The U.S. economy produced slight improvement in income and poverty levels last year, but failed to bring widespread benefits as the number of people without health insurance climbed to 47 million, according to a major report released Tuesday that reflects the nation’s underlying economic anxieties.

In its annual report on poverty, income and health insurance, the Census Bureau said that median household income rose slightly to $48,201, but mainly because people were working longer hours, not because they were being paid more.

The nation’s official poverty rate inched down to 12.3%. Again, the improvement was not broad-based, but the result of gains among a single segment of the population: older people.

The number of people without health insurance jumped by 2.2 million, or about 5%, the biggest increase since 2002. And a trend of steady progress in reducing the number of uninsured children seemingly lurched into reverse, as more than 600,000 youths were added to the rolls of the uninsured, an increase of nearly 8%.


The bleak statistic on children is released at a time when President Bush is threatening to veto legislation that would expand a health insurance program for children of the working poor, and that seemed certain to galvanize opposition to the administration’s stand.

The economy’s performance on issues of such importance as income and health coverage helps explain Americans’ persistent pessimism about their circumstances, including a sharp drop in consumer confidence reported Tuesday by the Conference Board, a business research group.

“As John Kennedy pointed out: ‘A rising tide raises all boats,’ ” said Jared Bernstein, a senior economist with the liberal Economic Policy Institute in Washington. “What the census numbers reveal is that while most boats got a little lift last year, the big gains of the recovery have accrued to the yachts.”

Bush portrayed the numbers as a vindication of his economic policies of low taxes and minimal regulation. “The census data show that income gains in 2006 were substantial and widespread across all income categories. And the largest percentage income gains occurred for people in the bottom 20% of incomes,” the president said in a statement.


Some analysts said that what Bush failed to note was that, in dollar terms, the gains near the top were 10 times those in the bottom 20%, and for most Americans, improvement was not the result of raises, but more work.

“The president is right that incomes rose and rose across the board,” said Rebecca M. Blank, a University of Michigan public policy professor who has written extensively on money and poverty. “But what the census data suggests is that earnings actually fell, which means the whole story is about people working harder and longer hours.

“This is one of the reasons people are not feeling good about this economic expansion,” Blank said.

Conservative commentators said the new numbers pictured a standard economic recovery, pointing out that household income had made it most of the way back to its pre-2001 recession levels and the poverty rate was lower than in most years of the boom-time 1990s.


“What we’re seeing is a fairly typical pattern for this stage of an economic recovery,” said Stuart M. Butler, director of economic and domestic studies at the conservative Heritage Foundation. “It’s not a particularly weak one.”

But a comparison of census numbers for post-recession recoveries over the last 2 1/2 decades suggests that the last five years have been an unusually weak period. Even with the recent decline, the poverty rate is still six-tenths of a point higher than it was in 2001. Median household income is two-tenths of a point higher. By contrast, during the first five years after the 1982 recession, poverty fell by 1.6 percentage points and income grew by 9.3 percentage points.

The new health coverage numbers disappointed experts across the political spectrum.

“I’m disheartened by this report,” said economist Joseph Antos, of the business-oriented American Enterprise Institute. “There is nothing that has happened in the economy or in the health insurance world that would have made me think we would have this large an increase” in the number of uninsured.


Presidential contenders, particularly Democrats, have been focusing on the uninsured, and the new census figures were already playing a role in the campaign by late Tuesday, with candidates citing them as evidence of the need for change.

Sen. Hillary Rodham Clinton (D-N.Y.) said Tuesday that the number of uninsured was an “even deeper outrage today” than when she and her husband, President Clinton, unsuccessfully tried to pass coverage for all in the 1990s.

Last week, Republican Mitt Romney, former governor of Massachusetts, became the latest candidate to unveil his healthcare principles.

“This is going to force more of the Republican candidates to come out with healthcare plans. They’re going to have to respond,” Antos said. “The healthcare chapter of the campaign really starts today. I think it is going to be a really significant issue for the election.”


The explanation for the discouraging numbers was familiar.

Employer-provided coverage continued to erode, while government healthcare programs held steady but did not fill the gap. And with the cost of health insurance rising more rapidly than wages, or general inflation, many people are unable to purchase a personal insurance plan on the individual market, particularly if they have a preexisting health problem.

“Median income went up seven-tenths of 1% in 2006, and in the same year. . . health insurance premiums went up 8%,” said Len Nichols, director of the health policy program at the nonpartisan New America Foundation. “There’s your story.”

Overall, 15.8% of the population was uninsured in 2006, or about 1 in 6. Although noncitizens were more likely to be uninsured, native-born Americans accounted for more than 60% of the increase in the number of people without coverage.


California had about 6.6 million uninsured residents, ranking seventh among the states in the proportion of uninsured. Latinos were more likely than any other ethnic group to be uninsured, with more than a third lacking coverage.

White House spokesman Tony Fratto said the census report bolsters Bush’s argument for tax credits and other changes to make private health insurance more affordable for individuals. “The numbers show why it is crucially important to reform the health system in a way that allows Americans to purchase their own health insurance,” he said.

But others said the salient political message from the figures was that Bush should reconsider his threat to veto an expansion of the State Children’s Health Insurance Program. The popular federal-state partnership, known as Healthy Families in California, currently insures about 6 million children and is scheduled to expire Sept. 30.

“It’s just ridiculous that the president and some in Congress could be opposed to this,” said MIT economist Jonathan Gruber, a technical advisor to Gov. Arnold Schwarzenegger and the California Legislature on their deadlocked healthcare effort. “This is as close to a no-brainer in government as legislation gets.”


The U.S. Senate has proposed expanding the $5-billion-a-year program to cover an additional 3 million children, and the House wants to extend coverage to 5 million more. Bush has proposed to renew the program with a modest funding increase that outside experts say will not be enough to sustain current levels of coverage.

The census report showed that the number of uninsured children rose for the second consecutive year in 2006, to 8.7 million. “The increase in the uninsured rate [for children] can be attributed to the decline in private coverage,” said David Johnson, chief of the bureau division that produced the statistics.

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peter.gosselin@latimes.com


ricardo.alonso-zaldivar@latimes.com