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



 
                             ESTABLISHING A

                        MODERN POVERTY MEASURE

=======================================================================

                                HEARING

                               before the

                            SUBCOMMITTEE ON
                   INCOME SECURITY AND FAMILY SUPPORT

                                 of the

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

                       ONE HUNDRED TENTH CONGRESS

                             SECOND SESSION

                               __________

                             JULY 17, 2008

                               __________

                           Serial No. 110-92

                               __________

         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
STEPHANIE TUBBS JONES, Ohio          THOMAS M. REYNOLDS, New York
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
SHELLEY BERKLEY, Nevada
JOSEPH CROWLEY, New York
CHRIS VAN HOLLEN, Maryland
KENDRICK MEEK, Florida
ALLYSON Y. SCHWARTZ, Pennsylvania
ARTUR DAVIS, Alabama

             Janice Mays, Chief Counsel and Staff Director

                  Brett Loper, Minority Staff Director

                                 ______

           SUBCOMMITTEE ON INCOME SECURITY AND FAMILY SUPPORT

                  JIM MCDERMOTT, Washington, Chairman

FORTNEY PETE STARK, California       JERRY WELLER, Illinois
ARTUR DAVIS, Alabama                 WALLY HERGER, California
JOHN LEWIS, Georgia                  DAVE CAMP, Michigan
MICHAEL R. MCNULTY, New York         JON PORTER, Nevada
SHELLEY BERKLEY, Nevada              PHIL ENGLISH, Pennsylvania
CHRIS VAN HOLLEN, Maryland
KENDRICK MEEK, Florida

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 
in electronic form. The printed hearing record remains the official 
version. Because electronic submissions are used to prepare both 
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unintentional errors or omissions. Such occurrences are inherent in the 
current publication process and should diminish as the process is 
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                            C O N T E N T S

                               __________
                                                                   Page

Advisory of July 10, 2008, announcing the hearing................     2

                               WITNESSES

Rebecca Blank, Ph.D., Robert V. Kerr Senior Fellow, The Brookings 
  Institution....................................................    40
Sheldon Danziger, Ph.D., H.J. Meyer, Distinguished University 
  Professor of Public Policy, Gerald R. Ford School of Public 
  Policy, University of Michigan, Anne Arbor, Michigan...........    25
Douglas W. Nelson, President/CEO, Annie E. Casey Foundation, 
  Baltimore, Maryland............................................    35
Mark Levitan, Ph.D., Director of Poverty Research, NYC Center for 
  Economic Opportunity, New York, New York.......................    48
Bruce D. Meyer, Ph.D., McCormick Tribune Professor, Harris School 
  of Public Policy Studies, University of Chicago, Chicago, 
  Illinois.......................................................    55

                       SUBMISSIONS FOR THE RECORD

Mayor Gavin Newsom, statement....................................    81
Wider Opportunities for Women, statement.........................    84
AARP, statement..................................................    92
Deborah Weinstein, letter........................................    93
Denton Vaughan...................................................    94
Diana Pearce.....................................................   100
Elisabeth Babcock, letter........................................   108
First 5 Marin Children and Families Commission, letter...........   109
Ismael Ahmed, statement..........................................   110
Kim Aponte, letter...............................................   111
Leadership Conference on Civil Rights, letter....................   112
Mark Greenberg, letter...........................................   113
Roger A. Clay, Jr., statement....................................   115
Steven P. Wallace, Ph.D., letter.................................   122
The National Senior Citizens Law Center, statement...............   122
The United Way of the Bay Area, statement........................   123


                             ESTABLISHING A



                         MODERN POVERTY MEASURE

                              ----------                              


                        THURSDAY, JULY 17, 2008

             U.S. House of Representatives,
                       Committee on Ways and Means,
        Subcommittee on Income Security and Family Support,
                                                    Washington, DC.

    The Subcommittee met, pursuant to notice, at 10:02 a.m., in 
room B-318, Rayburn House Office Building, Hon. Jim McDermott 
(Chairman of the Subcommittee), presiding.
    [The advisory announcing the hearing follows:]

ADVISORY

FROM THE 
COMMITTEE
 ON WAYS 
AND 
MEANS

                            SUBCOMMITTEE ON

                   INCOME SECURITY AND FAMILY SUPPORT

                                                CONTACT: (202) 225-1025
FOR IMMEDIATE RELEASE
July 10, 2008
ISFS-17

                     McDermott Announces Hearing on

                 Establishing a Modern Poverty Measure

    Congressman Jim McDermott (D-WA), Chairman of the Subcommittee on 
Income Security and Family Support of the Committee on Ways and Means, 
today announced that the Subcommittee will hold a hearing on a draft 
proposal to establish a modern measure of poverty in the United States. 
The hearing will take place on Thursday, July 17, 2008, at 10:00 a.m. 
in B-318, Rayburn House Office Building.
      
    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 to appear may submit a 
written statement for consideration by the Subcommittee and for 
inclusion in the record of the hearing.
      

BACKGROUND:

      
    On August 1st, 2007, the Subcommittee on Income Security and Family 
Support of the Committee on Ways and Means held a hearing on the 
current official poverty measure, which was devised in the mid 1960s 
and based on consumption patterns from the mid 1950s. Testimony from 
that hearing and other statements on the topic highlight a broad 
consensus that the current poverty measure is critically important, but 
it needs to be significantly updated. Modernizing the nation's 
measurement of poverty is necessary to accurately depict how widely 
shared economic prosperity is in America, to appropriately target 
resources to the most disadvantaged, and to fully assess the impact of 
programs and policies designed to reduce poverty.
      
    In 1995, the National Academy of Sciences (NAS) issued 
recommendations for an improved measure of poverty. Many experts 
continue to believe these proposed revisions represent the best 
opportunity for a comprehensive update of the current poverty measure.
      
    Chairman McDermott has prepared and circulated draft legislation, 
the Measuring American Poverty Act, reflecting the NAS recommendations. 
This newly proposed measure of poverty would continue to track 
significant deprivation, but it would be based on current consumption 
patterns for the most basic necessities. Additionally, it would more 
fully account for income assistance from public programs and for 
necessary living expenses. This new measure would augment, not replace, 
the current official poverty measurement. It would therefore not have 
any direct impact on public program eligibility or on the distribution 
of Federal funds (any decision to base program eligibility or the 
distribution of funds on the new modern poverty measure would have to 
occur on a program-by-program basis). Click here for the draft bill.
      
    In announcing the hearing, Chairman McDermott stated: ``If we want 
to make a measurable dent in poverty, we had better learn to measure it 
accurately. My draft bill and this hearing are designed to push us in 
that direction. No other critical statistic has fallen so far behind 
the times as the poverty measure. It's time to move forward with a 
measure that is realistic, non-ideological, and accurate.''

FOCUS OF THE HEARING:

      
    The hearing will consider proposals to improve and update the 
current poverty measure.
      

DETAILS FOR SUBMISSION OF WRITTEN COMMENTS:

      
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noted above.

                                 

    Chairman MCDERMOTT. Good morning. The meeting will come to 
order.
    I picked up this morning's Seattle Post-Intelligencer, and 
the article is entitled ``Everything Goes Up Except Wages'' so 
it seemed like they sort of anticipated what we were going to 
do here today.
    The Subcommittee has convened several hearings over the 
last 2 years to explore the policies and programs designed to 
reduce poverty in America. However, this ongoing discussion 
keeps highlighting the inadequacy of our current method for 
measuring poverty.
    In short, we are still using a poverty standard that was 
developed in the 1960s and is based on consumption data from 
the '50s. That means our poverty measure is based on 
multiplying a minimally adequate food plan by three, because in 
the mid-'50s families spent about one-third of their after-tax 
income on food.
    Today, however, we know there are other needs: housing, 
transportation, gasoline at $4.50 a gallon has to be somehow 
factored into what is going on. Medical care requires a much 
bigger share of the family budget than 50 years ago. It means 
that our poverty measure doesn't count work expenses like 
childcare because it assumes that most mothers stay at home as 
was the case in the middle of the last century. It means our 
poverty measure doesn't even count the earned income tax credit 
or food stamps toward disposable income because those programs 
didn't exist when the measurement was created.
    In 1995, a non-partisan panel of experts at the National 
Academy of Sciences, I think we have a couple of Members here 
today, recommended a better measure. We are late in responding, 
even by government standards.
    This hearing and the draft bill I have proposed marks a new 
effort to put those recommendations into place. The thrust of 
this approach requires measuring current expenditures needed 
for basic necessities like food, clothing, housing, utilities, 
and then determining income available to meet these needs, 
including near-cash benefits. The measure would also account 
for the geographical differences in the cost of living.
    Certain components in the proposed revision like updating 
the poverty thresholds will increase poverty rates, 
undoubtedly, compared to the current measure, while other 
aspects such as expanding the definition of income will reduce 
the rates. In the aggregate, a new poverty measure based on the 
National Academy of Sciences' suggestions will likely show a 
higher number of poor Americans compared to the current 
definition. However, it is important to remember this measure 
is still designed to assess significant deprivation, not a 
reasonable standard of living.
    My draft legislation calls for a second assessment on how 
to arrive at what I call a decent living standard. The draft 
bill also makes it clear that this modern definition of poverty 
would have no direct impact on program eligibility levels or on 
the distribution of Federal funding. Only future case by case 
decisions on individual programs could change these 
determinations, but at least we would be trying to do something 
on better data than we have done before.
    Our current poverty definition was first developed in 1963, 
before the Beatles trip to the United States, before the 
establishment of Medicare, and before the assassinations of 
Kennedy and Martin Luther King. It is clearly time, far past 
time for a major update.
    If we want to make measureable progress in reducing poverty 
we first need to measure poverty properly. I have put forward 
this proposal reflecting a consensus on expert opinion on how 
to dramatically improve the current measure.
    Mayor Bloomberg recently announced that New York City is 
implementing a very similar concept, so we know it can be done.
    Next month, new poverty figures will be announced that we 
all know fail to truly capture hardship in America. I therefore 
hope my friends on both sides of the aisle will join me in 
pushing for a comprehensive update in the way that we measure 
poverty. We have waited for nearly half a century for a new 
poverty measure. We shouldn't have to wait much longer.
    I want to yield to my Ranking Member, Mr. Weller.
    Mr. WELLER. Thank you Mr. Chairman, and good morning, and 
good morning to our panelists, and thank you for participating 
in today's hearing.
    Mr. Chairman, I want you to know I appreciate your calling 
this hearing and offering concrete ideas for changing how the 
U.S. measures poverty. These definitional questions are 
certainly important. I have offered my own legislation to 
improve how poverty is calculated, so I believe it is an area 
where we can work together.
    I want to start off by saying that we have an even more 
pressing need when it comes to poverty, and that is providing 
relief to the households effectively being forced into lower 
incomes and poverty due to rising energy prices. According to 
non-partisan Congressional Research Service, between 1 and 1.3 
million households have already seen their living standards 
fall below the poverty level due to recent spikes in home 
energy and gasoline prices.
    Mr. Chairman, I have a copy of this study by the non-
partisan Congressional Research Service. I ask unanimous 
consent to insert it into the record at this point.
    Chairman MCDERMOTT. So, ordered.
    [The Committee Insert follows:]
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    Mr. WELLER. Thank you Mr. Chairman.
    Mr. Chairman, these are people who don't want handouts, but 
like all Americans, they want to be able to afford the gas they 
need to get to work. They want to afford power for their homes, 
and to keep their families cool this summer and warm this 
winter. That is not too much to ask, but that is something this 
Congress has been totally incapable of delivering.
    The reason for all this is simple and increasingly obvious. 
The current leadership's refusal to increase energy supplies in 
effective and environmentally safe and sensible ways. This is 
nothing new. Unfortunately, Democratic leaders have been 
blocking new energy supplies for literally the last two 
decades.
    For example, former President Clinton vetoed legislation 
Congress passed in 1995 authorizing more environmentally safe 
exploration and development of oil in Alaska, oil that today 
would be helping to keep our energy prices down. In fact, I 
believe about 1.4 million barrels of oil a day would be in the 
pipeline today had that legislation been signed into law, and 
that would replace Venezuela as a foreign supplier.
    I would also note this past Monday, the President made an 
announcement regarding his intention to change the executive 
order allowing increased access on public lands giving the 
opportunity to increase supplies. We have already seen the 
impact on the price of oil as a result of that announcement, 
where the price per barrel of oil has dropped $10 on Tuesday 
and Wednesday immediately following that announcement. Imagine 
the impact on the price of oil if only Congress would also act 
to increase supplies, particularly for oil supply, and that 
would help workers, particularly those that are at the edge of 
poverty or below the edge of poverty, get to work.
    So, our very first order of business when it comes to 
poverty should be to reverse the damage already done to 
American families, and that means increasing the energy 
supplies which will reduce energy prices and energy-induced 
poverty.
    As for the draft proposal we are considering today, before 
a similar hearing last August I introduced legislation, H.R. 
3243, that would count more current antipoverty benefits as 
income. That legislation would improve our understanding, both 
of who is poor and how effective current antipoverty programs 
are. By better counting the help taxpayers already provide, my 
legislation would cut the real poverty rate in half while 
spotlighting those who need additional help to escape poverty.
    The proposal offered by my friend Mr. McDermott takes a 
different approach. To his credit, the Chairman's proposal 
would count some, but still not all, current antipoverty 
benefits as income, but the Chairman's proposal would also 
increase by even more the income someone needs to officially 
escape poverty. That is like advancing the football five yards 
but moving the goalpost another 20 yards further away.
    As a result, the Chairman's approach would dramatically 
increase the number of Americans who would be counted as poor. 
Using today's formula, there are currently 36 million Americans 
we consider poor. We all agree that is far too many, but under 
the Chairman's proposal, and without any change in anyone's 
real standard of living, there would be at least 52 million 
poor Americans. 15 million more, or a 40-percent increase in 
the total number of those considered to be in poverty.
    This proposal is especially ironic given prior proposals by 
my friend the Chairman. In 2005, my friend sought to make it a 
national goal to eliminate poverty in the United States within 
20 years, and that is a laudable goal, something I would like 
to see achieved. Yet today, our Chairman proposes to increase 
poverty by adding 15 million more Americans to the poverty 
rolls. What's more, adopting this proposal would guarantee the 
United States would never eliminate poverty so long as some 
Americans earn less than others spend.
    Despite these differences, it is important to note that all 
sides agree on the need to count more current antipoverty 
benefits as income, which my legislation would do, and the 
Chairman's proposal also includes. Our failure to do so, as Dr. 
Blank notes, means we have no effective measure of how our 
antipoverty policies have improved the economic well-being of 
low-income families over time. We can pass legislation to count 
more current benefits as income tomorrow, and in my view we 
should.
    Mr. Chairman, I very much want to work with you, we have 
had some successes when we do, and I look forward to today's 
testimony. Thank you.
    Chairman MCDERMOTT. Thank you. We could engage in a debate 
about oil, but I don't think we are going to go there today. 
Although I do have a bill here for gas stamps if you would like 
to look at it.
    [Laughter.]
    Mr. WELLER. Gas stamps.
    Chairman MCDERMOTT. Which would do something immediately 
rather than drilling in 10 years, but we won't talk anymore.
    Mr. WELLER. If we would increase supplies, the prices would 
go down, and people wouldn't need those gas stamps, Mr. 
Chairman.
    [Laughter.]
    Chairman MCDERMOTT. We are going to start with Sheldon 
Danziger as our first witness. Dr. Danziger is from
    Ms. BERKLEY. Mr. Chairman? May I submit my opening 
statements?
    Chairman MCDERMOTT. Oh, surely.
    Ms. BERKLEY. I could give them or submit them, but maybe in 
the interest of time
    Chairman MCDERMOTT. Yes, we want to move because we have 
got stuff coming.
    Ms. BERKLEY. Alright, then may I submit them for the 
record?
    Chairman MCDERMOTT. Without objection.
    Ms. BERKLEY. Thank you.
    Chairman MCDERMOTT. Sure.
    [The prepared statement of Ms. Berkley follows:]
    [GRAPHIC] [TIFF OMITTED] T5704.017
    
    Chairman MCDERMOTT. Dr. Danziger is the Distinguished 
University Professor of Public Policy at the Gerald Ford Public 
Policy School in Ann Arbor.
    Dr. Danziger.

STATEMENT OF SHELDON DANZIGER, PH.D., H.J. MEYER, DISTINGUISHED 
UNIVERSITY PROFESSOR OF PUBLIC POLICY, GERALD R. FORD SCHOOL OF 
   PUBLIC POLICY, UNIVERSITY OF MICHIGAN, ANN ARBOR, MICHIGAN

    Dr. DANZIGER. I am pleased to have the opportunity to 
testify today
    Chairman MCDERMOTT. Let me just say, we would ask you to 
keep your comments to 5 minutes so we have some time for 
questions, and the rest of your testimony has been entered into 
the record, so you
    Dr. DANZIGER. Thank you. I am planning to summarize the 
highlights from my written remarks.
    Chairman MCDERMOTT. Good.
    Dr. DANZIGER. I am here to comment on and support the ideas 
put forth in the draft proposal of the Measuring American 
Poverty Act.
    I have three key points to make. First, the official 
poverty rate, which was adopted in the late 1960s, remains an 
important social indicator. Despite its flaws, the official 
poverty rate provides valuable information on how far we still 
have to go to achieve President Johnson's goal of ending income 
poverty. I think it is very important, especially for the 
historical record, that the Census Bureau continues to publish 
this measure every year, as your bill suggests.
    Second, I want to point out that social scientists have 
spent a lot of time over the last three decades studying how to 
better measure poverty. There is widespread support among the 
research community for an updated measure based on the 
recommendations of the Panel on Poverty and Family Assistance 
of the National Academy of Sciences. In full disclosure, I was 
a member of that panel, so I obviously have long ago endorsed 
the report.
    What is important is that the NAS panel laid out the case 
as to why a modern poverty measure needs to have both a change 
in the poverty thresholds and a change in the resources that 
are counted. Again, the draft act does an excellent job of 
specifying how the NAS panel's recommendations in both areas 
could be moved forward by the Census Bureau and other 
statistical agencies.
    Third, I present some data analysis that I am not going to 
discuss in my oral testimony, that shows that a modern poverty 
measure would also do a better job of showing us the extent of 
poverty after the market, that is after individuals earn wages, 
salaries, private pensions, etc., and a better job of measuring 
the antipoverty effectiveness of government transfers. The fact 
that the act specifies that we measure both poverty before 
taxes and transfers and poverty after taxes and transfers is, I 
think, important.
    Let me mention very briefly the historical record. We have 
talked a lot about the NAS measure in recent years. There was a 
1976 study on poverty measurement mandated by Congress in 1974 
and it also came to conclusions that are quite similar to those 
of the NAS. I quote that report in my testimony. The key point 
to make is that the 1976 panel also suggested that it was 
appropriate to both raise the poverty cut-offs and to include 
additional sources of income.
    I think it is particularly important, as I mentioned, that 
we maintain an official Census Bureau series on progress 
against the official measure because of its historical nature. 
The Nobel prize-winning economist James Tobin, Robert Lampman, 
and a lot of other policy analysts who worked in the Johnson 
Administration when the war on poverty was started clearly saw 
at that time that the official poverty measure would eventually 
need to be revised. Lampman in 1971 wrote, ``As I see it, the 
elimination of income poverty is usefully thought of as a one 
time operation in pursuit of a goal unique to this generation. 
That goal should be achieved before 1980, at which time the 
next generation will have set new economic and social goals.''
    Thus, several decades later, it is very appropriate that we 
think about a new antipoverty goal, but it is also important to 
reflect on the difficulties we have had, which I have argued 
and written about, that are primarily due to economic changes 
that began in the 1970s. These changes have kept wages from 
growing as they did in the 25 years after the end of World War 
II.
    Even if one adds many non-cash benefits, the earned incomes 
tax credit and subtracts taxes, I think where you and Mr. 
Weller are in agreement, one would still have a poverty rate 
which is not close to zero. This tells us something about the 
economic difficulties the economy has experienced over the last 
several decades.
    In sum, the draft act is very important. I think it is 
appropriate to have a separate measure of medical risk as the 
act specifies. I will be happy to answer questions about 
anything else in my testimony at the end of the prepared 
remarks.
    Thank you very much.
    [The prepared statement of Mr. Danziger follows:]
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    Chairman MCDERMOTT. Thank you very much.
    Doug Nelson is the president and CEO of the Annie E. Casey 
Foundation in Baltimore.
    Mr. Nelson.

   STATEMENT OF DOUGLAS W. NELSON, PRESIDENT/CHIEF EXECUTIVE 
    OFFICER, ANNIE E. CASEY FOUNDATION, BALTIMORE, MARYLAND

    Mr. NELSON. Thank you Mr. Chairman, thank you Members of 
the Committee. I appreciate the invitation to speak on this 
issue and especially the opportunity to appear on a panel with 
some of the Nation's foremost research economists.
    I am here because I believe that this Committee's effort to 
establish a modern poverty measure can powerfully contribute to 
a bi-partisan consensus around policies that in the long run 
will yield greater security and success for America's low 
income families and children.
    The Annie E. Casey Foundation's commitment to helping 
vulnerable children is probably matched only by our 
determination to come to conclusions guided by quality data and 
useful indicators. I think every year since 1990 we have 
released an annual Kids Count data book which seeks to be the 
best available data to measure social, educational, economic, 
and physical conditions of America's children State by State. 
We care about this kind of data because we are convinced that 
it helps and has helped leaders and citizens make better 
decisions about how to improve the lives of children and 
families.
    Since its inception almost 20 years ago, Kids Count has 
tracked a core set of indicators for measuring child need and 
the effectiveness of programs designed to meet those needs. 
Clearly, of all the measures we rely on, none is more 
fundamental or consequential than how we assess a family's 
economic standing.
    That is why the Annie E. Casey Foundation has been so 
distressed at the Nation's continued reliance on what is an 
outdated, incomplete, and misleading measure of poverty. Today, 
almost everybody would agree that the current definition of 
poverty, which sets the threshold at about 21,200 for a family 
of four, utterly fails to yield anything remotely close to a 
well thought out or accurate measure of who is genuinely poor 
in the United States. Indeed, scholar Nicholas Eberstadt of the 
American Enterprise Institute has aptly dubbed the poverty 
measure 'America's worst statistical indicator.'
    The current measure is flawed in two fundamental ways. 
First of all, it badly underestimates the actual cost of paying 
for basic and essential needs that American families are 
expected to be able to meet. Secondly, the current measure 
significantly underestimates the total income, resources, and 
benefits that many of today's families actually receive and use 
to meet those minimum needs.
    Children's advocates across the country are right now 
rallying around a proposed campaign to cut the Nation's child 
poverty rate in half over the next decade. Yet many of our most 
promising approaches to improving the economic fortunes of 
children, expanding the earned income and child tax credits for 
working families, extending child care subsidies, increasing 
utilization of food stamps, providing housing assistance, many 
of these things are not even recognized under today's method of 
measuring poverty.
    Excluding these resources makes little sense, especially 
since they are among the very resources that have the greatest 
potential to pull families out of the deep and persistent 
poverty that hurts children the most.
    Evidence is overriding that when families are entrapped in 
persistent poverty, childhood problems multiply. Almost 90 
percent of the families who end up losing their kids to the 
foster care system in this country are poor. Poor kids are five 
times more likely to miss learning proficiency benchmarks in 
school than kids from more economically secure families. Kids 
growing up in poor families are far more likely to drop out of 
school, get pregnant, or get in trouble with the law.
    There is every reason to worry that this persistent 
sustained family poverty that triggers these kind of childhood 
problems will grow, particularly as more entry level, low-
skilled jobs in the American economy are impacted by an 
increasingly global labor market.
    We can now, as a country, reasonably predict that without 
appropriate policy reforms, an increasing share of American 
families will have to settle for wages that simply cannot buy 
enough to sustain a family at an American standard of living. 
This is a drag on America's competitiveness.Economists estimate 
that it costs almost $500 billion a year to allow child poverty 
to persist at current rates.
    An accurate measure of poverty would go a long way toward 
better informing how to help these vulnerable families. By 
including food stamps, EITC, child tax credit, and housing 
assistance, we would be better able to determine the impact of 
these important policy investments, as well as tracking more 
carefully who is taking advantage and who is not taking 
advantage of such assistance. By modernizing the current method 
to approximate what it actually takes to cover basic family 
needs, policy makers would be much better equipped to 
understand the real cost of getting by in America.
    For all of those reasons, we support the legislation being 
considered by this Committee. More Americans want to hear about 
what their political leaders will do to fight poverty, and it 
is time for all parties in this now-stalemated definitional 
debate to table their disagreements and come together around a 
more credible and policy-relevant approach to poverty 
measurement. A decade and a half after its release, the NAS 
report still provides the best roadmap for getting to a useful 
poverty measure.
    At Casey, we find it encouraging that this Subcommittee is 
considering a bill that would enact virtually all the key NAS 
recommendations.
    We commend the Subcommittee Chairman, the Ranking Member, 
and the Members of this Committee for seriously grappling with 
this urgent, much-needed reform.
    Let me close, Mr. Chairman, by saying we have learned a lot 
and we know a lot about how we can more accurately measure 
poverty. It is time to apply that learning as a first step 
toward reducing poverty and the harm it does for our kids and 
for this country's future.
    Thank you very much.
    [The prepared statement of Mr. Nelson follows:]
  Statement of Douglas W. Nelson, President/Chief Executive Officer, 
             Annie E. Casey Foundation, Baltimore, Maryland
    Thank you for the opportunity to testify today in support of 
efforts to revise the methods used to measure poverty in this country. 
My name is Douglas W. Nelson and I am President and CEO of the 
Baltimore-based Annie E. Casey Foundation, a national philanthropy 
devoted to fostering public policies, human services and community 
supports that meet the needs of disadvantaged children and families.
    The Annie E. Casey Foundation's passionate commitment to helping 
those children and families who are most vulnerable is matched only by 
our determination to be guided by quality data and useful indicators. 
This is illustrated by our KIDS COUNT project and our numerous 
investments aimed at measuring the impact of our grants on the status, 
conditions and well-being of the families our grantees are seeking to 
help. In our judgment, good measures of kid and family conditions are 
indispensible to good policy decisions and public accountability.
    Every year since 1990, we have released an annual KIDS COUNT Data 
Book, which uses the best available data to measure the educational, 
social, economic and physical well-being of children, state by state. 
The Foundation also funds a national network of state-level KIDS COUNT 
projects that provide a more detailed, county-by-county picture of the 
condition of children. We care about this data because it helps leaders 
and citizens make better decisions about how to improve the lives of 
children and their families.
    Let me give you an example of what I mean. Several years ago, our 
KIDS COUNT grantee in Rhode Island developed an improved measurement of 
childhood lead poisoning that was much easier for the public to track 
and understand. Rhode Island KIDS COUNT's baseline data showed that one 
in four children in Rhode Island had a history of lead poisoning upon 
entering kindergarten, and that one in three children in the state's 
five core cities entered kindergarten with a history of lead poisoning.
    The publication of this data sounded an alarm in Rhode Island that 
this was a serious issue in need of immediate attention. Community 
leaders responded in many effective ways, including better enforcement 
of lead laws and enhanced parent education. Their efforts resulted in 
the development of city and state lead poisoning prevention plans and 
the passage of a comprehensive lead poisoning prevention law by the 
General Assembly. The incidence of childhood lead poisoning has 
decreased significantly during the decade since the indicator was first 
published--down to 6 percent statewide and 10 percent in the core 
cities.
    Since its inception nearly 20 years ago, KIDS COUNT has tracked a 
core set of indices for measuring child need and the effectiveness of 
programs designed to meet those needs. But, clearly, of all the 
measures we rely on, none is more fundamental or consequential than how 
we assess a family's economic standing. That's why Casey has been so 
distressed at the nation's continued reliance on an outdated, 
incomplete, and misleading measure of poverty.
    All of this is to explain why I am here today and why I believe it 
is essential that we act now to change our deeply flawed poverty 
measure. It is essential for a simple reason: the lack of an accurate, 
credible, and relevant poverty measure has itself become a major 
impediment to combating poverty effectively. If we want to solve the 
poverty challenge, step one is to get our heads around the true scope, 
dimension, and dynamics of the problem.
    Today, almost no one would argue that the current poverty 
definition--which sets the poverty threshold at 21,200 for a family of 
two adults and two children--yields anything remotely close to a well 
thought out, accurate measure of who is genuinely poor. Indeed, scholar 
Nicholas Eberstadt of the American Enterprise Institute has dubbed the 
poverty measure ``America's worst statistical indicator.''
    Most Americans have a pretty solid sense of what it means for a 
family to be poor. As Rebecca Blank of the Brookings Institution has 
said, poor families are folks who do not have enough resources to 
afford decent housing, to find and hold a job, to be well fed and 
reasonably healthy and to pay for the things that their children need 
to be safe and succeed in school. Unfortunately, our current poverty 
measure--crafted in the 1960s--simply does not reflect this common 
sense understanding of what it means to be poor in 2008.
    The current measure is flawed in two fundamental ways. First of 
all, it underestimates the actual cost of paying for the core of basic 
and routine needs that American families are expected to meet. 
Developed when food represented one-third of a typical family's budget, 
the poverty line was drawn by the Federal Government by calculating the 
cost of a basic grocery budget and multiplying by three. The dollar 
figure developed in 1963 has only been adjusted for inflation, even 
though food is now one-seventh of a typical family's budget, and even 
though the formula does not take into account the actual cost of other 
core expenses, such as housing and work-related costs, that take up a 
much greater portion of family budgets today than they did 40 years 
ago. In the opinion of some analysts, the current formula produces a 
``poverty line'' income that may amount to less than 60 percent of what 
it actually costs a family to meet its basic needs.
    The second basic flaw of the current measure is that it 
significantly underestimates the total income, resources or benefits 
that many of today's families actually receive and use to meet those 
basic needs. The current poverty formula fails to include valuable non-
cash benefits such as housing assistance, the Earned Income Tax Credit, 
the Child Tax Credit and food stamps. Consequently, the official 
federal poverty data not only understates the cash and benefits many 
low-income families enjoy, but also gives us no indication of how well 
some of our key public investments in the economic well-being of low-
income families are paying off.
    Across the country, children's advocates are rallying around a 
proposed campaign to cut the nation's child poverty rate in half over 
the next decade. Yet many of our most promising approaches to improving 
the economic fortunes of children--expanding the earned-income and 
child tax credits for working families, extending child care subsidies, 
increasing the utilization rates for food stamps and other means-tested 
programs--would never be recognized by today's poverty measure. These 
are, however, among the very resources and benefits that have the 
potential to pull families out of the deep and persistent poverty that 
hurts kids most.
    The evidence is overwhelming that when families are entrapped in 
persistent poverty, childhood problems multiply. Ninety percent of the 
families who end up losing their kids to foster care are poor. Poor 
kids are five times more likely to miss learning proficiency benchmarks 
than kids from families with greater economic security. Kids growing up 
in poor families are far more likely to drop out of school, get 
pregnant, or get in trouble with the law. There is every reason to 
worry that the persistent, sustained poverty that triggers these 
problems could grow, particularly as more entry level jobs in the 
American economy are lost to the global labor market. As a result, more 
families are settling for wages that cannot produce enough to sustain a 
family at an ``American'' standard of living.
    Persistent structural poverty is a serious drag on American 
competitiveness, optimism, cohesion and influence in the world. 
Economists now estimate that child poverty costs the nation about $500 
billion a year. That burden will worsen in time. This nation--a 
dramatically aging one--cannot afford to have as much as a fifth of its 
children grow up without the skills, supports, connections and 
opportunities needed to participate in the nation's new economy.
    Unfortunately, the poverty measure as it exists today does not tell 
us enough about what is actually helping these children. There is ample 
evidence that the poverty threshold would be higher, and would convey a 
far more accurate sense of real need, if the poverty measurement 
objectively reflected how much a family needs to ``get by'' or ``make 
ends meet'' in America today.
    Under a number of approaches used in recent years to calculate this 
``getting by'' threshold, a basic family budget would include food, 
housing, out-of-pocket medical costs, child care, transportation and 
taxes. Although there were significant regional differences, most of 
the methods used resulted in a ``poverty'' standard that was 
approximately twice the current poverty level. The Economic Policy 
Institute, for example, which calculated this basic family budget for 
more than 400 communities, came up with a median budget of 39,984 for a 
family of four. By contrast, the poverty threshold at the time of the 
study was just 19,157.
    A large part of our work at the Annie E. Casey Foundation focuses 
on what we call Family Economic Success--the ability of families to 
secure adequate incomes, stabilize their finances, accumulate savings 
and live in safe, economically viable communities. In order to 
determine whether federal policies, and the work of our grantees, are 
effective, we need a more accurate and relevant measure of how families 
are progressing financially. At the very least, the measure should be 
designed to assess whether struggling families have the minimum 
resources they need to lead safe and healthy lives.
    An accurate poverty measure might lead to changes in some of the 
strategies we use to help families in need. By including food stamps, 
the EITC, the child tax credit and housing assistance in the poverty 
measurement, we would be able to better determine who was taking 
advantage of these programs and who wasn't--and how these families were 
doing as a result. We might find, for instance, that those who were 
receiving certain types of government assistance showed greater success 
at moving out of poverty, while those who weren't remained stuck in 
place year after year.
    Having an accurate poverty measure would also provide us with 
better information for considering long term, as well as short term 
strategies--what we call a ``two-generation approach'' to fighting 
poverty. Such an approach supports, stabilizes, and empowers low-income 
working parents through work support programs, while at the same time 
aggressively equipping their kids with the skills, experiences and 
values to increase their odds of avoiding hardship, forming intact 
families and contributing to national prosperity.
    Universal preschool and quality child care and after school 
programs, for example, are considered key tools for ensuring that the 
next generation of kids is better equipped to move out of poverty. A 
new approach to calculating poverty could provide a measure of the 
short and long term success of such strategies and create public and 
political will to expand those programs that have proven successful in 
reducing poverty. It could also help re-target programs that are not 
working as well.
    Clearly, there are many excellent reasons for changing the poverty 
measure. Why then hasn't it happened? Why do we tolerate such an 
egregiously flawed indicator of such a critically important measure of 
the social and economic status of our nation's citizens--especially 
when we know how to do better?
    There are doubtless lots of reasons. Inertia, convenience, and the 
advantages of keeping a measure that allows 40 years of longitudinal 
comparisons all reinforce acceptance of the status quo.
    Perhaps even more important, there are real philosophical and 
political differences about who should be counted as poor. Some critics 
have consistently preferred changes in the measure that would reduce 
the numbers of Americans counted as poor. They point to the failure of 
the current measure to take into account the value of public benefits, 
and they argue that many who are now counted as poor have far greater 
access to comforts and conveniences (e.g., cars, televisions, air 
conditioning) than those counted as poor 40 years ago.
    Other critics have favored changes that would increase the number 
of Americans described as poor. They contend that the amount of money 
required to minimally support a family--at today's housing, 
transportation, child care, utility, and medical costs--significantly 
exceeds the current poverty threshold, and that millions of families 
with pre-tax incomes well above the official poverty line experience 
great difficulty in paying for what are now considered the basic 
requirements of a stable family life.
    These two competing perspectives--each harboring some solid, if 
partial, correctness--have been allowed to paralyze the nation's 
poverty measurement reform efforts for decades. It's time that we 
recast the debate beyond an either/or choice to a new common sense 
consensus that draws thoughtfully from the analyses of both 
perspectives.
    Changing the poverty measurement would also likely result in shifts 
in the allocation of certain federal funding for some groups. In her 
2008 paper, ``How to Improve Poverty Measurement in the United 
States,'' Rebecca Blank notes that the alternative poverty measurement 
guidelines developed by the National Academy of Sciences (NAS) resulted 
in fewer people with large in-kind benefits being classified as poor, 
an increase in working poor after work expenses were calculated, and 
changes in the number of elderly poor due to such factors as the 
subtraction of out-of-pocket medical expenses.
    Some dissatisfaction is inevitable among competing groups likely to 
feel that their interests will be adversely affected by the new 
numbers. The process, however, will be far less painful if from the 
beginning the poverty measurement is taken out of the political realm.
    For the NAS guidelines or similar approaches to succeed, the 
Executive Office of the President should no longer have direct control 
of the poverty measurement. Unlike the vast majority of economic 
statistics, which are the responsibility of federal statistical 
agencies, updating the poverty measure is overseen by the Office of 
Management and Budget. That means any changes in the measure must pass 
through the White House. Ms. Blank got to the heart of the matter in 
her recent paper: ``If we need an example of why economic statistics 
should be in the hands of statistical agencies, the long-term stalemate 
over poverty measurement provides an excellent one!''
    At Annie E. Casey, we endorse Ms. Blank's suggestion for assigning 
to a federal statistical agency the authority to develop an alternative 
measure of poverty that embraces the key elements of the National 
Academy of Sciences' approach. That means including non-cash benefits 
and refundable credits, accounting for child care costs and out-of-
pocket medical expenses and, if feasible, adjusting for some regional 
differences in the cost of living.
    Like any good poverty measure, this new approach would follow data 
over time in order to understand trends and ensure that policy aimed at 
fighting poverty is really working. I believe that changing the poverty 
measure should be viewed as part of overall efforts in this country to 
hold ourselves and our policy makers accountable for honestly 
confronting the problems faced by those in need--and coming up with 
clear and measurable responses.
    We should add that other existing efforts to measure child well-
being in this country are, like the poverty measurement, inadequate and 
out-dated. That is why the Annie E. Casey Foundation strongly supports 
efforts being considered by both chambers of Congress that would create 
a state-level survey on child well being. Like a more accurate poverty 
measure, this survey would provide each state with reliable, accurate 
data about how their children are doing, across a wide range of 
indicators--education, social and emotional development, health and 
safety, attitudes and family well-being. This information would help 
states better target their scarce resources and more usefully assess 
whether child well-being improves when new programs and policies are 
instituted.
    This is clearly an opportune time to rethink the way we collect 
data about the lowest-income Americans. During the current election 
cycle, we have seen the presidential candidates talk more about poverty 
and economic insecurity than during any time in recent memory. A survey 
conduced earlier this year by Spotlight on Poverty and Opportunity and 
Freedman Consulting found a 145 percent increase in the number of times 
the media mentioned poverty in the context of stories about the primary 
campaigns.
    The media is clearly responding to frequent mentions of the issue 
by the presidential candidates, an increase in interest by religious 
and other groups and a growing desire by voters to see the problem of 
poverty in America addressed. In fact, a new poll released in early 
July suggests that Americans today feel the problem of poverty deserves 
even more attention. The survey was conducted by Republican pollster 
Jim McLaughlin for Spotlight on Poverty, an initiative launched last 
October by the Annie E. Casey Foundation, the Eos Foundation and other 
major foundations to draw greater attention to poverty during the 
election. Likely voters for the 2008 presidential campaign were asked 
whether they agreed or disagreed with the following statement: ``The 
media has spent an adequate amount of time during the presidential 
campaign covering the issue of how to fight poverty in the U.S.'' 56 
percent disagreed; 41 percent strongly disagreed.
    More Americans want to hear about what their political leaders will 
do to fight poverty.
    It is time for both sides in this debate to table their 
disagreements and come together around a more credible and policy 
relevant approach to poverty measurement. In the words of former Sen. 
Daniel Patrick Moynihan: ``You can't solve a problem until you first 
learn to measure it.'' We have learned a lot about how we can more 
accurately measure poverty. It's time to apply that learning.
    Thank you.

                                 

    Chairman MCDERMOTT. Thank you for your testimony.
    We have been joined by Dr. Rebecca Blank, who is a Ph.D. 
from the Brookings Institute. Dr. Blank?

   STATEMENT OF REBECCA BLANK, PH.D., ROBERT V. KERR SENIOR 
               FELLOW, THE BROOKINGS INSTITUTION

    Dr. BLANK. Chairman McDermott, thank you. I apologize for 
being late. What is normally a 15 minute cab ride took over an 
hour this morning and I----
    Chairman MCDERMOTT. It is the old story of those who live 
closest to the church are usually the ones who are late.
    [Laughter.]
    Dr. BLANK. I should have walked, right.
    I appreciate the chance to speak this morning, and let me 
give you my bottom line in agreement with the two have already 
testified.
    Our current poverty measure is based on data over 50 years 
old. It doesn't measure the resources available to today's 
families, and it is time for a change.
    A poverty measure requires two things. It requires the 
definition of a poverty line, which is the level above or which 
below you count someone as poor. The definition of resources, 
which is how you count what a family has to compare to that 
line to determine whether or not they are poor.
    There are serious problems with both the resource measure 
and the poverty line in today's current measure of poverty. Our 
poverty line today is essentially three times the USDA 
subsistence food budget, defined based on 1985 household 
consumption survey data. In 1955 the average family spent one-
third of their aftertax income on food.
    That is no longer anywhere near true, but the current 
poverty line is essentially this number calculated in 1963 and 
updated by the consumer price index ever since then. There is 
no other economic statistic in use today based on 1955 data and 
methods developed in the early 1960s.
    The poverty resource definition was simply cash income, 
which made sense in the early '60s, but makes no sense today. 
If a family receives food stamps, it doesn't count against 
their poverty measure. If a family receives an EITC refund 
check it doesn't affect whether they are poor or not. If a 
disabled individual starts to received Medicaid and pays less 
in out of pocket expenses it doesn't count for whether or not 
they are poor. Clearly this cash-based income definition of 
resources is simply insensitive to many of our most important 
antipoverty policies.
    Why is this a problem? It is a problem because it leads us 
to misinterpret the effect of these policies. In 1988, 
President Reagan declared, ``We declared war on poverty and 
poverty won.'' Well if you look at our official statistics that 
looks right, but the official statistics are wrong. In a very 
fundamental way, our poverty statistics have failed us and made 
it easy to claim that public spending on the poor had little 
effect.
    The National Academy measure, which was developed in the 
early 1990s, was developed by a panel of which I and Sheldon 
were both members. The panel spent 2 years reviewing the 
research and developing a new recommendation for how to measure 
poverty in a modern and updated manner.
    Since then broad support has emerged within the social 
science community on the approach that the National Academy 
suggested. The Census Bureau has developed alternative measures 
and research papers have discussed how to make these 
measurements and how to actually implement them. As Mr. Levitan 
is going to testify, New York City has already done this.
    Mr. McDermott's draft legislation, the Measuring American 
Poverty Act of 2008 is an effective way to move the poverty 
research agenda forward. It proposes to commission the Census 
Bureau to develop a modern poverty measure based on the NAS 
recommended approach, to publish these numbers regularly, to 
update them with new data, and as new statistical approaches 
become available.
    This is what we do with all of our economic statistics. It 
is a historical accident that poverty measurement sits 
essentially inside the Office of Management and Budget, defined 
by an OMB statistical directive. That means any change to this 
measure must be made through the executive office of the 
President, and any president or president's office, Democratic 
or Republican, is very reluctant to revise and change a 
sensitive government indicator.
    There is no other major economic statistic defined by OMB 
directive. They are all under the control of U.S. official 
statistical agencies, and the poverty measure should also be in 
this situation.
    We should not get derailed in the discussion about poverty 
in arguing whether poverty is actually higher or lower. Yes it 
does matter in terms of general appearances, but the most 
important thing about a poverty measure is not its absolute 
level, but how it tracks changes over time. It should reflect 
when policy changes, when the economy changes, and whether our 
most disadvantaged population are improving or deteriorating in 
terms of their economic situation.
    The modern poverty measure proposed by the National Academy 
of Sciences reflects the best consensus about how to improve 
poverty measurement in the United States. Since proposed, we 
have a decade of research showing how this recommendation can 
be effectively implemented. If we want to track the well-being 
of America's families and effectively measure the real effects 
of our antipoverty policies, we must update and modernize the 
measure of poverty in the United States. It is long past time 
to make that change.
    Thank you Mr. Chairman.
    [The prepared statement of Ms. Blank follows:]
 Statement of Rebecca Blank, Ph.D., Robert V. Kerr Senior Fellow, The 
                         Brookings Institution
    Rebecca Blank is the Robert V. Kerr Senior Fellow at the Brookings 
Institution in Washington, D.C. The views expressed in this testimony 
reflect her opinions and not those of any organization with which she 
is affiliated.
    Chairman McDermott, Ranking Member Weller, and distinguished 
members of the Committee, I appreciate the opportunity to talk with you 
today about the need for an improved measure of poverty in the United 
States. Our current poverty line is based on data more than 50 years 
old and our poverty count does not measure the actual resources that 
many families have available to them.
    I have been involved in the discussion of poverty measurement for 
many years. I was a member of the National Academies of Science's panel 
in the mid-1990s that recommended an improved poverty measure and which 
serves as the model for Representative McDermott's draft legislation, 
the Measuring American Poverty Act of 2008. Many of my remarks this 
morning are taken from the Presidential Address that I gave to the 
Association for Public Policy Analysis and Management last fall, in 
which I talked about the reasons why we have been so unsuccessful in 
implementing an updated and effective poverty measure in the United 
States (Blank, 2008).
Measuring Poverty
    An economic measure of poverty requires two definitions. First, one 
needs to define a poverty line or poverty threshold, the level of 
income or other resources below which a particular type of family is 
considered poor. Secondly, one needs to define a resource measure, 
which delineates the ways an individual family's economic resources 
will be counted. The poverty count is the number of people who live in 
families with resources below the poverty threshold.
    I emphasize these definitional items because it is important to 
think about poverty lines and resource definitions together. A 
statistically credible measure of poverty should have a poverty 
threshold that is consistent with its resource measure, so that the two 
can be used together. Unlike Representative McDermott's proposed 
legislation, many proposed changes in poverty measurement in the past 
have emphasized changing the way in which family resources are counted, 
without proposing to change the poverty threshold in a consistent way.
    There are serious problems in the current poverty measure with both 
the threshold definition and the resource definition. No simple, minor 
change will make this historical poverty measure accurate; a major 
redefinition is required.
The Historical Poverty Measure in the United States
    The current poverty measure was defined in 1963 by Mollie Orshansky 
in the Social Security Administration. Let me discuss first the poverty 
line and then the resource definition that she used and that is still 
in use today.
    The current poverty line. Orshansky created a poverty line using 
the calculation
        Poverty line = 3 x Subsistence food budget
    The subsistence food budget for a family of four was based on the 
Economy Food Plan developed within the USDA in 1961 using data from the 
1955 Household Consumption Survey. It was described as the amount 
needed for ``temporary or emergency use when funds are low.'' The 
multiplier of 3 was used because the average family of three or more 
spent one-third of their after-tax income on food in the 1955 Household 
Food Consumption Survey. If the average family spent one-third of its 
income on food, then three times the subsistence food budget provided 
an estimated poverty threshold. This calculation was done for a family 
of 4, and so-called ?equivalence scales' were used to estimate how much 
was needed by smaller or larger families.
    The current poverty line is this number, calculated in 1963 and 
based on 1955 data, updated by the Consumer Price Index in each year 
since.
    While this methodology for calculating a poverty line was fine in 
1963, and was based on the best data available, it is seriously flawed 
in 2008. There is no other economic statistic in use today that relies 
on 1955 data and methods developed in the early 1960s. All of our major 
statistics, from GDP to unemployment to the current account balance, 
are regularly updated and revised, and based on the most recent and 
best data available.
    It is not too strong a statement to say that, 45 years after they 
were developed, the official poverty thresholds are numbers without any 
valid conceptual basis. If one sticks with a threshold based only on 
food costs, the current multiplier on food costs would be 7.8 rather 
than 3 because food is a much smaller share of family budgets now than 
45 years ago. But basing the threshold numbers on a single commodity is 
almost surely not the correct way to calculate these thresholds because 
it leaves the numbers highly sensitive to the relative price of that 
commodity and insensitive to the price of any other necessary 
purchases. For instance, while food prices have fallen over the past 43 
years, housing prices have risen. Our current poverty calculation is 
not responsive to these changes in price and spending patterns over 
time.
    The current resource definition. The resource measure in 
Orshansky's calculations was straightforwardly defined as cash income. 
In 1963 this was a reasonable definition. Few low-income families were 
paying federal taxes. In-kind programs like Food Stamps, which provide 
non-cash resources to low-income families, were nonexistent or very 
small. Thus, cash income and disposable income were largely the same 
among low-income households.
    Forty-five years later, this resource definition is also seriously 
flawed, as cash income alone is no longer an adequate description of 
the economic resources available to low-income families. There is broad 
agreement that the resource measure should reflect a family's 
disposable income; that is, the income that a family has available for 
buying necessities such as housing and food, and after taxes and other 
mandatory expenditures are deducted. For instance, the recent expansion 
of the Earned Income Tax Credit (EITC) should provide more resources to 
low-wage earners; this is income we should count when estimating if a 
family is poor. Furthermore, many of the public assistance programs 
that have been created or expanded since 1963 provide benefits to low-
income families through in-kind payments, such as food stamps or rental 
subsidies, neither of which are paid to the recipient as cash income. 
In a country that wants able-bodied adults to work, work expenses are 
unavoidable and necessary. This includes transportation costs to work 
as well as child care expenses for single-parent or dual-earner 
couples. Similarly, out-of-pocket medical expenses are typically 
necessary expenditures; those with large prescription drug payments 
each month have fewer discretionary resources than those with no 
medical expenditures.
    Because the historical poverty measure is calculated based only on 
family cash income, it is unaffected by many changes in disposable 
income:

      If a disabled individual starts to receive Medicaid 
assistance and has lower out-of-pocket medical expenses, this will not 
affect their current poverty status.
      If a family receives food stamps and has more income left 
over for other items, this will not affect their current poverty 
status.
      If a worker receives an EITC refund check, this will not 
affect their current poverty status.

    Clearly, a cash income-based definition of family resources is 
highly insensitive to many of our nation's most effective anti-poverty 
programs.
    It is long past time to update both the definition of the poverty 
threshold and the resource definition to reflect the economic situation 
facing today's low-income families.
What Has Been the Effect of Using an Outdated Poverty Measure?
    There is widespread agreement among virtually everyone who looks at 
the current poverty measure that it is seriously flawed as an economic 
statistic. What effect has this had?
    Our poverty measurement has been impervious to most of the policies 
designed to improve life among low-income families that were 
implemented in the decades after 1963. The 1970s saw rapid growth in 
food stamp and housing benefits. In the 1980s, Congress enacted major 
tax reforms that reduced tax burdens on low-income families. In the 
1990s, the expansion of the EITC provided wage subsidies to many low-
wage workers. Since the 1980s, the dollars paid to public medical care 
has expanded enormously. In the late 1990s Food Stamp participation 
fell sharply, but (due to substantial program revisions) rose again in 
the early 2000s.
    None of these program changes had any measurable affect on the U.S. 
poverty rate, nor could they have any effect given how poverty is 
measured. Indeed, the official U.S. poverty rate, shown in Figure 1, 
has been largely flat since the early 1970s, with some cyclical 
movement over the business cycle. In 1988 President Ronald Reagan 
declared ``My friends, some years ago the Federal Government declared 
war on poverty and poverty won.'' Looking at Figure 1, this seems a 
reasonable conclusion.
[GRAPHIC] [TIFF OMITTED] T5704.026


    Although public spending on the poor grew rapidly after the 1960s, 
its effects were invisible because our official statistic did not 
reflect the effect of these antipoverty programs on the resources 
available to poor families. In a very fundamental way, our poverty 
statistics failed us and made it easy to claim that public spending on 
the poor had little effect.
    Economic statistics are designed to help us track trends in 
economic well-being, and to interpret the effects of environmental and 
policy changes. Because our historical poverty statistics are so poorly 
measured, we have no effective measure of how most of our anti-poverty 
policies have improved the economic well-being of low-income families 
over time.
    The only group who has experienced a major decline in the official 
poverty data over the past 30 years is the elderly. It is not 
coincidental that the elderly are the one group for whom we have 
provided greatly expanded assistance in the form of cash income, 
through expansions in Social Security and in Supplemental Security 
Income. Hence, our assistance to this group was reflected in our 
official statistics
The NAS Proposal for a Modern Poverty Measure
    The panel convened by the National Academies of Science (NAS) in 
the 1990s spent more than two years reviewing the research on different 
approaches to poverty measurement. The final panel report, released in 
1995, recommended a redefined modern poverty measure (Citro and 
Michael, 1995). This new measure was conceptually consistent with 
Orshansky's efforts but addressed many of the problems with the 1963 
definition.
    The NAS panel recommended calculating a poverty line based on 
expenditures on necessities (food, shelter and clothing), ``plus a 
little more.'' Their report emphasized the importance of updating this 
threshold calculation regularly, to reflect changes in spending 
patterns on necessities over time. The NAS panel recommended basing the 
resource definition on disposable income, which measures the resources 
available to low income families after they pay their tax bill, receive 
any public assistance, pay their medical bills and pay any work-related 
expenses. The panel addressed many other issues that I do not discuss 
here, such as equivalence scales (determining appropriate expenditures 
for families of different sizes) and geographic price variation.
    Since the NAS panel report, broad support has emerged within the 
social science research community for the approach that they suggest. 
The Census Bureau has used the NAS report as the basis for alternative 
poverty calculations. Research papers have discussed how to best make 
the measurements proposed in the report, such as effectively measuring 
child care expenses and improving the equivalence scales. As Mr. 
Levitan will testify, New York City has developed a city-specific 
poverty measure based on this approach.
Moving Toward a Modern Method of Poverty Measurement
    Mr. McDermott's draft legislation, the Measuring American Poverty 
Act of 2008, would be an effective way to move the poverty measurement 
agenda forward. This legislation proposes to commission the Census 
Bureau to develop a modern poverty measure based on the NAS-recommended 
approach, to publish these numbers regularly, and to update this 
measure as new data and new statistical approaches become available.
    This approach would break through the political logjams that have 
prevented the development and utilization of an updated poverty 
measure.
    It is an historical accident that our official poverty measure was 
established by a directive within the Office of Management and Budget 
(OMB Statistical Policy Directive 14), but it has made updating this 
statistic very difficult. Any change to this historical poverty 
definition had to come from within the Executive Office of the 
President, which oversees OMB. It should be obvious that it is 
extremely difficult to expect the White House--no matter which party 
controls it--to undertake an impartial review and revision of a 
sensitive government statistic. In fact, oversight of the historical 
poverty definition within OMB is a major reason why none of the 
proposals to update and revise this statistic have been successful.
    No other major economic statistic is defined by an OMB directive. 
All other major economic statistics are under the control of official 
U.S. statistical agencies, which are charged with regularly reviewing 
and updating them. These agencies provide professional expertise, close 
knowledge of available data, and a long history of providing government 
statistics without political interference.
    The proposal to create a modern poverty measure, housed with the 
Census Bureau, regularizes the poverty measure and puts it on a par 
with other government statistics, placing it within the statistical 
agency in charge of collecting and disseminating much of the data on 
which the poverty measure is based.
    The Census Bureau has long calculated a variety of alternative 
poverty definitions, including a variety of definitions based upon the 
NAS recommendations. It has never had the authority to select among 
these alternative definitions, but has always been directed to look at 
multiple options. This bill gives Census the authority to use their 
expertise to create a single modern poverty measure based upon the NAS 
recommendations, using the best data and analytic approaches available.
    At the same time, it is important to continue to calculate and 
report the historical poverty measure, making it available to those 
programs or analysts who wish to continue to use it. A number of 
programs have eligibility provisions that are tied to the current 
poverty measure. Over time, as programs come up for reauthorization, 
Congress can decide whether to continue to use the historical measure 
or whether to utilize the modernized poverty measure. This will assure 
that there are no disruptions to the programs that have relied on the 
historical measure for many years. Those who choose to switch to the 
newer measure can take steps to transition to the newer measure over 
time, using grandfathering clauses to assure there is no one who 
abruptly loses benefits because of definitional changes.
A Comparison to the European Union
    Mr. McDermott's proposed legislation directs Census to develop two 
measures of poverty, one looking at pre-tax and pre-transfer poverty 
and the other measuring poverty based on after-tax disposable income. 
The bill also authorizes money for the National Academies to develop a 
``Decent Living Standard'' measure.
    I want to say something about the value of comparing multiple 
measures of economic need, each measuring a different concept. The 
European Union has worked to develop a set of EU-wide economic 
statistics over the past two decades, including new measures of 
poverty. The EU has historically taken a very different approach to 
poverty than the United States, using a poverty threshold that is 
defined as a share of median income. The effect of this is to raise the 
poverty line with every increase in change in real income in the 
society. This makes it difficult to make progress against poverty.
    While the EU continues to use a percent-of-median-income poverty 
line, they have moved away from a single poverty measure and have 
chosen instead to require that EU members regularly report on a 
collection of measures of economic and social deprivation, each of 
which focus on a different aspect of economic opportunity or 
disadvantage. EU nations annually report not only poverty rates within 
their countries, but also on joblessness, literacy, life expectancy, 
and other measures of well-being. This allows countries to have a 
fuller picture of the problems of economic disadvantage and how it 
overlaps with other types of disadvantage.
    I find much to admire in this approach. While the U.S. collects 
many of these statistics, they are not regularly reported at the same 
time as the poverty measure, so we tend not to think about them as 
complementary and overlapping sources of information about 
disadvantaged populations within the United States.
    I want to emphasize the value of looking at multiple statistics to 
understand and interpret problems and progress among low-income 
families. The pre-tax and pre-transfer poverty rate tells us something 
about the market distribution of incomes. By comparing this to a 
poverty measure based on total disposable income, we can say something 
about the overall effect of our tax and transfer system, showing how 
much it improves economic well-being among low-income families.
    In the end, no income-based statistic can capture all the important 
dimensions of well-being, such as health, education, crime, or family 
functioning. The poverty rate is a measure of income adequacy and 
should be supplemented with measures that look at these other 
dimensions of family well-being.
Is Consumption Data an Alternative to Income Data?
    Some have argued that consumption data provides a better measure of 
household resources and that the income data is flawed (Meyer and 
Sullivan, 2008.) Measuring consumption behavior is valuable and useful. 
It is not, however, appropriate to use in a national poverty measure.
    Consumption does not typically measure what we mean by economic 
poverty. Consumption data measure something different than income data. 
Current consumption reflects a combination of current income, past 
income, and current consumption behavior. Hence, some individuals with 
low current income are able to consume more today because they take on 
debt or have savings. Poverty usually means that an individual lacks 
the income to consume at an adequate level. If a wage-earner has lost 
his job and his family is without income, most of us would consider 
that family poor, even if they are currently living on savings and 
maintaining a (temporarily) higher consumption level. If an elderly 
family is choosing to consume far less than they are able to, based on 
their income, they should be considered not poor, even if their 
consumption is quite low.
    For most people, of course, consumption and current income are 
pretty much the same. Some have argued that U.S. consumption data 
reveals quite a few families who appear income poor but have much 
higher actual consumption. This is not as mystifying as it may at first 
appear. First, the income data collected within the survey that also 
collects consumption data (the Consumer Expenditure Survey) have 
historically been less complete and less accurate than the income data 
collected in our major income survey, the Current Population Survey. 
Secondly, there is a problem of high respondent non-response, 
especially among lower-income persons who respond to the Consumer 
Expenditure Survey; this must be carefully accounted for in order to 
compare similar populations between these two surveys. In a recent 
article, Richard Bavier (2008) indicates that when the consumption data 
and the income data are appropriately reconciled, the differences 
between them are relatively small. Indeed, both of them show very 
similar trends in poverty and need.
    It is also worth noting that using consumption data resolves only a 
small set of issues in the measurement of poverty. Most of the 
difficult decisions--how to develop appropriate poverty thresholds; how 
to impute the value of in-kind benefits; how to determine equivalent 
poverty levels for families of different sizes; etc--are unaffected by 
the use of consumption versus income.
    Finally, consumption data is quite costly to collect. As a result, 
our consumption survey is relatively small with only about 20,000 
households from across the United States. This is much smaller than the 
samples sizes in our income survey, rendering consumption data less 
reliable as a source of national information on low-income families. 
And it makes it even more difficult to get reliable information on low-
income families within subgroups by age, by race or ethnicity, or by 
geographic region.
    The NAS report discusses the possible use of consumption data and 
concludes that it measures a different concept and that the current 
data we have available are not adequate for a national poverty measure. 
While there have been some improvements to the consumption data, the 
conclusions of that report are still relevant.
Conclusion
    The actual level of poverty in this country is an important 
concern, indicating something about how many of our fellow citizens are 
in economic need. The level of poverty will always be somewhat 
arbitrary, no matter how it is set. I am concerned that the debate over 
how to best modernize the U.S. poverty statistic should not be derailed 
by arguments about whether a new measure raises or lowers the poverty 
rate relative to the level determined by the historical poverty 
measure. With the NAS measure, taking account of taxes (especially the 
EITC refunds) and in-kind income will lower poverty. But subtracting 
off work expenses and medical out-of-pocket expenses will raise 
poverty. Regardless of what this does to the overall poverty count, 
these are the right calculations to do in order to calculate economic 
need based on disposable income among low-income families.\1\
---------------------------------------------------------------------------
    \1\ Indeed, one could benchmark a new poverty measure so that it 
produced exactly the same level value of poverty as the historical 
poverty measure in some transition year. Of course, the distribution of 
poverty across groups and regions would differ under a different 
measure, even if the total number was identical.
---------------------------------------------------------------------------
    Most important is a poverty measure that tracks progress (or lack 
of progress) over time in an effective manner. We need a statistic that 
demonstrates how policy and economic changes affect the economic 
outcomes among low-income families. This means that getting the trend 
right over time is far more valuable than arguing about the level of 
poverty. It is the change in poverty that tells us whether economic 
opportunities are improving or deteriorating among our most 
disadvantaged citizens.
    The modern poverty measure proposed by the National Academy of 
Sciences panel reflects the best consensus about how to improve poverty 
measurement in the United States. Since it was proposed, we now have 
over a decade of research showing how this recommendation can be 
effectively implemented with available data. If we want to track the 
well-being of America's low-income families, and if we want to 
effectively measure the effects of our antipoverty policies, then we 
must update and modernize the measure of poverty in the United States. 
It is long past time to make this change.
Reference
    Bavier, Richard. 2008. ``Reconciliation of Income and Consumption 
Data in Poverty Measurement.'' Journal of Policy Analysis and 
Management. 27(1):40-62.
    Blank, Rebecca M. 2008. ``How to Improve Poverty Measurement in the 
United States.'' Journal of Policy Analysis and Management. 27(2):233-
254.
    Citro, Constance F. and Robert T. Michael. 1995. Measuring Poverty: 
A New Approach. Washington, D.C.: National Academy Press.
    Meyer, Bruce D. and James X. Sullivan. 2008. ``Three Decades of 
Consumption and Income Poverty.'' Unpublished manuscript.

                                 

    Chairman MCDERMOTT. Thank you very much.
    Dr. Levitan is the Director of Poverty Research for the New 
York Center for Economic Opportunity in New York.
    Dr. Levitan.

STATEMENT OF MARK LEVITAN, PH.D., DIRECTOR OF POVERTY RESEARCH, 
    NYC CENTER FOR ECONOMIC OPPORTUNITY, NEW YORK, NEW YORK

    Dr. LEVITAN. Chairman McDermott, Ranking Member Weller, 
distinguished Members of the Committee, thank you for the 
opportunity to testify this morning.
    My remarks will focus on two topics: first, New York City's 
work to create a new poverty measure; and secondly, our 
continued belief that the Federal poverty measure must be 
updated along the lines proposed by the National Academy of 
Sciences.
    First New York. In March of 2006, Mayor Michael Bloomberg 
established a commission for economic opportunity. The 
commission was charged with the task of crafting a set of 
initiatives aimed at reducing poverty in New York City.
    In the course of their work, its members came to regard the 
current poverty measure as an inadequate guide for 
understanding the level of economic deprivation in New York, 
assessing the effects of current policy, or forecasting the 
potential impact of new policy initiatives they might propose. 
The commission concluded that along with programmatic 
initiatives to reduce poverty, the city also needed improved 
tools that measure it.
    The Mayor embraced this recommendation, and poverty 
measurement became one of the projects initiated by the City of 
New York Center for Economic Opportunity. Over the past year 
the city has developed a poverty measure that adopts the 
National Academy of Sciences' recommendations and makes use of 
the Census Bureau's American Community Survey.
    Compared against the current measure which only measures 
pre-tax cash income, the CEO poverty measure captures a fuller 
array of the resources available to low-income families. These 
include tax credits, nutritional assistance, and housing 
subsidies. That is essential for understanding poverty.
    Our measure also places those resources in the context of 
New York's high cost of living and the need to pay for child 
and health care. That is essential to understanding the 
adequacy of our antipoverty efforts.
    Under our new measure, the New York City poverty rate for 
2006 is 23 percent. The corresponding rate for using the 
official methodology is 18.9 percent. That is an attention 
getting difference, but it only becomes meaningful as we sift 
through the details to locate how and why the change in 
methodology affects specific groups.
    One of the most striking results from our work is that the 
poverty rate for elderly New Yorkers rises from 18.1 percent 
under the official measure to 32 percent under the CEO measure. 
The poverty rate for children, in contrast, hardly changes. It 
is 27.2 percent under the official measure and 26.6 percent 
under our alternative. Digging deeper, we find that the poverty 
rate for children living in single-parent families is 
considerably lower with our measure than under the official 
one, 41.6 percent compared to 44.4 percent.
    What these results are telling us is that even in the 
context of a more realistic poverty threshold, public programs, 
specifically the formerly uncounted tax credits, nutritional 
subsidies, and housing assistance are lifting some children out 
of poverty in ways that could not be seen under a measure that 
did not count these resources. Our work also suggests that 
medical out of pocket spending is a considerable burden to low-
income seniors.
    Findings like these will serve a variety of purposes. Most 
importantly, they will inform strategic planning by agencies 
across city government. We look forward to sharing the work we 
have done with other cities.
    However, it would be a mistake for the Federal Government 
to stand aside in the hope that local action can fill the need 
to change the Nation's Federal poverty measure. First of all, 
it is not practical. Very few local governments have the 
resources available to the City of New York. Secondly, even if 
a number of States or localities develop new measures, the 
result will inevitably lead to a variety of different 
approaches, and this will make comparisons between them 
confusing to the public and to policy makers.
    Even among researchers that closely identify with the 
National Academy of Sciences' recommendations, there are 
different approaches to issues such as accounting for 
healthcare, child care needs, and the valuation of home 
ownership, and subsidized housing. We would be pleased if 
everyone agreed with our decisions about these issues but we 
cannot create a standard for the Nation. Providing resources to 
local government and setting national standards are a 
fundamental responsibility of the Federal Government.
    To conclude, the City of New York urges Congress to take 
actions needed to improve the Nation's measure of poverty. We 
believe the direction taken by the draft legislation entitled 
the Measuring American Poverty Act of 2008 would be an 
important step forward. We would be pleased to offer our 
experience in any way that can be helpful, but to underscore my 
earlier remark, local efforts cannot substitute for Federal 
action.
    Thank you.
    [The prepared statement of Mr. Levitan follows:]
  Statement of Mark Levitan, Ph.D., Director of Poverty Research, NYC 
          Center for Economic Opportunity, New York, New York
    Chairman McDermott, Ranking Member Weller and distinguished members 
of the Committee, I am Mark Levitan, Director of Poverty Research for 
the City of New York's Center for Economic Opportunity. Thank you for 
the opportunity to offer testimony on behalf of the City of New York.
    My remarks will address three questions:

      Why did the City create an alternative to the Census 
Bureau's official poverty measure for New York?
      Why did New York follow the alternative recommended by 
the National Academy of Sciences Panel on Poverty and Family 
Assistance?
      And finally, what are the implications of our project for 
improving the federal poverty measure?
WHY A NEW MEASURE
    In March of 2006, Mayor Michael Bloomberg established a Commission 
for Economic Opportunity. The Commission was charged with the task of 
crafting a set of new initiatives aimed at reducing poverty in New York 
City. In the course of their work its members grew increasingly 
frustrated with the data and conceptual tools at their disposal. They 
came to regard them as inadequate guides for understanding the level of 
economic deprivation in New York, assessing the effect of current 
public policy, and forecasting the potential impact of new policy 
initiatives on the City's low-income population. The Commission 
concluded that, along with programmatic innovations to reduce poverty, 
the City needed to improve the tools that measure it.
    The Mayor shared the Commission's frustration and endorsed their 
recommendation, and poverty measurement became one of the new projects 
initiated by the City of New York's Center for Economic Opportunity 
(CEO). We began by reviewing the current poverty measure, developing a 
sense of its shortcomings and establishing a set of criteria for an 
alternative. Then we began to look at specific measurement options. We 
concluded that the City should base its alternative poverty measure on 
a set of recommendations that, at the request of Congress, had been 
developed by the National Academy of Sciences' (NAS) Panel on Poverty 
and Family Assistance.\1\
---------------------------------------------------------------------------
    \1\ National Research Council, Panel on Poverty and Family 
Assistance. Measuring Poverty: A New Approach. Constance F. Citro and 
Robert T. Michael, eds. Washington, DC: National Academy Press, 1995.
---------------------------------------------------------------------------
    Over the past year the staff of the Center for Economic Opportunity 
has worked to create a measure of poverty that implements the NAS 
Panel's alternative. On July 13, 2008, Mayor Bloomberg announced some 
of our initial findings, discussed in more detail below.
    We believe we have developed a better tool for understanding 
poverty and anti-poverty policy in New York City. We hope that other 
localities move in a similar direction. But the reason I am before you 
today is because we believe that our efforts are no substitute for a 
change in the way that the Federal Government's statistical agencies 
measure poverty.
Shortcomings of the Current Measure
    The Census Bureau measures poverty by comparing a family's total 
pre-tax cash income against a set of thresholds (the poverty lines) 
that vary by family size and composition. Income is defined as cash 
received from any source. This includes earnings, investments, 
pensions, and insurance, as well as government transfers such as social 
security and means-tested assistance, as long as they take the form of 
cash. The threshold levels rise as the number of family members grows. 
For example, the 2006 Census threshold for a family of one adult and 
two children was $16,227, while for a two-adult, two-child family it 
stood at $20,444.\2\ If a family's income falls below the threshold, 
each of the family members is classified as poor. The poverty rate is 
the proportion of the total population that is living in families with 
incomes below the poverty line.\3\
---------------------------------------------------------------------------
    \2\ U.S. Census Bureau, Poverty Thresholds 2006.
    \3\ A more detailed explanation for how the Census Bureau measures 
poverty is available at: http://www.census.gov/hhes/www/poverty/
povdef.html
---------------------------------------------------------------------------
    The apparent simplicity of this measure--a straightforward 
definition of resources and a yardstick against which they are 
measured--masks a number of significant deficiencies. As a recent 
review aptly concluded, ``The United States got itself the worst of all 
worlds--an increasingly mean measure of poverty that also suggested 
that U.S. social programs were not making a difference when they 
were.''\4\
---------------------------------------------------------------------------
    \4\ Glennerster, Howard. ``United States Poverty Studies and 
Poverty Measurement: The Past Twenty-Five Years,'' Social Science 
Review, March 2002.
---------------------------------------------------------------------------
Limitations of the resource measure
    Pre-tax cash income is an increasingly incomplete indicator of the 
resources a family may use to attain an acceptable standard of living. 
Income is taxed and the portion that goes to government reduces what is 
available to families. But government also uses refundable tax credits 
(such as the Earned Income Tax Credit) to supplement family income. 
Cash income also fails to account for the effect that ``near-cash'' 
benefit programs have on living standards. Food Stamps or Section 8 
housing vouchers, for example, are used as if they were money by low-
income families to meet their nutritional and shelter needs. They free 
recipients' cash income for other necessities such as clothing or 
transportation. Tax credits and near-cash benefits are an increasing 
share of government anti-poverty expenditures; Federal spending on Food 
Stamps, housing subsidies, and the Earned Income Tax Credit, for 
example, each dwarfs expenditures for traditional cash assistance.\5\ 
As a result, ever more of what government does to provide support to 
low-income families is uncounted by the Census Bureau's poverty 
measure.
---------------------------------------------------------------------------
    \5\ U.S. Bureau of the Census. Statistical Abstract. 2007.
---------------------------------------------------------------------------
Limitations of the threshold concept
    The Census Bureau's income thresholds are problematic in different 
ways. They are based on work done in the early and mid 1960s for the 
Social Security Administration and reflect spending levels specified in 
the U.S. Department of Agriculture's ``Economy Food Plan,'' a diet for 
``temporary or emergency use when funds are low.'' Because the survey 
data available at that time indicated that families typically spent a 
third of their income on food, the thresholds were set at three times 
the cost of the food plan. With the exception of some minor revisions, 
the only change in the thresholds since they were officially adopted in 
1969 is that the Census Bureau updates them annually by the change in 
the Consumer Price Index.\6\
---------------------------------------------------------------------------
    \6\ Fisher, Gordon. ``The Development and History of the Poverty 
Thresholds'' Social Security Bulletin Vol. 55 No. 4., 1992. Available 
at www.ssa.gov/history/fisheronpoverty.html.
---------------------------------------------------------------------------
    More than four decades later, these poverty thresholds have become 
an anachronism. First, they no longer reflect spending patterns. Food 
now accounts for little more than one-eighth of family expenditures. 
Also, housing is the largest major item in a typical family's budget, 
representing nearly one-third of total spending.\7\
---------------------------------------------------------------------------
    \7\ Family expenditure shares are computed for a consumer unit 
consisting of a husband and wife with children from data in ``Consumer 
Expenditures in 2005.'' U.S. Department of Labor, Bureau of Labor 
Statistics, Report 998, April 2007.
---------------------------------------------------------------------------
    Another of the thresholds' shortcomings is that they are uniform 
across the nation. The poverty line that defines who is poor in New 
York City is the same poverty line that applies in rural Mississippi. 
The need to account for differences in living costs across the nation 
is an obvious concern in New York City, where high housing costs (at 
2.6 times those in Carroll County, Mississippi) put a tight squeeze on 
family budgets.\8\ 
---------------------------------------------------------------------------
    \8\ This is the ratio of the U.S. Department of Housing and Urban 
Development's Fair Market Rents for 2007.
---------------------------------------------------------------------------
    A third issue concerning the thresholds is their declining value 
relative to the income level enjoyed by American families in the 
economic mainstream. Because they are only adjusted to reflect the 
rising cost of living, the poverty lines take no account of the rise in 
the standard of living. When first introduced, the poverty line for a 
family of four equaled roughly fifty percent of median income for a 
family of that size. Today this threshold is less than thirty percent 
of that median.\9\
---------------------------------------------------------------------------
    \9\ Ziliak, James. ``Understanding Poverty Rates and Gaps: 
Concepts, Trends, and Challenges.'' Foundations and Trends in 
Microeconomics. 1 (3), 2006.
---------------------------------------------------------------------------
    A frozen-in-time measure fails to recognize that what is considered 
an adequate standard of income always reflects social norms at a 
particular time and place. Expert estimates of income adequacy levels, 
as well as public opinion as to what constitutes enough income to ``get 
by,'' increase at roughly the same pace as increases in median family 
income.\10\ What the experts and the public understand is poverty's 
social dimension. Poverty entails not only an inability to obtain a 
physiologically minimum level of consumption, such as enough food to 
avoid malnutrition, but also the inability to obtain a level of 
consumption that allows people to fulfill the social roles customary to 
children or adults in a modern society. As incomes grow for most 
American families, and as society becomes wealthier and more 
technologically complex, the resources required to be successful at 
school or the workplace, to be an able parent or an informed citizen 
rises.
---------------------------------------------------------------------------
    \10\ Fisher, Gordon. ``Is There Such a Thing as an Absolute Poverty 
Line Over Time? Evidence from the United States, Britain, Canada, and 
Australia on the Income Elasticity of the Poverty Line.'' U.S. Bureau 
of the Census. Poverty Measurement Working Papers, August 1995. 
Available at www.census.gov/hhes/www/povmeas/papers/elastap4.html. 
Blank, Rebecca M. 2008. ``How to Improve Poverty Measurement in the 
United States.'' Journal of Policy Analysis and Management. Vol. 27(2) 
Spring.
---------------------------------------------------------------------------
Criteria for an Alternative
    CEO reviewed a wide variety of alternative approaches to measuring 
poverty. Our thinking was guided by several criteria.

    1.  The new measure should be easily understood by the ``non-
expert'' public. This suggested that rather than a radical departure 
from the familiar, if flawed, official measure, a new approach should 
maintain its structure (economic resources measured against a set of 
thresholds that are derived from expenditures on necessities), but seek 
to improve its component parts. Specifically the new measure should:

        A.  Provide a more complete measure of resources.
        B.  Employ thresholds that reflect differences in living costs 
        across the country and are updated in a manner that takes 
        account of the long-term rise in living standards.
        C.  Provide a poverty rate, a count of what fraction of the 
        city's or nation's population is living below the poverty line.

    2.  The new measure should be grounded in a substantial body of 
research and should be supported by experts in the field. Poverty 
measurement is a controversial topic. The credibility of a ``CEO 
poverty measure'' would rest, in part, on the degree to which it is 
based on research by, and consensus among, expert analysts.

    3.  The new measure should be a better tool for policymaking. The 
call for new measures of poverty came out of the frustrations 
experienced by people who wanted to design policies that address it. 
CEO put a premium on the extent to which a new measure could capture 
the impact of public policy.

    4.  A new measure should be practicable, that is, the City must be 
able to turn a better idea into an annual measure and do so at a 
reasonable cost.
WHY THE CITY CHOSE THE NAS METHODOLOGY
    CEO concluded that it should base its alternative poverty measure 
on a set of recommendations that, at the request of Congress, had been 
developed by the National Academy of Sciences' (NAS) Panel on Poverty 
and Family Assistance.\11\ While the Federal Government has yet to 
adopt these recommendations (except on an experimental basis), they 
have received extensive scrutiny by government researchers and 
university-based scholars.\12\ The NAS methodology is widely regarded 
as a far superior measure of poverty compared with the official 
measure. (A side-by-side comparison of the official and NAS recommended 
measure is provided in Figure One).
---------------------------------------------------------------------------
    \11\ National Research Council, Panel on Poverty and Family 
Assistance. Measuring Poverty: A New Approach. Constance F. Citro and 
Robert T. Michael, eds. Washington, DC: National Academy Press, 1995.
    \12\ Much of this research is available at http://www.census.gov/
hhes/www/povmeas/nas.html.
---------------------------------------------------------------------------
    The NAS Panel's recommendations in brief

    1.  Changes to the poverty threshold: The NAS panel recommended 
that the poverty thresholds reflect the amount a family needs for food, 
clothing, shelter, and utilities, rather than the costs of just one 
basic need. Specifically, the threshold should be set to equal roughly 
80 percent of median family expenditures on this market basket of 
necessities, plus ``a little more'' for other necessities. The panel 
proposed that these thresholds be updated annually by the change in 
median family expenditures, ensuring that over time the poverty line 
reflected the long-term rise in the nation's standard of living. In 
addition, the NAS suggested that the thresholds be adjusted 
geographically to reflect differences in the cost of living across the 
U.S.

    2.  Changes to the definition of resources: The NAS panel suggested 
that a much more inclusive definition of family resources be used for 
comparison to the new thresholds. In addition to cash income, the 
resource measure should account for the effect of tax liabilities and 
credits, along with the cash value of ``near-cash'' benefits. The panel 
also recommended that resources should be adjusted to reflect necessary 
work expenses such as commuting costs and child care. Finally, the 
panel proposed that medical out-of-pocket expenses should also be 
subtracted from income, because what a family must spend to maintain 
its health is unavailable for purchasing other necessities.


                                   FIGURE ONE: COMPARISON OF POVERTY MEASURES
----------------------------------------------------------------------------------------------------------------
                                                                                 NATIONAL ACADEMY OF SCIENCES
                                              CURRENT POVERTY MEASURE                   RECOMMENDATION
----------------------------------------------------------------------------------------------------------------
                                        Established in the mid-1960s at      Equal to roughly 80% of median
                                         three times the cost of ``Economy    family expenditures on food,
                                         Food Plan.''                         clothing, shelter and utilities,
                                                                              plus ``a little more'' for misc.
                                                                              items.
                                       -------------------------------------------------------------------------
THRESHOLD                               Adjust annually by change in         Adjust annually by change in median
                                         Consumer Price Index.                family expenditures for the items
                                                                              in the threshold.
                                       -------------------------------------------------------------------------
                                        No geographic adjustment.            Adjust geographically using
                                                                              differences in housing costs.
                                       -------------------------------------------------------------------------
                                                                             Total family after-tax income.
                                                                            ------------------------------------
                                                                             Include the value of near-cash, in-
                                                                              kind benefits such as Food Stamps.
                                                                            ------------------------------------
RESOURCES                               Total family pre-tax cash income.    Subtract work-related expenses such
                                                                              as child care and transportation
                                                                              costs.
                                                                            ------------------------------------
                                                                             Subtract medical out-of-pocket
                                                                              expenses.
----------------------------------------------------------------------------------------------------------------

WHAT HAVE WE LEARNED FROM OUR WORK?
    Over the past year the City has developed a poverty measure that 
adopts the NAS recommendations to the Census Bureau's American 
Community Survey. Mayor Bloomberg announced some of our results on July 
13, 2008. The CEO poverty measure captures a fuller array of the 
resources available to low-income families as they strive to meet their 
basic needs. That is essential to understanding poverty. It also places 
those resources in the context of New York's high cost of living. And 
that is essential to understanding the adequacy of our anti-poverty 
efforts.
    Using a geographically-adjusted threshold that equals $26,318 for a 
family of two adults and two children and a more comprehensive 
definition of income, we find that under our new measure, the New York 
City poverty rate for 2006 is 23.0 percent.\13\ The corresponding rate 
using the official methodology is 18.9 percent.\14\ That is an 
attention-getting difference, but it becomes truly meaningful as we 
sift through the details to locate how the change in methodology 
affects specific groups within the City. (See Table One).
---------------------------------------------------------------------------
    \13\ Following the NAS recommendations our income measure includes 
the effect of taxation, adds the value of nutritional and housing 
assistance, and subtracts work-related and medical out-of-pocket 
expenses.
    \14\ This is lower than the 19.2 percent rate reported by the 
Census Bureau because we must exclude people living in group quarters 
in our measure.
---------------------------------------------------------------------------
        Table One: Comparison of Poverty Rates,

                     Using CEO and Official Methods
               (Numbers are percent of group in poverty.)

                                                            Percentage
                                     CEO      OFFICIAL         Point
                                                            Difference

NYC Total                          23.0     18.9          4.1

By Age Group
Under 18                           26.6     27.2          -0.6
18 thru 64                         20.0     14.5           5.5
65 & up                            32.0     18.1          13.9

Children (under 18), by Family
 Type
Two parents                        17.2     16.5           0.7
One parent                         41.6     44.4          -2.8 Source: CEO tabulations from the American Community Survey, 2006.

    One of the most striking results from our work is that the poverty 
rate for elderly New Yorkers (persons 65 and older) changes from 18.1 
percent under the official Census measure to 32.0 percent under the CEO 
measure. The poverty rate for children, in contrast, hardly changes; it 
is 27.2 percent under the official measure and 26.6 percent under our 
alternative. Digging deeper, we find that the poverty rate for children 
living in single parent families is considerably lower with our measure 
than under the official one, 41.6 percent compared to 44.4 percent. 
What these results are telling us is that, even in the context of a 
more realistic poverty threshold, public programs--specifically the 
formerly uncounted tax credits, nutritional subsidies, and housing 
assistance--are lifting some children out of poverty in ways that could 
not be seen under a measure that did not count these resources. The 
results also suggest that medical out-of-pocket spending is a 
considerable burden to low-income seniors.
    Findings like these will serve a variety of purposes; most 
importantly, they will inform strategic planning by agencies across 
City government. Further reports that track changes in poverty rates 
over time will increase the usefulness of our work.
    Some might conclude that the lesson from our experience is that the 
Federal Government should stand aside and let local governments develop 
poverty measures that address local priorities. The City believes that 
this would be a grievous mistake.
    First, it is not practical. Few local governments have the 
resources available to the City of New York. Secondly, even if a number 
of states or localities develop new poverty measures, the result will 
inevitably lead to a variety of different approaches that will make 
comparisons between them confusing to the public. Even among 
researchers that are closely identified with the National Academy of 
Sciences' recommendations, there are differing approaches to issues 
such as accounting for healthcare spending, childcare needs and the 
valuation of homeownership and subsidized housing programs for low-
income renters. Not everyone will agree with all of our choices in 
detail, and for good reason; as we weighed the options it became clear 
that there are strong arguments that could be made for a number of 
different approaches.
    We would be pleased if everyone agreed with our decisions about 
these issues. But while we in the City of New York are eager to share 
our work and encourage other local efforts, we can not create a 
standard methodology for the nation. Providing resources to local 
governments and setting national standards are a fundamental 
responsibility of the Federal Government.
    I would include another task for the Federal statistical agencies, 
one that is not yet been addressed, to my knowledge, by any proposed 
legislation. The expertise of the Census Bureau and other statistical 
agencies is needed to improve the usefulness of the American Community 
Survey (ACS) in measuring poverty. The survey is the Census Bureau 
product for measuring socio-economic conditions at a local level. The 
size of the sample in the Bureau's other surveys, such as the Current 
Population Survey or the Survey of Income and Program Participation, 
precludes their provision of local-level data. Increasing the sample 
for these surveys enough to allow representative local-area data that 
could be issued on an annual basis is impractical.
    Unfortunately, the ACS did not exist when the NAS Panel was 
developing its recommendations, and it was not designed to generate a 
measure of poverty consistent with the NAS method. The Census Bureau, 
along with other Federal statistical agencies, should take a number of 
steps that would make the ACS more useful in this regard. Adding 
questions about residence in public housing, receipt of tenant-based 
housing assistance, and the use of childcare would be very helpful. The 
survey should also retain the question on Food Stamp receipt. Given the 
nature of the survey, however, the number of new questions that can be 
added is clearly limited.
    So in addition, the Census Bureau should develop imputation 
techniques for use with the American Community Survey (ACS) as it has 
with the Current Population Survey (CPS).\15\ This would include models 
that can estimate tax liabilities and credits, medical-out-of-pocket 
expenses, and child care costs. Because we have employed the ACS as our 
principal source of data for measuring resources, we have had some 
experience with this work. We were able to make good use of the 
estimation procedures that the Census Bureau and other researchers have 
developed for the Current Population Survey. I believe our work 
demonstrates the practicality of this proposal. But while I am proud of 
what we have done in this regard, I have no doubt that it can be 
improved upon.
---------------------------------------------------------------------------
    \15\ An explanation of much of this work is provided in Short, 
Kathleen, Thesia Garner, David Johnson, and Patricia Doyle, 
Experimental Poverty Measures: 1990 to 1997, U.S. Bureau of the Census. 
1999.
---------------------------------------------------------------------------
Conclusion
    The City of New York urges Congress to take the actions needed to 
improve upon the Nation's measure of poverty. We believe the direction 
taken in the draft legislation entitled the Measuring American Poverty 
Act of 2008 would be an important step forward. We would be pleased to 
offer our experience in anyway that can be helpful, but--to underscore 
my earlier remarks--local efforts can not substitute for Federal 
action.

                                 

    Chairman MCDERMOTT. Thank you very much for your testimony.
    Dr. Meyer is the McCormick Tribune Professor at the 
University of Chicago.
    Dr. Meyer.

     STATEMENT OF BRUCE D. MEYER, PH.D., McCORMICK TRIBUNE 
 PROFESSOR, HARRIS SCHOOL OF PUBLIC POLICY STUDIES, UNIVERSITY 
                 OF CHICAGO, CHICAGO, ILLINOIS

    Dr. MEYER. Chairman McDermott, Ranking Member Weller, and 
distinguished Members of the Committee, thank you for the 
chance to talk to you about measuring poverty.\1\
---------------------------------------------------------------------------
    \1\ McCormick Tribune Professor, Harris School of Public Policy 
Studies, University of Chicago.
---------------------------------------------------------------------------
    I have seven observations. Before making them, I want to 
emphasize that each of them concerns how we measure poverty for 
the purposes of assessing poverty reduction and economic 
performance. The issue of eligibility determination for receipt 
of government programs and the allocation of Federal funds are 
fundamentally different issues.
    One way to ensure that we have a flawed measure for the 
purposes of assessing poverty reduction and economic 
performance is to restrict ourselves to a measure that we will 
also use to determine program eligibility. Since program 
eligibility requires universally available information and 
simple rules, such a restriction would limit us unnecessarily.
    First, our official poverty measure ignores many of the 
main antipoverty efforts of the last 30 years. A clear example 
of the weakness of the official measure is that the EITC lifted 
3.7 million people above the poverty line in 2005, yet it did 
not affect our official poverty measure.
    Secondly, the thresholds to which pre-tax money income is 
compared are updated annually to account for inflation using 
the consumer price index, or CPI. However, the CPI sharply 
overstates inflation. These biases accumulate over time, so 
that over a decade or more the bias has a substantial effect on 
poverty rates, more than 3 percentage points over the last 25 
years.
    Thirdly, an absolute poverty measure avoids one layer of 
subjectivity that is inherent in a relative poverty measure 
like that proposed. With a relative poverty measure there is an 
additional element of arbitrariness in that one must choose how 
the thresholds change in real terms each year. A relative 
poverty measure also has a peculiar and unattractive property: 
income could rise for everyone, yet relative poverty could go 
up also.
    Fourth, we should from time to time set new goals for 
poverty reduction. As has been emphasized, we are using the 
same measure that was devised almost 50 years ago. As was 
previously mentioned, despite how we officially describe the 
measure, the thresholds have risen in real terms because of 
bias in the CPI. We would hope that a true absolute poverty 
rate would fall over time with economic growth and the success 
of antipoverty programs.
    Thus, periodically we may want to raise the cut off for an 
absolute poverty measure and set new poverty reduction goals. 
If thresholds are raised explicitly every decade or two, that 
is more transparent than a complicated annual adjustment.
    Fifth, consumption itself is a better measure of resources 
available for consumption than after tax, post-transfer income. 
Consumption reflects lifetime income and wealth and thus better 
captures the long-term prospects of a family than 1 year's 
income. Consumption is more likely to capture the effects of 
saving and dis-saving, the ownership of durable goods like 
houses and cars, and access to credit. Consumption is also more 
likely to reflect private and government transfers. Consumption 
seems to be better measured than income for those with fewer 
resources. Underreporting of transfer income is very pronounced 
and is rising in survey data sets.
    Sixth, what it means to be poor when poverty is defined by 
the current official standard has changed over time. This 
situation is true despite the official poverty rate in 1970 and 
2005 being exactly the same, 12.6 percent.
    As has been previously mentioned, President Reagan quipped 
that we fought a war on poverty and poverty won. There are 
plenty of statistics that disagree with that statement by 
Reagan, but our official poverty measure is not one of them. 
For example, in 1972, 54 percent of the officially poor owned a 
car compared to 70 percent today. In 1972, 6 percent of the 
poor had central air conditioning. Now 38 percent do. Table 1 
in my testimony is full of statistics like this.
    Seventh and last, in understanding poverty and policy, it 
matters whether or not you use a better measure of poverty. The 
effects of tax policy on poverty are evident in my Figure 4 in 
my testimony, which compares the pre-tax and post-tax poverty 
rate over the last 30 years. One can see that the 1981 and 1982 
tax acts were not particularly favorable to the poor. On the 
other hand the 1986 tax act and the 1990 and 1993 budget 
agreements reduced poverty. You would not see that with the 
official measure.
    The extent of progress against poverty for various 
populations is also different depending on whether one measures 
poverty with consumption or income. Looking at Table 2 in my 
testimony, you can see that using a poverty measure that uses 
consumption to measure poverty shows that poverty declined much 
more since 1980 for single-parent families and the aged than 
you would see with income poverty. On the other hand, progress 
against poverty has been less successful for married couples 
with children.
    This type of information is essential in understanding 
antipoverty policies and designing better policies for the 
poor. I am hopeful that in the future we will officially report 
multiple poverty measures not tied to program eligibility, 
including consumption measures and income measures that 
incorporate in-kind transfers and taxes.
    Absolute poverty measures are an important part of this 
package, with thresholds periodically but infrequently revised. 
Such poverty measures would ensure that better information is 
widely available to assess the operation of the economy and 
design policies for the poor.
    Thank you.
    [The prepared statement of Mr. Meyer follows:]
Statement of Bruce D. Meyer, Ph.D., McCormick Tribune Professor, Harris 
   School of Public Policy Studies, University of Chicago, Chicago, 
                                Illinois
    Chairman McDermott, Ranking Member Weller, and distinguished 
members of the Committee, I appreciate the opportunity to talk to you 
today about the measurement of poverty in the United States.
    By now you will have been reminded of the many deficiencies of our 
current poverty measure. In commenting on these deficiencies and 
considering alternative measures, I would like to make seven 
observations. Prior to stating these observations, I want to emphasize 
that each of them concerns how we measure poverty for the purpose of 
assessing poverty reduction and economic performance. The issue of 
eligibility determination for receipt of government programs and the 
allocation of federal funds are fundamentally different issues. One way 
to insure that we have a flawed measure of poverty for the purposes of 
assessing poverty reduction and economic performance is to restrict 
ourselves to a measure that we will also use to determine program 
eligibility. Since program eligibility requires universally available 
information and simple rules, such a restriction would limit us 
unnecessarily.
    First, our official poverty measure ignores many of the main anti-
poverty efforts of the past thirty years. These anti-poverty efforts 
include the Food Stamp Program, the Earned Income Tax Credit (EITC), 
Medicaid, and Housing Assistance. This omission violates the basic 
principle that the measure of resources available to a household should 
include all resources available for consumption. This omission also 
violates common sense. A clear example of the weakness of the official 
measure is that the EITC lifted 3.7 million people above the poverty 
line in 2005, yet it did not affect the official poverty measure.\2\
---------------------------------------------------------------------------
    \2\ Bruce D. Meyer, 2007, ``The U.S. Earned Income Tax Credit, its 
Effects, and Possible Reforms, Swedish Economic Policy Review 14.
---------------------------------------------------------------------------
    Other deficiencies of the official poverty measure include a price 
adjustment that overcompensates for inflation, a definition of the 
family that is not based on who in the household shares resources, an 
adjustment for family size and composition with unattractive features, 
and no adjustment for geographic differences in living costs. I will 
discuss price adjustment at length and the family definition briefly.
    Secondly, the thresholds to which pre-tax money income is compared 
are updated annually to account for inflation using the Consumer Price 
Index (CPI-U). However, the CPI-U sharply overstates inflation. While 
described in Census publications as thresholds that are in constant 
dollars, i.e. ones that compensate for changes in the purchasing power 
of a dollar, the thresholds rise considerably faster than inflation, 
leading more people to be below the line. These biases accumulate over 
time, so over a decade or more the bias has a substantial effect on 
poverty rates.
    The Boskin Commission, a group of eminent economists appointed by 
the Senate Finance Committee, issued a report in 1996 on the extent of 
CPI bias.\3\ They concluded that the annual bias in the CPI-U was 1.1 
percentage points per year at the time of the report, but 1.3 
percentage points prior to 1996. While there are criticisms of the 
Boskin Commission, there is little evidence that they overstated the 
bias.\4\ Some commentators suggest that the commission understated the 
bias.\5\ The Commission itself argued that the estimates were on the 
``conservative'' side and tended to understate the bias.\6\
---------------------------------------------------------------------------
    \3\ Michael Boskin et al., 1996, ``Toward a More Accurate Measure 
of the Cost of Living'' Final Report to the Senate Finance Committee. 
In describing the bias, four types of biases in the CPI-U are commonly 
emphasized: substitution bias, outlet bias, quality bias, and new 
product bias. Substitution bias refers to the bias in the use of a 
fixed market basket when people substitute away from high relative 
price items. Outlet bias refers to the inadequate accounting for the 
movement of purchases toward low price discount or big box stores. For 
example, the BLS disregards the low prices in big box stores, assuming 
that the lower prices are offset by worse service. The shift of 
purchases to the likes of Home Depot, Costco and Wal-Mart shows how 
consumers view this choice. Quality bias refers to inadequate 
adjustments for the quality improvements in products over time, while 
new product bias refers to the omission or long delay in the 
incorporation of new products into the CPI. For example, the BLS did 
not include cellular phones in the CPI until 15 years after their 
introduction in the U.S.
    \4\ For summaries see Ernst R. Berndt, 2006, ``The Boskin 
Commission Report After a Decade: After-life or Requiem?'' 
International Productivity Monitor 12: 61-73; Robert J. Gordon, 2006, 
``The Boskin Commission Report: A Retrospective One Decade Later,'' 
NBER Working Paper No. 12311; David S. Johnson, Stephen B. Reed and 
Kenneth J. Stewart, 2006, ``Price Measurement in the United States: a 
Decade After the Boskin Report,'' Monthly Labor Review 129:10-19.
    \5\ Jerry Hausman, 2003, ``Sources of Bias and Solutions to Bias in 
the Consumer Price Index,'' Journal of Economic Perspectives 17(1):23-
44.
    \6\ Boskin et al. (1996), Section VI; Hausman (2003); and Gordon 
(2006), p. 13.
---------------------------------------------------------------------------
    The Bureau of Labor Statistics (BLS), which has the unenviable job 
of constructing the CPI, has changed its methods since 1996 to 
eliminate about one-third of the earlier bias in the price adjustment. 
The BLS has applied these new methods going backward in time to provide 
an improved price index (the CPI-U-RS), but historical official poverty 
statistics are not revised based on such improvements. Even after 
recent improvements, outside experts have concluded that a bias of 0.8 
percentage points per year remains in the CPI-U.\7\
---------------------------------------------------------------------------
    \7\ Berndt (2006) reports that when polled, the individual Boskin 
Committee members' estimates for the bias remaining in 2000 was 0.73 to 
0.9 percentage points per year. Also see Gordon (2006).
---------------------------------------------------------------------------
    One can see in Figure 1 how important the inflation adjustment to 
the thresholds is for poverty measurement. Since 1980, after-tax 
poverty falls by more than an additional three percentage points when 
using a price index that accounts for the bias in the CPI-U.
      
    [GRAPHIC] [TIFF OMITTED] T5704.027
    

    Thirdly, an absolute poverty measure avoids one layer of 
subjectivity that is inherent in a relative poverty measure. The choice 
between an absolute poverty standard and a relative poverty standard is 
a value judgment. Both approaches rely on thresholds that must be 
chosen subjectively. But, with an absolute poverty measure, once one 
chooses initial thresholds, the only adjustment over time is for 
inflation. With a relative poverty measure, there is an additional 
element of arbitrariness, in that one must choose how the thresholds 
change in real terms each year.
    Relative poverty measures are in essence inequality measures. Some 
will argue that we should keep poverty and inequality separate because 
they are separate ideas. The Census Bureau already reports many 
inequality measures in a separate section of the same annual report 
that also includes the official poverty measure. These measures include 
percentiles of the distribution, shares of income received by different 
parts of the income distribution, and summary measures including the 
Gini index.\8\
---------------------------------------------------------------------------
    \8\ U.S. Census Bureau, 2007, ``Income, Poverty, and Health 
Insurance Coverage in the United States: 2006,'' Current Population 
Reports, Series P60-233, August.
---------------------------------------------------------------------------
    From the standpoint of understanding the material circumstances of 
the population, it is useful to know the share of people who are below 
an unchanging absolute standard, i.e. an absolute poverty measure. Such 
a measure is clear and easy to understand. A relative measure keeps 
adjusting the standard for overcoming poverty, making understanding 
what it captures much more difficult.

    The most common type of relative poverty measures sets the 
thresholds as a given percentage of median income or consumption. Such 
a relative measure has some undesirable properties. The recent 
experience of Ireland with a relative poverty measure is instructive. 
Ireland grew rapidly in recent years with real growth in incomes 
throughout the distribution including the bottom. However, because the 
middle grew a bit faster than the bottom, a relative poverty measure 
shows an increase in poverty. Thus, we have a situation of nearly 
everyone being better off, but poverty nonetheless rising.\9\ Another 
troubling example is a recession during which median income or 
consumption falls. A relative poverty measure might very well say that 
poverty was reduced in such a situation, even when absolute deprivation 
rose. The choice between an absolute and a relative poverty measure is 
a question of judgment, unlike the decision about what to include in 
household resources and the price adjustment, which have a firm 
scientific basis.
---------------------------------------------------------------------------
    \9\ Rebecca M. Blank, 2008, ``Presidential Address: How to Improve 
Poverty Measurement in the United States,'' Journal of Policy Analysis 
and Management, 27(2): 233-254.
---------------------------------------------------------------------------
    Fourth, we should from time to time set new goals for poverty 
reduction. We are using the same measure that was devised almost fifty 
years ago. Though, as previously mentioned, despite how we officially 
describe the measure, the thresholds have risen in real terms because 
of CPI-bias. Nevertheless, we hope that a true absolute poverty rate 
would fall over time with economic growth and the success of anti-
poverty programs. Thus, periodically we may want to raise the cutoff 
for an absolute poverty measure and set new poverty reduction goals. If 
thresholds are raised explicitly every decade or two, that is more 
transparent than a complicated annual adjustment.
    Fifth, there are better measures of resources available for 
consumption than after-tax post-transfer income. Substantial evidence 
suggests that consumption data provide a better indicator of well-being 
than income for families with few resources. Consumption reflects 
lifetime income and wealth, and thus better captures the long-term 
prospects of a family than one year's income.\10\ Consumption is more 
likely to capture the effects of saving and dissaving, the ownership of 
durable goods such as houses and cars, and access to credit. 
Consumption is also more likely to reflect private and government 
transfers.
---------------------------------------------------------------------------
    \10\ David M. Cutler and Lawrence F. Katz, 1991, ``Macroeconomic 
Performance and the Disadvantaged,'' Brookings Papers on Economic 
Activity 2: 1-74; James M. Poterba, 1991, ``Is the Gasoline Tax 
Regressive?'' In Tax Policy and the Economy 5, ed. David Bradford, 145-
164, Cambridge, MA: MIT Press; Daniel T. Slesnick, 1993, ``Gaining 
Ground: Poverty in the Postwar United States,'' Journal of Political 
Economy 101(1): 1-38; Bruce D. Meyer and James X. Sullivan, 2003, 
``Measuring the Well-Being of the Poor Using Income and Consumption,'' 
Journal of Human Resources 38(S): 1180-1220; Bruce D. Meyer and James 
X. Sullivan, 2007, ``Further Results on Measuring the Well-Being of the 
Poor Using Income and Consumption,'' NBER Working Paper 13413.
---------------------------------------------------------------------------
    Compared to available income data, available consumption data in 
the U. S. are better suited for imputing some non-money resources, 
particularly those related to housing and vehicle ownership, given the 
detail in the surveys.\11\ Furthermore, one can exclude categories of 
consumption that may not directly increase well-being, such as work 
expenses and medical out-of-pocket expenses.
---------------------------------------------------------------------------
    \11\ For example, a reasonable estimate of housing subsidies can be 
computed using Consumer Expenditure (CE) Survey data because the survey 
provides information on out of pocket rent and the characteristics of 
the living unit including the total number of rooms, the number of 
bathrooms and bedrooms, and appliances such as a washer, dryer, etc. 
These characteristics can be used to impute a total rental value. In 
addition, for homeowners the CE Survey provides self reported values of 
the rental equivalent of the home. The data also include information on 
make, model and year of cars owned, allowing one to calculate the flow 
of consumption services from car ownership.
---------------------------------------------------------------------------
    In work with James X. Sullivan, I found that consumption is a 
better predictor of well-being than income. For example, we examine 
measures of material hardship or adverse family outcomes for those with 
very low consumption or income. These problems are more severe for 
those with low consumption than for those with low income.\12\
---------------------------------------------------------------------------
    \12\ Meyer and Sullivan (2003, 2007).
---------------------------------------------------------------------------
    Consumption seems to be better measured than income for those with 
few resources. Under-reporting of transfer income is very pronounced 
and has increased over time. As can be seen in Figure 2, the share of 
AFDC/TANF dollars and Food Stamp dollars that are reported in the 
Current Population Survey (the official poverty source) is low and 
declining. While there is under-reporting of consumption, reported 
consumption tends to exceed reported income at the bottom of the 
distribution. As can be seen in Figure 3, which compares Consumer 
Expenditure Survey reported consumption to National Income Account 
consumption, a high share of food at home and rent plus utilities are 
reported in the survey.\13\ Other types of consumption are reported 
less well, including food eaten away from home and clothing. One can 
use as a poverty measure the consumption of food at home, housing 
including utilities, and transportation. This measure approximates 
necessities, and is measured well in the Consumer Expenditure Survey.
---------------------------------------------------------------------------
    \13\ An important caveat is that a substantial part of the 
difference between the Consumer Expenditure Survey and the National 
Income and Product Accounts totals is likely attributable to lack of 
comparability between the two sources. See the discussion and 
references in Bruce D. Meyer and James X. Sullivan, 2008, ``Three 
Decades of Consumption and Income Poverty,'' Working Paper, University 
of Chicago.

[GRAPHIC] [TIFF OMITTED] T5704.028


[GRAPHIC] [TIFF OMITTED] T5704.029


    It should be evident from these figures that one needs to pay 
attention to the quality of data used in any poverty measure. While 
income data are easier to report for many people than consumption data, 
the poor often have many irregular sources of income that make 
reporting difficult. Income is also a more sensitive subject than 
consumption. Overall, a larger (dollar weighted) share of consumption 
questions are answered in the Consumer Expenditure Survey than income 
questions in the Current Population Survey ASEC. Lastly, the unit that 
shares resources is identified in the Consumer Expenditure Survey 
because it is asked directly. In the Current Population Survey there 
are no direct questions that allow you to determine if the resources of 
a cohabitor, for example, should be included. I should emphasize that 
current consumption datasets do not have the geographic coverage and 
sample size to measure poverty at the state and local level. Thus, 
consumption data cannot be used for poverty calculations at fine 
geographic detail without expanding data collection.
    Sixth, what it means to be poor, when poverty is defined by the 
current official standard, has changed over time. This situation is 
true despite the official poverty rate in 1970 and 2005 being exactly 
the same, 12.6 percent.\14\ President Reagan famously quipped that we 
fought a War on Poverty and poverty won. The former Chairman of this 
Committee said a dozen years ago that ``Government has spent $5.3 
trillion on welfare since the war on poverty began, the most expensive 
war in the history of this country, and the Census Bureau tells us we 
have lost the war.''\15\ There are plenty of statistics that disagree 
with these statements, but our official poverty measure is not one of 
them.
---------------------------------------------------------------------------
    \14\ U.S. Census Bureau (2007) p. 44.
    \15\ House Ways and Means Committee Chairman Bill Archer's opening 
comments in the debate on the bill that became the 1996 welfare reform 
law (Congressional Record, 104th Cong., 1st sess., March 21, 1995).
---------------------------------------------------------------------------
    The official poor of today are much better off than the poor of 
thirty years ago. But, this change is largely due to poverty thresholds 
that have risen in real terms over time, thus including additional, 
better-off families. In 1972, 54 percent of the officially poor owned a 
car, compared to 70 percent today.\16\ In 1972, 6 percent of the poor 
had central air conditioning, while now 38 percent do. For single 
mothers we have seen rates of leaky roofs and deficient plumbing fall 
sharply.\17\ Since 1980, the fraction of the poor having a dishwasher 
has risen from 18 percent to 31 percent. Similar increases have 
occurred in the ownership of washers, dryers and other appliances as 
can be seen in Table 1.
---------------------------------------------------------------------------
    \16\ Author's tabulations using Consumer Expenditure Survey data 
for 1972/1973 and 2000-2005.
    \17\ Bruce D. Meyer and James X. Sullivan, Forthcoming, ``Changes 
in the Consumption, Income, and Well-Being of Single Mother Headed 
Families,'' American Economic Review.

[GRAPHIC] [TIFF OMITTED] T5704.030


    Looking at a wide range of indicators of children's living 
conditions including housing conditions, air conditioning, access to a 
telephone and doctor visits over a slightly earlier period, Jencks, 
Mayer and Swingle conclude that:
    Almost all our measures suggest that low-income children's living 
conditions improved fairly steadily between 1969 and 1999 . . . 
[O]fficial child poverty statistics do not currently provide reliable 
information about trends in material hardship among American 
children.\18\
---------------------------------------------------------------------------
    \18\ Christopher Jencks, Susan Mayer, and Joseph Swingle, 2004, 
``Can we Fix the Federal Poverty Measure So it Provides Reliable 
Information About Changes in Children's Living Conditions?'' Working 
Paper. Harvard University.
---------------------------------------------------------------------------
    There still are millions of people suffering material deprivation 
including millions of children whose long-term prospects are affected. 
But, if we are going to improve on our current policies to address 
poverty, we may want to recognize that the nature of poverty has 
changed over time. Forty years ago, one of the main food policy issues 
was making sure large numbers of people received sufficient calories. 
Now, the main health issue is making sure large numbers of people 
receive the right calories and not too much of the wrong kind.
    Seventh and last, in understanding poverty and policy, it matters 
whether or not you use a better measure of poverty. In pointing out how 
poverty measures affect our understanding, I will focus on changes in 
poverty over time. We can discuss how including or excluding various 
things from resources will raise or lower the current rate. But, as 
others have emphasized, when one adds or subtracts something from 
resources, it may call for a similar adjustment to the thresholds. The 
thresholds are fundamentally subjective, one might even say arbitrary. 
What is more informative is how the exclusion or inclusion of something 
from resources affects changes over time in poverty rates. To 
facilitate such comparisons, I would urge any change to our current 
official measure to adjust thresholds so that the poverty rate is the 
same as the current official rate in some base year, probably the year 
of adoption. We can think of the differences reported here as looking 
at what would have happened if we adopted a different measure in 1980 
and set thresholds to make the poverty rate the same in that initial 
year. This approach to assessing alternative poverty measures was also 
adopted by the Joint Economic Committee Democrats in a recent 
report.\19\
---------------------------------------------------------------------------
    \19\ Joint Economic Committee Democrats, 2004, ``Reduction in 
Poverty Significantly Greater in the 1990s than Official Estimates 
Suggest,'' Economic Policy Brief, August.
---------------------------------------------------------------------------
    The effects of tax policy on poverty are evident in Figure 4, which 
compares the pre-tax and post-tax poverty rate over the last 30 years. 
One can see that the 1981 and 1982 tax acts were not particularly 
favorable to the poor. One can see that the 1986 tax act and the 1990 
and 1993 budget agreements reduced poverty. It is also relatively easy 
to see the effects of the EITC on poverty in this figure. EITC changes 
were the main tax provisions affecting the poor in 1986, and the later 
expansions were the bulk of the tax changes in the 1990 and 1993 budget 
agreements (each of which was phased in over several years).

[GRAPHIC] [TIFF OMITTED] T5704.031


    The extent of progress against poverty for various population 
groups is different when one measures poverty with income compared to 
when one uses a more appropriate consumption measure. Looking at Table 
2, one can see that using a poverty measure that directly reflects what 
households are able to consume shows that poverty rates have declined 
sharply since 1980 for single parent families and families with a head 
that is 65 or older. On the other hand, progress against poverty has 
been less successful for married couples with children. This type of 
information is essential in understanding the effects of anti-poverty 
policies and designing better policies for the poor.

[GRAPHIC] [TIFF OMITTED] T5704.032


    I am hopeful that we will officially report multiple poverty 
measures not tied to program eligibility, including consumption 
measures and income measures that incorporate in-kind transfers and 
taxes. Absolute poverty measures are an important part of this package, 
with thresholds periodically, but infrequently revised. Such poverty 
measures would insure that better information is widely available to 
assess the operation of the economy and design policies for the poor.
    Thank you.

                                 

    Chairman MCDERMOTT. Thank you for your testimony and thank 
all of you for coming and sharing your expertise with us.
    I have a question and I think it is very topical, and that 
is the whole question of how does something like gasoline 
prices or fuel oil prices or the price of corn, because corn is 
now being used for ethanol, how does that get figured into this 
kind of a--we have had this sort of double shock right now 
where food prices have gone up and gasoline prices have gone 
up--how does that impact or how would that be figured into this 
standard? I open it to the panel. Dr. Blank.
    Dr. BLANK. The National Academy measure recommends that the 
poverty threshold be defined based on food, shelter, and 
clothing, plus a little more--utilities are also in there.
    So, an increase in food prices, a change in housing prices 
will affect this. So, as fuel affects utility prices, as food 
prices go up, this is going to potentially affect your 
threshold if you are changing it over time. It also of course 
affects the resources that families have available to them.
    If more families end up going on to food stamps or if more 
families end up qualifying for Medicaid because their income 
has fallen in other ways, that also is going to be taken into 
account.
    Chairman MCDERMOTT. Is the same true of the housing bubble 
bursting and now prices in housing going down across the 
country?
    Dr. BLANK. Yes, because housing has become less expensive 
for lower income families.
    Dr. LEVITAN. How
    Chairman MCDERMOTT. Go ahead.
    Dr. LEVITAN. There is another way that the cost of 
transportation would figure into this, because the NAS proposed 
that work-related expenses, among them the cost of getting back 
and forth from work, should be deducted from family resources. 
So, if you are putting $60 of fuel in your tank every couple of 
days, it means you have less money for the other things that 
your family needs.
    Chairman MCDERMOTT. The regional differences. Tell me how 
that works. Is it really cheaper to live some places than 
others? Are you as poor if you have an X number of dollars in 
one place as you do in another place?
    Dr. BLANK. So, I think it is a similar question to, ``Is it 
more or less expensive over time as inflation occurs to live in 
1 year versus another year?'' Similarly there are some areas of 
the country in which prices for housing, for fuel are simply 
quite a bit higher.
    Mr. Levitan knows this, as anyone who lives in New York 
City does. If you compare prices in New York City to prices in 
some parts of rural America, you simply have very, very 
different situations. Taking account of that when determining 
whether or not a family is poor is clearly the right way to 
develop your National economic measure.
    Chairman MCDERMOTT. The present measure has no reflection 
of that whatsoever.
    Dr. BLANK. None at all.
    Chairman MCDERMOTT. So, if you are living in rural Iowa or 
you are living in New York or Los Angeles or San Francisco or 
Seattle
    Dr. BLANK. It is exactly the same poverty line.
    Chairman MCDERMOTT. Let me ask the other question that I am 
sort of impressed that there is this large a crowd here for 
something as dry or seemingly unimportant as a Federal poverty 
line.
    What difference does it make if we do or do not change it? 
Why should we change it? You developed something in 1996. Has 
it stood the test of time of 10 years since 1996?
    Dr. DANZIGER. The poverty measure is a very important 
national social indicator. We get the unemployment rate every 
month and the GDP growth rate every quarter. Those indicators 
obviously get a lot more attention, but once a year we get the 
poverty measure and it is the focus of interest each time the 
Census Report is released.
    In my testimony, I have a quote from 35 years ago from 
James Tobin about the importance of the poverty measure in 
telling us about how our least advantaged citizens are faring. 
That is why it is important to continue to focus attention on 
poverty.
    For the last 30 years, it has been obvious that has what 
happened to the average family has not happened the same at the 
bottom and the top. It was the case from the end of World War 
II to the early 1970s that ``a rising tide lifts all boats.'' 
If you heard that GDP was growing rapidly, that unemployment 
rates were low, you could assume that low wage workers were 
gaining and high wage workers were gaining.
    Since the 1970s, however, there is a very strong 
disconnect--average economic measures, such as the unemployment 
rate, economic growth, GDP per capita, no longer do a good job 
informing us about how those at the bottom are faring. That is 
why the poverty measure is so important and continues to be an 
important social indicator.
    Dr. LEVITAN. I want to say something about the 
practicalities of this from the New York experience. This 
project began when a group of people were asked, 'come up with 
some new ideas about fighting poverty.' The feedback that the 
Mayor got from them is, 'we are not sure that we know what we 
are doing, because we are working with an apparatus, with 
statistical methods that are ignorant, and you have got to come 
back and give us some better ideas and better way of looking at 
poverty.'
    So as Dr. Blank pointed out, the issue really isn't, is it 
this percent, is it that percent, it is looking inside and 
seeing things that you didn't see before, that you couldn't see 
before using the old measure. That is why I made a point of 
pointing out what happens to children living in single-parent 
families.
    When you sort of unpack this thing and look, you see 
poverty in a different way. I think it is a more intelligent 
way, and it is a way that allows people to then think about 
policy.
    Mr. NELSON. I would like to just add my two cents.
    I think the question of why so many folks are interested in 
this issue probably doesn't turn on the technical arguments 
about what would be a more scientifically defensible standard. 
It is because there are a lot of people in this room and 
millions in the country who would like to see fewer American 
families unable to raise their children successfully and would 
like to reduce the poverty rate.
    The issue is that the kind of sustained political will and 
public interest in doing that important thing for the country 
requires that we have some shared view of who is poor in this 
country and what that means.
    Even more important, and I will give you a specific 
example, is some way of tracking our progress against that 
national objective of reducing poverty.
    The Casey Foundation has helped States look at the issue of 
the value of a State EITC. If you talk to a Governor and a 
legislator about making the difficult decision to introduce an 
expanded earned income tax credit at the State level, and he or 
she asks you a question, 'and if we do that and it is as 
effective as you think it is, will it reduce my State's child 
poverty rate,' and the answer to that question, 'not the 
official child poverty rate in that State,' and you create a 
real impediment to the will and energy and sense of public 
return on doing the right thing.
    So I think that that is why people are interested in 
getting this measure right.
    Chairman MCDERMOTT. Thank you. Mr. Weller will inquire.
    Mr. WELLER. Thank you Mr. Chairman. I am interested in 
discussion, and I know we are limited in time for each of us 
with our turns. Dr. Danziger, as I understand it, in the 
Chairman's definition under his legislation, if a family of a 
certain size has less disposable income in a year than two-
thirds of what the median similarly sized family in their area 
spends in a year, then they fall into poverty. Is that correct?
    Dr. DANZIGER. That is correct. In 1965, Mollie Orshansky, 
working at the Social Security Administration, was a researcher 
who had available data only on food consumption. That's what 
she had available. The official poverty line was developed very 
much like what the NAS proposes based on food only. She said, 
well the average family spends this much on food and we expect 
that the poor will spend a third of their income on food.
    So, the NAS measure says, we are going to look at food, 
clothing, shelter, utilities, and a little more. The budget is 
not going to be constrained to be only food. It is based on a 
broader consumption basket of necessities.
    The specific point you pick fort he poverty line, the NAS 
was clear to point out, cannot be scientifically determined. 
The NAS panel suggested picking a reference point in the 
consumption distribution based on the median family's spending 
on necessities and adding a little more, call that 15 percent. 
It also said that you could use a multiplier of 20 percent.
    The draft act specifies a specific number. It falls within 
the range that the NAS suggested. What the panel and what I 
would argue is that it is important to establish that we are 
going to have a modern poverty threshold, and that over time we 
are going to allow it to change with changes in median spending 
on food, clothing, shelter, and utilities.
    The NAS panel actually wanted to avoid claims that it was 
``moving the goal posts.'' The panel proposed that for 1992 the 
NAS threshold be set so that the NAS measure and the official 
measure would achieve the same poverty rate. Then as time 
passed, the official measure would change only by the change in 
consumer prices and the NAS measure would change with changes 
in spending on consumption on necessities.
    Mr. WELLER. Dr. Meyer would you care to comment on this 
mixing of income and spending?
    Dr. MEYER. Well let me also say one thing about the 
question that was just answered. One thing that is very 
different about this proposal is that it would set the standard 
relative to consumption of an average person, rather than an 
absolute standard. It would be moving the goal posts every year 
so that even if people at the bottom have their income going 
up, even if transfers to them are going up, poverty could still 
be going up since the proposed definition is the income of 
people at the bottom relative to consumption of those at the 
middle.
    Now the proposed measure does mix consumption and income. 
It uses consumption to set the standard and then compares 
income to it. I think we would be better off if we just looked 
at consumption as our measure of resources rather than income.
    Two examples are probably useful. In the case of single 
mothers, you find that they tend to get their resources from 
many different sources: from government programs, from 
transfers, from family and friends, and from many different 
jobs. Income also tends to be underreported sharply for single 
mothers.
    If you look in our standard surveys, including the one that 
we use to calculate the official poverty measure, only about 
half of food stamps and TANF benefits are reported. Therefore, 
if you look at consumption, you can see that the living 
conditions of single mothers have improved more sharply than 
income suggests.
    Another good example is aged households. Aged households 
have been much more likely over time to have a car and own a 
home, and the flow of resources from car ownership, and a home, 
do not count in income. Similarly, if you are drawing down 
savings, as the aged population is increasingly doing to 
finance their retirement, that again does not count as income. 
It should count as part of resources that reduce poverty, 
because it is a resource available for consumption.
    Mr. WELLER. Dr. Levitan, you did this work on behalf of 
Mayor Bloomberg, and Mayor Bloomberg like Members of Congress, 
we have limited resources and we want to allocate those 
resources as effectively as possible, because we want to help 
people that need help. In your work looking at the definition 
of poverty within New York City, your formula came up with a 
higher level of poverty.
    From an allocation of resources, did you look at the impact 
that would have on the New York City budget? What was the 
budgetary impact if that were to be implemented to determine 
distribution of benefits and assistance?
    Dr. LEVITAN. Well we have taken the same attitude toward 
our work that is embodied in the legislation from Mr. 
McDermott, which is that this is a social indicator, has no 
direct bearing on program eligibility or funding formulas, 
which are totally outside the purview of the government of the 
City of New York.
    So, this is a tool that we can use to better understand 
what we are doing and what is working and what is not working. 
If we see that the poverty rate is different under our measure 
when we look at, say, the foreign born, that may tell us 
something about where we need to target our outreach as we try 
to encourage more people to enroll in the food stamp program. 
Happily, if we get more people in the food stamp program, our 
poverty measure might actually capture it.
    So, this is the kind of thing that we want to do with this 
measure. This is not going to have the kind of budgetary impact 
that you are suggesting.
    Mr. WELLER. Does anyone else want to comment on that? I 
realize the red light is one for me, Mr. Chairman.
    Dr. DANZIGER. If I could. The NAS considered this issue. 
Congress seems to think that the current poverty measure isn't 
the one to be used because many public programs define 
eligibility by using a multiplier of the poverty line. For 
example, Medicaid use 180 or 185 percent of the poverty line; 
food stamps uses 130 percent of the poverty line.
    So, there does not have to be a direct connection between a 
revised and program eligibility requirements.
    Mr. WELLER. However, you are using examples of where there 
is a connection.
    Dr. DANZIGER. There is not a connection to the official 
line in the sense that Congress decided to use a multiple of 
the current poverty line. Congress is not using 100 percent of 
the poverty line to determine eligibility for these programs.
    So, the hypothetical would be, let us assume you did 
nothing but change the official measure from the current 
measure to 30 percent above the current measure. You then might 
decide that since the new official measure is the Orshansky 
line plus 30 percent, the new food stamp eligibility limit 
should be 100 percent of the new poverty line, not 130 percent.
    The poverty definition itself does not have any direct 
implications for program eligibility and need not.
    Dr. BLANK. Can I say something very quickly?
    Mr. WELLER. Sure.
    Dr. BLANK. Very few people think we ought to stop 
publishing the old official poverty line as defined by OMB, and 
every program that currently ties to that line can continue to 
tie to that line.
    There is absolutely nothing, if you develop this new 
measure, that would in any way interfere with ongoing use of 
the OMB-defined poverty line. Programs over time can decide 
whether they think that is fine or whether they want to make 
some changes, which is what they do anyway when they look at 
eligibility from year to year.
    Mr. WELLER. Well I know, Mr. Chairman, when I proposed my 
legislation last year with the desire to include accurate 
recognition of benefits that people received to help them with 
their income in determining poverty, we were suggesting that we 
have a model developed that would compare the existing poverty 
rate and then implement this even though it would not be 
immediately the official poverty rate, but it would give us an 
idea. I do believe that, if we change it, it is going to have a 
budgetary impact, and we need to think that through as well.
    Chairman MCDERMOTT. The panel is saying not necessarily a 
budgetary impact. What you are about is it gives you a better 
view of who it is that falls into these categories, and maybe 
that is
    Mr. WELLER. However, income eligibility for Medicaid and 
other programs is determined on where you fall within 
comparison to the poverty rate. It is going to have an impact 
on spending on that particular program.
    Dr. BLANK. Currently those programs are tied to the OMB 
directed line, which will continue to be calculated in exactly 
the way it is, so that there is no disruption or change in any 
of those program eligibility standards, unless over time a 
program decides to do so. It is not obvious that they will. 
This is a more complicated statistic, they may decide they want 
to stick with this much simpler food times three updated by the 
CPI, I mean that
    Mr. WELLER. Or Congress may decide to make that change. 
Thank you.
    Chairman MCDERMOTT. Mr. Stark will inquire.
    Mr. STARK. I was fascinated by this, Mr. Chairman. Thank 
you.
    I often think that it is difficult for those of us who live 
so comfortably to understand what poverty is. It is kind of 
remote from our observation. I was a very young puppy when I 
was poor, and I always defined poverty as the fact that I never 
slept alone until I was married. That was sort of what defined 
it.
    [Laughter.]
    Mr. STARK. Then I have heard Dr. Meyer talk about this 
ownership stuff, and where I live, in southern Maryland, I 
would like to show you, Dr. Meyer, there are some homes down in 
southern Maryland, I could show you a few homes where these 
folks, if you look in the yard, I could count perhaps a dozen 
refrigerators, eight or ten air conditioners, a whole bunch of 
television sets, but I think I would give you a nickel for any 
of them that worked.
    It seems to me that car ownership, aside from the cost of 
gasoline today can actually be a drag, and where it is a living 
unit made up of more people I suspect that you get more people 
per car or per air conditioning than you do otherwise.
    The one question, and I hate to have the Chair get to the 
left of me on this, but in other countries, and I would ask the 
panel this, and I understand there are some problems with this, 
but they do use relative poverty measures. A percentage of 
median income, I believe. Canada does that, U.K. does that. 
Canada it is what, 60 percent of the median income determines 
poverty, anybody, is that where we are today in
    Dr. BLANK. The OECD and the EU use that. Canada, actually, 
has another way in which it calculates what is called the low 
income lines.
    Mr. STARK. Based on median income or----
    Dr. BLANK. It is not a straightforward
    Mr. STARK. What is wrong with using, aside from the fact 
that now it would drop, it is kind of a moving target, but what 
is wrong with using something like that as a measure of 
poverty? It would be pretty easy to calculate the median 
income, I think. Why couldn't we? Anybody?
    Dr. LEVITAN. I think there are two issues. One is I think 
it confounds two conceptually different things, poverty and 
inequality. I think inequality is an enormously important 
issue, but that is measuring equality. Poverty is something
    Mr. STARK. Is poverty kind of inequality?
    Dr. LEVITAN. Poverty is related to inequality, but poverty 
relates to a state of material deprivation, which is related 
but not identical to inequality, which is your distance from 
the median, right?
    The other problem I would have with this approach is that 
you sometimes would get some very bizarre results. So, imagine 
we have a recession. Median income falls, which means the 
poverty threshold falls.
    Mr. STARK. At a time
    Dr. LEVITAN. At a time when more families are in distress. 
So, you could have a situation where, in a recession the 
poverty rate is falling, and that is a very odd result for a 
social indicator that is trying to measure families' 
deprivation.
    Mr. STARK. So, the alternative is to establish an amount of 
money that you need to exist?
    Dr. LEVITAN. The beauty of the NAS methodology is we are 
looking at changing the measure over time by median 
expenditures on necessities, and we are doing it slowly. We are 
talking about a 3 year moving average so we don't get these 
sorts of wild gyrations of where the poverty threshold is.
    Mr. STARK. Indulge me, somebody else. These ``necessities'' 
I think you would find some difference both on the panel and up 
here and at the witness table as to what is a necessity. I can 
think of people who would say poor people don't deserve a car, 
it ain't necessary. Walk, ride a bike, take the bus. Where do 
we make this determination?
    Dr. BLANK. So, the necessities that are defined within the 
National Academy line are food, shelter, clothing, and 
utilities. There is not a car
    Mr. STARK. Not healthcare. Not childcare, not work related 
care.
    Dr. BLANK. Some of those things are taken account of when 
you look at people's resources. On the resource side, what the 
National Academy recommends, and which I strongly agree with, 
is that you want to look at after tax income, taking account of 
in-kind benefits, and then also subtracting off what we think 
are necessary expenditures for work because we expect Americans 
to work, and out of pocket medical expenses because we think 
that you aren't better off if you are sick and have to pay out 
of pocket expenses.
    Mr. STARK. What do you do with child rearing? A single 
parent, is that a job or is that just a
    Dr. BLANK. That is part of work expenses. Work expenses is 
potentially transportation, childcare
    Mr. STARK. What if you don't work? What if you are a single 
parent with three kids and that is your full time job, how do 
you count that?
    Dr. BLANK. In that case, then child care is not subtracted 
off income because it is not a work expense.
    Mr. STARK. So that parent gets nothing for being the child 
care provider, trainer
    Dr. BLANK. If you are looking at the economic situation of 
the family in terms of the resources they have available for 
disposable income, no, your economic status is not affected if 
you are not working by whether or not you care for children or 
not.
    Mr. STARK. Thank you Mr. Chairman.
    Chairman MCDERMOTT. Mr. Davis will inquire.
    Mr. DAVIS. Thank you Mr. Chairman, and this is a 
fascinating topic, and I hope that the panel doesn't conclude 
that the absence of Members here means people are not deeply 
interested in this issue. I hope it doesn't mean that because I 
think it is an enormously important subject.
    Let me throw out a question and then make an observation 
after that. Using the current indices, the current ways we 
define poverty, what percentage of people, roughly, in poverty 
today have been in that condition for less than 12 months?
    Dr. BLANK. We don't have, we have no official measures of 
that. Of course we have only annual data on the ways basis in 
which we find official poverty.
    There is some other data you can look at that has less than 
annual information in it, but one reason to go to an annual 
poverty line is that you probably don't want to look at 1 
month, you probably
    Mr. DAVIS. That is not the point I was making.
    Honestly I am just trying to get a sense of how porous the 
line is and how many people move from middle class, lower 
middle class to poverty back to lower middle class back to 
poverty depending on fluctuations in their lives. I have seen 
data that indicates that as many as 27, 28 percent of people 
below the line today have been in that place for a fairly short 
period of time. I don't swear by that data but I have seen it 
in some contexts.
    Dr. DANZIGER. I can give you a rough, ball park estimate 
from memory.
    There is a data set called the Panel Study of Income 
Dynamics, which has followed families from 1968 to the present. 
You get into an interpretation of whether the glass is half 
full or half empty.
    If you are poor as a young person, say, let's look at young 
people 25 when they have left the parental home and they are 
just starting, and you find out that the person is poor, then 
the likelihood that they will be poor again over the next 40 
years is something like 80 percent. While a lot of people move 
into and out of poverty, the people who start at the bottom 
have a much higher likelihood of being poor again than others 
who start out from a higher economic position.
    If you start with an affluent person at that age, their 
probability of going into poverty is going to be something like 
15 percent over the next 40 years.
    Mr. DAVIS. Well, two points. From a public policy 
standpoint, I think you have two fascinating things I don't 
think exist in contradiction, but they do strain different 
sides of our politics. Your observation is exactly right. There 
are a lot of people who live in a fixed condition of poverty, 
and there is no question that the best predictor for being poor 
is that you are poor today.
    The other best predictor for being poor is that you don't 
have a high school education. The next best predictor is that 
you are a drop out. The next best predictor is that you don't 
have a college education, and so on and so on.
    That makes an obvious point. I don't think you can have 
this conversation without having a conversation about 
educational inequality. Two years ago, my State had a 41 
percent high school drop out rate. We improved to a 33 percent 
high school drop out rate last year and some people in my State 
have the nerve to celebrate that. The numbers are staggering. I 
was born in Montgomery, which is the State capital, a primarily 
urban/suburban city. It had a 50 percent drop out rate 3 years 
ago.
    The second observation that I would make, I think we have 
to get a handle on how debt affects this. While I don't argue 
this should be the way we measure poverty, if we measure 
economic stress, one very important question is the degree to 
which debt consumes your disposable income. If debt is 
consuming your disposable income, you may be living in a half 
million dollar house, but if you have two kids in the 
University of Alabama, then chances are if you are living in a 
million dollar house they don't qualify for financial aide.
    Again, I think what we are going to have to figure out as 
public policy makers is maybe how we move from the box of 
talking so much about poverty and moving to a broader 
conversation about economic anxiety and understand that one 
size doesn't fit all.
    In my final observation, limited time that I have, there 
are significant regional differences. The question of 
persistent poverty, people living in whole communities that 
face loss of jobs, poor educational systems, that does appear 
to be more concentrated in the South. There are roughly 243 
counties in the American South that are classified as being in 
conditions of persistent poverty, which is a combination of 
unemployment rate, poverty rate, and that is a significant 
problem.
    One new thing that I think that we have to do as a Congress 
is that we have to figure out how we can better target 
resources toward places like what we call the black belt in 
Alabama, the delta in Mississippi, the Appalachian regions in 
West Virginia, because when you have whole communities where 
foreclosure is a random regular event, where poverty is the 
norm, where failing schools are a norm, that has a cultural 
impact and depresses people's expectations. It limits housing 
values, it means industry doesn't come in, and becomes a cycle 
that repeats itself.
    So, I think we have to move away from our favorite culture 
versus nature arguments and we have to move to broader 
conversations about identifying economic distress and 
economically distressed communities.
    Thank you Mr. Chairman.
    Chairman MCDERMOTT. Mr. Weller will inquire.
    Mr. WELLER. Thank you Mr. Chairman.
    Under your proposal I just want to get an understanding of 
what the impact would be on the poverty rate, and Dr. Blank I 
believe that you are a supporter of what the Chairman is 
advocating with his proposal. So, what is the current poverty 
rate today?
    Dr. BLANK. The current poverty rate is 12.5.
    Mr. WELLER. What would it be under the Chairman's proposal, 
today?
    Dr. BLANK. One would have to do the exact calculation. 
Sheldon, you in your testimony have some numbers from 
experimental tabulations that have been run, although these are 
not exactly the same as the proposal. The part of the proposal 
is to go to census and tell census to use their professional 
judgment to make a series of decisions about exactly how 
certain things get done. So,
    Mr. WELLER. Would any of the panelists be able to provide 
an estimate on what the poverty level would be?
    Dr. DANZIGER. I have a footnote in my written testimony 
referring to a 2001 census report which showed an official 
poverty rate of 11.8 percent and an NAS style measure of 12 
percent. However, that report was based on analysis done 7 or 8 
years ago, so I don't know what it would be like today. I am 
sure that the Census Bureau experts who have been working on 
this topic for many years could provide updated data comparing 
the official measure and the NAS measure.
    Mr. WELLER. Does anybody else on the panel have a response?
    Dr. LEVITAN. Well not a precise one, but let me give you 
something that I think would give you a ballpark. Okay, so for 
2006, the poverty threshold, the official poverty threshold for 
a family of two adults and two children was $20,444. One of the 
NAS style thresholds that has been used that is very close to 
what is in the proposed legislation, the national threshold, is 
21,818. It is not really a big difference.
    So, you have a small upward adjustment in the threshold, 
but you are also including a lot more on the resource side. So, 
I don't think that on the national level you would get a very 
different poverty rate, which is consistent with the footnote 
that Dr. Danziger just dug up for you.
    Mr. WELLER. Dr. Meyer, would you like to comment?
    Dr. MEYER. I think the bigger concern with an NAS type 
measure is not how you initially set it but the fact that it is 
likely to grow over time. Especially that the poverty rate may 
very well grow over time even when incomes are growing and 
transfers to those at the bottom of the distribution are 
growing, because it is a relative measure.
    Now Dr. Levitan criticized a poverty measure that 
calculated the number of people who are below some percentage 
of the median because that measure could very well go down in a 
recession. However, this NAS type measure has that same bad 
property, it is just a little harder to see. If you had a 
recession and median consumption falls, it may very well be 
that poverty measured NAS style falls also.
    Mr. WELLER. So, if the current rate is about 12.5 percent 
as Dr. Blank stated, what would the rate be today? Do you have 
a projection, the way it would be under the Chairman's formula?
    Dr. MEYER. I have not done those calculations.
    Mr. WELLER. I am told there is, under that 12.5 percent is 
about 37 million people. Do we have a projection how many 
individuals, how many Americans would, under the Chairman's 
proposal be designated or determined to be living in poverty?
    Dr. BLANK. I think the answer to that is the same as the 
answer to the other question.
    The point about the National Academy measure is that there 
is not a simple projection as to what happens to the poverty 
count. There are some calculations that would reduce poverty, 
such as adding in-kind income and taking account of after tax 
and the EITC. There are, however, some other calculations that 
would push poverty up. When you subtract off out of pocket 
medical expenses or you subtract off work expenses, that has 
the opposite effect and those are off setting.
    Mr. WELLER. My concern is we have people testifying in 
favor of the proposal, and you have got some good ideas in the 
proposal Mr. Chairman, but no one seems to be able to tell us 
what the impact will be on the number of individuals, number of 
families, is it an increase, would there be more, would there 
be less, and to me that is very useful information for this 
Subcommittee to have.
    Mr. NELSON. I think, Congressman, that it is a fair 
question, but I don't think it goes to the heart of the utility 
about an agreement about a measure that over time people think 
is more credible. I think you and your prior legislation have 
made arguments which I would like to associate myself with.
    If we are going to communicate to the public going forward 
what the benefits and impact of public policy programs for low 
income families are, we have got to measure those in the 
calculation of their income and their resources. That is a 
critical step forward and we are now unable to do that.
    I also think that there is an equally compelling argument 
that our definition of what actually constitutes being poor 
needs to correspond more closely to what the common-sense 
public understanding of what being poor means, and I think the 
NAS threshold definition comes a whole lot closer than a 
minimum food budget times three to responding to that.
    The real issue is not what happens to the numbers tomorrow, 
the issue is whether it gives us the tool, which I would like 
to supplement with Congressman Davis's interest in knowing more 
about the assets of low income families and the persistence of 
poverty among low income families, if we had those three 
regularly updated, accurate data, we would create a context in 
which Democrats and Republicans and Independents, who are all 
committed to reducing poverty have more common ground to hold 
themselves accountable for policy.
    Mr. WELLER. Mr. Chairman, I think these are fair questions 
to ask because we have limited resources. How can we best 
allocate them to help those who need help.
    So, I would urge some modeling being done because I have 
seen figures as much as a 15 million increase in the number of 
people who would be in poverty under your formula. Of course I 
would like to see some official ones, but I think it would be 
very useful to have that information. So, I would encourage you 
Mr. Chairman.
    I would also ask, Mr. Chairman, I realize there are Members 
coming and going and we have another Ways and Means meeting 
going on at the same time which is competing with this hearing, 
but I would ask Mr. Chairman, if Members would have the 
opportunity to submit questions to our witnesses for the 
record.
    Chairman MCDERMOTT. Absolutely. Everybody has five 
additional days to submit questions and put anything in the 
record
    Mr. DAVIS. Mr. Chairman, would you allow each of us just a 
couple of minutes, because we have a few minutes before that 
Ways and Means hearing begins? Okay. Mr. Stark, did you want to 
go first? I don't want to
    Mr. STARK. I was going to go in the second round.
    Chairman MCDERMOTT. Mr. Stark will inquire.
    Mr. STARK. Well I wonder if the panel can help me on this. 
It seems to me that, and we have three MIT graduates here, two 
Ph.D.s and one bachelors degree sans laude----
    [Laughter.]
    Mr. STARK. Good in Latin, but that's----
    There is something about the inefficiencies of being poor. 
You, Mr. Davis touched on it. If you are suddenly unemployed, 
you may borrow money at the payroll check casher or if you have 
got a credit card, you may there. So, you can live off savings 
for a little while but you just dig a deeper hole.
    If you are poor and you live around Capitol Hill, you get 
to rip off role ins down here but you will pay a whole hell of 
a lot more I suspect for milk and sliced ham than if you can 
get yourself to Sam's Club or Wal-mart, which, if you are poor, 
is more difficult. If you are poor, it is probably more 
difficult to buy things in quantity, which would save you some 
money. You buy a whole turkey.
    I only did this because I tried to live on food stamps once 
when my wife had to do it as a thesis thing, and if we hadn't 
taken wine off the list, I might have starved to death, but it 
is hard. $25 a week. That chicken got the cleaner on a Fourth 
of July picnic.
    Do these numbers take into effect that idea that the 
expenses of either acquiring assets are more expensive for poor 
people, there is an inefficiency built in to trying to exist in 
a market if you are poor. Is that calculated by anybody?
    Dr. BLANK. So, the threshold, the poverty line that is 
calculated with this National Academy measure is calculated 
somewhere below the median in terms of spending on food, 
shelter, clothing, utilities, and to the extent that that group 
of people faces consistently a higher set of prices, that will 
show up in their expenditures. That is I think the short 
answer.
    Mr. STARK. So, there is some compensation in the formula 
that takes this into effect, that is what you are telling me?
    Dr. BLANK. To the extent that shows up in different 
expenditures, yes. That also would show up of course with price 
differences across regions potentially and it might show up 
somewhat in that price adjustment.
    Mr. STARK. Thank you.
    Mr. DAVIS. Chairman, I will be extremely brief.
    Chairman MCDERMOTT. Mr. Davis will inquire.
    Mr. DAVIS. I won't take the 5 minutes, but let me just 
enter an observation because I like Mr. Weller very much and I 
am sorry that he is retiring and leaving the House. I have an 
enormous amount of respect for him, I sincerely mean that, but 
he made an observation that I think is worthy of rebutting.
    He was talking about the limited resources we have. We have 
limited resources in part because we are spending $12 billion a 
month in Iraq. We have limited resources in part because we 
have substantially reduced income tax rates for people who are 
exceptionally well-heeled in this country. The average 
reduction of their tax burden is $104,000 a year, and that is 
for people who are making over $1 million.
    Ultimately, I just finished reading a wonderful book I 
would recommend to a lot of people in the room called ``The 
Last Campaign'', about Robert Kennedy's valiant 85 day effort 
ended by Sirhan Sirhan in California in 1968, and it talks 
about Senator Kennedy's last campaign, and he talked way before 
the issue was fashionable about sustained Federal efforts to 
reduce poverty.
    He believed the question was not one of resources, frankly, 
he believed it was one of political will. I think that is the 
really relevant part of this conversation.
    How do we build the political will in this country to be as 
zealous about reducing poverty as we were 5 years ago about 
promoting democracy in Iraq and the Middle East? How do we 
build the political will to be as zealous about reducing 
poverty and the bite of poverty in this country as we have been 
about offering the political climate in other countries around 
the world?
    That is not a resources question ultimately. It is a 
question of what we want to do.
    Did you want to speak to that Dr. Blank?
    Dr. BLANK. Only to say that I agree completely.
    [Laughter.]
    Dr. DANZIGER. I also agree. I am reminded of the quote 
which we heard in two of the testimonies, the Ronald Reagan 
quote about the war on poverty being a failure.
    I think the important point is that there is clear 
agreement that government benefits like the earned income tax 
credit, and food stamps ought to be added to the income measure 
and are part of the government's efforts that have reduced 
poverty more than the current measure shows.
    I also think one can look to the United Kingdom where, Tony 
Blair set a goal of reducing child poverty in the United 
Kingdom in the late 1990s. I applaud exactly setting such a 
goal. Blair used political will and focused attention on 
poverty. Then he put a set of programs in place that are based 
on U.S. programs. Many of the British programs which have cut 
poverty in the U.K. substantially for children over the last 10 
years, were essentially copies of American programs imported. 
The political will got people to look at programs which might 
seem to be discredited in the United States because we have 
this preconceived notion that government programs don't work.
    Chairman MCDERMOTT. Could you give us the specifics? Which 
ones of the programs did they copy?
    Dr. DANZIGER. They have a program called Sure Start, which 
sounds a lot like Head Start. However, in a very short period 
of time, almost all low-income 3-year-olds and 4-year-olds in 
the U.K. were in these child care programs.
    Mr. DAVIS. I take it they didn't spend 4 years trying to 
reduce it in their budget. They didn't go through five or 6 
years of trying to slash the budget for it.
    Dr. DANZIGER. They spent about 1 percent of GNP on the 
program expansions. They adopted the Working Families Tax 
Credit, which sounds like the earned income tax credit, but it 
is a lot bigger than ours and goes to a lot more people.
    I can supply for the record some papers that analyze them.
    Chairman MCDERMOTT. I would appreciate your doing that 
because I think it would be useful for the Committee.
    Mr. WELLER. Mr. Chairman?
    Chairman MCDERMOTT. Yes.
    Mr. WELLER. I would be interested in knowing, since our 
friends in Britain have adopted some U.S. ideas, do they 
include those benefits as part of determining the poverty line?
    Dr. DANZIGER. Sure. Sure. No, it is important
    Mr. WELLER. So, they have factored that in. So, they have 
adopted what some of us have been advocating.
    Dr. DANZIGER. Yes.
    Mr. WELLER. Okay.
    Mr. DAVIS. Thank you Mr. Chairman.
    Chairman MCDERMOTT. Mr. Stark will inquire.
    Mr. STARK. I just wanted to see if there is any kind of 
research, Mr. Weller suggested that the cost or the impact of 
the poverty program, and I would like to look at the other side 
and see if there is any research on the cost of not doing it.
    Mr. Davis brought up the question of 50 percent drop out 
rate from high school in his area. Actually, the drop out rate 
in the United States is such that 30 percent of the children 
who enter high school this coming September won't graduate. 50 
percent of those children who enter school in September who are 
not white won't graduate.
    So, then I hopped to California and I suggest to you, what 
does a 15 year old with an eighth grade literacy, that is 
spotting them a lot higher than I think they have got, what is 
a 15 year old do when they drop out of high school, say after 
ninth grade, tenth grade, can't read, calculate much above 
middle school, if that. What do they do?
    I am going to tell you that in California, a good number of 
them will end up in what we call the system. Now in California 
and I suspect it is not much different in New York, if you get 
tagged with a felony before you are 20, you will spend on 
average half of the time between 20 and 50 in the system. That 
is 15 years either in the tank, on parole, under some kind of 
State supervised activity. It costs $60,000 a year.
    So, what I am getting at is that for each one of these kids 
that drops out, that gets in the system, we lose $900,000, 
okay? Is my math right? I can do that with my shoe and socks 
on, okay. What are the odds, are you doing research today, if 
we took that $900,000, how many kids do I have to get through 
high school to save that $900,000? If I get one in ten? Going 
to spend 90 grand to get a kid to keep in school.
    Are you doing any of that sort of research to show me and 
Jerry what happens if we don't spend the money? Hey, we can 
find out what is going to happen if we do spend it, because the 
budget office is going to tell us what it costs, but we don't 
get many figures of what happens if we don't do something. Are 
you guys studying that?
    Mr. NELSON. Annie Casey Foundation has been interested in 
watching kids end up in the juvenile justice system and the 
foster care system and outside of an employment track. These 
are the kids that we first committed ourselves to understand, 
and the most important thing about those children is they 
disproportionately come from families who are persistently 
poor. So, there is a very big correlation.
    It is very, very expensive, and it is your numbers. In many 
ways these are lifelong consequences, and they are not only 
consequences of lost productivity to the economy, but they are 
very large tax consequences.
    The subject of inefficiencies came up and I know this seems 
a long way removed from the proper measure of poverty, but if 
we understood poverty more accurately and had a shared 
understanding of it, we would see in this country two 
inefficiencies which really go to Congressman Weller's genuine 
resource question.
    One is, poor families are inefficient consumers. Casey has 
published a lot about the high cost of being poor, and they pay 
more for credit, for financial transactions, for groceries, for 
goods and services, so you have got poor people compromising 
their own ability to get by by being compelled to be bad and 
inefficient consumers. They have medical debt and other kinds 
of debt that burden what limited income they have.
    There is also a bigger social inefficiency which I wish we 
would focus on, and that social inefficiency is, unless we give 
ourselves the tools to reduce poverty, we are going to continue 
to create enormous long term tax obligations and lost 
productivity to this economy and lost competitiveness to this 
economy.
    So, even if the short run, which I don't think there is 
anything in this recommendation that requires a change in 
public expenditures, but even if a better understanding of 
poverty did create a condition at State and Federal level where 
we invested more in low income families to raise them out of 
poverty, the long run return in terms of tax expenditures would 
be beneficial to the country's conservative resource 
calculations.
    So, I think this really is a resource question and we are 
wasting
    Mr. STARK. Dr. Meyer has got to do some research so I can 
sell Congressman Weller on the thought that we ought to spend 
the money because we will save the money down the line. We 
won't get budget scored for it unfortunately but that is that 
is the other side of this coin as your just so eloquently 
outlined, but what is going on out there in the research world 
that looks at the other side of this coin, and that is the cost 
in inactivity?
    Chairman MCDERMOTT. I am going to exercise my prerogatives 
as the Chairman.
    There is another meeting starting, although I do see in Dr. 
Nelson's testimony that economists now estimate child poverty 
costs the Nation about $500 billion a year. So, there must be 
something going on some place that is being aggregated.
    I don't expect us to be flooded with cards and letters to 
pass this piece of legislation, but we really do appreciate 
your coming because I think it is important as a standard by 
which people can measure what other programs may come about.
    I was sitting here thinking about the fact that we put 
through this Committee a reform of the unemployment insurance 
legislation. We took into account the changes in the way 
employment patterns in this country are. It isn't dad who goes 
to work and mom stays home anymore, it is part time workers and 
it is two-parent families and all the rest, and we really need 
to update what we are measuring in unemployment. I think the 
same is true here and we will have further hearings on this.
    Meeting is adjourned.
    [Whereupon, at 11:36 a.m., the hearing was adjourned.]
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    AARP appreciates the opportunity to submit a statement in support 
of updating the Census poverty measure. We commend Chairman McDermott 
and Representative Weller for holding a hearing to examine the 
inadequacies of the current poverty measure, and applaud Chairman 
McDermott's commitment to update the definition of poverty. It is 
important that we have a measure that is accurate, non-ideological and 
reflects current living conditions.
    The poverty measure is one of the most important social indicators 
used by both the public and private sectors to asses how well we are 
doing as a society in improving the lives of people with meager 
resources, young and old. The poverty measure is used for domestic 
policy formulation and research, and influences public perceptions of 
well-being in America. Yet the way the United States measures poverty 
today is greatly outdated. Because it focuses only on income rather 
than needs, it does a poor job of accurately accounting for necessary 
and rising living expenses, such as health and energy costs, that put 
an enormous strain on the incomes of most households, both those that 
are currently defined as poor and those that are not. The current 
measure also fails to account for income assistance from public 
programs that have made great strides in ameliorating poverty.
    The current measure has not changed in more than 40 years and is 
outdated. During that time, changes in the nation's economy have 
affected family economic well-being, yet these changes are not 
reflected in the poverty calculation. For example, health care costs as 
a share of total spending have risen markedly since the current poverty 
measure was adopted. Adjusting for out-of-pocket medical expenses 
(subtracting them from income) would increase the 2006 poverty rate for 
all Americans by 0.1 percentage points (from 12.3 to 12.4 percent); but 
it would increase the poverty rate among older Americans by 5.8 points 
(from 9.4 to 15.2 percent). Adjusting for medical expenses and 
geographic variations in the cost of living would reduce the overall 
poverty rate to 12.2 percent; but it would increase the rate among 
persons aged 65 and over to 14.7 percent. Other types of adjustments 
might also be appropriate. Measuring poverty more accurately is a 
prerequisite to addressing the needs of those households that are most 
in need.
    Even under the current incomplete measure of poverty, too many in 
our nation are poor. The poverty rate for older persons in the United 
States has not declined in many years, remaining at around 9 percent to 
11 percent for the past decade. The total poverty rate for older 
individuals obscures wide variation by sex, race, and living 
arrangement. Women aged 65 and older had a poverty rate of 11.5 percent 
in 2006 compared to 6.6 percent for men in the same age group. 
Similarly, the poverty rate for older non-Hispanic whites was 7.0 
percent, but for Hispanics it was 19.4 percent and for blacks 22.7 
percent. Rates were even higher for minority women, and older women 
living alone are among America's poorest residents.
    However, focusing only on those who are poor under the current 
poverty measure overlooks the large number of near-poor older persons 
at risk of falling into poverty for any number of reasons--the death of 
a spouse, unexpected health care expenditures, or rising utility bills, 
for example. One of the more restrictive definitions sets ``near poor'' 
at 125 percent of the current poverty measure. Using that definition, 
some 3.4 million persons aged 65 and older in the United States were 
poor in 2006 and another 2.2 million were near poor.
    Recently, the AARP Foundation, AARP's affiliated charity dedicated 
to confronting the economic challenges that Americans face as they age, 
issued Poverty & Aging in America, a report that profiles older 
Americans living in poverty or at risk of falling into poverty. The 
AARP Foundation also hosted a symposium on poverty and aging in 
America. The AARP Foundation's goal in holding this symposium was to 
explore avenues to improve the quality of life for older persons living 
in poverty or who are at high risk of falling into poverty. Clearly, a 
more accurate measure of poverty would allow all of us, both in the 
public and private sectors, to better assess who is most in need, and 
what are the best pathways for improving the quality of their lives.
    Even applying an outdated measure of poverty, Poverty & Aging in 
America provides a sobering portrait of the lives of older poor and 
near poor individuals. A few of the key findings of the AARP 
Foundation's report include the following:

      Social Security is critical to keeping people out of 
poverty--The poverty rate for persons age 65 and over would have 
increased from 9.4 percent to an astonishing 44.9 percent in 2006 
without Social Security.
      Only 62.5 percent of persons ages 50--64 who are living 
in poverty have any public or private health insurance coverage. Almost 
one-quarter of persons age 50 and older living in poverty said they 
could not see a doctor in the last 12 months because of cost.
      Families headed by women make up the majority of older 
families in poverty and are most at risk of falling into poverty.
      Continuing to work increases income and helps keep people 
out of poverty--among persons age 50-64 living in poverty, only one 
quarter are in the workforce compared to over three quarters of people 
in this age group with incomes at or above twice the poverty level.
      Older people with low income also have few other 
financial resources. The median net worth of families age 50 and older 
living in poverty in 2004 was just $10,000. Older persons living in 
poverty are unlikely to receive retirement income from a traditional 
pension, 401(k) or similar plan. And while many older poor households 
own homes, those owners struggle to meet home-related expenses.
      A significant percentage of older families living in 
poverty have heavy debt burdens--Almost 1 in 5 families age 50 and 
older living in poverty have debt payments in excess of 40 percent of 
total income.

    The overall portrait of persons age 50 and older living in or at 
risk of poverty that emerges from Poverty & Aging in America is of a 
population in economic distress. The report also highlights the 
critical role Social Security and other public programs play in 
preventing poverty among older persons and mitigating the effects of 
poverty.
    Developing and implementing a more accurate measure of poverty 
would greatly contribute to a better understanding of the conditions 
under which all poor persons in America live. An updated poverty 
measure would also allow a more accurate assessment of the impact 
programs such as Social Security have on the lives of vulnerable 
populations, and would lead to the development of better-informed 
solutions to the special challenges that face specific sub-groups of 
the poor and near-poor, such as women, the elderly and minorities.
    AARP supports the efforts of the Ways and Means Subcommittee on 
Income Security and Family Support to examine and reform the current 
poverty measure. We look forward to working with you in the future to 
reach the goal of establishing a modern poverty measure.

                                 

Dear Chairman McDermott:

    The Coalition on Human Needs (CHN) applauds your efforts to create 
a more accurate measure of poverty in America and also to develop a 
``Decent Living Standard''--one showing the income necessary to satisfy 
modest but above-poverty needs. CHN is an independent alliance of more 
than 100 national organizations working to improve federal policy and 
funding to meet the needs of low-income and vulnerable people. CHN also 
serves a network of tens of thousands of advocates nationwide, 
including service providers, religious organizations, policy experts, 
labor, civil rights groups, and many others.
    The Measuring American Poverty Act of 2008 includes elements that 
are in our view essential to modernizing the assessment of poverty. 
Among these are

      Counting expenditures more accurately
      Including certain public benefits as income
      Adjusting the calculation of poverty thresholds for 
regional differences in costs
      A means of showing the anti-poverty effects of benefits 
programs by comparing pre- and post-tax and transfer income
      A clear statement that the proposed changes are not to 
modify eligibility or amount of assistance for public benefits
      A provision to periodically re-assess the validity of the 
revised poverty measure

    The measurement of poverty in America should not be seen as an 
arcane matter for researchers. Poverty is a costly and wasteful brake 
on the nation's economy and future. The most important reason to 
improve the measure of poverty is to gauge whether the steps we take to 
reduce it are working.
    It is clear that the components of the Measuring American Poverty 
Act are closely intertwined. Many have correctly pointed out that the 
current measure is flawed in failing to count public benefits such as 
refundable tax credits, housing assistance, and food stamps as income. 
But today's poverty calculation is just as flawed for its outdated 
assessment of a poor family's expenses. Both income and expenditure 
must be assessed together to get a more accurate picture. We strongly 
favor the inclusion of cost estimates for housing, utilities, food, 
clothing, and other needs to get a better sense of what it means to be 
poor. Only food costs are included in the antiquated measure now in 
use; the increasing costs of housing, heat, transportation, child care 
and out of pocket medical expenses are left out.
    The Coalition on Human Needs is committed to setting a national 
goal to cut poverty in half in ten years. We are participating in Half 
in Ten: From Poverty to Prosperity, a new campaign run jointly by 
ACORN, the Center for American Progress, the Leadership Conference on 
Civil Rights, and CHN. Among the initiatives sought by the campaign are 
substantial improvements in the Child Tax Credit and Earned Income Tax 
Credit. Under the current poverty measure, success in achieving these 
important improvements will not result in any reduction in the official 
poverty rate because refundable tax credits are not counted as income. 
Similarly, CHN strongly supports increases in Food Stamp benefits, but 
when those occur the poverty rate will not change because food stamps 
are not counted as income. We need the change proposed in your 
legislation in order to see whether benefit increases have the desired 
effect, and further, whether certain population groups are helped more 
or less than others.
    We also favor assessing regional differences. Every year, the 
Coalition on Human Needs works with state groups to help them 
understand how to make use of the state data released by the Census 
Bureau on poverty, income, housing, transportation, education, and 
demographic differences. It is clear that there are big differences in 
rural and urban areas and from one part of the country to another. None 
of these are currently reflected in the poverty data.
    A more accurate poverty measure will also give us greater 
understanding of the needs of population subgroups. Our current 
standard may understate the hardships of the elderly in making ends 
meet by failing to take into account their high out of pocket medical 
costs. A new standard may help us to learn if poverty is more 
prevalent, or deeper, among certain demographic groups (race/ethnicity, 
age, rural/urban residence) because they are less likely to receive 
benefits.
    A very valuable part of the Measuring American Poverty Act is its 
call for a study of a Decent Living Standard--the assessment of the 
income needed for a modest standard of living, one that exceeds the 
standard of the impoverished. If we are to help the millions of the 
poor to contribute to and share in the nation's prosperity, we need to 
assess not just whether families inch a few dollars over the poverty 
line, but whether they are able to join the middle class, increase 
their economic security, and help their children realize their 
potential.
    We want to highlight our strong support for the bill's prohibition 
on using the new thresholds to change eligibility for public benefits. 
Under current practice, administrative agencies set poverty guidelines 
on an annual basis that are used to determine eligibility for means-
tested programs. These are similar but not the same as the poverty 
thresholds established each year by the Census Bureau for research 
purposes. Maintaining this distinction is especially important as the 
new thresholds are devised. This legislation should help us to learn 
more about poverty and how to eradicate it, not exclude very low-income 
people from receiving assistance. After some period of study agencies 
may propose alterations in their eligibility standards; those should be 
considered separately, with the goal of poverty reduction foremost.
    Whatever its imperfections, the current poverty measure has been 
very important in allowing us to see trends over time. We urge great 
care in making the transition from the old to the new standard, so that 
researchers remain able to evaluate trends. We also urge the Census 
Bureau to see as part of its mission the education of advocates and 
service providers in the proper use of the old and new statistics.
    New York City's experiment with an updated poverty measure is an 
encouraging development, allowing the city to assess progress towards 
its own poverty reduction goal. We also agree with Dr. Levitan, who 
emphasized that a federal definition is essential. We look forward to 
working with you to modernize the assessment of poverty, and in using a 
more accurate measure to develop effective anti-poverty legislation.
            Sincerely yours,
                                                  Deborah Weinstein
                                                 Executive Director

                                 

    Updating the Gallup measure to account for changes in family income 
since 1990
    The original research on which this update is based was undertaken 
more than ten years ago (Vaughan 1993, 2004).\1\ It is of interest how 
the income levels associated with the Gallup poverty measure has 
evolved over the ten years corresponding to the decade of the 1990's, 
how it compares with official poverty thresholds for the same period, 
and so forth. Unfortunately, the last Gallup measure was collected in 
1989. Since then no consistent set of comparable measures have been 
undertaken. However, the retrospective relationship between the median 
income of four-person families, net of tax, to the Gallup poverty 
threshold can plausibly be extended for the years lacking observations. 
It was shown that the Gallup measure averaged 50 percent of the median 
income of four-person families, net of tax, for roughly thirty years 
between 1960 and 1989. Furthermore there was no obvious trend over the 
same period. In the six four-year periods considered in the analysis, 
the average value of the thresholds varied between 51.8 and 48.6 
percent of the median income measure that was used. Since the income is 
measured annually in the Current Population Survey and the tax concept 
employed is reproducible in a manner consistent with the study, dollar 
amounts corresponding to the Gallup poverty standard, calculated at 50 
percent of the median income of four-person families, are easily 
derived. The necessary calculations were carried out and are presented 
in table B-1 (see p. 8 below) for the period 1990 to 2000. The official 
poverty threshold for four-person families, and the before- and after-
tax median income of four-person families is also given for purposes of 
comparison.\2\
---------------------------------------------------------------------------
    \1\ This update was completed in 2003. The author would like to 
thank Kathleen Short for her encouragement to undertake this work and 
to her and Sharon Johnson, of the Social Security Administration (SSA), 
for special tabulations of before- and after-tax income from the 
Current Population Survey. Michael Leonesio of SSA provided material on 
the rationale for wage indexing in the context of the social security 
program, as well as several helpful comments concerning the text. The 
author has also benefited from conversations with Bruce Klein, Richard 
Silva and the editorial assistance of Katalin Zentai and Kamilla 
Kovacs.
    \2\ The tax concept utilized to develop the estimates for the 
update differs slightly from the original version in that it includes 
State income taxes and the Earned Income Tax Credit (EITC). They 
account for about 3-4 percent of the before-tax median income of four-
person families through out the 1990's, and taking them into account 
results in a corresponding proportional reduction in the Gallup poverty 
standard over the period.
---------------------------------------------------------------------------
    At the beginning of the period, the Gallup standard (1990) was 129 
percent of the official standard. Over the decade, it rose along with 
the median income of four-person families. Since there was little trend 
in the ratio of before-tax to after-tax income for the period, taxes do 
not influence the trend Gallup standard during decade. Only the base 
level, at the beginning of the period, is affected, lowering it by 
about 17 percent from a before-tax level. During the 1990's, both the 
before- and after-tax income of four-person families increased by a 
little over 50 percent. Since the official standard rose only in 
response to the changes in the Consumer Price Index (CPI), it rose by 
less, only little more than 32 percent as family income gains generally 
outpaced inflation during the period. Consequently, the Gallup poverty 
standard reached 144 percent of the official threshold by the end of 
the decade (1999). This underscores the principal characteristic of a 
socially-defined standard which responds to growth in family income 
that reflects increases in the general standard of living, while the 
official measure changes only in response to increases in the prices 
and remains fixed in real terms. Thus, in any period of real income 
growth, the official standard is bound to fall behind a social standard 
that tracks changes in both prices and real growth in income.
Projections beyond the present
    Recently research has been conducted under the sponsorship of the 
Social Security Administration on projecting income of the retirement 
age population through 2020 in order to better understand the 
implications of various Social Security reform plans and their possible 
impact on poverty rates of the elderly (Butrica, Smith and Toder, 
2002). Given that benefits under current law are indexed by growth in 
real wages as well as prices, they chose two methods to update poverty 
thresholds to the end-point of their simulations: a simple extension of 
the current official thresholds in real terms and updating the current 
thresholds by increases in wages as projected by the Social Security 
Actuaries. While growth in wages will not be the same as growth in 
total family income, before or after tax, updating by the projected 
rate of wage growth serves to illustrate the long range implications of 
updating the official poverty thresholds without taking into account 
increases in the standard of living.\3\ After all, future wage growth 
is a useful indicator of the likely evolution of living standards over 
time and is the basic rationale behind tying Social Security benefits 
at retirement to previous growth in wages. Wage indexation of benefits 
in the Social Security program represents a policy decision that 
workers' benefits in retirement should reflect increases in the 
standard of living associated with improvements in productivity and the 
level of wages that occurred during their working life (Ball and Bethel 
2000, pp. 8-9).\4\
---------------------------------------------------------------------------
    \3\ Fisher (1999:25-29) argues that the original poverty line was 
intended by Orshansky to be consistent with contemporary living 
standards and that the CNSTAT Panel's recommended update of the measure 
would take into account the real growth in the general population's 
standard of living.
    \4\ A with any major decision of this magnitude there was 
considerable discussion of the implications at the time (1977). The 
discussion hinged on the choice between indexation for prices and 
indexation of wage levels. It was realized at the time that indexation 
by prices implied measuring standards of living in absolute terms while 
wage indexing implied measuring standards of living in relative terms 
(Munnell 1977, pp. 52-53). Ball argues that without wage indexing, the 
program ``would soon provide benefits that did not reflect previously 
attained living standards``. The discussion is reminiscent of the same 
concerns, pro and con, that arise when updating the poverty measure is 
considered. See also the Report of the Consultant Panel (1976, pp. 7-8) 
where the issue of comparative costs of the two alternatives is 
discussed.
---------------------------------------------------------------------------
    In table B-2 (see below, p. 9) the Gallup poverty standard is 
updated from 2000 to 2020 by the projected rates of growth of real 
annual wages and compared to the official threshold maintained in real 
terms. Neither are adjusted for prices in the first two columns of the 
table. Thus the official threshold remains at the value it had in 2000 
($17,603); the Gallup standard begins with the value estimated for 2000 
also ($25, 694) but is updated for growth in wages was projected by the 
Office of the Actuary (SSA 2002, table VB.1, intermediate 
assumptions).\5\ Additional assumptions are required for the update of 
the Gallup standard. For example, total Federal and State income and 
FICA taxes and the Earned Income Tax Credit at the median income of 
four-person families are held constant as a percentage of total family 
income, real wage growth is assumed to translate directly into 
increases in living standards, and the translation is assumed to be 
equally distributed among families of different size.
---------------------------------------------------------------------------
    \5\ Estimates pertain to the estimated growth in the annual wage in 
covered employment. Estimates of the Consumer Price Index (CPI) and the 
real wage differential are also given.
---------------------------------------------------------------------------
    However, none of these assumptions is very critical to the point to 
be illustrated. What the table shows is that by 2020 the social 
standard increases to between 1.2 and 1.3 times its level today (2000). 
In comparison to the official level it increases from a little less 
than 1.5 times the current poverty threshold for four-person families 
to 1.8 and 1.9 times the official standard in 2020. Thus while the 
official standard remains fixed in real terms, a social standard, 
indexed by real wage growth, increases markedly. Recall (Vaughan 2004: 
table 1b, p. 63) that at the beginning of the post-war period, a 
standard that was conceptually equivalent to the official threshold 
exceeded the Gallup threshold by nearly 35 percent. It then declined to 
the about the same level as the Gallup standard at the time of the 
unofficial introduction of the Orshansky thresholds in 1963. From that 
point onward, the poverty thresholds (introduced as official measure in 
1969) consistently lagged behind the Gallup standard (see table B-2, p. 
9, below). By 1990, the official threshold was about 20 percent below 
the level consistent with the Gallup measure. At the end of the 1990's, 
it had fallen further to about 30 percent below the level associated 
with the with the Gallup standard. By 2020, using projected wage growth 
to update the social standard and maintaining the official standard in 
real terms by updating only by estimates of changes in the Consumer 
Price Index, the official standard would be 46 percent below a social 
standard based on the Gallup level. Indexing the Gallup standard by 
wage growth might at first seem to result in a poverty line that is 
unrealistic by today's standards. However, if living standards increase 
as much as the wage growth is projected to increase by Social Security 
Actuaries over the next 15-20 years, based on history of the public's 
views over the 50 years since World War II, a socially defined poverty 
line is likely to change apace. Yes, today's standards will become 
outmoded. Then the official measure, if it remains fixed in real terms, 
will to come under increasing scrutiny as society's standards change 
with the continued evolution of living standards in the new century.
Changes in the real value of the social standard over time
    An issue that was not dealt with in the original article concerns 
the increase in real income implied with the use of a socially-defined 
needs standard. It turns out that over the fifty years between the end 
of World War II and the turn of the century, the real income of those 
living at the ``poverty level'' as measured by the Gallup poverty 
standard, has doubled.\6\ What does this imply about the standard and 
how is it to be interpreted? Some may suggest that those living at the 
Gallup poverty level are objectively much better off in terms of the 
quantity of good and services that they have at their disposal than 
they were at the middle 1940's.\7\
---------------------------------------------------------------------------
    \6\ The Gallup-poverty level was $1,688 in 1947 (1947 dollars, see 
Vaughan 2004, Table 1b, p.63) and the 1999 value of the Gallup based 
social standard was $24,558 (1999 dollars, Table B-1 p. 9, this study). 
Deflating the 1999 value of the social standard to the price level of 
1947 yields a dollar value of $3,567 or about 2 times its 1947 value in 
real terms.
    \7\ For a discussion that focuses heavily the effects of this 
phenomenon but draws nearly opposite conclusions about its significance 
concerning poverty in the present day United States, see Rector and 
Johnson (2004).
---------------------------------------------------------------------------
    With a standard informed by relative incomes this is not really 
surprising. With the substantial economic growth experienced in the 
United States over the past 40 years, the quantity and variety of goods 
and services commanded by those living at income level implied by the 
Gallup standard has necessarily increased markedly. But what is the 
significance of such changes? The standard of living that this increase 
affords, and the level of material resources it entails, lies behind 
the common observation that the poor in the United States have a higher 
standard of living than many middle class families in the developing 
world, or even in certain dimensions of consumption, Western European 
countries. But what is the relevance of such an observation for 
understanding the phenomenon of poverty in the United States? America's 
poor are Americans by residence and partake, for the most part, in the 
expectations and aspirations of those living here, not in Africa, Asia 
or Latin America or other countries. In the body of the article readers 
are invited to imagine an urban New Yorker of 1850. Such a person 
``would hardly have felt deprived by not being able to afford a 
telephone, radio or television; as such goods did not exist, they were 
not part of the choice set of a member of New York's society of 140 
years ago.'' Simply because such goods have entered the common choice 
set, and, along with many others, they have become an established part 
of people's expectations. This was considered relevant to the topic of 
poverty because it is also posited that ``a consistent inability to 
meet--[typical consumption aspirations] that arises from financial 
constraints is likely to take a heavy toll on individuals who see 
themselves as [or who aspire to be], family providers'' (Vaughan 2004, 
p.3) or otherwise see themselves as attempting to live by conventional 
norms. This is especially so when the shortfall is marked, such as when 
a person has at most only half the typical income of his society.
    Recall also that it was argued that the Gallup standard may be 
interpreted as measuring the social costs of living in society and is 
defined by the material offerings of a specific time and place.\8\ From 
this perspective, the criteria for judging what is sufficient or 
reasonable must be informed by the norms present in a given society at 
a given time. Such norms are likely to be a function of the selection 
of goods and services that are being consumed in that society's 
present. Seen in this light, the seeming contradiction between 
increasing standards of living and poverty is not so hard to 
appreciate. Many new goods and services have entered circulation in our 
society over time. Take consumer durables as an example. At the end of 
World War II television was just making its presence felt and was 
infrequently owned. Now the black and white TV has passed into oblivion 
and colored TV's are ubiquitous. Housing standards have increased 
markedly. In-door plumbing and central heating are nearly universal. 
Modalities of transportation have changed substantially with the 
evolution of the suburbs; and ownership of an automobile, more often 
than not, has become a necessary requirement for employment. With the 
increasing presence of women in the work place have come new expenses 
of transportation and childcare. These changes and a host of others 
have raised the objective cost subsistence in the United States. What 
were once luxuries have become necessities. In addition to the 
objective costs of subsistence there are the additional costs 
associated with adequate performance of key social roles. These costs 
lie at the core of a socially-defined needs standard. They distinguish 
it from a standard which reflects the changes in the objective costs of 
a minimal standard of living, and even more from a fixed subsistence 
standard, such as the official poverty threshold, which remains the 
same regardless of changes in the general standard of living.
---------------------------------------------------------------------------
    \8\ Adam Smith, the intellectual father of free markets, clearly 
understood that poverty involved a social component that was every bit 
as important as the material goods ``necessary to support life''. In 
his classic work on the operation of markets, The Wealth of Nations 
(1937, pp. 821-822), he comments on the distinction between necessities 
and luxuries, and how this distinction may vary between different 
countries at a given point in time. His discussion recognizes that the 
significance of particular commodities stems from the specific social 
context in which they are consumed and not only its intrinsic 
contribution to subsistence.
---------------------------------------------------------------------------
    By necessaries I understand not only the commodities which are 
indispensably necessary for the support of life, but whatever the 
custom of the country renders it indecent for creditable people, even 
of the lowest order, to be with out. A linen shirt, for example is 
strictly speaking, not a necessary of life. The Greek and Romans lived, 
I suppose, very comfortably, though they had no linen, but in the 
present time, through the greater part of Europe, a creditable day-
labourer would be ashamed to appear in public without a linen shirt, 
the want of which would be supposed to denote that disgraceful degree 
of poverty, which, it is presumed no body can well fall into without 
extreme bad conduct. Custom, in the same manner, has rendered leather 
shoes a necessary of life in England. The poorest creditable person of 
either sex would be ashamed to appear in public without them. In 
Scotland, custom has rendered them a necessary of life to the lowest 
order of men; but not to the same order of women, who may, without and 
discredit, walk about bare-footed. In France, they are necessaries 
neither to men nor to women; the lowest rank of both sexes appearing 
there publicly, without any discredit, sometime in wooden shoes, and 
sometime barefooted. Under necessaries therefore, I comprehend, not 
only those thing which nature, but those things which the established 
rules of decency have rendered necessary to the lowest rank of people.
    In principal, considerable insight could be gained into the kinds 
and quantities of goods and services required to carry out these roles. 
How those requirements have evolved concretely over the past 50 years 
could be explored by examination of the patterns of consumption of 
specific goods and services associated with the Gallup poverty standard 
as revealed in the decennial consumer expenditure surveys of the 
period. More attempts to measure social standards in current government 
surveys such as was done in the Consumer Expenditure Survey in the 
early eighties (see Garner and de Vos 1980), and more recently in the 
Survey of Income and Program Participation (Garner, 2002), would be 
most helpful. Special attention should be given eliciting information 
about the resource requirements successful performance of social roles 
associated with marriage, family life, and parenting. Exploration of 
specific consumption goods central to a social standard of poverty 
would also be helpful. If finding a place in Federal surveys proves 
infeasible,\9\ then reestablishment of a Gallup-like series in the 
private sector can, and should be, pursued.
---------------------------------------------------------------------------
    \9\ The challenges that so-called subjective measures have faced in 
finding a place in the Federal survey environment has been documented 
by the author (see Vaughan 1996).

    REFERENCES
    Bethell, Thoman N., ed. (2000).
    Insuring the Essentials: Bob Ball on Social Security, The Century 
Foundation Press. New York.
    Butrica, Barbara A., Karen Smith and Eric Toder (2002).
    ``Projecting Poverty Rates in 2020 for the 62 and Older Population: 
What Changes Can We Expect and Why?'', Center for Retirement Research 
at Boston College, Chestnut Hill, MA, September.
    Citro, Constance F. and R.T.. Michael, eds. (1995).
    Measuring Poverty: A New Approach. Washington, DC: National Academy 
Press.
    Consultant Panel on Social Security (1976).
    ``Report of the Consultant Panel on Social Security to the 
Congressional Research Service,'' Prepared for the Use of The Committee 
on Finance of the U.S. Senate and the Committee on Ways and Means of 
the U.S. House of Representatives, U.S. Government Printing Office, 
Washington, D.C, August.
    Garner, Thesia I (2002).
    ``Subjective Poverty Measurement: Minimum Income and Minimum 
Spending,''a presentation at the ASSA Annual Meetings, SGE Sponsored 
Session, January 3.
    Garner, Thesia I. and Klass de Vos (1990).
    ``Income Sufficiency, Expenditures, and Subjective Poverty: Results 
from the United States and the Netherlands,'' a paper presented at the 
Fifth Karlsruhe Seminar on Models and Measurement of Welfare and 
Inequality, August 12-19, Karlsruhe, Federal Republic of Germany, 
(revised version, December 1990).
    Kathleen Short (2001).
    Experimental Poverty Measures: 1999, U.S. Census, Current 
Population Reports, Consumer Income, Series P-60-216, U.S. Government 
Printing Office, Washington, D.C.
    Munnell, Alicia H. (1977).
    The Future of Social Security. The Brookings Institution, 
Washington, D.C.
    Office of the Actuary (2002).
    2002 OASDI Trustees Report. Social Security Administration, 
Baltimore, Md,
    Rector, Robert E. and Kirk A. Johnson (2004)
    ``Understanding Poverty in America,'' Backgrounder, No. 1713 
(January 5), The Heritage Foundation, Washington, D.C., full paper 
www.heritage/research/welfare/bg1713.cmf.
    Short, Kathleen, Martina Shea, David Johnson and Thesia Garner 
(1998).
    ``Poverty-Measurement Using the Consumer Expenditure Survey and the 
Survey of Income and Program Participation,'' American Economic Review, 
88:2:352-356 (May).
    Short, Kathleen, Thesia Garner, David Johnson and Patricia Doyle 
(1999).
    Alternative Poverty Measures: 1990 to 1997. U.S. Census Bureau, 
Current Population Reports, Consumer Income, P-60, No. 205 U.S. 
Government Printing Office, Washington, D.C.
    Short, Kathleen (2001).
    Alternative Poverty Measures: 1999. Census Bureau, Current 
Population Reports, Consumer Income, P-60, No. 216, U.S. Government 
Printing Office, Washington, D.C.
    Smith, Adam (1937).
    The Wealth of Nations. Random House, Inc., The Modern Library
    Vaughan, Denton R. (1996).
    ``Self-Assessments of Income Needs and Financial Circumstances: Two 
Decades of Seeking a Place in Federal Household Surveys,'' American 
Statistical Association 1996 Proceedings of the Social Statistics 
Section. Washington, D.C.
    Vaughan, Denton R. (1993).
    ``Exploring The Use Of The Views Of The Public To Set Income 
Poverty Thresholds And Adjust Them Over Time,'' Social Security 
Bulletin, 56:2:22-46. Published on the web at http://www.census.gov/
hhes/www/povmeas/papers/wkppov20_cen.pdf, with update, 2004.

 Table B-1.--Comparison of median four-person family income, before- and after-tax, the ``official'' four-person
    family poverty threshold and a social standard based on 50% of the median after-tax income of four-person
                                               families, 1990-2000
----------------------------------------------------------------------------------------------------------------
         [Current dollars]             Median 4-person family    ``Official'' four-person  Standard based on 50%
------------------------------------           income                   standard1             of the after-tax
                                    ------------------------------------------------------         median
                                      Annual Amount3    After               As % of the   ----------------------
                                    ------------------ as % of            median 4-person
                Year                                  ---------  Annual    family income               As % of
                                      Before   After             amount ------------------  Annual  ``Official''
                                       tax      tax     Before     3      Before   After   amount4    Standard
                                                         tax               tax      tax
----------------------------------------------------------------------------------------------------------------
1990...............................   34,321   34,321     82.8   13,359     32.2     38.9   17,161       128.5
1991...............................   35,450   35,450     82.3   13,924     32.2     39.3   17,725       127.3
1992...............................   36,482   36,482     82.4   14,335     32.2     39.3   18,241       127.2
 1993..............................   37,292   37,292     82.6   14,763     32.2     39.6   18,646       126.3
1994...............................   38,785   38,785     82.5   15,141     32.2     39.0   19,392       128.1
1995...............................   40,917   40,917     82.3   15,569     32.2     38.1   20,458       131.4
1996...............................   42,295   42,295     82.8   16,036     32.2     37.9   21,148       131.9
1997...............................   43,784   43,748     82.2   16,400     32.2     37.5   21,874       133.4
1998...............................   46,414   46,414     83.1   16,660     32.2     35.9   23,207       139.3
1999...............................   49,115   49,115     82.6   17,029     32.2     34.7   24,558       144.2
2000...............................   51,387   51,387     82.2   17,603     32.2     34.3   25,694       146.0
----------------------------------------------------------------------------------------------------------------
          Percent change:
----------------------------------------------------------------------------------------------------------------
 1990 to '94.......................     13.4     13.0    . . .     13.3    . . .    . . .     13.0       . . .
1990 to '95........................     19.9     19.2    . . .     16.5    . . .    . . .     19.2       . . .
1990 to '96........................     23.3     23.2    . . .     20.0    . . .    . . .     23.2       . . .
1990 to '97........................     28.3     27.5    . . .     22.8    . . .    . . .     27.5       . . .
1990 to '98........................     34.8     35.2    . . .     24.7    . . .    . . .     35.2       . . .
1990 to '99........................     43.4     43.1    . . .     27.5    . . .    . . .     43.1       . . .
1990 to '00........................     50.8     49.7    . . .     31.8    . . .    . . .     49.7       . . .
----------------------------------------------------------------------------------------------------------------

    `Note: The symbol ``. . .'' indicates not applicable.
    1  Average weighted threshold for families of size four.
    2  The median value of total family cash income, family 
of four. Taxes include Federal and state income and FICA taxes and the 
Earned Income Tax Credit as simulated by the Bureau of the Census. All 
estimates tabulated specifically for this study.
    3  Weighted average poverty threshold for a family of 
four (http:/ /www.census.gov/hhes/povertyhistpov/hstpovl.html).
    4  Calculated as 50% of the after-tax median income of 
four-person families as estimated in the table (see note 1).

   Table B-2.--Projection of a social (Gallup level) poverty standard from 2000 to 2020 on the basis of future
 growth in covered wages as estimated for actuarial purposes by the Social Security Administration (intermediate
                   assumptions)and comparison to the ``official'' standard for the same period
----------------------------------------------------------------------------------------------------------------
                                            Constant 2000 dollars             Social                     Social
                                   ---------------------------------------   standard                  threshold
                                      Social                                   minus     ``Official''   indexed
                                     poverty   ``Official''  Ratio of the  ``official``     poverty      by the
               Year                  standard     poverty    ``official''   standard /     standard      CPI-U3
                                     indexed   standard for     to the        by the      indexed by      plus
                                    growth in   four-person     social        social       the CPI3    growth in
                                     by real      family2      standard     standard X                    real
                                      wages1                                    100                      wages1
----------------------------------------------------------------------------------------------------------------
2000..............................   cents$25     4$17,603          1.46          31.5       $17,603    cents$25
                                         ,694                                                               ,694
2001..............................     26,413       17,603          1.50          33.4        18,096      27,133
2002..............................     27,153       17,603          1.54          35.2        18,639      27,974
2003..............................     27,832       17,603          1.58          36.8        19,105      29,345
2004..............................     28,249       17,603          1.60          37.7        19,621      30,577
2005..............................     28,588       17,603          1.62          38.4        20,960      31,831
2010..............................     29,221       17,603          1.66          39.8        23,405      38,876
2015..............................     30,864       17,603          1.75          43.0        27,133      47,527
2020..............................     32,599       17,603          1.85          46.0        31,455      58,102
                                          Ratio of threshold values
2005 to 2000......................       1.11         1.00         . . .         . . .          1.15        1.24
2010 to 2000......................       1.14         1.00         . . .         . . .          1.33        1.51
2015 to 2000......................       1.20         1.00         . . .         . . .          1.54        1.85
2020 to 2000......................       1.27         1.00         . . .         . . .          1.79        2.26
----------------------------------------------------------------------------------------------------------------

    (. . .)--Not applicable.
    1  Using projected growth in real wages, intermediate 
assumptions, as given in 2002 OASDI Trustees Report, Principal Economic 
Assumptions, table V.B1 (htttp:/www.ssa.gov/OACT/TR/TR02/
V_economic.html).
    2  Average weighted threshold for families of size four.
    3  Indexed by the estimated increase in the Consumer 
Price Index for Urban Wage Earners and Clerical Workers (CPI-U) through 
2020, as given in the 2002 OASDI Trustees Report, intermediate 
assumptions (see note 1, this table).
    4  Starting values: Social standard estimated as 50 % of 
the after-tax median income for four-person families, see table B-1; 
the ``official'' poverty standard is the weighted average poverty 
threshold for four-person families; both as of the year 2000.
    Source: Table B-1 of this paper and calculations by author.

                                 

    I want to thank the Chair, Rep. Jim McDermott, and the Committee 
for considering this important issue. My name is Diana M. Pearce, and I 
am Senior Lecturer and Director of the Center for Women's Welfare at 
the University of Washington. For more than a decade, I have worked on 
developing and disseminating an alternative measure of poverty, the 
Self-Sufficiency Standard.
    In this brief testimony, I would like to address four topics: (1) 
why we need a revised poverty measure, (2) the methodological and 
conceptual problems in the proposed National Academy of Sciences (NAS) 
approach, (3) the impact of using the NAS approach versus other 
alternative measures of poverty on both poverty rates and our 
understanding of poverty, and (4) recommendations for an alternative 
poverty measure and the difference an alternative measure can make.
    Please note that the following comments are grounded in my work 
over the last 12 years on the Self-Sufficiency Standard, which is now 
found in 37 states plus the District of Columbia and used in a wide 
array of settings and program applications. My conclusions reflect not 
just my opinions, but the experience of many who have applied this 
poverty standard in their work.
1. Why We Need a Revised Poverty Measure
    The first and most important reason that a revision of the federal 
poverty measure (known widely as the Federal Poverty Line, or FPL) is 
that the FPL is too low. I will not recount the reasons it is now too 
low, as they have been well-detailed elsewhere, but only remind us that 
a measure that is too low has three serious consequences. First, 
because the FPL is too low, many people who do not have enough income 
to meet their needs are not counted as ``poor''. Secondly, countless 
assistance programs have turned to using a multiple of the poverty line 
to determine eligibility. For example, eligibility for the Food Stamp 
Program is set at 130% of the FPL and eligibility for S-CHIP (State 
Child Health Insurance Program) is as high as 300% of the FPL. That is, 
in some states, costs are so high that families with incomes at 300% of 
the FPL are deemed unable to have enough to meet their children's 
health needs. It is an oxymoron to have an eligibility level that is 
three times the poverty level. Thirdly, because the FPL is too low, we 
have a skewed vision of poverty affecting our program and policymaking. 
Too many programs are focused only on getting people into employment, 
when in fact the great majority of families lacking adequate income 
according to the Self-Sufficiency Standard (80-85%) already have at 
least one worker in the workforce.\1\
---------------------------------------------------------------------------
    \1\ For more information see the Overlooked and Undercounted 
reports for California, Colorado, Connecticut, and Washington State, 
available at http://www.wowonline.org/ourprograms/fess/
---------------------------------------------------------------------------
    There are other problems with the FPL that should be mentioned 
briefly, as they have guided efforts to revise the poverty line:

      The FPL does not vary by place.
      The FPL does not, and cannot, reflect changing 
demographics, work patterns, and the emergence of new needs/costs, 
including child care, health care, transportation and taxes.
      The FPL does not show the impact of taxes, tax credits 
(such as EITC), or benefits including cash (such as TANF benefits), 
near-cash (such as Food Stamps), and in-kind benefits (such as child 
care assistance, Medicaid, or housing assistance.)
2. The Methodological and Conceptual Problems in the Proposed National 
        Academy of Sciences (NAS) Approach
    While I commend Representative McDermott and others for recognizing 
the need to reevaluate the way in which we measure the unmet needs of 
American households, I believe the NAS approach does not adequately 
address the critiques and concerns of the FPL described above. The 
heart of the problem with the NAS approach is the methodology. This is 
most clearly seen by comparing the methodology of the FPL, the Self-
Sufficiency Standard, and the NAS approach (see attached chart). 
Measuring poverty is a three-step process (see table on page 10). The 
NAS approach has problems and unintended consequences within each of 
the steps, which are described in order below.
Step 1: Creating the Poverty Threshold
    While the FPL only specifies food, by implication it includes all 
other costs that were significant at the time such as housing, 
transportation, clothing, and miscellaneous. The Self-Sufficiency 
Standard explicitly includes all the costs implied in the FPL--food, 
housing (including utilities), transportation, miscellaneous (including 
clothing)--plus new costs such as health care, child care, and taxes/
tax credits. In contrast, the NAS approach only includes food, shelter, 
clothing, and miscellaneous. Thus, the NAS approach only creates a 
partial poverty threshold.
    Partial thresholds are problematic, and when misunderstood as full 
thresholds, are too low. Thresholds quickly have a life of their own, 
and the ``fine print'' of the methodology gets lost. Most people assume 
that a revised measure is comparable to the original measure, that is, 
it is a complete threshold, but in fact, the NAS approach is ``apples'' 
to the FPL ``oranges''. The NAS threshold is only a partial threshold 
and cannot be used on its own. However, this crucial detail gets lost 
very quickly.
    For example, the New York Times editorial on July 22, 2008 entitled 
``Poverty's Real Measure'' notes that the FPL for a family of four was 
only $20,444, and in the next sentence states that ``The mayor raised 
New York's poverty ceiling to a more believable $26,138'' (p. A18). 
Note that nothing in this statement indicates that this number is a 
partial threshold, or that it needs to be adjusted for costs such as 
health care or child care.\2\
---------------------------------------------------------------------------
    \2\ In fact, the NAS-type threshold calculated for New York City 
could be considered almost literally ``half a threshold''. According to 
the most recent available Consumer Expenditure Survey (Table B, 2005), 
on average housing, food and apparel and services are 49.6% of average 
expenditures (median expenditures were not available). Pulling out 
equivalent costs from the Self-Sufficiency Standard for New York City 
(for a variety of four-person families across the different boroughs) 
we find that the total of housing, food and miscellaneous [which 
includes clothing] ranges from 99% to 119% of the threshold cited by 
Mark Levitan (except in Lower Manhattan, with its very high housing 
costs). But note again, this is only part of the costs families have to 
pay.
---------------------------------------------------------------------------
    A partial threshold is also problematic because poverty thresholds 
are used in many ways beyond measuring poverty with datasets. Not only 
are they used for eligibility, but poverty thresholds are also used as 
benchmarks to measure individual and program achievement, to target 
resources such as job training and education resources, to set minimum 
and living wage levels, and for many other purposes.
Step 2: Calculating Household Income
    In step 2, both the FPL and the Self-Sufficiency Standard simply 
count gross income from all sources (except refundable tax credits) to 
determine household income. In the NAS approach, gross income from all 
sources is also counted, however to determine household net income, 
certain expenses (actual expenditures only) are deducted from gross 
income (including health care and work-related expenses, such as child 
care and transportation).
    Reducing household income with deductions is problematic, as it 
underestimates and constrains some costs, particularly for certain 
groups. By including some costs, such as housing in the threshold 
itself, while assigning other costs to be deducted from household 
income, the NAS approach ``privileges'' some costs over others. When an 
amount is allotted in the threshold to meet a basic need, such as 
housing, this implies that that cost is essential. Conversely, other 
costs not given an allotment in the threshold itself, such as health 
care or child care, are implicitly labeled as non-essential, as 
optional or extra, for there is not an amount set aside to insure that 
there is enough to meet this need. However, employment and its 
associated costs are now the norm, not the exception: 62% of two-parent 
families have both parents in the workforce, and 72% of single parent 
families have the parent in the workforce, making work-related expenses 
such as child care essential, not optional, for the majority of 
families.\3\
---------------------------------------------------------------------------
    \3\ U.S. Department of Labor. Bureau of Labor Statistics. 
Employment Characteristics of Families in 2007. (page 2). Retrieved 
from http://www.bls.gov/news.release/pdf/famee.pdf
---------------------------------------------------------------------------
    The ``deductions'' approach hides the very poverty that should be 
made explicit because families too poor to afford these items will not 
have these deductions. If a family has enough income for rent, food, 
clothing and miscellaneous, but not health care, they will forgo the 
latter, and thus may not appear to be poor income-wise, but lack health 
care, a basic need. For example, a family of four with income of 
$27,000 could spend nothing on health care; in New York City, their 
income would be above the NAS-based poverty threshold of $26,138. 
However, an equivalent family, who had an income of $29,000, but spent 
$3,000 on health care, would have that expenditure deducted from their 
income, reducing their income to $26,000, putting them under the NAS 
threshold. Thus the former family would have less income and no health 
care, yet would not be considered poor, while the latter family would 
have more income (or virtually the same in net income), yet have health 
care and be counted as poor.
    The costs that are to be deducted from income may be capped at 
unrealistically low levels. For example, if the federal Child Care and 
Dependent Tax Credit (CCTC) caps are used to cap child care deductions, 
the amount a family could deduct for child care expenses may be much 
lower than the real cost of child care. The CCTC caps the amount for 
child care to $3,000 per year for one child and $6,000 for two or more 
children (or $250 per month for one child, and $500 for two children). 
Data from Self-Sufficiency Standard reports for recent years show that 
across a number of states the minimal cost of adequate child care 
ranges from $423 to $707 per month for infants in family care and from 
$544 to $805 for preschoolers in child care centers. Only for part-time 
school-age child care in one state are costs as low as the CCTC cap 
level ($250 to $536).\4\ Note as well that capping deductions does not 
acknowledge the geographic variation in costs; as suggested here, child 
care costs vary geographically almost as much as housing costs, but low 
caps negate this variation.
---------------------------------------------------------------------------
    \4\ Self-Sufficiency Standard reports, including child care costs 
are available at http://www.wowonline.org/ourprograms/fess/
---------------------------------------------------------------------------
    By not including these costs as necessities, the revised poverty 
measure hides substantial amounts of very real poverty. Such hidden 
poverty affects working poor families who cannot afford these 
necessities, primarily families with young children who need child care 
and health care.
Step 3: Treatment of Taxes, Tax Credits, and Transfers
    In the case of the FPL and the SSS, step 3 involves comparing the 
threshold determined in step 1 to the gross income determined in step 
2. (Note that in the Self-Sufficiency Standard, taxes and tax credits 
but not benefits have been included in the ``costs'' calculated in Step 
1). In step 3 of the NAS approach, however, net income is compared to 
the threshold both before and after taxes, tax credits, and transfers. 
The NAS treatment of taxes, tax credits, and transfers under-estimates 
need and over-estimates the impact of these three factors.
    Taxes: For most people, taxes are the first cost they must pay, in 
the form of payroll deductions before they even see their paycheck. 
This means that the amount people need to meet their needs includes the 
amount they have to pay in taxes upfront, including federal payroll, 
federal income and state income tax. Mathematically as well, taxes need 
to be included at the ``beginning'' not the ``end''. For example, to 
pay the payroll tax (for Social Security and Medicare) of 7.65%, one 
does not need to earn just $7.65 for each $100 (earned to cover other 
costs), but rather $108.28 (7.65% of $108.28 = $8.28) to fully cover 
the payroll tax.
    The NAS approach only accounts for federal taxes. State income 
taxes should be included as well as federal income taxes. If a 
household is earning a Self-Sufficiency Standard level of income, state 
income taxes range from.6% to over 6% of income in states with taxes; 
the average state tax burden is about 3.6%.\5\ Highly variable across 
states, the state income tax should be included in a poverty measure.
---------------------------------------------------------------------------
    \5\ This percentage is calculated for 20 states with Self-
Sufficiency Standards and with state income taxes.
---------------------------------------------------------------------------
    Tax Credits (Refundable): In contrast to taxes, tax credits are 
last to be received, overwhelmingly (99%, according to one survey) 
received as lump sums when people file their taxes, early in the 
following year.\6\ Moreover, most people do not use their tax credits 
to pay for daily expenses, such as food or housing. While some costs 
can be ``bought'' with credit, such as putting groceries on a credit 
card, most people according to studies (1) do not know how much they 
will be getting because of uneven income and (2) use their tax refund/
credit for lump sum purchases.\7\ The other most common uses are to 
make major purchases, such as a car, pay tuition, and pay first and 
last month's rent, or to pay off debts.\8\ The most common debt, 
however, is medical debt, not usually voluntarily taken on in 
anticipation of a refund. In other words, tax credits are used as 
``forced savings.'' Therefore continuing to assume that these credits 
are available to meet daily costs in the year in which they are earned 
needs to be reexamined.
---------------------------------------------------------------------------
    \6\ Of federal returns filed in 2001, only 137,685 taxpayers 
reported having received advanced EITC payments out of more than 16 
million families with children receiving the EITC. Numbers cited by 
John Wancheck of the Center on Budget and Policy Priorities, based on 
data reported in the IRS Income Tax Section, Monthly Operational Review 
of Earned Income Credit.
    \7\ Romich, J. L. & Weisner, T. (2000). How families view and use 
the EITC: The case for lump-sum delivery. Paper delivered at 
Northwestern University, Joint Center for Poverty Research Conference.
    \8\ Some workers may be unaware of the advanced payment option, and 
others may have employers who do not participate. Also, research has 
shown that families make financial decisions based on receipt of the 
EITC (together with tax refunds) when they file their taxes early in 
the following year. Romich, J. L. & Weisner, T. (2000). How families 
view and use the EITC: The case for lump-sum delivery. Paper delivered 
at Northwestern University, Joint Center for Poverty Research 
Conference.
---------------------------------------------------------------------------
    Transfers and Benefits: There is wide consensus that any revised 
poverty measure should reflect the impact of benefits such as child 
care or heath care assistance (Medicaid, S-CHIP) on family resources. 
The Self-Sufficiency Standard accounts for child care and health care 
costs in the first step of determining the poverty threshold, and 
therefore the impact of receiving assistance can be modeled as lowering 
the threshold wages needed, or as increasing the ``income adequacy'' of 
a given wage. However, the NAS approach does not have any means of 
showing their lack of ability to meet these needs. Since families 
receiving these benefits are by definition too poor to secure these 
resources at market rates, they will not be able to deduct the cost of 
these expenditures from their income (Step 2). At the same time, the 
NAS approach only shows the effect of food stamps and housing 
assistance, because only food and housing are included in the (partial) 
threshold. Benefits that reduce the cost of health care or work-related 
expenses, such as child care assistance or transportation cannot be 
credited against the costs of housing.
3. The Impact of Using the NAS Approach versus other Alternative 
        Measures of Poverty on both Poverty Rates and Understanding of 
        Poverty
    Because of the methodology used, the NAS approach creates both 
lower thresholds, and overestimates available resources, resulting in 
underestimating the number of people who are below poverty. Using the 
Self-Sufficiency Standard, which is based on a full rather than partial 
poverty threshold, results in a very different poverty rate and count 
of the poor.
    For example the count of the poor increases from 18.9% according to 
the FPL to 23% according to the NAS approach (in the NYC application), 
a 22% increase in the number of people counted as poor in New York 
City. However, the count of the poor increases from 7-10% according to 
the FPL to 20-30% using the Self-Sufficiency Standard in five select 
states (shown in the table below), which is a two-three fold increase 
in the number of people with inadequate income. (Note that the 
differences are probably even greater, as the studies done with the 
Self-Sufficiency Standard excluded the elderly and disabled, as the 
Standard assumes all income is earned.)

  Comparison of the Federal Poverty Level to the CEO Measure in New York and Self-Sufficency Standard in Select
                                                     States
----------------------------------------------------------------------------------------------------------------
                                                    NAS        The Self-Sufficiency Standard in Select States
                                                  Measure ------------------------------------------------------
                                                 ---------
                                                    New                                         New
                                                    York   California  Colorado  Connecticut  Jersey  Washington
                                                    City
----------------------------------------------------------------------------------------------------------------
Percent of Households with Inadequate Income          23%     30.3%        20%         19%     20.4%     20.7%
 According to Alternative Measures of Poverty...
----------------------------------------------------------------------------------------------------------------
Percent of Households Below the Federal Poverty     18.9%     10.6%       7.2%        6.8%      6.8%      8.3%
 Level (FPL)....................................
----------------------------------------------------------------------------------------------------------------
Ratio of Alternative Measures to the FPL........     1.22      2.86       2.78        2.79      3.00      2.49
----------------------------------------------------------------------------------------------------------------

    Note that the NAS approach not only results in a reduced poverty 
rate and poverty count than when the Self-Sufficiency Standard ``bare 
bones'' budgets are used, but also results in a very different picture 
of poverty. Not only are approximately four-fifths of households in 
these states ``working poor,'' but the Standard tells us that their 
income (almost all of it wages) is insufficient to meet the costs of 
working, meaning that they are forgoing meeting some needs such as 
health care and child care, to which the NAS thresholds and poverty 
rate analysis is ``blind.''
4. Recommendations for an Alternative Poverty Measure and the 
        Difference an Alternative Measure Can Make
    I would like to make the following recommendations to the 
subcommittee, based on experience with the Self-Sufficiency Standard 
and the analysis above:
    1. Incorporate in the legislation that the Modern Poverty Measure 
consider developments in terms of data availability and the experience 
of alternative approaches since the 1995 NAS report when devising 
methodology for this revision of the poverty measure. That is, the 
legislation should require that the Modern Poverty Measure be able to 
reflect changing needs, changing demographics, and changing data 
availability.
    Furthermore, there is no allowance, implied or otherwise, in any of 
these poverty standards, for debt, savings, or large capital purchases. 
Although the size and scope of tax credits has increased since the 
development of the NAS approach, so has the problem of debt and 
predatory lending. Certainly it would be unbalanced to assume that tax 
credits are available to meet daily expenses while not allowing for 
necessary non-daily expenses for which these credits are largely being 
used. In other words, if transfers are to be included in a poverty 
measure, debts and large purchases should also be included. 
Alternatively, neither tax credits nor debts and large purchases should 
be included in assessing resources available to families. This is not a 
simple issue, and deserves careful research.
    2. Although not addressed on in the hearing testimony, we recommend 
that sufficient resources be devoted to developing the Decent Living 
Standard as a realistic, but minimal, full measure of income adequacy. 
Given the inadequacies of the FPL, the Self-Sufficiency Standard was 
developed to meet the need for a complete, but modern standard of 
income adequacy. Now calculated in 37 states and the District of 
Columbia, this type of measure has been used by approximately 2000 
organizations, and increasingly has been adopted by workforce councils, 
state labor and welfare departments, in prison/parole systems, and many 
more settings across the nation. Given this high level of demand, and 
its evident usefulness, developing an official equivalent measure would 
contribute greatly to both measuring need and focusing policies and 
programs on true poverty reduction.
    The NAS approach proposes a means to more accurately measure 
poverty. Although the NAS approach does measure poverty, it is not 
designed to function as a tool. On the other hand, a Decent Living 
Standard can be--and in the case of the Self-Sufficiency Standard is 
being--used not only for measuring poverty but also as a policy tool. 
The Self-Sufficiency Standard is widely used by advocates, employers, 
policy makers, and service providers, to improve career counseling 
services, target employment and training programs towards higher wage 
jobs. The Self-Sufficiency Standard is also used to evaluate and design 
public policies with the goal of helping families reach self-
sufficiency. Because it provides fully comprehensive and transparent 
thresholds, the Self-Sufficiency Standard is a more versatile and 
useful tool in battling poverty because it is more than a measure. 
Indeed, the Self-Sufficiency Standard has gained wide usage in three-
quarters of our nation's states.\9\
---------------------------------------------------------------------------
    \9\ The Self-Sufficiency Standard is widely used by a variety of 
organizations and agencies across the states. For example, online Self-
Sufficiency Calculators, used by counselors and the public, have been 
developed for Illinois, New York, Pennsylvania, Washington State, the 
San Francisco Bay Area in California, and Washington, DC. In 1999, 
Sonoma County, California was the first county in the country to adopt 
the Standard as its formal measure of self-sufficiency and benchmark 
for measuring success of welfare to work programs. In Connecticut, the 
Standard has been adopted at the state level since 1998 and has been 
used in planning state-supported job training, placement and employment 
retention programs, and has been distributed to all state agencies that 
counsel individuals who are seeking education, training, or employment. 
The Standard has been used in a number of states (including New York, 
New Jersey, and Hawaii) to advocate for higher wages through Living 
Wage Ordinances and in negotiating labor union agreements. Workforce 
Development Boards in Pennsylvania, Washington, and Oregon are using 
the Standard as a case management tool. In Colorado, the Colorado 
Center on Law and Policy successfully lobbied the Eastern Region 
Workforce Board to officially adopt the Standard to determine 
eligibility for intensive and training services. When the Oklahoma DHS 
proposed large increases in the child care co-payments, the Oklahoma 
Community Action Project used analysis based on the Standard in a 
report that resulted in a rescinding of the proposed increases. More 
information on these and other examples on how the Standard is and can 
be used are available in the Self-Sufficiency Standard reports, http://
www.wowonline.org/ourprograms/fess/
---------------------------------------------------------------------------
The Self-Sufficiency Standard
    Below I will briefly outline a possible poverty measure 
alternative, the Self-Sufficiency Standard. I will explain how it 
addresses the issues raised above, and conclude with a discussion of 
the difference the Standard can and has already made in our 
understanding of poverty, as well as being a more useful tool to combat 
poverty. I developed this measure in the early 1990s, and since 1996, 
it has been calculated in 37 states and the District of Columbia. State 
reports may be found at http://www.wowonline.org/ourprograms/fess/
A Brief Description of The Self-Sufficiency Standard and How it is 
        Calculated
    The Self-Sufficiency Standard measures how much income is needed 
for a family of a certain composition in a given place to adequately 
meet its minimal basic needs without public or private assistance. The 
Standard is designed as a national measure, with a specific methodology 
that is tailored to the costs of each state and county within that 
state. The Self-Sufficiency Standard:

     Assumes that all adults in the household work full-time 
and, thus, have work-related expenses such as taxes, transportation and 
child care, when children are present.
      Assumes the employer provides employee and dependents' 
health insurance and uses average premiums and out-of-pocket expenses.
      Distinguishes by family size and type. The Standard 
accounts for differing costs not only by family size and composition 
(as does the official poverty measure), but also by the ages of 
children.
       Varies costs geographically and does not assume there is 
a universal ``equivalency'' scale based on the size of place or urban 
versus rural areas.
Seven Categories of Expenses
    The Standard measures seven categories of expenses using scholarly 
and credible federal and state data sources. The Standard does not rely 
on the cost of a single item, such as food, to establish a ratio 
against which to calculate the total family budget. The Self-
Sufficiency Standard is based on the cost of each basic need by 
county--food, housing, health care, child care, transportation and 
taxes--determined independently using official and otherwise publicly 
available data. We add 10 percent of these costs for miscellaneous 
necessary expenses such as clothing, phone, and household goods.
    The Self-Sufficiency Standard includes all taxes, including state 
and local sales and use taxes, payroll tax, federal, state and local 
income taxes, along with the Earned Income Tax Credit, Child and 
Dependent Care Tax Credit and Child Tax Credit. This is a minimal 
amount and produces a bare bones budget that does not take into account 
entertainment, savings, or education. It does not include funds for one 
time purchases (e.g. furniture, appliances or a car). The Standard does 
not build in costs related to savings for a security deposit, down 
payment, emergencies, retirement, college or debt repayment that can be 
essential in today's economy.
Cost Components of the Self-Sufficiency Standard
    Costs for the Self-Sufficiency Standard are based on data such as 
HUD's Fair Market Rent, the USDA Low-Cost Food Plan, and sub-state 
market rates for child care published by state welfare agencies. 
Transportation costs are figured using data from state and local 
transportation departments, the National Association of Insurance 
Commissioners, the American Automobile Association, and the IRS mileage 
allowance. Since families cannot be truly self-sufficient without 
health insurance, employer-sponsored coverage is assumed as the norm 
for full-time workers. For the family's health insurance premium and 
out-of-pocket costs, we rely largely on data from the Medical 
Expenditure Panel Survey (MEPS).\10\
---------------------------------------------------------------------------
    \10\ A complete discussion of data sources and methodology for the 
Self-Sufficiency Standard can be found on WOW's Website at: http://
www.wowonline.org/ourprograms/fess/ and clicking the report for any 
state.
---------------------------------------------------------------------------
What Diference Does Using a Measure Such as the Self-Sufficiency 
        Standard Make?
      Using the Standard results in a substantially larger 
number of households who lack adequate income. Because it is a 
realistic measure of income adequacy, it results in a substantially 
larger number of households who lack adequate income to meet their 
needs. In several state studies, using coded Census data, we have found 
that about one-fifth to almost one-third of non-elderly, non-disabled 
households lack adequate income. Specifically in California, about 30% 
of working-age households have incomes below the Standard, while in 
Washington, Colorado, New Jersey and Connecticut it is approximately 
one-fifth. This is almost three times as many households as are 
officially counted as poor--using the FPL--in each of these states.\11\ 
(Note that when the proportion of households lacking minimally adequate 
income reaches one in five, or more as in California, then it is clear 
that this is a systemic problem, that the issues are widespread and not 
simply attributable to individual issues, such as lack of education, 
etc.)
---------------------------------------------------------------------------
    \11\ To view the Standard's state Demographic reports, see the 
Overlooked and Undercounted reports for California, Colorado, 
Connecticut, and Washington State, available at http://
www.wowonline.org/ourprograms/fess/
---------------------------------------------------------------------------
      Using the Standard provides a different picture of who is 
poor in each of these states. Although there is much variation by 
state, several themes emerge. Those who are below the Standard, while 
disproportionately people of color, are racially and ethnically 
diverse. Families maintained by women alone, those who are Hispanic, 
and those with young children, are especially likely to have incomes 
below the Standard. Yet the majority of households are married couple 
households, and in most states, the majority are White. Most important, 
in every state, 80% or more of households with incomes below the 
Standard have at least one worker in them, and in roughly half of 
these, there is a full-time year-round worker. There is not space here 
to provide detailed pictures, but because it controls for cost of 
living differences (such as rural vs. urban counties in a given state), 
it reveals within-state geographic patterns and concentrations of those 
households with inadequate income.
       Using the Standard provides the means for understanding 
which costs are contributing the most to family budget constraints, as 
well as which programs are helping families make ends meet. The 
Standard can, and is, being used with clients to help them determine 
how much income they need, and thus what training/education or jobs 
will meet their self-sufficiency needs. The Standard can, and is, being 
used by program providers and policymakers to evaluate the impact of 
their services, and/or to model the impact on family budgets of 
specific services and work supports, such as child care assistance or 
tax credits.
    For references to studies and reports cited above, or further 
information about the Standard, how it is calculated, and how it can be 
used, please contact the author, Dr. Diana M. Pearce at 
[email protected] or (206) 616-2850, or the Center for Women's 
Welfare, School of Social Work, University of Washington, 4101 15th 
Avenue NE, Seattle WA 98105.

                  Comparison of Three Poverty Standards
------------------------------------------------------------------------
                                 Federal        Self-         National
                                 Poverty     Sufficiency     Academy of
                              Measure--FPL  Standard--SSS  Sciences--NAS
------------------------------------------------------------------------
Step 1
                             -------------------------------------------
Calculate                     Food--1/3     Food           Food
                             -------------------------------------------
Threshold                     All other
                               Costs--2/3
                             -------------------------------------------                             -------------------------------------------
                              Implied
                               included:
                             -------------------------------------------
                              Housing       Housing        Housing
                             -------------------------------------------
                              Clothing      Clothing       Clothing
                               (included     (included in
                               in            Miscellaneou
                               Miscellaneo   s)
                               us)
                             -------------------------------------------
                              Miscellaneou  Miscellaneous  Miscellaneous
                               s
                             -------------------------------------------
                              Transportati  Transportatio
                               on            n
                             -------------------------------------------
                              Not
                               included:
                             -------------------------------------------
                              Health care   Health care
                             -------------------------------------------
                              Child Care    Child Care
                             -------------------------------------------
                              Taxes         Taxes & Tax
                                             Credits
------------------------------------------------------------------------
Step 2
------------------------------------------------------------------------
Calculate Income              Gross Income  Gross Income   Gross Income
                               from all      from all       from all
                               Sources       Sources        Sources
                             -------------------------------------------
                                                           Deduct Actual
                                                            Costs of:
                             -------------------------------------------
                                                           Transportatio
                                                            n
                             -------------------------------------------
                                                           Health Care
                             -------------------------------------------
                                                           Child Care
                             -------------------------------------------
                                                           = Net Income
------------------------------------------------------------------------
Step 3
------------------------------------------------------------------------
Determine Poverty Status      Compare       Compare        Compare (net)
                               (gross)       (gross)        income to
                               income to     income to      Threshold
                               Threshold     Threshold
                             -------------------------------------------
                                                           For pre-tax/
                                                            transfer
                                                            pov. status
                             -------------------------------------------
                                                           Add taxes,
                                                            tax credits
                                                            and
                                                            transfers
                                                            for post tax/
                                                            transfer
                                                            poverty
                                                            status
------------------------------------------------------------------------
                              ues with FPL  SSS Responses  Critique of
                                                            NAS
------------------------------------------------------------------------
                              Too low       Full           Partial
                                             standard,      Standard,
                                             averages 50-   misunderstoo
                                             80% of area    d as full
                                             median         standard
                                             income         (too low)
------------------------------------------------------------------------
                              No            Geographic     Some
                               geographic    variation,     geographic
                               variation     by county,     variation
                                             and/or city/   for some
                                             borough (as    costs;
                                             data           however, not
                                             permits)       detailed
                                                            enough to
                                                            show true
                                                            geographic
                                                            variation in
                                                            cost
                             -------------------------------------------
                              Does not      Includes new   Privileges
                               reflect new   costs of       some costs
                               costs,        employment     (clothing
                               changing      (now the       and etc.)
                               demographic   norm), child   while
                               s             care,          devaluing
                                             transportati   others, such
                                             on, taxes      as childcare
                                                            and other
                                                            work-related
                                                            expenses
                             -------------------------------------------
                              Does not      Shows impact   Implies tax
                               show impact   of taxes,      credits used
                               of credits    credits, &     for daily
                               & benefits    transfers      expenses
------------------------------------------------------------------------


                                 

Dear Representative McDermott:

    Thank you for the opportunity to submit written testimony on the 
Measuring American Poverty Act proposed by U.S. Representative Jim 
McDermott. Crittenton Women's Union is a non-profit organization in 
Boston, MA that transforms the course of low-income women's lives so 
that they may attain economic independence and create better futures 
for themselves and their families. CWU provides safe housing, caring 
supports, education and training programs, and innovative new 
programmatic designs based on research and client experience. Through 
our advocacy efforts, we work to advance policy changes that address 
the root causes of the barriers low-income women face to achieving 
economic self-sufficiency.
    Since 1998, CWU has been one of 36 states to calculate the Family 
Economic Self-Sufficiency Standard (FESS), a realistic and useful 
measure of the income families must earn before they can thrive 
independent of government supports. Recently updated in 2006, MassFESS 
(www.liveworkthrive.org) is a comprehensive analysis of what it costs 
to support a family in Massachusetts with no public supports. Taking 
into account the cost of housing, childcare, healthcare, food, 
transportation, miscellaneous essential expenses as well as taxes and 
tax credits (EITC, Child Care Tax Credit, and Child Tax Credit), 
MassFESS indicates that a single parent family with a preschool aged 
child and a school aged child in Massachusetts would need to have an 
annual income of $48,513 (median for the state), nearly three times the 
federal poverty level.
    The Federal Poverty Level (FPL), the current standard for 
classifying families living in poverty and for extending benefits to 
these families, does not provide a complete picture of the needs of 
low-income families. The FPL is based on families' food costs alone; 
alternatively, FESS calculates a range of basic needs for 70 different 
family types, giving an accurate description of what families must earn 
to be self-sufficient. Program participants from CWU believe that it is 
crucial that so-called ``poverty standards'' reflect the varied 
composition of households, since the costs of children and extended 
family are a consistent barrier to reaching self-sufficiency. Given 
rising costs and stagnant wages for low-skilled work, many families are 
also supporting adult children and extended family members who are not 
even included in FESS or the Modern Poverty Measure.
    CWU applauds Subcommittee Chairman Jim McDermott for his draft 
legislation the Measuring American Poverty Act. This proposed 
legislation is a first step toward revising the inadequate standards 
used to determine eligibility for government supports. Like FESS, by 
taking into account the cost of food, clothing, necessary expenses, 
income assistance, family types, and geographical location, the 
proposed Modern Poverty Measure would modernize the approach the 
government takes to determining eligibility for support programs. Thus, 
it would ensure an inclusive and reasonable standard that can 
accurately gauge the level and severity of poverty in the United States 
and make sure that families receive adequate supports throughout their 
journey to self-sufficiency.
    Thank you for your consideration of this critical legislation. 
Should you have any questions, please contact Ruth Liberman, Vice 
President of Public Policy at (617) 259-2936 or 
[email protected]
            Sincerely,
                                    Elisabeth D. Babcock, MCRP, PhD
                                                  President and CEO

                                 

Chairman McDermott and Members of the Subcommittee:

    On behalf of First 5 Marin Children and Families Commission, I am 
writing in support of the chairman's proposal to establish a Modern 
Poverty Measure, and particularly the portion which calls for 
``geographic cost variation.''
    First 5 Marin is a local government agency serving young children 
and their families in Marin County, California, and we are extremely 
concerned for the economic well-being of those striving to survive on 
very low-incomes and especially those who are caring for children in 
severe poverty conditions.
    Marin County was recently identified* as the most expensive county 
in our state, and it is likely one of the most expensive counties in 
the country. As such, the financial struggle that low-income working 
families face in our county serves as a distinct example of the severe 
inadequacy of the current measurement of poverty offered by the Federal 
Poverty Level (FPL) for those living in high-cost states or high-cost 
metropolitan areas.
1. You Can't be Self-Sufficient Living in Poverty
    According to the 2008 California Family Economic Self-Sufficiency 
Standard*, a family of four in the most affordable county in 
California, Kern County, would require a household income more than two 
times the FPL of $21,200 to make ends meet ($44,686).
    For those in poverty and for the working poor, the FPL offers a 
false measure of a survival wage; a family living at the FPL does not 
have enough income to pay for even the most basic necessities. The FPL 
does not reflect a living wage or a self-sufficient wage; it is a 
desperation wage.
    Under the Self-Sufficiency Standard, the average California family 
with two adults, a preschooler and a school-age child needs to earn 
$52,889, to meet basic life costs (housing, food, childcare, 
transportation, healthcare and other basic needs).
    The monumental gap between official poverty standards and self-
sufficiency standards presents us with one of the most important 
challenges of our day: what measures can be adopted immediately and 
what measures can be pursued over the longer-term to significantly 
improve the economic well-being of all Americans living in poverty?
2. High Cost Region in a High Cost State
    In Marin County, the Self-Sufficiency Standard for the same family 
of four is $73,576. Marin County is the highest cost county in the 
State of California. (To reach this salary, both adults would need 
full-time jobs that paid at least $17.42 per hour; or, one adult would 
need an hourly wage of $34.84 or a monthly income of $6,131.) In this 
county, the value of a poverty wage is . . . distinctly invaluable.
    After paying the fair market rent of $1592 per month (according to 
the U.S. Dept. of Housing and Urban Development) for a two-bedroom 
apartment, the family of four living at the federal Poverty Level (of 
$21,200) would have $2,116 remaining . . . for the entire year. 
Ignoring all other potential expenses, it is hard to believe that four 
people could even buy enough calories to survive. (HUD calculates this 
fair market rent for the entire San Francisco metropolitan area; the 
costs in Marin County are likely much higher.)
    But many, many Marin families are living well below the self-
sufficiency wage of $73,576. We may only imagine the choices they are 
forced to make regarding food, housing, childcare and healthcare. And 
when a family's very survival is at stake, how can parents even hope to 
afford life-enriching opportunities for their children . . . much less 
adequate healthcare and quality preschool? This question should be a 
question that consumes all of us every day.
3. Measuring Poverty Standards, Achieving Subsistence Standards
    The Federal Poverty Level does not recognize poverty conditions for 
a family of four until income falls to $21,200. As such, the FPL is not 
a measure of a minimally adequate income--it is indeed a measure of 
inadequacy.
    On behalf of all working families, but especially those in high-
cost areas, we strongly support the chairman's proposal to create a 
``modern poverty measure'' which would set the poverty threshold at a 
percentage of current median personal or family expenditures--not just 
on food, but also on shelter, clothing and utilities.
    In addition, we urge the committee to fully examine and account for 
extreme geographic cost variations. Self-sufficiency in California is 
significantly beyond the Federal Poverty Level. Not only is the average 
wage needed for self-sufficiency in this state more than $30,000 over 
the federal poverty level ($52,889 compared to $21,200), but there is 
almost a $30,000 variation between counties in the state ($44,686 for 
Kern County compared to $73,576 in Marin County).
    We applaud your efforts to improve the measurement of poverty in 
this country. We cannot hope to adequately support families attempting 
to survive poverty wages until we more clearly understand the breadth 
and depth of their financial crises.
    While our ultimate goal for working families should be self-
sufficiency and economic well-being, our immediate goal must be, at the 
very least, subsistence. How could we do anything less?
            Sincerely,
                                                      Amy L. Reisch
                                                 Executive Director
                                                      First 5 Marin
Cc: Rep. Lynn Woolsey
      Senator Barbara Boxer
      Senator Dianne Feinstein
      State Senator Carole Migden
      State Assemblyman Jared Huffman

    * In May 2008, the Insight Center for Community Economic 
Development issued ``The 2008 California Family Economic Self-
Sufficiency Standard.'' The self-sufficiency standard ``measures how 
much income working individuals and families need to pay for their 
basic needs--including housing, food, child care, health care, 
transportation and other basic needs. The Insight Center for Community 
Economic Development is at www.insightcced.org.

                                 

    Chairman McDermott, Congressman Weller, Congressman Camp, and 
members of the committee, thank you for the opportunity to submit 
testimony on establishing a modern poverty measure.
    The mission of the Michigan Department of Human Services (MDHS) is 
to assist children, families and vulnerable adults to be safe, stable 
and self-supporting. We recognize that dealing with poverty is 
fundamental to our mission, and have begun the process of creating a 
statewide network to link local poverty reduction efforts to statewide 
policy initiatives in order to enhance our ability to impact the causes 
and conditions of poverty in our state. This network, the Voices for 
Action Network, will be launched as part of Michigan's first statewide 
summit on poverty November 13, 2008. It is essential that we ensure 
that all Michigan citizens have access to economic opportunity, and 
that we all work together to end poverty. All of us are affected by 
poverty and all of us have a role to play in relieving its effects and 
reducing the number of our neighbors blocked from full participation in 
our economic transformation. In order to measure the effectiveness of 
our poverty reduction efforts, we need a common sense poverty measure 
that includes impact of public programs, and the real costs of work and 
basic needs. There is broad consensus on the deficiencies of our 
current poverty measure, and I will not belabor that point but simply 
join in the chorus that it is woefully inadequate and must be changed.
    State human services agencies have a key role to play in reducing 
the effects of poverty by administering an array of federal and state 
programs aimed at assisting individuals and families. However, because 
of the limitations of the current poverty measure, many of our efforts 
to assist families are invisible and have no effect on the poverty rate 
in our state. This leaves us vulnerable to the perception that public 
programs aimed at poverty have failed because they don't reduce poverty 
rates even though there is no way to include the impact of these 
programs in the current poverty measure. For example, our state is 
committed to reaching out in creative ways to make sure that every 
person who is eligible for food stamps is actually receiving them. We 
are exceptional as a state in the percentage of eligible persons 
actually receiving food assistance, and we believe it makes a real 
difference in the degree to which poverty affects families. Similarly, 
Michigan is exceptional in that every community has created a plan to 
end homelessness, and we are adjusting policies to support these 
efforts including providing more housing assistance to people in 
shelters. These efforts make a real difference but can not affect the 
poverty measure because housing assistance and food assistance are not 
considered resources in the current poverty measure.
    As many have testified, including Rebecca Blank and Sheldon 
Danziger from the University of Michigan's National Poverty Center, it 
is likely that including food stamps and housing assistance in a 
poverty measure would actually show the effect public assistance 
programs have on the real experience of families living in poverty. 
This is a common sense approach and gives citizens a clear way to 
assess the impact of public assistance. Similarly, other public 
policies aimed at poverty such as the Earned Income Tax Credit and the 
Child Tax Credit are linked to quantifiable reductions in poverty for 
the lowest income levels when included in a poverty measure.
    The cliche that we have ``lost the War on Poverty'' is based on a 
circular argument. We don't include in our measure the impacts of major 
poverty policies and then don't see those impacts when we look at the 
measure over time. This creates a ``catch-22'' in which states struggle 
to show that our programs help even while the main economic indicator 
specifically excludes the impact of many of these programs. This gap 
between government programs and impact on poverty has widened over time 
as fewer and fewer dollars are spent on cash assistance.
    In addition to the inclusion of resources actually available to 
families, actual costs incurred by families that are unavoidable in 
order to generate income are essential components to a common sense 
poverty measure. Child care, transportation, and health care costs are 
not optional for many families; income is dependent on these factors. 
Therefore, a common sense poverty measure should include these factors 
as subsistence factors. Including these costs will assist in identifing 
issues that drive the poverty rate up, and design targeted policies to 
respond. For example, in the New York experience, their new poverty 
measure uncovered a higher rate of elderly poverty because of the 
impact of skyrocketing health care costs among this population leaving 
more seniors less able to meet basic needs. Similarly, measuring the 
real costs associated with work will reveal the impact of rising gas 
prices on working poor families and help us focus our attention on the 
large segment of people in poverty who are actively engaged in work but 
can not meet a basic level of subsistence.
    Ideally, information in the poverty measure would also be linked to 
key indicators of access to pathways out of poverty such as access to 
quality early childhood programs, education, and family support 
services to ensure that families are equipped to prevent inter-
generational poverty. The ability to identify changes in costs related 
to maintaining work and access to opportunity as part of a poverty 
measure would provide a consistent, reliable means to identify impact 
on poverty over time generated by policy initiatives such as Michigan's 
Jobs, Education and Training (JET) program which aims to link families 
to opportunities for long-term self-sufficiency.
    Finally, it is essential that responsibility for the poverty 
measure move from the Office of Management and Budget to a federal 
statistical agency. No other economic indicator is similarly entangled. 
The need for a reliable common sense poverty measure must outweigh 
political concerns related to fears of a sudden ``increase'' in poverty 
due to a switch to a meaningful measure. There are solutions to ease 
this concern including standardizing the measure, anchoring the new 
measure to the current measure for a period of time, and putting 
processes in place to regularly adjust the measure. Again, testimony 
from experts such as Sheldon Danziger from the National Poverty Center 
indicates that the overall poverty rate may not change significantly 
using a common sense measure, but that different population subgroup 
rates might, as has been the experience in New York as they have used a 
poverty measure with updated resource thresholds. This would give 
states a better sense of which groups are most effected by changing 
costs related to work and equip states with more reliable and 
consistent data on the effect of poverty reduction policies over time. 
In the long run, we are far better off dealing with the reality and the 
implications of these trends for public policies than avoiding the 
tough choices about how to best reduce poverty. Designing effective 
policies to ensure that working poor families have the supports they 
need to move beyond poverty is essential, not only to these families 
but for all of us who look forward to the benefits of a transforming 
economy.
    Thank you for the opportunity to submit this testimony.

                                 

    Re: Income Security and Family Support Advisory #ISF-17
    To the Honorable Congressman Jim McDermott Chairman of the 
Subcommittee on Income Security and Family Support of the Committee on 
Ways and Means:
    My name is Kim Aponte and I am a case manager of a township welfare 
program. I am writing to comment on the hearing to establish a modern 
measure of poverty. While I agree that a more modern measure is needed 
given how outdated our current model is, I am hoping that consumption 
as opposed to strictly income will be used as a more appropriate gauge. 
As we are all aware of the many factors aside from strictly income 
which are relevant in establishing an individual's ability to provide 
for their basic needs, specifically food, housing, childcare, 
transportation and healthcare.
    In addition, I have two other concerns. One concern is poverty 
measures versus financial eligibility criteria and standards of social 
welfare programs, including state and federal programs. Many of our 
current program's financial qualification standards (including ours in 
our General Assistance program within a township government) are so low 
as to cause the majority of individuals falling under slightly higher 
poverty thresholds to fall through the cracks. In those cases there are 
no social service programs to assist them. Our country's current 
economical status and subsequent job losses has caused record numbers 
of individual's to apply for financial assistance benefit programs. Due 
to outdated financial qualification standards and lack of programs in 
general, record numbers of individuals and families are being turned 
away.
    Notwithstanding, fiscal irresponsibility is causing many state 
governments to drastically reduce social welfare monies and/or programs 
at a time when they are needed more than ever. Why is it that social 
welfare programs are the first to receive cuts usually followed by 
education? Why aren't higher income people being taxed at higher rates 
to assist in managing our economy?
    This leads me to my final question. Once a more accurate indicator 
of poverty is established what changes will be implemented to benefit 
those in poverty? The truth of the matter as I see it lies with the 
priorities of many of the individual policy makers. Helping the poor 
has never realistically been a priority in our country. The poor do not 
fund campaigns nor do they have a large lobbying presence. The poor 
also focusing exclusively on surviving do not inundate our government 
officials with letters, faxes or emails regarding a lack of programs to 
assist them. And the social service agencies serving these clients are 
too fragmented, they are unwilling to become more cohesive, to unionize 
because so many are fighting for the same funding sources
    I have seen time and time again policy makers moving mountains to 
fund special interest projects, as well as having the ability to put 
aside political wrangling to get a bill passed in record time when it 
suits their agenda.
    Once again I am reminded of a poem by poet Tarapodo Rai titled 
``The Poverty Line.'' I would ask that you might read it and share it 
with others in your subcommittee. For while it is noteworthy to try to 
continue to define poverty, and issue more modern poverty guidelines, 
will more accurate statistics really cause our current or future 
administrations to make poverty a priority, to start creating, 
supporting, and funding anti-poverty measures and programs to help all 
of its citizens in need?
            Sincerely,
                                                         Kim Aponte
                                                         Kim Aponte
                                                     146 Valley Dr.
                                             Bolingbrook, Il. 60440
                                                  [email protected]

                                 

Dear Chairman McDermott:

    On behalf of the Leadership Conference on Civil Rights (LCCR), the 
nation's oldest, largest, and most diverse civil and human rights 
coalition with nearly 200 member organizations, we are writing in 
support of the Measuring American Poverty Act of 2008, a significant 
effort to create a more accurate measure of poverty in America.
    The current measure, which was devised in the mid 1960s and based 
on data from the mid 1950s, is flawed in several ways. Notably, it 
fails to count public benefits such as refundable tax credits, housing 
assistance, and food stamps as income. In addition, the current 
measure's assessment of a poor family's necessary expenses is extremely 
outdated. Only food costs are included in the antiquated measure now in 
use; the increasing costs of housing, heat, transportation, child care 
and out of pocket medical expenses are left out.
    The Measuring American Poverty Act of 2008 includes elements that 
are in our view essential to modernizing the assessment of poverty. 
They include:

      Counting expenditures more accurately
      Including certain public benefits as income
      Adjusting the calculation of poverty thresholds for 
regional differences in costs
      A means of showing the anti-poverty effects of benefits 
programs by comparing pre- and post-tax and transfer income
      A clear statement that the proposed changes are not to 
modify eligibility or amount of assistance for public benefits
      A provision to periodically re-assess the validity of the 
revised poverty measure

    There are a number of important reasons to improve the measure of 
poverty. It will be critical to be able to accurately gauge whether the 
steps the nation takes to reduce it are working. A more accurate 
poverty measure will also give us greater understanding of the needs of 
population subgroups. The current standard may understate the hardships 
of the elderly in making ends meet by failing to take into account 
their high out-of-pocket medical costs. A new standard may help us to 
learn if poverty is more prevalent, or deeper, among certain 
demographic groups (race/ethnicity, age, rural/urban residence) because 
they are less likely to receive benefits.
    LCCR is committed to setting a national goal to cut poverty in half 
in ten years. We are a founding partner of Half in Ten: From Poverty to 
Prosperity, a new campaign run jointly by ACORN, the Center for 
American Progress, the Coalition on Human Needs and LCCR. Among the 
initiatives sought by the campaign are substantial improvements in the 
Child Tax Credit and Earned Income Tax Credit. Under the current 
poverty measure, success in achieving these important improvements will 
not result in any reduction in the official poverty rate because 
refundable tax credits are not counted as income. Similarly, LCCR 
supports increases in Food Stamp benefits, but when those occur, the 
poverty rate will not change because food stamps are not counted as 
income. The change proposed in your legislation will allow a more 
accurate assessment of whether benefit increases have the desired 
effect, and further, whether certain population groups are helped more 
or less than others.
    We note that whatever its imperfections, the current poverty 
measure has been very important in allowing us to see trends over time. 
We urge great care in making the transition from the old to the new 
standard, so that researchers remain able to evaluate trends. We also 
urge the Census Bureau to include, as part of its mission, the 
education of advocates and service providers in the proper use of the 
old and new statistics.
    We look forward to working with you to modernize the assessment of 
poverty, and in using a more accurate measure to develop effective 
anti-poverty legislation. If you have any questions, please contact 
Nancy Zirkin at 202/263-2880 or Corrine Yu, LCCR Senior Counsel, 202/
466-5670, regarding this or any issue.
            Sincerely,
                                                     Wade Henderson
                                                    President & CEO
                                                       Nancy Zirkin
                     Executive Vice President / VP of Public Policy

                                 

Dear Chairman McDermott:

    On behalf of the Center for American Progress Action Fund (CACFP), 
I am writing to thank you for your efforts to develop an improved 
measure of poverty and to spur the development of a ``Decent Living 
Standard'' measure.
    The Center for American Progress Action Fund believes that the 
United States should commit itself to a goal of cutting poverty in half 
in ten years. We have joined with a set of partners in a campaign, Half 
in Ten, www.halfinten.org, seeking to build support for the goal of 
significant poverty reduction, and advocating policies that could 
accomplish that goal. We believe that a national goal of reducing 
poverty should be a key part of the domestic and economic policy agenda 
for Congress and the President, as well as for states and localities. 
Sustained persistent poverty reduces the life chances of those growing 
up in poverty, and it hurts our economy. Research commissioned for the 
Center for American Progress estimates that the cost to the U.S. 
economy of children growing up in persistent poverty is in the range of 
$500 billion a year, about 4 percent of our gross domestic product.\1\ 
Addressing poverty is essential to making progress toward the goals of 
promoting equal opportunity and expanding mobility in the United 
States, as well as enhancing our nation's global competitiveness.
---------------------------------------------------------------------------
    \1\ Harry Holzer, Diane Whitmore Schanzenbach, Greg J. Duncan, and 
Jens Ludwig, al., The Economic Costs of Poverty: Subsequent Effects of 
Children Growing Up Poor (Center for American Progress, January 24, 
2007), available at http://www.americanprogress.org/issues/2007/01/pdf/
poverty_report.pdf.
---------------------------------------------------------------------------
    In order to effectively address poverty, it is important to have a 
good measure of it. The current official federal poverty measure is 
deficient in many ways. It still provides valuable information about 
the extent and severity of deprivation, but it is seriously flawed. I 
discussed a number of its deficiencies, and urged an improved measure, 
in testimony before this subcommittee last year.\2\ Among key concerns, 
the current measure uses poverty thresholds that were established in 
the early 1960s and have only been adjusted for inflation since that 
time; fails to count certain resources, such as tax credits and near-
cash benefits, that are available to help meet family needs; fails to 
consider tax liabilities, work expenses, and medical expenses that 
reduce the amount of income available to meet basic needs; and fails to 
recognize substantial geographic variations in living costs.
---------------------------------------------------------------------------
    \2\ Testimony of Mark Greenberg, Subcommittee on Income Security 
and Family Support,
---------------------------------------------------------------------------
    The proposed Measuring American Poverty Act of 2008 would take a 
significant step forward by directing the development of a ``Modern 
Poverty Measure'' correcting a number of the flaws in the current 
measure. The draft bill would draw from the recommendations of the 
National Academy of Sciences' Panel on Poverty and Family Assistance 
described in Measuring Poverty: A New Approach (National Research 
Council, 1995). We agree that this set of recommendations should be the 
starting point for a new measure. Among the key improvements, the 
proposed bill would require the development of a poverty measure in 
which:

      Poverty thresholds are based on considering the actual 
costs that families pay to meet a set of basic needs;
      Tax credits and near-cash benefits that are available to 
meet those needs are considered;
      Tax liabilities, child care costs and other work 
expenses, and out of pocket medical costs are all adjusted for;
      Geographical adjustments are made in recognition of 
variations in living costs.

    Each of these improvements, as well as a set of more technical 
adjustments, would assist in having a better measure of poverty.
    An improved measure would also give a far better picture of the 
effectiveness of key public policies in addressing poverty. For 
example, under the current measure, since tax liabilities and credits 
are not considered, an expansion of the Earned Income Tax Credit has no 
direct effect on the measure of poverty. Similarly, an expansion or 
reduction in child care subsidies has no direct effect, since no 
consideration is given to family child care expenses. It is important 
to have a poverty measure that reflects the impacts of policies that 
affect family incomes, and the proposed bill would do so.
    We agree with the proposed approach of developing a Modern Poverty 
Measure, while leaving in place the Historical Measure, both for 
statistical purposes, and to ensure that no change would automatically 
occur for programs that presently determine individual eligibility or 
benefits or that allocate federal funds using the current poverty 
measure or a multiple of it. Rather, any usage of the Modern Poverty 
Measure for such purposes should appropriately be considered over time, 
on a case-by-case basis, as programs are reauthorized or otherwise are 
revised.
    We recognize that even with an improved measure of poverty, we will 
only have a better picture of one aspect of individual and family 
economic well-being. Thus, we commend your decision to charge the 
National Academy of Sciences with developing a method for calculating a 
Decent Living Standard threshold. We believe this is needed because 
even with an improved measure, the poverty line does not reflect the 
millions of Americans with incomes above poverty but who are still 
struggling to make ends meet and falling short of the income needed for 
a reasonably decent life. Ultimately, our nation should have good 
measures of both poverty and of a decent living standard, and the 
proposed bill would take a crucial step toward doing so.
    We also commend the draft bill's inclusion of a National Academy of 
Sciences study to develop a medical care risk measure. The proposed 
measure would provide data not just about the number of uninsured 
Americans, but also of the number who are underinsured.
    Finally, we encourage you to consider including several additional 
measures of economic well-being for which regular statistical reporting 
should occur. In particular, international poverty comparisons are 
often based on a ``relative'' poverty measure, looking at the share of 
individuals or families with incomes below a level such as 50 percent 
or 60 percent of median income. Such a measure is significant because 
instead of looking at whether a family can afford a limited set of 
basic needs, it focuses on the share of families that are living far 
from the social mainstream. It would be desirable for the Federal 
Government to begin regularly collecting, reporting, and analyzing such 
data, and to promote research to better understand the consequences of 
being in and growing up in relative poverty
    In addition, the nation would benefit from the development and 
regularly reporting of measures of assets and asset poverty. Wealth 
disparities in the United States are substantially greater than income 
disparities. One study estimated that in 2001, about 37.5 percent of 
U.S. households were ``asset poor,'' meaning they did not have enough 
liquid assets to live above the poverty line for three months.\3\ We 
would benefit from better data about the extent, nature and 
consequences of asset poverty.
---------------------------------------------------------------------------
    \3\ Robert Haveman and Edward N. Wolff, ``The Concept and 
Measurement of Asset Poverty: Levels, Trends and Composition for the 
U.S., 1983-2001,'' Journal of Economic Inequality 2 (2): August 2004.
---------------------------------------------------------------------------
    Thank you for your interest in these issues, for developing the 
draft bill, and for advancing efforts to develop an improved poverty 
measure and a measure of a decent living standard for the United 
States.
            Sincerely yours,
                                                     Mark Greenberg
                           Director, Poverty and Prosperity Program

                                 

    Mr. Chairman, members of the Subcommittee, I am pleased to submit 
testimony to the Subcommittee on Income Security and Family Support of 
the Ways and Means Committee and applaud Chairman McDermott's 
leadership in the movement to development a poverty measure that 
reflects the reality of poverty today. I am Roger A Clay, Jr., 
President of the Insight Center for Community Economic Development 
(formerly NEDLC). The Insight Center is a 39-year old national 
research, consulting, and legal organization dedicated to building 
economic health and opportunity in vulnerable communities throughout 
the nation. We partner with a diverse range of colleagues to develop 
innovative strategies and programs that result in systemic change and 
help people become, and remain, economically secure.
    The Insight Center strongly supports the creation of an alternative 
poverty measure such as the Modern Poverty Measure called for in 
Representative McDermott's draft proposal of the Measuring American 
Poverty Act of 2008. We would like to specifically encourage that the 
bill, when introduced:

      Include the cost of essential basic goods such as child 
care, health care, and transportation in the calculation of the Modern 
Poverty Measure--In California, as well as throughout the country, 
child care costs are consistently one of the highest costs in family 
budgets. Expensive health care costs, particularly for seniors, and 
rising gas prices, are also significantly impacting families' budgets.
      Include multiple family sizes and compositions--In order 
to create effective public policy, such as setting client eligibility 
for social service programs, a measure that includes multiple family 
types and compositions will most accurately reflect the needs of low-
income people.
      Include localized data--Due to the wide variation in the 
cost of goods within states (e.g. the cost of housing for a one-bedroom 
apartment in California ranges from $612 per month in Tulare county to 
$1,808 per month in Marin county).*
---------------------------------------------------------------------------
    * Information based on the United States Department of Housing and 
Urban Development (HUD) Fair Market Rent and National Low Income 
Housing Coalition data included in the California Family Economic Self-
Sufficiency Standard (2008).
---------------------------------------------------------------------------
      Include data reflecting costs faced by seniors--The 
consumption patterns for seniors differs from that of families, 
especially given the increased need for health care.

    It is significant both to recognize the effect of receiving public 
support on a families' economic security, as the proposed Modern 
Poverty Measure does, as well as having a measure of the income 
families need to meet their basic needs without public or private 
supports. The Self-Sufficiency Standard and Elder Economic Security 
Standard TM Index (Elder Index) provide that measure by 
calculating the income families and retired seniors need to meet their 
basic needs by family composition and county of residence. The Self-
Sufficiency Standard and Elder Index are powerful tools that 
policymakers, grant makers, advocates, educational institutions, and 
service providers around the country are using to develop programs and 
policies that have and continue to lead low-income people toward 
economic security. What follows is information about the Self-
Sufficiency Standard and Elder Economic Security Standard TM 
Index and how they are used to effectively address the needs the of 
working families and retired adults.
    The Insight Center is a state partner of the national organization, 
Washington D.C.-based Wider Opportunities for Women (WOW), as a part of 
their Family Economic Self-Sufficiency Project (FESS). Our statewide 
coalition, Californians for Economic Security (CFES), is comprised of a 
diverse network of over 400 service providers, workforce agencies, 
educators, advocates, grassroots groups, women's organizations, 
community colleges and immigrant organizations. The mission of the 
project is to advance policies and programs that build economic 
security for families, seniors, and the communities in which they live.
    Policy makers and the public are increasingly asking why so many 
Americans come up short as they struggle to make ends meet. To answer 
that question and identify strategies to help these families, WOW--in 
partnership with four organizations including the Insight Center--
launched the FESS (Family Economic Self-Sufficiency) Project in the mid 
90's. During this period, WOW piloted a new geographically-based 
measure of economic security, the Self-Sufficiency Standard, to 
reflect the true costs of living for working families that is based on 
today's economic realities. Based on publicly available federal, state, 
and local data sources including the Department of Housing and Urban 
Development (HUD) Fair Market Rent and the United States Department of 
Agriculture (USDA) Low-Cost Food Plan, the Self-Sufficiency Standard is 
a measure of the income families of different compositions need to meet 
basic needs such as housing, food, health care, child care, 
transportation, and other necessary goods in a given county without 
public or private assistance. The Self-Sufficiency Standard has been 
developed and is utilized in 35 states and the District of Columbia. It 
has been drawn on by states and national organizations and think tanks 
 in their efforts to establish a more relevant and credible measure to 
use in making policy and program decisions.
---------------------------------------------------------------------------
     The Self-Sufficiency Standard was developed by Dr. Diana Pearce 
of the University of Washington who at the time was Director of the 
Women and Poverty project at WOW.
     For instance, the National Center on Children and Poverty has 
drawn on the Self-Sufficiency Standard in the development of its matrix 
presented today.
---------------------------------------------------------------------------
    Recently, WOW and the Gerontology Institute at the University of 
Massachusetts-Boston developed an income adequacy measure for retired 
seniors: the Elder Standard TM index Sec. , that 
will be in computed for the entire country by 2012. Based on this 
national methodology, the UCLA Center for Health Policy Research, in 
partnership with the Insight Center, calculated and released the 
California Elder Economic Security Standard? Index (Elder Index) this 
past February. Like the Self-Sufficiency Standard, the Elder Index is a 
measure of the income retired seniors need to meet basic needs and is 
based on publicly available federal, state, and local data. The Elder 
Index also reflects the actual consumption patterns of older adults and 
is the only measure of its kind in the country.
---------------------------------------------------------------------------
     In the past three years, we partnered with the Gerontology 
Institute of the University of Massachusetts/Boston to develop the 
Elder Economic Security StandardTM index that takes account 
of differences in health and housing status for retired persons aged 65 
and over.
---------------------------------------------------------------------------
    Across America, a growing number of working families and seniors 
are struggling to stretch their wages and savings to meet rising costs 
for basic necessities. At the same time, public assistance from 
federal, state and local resources are dwindling. These trends give new 
urgency to the question of economic independence beyond the poverty 
line. Although many of these families and seniors are not poor 
according to the official poverty measure, their incomes are inadequate 
to meet the most minimal needs. Today, organizations around the country 
are using the Self-Sufficiency Standard to help policy makers and 
individuals answer the question of how to measure the circumstances and 
obstacles facing low-income families trying to become economically 
self-sufficient.
    The Self-Sufficiency Standard provides a conceptual framework as 
well as real numbers to address a range of policy issues: the kinds of 
jobs, education, training, work supports, retirement savings, and 
income assistance needed to make ends meet given the cost of living in 
particular local economies for different type of family configurations.
    The Self-Sufficiency Standard serves as an alternative to the 
federal poverty level. Currently, the federal poverty level is used to 
guide a host of federal and state policies and to set eligibility 
thresholds. And, it has inadvertently and inappropriately been 
interpreted to define income adequacy. This is damaging for a number of 
reasons, but perhaps one no greater than that the federal poverty level 
is a flawed measure, based on assumptions about costs and family 
structure that are completely out of date with the social and economic 
realities of today's families. For instance, the official poverty 
measure was developed in 1964 when there were many fewer single heads 
of household and many fewer mothers who worked outside the home and 
needed to pay for child care.
Why is the Federal Poverty Level (FPL) Inadequate?
    The inability of the official federal poverty measure to give a 
realistic picture of what it takes to make a living in today's society 
has been well documented. We are pleased that the Committee held the 
hearing to draw attention to the subject. The Insight Center is 
particularly concerned about the following deficiencies inherent in the 
current federal poverty level (FPL):
    The measure:

     Is based on the cost of a single item: food. It does not 
consider other costs such as housing, child care, transportation, and 
it uses the false assumption that food represents one-third of a 
family's budget.**
---------------------------------------------------------------------------
    ** The findings of the Self-Sufficiency Standard suggest that, on 
average, food costs represent between 10 and 19 percent of the budget 
for one adult, a pre-schooler and an infant--not 33% as the federal 
poverty line assumes.
---------------------------------------------------------------------------
     Is computed nationally, and thus fails to capture the wide 
range of housing and other cost differentials across the country;
     Uses the implicit demographic model of the two-parent 
family with a stay-at-home wife. Today, the likely scenario is that 
both parents are working.
     Does not distinguish between those families in which the 
adults are employed and those in which the adults are not employed.
     Does not recognize the impact of care giving for children 
and does not take into account the age of children in a family.
     Assumes that if the family has one adult household member, 
that member does not work. In 2004, 83.9 percent of single fathers and 
72 percent of single mothers were in the labor 
force.
---------------------------------------------------------------------------
    \\ Employment Characteristics of Families in 2004, 
U.S. Bureau of Labor Statistics. Available at: http://www.bls.gov/
news.release/archives/famee_06092005.pdf
---------------------------------------------------------------------------
     Does not vary by seniors' age, health, or life 
circumstances.
The Self-Sufficiency Standard: An Alternative to the FPL
    The Self-Sufficiency Standard measures how much income is needed 
for a family of a certain composition in a given place to adequately 
meet its minimal basic needs without public or private assistance. The 
Standard is designed as a national measure, with a specific methodology 
that is tailored to the costs of each state and county within that 
state.
    The Self-Sufficiency Standard in California:

      Assumes that adults in the household work full-time and, 
thus, have work-related expenses such as taxes, transportation and 
child care when children are present.
      Assumes the employer provides employee and dependents' 
health insurance and uses average premiums and out-of-pocket expenses
      Distinguishes by family size and type. The Standard takes 
account of differing costs not only by family size and composition (as 
does the official poverty measure), but also by the ages of children. 
While food and health care costs are slightly lower for younger 
children, child care costs can be much higher, particularly for 
preschool children. The Standard contemplates 70 different family types 
establishing different categories for infants, preschooler, school-age 
children and teenagers.
Seven Categories of Expenses
    The Standard measures seven categories of expenses using scholarly 
and credible federal and state data sources. The Standard does not rely 
on the cost of a single item, such as food, to establish a ratio 
against which to calculate the total family budget. The Self-
Sufficiency Standard is based on the cost of each basic need by 
county--food, housing, health care, child care, transportation and 
taxes--determined independently using publicly available data.
    The Self-Sufficiency Standard nets out all taxes, including state 
and local sales and use taxes, payroll tax, federal, state and local 
income taxes, along with the Earned Income Tax Credit, Child and 
Dependent Care Tax Credit and Child Tax Credit. After all taxes and 
basic needs are accounted for, we add 10 percent for miscellaneous 
expenses such as clothing, phone, and household goods. These 
miscellaneous expenses reflect a minimal amount for a bare bones budget 
that does not take into account entertainment, a vacation or eating 
out. It does not include funds for one time purchases (e.g. furniture, 
appliances or a car). The Standard does not build in costs related to 
savings for a security deposit, down payment, emergencies, retirement, 
college or debt repayment that can be essential in today's economy.
Cost Components of the Self-Sufficiency Standard
    To factor in actual costs, the Self-Sufficiency Standard uses such 
data as HUD's Fair Market Rent, the USDA Low-Cost Food Plan, and sub-
state market rates for child care published by state welfare agencies. 
Transportation costs are figured using data from state and local 
transportation departments, the National Association of Insurance 
Commissioners, the American Automobile Association, and the IRS mileage 
allowance. Since families cannot be truly self-sufficient without 
health insurance, employer-sponsored coverage is assumed as the norm 
for full-time workers. For the family's health insurance premium and 
out-of-pocket costs, we rely largely on data from the Medical 
Expenditure Panel Survey (MEPS).==
---------------------------------------------------------------------------
    \==\ A complete discussion of data sources and methodology for the 
Self-Sufficiency Standard can be found on WOW's Website at:http://
www.sixstrategies.org/includes/productlistinclude.cfm?str
ProductType=resource&searchType=type&strType=self-
sufficiency%20standard and clicking the report for any state.
---------------------------------------------------------------------------
The Real Cost of Living in One County:
    For each state, county-by-county tables with 156 different family 
types show the cost of each basic budget item and the hourly, monthly 
and annual wage needed to achieve self-sufficiency. On the following 
page is a table on the following page is for Alameda County, where 
Representative and Committee on Ways and Means Member Stark serves. In 
2008, the State of California Self-Sufficiency Standard was $58,854 for 
a family of one parent, one infant and one preschooler, more than 
triple the official poverty threshold of $17,600 for the same family.

                California Family Economic Self-Sufficiency Standard for Four Family Types (2008)
                                           Alameda County, California
---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Monthly Costs...................................       One Adult     One Adult &  One Adult, One    Two Adults &
                                                                        One Pre-   Preschooler &             One
                                                                        Schooler  One School Age   Preschooler &
                                                                                           Child  One School Age
                                                                                                           Child
----------------------------------------------------------------------------------------------------------------
Housing.........................................            1027            1216            1216            1216
----------------------------------------------------------------------------------------------------------------
Child Care......................................               0             859            1283            1283
----------------------------------------------------------------------------------------------------------------
Food............................................             290             438             656             903
----------------------------------------------------------------------------------------------------------------
Transportation..................................             116             116             116             232
----------------------------------------------------------------------------------------------------------------
 Health Care....................................             104             258             270             333
----------------------------------------------------------------------------------------------------------------
Miscellaneous...................................             154             289             390             397
----------------------------------------------------------------------------------------------------------------
Taxes...........................................             363             622             899             757
----------------------------------------------------------------------------------------------------------------
Earned Income Tax Credit (-)....................               0               0               0               0
----------------------------------------------------------------------------------------------------------------
Child Care Tax Credit (-).......................               0            (50)           (100)           (100)
----------------------------------------------------------------------------------------------------------------
Child Tax Credit (-)............................               0            (83)           (167)           (167)
----------------------------------------------------------------------------------------------------------------
Self-Sufficiency Wage -Hourly...................          $11.66          $20.82          $24.83     $13.79 (per
                                                                                                          adult)
----------------------------------------------------------------------------------------------------------------
-Monthly........................................          $2,052          $3,664          $4,370          $4,854
----------------------------------------------------------------------------------------------------------------
-Annual.........................................         $23,240         $43,974         $52.442         $58,251
----------------------------------------------------------------------------------------------------------------

Coming Up Short
    The Self-Sufficiency Standard helps illustrate the critical nature 
of federal programs under the jurisdiction of this committee, and 
others, as work supports--publicly funded income support and services 
that help fill the gap between a low wages and a level of self-
sufficiency. In an examination of work supports in ten communities for 
a parent, one infant and one preschooler,Sec. Sec.  WOW 
found that the wages of people leaving welfare covered only 30 percent 
of the Self-Sufficiency Standard. A minimum wage job at $5.15 per hour 
brought the level to 34 percent. Even the recent increase in the 
minimum wage to $5.85 will not bridge the gap with the skyrocketing 
costs of gasoline and food. On average across the communities, a single 
parent would have to work three full time minimum wage jobs at a time 
to meet his/her family's minimal basic needs.
---------------------------------------------------------------------------
    \Sec. Sec. \ Coming Up Short: A Comparison of Wages and Work 
Supports in 10 American Communities, Wider Opportunities for Women, 
2006, http://wowonline.org/docs/dynamic-CTTA-43.pdf.
---------------------------------------------------------------------------
Uses of the Self-Sufficiency Standard as an Alternative to the FPL
    Today, more than 2,000 local and state agencies and a variety of 
organizations are part of WOW's national Family Economic Self-
Sufficiency and Elder Economic Secuity Initiative (EESI) networks. FESS 
and EESI partners include elected officials, workforce development 
boards, women's commissions, community action agencies, child and 
senior advocates, job training programs, welfare rights groups, and 
state fiscal policy organizations. They use the Self-Sufficiency 
Standard and Elder Index frameworks to design, conduct, and advocate 
for programs and policies that move low-income families and seniors 
toward economic independence.
California: Legislation and Implementation
    In California and in many other states across the country, we have 
found that our state-specific Self-Sufficiency Standard is an 
invaluable tool because of the county specific nature of the 
information. Over the past decade, Californians for Family Economic 
Self-Sufficiency has worked to institutionalize the Self-Sufficiency 
Standard in public policies, administrative actions and programs across 
the state and across a variety of issue areas. Our efforts have 
resulted in the following policy and programmatic initiatives, among 
others.
 Use of Self-Sufficiency Standard in State and Local 
        Legislative Action
    In 2003, Californians for Family Economic Self-Sufficiency worked 
with leaders in the California State legislature to pass Senate Joint 
Resolution 15. This resolution urges the President and the Congress to 
begin a process to better calculate the federal poverty level, and to 
use a self-sufficiency index to calculate poverty, including 
geographical costs of living.
    In 2004, the San Francisco Board of Supervisors passed a resolution 
making family economic self-sufficiency a goal for the City.
    In 2008, Los Angeles City Councilmember Richard Alarcon introduced 
a motion calling for the development of a ``self-sufficiency index'' 
for the City of Los Angeles to reflect the regional cost of living, 
including health care, food, housing, child care, transportation and 
other basic necessities.
 Use of Self-Sufficiency Standard by Workforce Investment 
        Boards
    At the local level, we have partnered with the Workforce Investment 
Boards of Sacramento, Long Beach, Pasadena, San Francisco, Santa Cruz, 
Contra Costa, Mendocino, San Bernardino, and Oakland to expand their 
eligibility criteria for receiving intensive case management and 
training services, so that their eligibility income levels are closer 
to the Self-Sufficiency Standard. By using a percentage of the Self-
Sufficiency measure, these Workforce Investment Boards allow low-wage 
workers to access training; they also help their clients to set family-
sustaining goals and to understand the impact of their education and 
training decisions.
    Local Workforce Investment Boards also use the Self-Sufficiency 
Standard as a planning tool in policy and programmatic decisions. For 
example, the Self-Sufficiency Standard has helped the Sacramento 
Employment and Training Agency (SETA) and the San Bernardino Workforce 
Investment Boards to determine which industries with good wages are 
growing in their regions. They are then able to direct their clients 
and public resources toward those industries.
 Use of the Self-Sufficiency Standard in Policies and Programs 
        to Help Clients Move Toward Economic Security
    United Way of the Bay Area has adopted the Self-Sufficiency 
Standard as a tool to prioritize and measure the effectiveness of its 
own funding strategies. One group of their grantees was asked to track 
client progress toward self-sufficiency, as well as other services, and 
training being provided. With this information, they were able to 
analyze which programs were most effective at moving families out of 
poverty.
    Chabot Community College in Hayward and Berkeley City College use 
the Self-Sufficiency Standard with students who are receiving TANF to 
help them find works supports while in school and to measure progress 
their students' towards self-sufficiency over time.
    Opportunity Junction (formerly OPTIC)--a non-profit organization 
which provides training programs for occupations in the IT industry for 
low-income workers--uses the Self-Sufficiency Standard as a 
benchmarking tool with their in-coming students to determine how close 
their students are to self-sufficiency before and after participating 
in the agency's job training and placement program.
    Lastly, Mission Hiring Hall in San Francisco has incorporated the 
Self-Sufficiency Standard into a program funded by the San Francisco 
Mayor's Office of Community Development, which combines family support 
and employment training to serve an entire family, not just the 
jobseeker.
    All of these examples illustrate how an alternative, more realistic 
cost of living index enables policymakers, agency directors, and 
program operators focus their efforts and resources toward moving 
families out of poverty and toward economic self-sufficiency.
Developing a Measure of Income Adequacy for Seniors
    The Elder Economic Security StandardTM index, piloted in 
Massachusetts in 2006, uses similar data as the Family Economic Self-
Sufficiency Standard. It differentiates, however, among individuals and 
couples who own their homes free and clear, those who rent and those 
who still hold mortgages. It also differentiates by health status--
poor, good, and excellent. Included are premium and co-pay costs for 
Medicare Parts B, C and D and median out-of-pocket costs from the 
Medical Expenditure Panel Survey. Costs of home- and community-based 
long-term care are also included in the Elder StandardTM 
index. Elder StandardTM indices for California, Illinois, 
Massachusetts, Pennsylvania, and Wisconsin were released this year, and 
will be calculated for the rest of the country by 2012.
    Like policies and programs for working families, much of current 
policy and program design for low-income elders is based upon federal 
poverty thresholds. In the case of seniors, the threshold is even lower 
than that designed for working families because the U.S. Department of 
Agriculture calculations assume that older adults have lower caloric 
requirements than younger adults. As a result, the official U.S. 
poverty thresholds are lower for adults 65 and older than for younger 
adults.***
---------------------------------------------------------------------------
    *** The poverty guidelines are a second version of the federal 
poverty measure. Issued each year in the Federal Register by the 
Department of Health and Human Services, they are a simplification of 
the poverty thresholds for administrative uses, such as determining 
eligibility for certain federal programs. The federal poverty 
guidelines for 2008 are $10,400 for one-person households and $14,000 
for two-person households. They are the same in 48 states and adjusted 
for living costs only in Alaska and Hawaii.
---------------------------------------------------------------------------
    The Elder StandardTM index uses cost data from public 
federal and state sources that are comparable, geographically specific, 
easily accessible, and widely accepted. In areas where existing public 
data sources are not currently available, such as long-term care costs, 
we use a consistent methodology to derive comparable measures for 
costs.
    The Elder StandardT index:

      Measures basic living expenses for seniors (aged 65 and 
older) in the community (not in institutions, such as skilled nursing 
facilities or assisted living facilities).
      Measures costs for senior households to live 
independently (vs. living in intergenerational households).
      Includes Medicare because seniors qualify for and receive 
it based on age, not income eligibility, making it nearly a universal 
program.
      Models costs for retired elders, who no longer face costs 
of working, such as payroll taxes and commuting to work.

    The Elder StandardTM index, just like the Family 
Economic Self-Sufficiency Standard, measures costs in today's 
marketplace. Economic security implies that seniors can meet their 
basic needs without income-eligible public subsidies, such as food 
stamps, subsidized housing, Medicaid, or property tax help.
    With 3.5 million people over the age of 65, California has the 
largest older adult population in the nation, and this population is 
expected to grow by 172% over the next 40 years. The California Elder 
Economic Security Initiative--a diverse network of public agencies, 
health and aging research centers, senior service providers, 
legislators, and advocacy groups and foundations managed by the 
National Economic Development and Law Center--plans to use the Elder 
StandardTM index to help this burgeoning population age in 
place with dignity.
    Specifically, the Elder StandardTM index will help our 
statewide coalition to:

      Provide important new information to illustrate the basic 
costs seniors face and how their financial security is affected when 
their life circumstances change
      Serve as an educational and advocacy tool for elders, 
their children and caregivers, as well as for people nearing retirement
      Provide a foundation for developing a state policy agenda 
and a platform for engaging in national advocacy
      Provide a framework for analyzing the impacts of local, 
state, and federal public policies and policy proposals
      Serve as a financial counseling tool for those working 
with elders in need of income supports and additional skill sets, and
      Enable service providers, foundations, and public 
agencies evaluate the impact of their programs and services for 
seniors.
    Already, some local Area Agencies on Aging intend to use the 
California Elder Standard in their own strategic area plans as they 
prepare for the needs of retiring baby boomers in their local 
communities
    The table below illustrates the Elder StandardTM index 
using the U.S. cost data for four selected elder household types in 
good health: an individual elder homeowner who owns a home without a 
mortgage, an elder tenant in a market rate apartment, an elder couple 
who own their home without a mortgage, and an elder couple in a market 
rate apartment.

                  The California Elder Economic Security StandardT Index, Alameda County (2008)
                                  Monthly Expenses for Selected Household Types
----------------------------------------------------------------------------------------------------------------
                                                                       Elder               Elder Couple
                                                                       Person   --------------------------------
            Monthly Expenses/Monthly and Yearly Totals             -------------    Fair                  Fair
                                                                     Owner w/o     Market   Owner w/o    Market
                                                                      Mortgage    Rent 1BR   Mortgage   Rent 1BR
----------------------------------------------------------------------------------------------------------------
Housing                                                                    $426     $1,055       $426     $1,055----------------------------------------------------------------------------------------------------------------
Food                                                                       $302       $302       $557       $557----------------------------------------------------------------------------------------------------------------
Transportation (Private Auto)                                              $202       $202       $323       $323----------------------------------------------------------------------------------------------------------------
Health Care (Good Health)                                                  $293       $293       $586       $586
----------------------------------------------------------------------------------------------------------------Miscellaneous @ 20 percent                                                 $244       $244       $378       $378
----------------------------------------------------------------------------------------------------------------Elder Standard Per Month                                                 $1,467     $2,096     $2,270     $2,899
----------------------------------------------------------------------------------------------------------------
Elder Standard Per Year                                                 $17,602    $25,153    $27,237    $34,788
----------------------------------------------------------------------------------------------------------------

      
    According to the Elder Standard \TM\ index, a single elder 
homeowner without a mortgage and in good health needs at least $17,602 
per year in Alameda County just to meet basic expenses. Three out of 
ten retired elders rely solely on Social Security. For this group of 
seniors, the average annual Social Security payment ($12,642 in 2007) 
provides only 72 percent of what a one-person elder homeowner without a 
mortgage needs and only 50 percent of the income needed by an elder 
renter ($25,153). Economic security is even further out of reach for 
women as 46 percent of all elderly women relied on Social Security for 
more than 90 percent of their income in 2004. With a federal poverty 
level of $10,400, many elders do not qualify for important low-income 
supports which could assist in close the income gap illustrated by the 
Elder Standard \TM\ index.
    Long-term care costs can nearly equal or more than double the costs 
of all other components in the Elder Standard TM index, 
leading to a severe financial impact on elders' budgets.
Conclusion
    Particularly in high cost states like California, thousands of low-
wage workers and retired seniors have incomes too high to quality for 
benefits based on the federal poverty line; yet their wages or 
retirement income are too low to cover basic necessities for themselves 
and their children.
    We salute Congressman McDermott for taking on the challenge of 
raising the issue of the inadequacy of the current federal poverty 
level. As a country, we can not shy away from facing the facts of what 
it costs to live in the United States today. Although, in the short 
run, some will find it uncomfortable to acknowledge that more people 
are struggling to meet their daily costs of living, in the long term a 
new measure will lay the basis of sound policy and program development 
for the future. The incorporation of the Self-Sufficiency Standard in a 
wide range of policy, program, and direct service implementation in a 
critical mass of states, including California, reflects the fact that 
states and local governments are succeeding in using an alternative to 
the federal measure.
    Section 1150B of Congressman McDermott's bill includes many of the 
basic principles used in both the Self-Sufficiency Standard and Elder 
Index. We encourage the Federal Government to develop both a tool and a 
framework to guide federal policy that reflects a higher, more accurate 
measure of economic security at all stages of life, for multiple family 
sizes and compositions, and also for geographic regions across the 
nation.
    We stand ready with Wider Opportunities for Women and the Family 
Economic Self-Sufficiency (FESS) and Elder Economic Security 
StandardTM Index state partners to work with you to develop 
such a measure.

                                 

Dear Representative McDermott:

    I am writing to provide information relevant to your efforts to 
update the poverty measure that the Federal Government uses. As you 
know, the current federal poverty guidelines are based on a methodology 
designed in the early 1960's, using data from the 1950's. While 
adoption the measure was a major advance at the time, it is now serious 
out of date and flawed.
    We have been working for the past year on a new approach to 
measuring income security for older adults, the Elder Economic Security 
Standard Index (Elder Index). Originally developed by Wider 
Opportunities for Women and the University of Massachusetts-Boston, the 
Elder Index provides an empirically-driven way to identify the basic 
income needed by elders that varies by county, health status, and 
living arrangement. The attached document shows how we have implemented 
the Elder Index in California together with the Insight Center for 
Community Economic Development. It is critical that any poverty measure 
take into account the different balance of expenses through the life-
cycle, which makes the Elder Index an excellent model.
    Section 1150B in your bill includes many of the basic principles 
used in the Elder Index and its companion, the Family Economic Self-
Sufficiency Standard. I encourage you to build upon the work of these 
existing measures in your bill.
    If you need any additional information about the Elder Index please 
feel free to contact me at 310-794-0910 or email [email protected]
            Sincerely,
                                           Steven P. Wallace, Ph.D.
                            Professor, UCLA School of Public Health
         Associate Director, UCLA Center for Health Policy Research

                                 

    The National Senior Citizens Law Center (NSCLC) has, for over 35 
years, been actively engaged in legal advocacy to promote the 
independence and well-being of low-income elderly individuals and 
people with disabilities. NSCLC focuses on the two most fundamental 
issues facing the aging and disability communities: assuring adequate 
income to meet basic needs and having access to quality health care.
     We strongly support the proposal by Rep. McDermott to establish a 
Modern Poverty Measure and the companion provision calling for study of 
the concept of a decent living standard threshold. The traditional 
Federal Poverty Level has become increasingly inadequate to meet the 
demands of a society and an economy which are significantly different 
from the mid-twentieth century for which it was designed. Regional 
disparities have become more pronounced and people spend their money in 
significantly different ways than they did a half century ago. In 
addition to establishing different regional standards, consideration 
should also be given to establishing a separate standard for measuring 
poverty among the elderly. This is important in light of the constantly 
growing out-of-pocket medical costs for older Americans. New York City 
Mayor Michael Bloomberg's representative before the Subcommittee, Mark 
Levitan, in his testimony provided significant evidence of how today's 
Federal Poverty Level (FPL) is especially inadequate in measuring 
poverty among those over age 65. The measure developed by the City 
reveals a poverty rate among the elderly twice the rate shown by the 
official FPL. Also, while the FPL shows a poverty rate among the 
elderly both in New York City and nationwide which is slightly lower 
than the average for all age groups, the New York City measure 
demonstrates a poverty rate among the elderly (32%) which is 
significantly higher than for any other age group. Given the inadequate 
savings rates of those approaching retirement age, this is a problem 
which can only be expected to grow in the near future. It is thus 
important that we have a reliable measure of poverty among the elderly 
if we are to have well designed programs to address the need.
    Although most of the emphasis seems to be placed on the measurement 
of poverty, we believe that the proposal to study the development of a 
decent living standard threshold is at least as important. While it is 
important to eliminate poverty, we cannot declare victory by raising 
people to the verge of poverty. We need an agreed upon standard for 
income adequacy, i.e., a level of income sufficient to provide a modest 
standard of economic security such that people need not fear being 
thrown into poverty by the next unanticipated expense. For that reason 
we strongly support the proposed study called for in Sect. 1150B of the 
proposed Act.
    We also want to call your attention to the Elder Economic Security 
Initiative, which has now been launched in five states, California, 
Illinois, Massachusetts, Pennsylvania and Wisconsin. This effort is 
being coordinated nationally by Wider Opportunities for Women (WOW) and 
has been led here in California by the Insight Center for Community 
Economic Development in consultation with a wide array of senior 
advocacy groups including NSCLC. It provides, on the basis of research 
by the UCLA Center for Health Policy Research, a county by county 
breakdown of what is required for older people in different living 
situations to meet their basic needs. This is useful, not only as a 
measure of what we as a society should be striving for, but also as a 
potential planning tool for those who have not yet reached retirement 
age. It provides a reality check of what they will need after they 
retire and can provide an incentive to start saving more money for 
their retirement. We suggest that any study of a decent living standard 
make use of the work that has been done here in California and in the 
other states participating in the Elder Economic Security Initiative.

                                 

    The United Way of the Bay Area (UWBA) is pleased to submit comments 
on the proposed creation of the Modern Poverty Measure to the 
Subcommittee on Income and Family Support. UWBA is dedicated to 
improving the lives of children, families and the community in the Bay 
Area including the counties of Alameda, Contra Costa, Marin, Napa, 
Solano, San Francisco, and San Mateo. We work with many business and 
community leaders, nonprofit organizations, and government agencies to 
address major Bay Area issues.
    UWBA was one of the first funders in California to utilize the 
California Self Sufficiency Standard in grantmaking. The Self-
Sufficiency Standard is a measure of the basic cost of living 
calculated on a county by county basis (produced by the Insight Center 
for Community Economic Development and Wider Opportunities for Women). 
UWBA decided to use the standard because of the inadequacies of the 
Federal Poverty Line in measuring the economic needs of families 
throughout our high-cost Northern California Region.
    UWBA strongly supports the creation of an alternative poverty line, 
such as the Modern Poverty Measure called for in Representative Jim 
McDermott's draft proposal of The Measuring American Poverty Act. We 
would like to specifically encourage that the bill, when introduced, 
include the following:

      Localization of Data below the State Level: Because the 
Federal Poverty Line is the same all over the country, it ignores the 
realities that different cities/states have different costs of living, 
and therefore different needs for low income families. Under the 
current poverty line, the basic cost of living in San Francisco or 
Manhattan would be equal to the cost of living in Idaho or South 
Dakota.
      Data on Demographic, Geographic and Other Sub Groups of 
Families: In order to create public policy that accurately addresses 
the needs of low income people, this type of data is necessary.
      Inclusion of Childcare as a Cost Measurement (Sec. 1150A 
Sub.B Sub.1): In our experience of using the California Self 
Sufficiency Standard, we have seen that child care is consistently one 
of the highest costs in family budgets. However, the proposed Modern 
Poverty Measure appears to only include the costs of food, clothing and 
shelter.
      Inclusion of Multiple Family Sizes: The implementation of 
the measure should ensure that multiple family sizes are calculated, 
particularly single parent households. This is important in order to 
utilize this measure as a client eligibility criteria for social 
service programs.
      
    The United Way of the Bay Area also recommends that the 
Subcommittee consider using the Family Self Sufficiency Standard and 
Elder Economic Security Index Standards (Produced by Wider 
Opportunities for Women) as models to include the cost for younger 
families as well as those over the age of 65 (see www.wowonline.org).
    In September of 2004, United Way of the Bay Area published a report 
entitled The Bottom Line: Setting the Real Standard for Bay Area 
Working Families. In that report, we found that 1 in 4 Bay Area 
families have incomes too low to make ends meet (http://www.uwba.org/
helplink/reports/BottomLine.pdf). We produced and released this report 
to show just how significant the issue of accurately measuring poverty 
is, and how severe the conditions are for low-wage working people in 
our region. UWBA appreciates the opportunity to offer our comments to 
the Subcommittee in regards to this issue, and we look forward to a 
continued dialogue on poverty in our communities. It is our hope that 
this bill will serve as a building block for future policy efforts to 
address the needs of working families throughout the country.

                                  
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