be the difference 
in terms of someone holding on by their fingertips to some kind 
of rental housing. So, I don't think it is something to be 
dismissed. I think a move toward minimum wage is something that 
we have to, at least coming from what I am trying to serve, we 
    Mr. BECERRA. I am sympathetic to what you are saying, 
because, coming from Los Angeles, where our minimum wage is 
above $7.25 an hour today, obviously, in an urban area that is 
as costly as New York or Los Angeles, you wouldn't be able to 
live on $7.25, let alone $5.15.
    Let me ask another question; and perhaps, Dr. Holzer, you 
can answer this one.
    The President has enacted several tax cut measures since 
2001. My understanding is that, so far, we have seen about $2 
trillion in the tax cuts that have gone out. For the 37 million 
people who are living in poverty that we are talking about and 
the 9 million or so of those 37 million being children, how 
much have they received in those $2 trillion in tax cuts that 
this Congress has enacted for President Bush?
    Dr. HOLZER. I don't know the exact numbers on that. I think 
we do know that 40 to 50 percent of the dollars in tax cuts of 
the top 1 percent of the earnings distribution; there have 
been, also been cuts at the bottom, and there was an expansion 
of the child tax credit that did provide some benefits to low-
income people.
    Mr. BECERRA. That was actually a proposal proposed by the 
Congress, not so much the President.
    Dr. HOLZER. Most of us thought that was a good thing.
    So, there are some pieces of the tax cut I think that are 
more beneficial than others, but a lot of dollars have been 
thrown to the very top end, and I think the unanimity on this 
panel really that there are some investments--no one is talking 
about throwing cash at low-income people. We are talking about 
investments to improve people's skills, improve their 
connections to the labor market and create better incentives 
for work. A good chunk of that money I think could have been 
better spent on the kinds of initiatives that all of us here 
    Mr. BECERRA. Thirty-seven million people in poverty in 
America. That is 13 percent or so percent of our population. Is 
it fair to say that less than 13 percent of the tax cuts went 
to those 37 million people?
    Dr. HOLZER. Yes, I believe so.
    Mr. BECERRA. Let me ask this. In terms of the definition--
and this I will ask Mr. Nilsen--the definition of poverty and 
the discussion that took place with Dr. Haskins, can you tell 
us what your examination of this issue leads you to conclude if 
we were to examine what the National Academy of Sciences said 
about the definition of poverty and what would happen to people 
in their classification as living in poverty if we changed the 
    Mr. NILSEN. Most of the research we looked at used the 
current definition of poverty; and, as Mr. Haskins said, there 
is a lot of controversy over that definition because it was 
developed in 1965 and largely has just been indexed for 
    In the 1990s, the National Academy of Sciences issued a 
report, 1995, that suggested some changes to the measurement of 
poverty, as Mr. Haskins said, add in other benefits as income 
that people get, like the EITC, food stamps and other things.
    The other thing their proposal did was to adjust downward 
for taxes like Social Security that people paid, other costs of 
employment, transportation, child care and other things and 
also index it or change it for the cost of living in various 
geographic areas.
    Mr. BECERRA. What was the net result?
    Mr. NILSEN. The net result of this was raising the 
proportion of the population in poverty. I have some statistics 
from 1998, and I think the latest Census Bureau report from 
2003 shows about the same thing, poverty went up from about 
12.7 percent to about 14 percent.
    Mr. BECERRA. Thank you. I appreciate that.
    Thank you, Mr. Chairman. I yield back.
    Chairman RANGEL. Thank you.
    Mr. Ramstad.
    Mr. RAMSTAD. Thank you, Mr. Chairman; and thank you for 
holding this hearing, Mr. Chairman, on these very compelling 
    I have always thought that one of the most noble objectives 
of the public sector--or the private sector, for that matter--
is to reduce childhood poverty and the corresponding hunger, 
childhood hunger.
    Before I got into public service back in the late 1970s, I 
co-founded a major food bank in Minnesota in the Twin Cities 
and have worked in the food bank network for 27 years, and 
nothing grabs me more than----
    Chairman RANGEL. Gentlemen, the bells indicate that we have 
two votes, which means there will be 20 minutes. We will have 
10 minutes to stay here. Could the members who haven't inquired 
indicate how many are willing to come back after the votes? 
Okay. Could I ask the witnesses after this query to stay for 
another 20 minutes after? I really appreciate that.
    I am sorry to interrupt.
    Mr. RAMSTAD. Not at all, Mr. Chairman.
    Nothing bothers me more than to hear what is commonly 
accepted by the--I think it is the consensus of the studies 
that show at least 3 million children in America go to bed 
hungry every night. So, I appreciate the attention that is 
being brought to this issue, the focus that we are bringing 
here today, and I certainly appreciate the five experts on this 
    I would like to direct the question to you, Dr. Holzer. In 
trying to find a solution, I think we have reduced childhood 
poverty somewhat through welfare reform, and we can debate 
that, but I think the indices of poverty have improved. I want 
to focus on a more narrow issue. In your testimony, Dr. Holzer, 
you mentioned that faith-based initiatives can play a key role 
in reducing childhood poverty in concert with other--other 
factors. Can you elaborate on the types of faith-based 
initiatives that you believe are effective, again in 
combination with other policies, to reduce childhood poverty?
    Dr. HOLZER. Well, I would like to offer a friendly 
amendment to the summary of what you said. I listed faith-based 
initiatives as being one of many options that potentially could 
be useful in this area. I don't think--to my knowledge, I 
haven't seen rigorous evaluation evidence of faith-based 
programs. I think they might potentially work, certainly with 
certain disadvantaged populations like ex-offenders and the 
need to reintegrate them into society, or young people, young 
men at high risk of dropping out or who have already dropped 
out and we are trying to reintegrate them perhaps before they 
become incarcerated.
    I believe there is much potential for faith-based programs 
to provide assistance there as well as many non-faith-based 
programs. There is a role at the table. I would like to see 
those roles evaluated, among many others.
    Mr. RAMSTAD. I haven't studied it in a macro sense, as you 
experts have, but I certainly anecdotally know I can attest to 
what you state.
    Thank you very much for your response and all of you for 
your testimony this morning; and, Mr. Chairman, I would like to 
yield to our ranking Member.
    Mr. MCCRERY. Thank you.
    Mr. Jones, I just want to make it clear that nobody here 
today has talked about the value of marriage as it relates to 
poverty in moral terms. I certainly don't. That is not my point 
at all.
    I am looking at data that has been prepared by you and--not 
you, but Dr. Holzer and others over the years that clearly 
indicate an advantage to two-parent families. You go down--
repeated grades, suspended from school, delinquency, violence, 
therapy and attempted suicide--in every instance, the rate of 
incidents among those from one-parent families as opposed to 
two-parent families is double, or 50 percent higher.
    So, we are just--we would like to work with you and others 
who have experience in the field and try to find ways that we 
could maybe make it more attractive to young men--or to 
couples--to get married. We do that through the tax system, we 
do that through programs, faith-based programs and others. That 
is all I am asking, is work with us here.
    Dr. JONES. I absolutely will, Congressman. I don't disagree 
that I like married couples in my communities. I just want to 
set the preconditions so that is possible. I don't think we 
have a fundamental difference.
    Mr. MCCRERY. No debate. We can't force people to get 
married and shouldn't. If we work together maybe we can find 
ways to make it more attractive.
    Dr. JONES. I am very willing, sir.
    Chairman RANGEL. Mr. Pomeroy.
    Mr. POMEROY. Thank you, Mr. Chairman, for this hearing. It 
has been a topic we haven't talked about, I believe, during the 
entire time I have been on the Committee on Ways and Means as a 
focused matter of the hearing. We heard a lot about, have seen 
a lot of fancy statistics about this economy, but I believe 
that poverty has not come under the focus that you brought, Mr. 
Chairman. I appreciate it.
    My time is very short, so I just ask a single question. The 
President last night indicated that we couldn't address health 
care reform without the Tax Code. I would like to basically 
take up, play off of that and talk to you about poverty and the 
major assault this Congress needs to have against poverty. Is 
that through the Tax Code or is it through funding programs 
that provide assistance?
    My sense is that--and I have supported EITC in the past, 
and I continue to believe strongly in it. I think it is 
somewhat ineffectual, not nearly as effective as direct 
program--as a matter of fact, we have a lot of people in the 
poverty ranks not filing and are not in taxable circumstances 
because of their low income.
    So, as you talk to the Ways and Means, the tax-writing 
Committee, where would you counsel us in terms of an assault on 
poverty--the Tax Code or the appropriations process or both? If 
so, what aspects should we look at in this Committee?
    Thank you.
    Dr. HOLZER. I would differ a little bit with your 
presumption that the EITC hasn't been effective. Remember, the 
EITC is a refundable tax credit, so even with people with no 
Federal tax liability benefits, I think the evidence--I think 
all of us agree the evidence is overwhelming that it has 
improved work incentives and has helped direct income. So, I 
think the EITC, especially on this Committee, ought to be on 
the table and can be expanded in a number of ways.
    Mr. POMEROY. I just want to clarify. I have supported the 
EITC, continued to. It hasn't worked as perfectly as I would 
have liked, the number of people who are eligible who haven't 
claimed credit. That is my only point of reservation with it.
    Dr. HOLZER. I think the take-up rates in low-income 
families are relatively high right now, and a lot of mechanisms 
have been developed. H&R Block going into communities and 
making them more aware of the potential. I think the EITC can 
be a very potent force for improving work incentives for people 
outside the system right now.
    Having said that, there are other programmatic efforts as 
well to help prepare people, pre-K programs that all of us have 
talked positively about, programs in the schools, et cetera, 
that ought to be--I don't know we think it ought to be an 
either/or choice. I think the EITC is a very important 
mechanism. There are others as well.
    Chairman RANGEL. We will recess for 15 minutes.
    Chairman RANGEL. If the Committee will come to order, we 
are going to start with Mr. Blumenauer.
    Unfortunately, there are going to be additional votes; and 
so, if Members do come back, we will be able to hear from them. 
We can start, and we will be here as long as we can, but the 
next recess would have to be an adjournment because of the 
voting records.
    Mr. Blumenauer.
    Mr. BLUMENAUER. Thank you. Thank you, Mr. Chairman; and I 
appreciate your focus on poverty for the Committee.
    I would like to--if I could just pose two questions to the 
panel and seek at some point your feedback. There isn't time to 
hear from you all, for which I apologize, but I would like to 
at least put on the table two concepts.
    One, there is evidence that investment in some of the 
programs that you all have mentioned, we can quantify returns. 
I have heard, for example, early childhood, that the return can 
be up to seven to one or more for each dollar invested. We know 
that there are programs dealing with children's health that are 
remarkably productive.
    What I would hope is that you might reflect for us and 
provide either to the Committee, or at least me, observations 
you have about the capacity we have to capitalize on the 
savings, how we might advance-fund some of the problem, some of 
these issues that relate to poverty.
    I have been struck that when it comes to the physical 
infrastructure that we are very good at capturing value. Tax 
increment financing has helped revitalize communities because 
we know that there is going to be value that is captured and we 
have certified, smart people in the financial community who 
have enough confidence that they can identify, capture and have 
that increment returned.
    Now part of it is how we design bond instruments. People 
are pretty sophisticated about that. There is a moral 
obligation to repay. Certificates of participation are building 
physical infrastructure across the country without really 
having general obligation bonds, for instance. I wonder if you 
could reflect and perhaps provide to me and the Committee areas 
where such early investment might have the greatest potential 
for long-term savings.
    If you have some thoughts about mechanisms that we might 
employ to enforce the fiscal discipline that we have with 
fiscal, with--excuse me, with physical infrastructure, to do it 
with our human infrastructure.
    If at some point you want further elaboration from me, my 
staff or I will be happy to follow up with you. I have had 
these conversations, for example, with Governor Corzine 
thinking that might be really great, somebody with his 
background, Goldman Sachs, Governor of New Jersey now facing 
these issues, that there might be some folks who can help us 
explore this.
    My second question deals with the notion that the poor pay 
more. It is not just putting money in their hands. I was 
struck, Mr. Jones, with your point about the security guards, 
people who are gainfully employed, but they are working for $7, 
$8, $9 an hour. They can't afford health insurance. Yet in New 
York I would venture to say they are probably the only people 
who are paying full retail if they have got an appendectomy, 
that people with health insurance pay less--not just because 
the insurance pays it, but the rate that is charged for the 
operation is a fraction of what this poor person or this 
working poor person pays.
    The reference of the EITC, I agree, terrific boon for the 
working poor and near poor, but we have people who have abused 
the poor in terms of how that is exploited, and they pay more 
of a percentage of their income for very simple returns than 
people with complex returns who are very wealthy.
    I could go on. There are studies that show the poor pay 
more for a gallon of milk; they pay more on a capital basis for 
inferior housing.
    I would love to have your guidance in some feedback for 
policy changes we could consider to deal with the phenomena 
that the poor and 100 million who are struggling for the middle 
class actually end up paying more for transportation, for 
housing, for health care, for mortgages, they get steered to 
sub-prime lending, that you might help us think about ways with 
no new subsidy we could help the poor and near poor squeeze 
more out of their investment.
    Mr. Chairman, I appreciate your indulgence, but these are 
two areas that I would love to work on with you and the 
Committee that would actually help them get more without 
spending more tax dollars.
    Chairman RANGEL. Very well-framed questions. I hope that 
the panel would share their responses with you, with the 
ranking Member and me.
    We have a 15-minute vote, and so what I would like to do is 
to give 2 minutes to the people that have come back--Mr. 
Tiberi, Mr. Davis and Mr. Weller--2 minutes apiece because we 
have to adjourn.
    Mr. Tiberi.
    Mr. TIBERI. Thank you, Mr. Chairman.
    Dr. Holzer, I will be brief. How do you determine or what 
does it mean to grow up poor for the purposes of your report?
    Dr. HOLZER. Different studies define that in different 
ways. What most of us did is we took a variety of studies that 
either looked at an individual point in time, say on crime, if 
you are growing up in a family below the poverty line or in the 
bottom 20 percent of the income distribution, what is the 
greater likelihood that you will engage in criminal activity? 
So, there are some studies that do it that way.
    There are other studies, more on the earnings side, that 
look at, on average, the fraction of years your family spent 
below the poverty line in your childhood years or your average 
family income averaged over many years and whether that income 
averaged below the poverty line or not.
    So, different studies do it in different ways.
    Mr. TIBERI. So, if I--just a quick question. If I grew up 
in a household where I was eligible for the free and reduced 
lunch program in a public school in Columbus, Ohio, would that 
be defined as poor?
    Dr. HOLZER. I don't know the particular details of that 
    Again, most of these studies either used the poverty line 
or the bottom decile or quintile of incomes distribution.
    Mr. TIBERI. Anyone else?
    Dr. HASKINS. Well above poverty, school lunch is well above 
    Chairman RANGEL. Mr. Davis.
    Mr. DAVIS. Thank you, Mr. Chairman.
    Dr. Holzer, I direct this question to you. One of the 
reasons I think we tend to get bogged down in the debate we had 
early in the morning about the impact of culture versus the 
impact of policy is because we tend to presume that a large 
number of people who are poor in this country, that it is a 
fixed identifiable class of people, it is the same people over 
a period of time; and I wonder if that is accurate.
    I am going to ask you a quick question. What percentage of 
people in poverty have been in that condition for more than say 
18 months?
    Dr. HOLZER. I don't know the answer off the top of my head. 
Ron might.
    Dr. HASKINS. I will send you a study. There is one very 
good study based on, roughly speaking, about if you are in 
poverty at a given point about half the people are out within 
18 months.
    Mr. DAVIS. The relevance of that, actually, I think 
undercuts a lot of the points that you were making earlier, Dr. 
Haskins. If we have way too permeable a border between class in 
this country and too many people keep slipping from middle 
class into poverty, it strikes me we need to figure out policy 
that is very targeted toward closing those portals.
    Second point, the data--if I am reading this correctly, 28 
percent of people who have some level of postsecondary 
education or higher end up below the poverty line. I am sure 
some of those people are becoming alcoholics or developing 
mental illness or something such as that, but that is 
presumably a narrow class of people.
    Do any of you want to quickly comment? What does this say 
about our--a very basic thing. We are getting people into 
college, they are dropping out of college, and this is an 
amazing number to me. Any of you want to comment on that?
    Dr. JONES. I can only talk from the New York experience. 
The community college system is really showing an incredible 
attrition rate. People are coming in on the front end; and, 
interestingly enough, it is not necessarily their level of 
educational attainment as they come in. The economics make it 
impossible for them to stay in place.
    That seems to be the big driver. They come in, they try to 
get set, and then they can't sustain it economically.
    Chairman RANGEL. Mr. Weller.
    Mr. WELLER. Thank you, Mr. Chairman; and I commend you for 
conducting this hearing.
    The question you had asked earlier on is, we are looking 
for ideas that work. I would note that welfare reform, which 
was a product of this Committee, a bipartisan effort passed by 
a Republican Congress, signed into law by a Democrat President, 
was a bipartisan product. Dr. Haskins, of course, played a big 
role in that. Today, 1.4 million fewer children are living in 
poverty because of welfare reform. So, clearly, the initiatives 
in that were successful; and I hope we can build on that.
    Earlier, we had a discussion regarding marriage, two-parent 
households and the difference that makes. There is an 
interesting statistic here today about 36.2 percent of all 
households in America are headed by a female-headed household, 
single parent, but they represent 61 percent of all the 
families living in poverty today.
    There was a discussion earlier where one of the panelists 
made the comment that if we encourage marriage as part of our 
policy, we are somehow imposing our moral values on others. I, 
for one, believe it is a good idea to encourage the father of a 
child to take responsibility, because personal responsibility 
is a good thing if we are going to rebuild families and rebuild 
communities and bring children out of poverty.
    Dr. Haskins, what are--the States are innovative 
laboratories. What are some of the ideas out there that appear 
to be working, whether in the District of Columbia or elsewhere 
in the States, where there are initiatives which are actually 
encouraging the father to take responsibility and to provide a 
two-parent household, whether they are living together in holy 
matrimony or just living together so Mom and Dad are in the 
same home providing a loving home for that child and helping to 
lift them out of poverty? What is working out there?
    Dr. HASKINS. Five seconds. Two things that are 
interesting--there are many, many, many, but two interesting 
things. One is that the District of Columbia is establishing 
accounts that if young couples, they can save money and they 
get a match and if they get married and stay married for a 
certain period of time they get to have the match for the 
money. So, it is an inducement. It doesn't force them to do 
anything, but it is an inducement to marry.
    A second thing is that there is definitely a marriage 
penalty, very good research on this now from the cash programs, 
not the EITC but from the cash programs. So, the District was 
about to implement a program that Mayor Williams had worked out 
with Brownback in which the mother would get a year's worth of 
benefits if she got married.
    So, let's say she is getting $3,000 in cash from TANF. If 
she got married normally, she would lose that money. She would 
get a check for $3,000.
    Unfortunately, we are not going to be able to do that, 
because it is going to be cut in the appropriations process. 
That is the kind of thing that the States are looking to do.
    Mr. WELLER. Thank you, Doctor.
    I realize I am limited on time. Thank you, Mr. Chairman.
    Chairman RANGEL. Mr. Meek.
    Mr. MEEK. Thank you, Mr. Chairman.
    I want to thank all of our witnesses for coming before us, 
and I am glad that we are talking about poverty in America.
    We know that we have poverty throughout the world; and to 
be able to move this issue forward, in my opinion, we have a 
great challenge, because to do anything about poverty--we have 
already made the statement as a Congress in a pay-as-you-go 
kind of rule that we have adopted here is to live within our 
means; and if we are going to do something new, how are we 
going to pay for it? Looking at it from that light--and then we 
have this war that is costing quite a bit of money, that is 
kind of getting the benefits of poverty in rural and urban 
America of individuals enlisting to get--to be able to get a 
higher education, to be able to go into the area of providing 
money for their family.
    I am of the belief for those States--as we passed this 
devolution of taxation down to the States and they are having 
to balance their budgets, tuition rates go up. That makes it 
even more difficult for those that are financially challenged 
in our country to be able to make ends meet.
    I just want to hear from a few of you on the panel how you 
believe we can move towards not only discussion but action here 
on Capitol Hill of finding the dollars--where are we going to 
get it from--to be able to resolve some of the issues that we 
are facing?
    One of you mentioned--and I am sorry, opening statements, 
it was like 2 hours ago--mentioned the EITC. How do we continue 
to add on to that and where do we get the money from? That is 
the question. We know we have the super-wealthy getting the big 
breaks right now. What amount of money can be moved from those 
areas to be able to help us with our poverty issues, especially 
in U.S. cities?
    I thought that was a softball.
    Dr. HASKINS. Ignoring political feasibility, there are 
many, many programs that have been shown by evaluations not to 
produce good results. I will mention one right off the bat is 
title 1.
    Now it is under--congressional rules get in the way here, 
because it is not under your jurisdiction, but title 1 is 
billions of dollars every year that--and, I don't know, hundred 
and maybe 200 billion dollars have been spent since it was 
enacted in 1965, and their evaluation after evaluation after 
evaluation, no effects.
    Another program that enjoys very weak political support are 
farm subsidies. Now we spend something like $25 billion a year 
on farm subsidies, and as far as I can tell there are no--very 
few positive effects and lots of negative effects.
    So, the point is, in this era of budget scarcity, we are 
going to have to cut programs in order to invest the money more 
productively; and that is what we should do.
    Dr. HOLZER. I would add also two options. One is to save 
money on other expenditures that Ron emphasizes and there is 
generating more revenue, and allowing the tax breaks at the 
very high end of the income spectrum to expire would generate 
some revenue.
    Dr. HASKINS. I swore on a stack of Bibles I would never say 
    Dr. HOLZER. I am sure.
    Mr. MEEK. I see the red light is on. That is the quickest 5 
minutes. I don't know if we are going by 5 minutes, Mr. 
    Chairman RANGEL. No, 2.
    Mr. MEEK. Oh, 2. I am sorry. I thought it was--okay.
    Chairman RANGEL. We do that for members who had to vote.
    Mr. MEEK. I thought it was because I was on the bottom row 
here. I am just joking.
    Thank you, Mr. Chairman. I am glad that the Chairman said 
we are going to continue this discussion, because this is a 
square table kind of discussion, and we are going to have to 
make some decisions, and we are going to have to have some 
    So--I am sorry, Mr. Nilsen. You wanted to say something?
    We have to have some results, and I am along the lines of 
thinking where can we get the money and make the justification 
to the American people and to the Congress?
    You talk about the political will to be able to change some 
things that are not working, to be able to identify those 
dollars that are already in the pool. I believe it will be much 
more difficult to--maybe in the 109th Congress you could step 
out and borrow money from foreign nations to pay for programs 
here and even put us further into debt. Since we don't have--we 
don't want to do that, we have to find within what is not 
working and do the tweaking that we need to do that is going to 
make the ultimate change in rural and urban America and in 
    This is where the rubber meets the road, and I am excited 
about being here part of this discussion. I am looking forward 
to not only receiving more information from you all, but future 
meetings maybe in a workshop setting that the Chairman has 
already spoken of on a bipartisan basis would be able to help 
us make conclusions to get ourselves out of this situation. As 
long as Iraq is going on, there is going to continue to be a 
major sucking sound, pulling the will or the means to be able 
to carry out a way to work towards some sort of resolution on 
poverty in America.
    Thank you, Mr. Chairman. I yield back.
    Chairman RANGEL. Mr. McCrery.
    Mr. MCCRERY. No more questions. Thank you very much, panel, 
for coming.
    Chairman RANGEL. Well, this is just the beginning. I hope 
that all of you will share with us--and we will contact you--
anything you can think of that will show the economic impact on 
the economy. We have to think differently. This is not a moral 
or spiritual thing. It is for the national security of our 
great country. Since we find the economists know how to do 
things creatively, we are going to have to get everybody on the 
same page, because an emergency is an emergency and we have to 
deal with it.
    I can't thank you enough for the expertise that you brought 
to this. I apologize for the votes on the House floor 
interfering with this hearing, and I would want the record to 
remain open for at least 2 working days for the other members 
to get their statement in the record.
    Please feel free to get in touch with me and the ranking 
Member if you come up with anything that you think that could 
be helpful to us.
    This meeting will stand adjourned.
    [Whereupon, at 12:45 p.m., the hearing was adjourned.]
    [Submissions for the Record follow:]

              Statement of Child Welfare League of America

    The Child Welfare League of America (CWLA), representing public and 
private nonprofit, child-serving member agencies across the country, is 
pleased to submit testimony to the Ways and Means Committee this 
morning. The issue of the economic and social costs of poverty to our 
country is one that deserves a great deal more attention than it has 
received in recent years. The attention of this congressional committee 
and the priority that Chairman Rangel has placed on this issue is 
greatly appreciated and is to be commended. We look forward to working 
with you on this and related issues in the coming months.
    Parents and other caregivers require certain economic resources to 
provide their children with proper nutrition, adequate housing, and 
sufficient health care. Although economic resources provide no 
guarantee of a child's healthy development or well-being, poverty is 
correlated with a wide range of negative outcomes that begin in 
childhood and can forever impact a child's future.\1\ Children raised 
in poverty are likely to experience more risks and have fewer 
protective factors and resources than children living above the poverty 
    \1\ Lieberman Research Worldwide. (1999, April). Assessing public 
opinion and perceptions regarding child abuse in America: Final report. 
Prepared for the Child Welfare League of America, Washington, DC.
    \2\ Parker, S., Greer, S., & Zuckerman, B. (1988). Double jeopardy: 
The impact of poverty on early child development. The Pediatric Clinics 
of North America, 35(6), 1227-1240.
    Many children raised in poverty begin their lives at a disadvantage 
because of inadequate prenatal care, poor maternal nutrition, or birth 
complications. They often also face a wide array of familial and other 
environmental obstacles, including low levels of parental education, 
increased levels of familial stress, poor social support, and limited 
community assistance. Compared with other children, children living in 
poverty are more likely to experience difficulty in school and have a 
higher high school drop-out rate. Poverty during early childhood may be 
more damaging than poverty experienced later in life because much of 
the foundation for learning is built in the early years. Poor children 
score lower on measures of vocabulary, language skills, understanding 
of number concepts, organization, and self-regulation. In addition, 
children living in poverty are more likely to become teen parents, and, 
as adults, earn less and be unemployed more frequently.\3\
    \3\ Ibid.
    CWLA believes that as a country we must confirm our commitment to 
prevent child abuse and neglect and to support children who have been 
abused and neglected. A fundamental building block to reaching this 
goal is to tackle poverty head-on.

    In August 2005, for a brief moment, the Nation's attention was 
focused squarely on the issue of poverty in America. Everyone's eyes 
were glued to their television screens as the levees broke in New 
Orleans, Louisiana, and significant tragedy unfolded. Images of 
individuals and families trapped by floodwaters and testimony of those 
mourning the loss of loved ones, homes, and personal belongings 
destroyed any ideas of poverty as merely an illusion. This attention 
was unfortunately fleeting, however, and the commitments that had been 
made to address the poverty issue quickly faded.
    In fact, if you were living in Washington, DC, on that August 2005 
day, you might have attended a forum hosted by the prestigious 
Brookings Institute that included a panel discussion interpreting the 
meaning of the new census data on poverty. As has been the case in 
other discussions and in other forums over the last several years, much 
of that discussion focused on how we measure poverty and whether or not 
it is as severe as some would argue. We will not continue that debate 
here because, in our view, poverty is severe and the United States is 
not doing enough to combat the issue.
    CWLA sees poverty as a serious matter that impacts individuals 
across the country and shapes the direction we are headed as a nation. 
Poverty touches on our economic preparedness, the effectiveness of our 
schools, the health of our Nation, and--most significantly to CWLA--the 
welfare of our Nation's children.
    In 2005, the national poverty rate stood at 13%.\4\ For children 
under the age of 18, the poverty rate was higher at 18%, which meant 
that approximately 12.8 million of our Nation's children were being 
raised in poverty.\5\ For children under the age of 5, the percentage 
was even higher at 21%.\6\ One out of five children in the critical 
child developmental period of 0 through 5, then, live in poor 
conditions that will certainly affect their chances at future success 
and well-being.
    \4\ U.S. Census Bureau, 2005 American Community Survey. (2005). 
Data profiles: Selected economic characteristics. Retrieved January 23, 
2007, from http://factfinder.census.gov/servlet/ADPTable?_bm=y&-
&-redoLog=false&-format. Washington, DC: Author.
    \5\ Ibid.
    \6\ Ibid.
    According to the CWLA Standards of Excellence for Services for 
Abused or Neglected Children and Their Families, neglect is defined as 
``Failure of parents or other caregivers, for reasons not solely due to 
poverty, to provide the child with needed age-appropriate care, 
including food, clothing, shelter, protection from harm, supervision 
appropriate to the child's development, hygiene, education, and medical 
    In 2004, the most recent data available, an estimated 3 million 
children were reported as abused or neglected and received an 
assessment or screening to determine whether or not there was evidence 
of abuse or neglect. Approximately 872,000 children were substantiated 
as abused or neglected.\7\
    \7\ U.S. Department of Health and Human Services, Administration on 
Children, Youth, and Families. (2006). Child maltreatment 2004 (Table 
2-1). Retrieved January 23, 2007, from www.acf.hhs.gov/programs/cb/
pubs/cm04/index.htm. Washington, DC: U.S. Government Printing.
    Of the 872,000 substantiated cases of abuse or neglect, 62.4% of 
these children experienced neglect, 17.5% were physically abused, 9.7% 
were sexually abused, 7% were psychologically maltreated, and 2.1% were 
medically neglected. Nearly three-quarters (or 72.9%) of child victims 
age 0 to 3 years were neglected--higher than any other age category.\8\
    \8\ U.S. Department of Health and Human Services, Administration on 
Children, Youth, and Families. (2006). Child maltreatment 2004. 
Retrieved January 23, 2007, from www.acf.hhs.gov/programs/cb/pubs/cm04/
index.htm. Washington, DC: U.S. Government Printing.
    In 1996, the U.S. Department of Health and Human Services released 
the Third National Incidence Study (NIS) of Child Abuse and Neglect. 
The NIS is a congressionally mandated, periodic research effort to 
assess the incidence of child abuse and neglect in the United States. 
The fourth study is currently underway. The NIS gathers information 
from multiple sources to estimate the number of children who are abused 
or neglected and to provide information about the nature and severity 
of the maltreatment, the characteristics of the children, perpetrators, 
and families, and the extent of changes in the incidence or 
distribution of child maltreatment since the previous NIS.
    In the 1996 study, a significant correlation was found between the 
incidence of maltreatment and family income. It found that 47% of 
children with demonstrable harm from abuse or neglect and 95.9% of 
endangered children came from families whose income was less than 
$15,000 per year.\9\
    \9\ Sedlack, A. J. & Broadhurst, D. D. (1996). Third national 
incidence study of child abuse and neglect: Final report. Washington, 
DC: U.S. Department of Health and Human Services.
    Children from families with annual incomes below $15,000 as 
compared to children from families with annual incomes above $30,000, 
were over 22 times more likely to experience some form of maltreatment 
that fit the study's harm standard and over 25 times more likely to 
suffer some form of maltreatment as defined by the endangerment 
    \10\ Ibid.
    Children from families in the lowest income bracket were 18 times 
more likely to be sexually abused, almost 56 times more likely to be 
educationally neglected, and over 22 times more likely to be seriously 
injured from maltreatment than children from higher income 
    \11\ Ibid.
    The stress created by living in poverty may play a distinct role in 
child abuse and neglect.\12\ Parents who experience prolonged 
frustration in trying to meet their family's basic needs may be less 
able to cope with even normal childhood behavior problems. Those 
parents who lack social support in times of financial hardship may be 
particularly vulnerable. Parents who are experiencing problems with 
employment are frequently rated by child protective services staff as 
being at moderate to high risk of child maltreatment.\13\
    \12\ Gil, D. G. (1970). Violence against children. Cambridge, MA: 
Harvard University Press.
    \13\ English, D. (1994). Risk assessment: What do we know? Findings 
from three research studies on children reported to child protective 
services. In Center for Advanced Studies in Child Welfare and the 
Center for Urban and Regional Affairs, Children of the shadows--The 
state of children in neglecting families: Conference proceedings. 
Minneapolis, MN: University of Minnesota; National Research Council. 
(1993). Understanding child abuse and neglect. In G. B. Melton & F. D. 
Barry, Protecting children from abuse and neglect: Foundations for a 
new national strategy (pp. 132-134). New York: Guilford Press.
    These findings suggest that we could help alleviate the flow of 
children into other parts of the child welfare system by addressing the 
core issue of poverty. For those children who are in care, the 
challenges and the issue of poverty are no less significant. As of 
September 30, 2004, 509,662 children were in foster care in the United 
States.\14\ Foster care, when it is the most appropriate service for a 
child, should provide a child with protection, care, and nurturance for 
a temporary period of time while services are provided to the child's 
parents in order to deal with the problems that led to placement.
    \14\ Child Welfare League of America. (2006). Special tabulation of 
the Adoption and Foster Care Analysis Reporting System (AFCARS). 
Washington, DC: Author.
    When a child cannot remain in his or her own home, it is critical 
that the child welfare system work to provide that child with 
permanence. All children deserve to be a part of, or have a connection 
with, stability and families that are intended to be permanent. Family 
foster care and foster care services should emphasize safety and the 
well-being of children; recognize that the family is a fundamental 
foundation of child rearing; and acknowledge the importance of a 
comprehensive, child-centered, family-focused, culturally competent 
approach. To fulfill their vital role, then, public child welfare 
agencies need to ensure that children in care are protected and cared 
for and that they receive the services they need. The agency should 
also ensure that the families of the children in care receive services 
directed toward early reunification with their child or, as an 
alternative, another permanency goal.
    To meet these goals, it is clear that families must have the needed 
support to help foster children. According to the National Survey of 
America's Families (NSAF), only 39% of out-of-home care provider 
families have incomes that place them beyond 200% of the poverty level. 
Among all families--in-home, foster, and kinship--those involved with 
the child welfare system are five times more likely to have income at 
only 50% of the poverty level than families in the general 
    \15\ U.S. Department of Health and Human Services, Administration 
on Children, Youth, and Families. (2005). CPS sample component wave 1 
data analysis report. National survey of child and adolescent well-
being. Washington, DC: Author.
    The needs of children in foster care and the support their families 
provide to them is only made more challenging by the fact that less 
than half of the children in care are eligible for federal support. A 
child in foster care is eligible for federal support only if that child 
was removed from a family that would have been eligible for the now 
nonexistent Aid to Families with Dependent Children (AFDC) as it 
existed in July 1996.
    According to 2005 calculations by the Congressional Research 
Service (CRS), this outdated eligibility, which erodes every year, 
means ``that in as many as 25 states, eligibility for the Title IV-E 
foster care program may only be established for children removed from 
families with incomes less than half the Federal poverty level (roughly 
$8,000/year for a family of three).'' \16\
    \16\ Congressional Research Service. (2005). Child welfare 
financing: An issue overview, Congressional Research Service report for 
Congress. Washington, DC: Stoltzfus, Emilie.
    Another significant and growing part of the child welfare system is 
the use of kinship care and kinship settings. By definition, kinship 
care is the full-time care, nurturing, and protection of children by 
relatives, members of their tribes, godparents, stepparents, or any 
adults who have a kinship bond with a child. This definition is 
designed to be inclusive and respectful of cultural values and ties of 
affection. Beyond its formal definition, what kinship care provides is 
an opportunity for a child to grow to adulthood in a familial 
environment. For many children, it is also a lifeline to a safe and 
productive future. It is, therefore, the type of care that we must 
nurture and promote in every way possible.
    Over six million children are living with a relative who serves as 
their caregiver, with approximately four-and-a-half million of these 
being grandparents. According to the last census, nearly two-and-a-half 
million grandparents report that they are primarily responsible for 
their grandchildren. The same census survey reveals that nearly 20% of 
these grandparents live in poverty.\17\
    \17\ S. Census Bureau. (2000). Census 2000 summary file 1: Table 
P28, relationship by household type for population under 18 Years. 
Available from www.factfinder.census.gov. Washington, DC: Author.
    When Congress enacted the Adoption and Safe Families Act (ASFA) in 
1997, it gave formal recognition to kinship placements as a permanency 
option even though that same act did not extend federal funding to 
these placements. The increased urgency that ASFA placed on the goal of 
permanency also influenced the increased use of kinship placements. 
These families are a vital support for millions of children and are a 
key to ensuring the safety and permanency, as well as the nurturing and 
well-being, of these children.
    Although we have seen a decrease in the poverty rates amongst these 
families from the end of the last decade and through 2002, the 
percentage of children in a kinship setting living in poverty is still 
too high. According to an Urban Institute analysis,\18\ the poverty 
rate for children living in public kinship care or kinship care 
provided through the child welfare system is 18%. That is the same as 
the overall child poverty rate for children under 18. For private 
kinship care--those kinship families not coming through the public 
child welfare system--the poverty rate is 31%. When compared to non-kin 
foster parents, kinship families are much more likely to be low income 
(defined as 200% of the poverty level or lower), single, and older. In 
all instances, poverty certainly creates additional burdens and 
challenges for these families who have opened their homes and are 
providing a vital service to these children. If we continue to adhere 
to the goals of the Federal Adoption and Safe Families Act and we 
recognize kinship placements as a permanency option as we should, we 
must provide accompanying federal financial support.
    \18\ Main, R., Macomber, J. E., & Geen, R. (2006). Trends in 
service receipt: Children in kinship care gaining ground. Washington, 
DC: Urban Institute.
    For too many older children in foster care the exit from the system 
will come only when they reach the age of 18. More than 22,000 young 
people leave foster care annually because they age out of the 
system.\19\ Although data is sometimes sparse, we know of common 
challenges for these young people from several studies. In one national 
survey, 25% of foster youth reported having been homeless at least one 
night in the two-and-a-half to four years after exiting foster 
care.\20\ In a national survey, only 54% of former foster youth had 
completed high school,\21\ and in another study, 3 in 10 of the 
Nation's homeless adults reported a foster care history.\22\
    \19\ Child Welfare League of America. (2006). Special tabulation of 
the AFCARS. Washington, DC: Author.
    \20\ Cook, R. (1991). A national evaluation of title IV-E foster 
care independent living programs for youth. Rockville, MD: Westat Inc.
    \21\ Ibid.
    \22\ Roman, N. P. & Wolfe, N. (1995). Web of failure: The 
relationship between foster care and homelessness. Washington, DC: 
National Alliance to End Homelessness.
    Children and youth in foster care are also challenged when it comes 
to education outcomes. Placement in out-of-home care may create issues 
around mobility and stability in a child's education arrangements. For 
example, a three-year study of youth aging out of care by Chapin Hall 
indicated that over one-third of young adults reported five or more 
school changes.\23\ Another study of the Chicago school system (also by 
Chapin Hall) indicated that over two-thirds of children and youth 
included in the study had switched schools shortly after their initial 
placement.\24\ This kind of instability, along with the challenges of 
poverty, creates greater barriers to successful education outcomes.
    \23\ Courtney, M. E., Terao, S., & Bost, N. (2004). Midwest 
evaluation of the adult functioning of former foster youth: Conditions 
of youth preparing to leave state care. Chicago: Chapin Hall Center for 
Children at the University of Chicago.
    \24\ Smithgall, C., Gladden, R. M., Howard, E., Goerge, R., & 
Courtney, M. (2004). Educational experiences of children in out-of-home 
care. Chicago: Chapin Hall Center for Children at the University of 
    A 2001 Washington state study is typical of other research in its 
findings, which showed that youth in foster care attending public 
schools scored 16 to 20 percentile points below nonfoster youth in 
statewide standardized tests at grades three, six, and nine.\25\ Over 
one-third of young people in a Midwest Study had received neither a 
high school diploma nor a GED by age 19, compared to fewer than 10 
percent of their same-age peers in a comparable national sample.\26\ In 
addition, other studies have demonstrated that such outcomes continue 
to have an impact as these youth attempt to succeed at the post-
secondary education level. The Northwest Alumni Study found that of the 
foster care alumni studied, 42.7 percent completed some education 
beyond high school, 20.6 percent completed any degree or certificate 
beyond high school, 16 percent completed a vocational degree and 1.8 
percent completed a bachelor's degree. This completion rate for a 
bachelor's degree compares to 24 percent among the general population 
of the same age as those surveyed in the study.\27\ CWLA believes that 
these results offer strong evidence that efforts to improve the 
education outcomes for these children and youth in foster care must be 
a part of our national strategy to improve education and to reduce 
    \25\ Burley, M., & Halpern, M. (2001). Educational attainment of 
foster youth: Achievement and graduation outcomes for children in state 
care. Olympia, WA: Washington State Institute for Public Policy.
    \26\ Courtney, M.E., Dworsky, A., Ruth, G., Keller, T., Havlicek, 
J., & Bost, N. (2005). Evaluation of the adult functioning of former 
foster youth: Outcomes at age 19. Chicago, IL: Chapin Hall Center for 
Children at the University of Chicago.
    \27\ Pecora, P., Kessler, R., Williams, J., O'Brien, K., Downs, C., 
English, D., White, J., Hiripi, E., White, C.R., Wiggins, T., & Holmes, 
K. (2005). Improving Family Foster Care: Findings from the Northwest 
Foster Care Alumni Study Alumni Study. Seattle, WA: Casey Family 
    Children and parents living in poverty are less likely to have 
access to adequate health and mental health care. The lack of 
comprehensive health services for both children and parents increases 
entry into the child welfare system and makes it more difficult for 
children in the system to attain long-term health, stability, and 
    The first three years of life are crucial to a child's brain 
development and early mental health status.\28\ There are an astounding 
number of children living in poverty during this critical period. 
Moreover, the 2005 U.S. Census Survey reported 11.2% of children as 
uninsured, despite widespread eligibility for Medicaid or SCHIP.\29\ 
Lack of health insurance or limited health insurance coverage 
contributes needlessly to an increasing number of children in the child 
welfare system with an unmet health need as well as placement of 
children in the child welfare system solely to obtain essential mental 
health services.\30\ The data demonstrates a greater need for outreach 
to meet the needs of these children by increasing enrollment in 
eligible health insurance programs and ensuring comprehensive access to 
health and mental health resources under them. Increased access to 
health and mental health care improves a child's chance for 
    \28\ National Child Welfare Resource Center for Family Centered 
Practice. (2003). Family centered child welfare. Washington, DC: 
    \29\ DeNavas-Walt, C., Proctor, B., and Hill Lee, C. (2006). 
Income, Poverty, and Health Insurance Coverage in the United States: 
2005. Current Population Reports (pp. 60-231). Washington, DC: U.S. 
Government Printing Office.
    \30\ United States General Accounting Office. (2003, April). Child 
welfare and juvenile justice: Federal agencies could play a stronger 
role in helping states reduce the number of children placed solely to 
obtain mental health services. Report to Congressional Requesters (14). 
Washington, DC: Author.
    \31\ Vandivere, S., Gallagher, M., and Anderson Moore, K. (2004). 
Changes in children's well-being and family environments. Snapshots of 
America's Families III, No. 18. Washington, DC: Urban Institute.
    Poverty also correlates with increased rates of mental illness and 
substance abuse among parents,\32\ leaving them less ready to handle 
the stressors associated with raising children. The children of parents 
with substance abuse or mental health concerns are therefore more 
likely to be victims of abuse or neglect. Availability of comprehensive 
mental health care reduces caregiver stress and increases a child's 
chance for healthy development and stable placement.\33\ Helping 
children to overcome the obstacles created by the presence of poverty 
in their early lives means increasing services to address the mental 
health and substance abuse treatment needs of these children and their 
    \32\ DeBellis, M. D., Broussard, E. R., Herring, D. J., Wexler, S., 
Moritz, G., & Benitez, J. G. (2001). Psychiatric co-morbidity in 
caregivers and children involved in maltreatment: A pilot research 
study with policy implications. Child Abuse & Neglect 25(7): 923-44. 
Chicago: The International Society for Prevention of Child Abuse and 
    \33\ McCarthy, J. (2003). Creating effective systems for mental 
health care and services. Best Practice Next Practice. Washington, DC: 
National Child Welfare Resource Center for Family Centered Practice.
    The booming economy in the 1990s resulted in increases in overall 
income levels and modest declines in poverty levels relative to 
economic gains. The percentage of U.S. children living in families with 
high incomes grew to 29.7% in 2000, while one in three children (34%) 
lived in families with medium incomes.\34\
    \34\ Federal Interagency Forum on Child and Family Statistics. 
(2002). America's children: Key national indicators of well-being, 
2002. Washington, DC: U.S. Government Printing Office.
    The progress made at the end of the last decade, however, has 
either plateaued or reversed. Poverty remains prevalent and 
debilitating for millions of U.S. children, youth, and families. 
Children are almost twice as likely to live in poverty as Americans in 
any other age group.\35\ The extent of inequality in the distribution 
of earned income since the 1970s has dramatically increased. While 
workers with higher schooling levels and more experience have enjoyed 
increases in their inflation-adjusted earnings, the real earnings of 
younger and less-educated workers have fallen sharply.\36\
    \35\ National Center for Children Living in Poverty. (2002). Child 
poverty fact sheet. New York: Columbia University.
    \36\ Hofferth, S. L. (1998). The American family: Changes and 
challenges for the 21st century. In H. M. Wallace (Ed.), Health and 
welfare for families in the 21st century. Sudbury, MA: Jones and 
    Although secure parental employment may provide access to health 
care and reduction of some stressors, poor working parents often face 
multiple pressures that negatively impact their ability to adequately 
care for their children. When they are exhausted from low-paying jobs 
and enervated by the sheer demands of coping with inadequate resources, 
parents find it harder to be consistent in discipline, to be responsive 
to children's needs, and to provide a range of socially and 
educationally stimulating experiences.

      Providing a broader and better financial situation for 
low-income families will give these families adequate resources that 
positively affect child development, especially for younger children. 
CWLA therefore supports federal strategies that seek to increase low 
family incomes and include income supports, such as increasing the 
Earned Income Tax Credit and raising the minimum wage.
      CWLA supports enhancements in programs such as the 
Temporary Assistance to Needy Families. This enhancement, however, must 
assist parents in reaching more and better paying jobs and not just 
focus on arbitrary work rates and punitive measures for failure to 
      CWLA supports the enhancement of child care and preschool 
readiness programs, high school completion programs, and other 
educational supports to increase opportunities for the Nation's poorest 
children and youth.
      CWLA supports increased investments in prevention, 
intervention, and treatment services to reduce the negative impact of 
poverty on children and youth and on the larger culture. This includes 
the expansion of home visiting programs and full funding of prevention 
and intervention programs such as the Child Abuse Prevention Treatment 
Act and the Promoting Safe and Stable Families program.
      Congress needs to reauthorize and strengthen the State 
Children's Health Insurance Program, including the provision of funds 
necessary to avoid shortfalls and expand coverage to more uninsured 
      Congress must preserve the Federal guarantee of Medicaid 
as an entitlement program for low-income children, youth, and families 
and prevent any cuts that would result in reduced benefits and 
restricted eligibility for beneficiaries. Coverage for youth leaving 
foster care should be required to age 21.
      In the reauthorization of the education act, the No Child 
Left Behind law, Congress must include initiatives that will assure and 
strengthen the access of foster children to public education and 
eliminate current barriers to stability and a foster child's ability to 
continue in his or her current school setting.
      CWLA believes we cannot succeed in reducing the number of 
children in care without greater federal support. We must fix the 
financing mechanisms for children who are in the child welfare system. 
This means extending Title IV-E funding to kinship placements and 
replacing the outdated eligibility requirements for foster care and 
adoption assistance currently tied to the now nonexistent AFDC program 
as it existed in July 1996.

    CWLA appreciates the opportunity to offer our testimony to the 
committee in regard to the issue of poverty. The fact that the Ways and 
Means Committee, under the leadership of Chairman Rangel, has held this 
hearing as one of its first hearings demonstrates a commitment to child 
welfare by the chairman and the committee. This gives CWLA hope that 
this country will once again seriously confront the challenge and the 
need to reduce poverty and improve the lives of children and families 
throughout the United States of America.

     Statement of Nicholas Eberstadt, American Enterprise Institute

    For well over a century, with ever-expanding scale and scope, the 
United States government has been generating statistics that might 
illuminate the plight of society's poorest and most vulnerable 
elements. From the beginning, the express objective of such efforts has 
always been to abet purposeful action to protect the weak, better the 
condition of the needy, and progressively enhance the general weal. 
First unveiled in early 1965, shortly after the launch of the Johnson 
administration's ``War on Poverty,'' the poverty rate is a measure 
identifying households with incomes falling below an official ``poverty 
threshold'' (levels based on that household's size and composition, 
devised to be fixed and unchanging over time). Just months after its 
debut, the War on Poverty's new Office of Economic Opportunity (OEO) 
designated the measure as its unofficial ``working definition'' of 
poverty. By August 1969, the Bureau of the Budget had stipulated that 
the poverty thresholds used in calculating American poverty rates would 
constitute the Federal government's official statistical definition for 
poverty. It has remained so ever since.\1\
    \1\ For informative background on the origin and evolution of the 
poverty rate, see Gordon M. Fisher, ``The Development of the Orshansky 
Poverty Thresholds and Their Subsequent History as the Official U.S. 
Poverty Measure,'' U.S. Census Bureau Poverty Measurement Working 
Papers (May 1992, partially revised September 1997).
    U.S. government antipoverty spending has come to be calibrated 
against, and made contingent upon, this particular measure. Everywhere 
in America today, eligibility for means-tested public benefits depends 
on the relationship between a household's income and the apposite 
poverty threshold. In Fiscal Year 2002, perhaps $300 billion in public 
funds were allocated directly against the criterion of the ``poverty 
guideline'' (the Department of Health and Human Services' version of 
poverty thresholds).\2\ Given its unparalleled importance--both as a 
touchstone for informed public discussion and as a direct instrument 
for public policy--the reliability of the official poverty rate (OPR) 
as an indicator of material deprivation is a critical question. How 
faithfully, in other words, does our Nation's poverty rate describe 
trends and patterns in the condition that most Americans would think of 
as poverty?
    \2\ Douglas J. Besharov and Peter Germanis, ``Reconsidering the 
Federal Poverty Measure: Project Description,'' http://
www.welfareacademy.org (June 14, 2004), 5. Poverty guidelines are based 
on poverty thresholds but differ from them in that they are more 
currently updated to reflect intervening changes in price levels and 
have a slightly more simplified schema for determining household 
eligibility levels, with fewer categories for family size and 
composition than are found in the Census Bureau's poverty threshold 
    Although our official poverty rate is now by and large taken for 
granted, having become widely regarded with the passage of time as a 
``natural'' method for calibrating the prevalence of material 
deprivation in American society, the measure itself was originally an 
ad hoc improvisation--and arguably a fairly idiosyncratic one--and in 
practical terms appears to be a problematic descriptor of poverty 
trends and levels in modern America. For one thing, its reported 
results do not track well with other indicators that would ordinarily 
be expected to bear directly on living conditions across the Nation. In 
fact, over the past three decades, the relationship between the OPR and 
these other indicators has been perversely discordant.
    While the official poverty rate suggests that the proportion of the 
American population living below a fixed ``poverty line'' has 
stagnated--or increased--over the past three decades, data on U.S. 
expenditure patterns document a substantial and continuing increase in 
consumption levels for the entire country--including the strata with 
the lowest reported income levels. And while the poverty threshold was 
devised to be measuring a fixed and unchanging degree of material 
deprivation (i.e., an ``absolute'' level of poverty) over time, an 
abundance of data on the actual living conditions of low-income 
families and ``poverty households'' contradicts that key presumption--
demonstrating instead that the material circumstances of persons 
officially defined as poor have improved broadly and appreciably over 
the past four decades.
    In short, America's most relied-upon metric for charting a course 
in our national effort to reduce and eliminate poverty appears to offer 
unreliable, and indeed increasingly misleading, soundings on where we 
are today, where we have come, and where we seem to be headed.

History of a Calculation
    The schema and framework for estimating official poverty rates in 
the United States today are basically the same as in 1965. Annual OPRs 
are still determined on the basis of poverty thresholds maintained and 
updated by the U.S. Census Bureau; official poverty status is still 
contingent upon whether a household's measured annual pretax money 
income exceeds or falls below that stipulated threshold. While a number 
of minor revisions have been introduced, the original approach of 
computing poverty rates on the basis of poverty thresholds and annual 
household income levels remains entirely intact. The most significant 
change in the original poverty thresholds is their annual upward 
adjustment to compensate for changes in general price levels. In 1969, 
the Bureau of the Budget directed that the poverty line would 
thenceforth be pegged against the Consumer Price Index (CPI) and ruled 
that the CPI deflator would also be used to establish official 
``poverty thresholds'' back to 1963, the base year for the original 
    As of 2005, the U.S. official poverty rate is the single longest-
standing official index for assessing deprivation and material need in 
any contemporary country. That fact alone makes it unique. But 
America's OPR is unique in another sense, as well. For although a 
multitude of governments and international institutions have pursued 
quantitative efforts in poverty research over the past two decades, and 
have even fashioned particular national and international poverty 
indices, none has elected to replicate the United States' approach to 
counting the poor. This curious fact is not often remarked upon by U.S. 
statistical authorities--but it is not only worth bearing in mind, it 
is also worth pondering as one evaluates the U.S. poverty rate and its 
long-term performance.

Stark Numbers
    Estimates of the official poverty rate for the United States are 
available from the year 1959 onward. For the total population of the 
U.S., the OPR declined by nearly half over this period, from 22.4 
percent in 1959 to 12.7 percent in 2004, and dropped by roughly similar 
proportions for America's families, from 20.8 percent to 11.0 percent. 
Measured progress against poverty was more pronounced for older 
Americans (the OPR for persons 65 and older fell from 35.2 percent to 
9.8 percent) but more limited for children under 18 (27.3 percent vs. 
17.8 percent). For African Americans, the official poverty rate 
declined by almost three-fifths--by over 30 percentage points--between 
1959 and 2004, but in 2004 remained over twice as high for whites.
    One may note that most of the reported reduction in overall U.S. 
poverty, according to this federal poverty measure, occurred at the 
very beginning of the series--that is to say, during the first decade 
for which numbers are available. Between 1959 and 1968, the OPR for the 
total population of the United States fell from 22.4 percent to 12.8 
percent, or by more than a point per year. In 2004, by contrast, the 
U.S. poverty rate was only imperceptibly lower than it had been in 
1968--and actually slightly higher than it had been back in 1969.
    Indeed, to judge by the official poverty rate, the United States 
has suffered a generation and more of stagnation--or even 
retrogression--in its quest to reduce poverty. Figure 1 illustrates the 
situation. For the entire U.S. population, the lowest OPR yet recorded 
was for the year 1973, when the index bottomed at 11.1 percent. Over 
the subsequent three decades, the OPR nationwide has remained steadily 
above 11.1 percent, often substantially; in 2004, the rate reported was 
12.7 percent.
    Between 1973 and 2004, the official poverty rate did decline for 
older Americans as a whole (16.3 percent vs. 9.8 percent) and for 
persons living alone (25.6 percent vs. 20.5 percent); it also declined 
for African Americans overall (31.4 percent vs. 24.7 percent). But for 
the rest of the country, the official poverty rate was in general 
higher at the start of the new century than it had been in the early 
1970s. Measured poverty rates, for example, were higher in 2004 than 
they had been in 1973 for children under 18 (14.4 percent in 1973 vs. 
17.8 percent in 2004) and for people of working ages, i.e. 18 to 64 
(8.3 percent vs. 11.3 percent). The nationwide OPR for U.S. families 
likewise rose over those years (from 9.7 percent to 11.0 percent). 
Outside of the South, where the OPR registered a slight decline (from 
15.3 percent to 14.1 percent), poverty rates were higher in every 
region of America in 2004 than in 1973. Overall poverty rates for non-
Hispanic whites--so-called Anglos--were also higher than they had been 
in 1973 (7.5 percent vs. 8.6 percent). No less striking, the overall 
poverty rate for Hispanic Americans was exactly the same in 2004 as in 
1973--21.9 percent--implying that the circumstances of this diverse but 
often socially disadvantaged ethnic minority had not improved at all 
over the course of three full decades.
    Taken on their face, these stark numbers would seem to be a cause 
for dismay, if not outright alarm. To go by the official poverty rate, 
modern America has failed stunningly to lift the more vulnerable 
elements of society out of deprivation--out from below the income line, 
according to the author of the Federal poverty measure, where 
``everyday living implied choosing between an adequate diet of the most 
economical sort and some other necessity because there was not money 
enough to have both.'' This statistical portrait of an apparent long-
term rise in absolute poverty in the contemporary United States evokes 
the specter of profound economic, social, and political dysfunction in 
a highly affluent capitalist democracy. All the more troubling is the 
near-total failure of social policy implied by such numbers, for 
despite the War on Poverty and all subsequent governmental antipoverty 
initiatives, official poverty rates for the Nation have mainly moved in 
the wrong direction over the past three decades.

Other Measures
    Although the official poverty rate is accorded a special official 
status as an index of poverty conditions in modern America, it is by no 
means the only available indicator that might provide insight on 
poverty conditions and material deprivation in the country. Many other 
indices bearing upon poverty are readily available, and their trends 
can be compared with the reported OPR. Curiously, the official poverty 
rate does not seem to exhibit the normal and customary relationship 
with any of these other poverty proxies.
    Table 1 illustrates the problem. It contrasts results for the years 
1973 and 2001 for the official poverty rate and several other 
indicators widely recognized as bearing directly upon the risk of 
poverty in any modern urbanized society. (The choice of these two 
specific end-years is admittedly and deliberately selective--but it is 
a selection that highlights the underlying contradictions discussed 
    In the period between 1973 and 2001, for example, per capita income 
in the United States rose very significantly in real (inflation-
adjusted) terms: by roughly 60 percent, according to estimates from the 
Census Bureau's CPS series. By the same token, the measured rate of 
unemployment for persons 16 and older was somewhat lower in 2001 (4.7 
percent) than it had been in 1973 (4.9 percent). As for educational 
attainment, America's working-age adults clearly had completed more 
years of schooling in 2001 than in 1973. In 1973, nearly 40 percent of 
U.S. adults 25 or older had no high school degree; by 2001, the 
corresponding fraction was under 16 percent.
    Then there are the trends in spending by government at the Federal, 
state, and local levels on means-tested benefit programs: that is to 
say, public antipoverty outlays. Between Fiscal Year 1973 and Fiscal 
Year 2001, real spending on such programs more than tripled, leaping 
from $153 billion to $484 billion (in constant 2002 dollars). One can 
make arguments for excluding the health and medical care component from 
the measure of antipoverty program spending; doing the sums, nonhealth 
antipoverty spending would still rise in constant 2002 terms from $109 
billion in 1973 to $231 billion in 2001, or by 57 percent per 
capita.\3\ These data, one must emphasize, account for just the 
government's share of anti-poverty programs: Private charitable 
donations provide additional resources for meeting the needs of 
America's poor, and those resources are considerable. In the year 2001, 
total private philanthropic giving was estimated at $239 billion--in 
real terms, 156 percent more than in 1973; and in real per capita 
terms, an increase of over 90 percent. Although we cannot know the 
exact proportion of these private funds earmarked for poverty 
alleviation, it seems safe to say that antipoverty spending by both the 
public and the private sectors increased very significantly on a real 
per capita basis between 1973 and 2001.
    \3\ Derived from Vee Burke, Cash and Noncash Benefits for Persons 
with Limited Income: Eligibility Rules, Recipient and Expenditure Data, 
fy2000-fy2002, Congressional Research Service Report rl32233 (November 
25, 2003), Table 5, and Statistical Abstract of the United States 2004-
2005, Table 2.
    Per capita income, unemployment, educational attainment, and anti-
poverty spending are factors that would each be expected to exert 
independent and important influence on the prevalence of poverty in a 
modern industrialized society--any modern industrialized society. When 
trends for all four of these measures move conjointly in the direction 
favoring poverty reduction, there would ordinarily be a strong 
expectation that the prevalence of measured poverty would decline as 
well (so long, of course, as poverty was being measured against an 
absolute rather than a relative benchmark). Yet curiously, the official 
poverty rate for the United States population was higher for 2001 (11.7 
percent) than for 1973 (11.1 percent).
    Needless to say, this is a discordant and counterintuitive result 
that demands explanation. Further examination, unfortunately, reveals 
that the paradoxical relationship between the poverty rate and these 
other indicators of material deprivation in Table 1, while perverse, is 
not at all anomalous. To the contrary: For the period since 1973, the 
U.S. poverty rate has ceased to correspond with these other broad 
measures of poverty and progress in any common-sense fashion. Instead, 
the poverty rate seems to have become possessed of a strange but deeply 
structural capriciousness: For while it continues to maintain a 
predictable relationship with these other indicators, the relationship 
is by and large precisely the opposite of what one would normally 
expect for a poverty indicator.
    Clearly, something is badly amiss here. And unless someone can 
offer a plausible hypothesis for why U.S. data series on per capita 
incomes, unemployment rates, adult educational attainment, and anti-
poverty spending should be collectively flawed and deeply biased for 
the post-1973 period, the simplest explanation for these jarring 
results would be that the officially measured poverty rate happens to 
offer a highly misleading, or even dysfunctional, measure of material 
deprivation and has, moreover, been doing so for some considerable 
period of time.

A Major Discrepancy
    The implicit assumption that a poverty-level household's annually 
reported money income will equate to the level of its annual 
expenditures represents an additional problem with the official poverty 
rate. The original methodology estimated ``poverty thresholds'' to 
designate consumption levels consonant with poverty status, and matched 
these against annually reported household incomes--but it made no 
effort to determine the actual consumption levels of those low-income 
households. Instead, it posited an identity between reported money 
income and expenditures for these families. To this date, the method by 
which the official poverty rate is calculated continues to presume an 
identity between measured annual money incomes and annual expenditure 
levels for low-income households. Yet this presumption is dubious in 
theory, and it is confuted empirically by virtually all available data 
on spending patterns for America's poorer strata.
    Families and individuals base their household budgets not just on 
the fortunes (and uncertainties) of a single year, but instead against 
a longer life-course horizon--stabilizing their long-term living 
standards (and smoothing their consumption trajectory) against the 
vagaries of short-term income fluctuations. Such behavior naturally 
suggests that the marginal propensity to consume will tend to be 
disproportionately high for lower-income households--and for the 
perhaps considerable number of households where expected ``permanent 
income'' exceeds current income (i.e., ``transitory income''), current 
consumption will likewise exceed current income if financial 
arrangements permit.\4\
    \4\ The concept of transitory income can be traced back at least as 
far as Milton Friedman and Simon S. Kuznets, Income from Independent 
Professional Practice (National Bureau of Economic Research, 1945), 
Chapter 7, where the term itself was perhaps coined. Consumer behavior 
theory would suggest that annual incomes would equate to annual 
expenditures in the lowest income strata only where those low income 
levels were in fact consonant with a household's expectations of its 
long-term financial outlook--or where institutional barriers prevented 
the household from financing additional near-term consumption.
    From the standpoint of empirics, U.S. survey data provides evidence 
of a major discrepancy between reported annual expenditure levels and 
reported annual income levels for poorer households in the United 
States--a disproportion that seems to have been widening steadily over 
the decades since the official poverty rate was first devised. These 
trends are evident from the Consumer Expenditure (CE) Survey, produced 
by the Bureau of Labor Statistics (BLS). In 2002, constant expenditures 
for the poorest fifth (lowest income quintile) of U.S. households were 
77 percent higher than they had been for the poorest fourth (lowest 
quartile) in 1960-61; between 1972-73 and 2002, real expenditures for 
the lowest quintile of households increased by 57 percent.
    It is striking that real levels of household expenditures for the 
poorest fifth of U.S. households have risen by over half during a 
period in which the official poverty rate should also have risen (from 
11.5 percent of the population in 1972-73 to 12.1 percent in 2002)--and 
during which, according to the same CE survey data, real incomes for 
the poorest fifth of U.S. households reportedly fell. The contradiction 
is explained, in proximate terms, by a dramatic increase in the ratio 
of expenditures to income for poorer U.S. households. By 1972-73, the 
poorest fifth of households were spending nearly 40 percent more than 
their annual income--and by 2002 were spending well over double their 
reported annual income.

Temporary Poverty
    The stark and increasing mismatch between reported annual incomes 
and reported annual expenditures for low-income households in 
contemporary America may go far in helping to explain why the official 
poverty rate--predicated as it is on reported annual money income--
seems so very out of keeping with other data series bearing on the 
incidence of material deprivation in modern America. But how is this 
widening gap to be explained?
    One hypothesis for the growing discrepancy between income levels 
and expenditure levels for poorer Americans might be that low-income 
Americans are ``overspending''--i.e., going ever deeper into debt. By 
the reasoning of this surmise, the apparently widening gap between 
income and expenditures reported for poorer Americans, far from being 
an artifact, would represent an all-too-genuine phenomenon: an 
unsustainable binge that must eventually end, with ominous consequences 
for future living standards of the vulnerable and the disadvantaged.
    On its face, this hypothesis might seem plausible. In the event, 
however, it appears to be confuted by data on the net worth of poorer 
American households. If expenditures for lower-income households were 
being financed through a steady draw-down of assets or accumulation of 
debt, we would expect the net worth of poor Americans to decline 
steadily over time in absolute terms. No such trend is evident from the 
two government data sources that attempt to estimate the net worth of 
poorer Americans: the Census Bureau's Survey of Income and Program 
Participation (SIPP) and the Federal Reserve Board's Survey of Consumer 
Finance (SCF).\5\
    \5\ SCF appears to offer more a comprehensive inventory than SIPP 
of the various components of household wealth. For a detailed 
comparison and evaluation, see John L. Czaijka, Jonathan E. Jacobson, 
and Scott Cody, Survey Estimates of Wealth: A Comparative Analysis and 
Review of the Survey of Income and Program Participation (Mathematica 
Policy Research Inc., August 22, 2003).
    If the growing statistical discrepancy between incomes and 
expenditures for poorer Americans cannot be explained by a growing 
indebtedness of lower-income households, how, then, can we account for 
it? Three partial explanations come immediately to mind.

      Changes in CE survey methods and practices. The growing 
mismatch between reported income and reported expenditures for lower-
income households could in part be an artifact of changes in the CE 
survey itself.
      Income underreporting. A second potential problem, 
related to the first, might be a tendency over time toward increased 
misreporting of income. As already mentioned, the BLS staff responsible 
for the CE surveys carefully note that users should place more 
confidence in their expenditure estimates than their income estimates, 
especially for the lowest reported income deciles.
      Increased year-to-year income variability. The third 
possible explanation for a secular rise in the expenditure-to-income 
ratio for households in the lowest annual income quintile would be a 
long-term increase in year-to-year variations in household income. If 
U.S. consumer behavior comports with the ``permanent income'' 
hypothesis, and if the stochastic year-to-year variability (i.e., 
transitory variance) in American income patterns were to increase, then 
we would expect, all other things being equal, that the ratio of 
reported annual expenditures to reported annual incomes would increase.

    The greater the proportion of ``temporary poor'' in the total 
poverty population, the greater the discrepancy between observed income 
levels and observed expenditures levels should be within the poverty 
population. If poverty is defined in terms of a particular income 
threshold, it should be readily apparent that poverty status is not a 
fixed, long-term condition for the overwhelming majority of Americans 
who are ever designated as poor. Quite the contrary: Since American 
society and the U.S. economy are characterized by tremendous and 
incessant mobility, long-term poverty status appears to be the lot of 
only a tiny minority of the people counted as poor by the official U.S. 
    The Census Bureau's longitudinal Survey on Income and Program 
Participation (SIPP) documents this central fact. For the calendar year 
1999, nearly 20 percent of the noninstitutionalized American population 
was estimated to have experienced two or more months in which their 
household income fell below the poverty threshold. And at some point 
during the four years 1996-1999, fully 34 percent of the surveyed 
population spent two months or more below the poverty line. On the 
other hand, just 2 percent of the population spent all 48 months of 
1996-99 below the poverty line. The long-term poor (or ``permanent 
poor''), in other words, accounted for barely one-tenth of those who 
passed through officially designated poverty at some point in 1999, and 
less than 6 percent of those who were counted as poor at any point 
between the start of 1996 and the end of 1999.
    As might be expected, the incidence of chronic or long-term poverty 
varies according to ethnicity, age, household composition, and 
location. Whereas just 1 percent of the non-Hispanic white population 
is estimated to have spent all of 1996-99 below the poverty line, the 
rate was over 5 percent for both African-Americans and Hispanic-
Americans; long-term poverty rates of over 5 percent also typified 
female-headed households and persons living alone. Yet even for the 
groups with the highest measured rates of long-term poverty, these 
permanent poor accounted for a very small fraction of the ``ever 
poor'': Fewer than a sixth of the Hispanics counted as poor at any time 
during 1999, for example, had been below the poverty line throughout 
    Given the high proportion of the temporarily poor within the 
overall population of those counted as poor, it should not be 
surprising that reported expenditures would exceed reported income 
among America's lower-income strata, as they apparently do today.
    Clearly more research is warranted here. For now, however, we may 
note that the curious divergence between reported income and 
expenditure patterns that has been recorded in consumer expenditure 
surveys for the period since the early 1970s appears to be matched by a 
simultaneous reported rise in proportionate year-to-year variations for 
families on the borderline of the bottom income quintile.

Incontestably Better Off
    By indexing annual changes in nominal poverty thresholds against 
the Consumer Price Index, the official poverty rate for the U.S. is, in 
principle, devised to track over time a set of fixed and constant 
household income standards for distinguishing the poor from the 
nonpoor. The OPR was intended to be an absolute measure--one that would 
identify people living in conditions determined by a specific and 
unchanging budget constraint.
    The notion that the official poverty rate tracks a fixed and 
unchanging material condition, however, is contradicted by a wide array 
of physical and biometric indicators. These data demonstrate steady and 
basically uninterrupted improvements in the material conditions and 
consumption levels of Americans in the lowest income strata over the 
past four decades.
    The poverty rate was intended to designate an income level below 
which ``everyday living implied choosing between an adequate diet of 
the most economical sort and some other necessity because there was not 
money enough to have both.'' In purely material terms, today's American 
poverty population is incontestably better off than were the 
measurement's original poor back in 1965.
    To track the changing material circumstances of America's low-
income population, we will follow trends in four areas: 1) food and 
nutrition; 2) housing; 3) transportation; and 4) health and medical 
care. From the early 1960s through the beginning of the twenty-first 
century, American consumers, poor and nonpoor alike, devoted the great 
majority of their personal expenditures to these four categories of 
goods and expenditures. Between 1960-61 and 2002, food, housing, 
transport, and health/medical care together accounted for about 70 
percent of mean U.S. household expenditures, and for about 80 percent 
of the expenditures of households in the lowest income quintile. And 
while the composition of these allocations by category shifted over 
these decades, their total claim within overall expenditures remained 
remarkably stable. Let us then examine in turn trends in food and 
nutrition, housing, transportation, and health/medical care.
    Food and nutrition. In the early 1960s--the years for which the 
poverty rate was first devised--undernourishment and hunger were 
unmistakably in evidence in the United States. Indeed, self-assessed 
food shortage was clear from the expenditure patterns of American 
consumers: In the 1960-61 consumer expenditure survey, for example, the 
marginal propensity of consumers to spend income on food rose between 
the lowest and the next lowest income groupings. This poorest grouping 
of Americans--accounting for about 1 percent of the households 
surveyed--defined a grouping for which foodstuffs were ``luxury 
    For purely biological reasons, a society's most nutritionally 
vulnerable groups are typically infants and children. Anthropometric 
and biometric data suggest that nutritional risks to American children 
have declined almost continuously over the past three decades. Even for 
low-income children--i.e., those who qualified for means-tested public 
health benefits--those nutritional risks look to have been declining 
progressively. According to the National Pediatric Surveillance System 
of the CDC, for example, the percentage of low-income children under 
five years of age who were categorized as underweight (in terms of BMI 
for age) dropped from 8 in 1973 to 5 in 2003. Similarly, the proportion 
of medically examined low-income children who presented height-for-age 
below the expected fifth percentile level on pediatric growth charts 
declined from 9 percent in 1975 to 6 percent in 2003. Blood work for 
these same children suggested a gradually declining risk of anemia, to 
judge by the drop in the proportion identified as having a low 
hemoglobin count.
    Housing and home appliances. Statistical information on U.S. 
housing conditions and home appurtenances are available today from 
three main sources: 1) the decennial census of population and housing; 
2) the Census Bureau's American Housing Survey (AHS), conducted in 1984 
and every few years thereafter; and 3) the Department of Energy's 
Residential Energy Consumption Survey (RECS), initially conducted in 
1978 and currently re-collected every four years. Since 1970, the 
decennial census has cross-classified household housing conditions by 
official poverty status; AHS and RECS also track poverty status and its 
correlates in their surveys.
    In terms of simple floor-space, the homes of the officially poor 
were more spacious at the dawn of the new century than they had been 
three decades earlier. In 1970, almost 27 percent of poverty-level 
households were officially considered overcrowded (the criterion being 
an average of over one person per room). By 2001, according to the AHS, 
just 6 percent of poor households were ``overcrowded''--a lower 
proportion than for nonpoor households as recently as 1970. Between 
1980 and 2001, moreover, per capita heated floor-space in the homes of 
the officially poor appears to have increased substantially--to go by 
official data, by as much as 27 percent or perhaps even more.\6\ By 
2001, the fraction of poverty-level households lacking some plumbing 
facilities was reportedly down to 2.6 percent--a lower share than for 
nonpoor households in 1970.
    \6\ RECS 2001 (upon whose figures the calculation above was based) 
places the mean heated floor space per poverty household at 472 per 
person; the ahs 2001, for its part, indicates a median value of 739 
square feet per person for poverty households, although this total 
appears to include both heated and unheated floor space and pertains 
only to the 55 percent of poverty-level households in single, detached 
and/or mobile/manufactured homes. (American Housing Survey 2001, Table 
    Trends in furnishings and appurtenances for American households 
similarly record the steady spread of desirable consumer appliances to 
poor and nonpoor households alike. From 1970 to the present, poorer 
households' access to or possession of modern conveniences has been 
unmistakably increasing. For many of these items--including telephones, 
television sets, central air conditioning, and microwave ovens--
prevalence in poverty-level households as of 2001 exceed availability 
in the typical U.S. household as of 1980, or in nonpoor households as 
of 1970. By the same token, the proportion of households lacking air-
conditioning was lower among the officially poor in 2001 than among the 
general public in 1980. By 2001, over half of all poverty-level 
households had cable television and two or more television sets. 
Moreover, by 2001 one in four officially poor households had a personal 
computer, one in six had Internet access, and three out of four had at 
least one VCR or DVD--devices unavailable even to the affluent a 
generation earlier.
    These data cannot tell us much about the quality of either the 
housing spaces that poverty level households inhabit or the 
appurtenances furnished therein. They say nothing, furthermore, about 
nonphysical factors that bear directly on the quality of life in such 
housing units--most obvious among these being crime. These data, 
however, strongly support the proposition that physical housing 
conditions are gradually improving not only for the rest of America, 
but for the officially poor as well. In any given year, a gap in 
physical housing conditions separates the officially poor from the 
nonpoor--but the data for today's poor appear similar to those for the 
nonpoor a few decades earlier.
    Transportation. At the time of the 1972-73 consumer expenditure 
survey, almost three-fifths of the households in the lowest income 
quintile had no car. Since the official poverty rate for families in 
those years was only about 10 percent, we may suppose that the 
proportion of poverty-level households without motor vehicles at that 
time was somewhat higher. By 2003, however, over three-fifths of U.S. 
poverty-level households had one car or more--and nearly three of four 
had some sort of motor vehicle. (The distinction is pertinent, owing to 
the popularity and proliferation of SUVs, light trucks, and other motor 
vehicles classified other than as cars from the late 1970s onward.)
    By 2003, quite a few poverty-level households had multiple motor 
vehicles: Fourteen percent had two or more cars, and 7 percent had two 
or more trucks. In 2003, to be sure, vehicle ownership was more limited 
among the officially poor than among the general public; for the 
country as a whole, fewer than 9 percent of households reported being 
without any motor transport whatever. The increase in motor vehicle 
ownership among officially poor households has followed the general 
rise for the American public--albeit with a very considerable lag. As 
of 2003, auto ownership rates for poverty-level households mirrored 
ownership rates for U.S. families in general in the early 1950s; for 
all forms of motor transport, U.S. poverty households' ownership levels 
in 2003 matched overall U.S. families' auto ownership levels from the 
early 1960s; and poverty households' ownership levels for two or more 
motor vehicles paralleled that of the general U.S. public in the late 
1950s or early 1960s.
    Health and medical care. NCHS data can be used to illuminate two 
separate aspects of health status and medical care in modern America: 
outcomes and service utilization. The most critical datum for health 
status is arguably mortality: All other health indicators are 
subsidiary to survival. For babies and infants, the single most 
important measure of health status is surely the infant mortality rate. 
Between 1970 and 2002, the infant mortality rate in the United States 
fell by nearly two-thirds, from 20 per 1,000 live births to 7 per 
thousand. The infant mortality rate continued its almost uninterrupted 
annual declines after 1973, when officially measured poverty rates for 
U.S. children began to rise. The contradistinction is particularly 
striking for white babies. Between 1974 and 2001, their infant 
mortality rates fell by three-fifths, from 14.8 per 1,000 to 5.8 per 
1,000; yet over those same years, the official poverty rate for white 
children rose from 11.2 percent to 13.4 percent. (See Figure 2.)
    These survival gains were achieved not only in the face of 
purportedly worsening poverty status, but also despite unfavorable 
trends in biological risk. In 2001, the proportion of white babies born 
at high-risk ``low birth weight'' (below 2,500 grams) was actually 
somewhat higher than in 1974. Yet despite these troubling trends in 
low-birth-weight disposition, infant mortality rates improved 
dramatically. Since the inherent biological disparities in mortality 
risk between low-birth-weight and non-low-birth-weight newborns did not 
diminish over this period, the reasonable inference might be that 
medical and health care interventions--changes in the quality and 
availability of services--accounted for most of the difference. And 
since low-birth-weight infants are disproportionately born to mothers 
from disadvantaged socioeconomic backgrounds, a further reasonable 
inference is that these improvements in quality and availability of 
medical care extended to America's poorer strata, not just the well-to-
    Trends in utilization of health care for the poor are further 
illustrated by the circumstances of children under 18--more 
particularly by the proportion reporting no medical visits over the 
year preceding their health interview survey. While the percentage of 
children without an annual medical visit is always higher among the 
poor than among the nonpoor, steady declines are reported for both 
groups--and the declines were substantial. The proportion of children 
without a reported annual medical visit, in fact, was significantly 
lower for the poverty population in 2002 (12.1 percent) than it had 
been for the nonpoverty population 20 years earlier (17.6 percent). 
This cannot address the question of preexisting health needs--it could 
be that pediatric medical problems were on the rise during this period. 
These data thus do not conclusively demonstrate that ``access'' or 
``availability'' of health and medical care have been improving. But 
they are strongly suggestive of this possibility--all the more so in 
conjunction with the salutary trends in health status outcomes.
    To summarize the evidence from physical and biometric indicators: 
Low-income and poverty-level households today are better-fed and less 
threatened by undernourishment than they were a generation ago. Their 
homes are larger, better equipped with plumbing and kitchen facilities, 
and more capaciously furnished with modern conveniences. They are much 
more likely to own a car (or a light truck, or another type of motor 
vehicle) now than 30 years earlier. By most every indicator apart from 
obesity, their health care status is considerably more favorable today 
than at the start of the War on Poverty. Their utilization of health 
and medical services has steadily increased over recent decades. The 
official poverty rate is incapable of representing what it was devised 
to portray: namely, a constant level of absolute need in American 
society. The biases and flaws in the poverty rate are so severe that it 
has depicted a great period of general improvements in living 
standards--three decades from 1973 onward--as a time of increasing 
prevalence of absolute poverty.
    To state this much is not to assert that material progress for 
America's poverty population has been satisfactory, much less optimal. 
Nor is it to deny the importance of relative as opposed to absolute 
deprivation in the phenomenon of poverty as the poor themselves 
experience it. In some quarters, criticism of the various shortcomings 
of America's official poverty rate will be taken as evidence of 
indifference to the plight of America's disadvantaged and poor. Such an 
inference is illogical at best. Proponents of more effective 
antipoverty policies should be in the very front ranks of those 
advocating more accurate information on America's poverty problem. 
Without such information, effective policy action will be impeded; 
under the influence of misleading information, policies will be 
needlessly costly--and ineffective.
    As we have seen, the U.S. federal poverty measure is premised on 
the assumption that official poverty thresholds provide an absolute 
poverty standard--a fixed inter-temporal resource constraint. Such a 
standard should mean that general material conditions for the poverty 
population should remain more or less invariant over time. Yet quite 
clearly, the material condition of the poverty population in modern 
America has not been invariant over time--it has been steadily 
improving. The OPR thus fails--one is tempted to say that it fails 
spectacularly--to measure what it purports to be tracking over time. As 
an indicator of a condition originally defined in 1965, the official 
poverty rate seems to have become an ever less faithful and reliable 
measure with each passing year. The task of devising a better 
statistical lodestar for our Nation's antipoverty efforts is by now far 
overdue. Properly pursued, it is an initiative that would rightly tax 
both our formidable government statistical apparatus and our finest 
specialists in the relevant disciplines. But such exertions would also 
stand to benefit the common weal in as yet incalculable ways.

            Statement of Legal Momentum, New York, New York

    We appreciate the opportunity to submit this statement on behalf of 
Legal Momentum, the Nation's oldest women's legal rights organization, 
for the Committee's hearing on the important topic of the Economic and 
Societal Costs of Poverty. Poverty is one of the main causes of family 
hardship. A 2001 study by the Economic Policy Institute found that 
about 30% of those below the poverty line experienced critical 
hardship, defined as being evicted, having utilities disconnected, 
doubling up in others' housing due to lack of funds, or not having 
enough food to eat; and that an additional 30% to 45% experienced other 
serious hardships.\1\ Compared with families whose income is above 200% 
of the Federal poverty level, families whose income is less than 200% 
of poverty are more than six times as likely to not have enough food to 
eat (12.6% vs. 1.6%); more than five times as likely to miss meals 
(17.5% vs. 3.4%); eleven times more likely to be evicted (1.1% vs. 
.1%); 50% more likely to skip necessary medical care (12.7% vs. 8.0%); 
seven times as likely to have their utilities disconnected (4.1% vs. 
0.6%); and three times as likely to have their telephone disconnected 
(10.4% vs. 3%).\2\
    \1\ Boushey & Gunderson, When Work Just Isn't Enough, Economic 
Policy Institute Briefing Paper (Washington D.C.: Economic Policy 
Institute 2001), available at http://www.epinet.org/briefingpapers/
    \2\ Boushey et. al, Hardships in America, (Washington D.C.: 
Economic Policy Institute 2001), available at http://www.epinet.org/
    The Children's Defense Fund has estimated that child poverty will 
cost our society over $130 billion in future economic output as poor 
children grow up to be less productive and effective workers.\3\ 
Poverty damages children in ways that harm their own and the Nation's 
future. Poor children experience increased risk of stunted growth and 
anemia, more often have to repeat years of schooling, have lower test 
scores and drop out more often. As adults, they earn less and are 
unemployed more.\4\
    \3\ Arloc Sherman, Poverty Matters: The Cost of Child Poverty in 
America, (Washington D.C.: Children's Defense Fund 1997), available at 
    \4\ Id.
    Women bear a disproportionate share of the cost of poverty. There 
has been a large gender poverty gap in every year since the official 
poverty standard was created in the 1960's. In 2005 women were 45% more 
likely to be poor than men. As set out in the table we have compiled 
from the detailed poverty statistics on the Census Bureau Web site, the 
poverty gap persists even when factors such as age, work experience, 
education, or family structure are taken into account: aged women are 
much more likely to be poor than aged men; women who work outside the 
home are much more likely to be poor than men who work outside the 
home; single mothers are much more likely to be poor than single 
fathers; at every educational level, women are much more likely to be 
poor than men with the equivalent education.

                                  Poverty Rates for Adult Women and Men in 2005
                                                                                       Increased incidence of
                                                              Women        Men      poverty among women compared
                                                                                               to men
All adults (18 or above).................................       12.9         8.9                            45%
Age 65 or above..........................................       12.3         7.3                            67%
Single parents...........................................       36.2        17.6                           106%
Worked...................................................        7.0         5.1                            39%
High School only.........................................       14.3         9.4                            52%
College less than 4 yrs..................................       10.2         7.0                            44%
College 4 yr degree......................................        4.5         3.6                            24%

    Poverty rates and the gender poverty gap are much higher in the 
United States than in other rich countries. One study found that the 
United States had the highest poverty rate for female-headed households 
among the 22 countries studied, 30.9% compared to the 10.5% average for 
the group.\5\ The exceptionally high poverty rate for single mothers in 
the United States is not the result of below average work effort. In a 
study of single mothers' employment rates (full or part time) in eight 
rich countries in the mid-1990's, the 69% rate in the United States was 
the highest rate and was twenty percentage points higher than the 49% 
average in the other seven countries (United Kingdom, Australia, 
Netherlands, Germany, Norway, Finland, Denmark).\6\ In a study 
reporting on average annual hours worked by poor single parents around 
2000, the 1,087 average hours of work for poor single parents in the 
United States was the highest total, and almost twice the 582 average 
in the other six countries (Canada, Netherlands, Austria, Germany, 
Belgium, Ireland).\7\
    \5\ Pressman, Explaining the Gender Poverty Gap in Developed and 
Transitional Economies, Luxembourg Income Study Working Paper No. 243 
(Sept. 2000), available at http://www.lisproject.org/publications/
liswps/243.pdf. This study defined poverty as an income less than 50% 
of the median income and was based on national income surveys conducted 
in the early 1990's.
    \6\ Mia Hakovirta, The Income Sources Of Single Parents: A 
Comparative Analysis, Luxembourg Income Study Working Paper No. 282 
(Nov. 2001), available at http://www.lisproject.org/
    \7\ Timothy Smeeding, Poor People in Rich Nations: The United 
States in Comparative Perspective, Luxembourg Income Study Working 
Paper No. 419 (Oct. 2005), available at http://www.lisproject.org/
    One reason for the exceptionally high poverty rates in the United 
States is that we invest less in social welfare programs: in 2000 the 
United States spent less than 3% of Gross Domestic Product on social 
assistance to the non-elderly, and this was less than half the spending 
by Canada and Great Britain; less than a third of the spending by 
Germany, the Netherlands, and Belgium; and less than a fourth of the 
spending by Finland and Sweden.\8\ We have much less generous parental 
leave than other rich countries and far less public support for child 
care,\9\ and we have allowed our minimum wage to decline to such a low 
level that even year round full time work does not guarantee an above 
poverty income.\10\
    \8\ Timothy Smeeding, Public Policy and Economic Inequality: The 
United States in Comparative Perspective, Luxembourg Income Study 
Working Paper No. 367 (Feb. 2005), available at http://
    \9\ Jane Waldfogel, ``What Other Nations Do: International Policies 
Toward Parental Leave and
Child Care,'' The Future of Children 11(4): 99-111 (2001), available at 
    \10\ Legal Momentum, Working Women & Increasing Minimum Wage: A 
Down Payment on the Future of America's Families, (2007), available at 
    Our Nation needs to take steps to reduce poverty and the gender 
poverty gap. We must find fiscally responsible ways to broaden the 
scope of our social welfare programs, including expanding parental 
leave and enacting paid leave legislation, increasing governmental and 
public support for child care, raising the minimum wage and indexing it 
for inflation, and of course continuing to combat sex and race 

           Statement of Theo MacGregor and Jerrold Oppenheim

    Investing in the eradication of poverty in America could increase 
the resources of American households by an average of more than $18,000 
a year, equivalent to a wage increase of more than 30 percent. 
Investments in the eradication of poverty would:

      substantially reduce losses due to crime, a large 
fraction of which is caused by poverty;
      increase incomes to people now unemployed or 
underemployed, which would result in new expenditures (including income 
and sales taxes) circulating through the economy and becoming income to 
      reduce the cost of health care, including the cost we all 
share of taking care of people who cannot afford health insurance or 
      virtually eliminate the need for societal supports to 
ameliorate the most extreme manifestations of poverty.

    A study conducted by the authors for Entergy Corporation found 
that, in the wealthiest country on Earth, more than 30 million 
households try to live on $26,640 or less (60% of current median 
income), while the rest live on incomes averaging more than $60,000. In 
order to make it to that $26,640 income level, a family would need two 
adults working full time at 1\1/2\ times the minimum wage. The average 
service job pays only twice the minimum wage, so there are many who 
earn less than that. Those folks, although working, are unable to 
afford the basics of food, shelter and medicine. And the buying power 
of the minimum wage is at its lowest in 50 years. For the poor, there 
is not enough income to heat and/or cool their homes, feed their 
children, and afford medical care. This discrepancy in incomes, as well 
as poverty itself, leads to real and growing costs.
    What makes poverty expensive to the rest of us is not social 
supports but rather its large but indirect costs, especially in health 
care, crime, and lost productivity. Indeed--middle-income supports--
such as Medicare, social security, and income tax breaks--cost the 
average family about four times as much as do low-income supports such 
as homeless shelters and food. Eliminating the indirect costs of 
poverty in the simplest way--directly raising incomes to a low but 
decent level (60% of current median income)--would cost $12,047 per 
low-income household, or $397.2 billion per year, but would return 
almost four times the investment. In other words, the annual cost of 
eliminating poverty would be no more than about a quarter of the annual 
savings for the average non-low-income family. These calculations are 
conservative and leave out many benefits of eradicating poverty, such 
as the savings of increased preventive health care and the productivity 
lost due to underemployment (employment below skill level).
    How do people cope with skyrocketing prices and incomes that are 
not keeping pace? American low-income households are the best money-
managers there are. But that is not enough. A study by the National 
Bureau of Economic Research shows that, in extreme weather, low-income 
families actually eat less--about ten percent less. Other studies show 
that another strategy is to skip needed medicines or forego medical 
    \1\ We appreciate the opportunity to provide this information to 
the Committee. For further information, see the attached full report: 
``The Economics of Poverty: Benefits to All
Americans from Investments to Eliminate Poverty'' or go to our Web 
site: www.DemocracyAndRegulation.com. We can also be reached by 
telephone: 1-978-283-0897 (office), or 1-978-335-6748 (mobile).
    We do not, however, propose simply raising incomes because, as we 
will explain, we think more targeted investments will have even larger 
    Health Care. For example, increasing health care coverage. Studies 
show that the health of individuals in society is strongly and 
inversely correlated with inequality of income. The U.S. is the 
wealthiest nation on earth--ever--but people live longer in Sweden and 
Norway, where incomes are more equal. Japan, which has the longest life 
expectancy in the world, also has among the narrowest of income 
distributions.\2\ People lower down the income scale in rich, developed 
countries have death rates two to four times higher than those nearer 
the top of the scale; and the greater the extremes between wealth and 
poverty, the greater the health differences.\3\ Economic equality is 
thus more important to health than wealth is.
    \2\ Blane, Brunner and Wilkinson, Health and Social Organization, 
pp. 60-61, Routledge, London and New York (1996).
    \3\ Richard G. Wilkinson, Unhealthy Societies: The Afflictions of 
Inequality, p. 54-56, 76, Routledge, London and New York (1996).
    Poverty carries with it a much higher risk of illness. The Census 
Bureau recently reported that 47 million Americans have no health 
insurance at all, and as our study shows, the number with only partial 
insurance is about double that. Even the Census Bureau figure is almost 
16 percent--a fraction that has been steady or rising steadily in every 
year but two of the last 18. Poor uninsured individuals often defer 
seeking out care when they are ill. As a result, their illness 
progresses and can become needlessly severe. They then require more 
expensive care, often through the emergency room or hospitalization.\4\ 
An estimate from the National Academy of Sciences puts the number who 
die each year because they lack health insurance at 18,000.\5\ More 
than half of the bankruptcies in the U.S. are now due to medical 
expenses, even though a large majority (75.7 percent) had insurance at 
the onset of the illness that contributed to the bankruptcy.\6\
    \4\ Whitney W. Addington, ``No Health Insurance? It's Enough to 
Make You Sick--Scientific Research Linking the Lack of Health Coverage 
to Poor Health,'' ACP Online, http://www.acponline.org/uninsured/lack-
    \5\ Joan Gralla, ``U.S. Uninsured Health Care Cost Put at $125 
Billion,'' Common Dreams News Center, (Reuters, May 11, 2004).
    \6\ Himmelstein, et al., ``MarketWatch: Illness and Injury As 
Contributors to Bankruptcy,'' Health Affairs (Feb. 2, 2005).
    Medicaid served 38 million people in 2005,\7\ yet ``more than eight 
in ten low-income, uninsured adults do not qualify for Medicaid or 
other public health coverage because their incomes are too high . . . 
.In 42 states, unless they are severely disabled, they are ineligible 
for Medicaid regardless of their income.'' \8\ In addition, most of the 
care provided through the Medicaid program goes to low-income elderly 
or seriously disabled people who are also covered under Medicare. Only 
30 percent of Medicaid costs go to cover low-income children and 
pregnant women.\9\
    \7\ Michelle Chen, ``Poor `Share' More Costs Under Medicaid `Cost 
Sharing' Initiatives,'' The New Standard, (June 3, 2005).
    \8\ ``Working without a Net: The Health Care Safety Net Still 
Leaves Millions of Low-Income Workers Uninsured,'' (Families USA, April 
2004). Other public health services include the State Children's Health 
Assistance Program and local health clinics.
    \9\ ``Future Medicaid Growth is not Due to Flaws in the Program's 
Design, but to Demographic Trends and General Increases in Health Care 
Costs,'' (Center on Budget and Policy Priorities, Feb. 4, 2005).
    In addition to all of the uninsured Americans, many more are 
``underinsured.'' Nearly two million people under 65 spent more than 10 
percent of their pre-tax income on health care.\10\ A Kaiser Commission 
study found that uninsured hospital services alone would cost $41 
billion.\11\ The same study estimated total costs to be spent on health 
care for the uninsured came to $125 billion.\12\ Investing in adequate 
health care coverage for all Americans would eliminate these costs to 
    \10\ ``PHC4 FYI--Uninsured Stats Continue to Climb,'' citing 
Kathleen Stoll, Director of Health Policy Analysis for Families USA, 
(Pennsylvania Health care Cost Containment Council, April 2005), http:/
    \11\ ``PHC4 FYI--Uninsured Stats Continue to Climb,'' (Pennsylvania 
Health care Cost Containment Council, April 2005), http:/www.phc4.org/
reports/fyi29.htm; May 2004 report projecting 2005.
    \12\ Joan Gralla, ``U.S. Uninsured Health Care Cost Put at $125 
Billion,'' Common Dreams News Center, (Reuters, May 11, 2004).
    Education. ``Poverty prevention is more dependent on education than 
on any other factor, as is escape from poverty.'' \13\ Education is the 
primary means by which people can lift themselves out of poverty, yet 
the amount spent on education targeting low-income children falls far 
short of the need. Educating all of our people so that people can take 
jobs at higher skill levels would increase the money circulating 
throughout our economy. ``The achievement gap between poor and non-poor 
children is well-documented. Low-income children consistently fall 
behind their peers in test scores, graduation rates, college 
enrollment, and other measures of academic success.'' \14\ Head Start 
has enrolled over 20,000,000 low-income children since its inception as 
a summer program in 1965.\15\ Long-term follow-up studies on a number 
of these children have shown that Head Start participants achieve 
greater school success and avoid crime as they grow.\16\
    \13\ S. Levitan et al., Programs in aid of the Poor, p. 274 (Johns 
Hopkins Press, 8th ed., 2003).
    \14\ Kevin Carey, ``Education Funding and Low-Income Children: A 
Review of Current Research,'' Center on Budget and Policy Priorities 
(Nov. 5, 2002).
    \15\ Joan E. Ohl, ``Head Start: Building on the Pillars of our 
Success'' presented at the National Head Start Association Conference, 
May 28, 2003.
    \16\ Oden, et al., ``Into Adulthood: A Study of the Effects of Head 
Start'' (High/Scope Educational Research Foundation, 2005).
    In an earlier study for Entergy, Oppenheim and MacGregor found that 
educating low-income children when they are very young returns about $9 
for every dollar spent. Benefits include children staying in school 
through high school, developing a work ethic, and getting and keeping 
better jobs, with the commensurate rise in pay and associated income 
taxes, along with the multiplier effect of putting more money in the 
    \17\ J. Oppenheim and T. MacGregor, ``The Economics of Education: 
Public Benefits of High-Quality Preschool Education for Low-Income 
Children'' (Entergy Corp., n.d. [2002]).
    Employment. Unemployment is devastating for the family depending on 
a breadwinner to pay the rent and put food on the table. 
Underemployment is also difficult for families in today's economy, 
where two full-time salaries at one-and-a-half times the minimum 
wage\18\ just make it to the poverty cut-off of 60 percent of median 
income.\19\ Almost half of the prisoners in the U.S. are unemployed 
when they're arrested, and 70% are functionally illiterate. After 
release from prison, they face a wage penalty of as much as 12% for 
longer than 8 years. So the cycle continues: low wages, low self-
esteem, more crime. The cost of our judicial, correctional, and 
security systems could be substantially reduced by removing the 
desperation of unemployment that causes a substantial fraction of 
    \18\ Minimum wage is $5.15 per hour. Average hours worked for a 
service worker is 32.4 hours a week or 1684.8 hours per year. Bureau of 
Labor Statistics. The total income would be $26,030.
    \19\ $26,640 in 2004. U.S. Census.
    Unemployment and underemployment push families into poverty. 
Families falling into poverty are costly to the Nation because of the 
increased costs they cause of crime, health care, and social services. 
Thus, as difficult as unemployment and underemployment are for the 
families that experience them, unemployment and underemployment are 
costly drags on the economy that affect everyone. Some of the costs 
that could be avoided by reducing unemployment and underemployment are 
taxpayer-financed social supports such as unemployment compensation, 
job training, and retraining. In addition, unemployed and underemployed 
persons pay less in taxes than if they were fully employed. They also 
spend less on job-producing goods and services--the so-called 
multiplier effect.
    Crime. In societies where inequality of income prevails, violence 
is more prevalent than in more equal societies, and the poor are more 
likely to commit crimes than the wealthy. During the past 25 years, the 
population of people convicted of criminal activity in the U.S. rose 
from 1.8 million to 6.3 million--with over two million in prison and 
another four million on probation, the highest per capita incarceration 
rate in the world.\20\ With more money from full employment at decent 
wages, people are less likely to commit crimes, saving society costs of 
the judicial system, police, corrections facilities, and security 
systems. Added to these costs are the enormous costs to victims, both 
persons and businesses.
    \20\ David Mericle, ``Profiting from Poverty: The U.S. Prison-
Industrial Complex,'' Http://www.impactpress.com/aticles/febmar01/
    The total net burden of crime in the United States is estimated to 
be $1 trillion annually, or $4,118 for every U.S. resident.\21\ 
According to The National Center for Victims of Crime, in 2002, crime 
was estimated to create $105 billion in medical expenses, lost 
earnings, and costs for victim services. Including intangible costs, 
such as pain and suffering and a reduced quality of life, brought the 
estimated cost of crime to victims to $450 billion annually.\22\ The 
costs to society of incarcerating criminals are almost as staggering. 
Recent estimates put the cost at $38 billion annually.\23\ The costs of 
police and the judicial system at the Federal, state and local levels 
add another $110 billion.\24\ The vast majority of prisoners are poor, 
but even attributing only 50 percent of crime to poverty and its 
effects results in a cost to society from crime committed by poor 
people of nearly $661 billion a year. Saving one child from a life of 
crime can save society around $2 million. Providing full employment at 
a living wage, with health and other benefits, can reduce crime and 
save society an estimated $661 annually.
    \21\ http://www.ncpa.org/pi/crime/pd041100e.html, citing David A. 
Anderson, ``The Aggregate Burden of Crime,'' Journal of Law and 
Economics (October 1999).
    \22\ http://www.ncvc.org/ncvc/
main.aspx?dbName=DocumentViewer&DocumentID=38710, citing Miller et al. 
(1996). Victim Costs and Consequences: A New Look. Washington, DC: 
National Institute of Justice, U.S. Department of Justice. Online: 
    \23\ http://www.ncvc.org/ncvc/
    \24\ www.ojp.usdoj.gov/bjs/glance/tables/exptyptab.htm.
    Housing. Homelessness exploded in the 1980s. Yet current federal 
spending on housing assistance programs targeted at low-income 
populations is less than 50 percent of 1976 spending levels.\25\ More 
than 3.5 million Americans are affected by homelessness for at least 
part of the year each year. On any given day, at least 840,000 people 
in the United States are homeless--nearly 40 percent of them children. 
Over 40 percent of homeless persons are eligible for disability 
benefits, but only 11 percent actually receive them. Most are eligible 
for food stamps, but only 37 percent receive them. Most homeless 
families are eligible for welfare benefits, but only 52 percent receive 
    \25\ ``Overview of Homelessness In America'' National Student 
Campaign Against Hunger and Homelessness, http://
    \26\ Jay Shaft, ``U.S. Homelessness and Poverty Rates Skyrocket,'' 
(Information Clearing House, July 7, 2003), http://
    More than one in eight households pay more than 50 percent of their 
income for housing, and another 2.5 million live in over-crowded or 
severely inadequate housing.\27\ These factors contribute to 
interrupted educations, lack of adequate health care, persistent 
hunger, and higher crime rates. Children living with families that are 
homeless attend school less frequently, score lower on standardized 
tests, are less likely to graduate from high school and become 
productive members of society.\28\
    \27\ ``The State of the Nation's Housing'' (Harvard University 
Joint Center for Housing, June 13, 2005) http://www.jchs.harvard.edu/
    \28\ ``A Plan, Not a Dream: How to End Homelessness in Ten Years,'' 
citing research by Dr. Yvonne Rafferty of Pace University (National 
Alliance to End Homelessness, 2000), http://www.endhomelessness.org/
    Homelessness can both cause and result from serious health care 
issues. Homelessness can exacerbate drug and alcohol addictions. Other 
major causes of homelessness are unemployment or underemployment; high 
housing costs, including rising utility bills; domestic abuse; mental 
illness and substance abuse, with lack of treatment services; cuts in 
public assistance; and the general state of the economy. The study 
calculates the costs of homeless shelters, public housing, and public 
subsidies to private housing (including tax expenditures) at $69.1 
    Hunger. In addition to being homeless, too many Americans are 
hungry. An estimated 14 million American children live in homes where 
there is not enough food.\29\ Bread for the World reported that 35 
percent of Americans had to choose between food and rent, while 28 
percent had to choose between medical care and food, in the first half 
of 2004.\30\ Other studies show that money devoted to food by families 
is typically the first to be sacrificed. Families will often pay their 
fixed payments first, such as rent and utilities, rather than pay for 
food.\31\ The direct cost to other Americans to provide food for hungry 
people includes: food grants from non-governmental food pantries ($2.3 
billion); the Federal Women, Infants and Children (WIC) program ($5.2 
billion); Food Stamps ($27.2 billion in 2004); school and other child 
nutrition programs ($11.9 billion); and other food assistance ($300 
million), for a conservative $46.9 billion.
    \29\ ``Hunger, Poverty and Nutrition Policy: Childhood Hunger, 
Childhood Obesity'' (Tufts University 1995-2005), http://
    \30\ ``Overview of Hunger In America'' National Student Campaign 
Against Hunger and Homelessness, http://www.studentsagainsthunger.org/
    \31\ Id.
    Energy. Poor people cannot afford the full cost of heating and 
lighting their homes. Utilities, governments, and social service 
agencies have long assisted low-income ratepayers in paying their bills 
through such programs as the Low-Income Home Energy Assistance Program 
(LIHEAP), charitable fuel funds, levelized billing, discounts, home 
weatherization, energy efficiency, energy usage education, and 
arrearage forgiveness/debt management. Nevertheless, utility bad debt 
costs around $1 billion annually.\32\ American utilities, through their 
ratepayers, paid an average of $3 per customer to collect bad debt and, 
in some cases, the cost was as high as $10.\33\ If all Americans lived 
in weatherized and energy efficient homes, and had the income to pay 
their full share of utility bills, all other ratepayers would save 
nearly $6 billion in poverty costs, including fuel assistance, lifeline 
and other rate assistance; weatherization and efficiency costs; and the 
costs of late and unmade payments, such as service disconnections.\34\
    \32\ Industry Solutions, The CBE Group, http://www.cbegroup.com/
    \33\ ``Utility Collections Best Practice: Theory Into Practice'' 
(Peace Software White Paper, May 2005). http://www.peace.com/industry-
watch/whitepapers/Peace-Collections-Best-Practice.pdf This paper also 
states that total utility bad debt written off in the U.S. each year is 
as high as $1.7 billion. This study used the more conservative $1 
    \34\ LIHEAP Clearinghouse, National Energy Assistance Directors' 
Association (NEADA), National Center for Appropriate Technology (NCAT), 
National Community Action Foundation (NCAF).
    Other Social Services. Some additional anti-poverty programs and 
initiatives for which the average non-low-income household contributes, 
and which are not detailed above but are included in the total estimate 
of the cost of poverty, include the following:

      Legal Services and other civil legal aid--$573 million;
      Transitional Aid to Needy Families (TANF)--$27.5 billion, 
federal and states combined;
      Supplemental Security Income (SSI)--$42.6 billion;
      Earned Income Tax Credit (EITC)--$36.7 billion;
      Services to low-income seniors--$1.830 billion;
      Other social services--$2.673 billion;
      Community Services Block Grants--$636.8 million; and
      Community Development Block Grants--$4.116 billion.\35\
    \35\ Legal Services Corp. fy2005 appropriation; ``Documenting the 
Justice Gap in America'' Legal Services. Corp, Sept. 2005; Tax Policy 
Center--Urban Institute and Brookings Inst. Joint venture from OMB; 
http://www.whitehouse.gov/omb/budget/fy2006/treasury.html; U.S. Dept. 
of Health and Human Services--Office of Family Assistance; Center on 
Budget and Policy Priorities; http://www.ssa.gov/policy/docs/statcomps/
ssi_monthly/2005-11/table01.html; National Center for Appropriate 
Technology (NCAT).
    The maximum investment needed to eradicate poverty in the United 
States is an amount that would raise the income of every low-income 
household to the minimum income required to be a non-low-income 
household. As explained above, there are investments that are more 
effective, as well as more cost-effective, than cash transfers to 
eradicate poverty--such as education, job training, nutrition, housing, 
and health care.\36\ But even paying people directly to eradicate 
poverty is considerably less than the annual benefit that it would 
achieve by reducing the costs of crime, health care, unemployment and 
underemployment, and transfers and other current investments in low-
income families.
    \36\ S. Levitan et al., Programs in aid of the Poor at pp. 43, 262 
et seq. (Johns Hopkins Press, 8th ed., 2003).
    Such investment would not even come close to raising incomes to the 
self-sufficiency income standard.\37\ These are very detailed 
calculations, usually done on a county-by-county, state-by-state basis 
that take into account actual expenditures necessary to live a basic 
life in various family configurations. Bare bones budgets for a working 
family are calculated to include housing, child care, food, 
transportation, health care, clothing, household items, and taxes--no 
recreation, entertainment, or savings.\38\ In particularly costly 
locales, such as along the two ocean coasts, self-sufficiency incomes 
can be as high as a state's median income, as, for example, in 
Boston.\39\ However, even in Atlanta, the self-sufficiency requirement 
for such a family is 90 percent of the state's median income.\40\
    \37\ See generally http://www.sixstrategies.org/includes/
    \38\ E.g., D.Pearce and J. Brooks, ``The Self-Sufficiency Standard 
for Georgia'' (Women's Policy Group, 2002).
    \39\ Self-sufficiency income required for a single parent with two 
children in Boston is $51,284. D.Pearce and J. Brooks, ``The Self-
Sufficiency Standard for Massachusetts'' (Women's Educational and 
Industrial Union, 2003). Massachusetts state median income in 1999 was 
$50,502. http://quickfacts.census.gov/qfd/states/25000.html.
    \40\ Self-sufficiency income required for a single parent with two 
children in Atlanta is $37,982. D.Pearce and J. Brooks, ``The Self-
Sufficiency Standard for Massachusetts'' (Women's Educational and 
Industrial Union, 2003). Georgia median income in 1999 was $42,433. 
    Avoidable annual costs of poverty are described in the full report 
and fall into four broad categories. These are costs to the society at 
large that are caused by the existence of poverty and do not include 
the substantial costs to low-income households themselves.
    Costs of criminal activity, including property losses, costs of the 
judicial and correctional system, and security costs;
    Costs of health care, including costs that are preventable by 
improving health care and costs of low-income health care that are 
spread through the society;
    Costs of unemployment and underemployment, including unemployment 
compensation, job training, and the multiplier effect of lost economic 
    Costs of current anti-poverty investments, including costs for 
social services, elderly services, income supports, affordable housing, 
food, education, energy and utility supports, and block grants for 
community services and community development.
    As substantial as these avoidable costs are, they are significantly 
understated. For example, this study conservatively did not include:

      many state expenditures;
      most non-governmental expenditures;
      increased risks of damage from fire caused by inadequate 
      increased pressure on energy prices caused by energy 
waste in leaky homes;
      increased property tax receipts caused by needed property 
      increased borrowing costs caused by bad debt and slow 
payments of low-income consumers; and
      increased vulnerability to disasters such as hurricanes, 
causing additional requirements for disaster relief.

    An additional benefit of eradicating poverty not fully quantified 
is the increased economic activity caused by the multiplier effect of 
increased income.\41\
    \41\ At a multiplier of 2, the impact of an increase in income is 
doubled through the economy. This is accounted for in the report only 
with regard to unemployment.
    These costs are shared by all non-low-income households, the number 
and median income of which are derived from the U.S. Census. From these 
data, it is possible to compute the annual per-household burden of 
    It is also possible to compute a benefit:cost ratio on the 
assumption that investments are made to close the income gap in order 
to eradicate poverty and thus eliminate the avoidable costs of poverty 
described above.
    Conclusion. Investments in low-income Americans are among the most 
cost-effective investments we can make. Simple cash payments to low-
income families may be among the least cost-effective investments 
against poverty in the long-run. Yet, as we show above, even simple 
cash payments sufficient to lift all Americans out of poverty would 
immediately be returned almost fourfold. Yet, as we have shown 
elsewhere, there are investment strategies on behalf of low-income 
families with even greater potential payoffs. For example, investing in 
weatherization and installing efficient appliances in low-income homes 
returns at least seven times the investment.\42\ Investing in the 
education of three-and-four-year-olds returns nine times the 
investment.\43\ Others have shown that investments in preventive health 
care earns a positive return.\44\ Additional study should confirm the 
economic wisdom of other investments in low-income families. Indeed, in 
many cases, the science is established and the political decision has 
been made to create a program. All that remains to do in those cases is 
to adequately fund the existing programs.\45\
    \42\ J. Oppenheim and T. MacGregor, ``The Economics Of Low-Income 
Electricity Efficiency Investment'' (Entergy, 2001, rev. 2002).
    \43\ J. Oppenheim and T. MacGregor, ``The Economics of Education: 
Public benefits of High-Quality Preschool Education for Low-Income 
Children'' (Entergy, n.d. [2002]).
    \44\ E.g., J. Abramson, M.D., Overdosed America at pp. 49, 166 
(Harper Perrennial 2005).
    \45\ E.g., ``Millions of eligible children do not receive free or 
reduced price lunches.'' S. Levitan et al., Programs in aid of the Poor 
at p. 122 (Johns Hopkins Press, 8th ed., 2003). ``Whereas [the job 
training program phased out in 2000] ended with sufficient funds to 
enroll approximately 1 percent of those who were eligible for its 
services, [its replacement program] adult ratio approaches the 
infinitesimal.'' Id. at p. 234. Housing programs are inadequately 
funded and do not pay enough in many markets to keep housing costs 
below 40 percent of income. ``They simply need more resources to meet 
the needs of those eligible by cutting interminable waiting lists.'' 
Id. at p. 272.
    Weatherization, Head Start, and preventive health care are examples 
of under-funded cost-effective investment opportunities that have 
already been mentioned. Another example is childhood nutrition. It is 
well established that a nutritious breakfast and lunch determines a 
child's ability to learn, with significant implications for later 
success in life,\46\ just as it is well established that nutrition 
during the first two years of life, as well as of pregnant mothers, has 
an enormous impact on later health and intellect.\47\ That is why there 
is a successful program to provide adequate nutrition to infants and 
pregnant mothers.\48\ Similarly, this is the basis for the free and 
reduced price school meal program.\49\
    \46\ E.g., J. Fraser Mustard, ``Health and social capital'' in D. 
Blane et al., Health and Social Organization, at p. 306 (Routledge, 
    \47\ E.g., M. Wadsworth, ``Family and education as determinants of 
health,'' in D. Blane
et al., Health and Social Organization, at pp. 154-156 (Routledge, 
1996); J. Fraser Mustard, ``Health and social capital'' in id. at pp. 
304-306; V. Lazariu-Bauer et al., ``A Comparative Analysis of Effects 
of Early Versus Late Prenatal WIC Participation on Birth Weight:
NYS, 1995,'' 8 Maternal and Child Health Journal 77 (2004), 
www.springerlink.com/ (baf1qf55lma12mnqiwgv13qi) / app / home / 
journal,9,38;linkingpublicationresults,1:105600,1; USDA, Economic 
Research Service, Effects of Food Assistance and Nutrition Programs on 
Nutrition and Health, Volumes 1-4, and Nutrition and Health 
Characteristics of Low-Income Populations, volumes 1-4, 
    \48\ www.fns.usda.gov/wic/
    \49\ E.g., The ``School Breakfast Program provides nutritious 
breakfasts to promote learning readiness and healthy eating 
behaviors.'' www.fns.usda.gov/cnd/Default.htm.
    Later in life, effective vocational training and re-training can 
turn a marginal worker into an economic success.\50\ Investing in 
decent housing provides the first prerequisite for a homeless family to 
even participate in the economy.\51\ All are cost-effective investments 
in low-income families that could pay huge dividends if expanded.
    \50\ ``Some form of postsecondary career preparation has become 
essential to earning a family-sustaining income. . . . *** . . . skill 
training can be accomplished through apprenticeship or employment with 
an employer committed to substantial incumbent training . . . few will 
escape poverty or near-poverty in the future without setting foot on a 
substantial career ladder and following it upward.'' S. Levitan et al., 
Programs in aid of the Poor at pp. 208-209 (Johns Hopkins Press, 8th 
ed., 2003). See generally chapters 5-6. ``Poverty prevention is more 
dependent on education than on any other factor, as is escape from 
poverty.'' Id. at p. 274.
    \51\ ``Marriage is unlikely to occur or last without [affordable 
housing].'' S. Levitan et al., Programs in aid of the Poor at p. 271 
(Johns Hopkins Press, 8th ed., 2003).
    It is time for America to invest in eradicating poverty for the 
benefit of all Americans.


                     Wisconsin Community Action Program Association
                                           Madison, Wisconsin 53714
                                                   January 24, 2007

    Chairman Rangel:
    The Wisconsin Community Action Program Association (WISCAP) is the 
statewide voluntary association of Wisconsin's 16 Community Action 
Agencies (CAAs) and three special purpose agencies with statewide anti-
poverty missions. On behalf of our membership, we thank you for calling 
this very important hearing on the economic and social costs of 
    For over forty years, Community Action has been a catalyst for 
change and a vital part of the effort to eliminate poverty in Wisconsin 
and throughout the United States. CAAs are independent, nonprofit 
organizations that are community-based and locally controlled by boards 
composed of one-third people experiencing poverty, one-third local 
elected officials, and one-third community and business leaders. All 
members of WISCAP are nonprofit organizations committed to creating 
economic opportunities and community-based solutions to poverty.
    In 2005 over 428,000 individuals living in Wisconsin built assets, 
developed knowledge and skills, increased economic self-sufficiency, or 
met basic needs through the resources offered by Community Action. Our 
funding comes from an array of public and private sources, but critical 
core support is provided by the Community Services Block Grant (CSBG). 
We strongly support reauthorization and full funding of CSBG, without 
which Community Action would lose significant capacity to assist low-
income people and their communities.
    We are appreciative of this opportunity to discuss the costs and 
consequences of poverty and believe that our organizations have the 
successful track record, involvement of the poor, and credibility in 
our communities to participate in this discussion and play an even 
larger role in eliminating poverty in our Nation. Poverty is the cause 
of unnecessary and preventable suffering among millions of Americans of 
all ages, and the economic and social costs are enormous.
    We believe that all Americans are vulnerable to poverty and that 
the costs and consequences of poverty have significant effects on 
everyone, whether poor or not.
    Over the period 2003-2004, Wisconsin had the highest growth rate of 
people living in poverty in the United States. About 600,000 people 
live in poverty in our state. Please refer to our Web site, 
www.wiscap.org for our report ``Poverty Matters: Facing Poverty in 
Wisconsin'' and more about the work of Community Action. We believe 
that poverty matters and that we can do something about it.
Consequences to Children
    The costs of child poverty to society in terms of lost potential, 
unnecessary suffering, reduced achievement, and other social ills are 
staggering. Children from low-income families are more likely to:

      suffer from hunger or inadequate nutrition,
      develop learning disabilities,
      have untreated vision or dental problems,
      become the victim of child abuse or neglect,
      be expelled from school or repeat a grade,
      attend inferior schools with fewer resources and less-
skilled teachers, and
      grow up with less hope and lower expectations.

    These concrete hardships can contribute to:

      lower verbal and math performance,
      higher risk of dropping out of school,
      reduced likelihood of going to college,
      more involvement in juvenile crime, and
      lower skills upon entering the workforce.
Economic Costs and Consequences
      Our economy suffers when businesses have difficulty 
finding enough skilled workers to compete globally. Poverty greatly 
affects people preparing for and entering the workforce. Children who 
grow up with a poor education, poor nutrition, and poor health care are 
much less likely to escape poverty. Combined with unstable families or 
neighborhoods and faced by a chronic lack of opportunities, these 
children of poverty are much less likely to join the workforce with 
skills that make our economy stronger. We all pay the price. It is 
imperative that tomorrow's workers be well educated and well trained.
      A growing number of seniors are supported by fewer 
workers earning less money. Wisconsin's population is growing older, 
and the proportion of younger workers is shrinking. Social Security and 
other programs that assist seniors will have to be funded by a 
diminishing proportion of workers. But based on demographic and 
economic trends, a growing percentage of those future workers will be 
low-income. Addressing poverty today in earnest will create a future in 
which workers are prepared to pay taxes and contribute their skills.
Health Consequences and Costs

    Health costs are soaring, and that affects all of us. Some of the 
costs stem from the direct and indirect effects of poverty on the 
health of low-income people. Due to inadequate nutrition, stressful or 
dangerous environments, lack of health care, and other factors poverty 
is associated with higher rates of:

      heart disease, asthma, diabetes, hypertension, and 
      injury through violent crime,
      premature and underweight births, and infant mortality,
      lead poisoning, and dental problems.

    These health problems contribute to the soaring cost of health 
insurance and medical care. Insurance premiums rise when hospitals must 
pass along costs associated with increased use of emergency rooms by 
those who have no insurance. Out of necessity, people in poverty often 
put off going to a doctor or dentist until a condition worsens and 
becomes an emergency. It is more cost-effective to invest upfront by 
offering good, affordable, preventive care rather than paying after the 
problems move to a crisis stage.
    One study found that Wisconsin families who have their insurance 
through their private employers pay, on average, $739 more annually in 
premiums due to the cost of health care for the uninsured. (Families 
USA 2005: ``Paying a Premium: The Added Cost of Care for the 
Uninsured,'' Washington, D.C., p. 4)
    Women in poverty are much more likely to receive poor prenatal care 
and inadequate nutrition and to deliver underweight or premature 
babies, which require intensive medical care and incur long-term costs. 
These costs, borne by insurance providers and passed along to those who 
pay for health insurance, have been estimated at $500,000 for each such 
Other Social and Economic Consequences and Costs
      Loss of potential and participation. One of the greatest 
tragedies of poverty is the loss of human potential. Growing up in 
poverty causes many individuals to fall short of attaining their full 
potential, depriving them and their communities of their gifts, 
talents, and contributions. People in poverty often feel isolated and 
marginalized. They are less likely to vote or participate in civic or 
cultural activities. We must recognize the strengths and gifts of the 
poor and find ways to help them have hope for a better future.
      Crime and the costs of prisons and police. Crime and 
incarceration rates correlate with poverty. Although the vast majority 
of low-income people are law-abiding, children and youths who grow up 
in poverty are statistically more likely to become involved in crime. 
This is a powerful argument for upfront investment in education from 
early childhood throughout the school years, for community building and 
economic development in low-income neighborhoods, and for mentoring, 
supportive youth activities, and other measures that counteract the 
degrading effects of poverty.
      Racial discrimination and structural/institutional 
racism. People of color suffer from much higher rates of poverty and 
many of its consequences. Gaps in educational achievement, 
incarceration rates, ownership of assets, and many other inequities 
exacerbate racial divisions in our communities and present real 
barriers to self-sufficiency for many people of color.
      Family instability. Families in poverty often experience 
high levels of stress as parents juggle one or more low-paying jobs, 
child-care, getting around without reliable transportation, and other 
responsibilities--while struggling to pay the bills. A problem that 
would be minor for others, such as a sick child or the breakdown of a 
car, can be a major crisis for a parent in poverty.
WISCAP's Principles

    All people of Wisconsin and the United States should have these 
basic necessities of life:

      Economic opportunity--All should have access to the 
opportunities and skills they need to obtain employment that offers 
health benefits and wages sufficient to lift them and their families 
out of poverty. All should have access to the tools they need to build 
savings and assets for a secure future.
      Affordable housing and energy--All should have decent, 
safe, sanitary, affordable, and energy-efficient housing. Those with 
accessibility needs should have those needs met.
      Food security--All should be able to afford enough 
nutritious food.
      Health and safety--All should have access to dependable, 
affordable health care--physical, mental, and dental--and all should 
live free from violence.
      A voice in the community--All should have the opportunity 
to contribute to a better neighborhood and nation through civic 
participation and community involvement.
      Education--All should have access to quality, affordable 
education throughout their lives so they have opportunities to develop 
skills and their personal potential.
      Human dignity--All deserve respect as human beings and 
should have equal opportunity in the basic aspects of life, regardless 
of income, wealth, race, ethnicity, gender, disability, age, religion, 
or sexual orientation.

    There was a great deal of lip service given to the issue of poverty 
when Americans saw the images of the poor after the tragedy of 
Hurricane Katrina. But little has changed for the poor throughout our 
country since that time. We in Community Action have struggled 
alongside the poor for over 40 years, and we are ready to work with our 
national, state and local leaders to increase the focus on eliminating 
poverty for all Americans. As one step, we strongly support the 
reauthorization and full funding of the Community Services Block Grant, 
which provides critical core funding for the Nation's Community Action 
    We must not accept the existence of poverty as something normal or 
routine. We believe it is possible, with all of our combined talents 
and resources, to eliminate poverty and increase the opportunities 
available to all of the people of Wisconsin and the United States. We 
believe that there are cost-effective solutions to poverty. Through 
efforts that create jobs that pay living wages with benefits, along 
with programs that emphasize strategies like prevention, skill 
development, access to health care, affordable housing, and community 
economic development, we can transform our common future to eliminate 
poverty. It is morally imperative and in our personal, social, and 
economic interests to do so.

            Respectfully Submitted,

                                                    Richard Schlimm
                                                 Executive Director

Members of the Wisconsin Community Action Program Association

Fond du Lac, WI

CAP Services, Inc.
Stevens Point, WI

Central Wisconsin Community Action Council, Inc.
Wisconsin Dells, WI

Community Action Coalition for South Central Wisconsin, Inc.
Madison, WI

Community Action, Inc.
Janesville, WI

Couleecap, Inc.
Westby, WI

Indianhead Community Action Agency, Inc.
Ladysmith, WI

Lakeshore CAP, Inc.
Manitowoc, WI

Oconto, WI

North Central Community Action Program, Inc.
Wisconsin Rapids, WI

Northwest Wisconsin Community Services Agency, Inc.
Superior, WI

Racine/Kenosha Community Action Agency, Inc.
Racine, WI

Social Development Commission, Inc.
Milwaukee, WI

Southwest Wisconsin Community Action Program, Inc.
Dodgeville, WI

West CAP, Inc.
Glenwood City, WI

Western Dairyland Economic Opportunity Council, Inc.
Independence, WI

Coalition of Wisconsin Aging Groups, Inc.
Madison, WI

Foundation for Rural Housing, Inc.
Madison, WI

United Migrant Opportunity Services, Inc.
Milwaukee, WI

                Statement of Zero To Three Policy Center

    Chairman Rangel and Members of the Committee:
    I am pleased to submit the following written testimony on behalf of 
ZERO TO THREE. My name is Matthew Melmed. For the last 12 years I have 
been the Executive Director of ZERO TO THREE, a national non-profit 
organization that has worked to advance the healthy development of 
America's babies and toddlers for close to 30 years. I would like to 
start by thanking the Committee for its interest in examining the 
economic and societal costs of poverty and for providing me the 
opportunity to discuss the interaction between poverty and the healthy 
development of our Nation's infants and toddlers and how federal policy 
can help address the issues raised.
    Some may wonder why babies matter in public policy. Surely they are 
the province of their parents or caregivers. Yet, public policies often 
affect very young children, policies that are sometimes created with 
little thought as to their consequences for this age group. In 
addition, many policies focus on the effects of ignoring the needs of 
infants and toddlers, for example, by having to address the cognitive 
gaps between low-income preschoolers and their more affluent peers or 
providing intensive special education services for problems that may 
have begun as much milder developmental delays left untreated in a 
young baby. Mr. Chairman, my message to you is that babies can't wait--
we know that early intervention and prevention works best and we know 
what works to promote healthy development in young children.
    The early years create an important foundation for later school and 
life success. We know from the science of early childhood development 
that infancy and toddlerhood are times of intense intellectual 
engagement.i During this time--a remarkable 36 months--the 
brain undergoes its most dramatic development, and children acquire the 
ability to think, speak, learn, and reason. All babies and toddlers 
need positive early learning experiences to foster their intellectual, 
social, and emotional development and to lay the foundation for later 
school success. These years may be even more critical for young 
children living in poverty.
    \i\ Shonkoff, Jack and Phillips, Deborah. 2000. From neurons to 
neighborhoods: The science of early childhood development. Washington, 
DC: National Academy Press.
    One of the most consistent associations in developmental science is 
between economic hardship and compromised child 
development.ii The malleability of young children's 
development and the overwhelming importance of the family (rather than 
school or peer) context suggest that economic conditions in early 
childhood may be far more important for shaping children's ability, 
behavior, and achievement than conditions later in 
childhood.iii Lower-income infants and toddlers are at 
greater risk than middle to high-income infants and toddlers for a 
variety of poorer outcomes and vulnerabilities such as later school 
failure, learning disabilities, behavior problems, mental retardation, 
developmental delay, and health impairments.iv Babies and 
toddlers living in high-risk environments need additional supports to 
promote their healthy growth and development.
    \ii\ Ibid.
    \iii\ Ibid.
    \iv\ Ibid.
    Congress must consider the unique needs of very young children and 
their families who are living in poverty. Policies should help attack 
the intergenerational cycle of poverty by laying the foundations for 
early learning and improving prospects of later school success on the 
part of the children. We know that intervening early in the life of a 
child at-risk for poor development can help minimize the impacts of 
these risks. We must ensure that infants, especially those living in 
poverty, have time at home with their parents in the first months of 
life. We must also ensure that infants and toddlers living in poverty 
have access to quality, developmentally appropriate early learning 
programs such as Early Head Start or quality child care to help ensure 
that they are ready for school.
Portrait of Infants and Toddlers Living in Poverty
    There are more than 12 million infants and toddlers living in the 
United States. Twenty-one percent--2.6 million--live in poor 
families.v After a decade of decline, the percentage of 
children under the age of 3 living in low-income families is on the 
rise again.vi Between 2000 and 2005, the number of children 
of all ages who were poor increased by 11 percent.vii During 
the same period, the number of infants and toddlers who were poor 
increased by 15 percent.viii It is important to note that 
young children are disproportionately impacted by economic stress. 
Forty-three percent of children under the age of 3--5.2 million--live 
in low-income families (defined as below 200 percent of 
    \v\ Douglas-Hall, Ayona; Chau, Michelle; and Koball, Heather. 2006. 
Basic facts about low-income children: Birth to age 3. September 2006. 
http://www.nccp.org/media/ecp06b_text.pdf (accessed February 5, 2007).
    \vi\ Ibid.
    \vii\ Ibid.
    \viii\ Ibid.
    \ix\ Ibid.
    The environmental stresses to which these children are more likely 
to be exposed, such as inadequate nutrition, substance abuse, maternal 
depression, exposure to environmental toxins, and trauma/abuse can all 
negatively influence their development.x For example, the 
existence of maternal depression and other adult mental health 
disorders can negatively affect children if parents are not capable of 
providing consistent sensitive care, emotional nurturance, protection 
and the stimulation that young children need.xi Maternal 
depression, anxiety disorders, and other forms of chronic depression 
affect approximately 10 percent of mothers with young 
childrenxii--this number is even higher for families in 
poverty. In fact, findings at enrollment from the Early Head Start 
Research and Evaluation Project indicate that nearly half (48 percent) 
of mothers reported enough depressive symptoms to be considered 
clinically depressed.xiii Early and sustained exposure to 
the aforementioned risks can influence the physical architecture of the 
developing brain, preventing babies and toddlers from fully developing 
the neural pathways and connections that facilitate later learning.
    \x\ National Center for Children in Poverty. 1999. Poverty and 
Brain Development in Early Childhood. http://www.nccp.org/media/pbd99-
text.pdf (accessed February 6, 2007).
    \xi\ Cohen, Julie., Onunaku, Ngozi., Clothier, Steffanie., and 
Poppe, Julie. 2005. Helping young children succeed: Strategies to 
promote early childhood social and emotional development. Washington, 
DC: National Conference of State Legislatures and ZERO TO THREE.
    \xii\ M. O'Hara, Postpartum Depression: Causes and Consequences 
(New York, NY: Springer-Verlag Inc., 1994).
    \xiii\ Early Head Start Evaluation and Research Project, Research 
to Practice: Depression in the Lives of Early Head Start Families 
(Washington, DC: U.S. Department of Health and Human Services, 
Administration for Children and Families, January 2003).
The Importance of Unhurried Time
    Welfare to work policy is an area where the importance of infant 
and toddler development may not be so obvious, but is a factor that 
should be given great weight. The need for infants, especially, to 
spend time with their parents should be balanced against society's goal 
of moving adults quickly into the workforce. Often, when this need is 
considered, it is only in the context of the expense of providing child 
care for this group.
    According to a groundbreaking report released by the National 
Academies of Science, From Neurons to Neighborhoods: The Science of 
Early Childhood Development, parents structure the experience and shape 
the environment within which a young child's early development 
unfolds.xiv Infants and toddlers need unhurried time with 
their parents to form the critical relationships with them that will 
serve as the foundation for social, emotional, and cognitive 
development. The better parents know their children, the more readily 
they will recognize even the most subtle cues that indicate what the 
children need to promote their healthy growth and development. For 
example, early on infants are learning to regulate their eating and 
sleeping patterns and their emotions. If parents can recognize and 
respond to their baby's cues, they will be able to soothe the baby, 
respond to his cues, and make the baby feel safe and secure in his new 
world. Trust and emotional security enable a baby to explore with 
confidence and communicate with others--critical characteristics that 
impact early learning and later school readiness.
    \xiv\ Shonkoff, Jack and Phillips, Deborah. 2000. From neurons to 
neighborhoods: The science of early childhood development. Washington, 
DC: National Academy Press.
    At-risk infants and toddlers in particular need time with their 
parents because their early attachments can help serve as a buffer 
against the impact of the multiple risk factors they may face. Early 
attachments are critical for infants and toddlers because a positive 
early relationship, especially with a parent, reduces a young child's 
fear in novel or challenging situations thereby enabling her to explore 
with confidence and to manage stress and also strengthens a young 
child's sense of competence and efficacy.xv In addition, 
early attachments set the stage for other relationships, foster the 
exploratory behavior that is so critical to early learning, and play an 
important role in shaping a young child's ability to react to stressful 
    \xv\ Ibid.
    \xvi\ Ibid.
    The need for time with infants has direct relevance to welfare to 
work policies, and Congress should consider the developmental needs of 
infants and toddlers in shaping these policies. Excessive mandatory 
work requirements for low-income parents who are receiving Temporary 
Assistance to Needy Families (TANF) make unhurried time difficult. 
While states have the option of exempting parents with infants from 
work requirements, many do not take advantage or exempt these parents 
for only a few months.
    There is evidence to suggest that long hours of maternal employment 
in the child's first year, can be a negative factor for infant 
development.xvii It is particularly difficult for mothers 
with young children living in poverty because of the kinds of jobs they 
tend to have (i.e. service jobs), the nontraditional hours they are 
often required to work, and the poor quality child care that is 
available. Young children living in poverty are much more likely to 
have a mother who works nontraditional hours compared with young 
children living above the poverty line.xviii Service jobs, 
which often entail very low wages, few benefits and nontraditional work 
hours, are disproportionately filled by less-educated women who now 
comprise a large group of mothers who are entering the labor force as a 
result of welfare reform and federal work requirements.xix
    \xvii\ Ibid.
    \xviii\ Ibid.
    \xix\ Ibid.
    Finally, we know almost nothing about how the TANF program with its 
work requirements has affected infants and toddlers, for good or ill. 
Some studies have looked at the impact of TANF on older children, but 
ignore the impacts on the youngest. I urge Congress to require research 
into the impacts this program has on the well-being of infants and 

Early Head Start: A Beacon of Hope for Babies Living in Poverty
    Comprehensive high quality early learning programs for infants and 
toddlers, such as Early Head Start, can help to protect against the 
multiple adverse influences that may hinder their development across 
all domains. Very young children living in poverty are more at-risk for 
a variety of poor outcomes than low-income families. Programs like 
Early Head Start not only set the stage for later school readiness and 
success, but also for the parent's road to self-sufficiency.
    Research from the Early Head Start Research and Evaluation Project, 
and its companion follow-up results, concluded that the program is 
making a positive difference in areas associated with children's 
success in school, family self-sufficiency, and parental support of 
child development. For example, Early Head Start produced statistically 
significant, positive impacts on standardized measures of children's 
cognitive and language development. A smaller percentage of Early Head 
Start children scored in the ``at-risk'' range of developmental 
functioning. Early Head Start children had more positive interactions 
with their parents than control group children. In addition, Early Head 
Start significantly facilitated parents' progress toward self-
sufficiency. Although there were not significant increases in income, 
there was increased parental participation in education and job-
training activities. The study also found that Early Head Start parents 
were more involved and provided more support for learning. Early Head 
Start parents were observed to be more emotionally supportive and less 
detached than control-group parents. They also provided significantly 
more support for language and learning than control-group 
    \xx\ U.S. Department of Health and Human Services, Administration 
for Children and Families. 2002. Making a difference in the lives of 
infants and toddlers and their families. The impacts of Early Head 
    The experience of Early Head Start suggests that exempting parents 
of young children from work requirements need not mean an unproductive 
period. They can be engaged in activities that are good for their own 
development as well as that of their children--if resources are 
available. In fact, a few states have channeled TANF funds into 
expanding Early Head Start services.
    Although the benefits of Early Head Start are clear, the program is 
only reaching a small proportion of at-risk children and families. 
Currently, only 10 percent of the overall Head Start budget is used to 
serve 61,243 low-income families with infants and toddlers in the Early 
Head Start program--less than three percent of those eligible. In order 
to ensure that the program can serve more eligible babies, Congress 
must increase the Early Head Start set-aside to at least 25 percent 
over five years and expand funding for Head Start to make those 
increases a reality. We can't wait until these at-risk children are 
already behind at age four to intervene.

Quality Child Care for At-Risk Infants and Toddlers
    Second only to the immediate family, child care is the context in 
which early childhood development most frequently unfolds, starting in 
infancy.xxi According to 2005 data, 42 percent of one-year-
olds and 53 percent of one-to-two-year-olds have at least one regular 
non-parental care arrangement.xxii The increase in the 
number of working parents with babies and toddlers comes at a time when 
science has demonstrated the critical importance of supporting the 
development and learning of children ages birth to three, and makes the 
need for quality child care even more significant.
    \xxi\ Shonkoff, Jack and Phillips, Deborah. 2000. From neurons to 
neighborhoods: The science of early childhood development. Washington, 
DC: National Academy Press.
    \xxii\ Schumacher, Rachel, Hamm, Katie, Goldstein, Anne, and 
Lombardi, Joan 2006. Starting off right: Promoting child development 
from birth in state early care and education initiatives. Washington, 
DC: Center for Law and Social Policy and ZERO TO THREE.
    The evidence associating the quality of infant and toddler care 
with early cognitive and language outcomes ``is striking in 
consistency.'' xxiii High quality child care is associated 
with outcomes that all parents want to see in their children, ranging 
from cooperation with adults to the ability to initiate and sustain 
positive exchanges with peers, to early competence in math and 
reading--all of which are key ingredients to later school success. 
However, more than 40 percent of infants and toddlers are in child care 
rooms of poor quality.xxiv
    \xxiii\ Shonkoff, Jack and Phillips, Deborah. 2000. From neurons to 
neighborhoods: The science of early childhood development. Washington, 
DC: National Academy Press.
    \xxiv\ Cost, Quality and Child Outcomes Study Team. Cost, Quality 
and Child Outcomes in Child Care Centers, Public Report, 2nd edition. 
(Denver Economics Department, University of Colorado at Denver, 1995).
    Research indicates that the strongest effects of quality child care 
are found with at-risk children--children from families with the fewest 
resources and under the greatest stress.xxv Yet, at-risk 
infants and toddlers who may benefit the most from high-quality child 
care are unlikely to receive it--they receive some of the poorest 
quality care that exists in communities across the United 
States.xxvi Poor quality child care for at-risk children may 
diminish inborn potential and lead to poorer developmental 
    \xxv\ Shonkoff, Jack and Phillips, Deborah. 2000. From neurons to 
neighborhoods: The science of early childhood development. Washington, 
DC: National Academy Press.
    \xxvi\ Ibid.
    \xxvii\ Ibid.
    Congress should ensure that all babies and toddlers, particularly 
those living in poverty, have access to quality child care. An increase 
in federal funding for child care would lead to increased investments 
in quality and would help to ensure that more low-income infants and 
toddlers have access to quality child care settings. More funding needs 
to be directed specifically at improving the quality of care for 
infants and toddlers, and providing professional development 
opportunities with infant-toddler content for early childhood staff who 
work with this age group.

    During the first three years of life, children rapidly develop 
foundational capabilities--cognitive, social and emotional--on which 
subsequent development builds. These years are even more important for 
infants and toddlers living in poverty. All young children should be 
given the opportunity to succeed in school and in life. We know that 
all babies, especially those at-risk, need unhurried time in the first 
months of life with their parents. We also know that access to 
comprehensive, high-quality, developmentally appropriate programs and 
services--whether Early Head Start or child care--can serve as a 
protective factor for at-risk infants and toddlers.
    Too often, the effect of our overall policy emphasis is to wait 
until at-risk children are already behind developmentally before 
significant investments are made to address their needs. I urge the 
Committee to change this pattern and invest in at-risk infants and 
toddlers early on, when that investment can have the biggest payoff--
preventing problems or delays that become more costly to address as the 
children grow older. We do not need to accept that vulnerable children 
will inevitably have already fallen behind at age four and then provide 
special education and intensive prekindergarten services to help them 
play catch up. We know what at-risk babies need to help them grow up 
healthy and ready to learn. I urge the Committee to consider the very 
unique needs of babies living in poverty as you address the economic 
and societal costs of poverty.
    Thank you for your time and for your commitment to our Nation's at-
risk infants, toddlers and families.