From: DGS4@psuvm.psu.edu
Newsgroups: alt.politics.clinton,alt.politics.bush
Subject: Re: Poverty
Date: 4 Sep 92 19:43:38 GMT
 <1992Sep4.130143.12988@tamsun.tamu.edu> <92248.100227DGS4@psuvm.psu.edu>
 <1992Sep4.160450.3478@midway.uchicago.edu>
Distribution: usa
Organization: Penn State University

In article <1992Sep4.160450.3478@midway.uchicago.edu>, wag5@quads.uchicago.edu
(john peter wagner) says:
>
>In article <92248.100227DGS4@psuvm.psu.edu> DGS4@psuvm.psu.edu writes:
>><<<Statistics deleted>>>
>>
>>Most of the content of this thread came from the Census Bureau report
>>on poverty and an editorial page article in the Wall Street Journal.
>>Someone else has started a similar thread in sci.econ, I think (maybe
>>talk.politics.misc).  I want to make a couple of points about the article
>>in the WSJ.
>>
>>First, the author castigates the Census for not counting noncash benefits
>>as income.  That ignores the fact that Census has had a major research
>>effort into this issue for at least the last 7 years with two publications
>>on the effect of benefits on poverty.  The results from this research
>>are well-known and have, in fact, been the subject of front page articles
>>in the WSJ (I think, maybe editorial page).  Draw your own conclusions
>>about the article in the WSJ.
>>
>>Second, the author uses a statistic which he admits is fatally flawed to
>>conclude that the War on Poverty has not succeeded.  To truly examine this
>>we would have to look at the adjusted poverty rate from 1950 to 1990.
>>The author, instead, uses the unadjusted rate to illustrate that as welfare
>>spending has climbed, poverty has not declined.  What he really shows is that
>>as welfare spending has climbed, poverty excluding the welfare spending      n
>portio
>>of income has not declined.  The best solution would be to have the adjusted
>>poverty rate for 1966 and 1990.  The Census Bureau has not yet been able to
>>calculate those figures, though I think they were planning to do it.
>>
>You select two years?  Any researcher worth his guns does not take
>'two samples' unless the data is VERY hard to come by.  What if you chose
>a depression year and a boom year and compared them? Would that be
>indicative of any policy effect, or the fact that the years were in fact
>very different? This sounds like a common method of statisticians to
>make a set of data say whatever they want.  You could take any two
>single years and compare them, ensuring that the discrepancy between the
>years LUCKILY follows your prediction.

Read the portion of my post starting "To truly..."

These two years were "picked" because I was trying to keep my numbers
comparable to those the author used in his article.
The author dates the start of the War on Poverty as 1966
looks at unadjusted poverty data from 1966 to 1990.
Yet, by his own methodology
we should look at ADJUSTED, not unadjusted poverty.

Unfortunately, however, the Census Bureau only
has published the adjusted poverty data for 4 years (1986-1989(,
so, in fact, the adjusted poverty data is very hard to come by.

>
>>We do have some useful information.  In 1966 the unadjusted poverty rate was
>>14.7% and welfare spending was about 50 million dollars (1990 dollars).  In
>>1989 adjusted poverty was 8.9%.  So, if you believe that the 50 million
>>in 1966 reduced poverty by 5.8% (10-15 million people, roughly) then
>>maybe you can conclude that the increased welfare spending hasn't reduced
>>poverty rates. (Note that I'm not talking about the dynamics of poverty
>>which is an additional important issue).
>>
>Whats this 'unadjusted' poverty rate business? Sure, if the poverty line
>is $2,000(or whatever) today and there are X people fitting under
>that line, 24 years of inflation earlier would show beaucoup more
>people fitting under that $2,000, many of whom's life style would
>be classified as well above the poverty line.  I think if you adjust
>the dollars to reflect inflation, you will see that there are now
>more people in actual 'poverty' today than in the pre-1967 world.

Poverty lines ARE adjusted for inflation.  The adjustment discussed is
adjusting poverty for noncash sources of income.  You might want to read
the article in the Wall Street Journal and the Census Bureau publications
on the poverty rate.

>
>>In addtion, there is the following information.  From 1987 to 1989 welfare
>>spending increased by about 25 million dollars.  The adjusted poverty rate
>>declined from 9.4 to 8.9 percent.
>1987 to 1989 were also years experiencing unparalleled economic growth. This
>is an example of your 'conveniently selecting' two years that 'seem
>to fit when you leave out something.'  For example, if I take the cumulative
>inflation from 1987 to 1989 and compare it to this $25 million increase
>divided by the total 1987 welfare spending, we see that the increases
>are closely proportionate to inflation during that period.

See above about the lack of adjusted poverty data, and inflation
adjustments.  For the small sample
of data that we do have, poverty fell as welfare spending increased
IN REAL TERMS.  As I clearly stated in my post, the best solution
would be to have adjusted poverty data for all years.  We don't have
that, so you have to make do with what you have.

>>At the very least, the graph in the WSJ article is misleading.  I'll
>>certainly be using it to illustrate the abuse of statistical data in
>>some of my classes.
>
>        Will you also be using this(your) post?

Certainly.  Please supply me with any quote from my post in which I claim
anything more than that the methods used in the WSJ article are flawed.


>>
>>Finally, I wanted to comment on the idea in the WSJ article that
>>poverty "plummeted" from 1950 to 1966, while not declining since then.
>>First, simple economics implies that as you lower the poverty rate you
>>get diminishing returns from welfare spending.  Second, much research
>>suggests that both income grwoth AND increases in Social Security led
>>to declines in poverty in this earlier period.  It looks to me like
>>the article excludes Social Security from welfare spending, misleading
>>readers about the role of government in the earlier poverty declines.
>
>Do you mean 'diminishing marginal returns?' Simple economics 'implies?'

Yes.


>What?  'Lower poverty rate', I presume this is a number of people
>under the 'poverty line;' 'Welfare spending'- ahh, so you are saying that
>'social security' replaced 'welfare' in causing the decline in poverty after
>the '50's?'  That would indicate that it was the elderly who comprised

No, what I'm saying is that the author makes the following statements in his
WSJ article.  First, welfare spending was low before 1966.  Second, unadjusted
poverty fell rapidly from 1950 to 1966.  Third, welfare spending grew quickly
from 1966 to 1990.  Fourth, unadjusted poverty did not fall much from 1966
to 1990.  It appears to me that he misleads his readers in two ways.  First, he
excludes Social Security spending from welfare spending (I think.  He doesn't
say this, but his "welfare spending" numbers appear to be too small to include
Social Security).  In 1959 35.2% of the elderly were in poverty.  Persons age
65 and older made up 40% of the poverty population.  Thus, much of Social
Security in the 1950-1966 period should probably be considered "welfare
spending."  Second, as noted above, by the author's own methods we should
be looking at poverty rates adjusted for noncash income.

Is that a little clearer?

>much of the 'poverty' class before 1967.  You would also say that 'income
>growth' during the earlier period explained the drop in poverty, although
>you wouldn't bring it up for the '87-'89 Reagan years.  What this says
>is that the economy, the free market, brought people out of poverty,
>as well as economic programs for the elderly.  This sounds cool.  Isn't
>it what the Repubs have been supporting?

I "didn't bring it up" because I was addressing the methodology of another
article in the Wall Street Journal.  That method focuses on adjusting
income for noncash items like benefits and housing.

Just to make things clear, here is the ONLY point that anyone
should take from my post.
********************************************************************
The article from the WSJ uses a flawed methodology in reaching its
conclusions.

The conclusions may be right or wrong.
*******************************************************************
I hope this helps.

>BTW, does Penn State have a policy of hiring pedants?

  I don't know.  Are you looking for a friend of yours?


Dennis G. Shea, Penn State
<<DISCLAIMER>>
Ain't nobody's bizness but my own. I'll be happy to accept all
the credit for anything I've written.  It's funny, however, how
employers only acknowledge the profitable ideas.
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