The Buzz

Did Welfare Reform Really Throw 3.5 Million Children Into Third World Poverty?

Today is the 20th anniversary of welfare reform. Two decades ago, President Bill Clinton signed the Personal Responsibility and Work Opportunity Reconciliation Act, known as welfare reform, into law.

The highly popular reform cut welfare caseloads by over 50 percent, sharply boosted the employment of the least-skilled single mothers, and pushed the poverty rates of black children and single-parent families to historic lows.

But the left always hated welfare reform. It now claims that reform has thrown 3.5 million children into “extreme poverty,” the kind seen in the developing world, living in destitution on less than $2 per day.

CBS News asserts that, because of welfare reform, “ … America is joining the likes of Third World countries.” The New York Times proclaims “welfare reform has resulted in a layer of destitution that echoes poverty in countries like Bangladesh.”

Bloomberg News gasps that millions of Americans now “live on less than the average GDP [gross domestic product] per capita of a low-income country such as Afghanistan, Mozambique, or Haiti.” It insists millions in America are poorer than the “disabled beggars of Addis Ababa in Ethiopia.”

The origin of these sensational claims is a recent book, “$2.00 a Day: Living on Almost Nothing in America,” by Kathryn Edin and Luke Shaefer.

The authors argue that welfare reform has led 3.55 million children (and 1 in 25 of all families with children) in America to subsist on less than $2 per person per day, which they identify as “one of the World Bank’s measures of global poverty.” According to Edin and Shaefer, these families live in “extreme destitution,” regularly engaging in prostitution, selling their blood, and collecting scrap metal to survive. Edin claims that “extreme poverty” is actually“much worse” in the U.S. than in developing nations because there is no “barter economy” here.

Edin and Shaefer’s bizarre charges are based on the government’s Survey of Income and Program Participation. However, examination of the survey data reveals that the families Edin and Shaefer claim are living in “extreme poverty” don’t actually appear to be particularly poor, let alone living in “extreme destitution.”

According to the data, some 67 percent of families with children allegedly living in “extreme poverty” have a computer, 86.5 percent have air conditioning in their homes or apartments, 89 percent have cellphones, and 88 percent have a DVD player, digital video recorder, VCR, or similar device.

What about hunger? Surely, hunger must be widespread among families in “extreme destitution.” But, according to the survey data, only 1 percent of families allegedly living in “extreme poverty” report that they “often” did not have “enough food to eat” over the previous four months; another 8 percent said they “sometimes” did not have “enough to eat.” The remaining 91 percent report that they “always” had enough food to eat.

Despite having alleged incomes of less than $2 per day, only 1 percent of these families were evicted during the prior year, while 4 percent had their oil, gas, or electricity cut off.

Edin and Shaefer concoct their remarkable claim that 3.5 million children routinely live in “extreme destitution,” on $2 per day or less, through a combination of statistical sleight of hand and lousy data. In 2014, federal and state government spent $221 billion on cash, food, and housing for low-income families with children. That’s two and a half times the amount needed to eliminate all poverty among families with children.

But when Edin and Shaefer calculate “extreme poverty,” they exclude nearly all of that welfare spending from their count of family income. With welfare out of the picture, it’s not hard to find families with very low incomes.

The authors admit that if food stamps and the earned income tax credit are counted, the number of kids in “extreme poverty” drops to 1.2 million. But that number is still misleading because the survey used by Edin and Shaefer undercounts receipt by more than 20 million welfare benefits distributed to recipients each month.

In a nutshell, Edin and Shaefer have used a survey that omits more than 20 million welfare benefits each month to conclude that 1.2 million children live in families that go without welfare in that month. They are simply measuring large data gaps in a flawed survey, not actual holes in the safety net.

Poverty experts understand that government income surveys, such as the Survey of Income and Program Participation, always underreport the incomes of the poor, especially welfare and off-books earnings. No surprise then that the U.S. Department of Labor’s Consumer Expenditure Survey has shown for decades that the poor households routinely report spending roughly $2.40 for every dollar of apparent income. For families in Edin and Shaefer’s “extreme poverty,” the expenditure-to-income ratio in the Consumer Expenditure Survey rises to around $25 to $1.

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