Half of All Americans Are Poor Or Near-Poor?

That is today’s sensational news headline: Census shows 1 in 2 people are poor or low-income. Half of all Americans are living in near-poverty? The Associated Press paints a grim picture:

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. …

About 97.3 million Americans fall into a low-income category, commonly defined as those earning between 100 and 199 percent of the poverty level, based on a new supplemental measure by the Census Bureau that is designed to provide a fuller picture of poverty. Together with the 49.1 million who fall below the poverty line and are counted as poor, they number 146.4 million, or 48 percent of the U.S. population.

So the “one in two” headline is based on a definition of low income that includes everyone who earns up to twice the poverty level, as defined by the Census Bureau’s new “supplemental measure.” This graphic shows how the population is divided according to this method:

In the paragraph quoted above, the AP explains that its numbers are based on “a new supplemental measure by the Census Bureau that is designed to provide a fuller picture of poverty.” You can read about that new measure here. What is the definition of “poverty” under this new formula? It is described as “The 33rd percentile of FCSU [food, clothing, shelter and utilities] expenditures of all consumer units with exactly two children.” This figure is then “adjusted for the size and composition of the SPM resource unit relative to the two-adult-two-child threshold using an equivalence scale.” The system is opaque–to me, anyway–but it appears that the definition of poverty will float with the expenditures that households make for food, clothing, etc., so that as such expenditures rise, so does the poverty level.

Given that construct, it is not clear that people who earn double the “poverty” level should be considered “low income” or “near-poor.” That group includes almost exactly one-half of all Americans. Yet, as of 2008, the median income for all American families was $61,521. (For married couples, the median income was $72,743.) If the AP’s alarmist headline is correct, then every family with an income below $60,000 is “low income.”

It is undeniably true that the Obama economy has been a disaster for the American people, and that low- and middle-income Americans have suffered acutely during the last three years. But let’s not exaggerate American decline: the idea that one-half of us are perilously close to poverty is absurd.