TOPICS > Economy

Record Poverty Level: ‘Long Slog Ahead’ for Poor Americans?

September 16, 2010 at 7:25 PM EST
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The Census Bureau released a report showing that one in seven Americans lived in poverty last year, and more than 50 million are not insured. Ray Suarez discusses the record poverty numbers and the recession's effects on the poor with economists Isabel Sawhill and Harry Holzer.
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JIM LEHRER: Today’s reported rise in poverty underscored the depths of the recession, as new data gave conflicting signals about what lies ahead. And, at the same time, Congress labored on new ways of lifting the country out of recession.

For millions of small businesses, from diners to hardware stores, a Senate vote today could bring new access to credit to get them hiring again. Senate Democrats broke through a Republican filibuster to approve $30 billion for community banks.

WOMAN: The motion is agreed to.

JIM LEHRER: Supporters said it could be leveraged into $300 billion in loans. The bill goes now to the House. But Republicans, like House Minority Leader John Boehner, said the way to boost hiring is to keep the Bush-era tax cuts. They’re set to expire at the end of the year.

REP. JOHN BOEHNER (R-OH), House Minority Leader: The sooner we get our arms around spending and the sooner we extend the current tax rates for all Americans, the sooner some of the uncertainty that is clouding the picture for small businesses begins to clear up.

JIM LEHRER: President Obama wants to keep the tax cuts for the middle class, but not for better-off Americans.

A growing number of House Democrats said they would support extending tax relief for everyone. In turn, House Speaker Nancy Pelosi insisted today there is no justification for that stance.

REP. NANCY PELOSI (D-CA), Speaker of the House: Our priority is the middle class, tax cuts for the middle class. Republicans have made it clear their priority is no tax cut for the middle class, unless there’s a tax cut for the wealthiest people in our country.

JIM LEHRER: For his part, the president focused on pushing exports to fuel economic recovery. He addressed his new Export Council and said sales of U.S. goods abroad are up 18 percent from last year.

U.S. PRESIDENT BARACK OBAMA: The more American companies export, the more they produce. And the more they produce, the more people they hire. And that means more jobs.

JIM LEHRER: On the jobs front, there was a glimmer of good news. New applications for unemployment benefits dropped to a two-month low.

On the other hand, home mortgage foreclosures hit their highest level since the housing meltdown began. There were 95,000 homes repossessed last month. The Pew Research Center reported, more Americans are now willing to default. Thirty-six percent in Pew’s latest poll said it’s acceptable under some circumstances to simply walk away from a mortgage.

That kind of sentiment was underscored all the more by the poverty numbers in the Census Bureau’s annual survey of U.S. households. According to numbers for 2009, 14.3 percent, or one in seven Americans, were living at or below the poverty level last year. That was four million more people than the year before, and the most since 1994.

The ranks of the working-age poor reached the highest levels since the 1960s. In addition, the number without health insurance topped 50 million, as people lost jobs and the medical coverage that employers had provided.

And Ray Suarez has more on those new poverty numbers.

RAY SUAREZ: For a closer look at what’s behind the bad news on poverty and the uninsured, we turn to two experts who study these matters.

Harry Holzer is a professor of public policy at Georgetown University, a fellow at the Urban Institute, and a former chief economist for the U.S. Department of Labor. And Isabel Sawhill is a senior fellow at the Brookings Institution and co-director of their Center on Children and Families.

And, Isabel Sawhill, let me start with you.

What do both these numbers, the new numbers on the increase in the uninsured and the increase in those who are living in poverty tell you about the state of the American economy in 2010?

ISABEL SAWHILL, senior fellow, Brookings Institution: Well, obviously, Ray, it’s not a good story. It shows that the recession is beginning to have a major impact on the number of people with very low incomes.

With so many people out of work, it’s not surprising that the poverty rate has gone up in the way it has and that the uninsured has also gone up. But it is still, as you noted, the highest rate we have had since the early 1990s.

RAY SUAREZ: Professor Holzer, we have had eight recessions in the last 50 years, but this is the steepest increase in the number — in the number and percentage of those living in poverty. What’s different about this recession?

HARRY HOLZER, professor of public policy, Georgetown University: Well, very simply, this is the steepest recession in terms of the job market. And that’s where people’s earnings and people’s incomes are directly impacted.

Actually, so far, the increase in the poverty rate is not as steep as we saw in the early 1980s, when we also had a severe recession, although I think we’re — unfortunately, I think we’re not quite done. I think we’re going to see the poverty rate continue to rise into 2010.

This number also might have been a little worse had it not been for one positive number. And that’s the fact that poverty among the elderly actually went down because more of them are working in the labor market than was the case before their 401(k)s collapsed in value.

RAY SUAREZ: What about children? How are they doing? They’re a special concern of yours, Isabel Sawhill.

ISABEL SAWHILL: That’s right. The poverty rate amongst children has also increased a lot. And, as Harry noted, this is just the beginning of what is going to be, I’m afraid, a number of years of increasing rates.

We have done some projections at Brookings based on historical data that suggests that the overall poverty rate will probably peak around 16 percent in the middle of the decade, and that it will not be until the end of the decade that it gets anywhere near where it was before the recession started.

So, we have a long slog ahead of us, in terms of a lot of people with low incomes. And once the unemployment insurance benefits that many people have relied on are increasingly exhausted, and assuming the Congress doesn’t re-up on unemployment insurance, which I don’t think they will, then you’re going see even more pain out there.

RAY SUAREZ: There was a lot of attention on those who were on the wrong side of the poverty line. That’s about $10,000 for a single person, $22,000 for a family of four. Just on the other side of that line, are there millions more who are living in what a lot of Americans would consider poverty, but just are not counted that way by the federal government?

HARRY HOLZER: That’s right. There’s a fair amount of controversy about exactly how we measure poverty. And we use a measure that was developed in 1965, when the economy was really very different. And it’s only been adjusted for inflation over the last 45 years. If you had a more accurate count of the number of people who are poor, according to alternative measures that some economists have devised, the overall number probably would be higher, and you would see a lot more of those people, right now between 100 percent and 150 percent of the poverty line, perhaps counted as poor.

But you’re right. They are not doing well also in these circumstances.

RAY SUAREZ: So, Ms. Sawhill, help us understand who the new poor are. Are they people — are they people who just didn’t slide very far from a status just above the poverty line? Are or there many families that have really taken a calamitous fall? Earlier in the program, we reported on the record number of foreclosures.

ISABEL SAWHILL: I suspect there’s some from both categories, Ray. And you’re — you’re quite right to point out that the poverty line is a rather arbitrary measure of who’s poor and who isn’t. What’s the difference between having an income of $26,000 and an income of $18,000? They’re both very low incomes by American standards, especially if you live in one of our high-cost cities.

And, by the way, the poverty measure doesn’t adjust for geographic differences across different areas of the country.

RAY SUAREZ: Is the safety net holding? Is it different to fall into poverty now — and these numbers are from 2009 — than it was in the middle of the Great Society programs 40 years earlier? Is it a — is there as much to help those families as there was 40 years ago?

HARRY HOLZER: I think, in general, the safety net is not quite as strong as it was. And there’s many categories of people who previously were working-poor families who are not covered in the same way by welfare benefits, by unemployment insurance.

We have done a good job of extending unemployment insurance for up to 99 weeks of unemployment. That’s almost two years of unemployment. And, yet, if what Bel said is true — and I think she’s right about that, that this will be a very slow recovery — those benefits are going to expire and a lot more people over the next three, four years are going to have major problems making ends meet.

RAY SUAREZ: Speaking of benefits, Ms. Sawhill, we haven’t talked specifically about health insurance. In that new number of uninsured, are there also Americans who aren’t falling into poverty necessarily, but perceive their standard of living as declining because the places they work or the places they have relied upon to get health care are no longer providing it?

ISABEL SAWHILL: Well, I think that’s right. I think that gets to the question of, what does the poverty measure get at? And, basically, it’s based on your cash income. And it doesn’t include whether or not you have health insurance. And, for many families, that’s a major source of security and well-being and a great help.

And I disagree a little bit with Harry on what’s happened since the 1960s, because we do have a lot more people than we used to, especially amongst the working low-income population, who do have health insurance, either through the government or through an employer.

And we also have a variety of tax credits, such as the earned income tax credit and the tax credit that the president pushed forward as part of the Recovery Act, that are helping a lot of lower-income families. And one of the things I worry about is what happens when those temporary tax credits that were part of the Recovery Act go away.

RAY SUAREZ: So, she disagrees with you a little bit on the way the safety net is catching these families.

What about the effect from here on out? If you’re a young worker, and you’re having trouble getting traction, does the effects of falling into poverty now last longer than the recession does?

HARRY HOLZER: My concern is that there will be some really significant scarring of people, of children in families that have fallen below the poverty line, even if only temporarily, of children whose parents have permanently lost a job. There’s a lot of stress on those families and on those kids — and that shows up in terms of worse educational outcomes and worse earnings later in life.

And for young people, for teenagers and young adults entering the labor market under these really bad circumstances, and having difficulty getting that first foothold in the labor market, there’s research evidence showing that they’re going to be scarred in terms of lower earnings for many years to come, even when they are, in fact, gainfully employed.

And having difficulty getting that first foothold in the labor market. There’s a research evidence showing that they’re going to be scarred in terms of lower earnings for many years to come, even when they are, in fact, gainfully employed.

RAY SUAREZ: So, that effect shadows them through their adult lives?

HARRY HOLZER: That’s right. It may not be for their entire lives, but it could well be for 10, 15 or more years after that. There’s some significant scarring that will occur.

And, again, part of that is made worse by the fact that this recovery will be so slow, and it will take so many years for us to get back to a full employment labor market.

RAY SUAREZ: Professor Holzer, Dr. Sawhill, thank you both.

HARRY HOLZER: Thank you.

ISABEL SAWHILL: Thank you.