Debt Debate: Are the Poor in Poverty?

Jul 19, 2011 7:00am

gty poverty begging mw 110718 wb Debt Debate: Are the Poor in Poverty?

ABC’s Z. Byron Wolf (@zbyronwolf) reports:

The government is two weeks away from what would be an historic default of the U.S. government is lawmakers fail to raise the U.S. debt ceiling and the talk among many economists is of an ensuing financial apocalypse.

Credit rating agencies would downgrade Treasury bonds from their AAA status, interest rates would rise and at some point the government would have to stop paying social security checks, government salaries and more.

The fight in Washington over what spending exactly to cut has been carried out largely behind closed doors, first with Vice President Biden and House Majority Leader Eric Cantor and now with President Obama and House Speaker John Boehner.

But many conservatives have their sights set on Medicaid and other social programs meant to benefit the poor.

Conservative filmmaker James O’Keefe issued a new video Monday that goes under-cover at government offices in Ohio. His video Youtube video argues for reform of social programs when it shows county government workers in four offices guide men pretending to be Russian drug dealers through how to apply for Medicaid services.

Also Monday a conservative think tank – the Heritage Foundation – published a paper arguing that the government definition of poverty is inflated.

“Poor families certainly struggle to make ends meet, but in most cases, they are struggling to pay for air conditioning and the cable TV bill as well as to put food on the table. Their living standards are far different from the images of dire deprivation promoted by activists and the mainstream media,” said Robert Rector, the Heritage scholar who wrote the paper.

Read the Heritage report here.

Rector and his colleague Rachel Sheffield analyze census data on what objects Americans have – from washing machines and TVs to video games. They find that even the poor have access to the necessary and many of the non-necessary items. And they point out that the average poor American has more living space than the average European of any income.

“The normal image of the poor is sort of that they’re one meal away from starvation, don’t have a house to live in and so forth, is really inaccurate,” said Rector, who argued that government must spend less money on things like Medicaid and food stamps.

The full cost of social services, he said, will be about $900 billion this year and quickly creep over $1 trillion. Those numbers come from the Heritage analysis of President Obama’s budget proposal, which suggests that the U.S. pays more than $16,000 for each person assisted by welfare programs – more than the individual poverty rate.

Eligibility for more than 80 assistance programs – from state-run Medicaid to federal food assistance – is tied to the poverty level.

The Heritage study is sure to draw some fire, particularly from progressives who want to protect those social services programs.

People in poverty may be able to buy food and have a TV, but the disparity in income between the haves and the have-nots in this country is at the highest level since the Great Depression.

A member of the Federal Reserve Board of Governors, Sarah Bloom Rasking recently suggested that inequality was hurting the economic recovery.

“This inequality is destabilizing and undermines the ability of the economy to grow sustainably and efficiently,” she said. Income inequality, she continued, “is “anathema to the social progress that is part and parcel of such growth.”

Others point to the fact that many people living below the poverty line aren’t going hungry as evidence of success of government programs, like SNAP, which is the new name for food stamps.

“Rather than stating that poor people in America aren’t hungry enough, we should be celebrating the success of public policies that ensure that people have access to basic nutritional assistance when they fall on hard times. People don’t want to see their fellow Americans starving,” said Melissa Boteach of the Center for American progress. In 2009, according to the US Department of Agriculture, 14.7 percent of American households reported themselves to be “food insecure.”

She said most Americans would be shocked to hear the federal poverty rate, which is set by the government at $22,350 for a family of four for 2011.

Boteach has argued for a supplemental poverty level that would reflect the changing needs of Americans, like childcare and transportation, which were not factored in when the federal povery level was first calculated in the 1960s.  Back then, food was one third of a family’s budget. Today it is 1/7th, she said.  Someone in poverty who is working or wants to work needs to factor childcare and transportation into their family budget, she said.

But with the $14.29 trillion national debt and likely $1.56 trillion 2011 deficit, these programs could face increasing pressure for cuts.

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