President Donald Trump and his administration could redefine what it means to be impoverished in America. Its latest move would lower the official rate of poverty in the U.S. and likely kick a large number of Americans off public assistance programs.
The shift comes from changing how inflation—the "official poverty measure" typically used to determine if Americans are eligible for key welfare programs—is calculated. In a regulatory filing Monday, the White House Office of Management and Budget said it was considering a rule change that would alter the method that has been in place since the 1960s.
Poverty is currently calculated on a federal level by multiplying the cost of what is considered a "minimum food diet" by three. The rate is adjusted every year for the cost of food. Currently, a family of four bringing in less than $26,000 is considered to be living in poverty and qualifies for a number of federal aid programs, such as Medicaid and food stamps.
On Monday, the OMB proposed changing the way the measure calculates inflation by using a tool called "chained CPI."
CPI, or consumer price index, measures changes in the price of a basket of market goods most households use and is used to measure the changes in inflation.
"There's a whole history of attempts to cut benefits of various kinds by saying we could use a more accurate measure of inflation, but the only change suggested by these groups are changes that would kick more Americans off welfare benefits," said Monique Morrissey, an economist at the liberal-leaning Economic Policy Institute. "This is being done to lower eligibility, and this administration cannot pretend they're doing it for accuracy purposes, especially if the only thing they're changing is to make a measure that is already too low even worse... There's no rationalizing this as help."
Chained CPI calculates a slower growth of inflation because instead of measuring the changes in the prices of certain foods or goods, it assumes that consumers will simply substitute them for something else. So, if the price of broccoli rises, for example, consumers might buy lettuce instead.
But chained CPI, said Morrissey, does not properly account for poor Americans' spending habits. It assumes that if the price of smart phones falls, for example, impoverished people would be able to spend more on food. But data shows that low-earners don't tend to spend their money on electronics to begin with.
The change "seems technical," tweeted Melissa Boteach, who oversees income security programs at the National Women's Law Center, "but it's actually a big attack on working people. In short, Trump wants to weaken how our poverty definition keeps pace with the cost of living. So each year, as costs go up, many working people w/low pay would gradually be stripped of WIC, Medicaid and other basics."
The difference would make it appear that the rate of poverty in the U.S. is growing more slowly, and will classify some families that currently qualify for federal aid above the impoverished threshold.
"Because of this, changes to the poverty thresholds, including how they are updated for inflation over time, may affect eligibility for programs that use the poverty guidelines," the OMB wrote in its official filing.
While the differences between the two measurements are relatively small, they quickly add up. Between 2000 and 2017, the primary CPI rose by 45.7 percent and the chained CPI by only 39.7 percent, that's a difference of 6 percentage points, according to the Brookings Institution.
That means that if chained CPI had been in use starting in 2000, about 2 million fewer Americans would be considered "poor" by 2017, according to an analysis by Morrissey. "Over longer periods, it would appear that the poverty rate was falling faster (and eligibility for programs shrinking more)," she said.
The government and a number of economists prefer an entirely different threshold to measure poverty, called the supplemental poverty measure (SPM). This tool, which is measured by the official census, "is infinitely better than the current threshold," said Morrissey, yet all government means-tested welfare programs remain linked to the CPI.
If this administration was really worried about accuracy in measuring poverty, said Morrissey, it "would worry about factoring in things like rising health care costs instead of cherry picking technical improvements that don't come halfway close to measuring the cost of living. It's farcical to focus on a minor issue that would only lower eligibility."
The change could also set a bad precedent for Social Security, currently linked to another type of CPI, called CPI-W, which measures a basket of goods purchased by urban wage earners and clerical workers (why a program for mostly elderly, retired people is linked to an inflation index for people who are working is a whole different question).
"If chain CPI was being accepted as a technical improvement for measuring poverty, it would certainly lend support to the people arguing to do the same to Social Security," said Morrissey.
According to the National Organization for Women (NOW), moving to chained CPI would disproportionately affect women. "Chained CPI," it wrote, "fails to take into account the rising costs of health care, which especially impacts seniors. Because women on average live longer than men, are poorer and have higher health care costs, the result of less income over time will be very harsh, reaching as high as 9.2 percent less in Social Security benefits."
Changing the measure of poverty, NOW wrote, "would mean the difference for many seniors between having sufficient food or paying for medication and other essential items each month."
The president has regularly discussed his desire to limit access to welfare programs in the United States. "Millions of able-bodied, working-age adults continue to collect food stamps without working or even looking for work," Trump said late last year. "Our goal is to move these Americans from dependence to independence, and into a good-paying job and rewarding career."
While proposing cuts and changes to welfare and safety net programs, Republicans have largely eschewed the former deficit hawkishness associated with their party. The Trump administration is "spending a bunch of money on stuff we're not supposed to," like a $1.5 trillion tax cut and inflated spending proposals, interim Chief of Staff Mick Mulvaney told The Atlantic last month. But "at least I'm losing at the very highest levels," he said.
President Barack Obama also suggested changing the measure of inflation during his presidency but received backlash from Congress and quickly put an end to his proposal.
Uncommon Knowledge
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Newsweek is committed to challenging conventional wisdom and finding connections in the search for common ground.
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Nicole Goodkind is a political reporter with a focus on Congress. She previously worked as a reporter for Yahoo Finance, ... Read more
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