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Date:         Fri, 11 Dec 1992 16:48:43 -0500
From:         Andrew Allen <E7L8ALL@TOWSONVX.BITNET>
Subject:      Look back and wrangle...the poverty thing again
Comments: To: politics@ohstvma.bitnet

Well, here we are back to that ol' poverty thing again...

Now that Peter has informed Brett', -andy and whomever else is on the
"gee I think we're overestimating the numbers of poor" bandwagon that
the figures that they are gnawing on aren't the ones that determine
how much money the government spends on the poor, it appears that
they are going to revive the tired old Reaganista rhetoric about
fraud in the system...naturally they'll intimate that most folks
who receive aid have homes, sports cars, large cash incomes from
selling Amway, etc.

As usual they will utilize a variety of amusing anecdotes... like...

>        And here's the scenario that most people use:

>        Assets are transferred to relatives and "friends" (live-in SOs, for
>example).
>        Carol Mosely-Braun (Senator-elect from Ill.) got stung by this when it
>was revealed that her mother was using medicaid despite considerable money gain
>from the sale of timber rights--which were transferred to Carol and her other
>children.

>        In another situation, a mother of three refuses to marry her boyfriend
>because that would cut off the ADC aid and put both of them off welfare.  Their
>"official" jobs are both below-poverty-line wages.  But they also sell amway,
>and he runs a pretty profitable insurance price-fixing scam.

>        Needless to say, that's five more "poverty-stricken" people who aren't.


So which is it that Brett' and -andy are upset about; is it that some
people are receiving government aid that don't need it, or is it that
there is some distortion in the poverty statistics?

I would certainly say that there is some of both; I'm sure that there
are a certain number of budding Boesky's and maybe even multitudes of
Milken's among the poor. I certainly think the number of poor is
underestimated, largely because the poverty level is set way too low.

They will be heartened to know that the SA has some stats that may clear
up their questions; it is titled "Persons below the poverty level and
poverty rate, by definition of income: 1990" my copy of the SA is actually
the "American Almanac" which contains many of the SA tables but renumbered
and rearranged so the number that I have won't help. If I get a chance
next week I'll type it in.


>>>         How do we account for the fact that the bottom 10%, on average, spen
   d
>>> twice their reported income each year?

>>Interesting figure.  I'd appreciate seeing a source and some more
>>detail on this--it seems a little high to me.  Though there are several
>>possible explanations that occur to me, which we can go into later.

>        Source is _The Seven Fat Years_ by Robert Bartley.

>        I can repost the numbers later this weekend.

Allow me to spare you the effort...

>                Income and Expenditure by Quintile
>
>                Income before taxes             Average annual expenditure
>                ===================             ==========================
>
>Lowest 20%      $ 5,720                         $12,119
>
>Second 20%       13,894                          17,616
>
>Third 20%        23,856                          24,476
>
>Fourth 20%       37,524                          34,231
>
>Fifth 20%        75,406                          53,093
>
>[Source: The Seven Fat Years, page 272.]
>

Brett' provides in the way of explanation for the chart:

>        The reasons for the descrepencies for the bottom two quintiles, and the
>bottom quintile specifically are: many entitlements are not counted as
>"income", yet provide spendable funds for those people; significant portions of
>the bottom two quintiles consist of either older people, who generally own
>their own home, and live on a fixed income, and students, who have sources of
>income (parents) outside of regular wages.

I would like to see some explanation of how these figures were cooked.
Do they, for example, include capital gains, income from health insurance
supplements, non-cash government transfers, credit (particularly in the
case of farm income/expenditures and self-employed), value of use of
business property... this chart and the explanation is somewhat inadequate.

>Brett'

-other Andy
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