The U.S.
Census Bureau released poverty figures for 2004 on August 30, and if
you were to take the mainstream media reports on the subject at face
value, you would have to conclude that things are pretty bad in our
nation. By leaving out that the latest data is actually as good as
or better than 20 of the last 25 years, the reports spun a good news
story into just the opposite.
For instance, this is from David Leonhardts article in the August 31 New York Times:
The census's annual report card on the nation's economic well-being showed that a four-year-old expansion had still not done much to benefit many households.
Not to be outdone, Jonathan Weisman and Ceci Connolly of The Washington Post had this to say:
The Census Bureau's annual report on income, poverty and health insurance sheds light on voter discontent with the economy in the face of seemingly strong economic data. The broad data draw a picture of a labor market still struggling to find its footing, three years after the 2001 recession.
What both of these articles did was create a false comparison. They exclusively related current data to those achieved during the peak of the stock market bubble and the middle of the period when corporations were using questionable accounting practices to inflate their earnings. And, they skipped any reference to todays data that offered a better perspective of how these numbers compare to more realistic periods in our history times not impacted by absurd stock valuations and fraudulent corporate reporting.
For instance, as depicted in Table 2 of this Census Bureau report, the current poverty rate of 12.7 percent is equal to or better than six of the eight years under Clinton. Only 1999 and 2000, in the midst of the tech bubble and corporate governance abuses, were better.
More importantly, 2004s 12.7 percent is better than 20 out of the past 25 years. Again, the only years that were better in the 80s and 90s were 1999 and 2000. Additionally, the current 12.7 percent rate is better than the 12.8 percent registered in 1989 at the peak of the 80s economic recovery. And, for even greater historical reference, 2004s 12.7 percent rate has only been bested in 13 of the last 56 years.
Beyond this, these articles neglected to compare the increases in poverty resulting from previous recessions to this most recent one. For instance, in 1979, poverty was at 11.7 percent. By 1983, it had risen to 15.2 percent, an increase of nearly a third. In 1989 the poverty rate was 12.8 percent. By 1993, it had risen to 15.1 percent, roughly one-fifth higher.
The first thing these numbers illustrate that was not addressed in either of these articles is that it normally takes four years after a recession begins for the poverty rate to peak. The increase in poverty since the 2001 recession is significantly less than in the previous two, and appears to be leveling off at a rate that is about 2.5 percent lower than those post-recession peaks. Having bottomed at 11.3 percent in 2000, the current poverty rate has increased to 12.7 percent in four years or only one-ninth higher.
Somehow both articles portrayed this as evidence of doom. They also referred to regional differences in poverty increases but left out essential information. For instance, according to Census Bureaus Table 9, almost 69 percent of the increase in poverty over the past four years comes from the Midwest and the South. By contrast, poverty increases in the Northeast and the West over the past four years are quite small.
Both articles failed to address the difference between the recent increases in citizen versus non-citizen poverty rates. For instance, according to Table 23, there has only been a 268,000-person increase in poverty among foreign-born naturalized citizens over the past four years. The poverty rate in this group has only gone from 9.0 percent in 2000 to 9.8 percent in 2004.
However, during the same period, the number of foreign-born non-citizens in poverty has increased by 837,000, moving this poverty rate from 19.2 percent in 2000 to 21.6 percent in 2004. That makes this demographic the largest impacted by poverty as a percentage, and means that more than 15 percent of the increase in poverty over the past four years is from non-citizens, a fact The New York Times and The Washington Post didnt share with their readers.
Finally, both articles suggested the lack of inflation-adjusted income gains in our current expansion is unprecedented, and they implied that this recovery phase is weaker than those in the past:
There has always been a lag between the end of a recession and the resumption of raises, [Phillip L. Swagel, a resident scholar at the American Enterprise Institute] added, but the length of this lag has been confounding.
However, as can be seen from the following chart, the past two economic recoveries have started with exactly the same income pattern as this one.
For example, the late 1970s and 1980s recoveries ended with 10- to 15-percent increases in real median household incomes. When their associated recessions started, those incomes declined and then leveled off for several years with no significant increases before eventually resuming a movement higher. That means there is ample precedent for the current delay in income gains.
The problems in these articles highlight an ongoing issue occurring in many mainstream economic reports: The stories consistently compare current data to only one moment in history while ignoring how the numbers relate to other time periods.
To benchmark numbers against only one time period is bad enough, but the period typically being employed as the yardstick today is one in which all economic data was inflated by an unsustainable stock market bubble and erroneous financial reporting from much of the corporate world.
Noel Sheppard is an economist, business owner and contributing writer for the Business & Media Institute. He is also member of the Media Research Centers NewsBusters squad. He welcomes your feedback at slep@danvillebc.com.
For instance, this is from David Leonhardts article in the August 31 New York Times:
The census's annual report card on the nation's economic well-being showed that a four-year-old expansion had still not done much to benefit many households.
Not to be outdone, Jonathan Weisman and Ceci Connolly of The Washington Post had this to say:
The Census Bureau's annual report on income, poverty and health insurance sheds light on voter discontent with the economy in the face of seemingly strong economic data. The broad data draw a picture of a labor market still struggling to find its footing, three years after the 2001 recession.
What both of these articles did was create a false comparison. They exclusively related current data to those achieved during the peak of the stock market bubble and the middle of the period when corporations were using questionable accounting practices to inflate their earnings. And, they skipped any reference to todays data that offered a better perspective of how these numbers compare to more realistic periods in our history times not impacted by absurd stock valuations and fraudulent corporate reporting.
For instance, as depicted in Table 2 of this Census Bureau report, the current poverty rate of 12.7 percent is equal to or better than six of the eight years under Clinton. Only 1999 and 2000, in the midst of the tech bubble and corporate governance abuses, were better.
More importantly, 2004s 12.7 percent is better than 20 out of the past 25 years. Again, the only years that were better in the 80s and 90s were 1999 and 2000. Additionally, the current 12.7 percent rate is better than the 12.8 percent registered in 1989 at the peak of the 80s economic recovery. And, for even greater historical reference, 2004s 12.7 percent rate has only been bested in 13 of the last 56 years.
Beyond this, these articles neglected to compare the increases in poverty resulting from previous recessions to this most recent one. For instance, in 1979, poverty was at 11.7 percent. By 1983, it had risen to 15.2 percent, an increase of nearly a third. In 1989 the poverty rate was 12.8 percent. By 1993, it had risen to 15.1 percent, roughly one-fifth higher.
The first thing these numbers illustrate that was not addressed in either of these articles is that it normally takes four years after a recession begins for the poverty rate to peak. The increase in poverty since the 2001 recession is significantly less than in the previous two, and appears to be leveling off at a rate that is about 2.5 percent lower than those post-recession peaks. Having bottomed at 11.3 percent in 2000, the current poverty rate has increased to 12.7 percent in four years or only one-ninth higher.
Somehow both articles portrayed this as evidence of doom. They also referred to regional differences in poverty increases but left out essential information. For instance, according to Census Bureaus Table 9, almost 69 percent of the increase in poverty over the past four years comes from the Midwest and the South. By contrast, poverty increases in the Northeast and the West over the past four years are quite small.
Both articles failed to address the difference between the recent increases in citizen versus non-citizen poverty rates. For instance, according to Table 23, there has only been a 268,000-person increase in poverty among foreign-born naturalized citizens over the past four years. The poverty rate in this group has only gone from 9.0 percent in 2000 to 9.8 percent in 2004.
However, during the same period, the number of foreign-born non-citizens in poverty has increased by 837,000, moving this poverty rate from 19.2 percent in 2000 to 21.6 percent in 2004. That makes this demographic the largest impacted by poverty as a percentage, and means that more than 15 percent of the increase in poverty over the past four years is from non-citizens, a fact The New York Times and The Washington Post didnt share with their readers.
Finally, both articles suggested the lack of inflation-adjusted income gains in our current expansion is unprecedented, and they implied that this recovery phase is weaker than those in the past:
There has always been a lag between the end of a recession and the resumption of raises, [Phillip L. Swagel, a resident scholar at the American Enterprise Institute] added, but the length of this lag has been confounding.
However, as can be seen from the following chart, the past two economic recoveries have started with exactly the same income pattern as this one.
For example, the late 1970s and 1980s recoveries ended with 10- to 15-percent increases in real median household incomes. When their associated recessions started, those incomes declined and then leveled off for several years with no significant increases before eventually resuming a movement higher. That means there is ample precedent for the current delay in income gains.
The problems in these articles highlight an ongoing issue occurring in many mainstream economic reports: The stories consistently compare current data to only one moment in history while ignoring how the numbers relate to other time periods.
To benchmark numbers against only one time period is bad enough, but the period typically being employed as the yardstick today is one in which all economic data was inflated by an unsustainable stock market bubble and erroneous financial reporting from much of the corporate world.
Noel Sheppard is an economist, business owner and contributing writer for the Business & Media Institute. He is also member of the Media Research Centers NewsBusters squad. He welcomes your feedback at slep@danvillebc.com.
