6-26-15 – Bernie’s Misleading Claim Highlights Need to Re-Define Poverty Statistics

Posted by Rob Roper

The website FactCheck.Org recently took Bernie Sanders to task for claiming that 1 in 5 seniors “live on an average income of $7,600 a year.” Not true.

Without getting into the weeds about how that number was incorrect (and low) in and of itself, Fact Check pointed out that Bernie’s calculation does not count things like food stamps, housing assistance, LIHEAP heating assistance, Medicare or Medicaid reimbursements, proceeds from reverse mortgages, withdrawals from savings, insurance proceeds, gifts, capital gains (such as profit from sale of a personal residence), or lump-sum insurance payments or inheritances.

These folks, while perhaps still in tight financial shape, are not “living on” just $7,600 a year.

Which gets to an important part about poverty statistics and how they can be confusing. The U.S. calculates poverty based on money income before taxes and does not include benefits such as public housing, Medicaid, and food stamps, etc., or capital gains. So when the government or a politician tells us X percentage of Americans are “living in poverty,” in many cases they really aren’t. They are living middle class lives, albeit subsidized by the taxpayer.

It would, therefore, make a whole lot more sense to calculate poverty rates AFTER taxes and taking into account government redistribution programs.

A few years ago, Gary Alexander, Secretary of Public Welfare, Commonwealth of Pennsylvania, calculated, “the single mom is better off earnings gross income of $29,000 with $57,327 in net income & benefits than to earn gross income of $69,000 with net income [after taxes] and benefits of $57,045.” Using Alexander’s example, in both cases, when it comes to calculating where someone lies on the poverty/middle class/wealthy scale, aren’t the $57,327/$57,045 numbers more accurate and revealing than the $29,000/$69,000?

This is how we should calculate whether someone is living in poverty or not. And, as such, perhaps we need a new classification: “Dependent.”

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