GREENSTEIN: Poverty rate rises, health care dips

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By Robert Greenstein

ANALYSIS/OPINION:

The new Census Bureau data showing that the nation lost substantial ground on poverty, median income and health insurance coverage in 2008 is important not just for what it says, but also for the context in which it came.

It came after an economic expansion in 2001-2007 during which poverty actually rose and median income for working-age households fell - the opposite of what normally occurs during expansions. Moreover, the grim figures for 2008 likely will be even worse for 2009, when the recession deepened and unemployment rose considerably.

These long-term trends highlight not only the need for health reform that will expand insurance coverage to the more than 46 million Americans who lack it. They also highlight the need for policymakers to be mindful of falling incomes among working-age Americans and rising poverty when deciding how to finance health care reform and, down the road, who will bear the burden of reducing soaring budget deficits.

The Census Bureau report was grim indeed. For starters, the poverty rate, or the share of the population living in poverty, rose to its highest level since 1997. The share of the population living in "deep poverty" - with cash incomes below half of the poverty line - reached its highest level since 1994. And the income of the typical, or median, household fell to its lowest level since 1997.

In part, these figures reflect the impact of the recession, which began in December 2007. But, as noted above, they also reflect the disappointing record of the 2001-07 expansion. Never before, since the government began collecting such statistics, was the poverty rate higher and median income for working-age households lower at the end of an expansion than at its beginning. And because the nation lost ground over that expansion, we entered this recession in a particularly weak position.

Why was the 2001-07 expansion so disappointing? For one thing, its benefits were heavily skewed to high-income Americans rather than broadly shared. Economists Thomas Piketty and Emmanuel Saez have found the top 1 percent of households received two-thirds of the growth in national income that occurred during the recovery, a larger share than in any other expansion since the 1920s.

In health coverage, the most striking feature of the census figures concerns the weakening of employer-sponsored coverage, the main source of coverage for the nonelderly. Between 2001 and 2008, the share of the nonelderly population with job-based coverage fell from 67 percent to 62 percent. Both full- and part-time workers were less likely to have job-based coverage in 2008 than in 2001.

Fortunately, public health insurance programs such as Medicaid and the Children's Health Insurance Program helped offset the drop in employer-sponsored coverage. In fact, the number of uninsured children actually dropped by 800,000 in 2008 as more low-income children were enrolled in these programs. But the overall number of people who are uninsured jumped by 682,000 in 2008 and now exceeds 46 million.

Given the weak economy and huge job losses in the first part of this year, virtually all of the above figures will look considerably worse a year from now when the Census Bureau releases data for 2009. In addition, in recent recessions unemployment has continued rising for well over a year after the recession ended. If that pattern holds, the results for 2010 could be even worse.

However, the expected increases in poverty in 2009-2010 will be much smaller than they would have been without the economic recovery legislation enacted in February. Though the recovery act's main purpose was to stimulate the economy, it is also helping keep millions of Americans out of poverty.

We estimate that a series of provisions in the recovery act - improvements in unemployment insurance, tax credits for working families, an increase in food stamps, and a one-time payment for retirees, veterans, and people with disabilities - will keep 6.2 million Americans, including 2.4 million children, from falling into poverty in 2009 and will reduce the severity of poverty for 33 million others.

To derive these figures, we considered not only peoples' income and taxes, but also the value of cash and noncash benefits, such as food stamps, they receive. We also used an alternative poverty measure, from the National Academy of Sciences, for our calculations because that measure considers such cash and non-cash benefits that the official poverty measure does not.

Looking ahead, Congress is considering health care reform bills that would cover tens of millions of uninsured Americans, strengthen employer coverage and Medicaid, provide new health insurance choices, and prevent insurers from denying coverage or charging exorbitant amounts to people with medical conditions, as well as begin to slow the growth of health care costs. The census numbers underscore the urgency of such steps.

In addition, the discouraging census figures on poverty and incomes should serve as a caution to policymakers when they finally begin to address long-term deficits.

David Stockman, President Reagan's budget director, once argued that when the federal government seeks to reduce the deficit, it should target areas where government resources aren't warranted instead of targeting politically weak constituents. "We are interested in curtailing weak claims rather than weak clients," Mr. Stockman stated. "We have to show that we are willing to attack powerful clients with weak claims."

The large and growing number of Americans who are struggling to make ends meet may not be politically powerful, but we need to consider their economic status when we finally address the budget deficit.

• Robert Greenstein is executive director of the Center on Budget and Policy Priorities.