In early May, the Office of Management and Budget announced that it was seeking public comments on a proposal to change how inflation and the consumer price index are calculated, and, by extension, how poverty rates in the United States are estimated.
The federal poverty line measure was developed in the early 1960s by a Social Security Administration economist named Mollie Orshansky. It has gone through numerous tweaks over the 56 years since then, but the basic premise has always held: it is calculated assuming particular spending patterns on goods, ranging from food to housing to fuel to clothing, that a family needs to purchase to have even a modicum of economic security. The poverty line is modified depending on the size of the family. In the U.S., the line isn’t varied by geographic region, but it is updated yearly based on changes in the Consumer Price Index — basically, the rate of inflation.
So ingrained is the poverty measure in our discussion of politics, of inequality, of economic vibrancy, that we have, over the decades, come to think of the statistic as something absolute; when we say that 12.3 percent of Americans, or nearly 40 million people, currently live below the poverty line, we assume that means something incontrovertible; that 40 million of us are poor and the rest of us aren’t. But of course, in reality, there’s no such absolute divide. Poverty measures are inherently impressionistic, based on a series of assumptions about how people spend their money and what constitutes basic need, and, as importantly, how they substitute one good for another when there are selective price spikes affecting certain goods and services.
There are economists who spend their entire careers crafting their own estimates of how consumers behave as these prices subtly shift. But amid the din of competing data, one thing stands out: Experts on poverty, from organizations as diverse as the Center for American Progress to the National Academy of Sciences believe that the measure is actually far too conservative. They say the “basic needs” that the poverty line considers are outdated — not fully factoring in things such as recent increases in the costs of housing and medical care, or the importance of access to technologies such as the internet and cell phones in the modern era. As a result, they say, the real poverty rate in America is actually considerably higher than the official numbers suggest.
Now, however, the Trump administration looks set to head off in the exact opposite direction. It has come up with a proposal to measure inflation by a “chained consumer price index,” which will most likely take millions of people who were previously considered by the government to be living in poverty, and declare that suddenly, magically, they are no longer poor.
The chained consumer price index is a particularly cautious way of measuring inflation: On a monthly basis, it tries to factor in how people change their consumption patterns in response to price spikes or changes in technology. If, for example, car prices significantly increased, but in response, vastly more people used public transport and thus weren’t as impacted by the industry-specific inflation, it would factor that in and reduce the price increase’s overall impact on the inflation rate.
In theory, that’s all well and good — except for the fact that poor people tend to be less flexible in their spending patterns than more affluent Americans. In recent years, economists have found that poor people actually experience higher rates of inflation than do those with more disposable income. If gas prices go up, for example, a middle-class American might choose to counter that impact by purchasing a hybrid or electric car; a poor person likely won’t have the down-payment or the monthly income needed to purchase a new vehicle and will thus be stuck with the old gas guzzler.
The introduction of the chained consumer price index as a way to calculate poverty rates is being marketed by the Trump administration as simply a technical revamp, and, in part, that’s true: There’s nothing that says Orshansky’s way of measuring poverty is the only way for all eternity. But, given what we know about low-income Americans’ spending patterns, the particular proposal championed by Trump’s team in practice must be seen as a shameless manipulation of data for partisan advantage.
If you recalculate how poverty is measured in a way specifically designed to make it harder for a person to fall below the poverty line, you instantaneously reduce the number of people who do indeed fall below it — thus allowing whatever government is in office at the time to claim they have reduced the poverty rate. More importantly, you render all of those suddenly “non-poor” people less eligible for benefits such as SNAP, Medicaid, free or reduced school breakfasts and lunches, and housing assistance — despite the fact that, in reality, their living conditions haven’t changed for the better.
The University of California Center for Labor Research and Learning estimates that by 2028 in California alone this could result in 60,000 people losing access to Medi-Cal; 1 million Californians receiving lower subsidies to help them buy health insurance; and up to 3.7 million Californians losing access to Cal-Fresh, the state’s food stamps program, which allows people earning up to 130 percent of the federal poverty level to receive some benefits. Nationally, the Children’s Defense Fund and the Center on Budget and Policy Priorities have concluded that over the course of a decade, 300,000 children would be kicked off the Children’s Health Insurance Program and Medicaid.
Trump’s proposal is very much of a piece with how Bill Clinton shamelessly claimed credit for reducing the number of people reliant on welfare after the 1996 welfare reforms — reforms that achieved their goals not by actually reducing the need for welfare but largely by dramatically curtailing eligibility for cash welfare payments.
Or, to take an international example, the Trump administration’s recalculation plan is cut out of the same cloth as the changes in how Margaret Thatcher’s Conservative Party government chose to measure unemployment in the United Kingdom in the 1980s. Thatcher’s tight monetary policies had resulted in the unemployment rate more than doubling from the time she assumed power in 1979 through to 1984. In response, the government introduced nearly 30 changes in how unemployment was measured, removing elderly workers from the unemployment data, only counting those who were claiming unemployment benefits (rather than those who had applied for but not yet started receiving these benefits) and so on. All were intended to reduce the headline numbers around unemployment.
The Trump administration’s attempt to redefine the poverty line isn’t about accuracy, or about making the government and public programs more responsive to the needs of the tens of millions of economically insecure and borderline destitute Americans. Quite the reverse; it is about denigrating the needs of those in poverty and making it ever-harder for them to prove their neediness and to qualify for public assistance. It is, in short, yet another anti-empathic move by an administration peopled with members of the economic elite.
Trump claims that he is worth $9 billion, though Forbes calculates his real worth to be about a third of that. Whichever number is correct, he’s among the wealthiest few thousand people on the planet. Commerce Secretary Wilbur Ross is worth somewhere between $700 million and $2.9 billion. Treasury Secretary Steve Mnuchin is worth hundreds of millions of dollars. Jared Kushner’s family are multibillionaires. Education Secretary Betsy DeVos is part of a family worth billions.
This is a government by and for plutocrats that, grotesquely, has managed to portray itself to its base as populists. And now those plutocrats are trying to define millions of poor people, many of whom make up Trump’s most loyal base, out of poverty by a statistical sleight of hand.