What the Child Poverty Rate Is Missing

The Census Bureau’s tallies still don’t include $1.9 trillion in government transfer payments

By Phil Gramm and John Early. Excerpts:

"The official census numbers are out, and in 2021 the poverty rate among children under 18 was 15.3%. It fell a mere 0.7 percentage point from 16% in 2020 and was still 0.9 point higher than the pre-pandemic low of 14.4% in 2019, even though government spent an extra $2.6 trillion on transfer payments in 2020-21."

"the income numbers used to calculate the official poverty rates don’t count refundable tax credits as income to the recipients. No matter how much money the government pours into any of these tax credits, it will never raise the official income measure given the way the census defines income."

"The Census Bureau fails to count two-thirds of all government transfer payments to households in the income numbers it uses to calculate not only poverty levels but also income inequality and income growth. In addition to not counting refundable tax credits, which are paid by checks from the U.S. Treasury, the official Census Bureau measure doesn’t count food stamps, Medicaid, the Children’s Health Insurance Program, rent subsidies, energy subsidies and health-insurance subsidies under the Affordable Care Act. In total, benefits provided in more than 100 other federal, state and local transfer payments aren’t counted by the Census Bureau as income to the recipients."

"If the Census Bureau had included the missing $1.9 trillion in transfer payments, child poverty would have been only 3.2% in 2017, compared with the official rate of 17.5%."

"This experimental measure [supplemental poverty measure] shows that poverty for children fell by 4.5 percentage points, from 9.7% in 2020 to 5.2% in 2021. This supplemental rate does count refundable tax credits and some other transfer payments not counted by the official measure, but it still fails to count about half of all transfer payments and significantly overstates the amount of child poverty in America."

"the official measure of poverty, which will be the focal point of debate in future years, won’t record any reduction in the child poverty level from the refundable child tax credit."

"Last year, the official census numbers for 2020 failed the laugh test. They showed that household income was down by 2.9% and the poverty rate was up by 1 percentage point in a year when federal transfer payments expanded by 36%. For the first time ever, the Census Bureau included the supplemental estimate in the same release as the official number, showing that income had actually risen by 4% and the poverty rate had fallen from 11.8% to 9.1%. Had it counted all the transfer payments, the poverty rate would have been about 2%."

"In the past 50 years the real value of taxpayer funding for transfer payments to the poorest 20% of American households has risen from an average of $9,677 to $45,389."

"The financial burden of federal transfers rose to more than $4.5 trillion annually in 2021."

"reduced the percentage of work-age adults in the bottom quintile who actually work from 68% in 1967 to 36% in 2017."