By
updated 11/7/2011 3:05:08 PM ET 2011-11-07T20:05:08

A record number of Americans — 49.1 million — are poor, based on a new census measure that for the first time takes into account rising medical costs and other expenses.

Major Market Indices

The numbers released Monday are part of a first-ever supplemental poverty measure aimed at providing a fuller picture of poverty. Although considered experimental, they promise to stir fresh debate over Social Security, Medicare and programs to help the poor as a congressional supercommittee nears a Nov. 23 deadline to make more than $1 trillion in cuts to the federal budget.

Based on the revised formula, the number of poor people exceeds the record 46.2 million, or 15.1 percent, that was officially reported in September.

Broken down by group, Americans 65 or older sustained the largest increases in poverty under the revised formula — nearly doubling to 15.9 percent, or 1 in 6 — because of medical expenses that are not accounted for in the official rate. Those include rising Medicare premiums, deductibles and expenses for prescription drugs.

"As seniors choose between food and medicine, some lawmakers are threatening lifeline programs that provide a boost to those in poverty or a safety net to those grasping at the middle class," said Jo Ann Jenkins, president of AARP Foundation, which represents the needs of older Americans. "With nearly 16 percent of seniors already living in poverty, our country cannot afford to slide further backward."

Working-age adults ages 18-64 saw increases in poverty — from 13.7 percent to 15.2 percent — due mostly to commuting and child care costs.

And for the first time, the share of Hispanics living in poverty surpassed that of African-Americans, 28.2 percent to 25.4 percent. That is due to a jump in the poverty rate for Hispanics under the new measure because of lower participation among immigrants and non-English speakers in government aid programs such as housing and food stamps.

Due to new adjustments for geographical variations in costs of living, people residing in the suburbs, the Northeast and West were the regions mostly likely to have poor people — nearly 1 in 5 in the West.

Economists have long criticized the official poverty rate as inadequate, although they differ widely on the best ways to calculate it. Based on a half-century-old government formula, the official rate continues to assume the average family spends one-third of its income on food. Those costs have actually shrunk to a much smaller share, more like one-seventh.

The official formula fails to account for other expenses such as out-of-pocket medical care, child care and commuting, and it does not consider non-cash government aid when calculating income, such as food stamps and tax credits, which have increased in the last few years.

In reaction to some of the criticism, the federal government last year tasked the Census Bureau with developing a new measure, based partly on recommendations made by the National Academy of Sciences. The new measure's goal is to help lawmakers to better gauge the effectiveness of anti-poverty programs. It does not replace the Census Bureau's official poverty formula, which continues to determine eligibility and distribution of billions of dollars in federal aid for the poor.

"We're now about to go into federal debt discussions showing a major increase in elder poverty and a decrease for African-Americans. That just defies common sense, and the political implications could be devastating," said Douglas Besharov, a University of Maryland public policy professor and former scholar at the conservative American Enterprise Institute, who called the new measure "arbitrary."

"Sure, there's a lot of suffering out there, but the inexorable result of all of this is to give more ammunition to groups to prevent cuts for the elderly. That means more cuts for low-income families," he said.

Kathleen Short, a research economist at the Census Bureau, said many of the shifts in poverty reflect the large numbers of older people who hover near the poverty line after receiving Social Security cash payments. The poverty line is defined under the official measure as $11,139 for an individual, or $22,314 for a family of four.

Because of Social Security benefits, only 9 percent of seniors, or roughly 3.5 million, live in poverty according to the official formula. But that number increases by roughly 2.7 million when taking into account additional health care costs and other factors. If it weren't for the health care costs, the poverty rate for seniors would have dropped to 8.6 percent.

"The medical expenses are very large," Short said.

Not all groups saw increases in poverty under the new measure. For instance, children and African-Americans saw declines in their poverty rates, mostly due to the positive effects of government aid programs including food stamps. Residents living in more rural areas as well as the Midwest and South also fared better, due to lower costs of living.

The census report found that the poverty rate for all groups would have jumped to 18 percent — or 6 million more people — if it weren't for the earned income tax credit, a safety net program which offers credits to low- and moderate-income families as an incentive to work and to help offset the burden of Social Security taxes. Temporary expansions to that program are slated to expire after next year.

Without food stamps, the poverty rate would have risen to 17.7 percent, which translates to about 5 million more people. That program was expanded in 2009 as part of the federal stimulus plan; the expansions are now phasing out gradually and will expire completely in 2014.

"Ironically, the new poverty figures are arriving just in time to show the success of many of the very programs that are being subject to budget cuts and scrutiny at the federal and state level," said Arloc Sherman, a senior researcher at the Center for Budget and Policy Priorities, a liberal-leaning think-tank. "Legislatures are making some of the harshest state cuts in recent history for vulnerable families, and some in Congress are advocating cutting deeply from federal assistance for those at the bottom."

Other findings:

  • Poverty for Asians increased, from 12.1 percent under the official measure to 16.7 percent. Among non-Hispanic whites, it rose from about 10 percent to 11.1 percent.
  • The poverty rate for children declined, from 22 percent to 18.2 percent.
  • Under the revised formula, the West had the most people in poverty at 19.4 percent. It was followed by the South (16.3 percent), the Northeast (14.5 percent) and the Midwest (13.1 percent).

On Monday, the Census Bureau said its new measure remained a "work in progress," with additional refinements needed to better determine commuting and housing costs. The bureau also said it needed to collect additional data before it can publish reliable supplemental numbers on poverty broken down by state.

Copyright 2011 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

Discuss:

Discussion comments

,

Most active discussions

  1. votes comments
  2. votes comments
  3. votes comments
  4. votes comments

Data: Latest rates in the US

Home equity rates View rates in your area
Home equity type Today +/- Chart
$30K HELOC FICO 4.32%
$30K home equity loan FICO 5.05%
$75K home equity loan FICO 4.50%
Credit card rates View more rates
Card type Today +/- Last Week
Low Interest Cards 10.98%
10.98%
Cash Back Cards 16.43%
16.43%
Rewards Cards 16.00%
16.00%
Source: Bankrate.com