President Donald Trump and his administration may redefine what it means to be impoverished in America. The move would lower the official rate of poverty in the U.S. and likely kick a large number of Americans off of welfare programs.
The shift comes from changing how inflation is calculated in the “official poverty measure,” which is what is typically used to determine if Americans are eligible for key welfare programs. In a regulatory filing Monday, the White House Office of Management and Budget said it was considering a rule-change that would alter the method that has been in place since the 1960s.
Poverty is currently calculated on a federal level by multiplying the cost of what is considered a “minimum food diet” by three. The rate is adjusted every year for the cost of food. Currently, a family of four bringing in less than $26,000 is considered to be in poverty and qualifies for a number of federal aid programs like Medicaid and food stamps.
President Donald Trump has floated a rule that would change the way poverty in the United States is calculated. SAUL LOEB/AFP/Getty Images
On Monday, the OMB proposed changing the way the measure calculates inflation by using a tool called “chained CPI.”
CPI, or consumer price index, measures changes in the price of a certain basket of market goods most households use and is used to measure the changes in inflation.
“There’s a whole history of attempts to cut benefits of various kinds by saying we could use a more accurate measure of inflation, but the only change suggested by these groups are changes that would kick more Americans off of welfare benefits,” said Monique Morrissey, an economist at the left-leaning Economic Policy Institute. “This is being done to lower eligibility, and this administration cannot pretend they’re doing it for accuracy purposes, especially if the only thing they’re changing is to make a measure that is already too low even worse...There’s no rationalizing this as help.”
Chained CPI calculates a slower growth of inflation because instead of measuring the changes in the prices of certain foods or goods, it assumes that consumers will just substitute them for something else. So, if the price of broccoli rises, for example, consumers might buy lettuce instead.
But chained CPI, said Morrissey, does not properly account for poor Americans' spending habits. It assumes that if the price of smart phones fall, for example, impoverished people will be able to spend more on food. But data shows that low-earners don't tend to spend their money on electronics to begin with.
The change “seems technical,” wrote Melissa Boteach, who oversees income security programs at the National Women's Law Center, on Twitter, “but it’s actually a big attack on working people. In short, Trump wants to weaken how our poverty definition keeps pace with cost of living. So each year, as costs go up, many working people w/low pay would gradually be stripped of WIC, Medicaid and other basics.”
The difference would make it appear that the rate of poverty in the U.S. is growing more slowly, and will classify some families that currently qualify for federal aid above the impoverished threshold.
“Because of this, changes to the poverty thresholds, including how they are updated for inflation over time, may affect eligibility for programs that use the poverty guidelines,” the OMB wrote in their official filing.
While the difference between the two measurements are relatively small, they quickly add up. Between 2000 and 2017, the primary CPI rose by 45.7 percent and the chained CPI by only 39.7 percent, that's a difference of 6 percentage points, according to The Brookings Institute.
That means that if chained CPI had been in use starting in 2000, about two million fewer Americans would be considered “poor” by 2017, according to an analysis by Morrissey. “Over longer periods, it would appear that the poverty rate was falling faster (and eligibility for programs shrinking more),” she said.
The government and a number of economists prefer a different threshold entirely to measure poverty, called the supplemental poverty measure (SPM). This tool, which is measured by the official census “is infinitely better than the current threshold,” said Morrissey, yet all government means-tested welfare programs remain linked to the CPI.
If this administration were really worried about accuracy in measuring poverty, said Morrissey, they “would worry about factoring in things like rising healthcare costs instead of cherry picking technical improvements that don’t come halfway close to measuring the cost of living. It’s farcical to focus on a minor issue that would only lower eligibility.”
The change could also set a bad precedent for Social Security, currently linked to another type of CPI, called CPIW, which measures a basket of goods purchased by working Americans (why a program for mostly elderly, retired people is linked to an inflation index for people who are working is a whole different question).
“If chain CPI was being accepted as a technical improvement for measuring poverty, it would certainly lend support to the people arguing to do the same to Social Security,” said Morrissey.
According to the National Organization for Women (NOW), moving to chained CPI would disproportionately affect women. “Chained CPI,” they write, “fails to take into account the rising costs of health care which especially impacts seniors. Because women on average live longer than men, are poorer and have higher health care costs, the result of less income over time will be very harsh, reaching as high as 9.2 percent less in Social Security benefits.”
Changing the measure of poverty, NOW wrote, “would mean the difference for many seniors between having sufficient food or paying for medication and other essential items each month.”
The president has regularly discussed his desire to limit access to welfare rolls in the United States. “Millions of able-bodied, working-age adults continue to collect food stamps without working or even looking for work,” Trump said late last year. “Our goal is to move these Americans from dependence to independence, and into a good-paying job and rewarding career.”
While proposing cuts and changes to welfare and safety net programs Republicans have largely eschewed the former deficit hawkishness associated with their party. The Trump administration is “spending a bunch of money on stuff we’re not supposed to,” like a $1.5 trillion tax cut and inflated spending proposals, admitted interim chief-of-staff Mick Mulvaney to The Atlantic last month. But, he said, “at least I’m losing at the very highest levels.”
President Obama also suggested changing the measure of inflation during his presidency but received backlash from Congress and quickly put an end to his proposal.