The trouble is that the official poverty rate is a lousy indicator of people’s material well-being. It misses all that the poor get — their total consumption. It counts cash transfers from government but not non-cash transfers (food stamps, school lunches) and tax refunds under the EITC. Some income is underreported; also, the official poverty line overstates price increases and, therefore, understates purchasing power. Eliminating these defects, economists Bruce Meyer of the University of Chicago and James Sullivan of the University of Notre Dame built a consumption-based index that estimates the 2010 poverty rate at about 5 percent.
People at the bottom aren’t well-off, but they’re better off than they once were. Among the official poor, half have computers, 43 percent have central air conditioning and 36 percent have dishwashers, report Meyer and Sullivan. These advances are especially impressive because the massive immigration of unskilled Hispanic workers inflated the ranks of the poor. From 1990 to 2007, the entire increase in official poverty was among Hispanics.
But this wasn’t the war LBJ envisioned; unfortunately, we lost that war, which aimed to catapult the poor into the economic mainstream. The root problem, Johnson said, was that many poor didn’t have “a fair chance to develop their own capacities.” Government would remove the obstacles holding them back through “better schools . . . health . . . training.” Thus liberated, most poor people would become more productive, independent and middle class. A phrase at the time was “a hand up, not a handout.”