How Food Stamps Increase Measured Poverty By David Henderson

The leading story in the Monterey County Herald this morning is titled, “Nearly half in U.S. near poverty or low-income.” It is Hope Yen’s Associated Press item, and the leading two paragraphs are:

Squeezed by rising living costs, a record number of Americans — nearly 1 in 2 — have fallen into poverty or are scraping by on earnings that classify them as low income.

The latest census data depict a middle class that’s shrinking as unemployment stays high and the government’s safety net frays. The new numbers follow years of stagnating wages for the middle class that have hurt millions of workers and families.

That is bad. But then she quotes University of Michigan professor Sheldon Danziger “who specializes in poverty.” She’s right; he does. So you would expect a specialist in poverty to know how the U.S. Census Bureau, the data source for this story, measures poverty, right?

Before quoting him, let me quote from the Census Bureau’s study on poverty in 2010, “Income, Poverty, and Health Insurance in the United States, 2010,” September 2011:

[M]oney income does not reflect the fact that some families receive noncash benefits, such as food stamps, health benefits, subsidized housing, and goods produced and consumed on the farm.

So food stamps, Medicaid, Medicare, and subsidized housing, a substantial part of the welfare state, don’t count in measuring people’s income. And those items, especially food stamps, are a particularly large part of the poor people’s income.

That makes Danziger’s quote particularly striking. [Of course, I’m assuming that she quoted him correctly. If she didn’t, then my apologies to Professor Danziger.] Here are the next two paragraphs in Ms. Yen’s piece:

“Safety net programs such as food stamps and tax credits kept poverty from rising even higher in 2010, but for many low-income families with work-related and medical expenses, they are considered too ‘rich’ to qualify,” said Sheldon Danziger, a University of Michigan public policy professor who specializes in poverty.

“The reality is that prospects for the poor and the near poor are dismal,” he said. “If Congress and the states make further cuts, we can expect the number of poor and low-income families to rise for the next several years.”

Contrary to Professor Danziger, food stamp programs did not keep the U.S. Census Bureau’s measure of poverty from rising even higher. Indeed, even if the effect of food stamp programs on the willingness to earn income is small, any incentive effect at all means that food stamp programs made measured poverty higher. And if the feared cuts that Professor Danziger is referring to are cuts in food stamps [I don’t know if that’s what he had in mind], those cuts will not cause the number of poor and low-income families to rise.