Alison
By Allison Linn Senior writer
msnbc.com
updated 9/16/2010 10:41:22 AM ET 2010-09-16T14:41:22

The latest national poverty rate data was released Thursday, and that means there’s finally one thing both liberals and conservatives can agree on: The way we measure poverty is flawed.

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“Everybody’s dissatisfied with the poverty rate, although not always for the same reasons,” said Nicholas Eberstadt, a researcher at the American Enterprise Institute, a conservative think tank.

The Census Bureau said Thursday that the poverty rate hit 14.3 percent in 2009, up from 13.2 percent in 2008. That's the highest poverty rate since 1994 and the second significant increase since 2004.

The number of people living in poverty hit 43.6 million in 2009, the Census Bureau said, up from 39.8 million people in 2008. That's the largest number of people living in poverty since recordkeeping began in 1959.

The numbers are staggering, but researchers on both sides of the ideological fence argue that they don't paint the full picture. Liberals often say the data understate the extent to which Americans are suffering to make ends meet, and some conservatives worry the data overstate the problem.

Experts on both sides say the current method of calculating the number of Americans living in poverty is too simplistic and fails to account for a wide swath of factors beyond income that could influence how families make ends meet.

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Starting next year, the government plans to address some of those concerns by releasing a supplemental poverty measure that will incorporate factors like tax credits and work expenses. That should offer a more nuanced look at Americans’ financial state but is not expected to replace the official poverty measure.

Some researchers already are arguing that even those more robust supplemental calculations won’t be enough to give Americans an accurate picture of who is truly poor in this country.

It may be a case where it is impossible to satisfy everyone.

“It would be very difficult to ever have a measure that everybody likes,” said Shawn Fremstad, a policy analyst with the liberal-leaning Center for Economic and Policy Research.

The poverty rate is calculated largely using taking the household income of an individual or family and then factoring in the number of people who are living off that income, and their ages. The poverty thresholds were developed in the early 1960s based on data from the time period about how much a family needed to spend, at minimum, on food.

The data are revised annually to account for inflation but does not vary by location. The measure includes only cash income and excludes income substitutes such as food stamps and housing subsidies.

For 2009, the average poverty threshold for a family of four was $21,954. For a single person under 65 it was $11,161, and for a single person over 65 it was $10,289.

Fremstad argues that the current poverty threshold is unrealistic.

“Very simplistically, I think it’s too low in terms of the basic amount it takes to make ends meet in today’s economy,” he said.

He’d prefer to see a measure that was based on Americans’ median income, to give a better sense of how people are doing compared to others in society. Median income was $49,777, a very slight drop from a year earlier.

Fremstad also thinks the poverty measure is too narrow because it fails to account for other sources of income such as food stamps, as well as other factors that could make a person’s financial needs higher, such as being disabled or living in a high-cost area.

“You can be income-poor and asset rich, and in balance that means you’re not poor,” Fremstad said. “You can also have income just above poverty line but be in debt and under water (on your) mortgage.”

Ideally, he’d like to see something more like a hardship index that looks at income but also takes into account other factors such as a person's housing situation and nutrition levels.

On the conservative side, Eberstadt argues that the poverty rate should be calculated not by looking at incomes but by looking at spending habits.

“The poverty rate as a measure is looking through the wrong end of the telescope,” he said.

In the modern economy, people’s incomes can vary greatly from year to year based on seasonal employment or other factors. For example, Eberstadt said, a family that shows little income one year may have a lot of savings from the previous year.

Other factors could come into play, he said, such as gifts from family members or the earned income tax credit for the working poor.

“People’s spending power, pretty much, is a good reflection of their living standards,” he said.

The poverty rate is not the only way the government measures hardship. The local and national unemployment rates, also are widely used gauges of how the nation is faring.

Then there’s just common sense.

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“The bottom line is you don’t need a poverty measure to know that last year was a really bad year for a whole lot of people in America,” Eberstadt said.

Want to read more about how the economy is affecting Americans? Follow me on Twitter @alinnmsnbc

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