Casualty Count. The War Against the Poor

By Robert Greenstein

Vol. 8, No. 1, 1986, pp. 7-10

If you look at the statistics of American poverty today, one set–the figures for children’s poverty–hits you over the head. Fifteen years ago the child poverty rate was between thirteen and fourteen percent. Last year it was over twenty-one percent. The poverty rate for children is a full one-third higher than in the late 1970s when the unemployment rate was at the same level as it is today.

And, while there has been a very slight recent reduction in the overall poverty rate during the past year, and in the overall child poverty rate, all the reduction in child poverty has occurred among white children. None of it has occurred among black or Hispanic children.

The poverty rate for black children under the age of six now has reached just over fifty-one percent. One out of every two black children under the age of six in the United States lives in poverty.

Nor do we expect any substantial further reduction in poverty soon. Real wages (wages adjusted for inflation), which are an important predictor of the poverty rate, remain unchanged from a year ago. Inflation isn’t going up very fast, but wages are going up even less than inflation. The

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real purchasing power of wages did not improve in 1985.

Why is this happening?

Before the scant decline in the poverty rate was announced, Secretary of Commerce, Malcolm Baldrige, hailed the improved unemployment figures and predicted that the poverty rate for 1984 would go down to thirteen percent.

It didn’t happen.

Meanwhile, several economists at the Institute for Research on Poverty in Madison, Wisconsin, were forecasting the 1984 poverty statistics almost exactly on the mark. What were the differences between how the Reagan Administration and the Wisconsin researchers analysed the circumstances of poverty?

The Administration assumed the major issue was the economy: unemployment goes up, poverty goes up, unemployment comes down, poverty comes down.

The economists at the Institute for Research on Poverty recognized that changes in the economy are important, but found that the domestic budget cuts since 1981 also have played a role and have had a long-lasting effect in increasing the number of families with children who are poor.

They also found the benefits of the current economic “recovery” are less evenly distributed than those of any previous economic recovery of recent decades. The gap between rich and poor is growing. In fact, the gap between upper and lower income families in the United States is wider today than at any time since the US Census began collecting data on income distribution in 1947.

The poorest forty percent of all US families now have a smaller share of the national income than at any time since 1947.

The richest forty percent of all US families now have a larger share of the national income in any time since 1947.

What’s more, if you examine median family income since 1980 you’ll find that the a family in the poorest forty percent of the population had nearly $500 less in annual income by 1984 than in 1980 (after adjusting for inflation). By constrast, the median family of the top forty percent was $1,800 richer in 1984 than in 1980. And the median family income in the top ten percent of the population had increased by $5,000 in those years. That’s before-tax income–even before the effects of the Reagan help-the-rich tax cuts.

These figures have implications for rich and poor, and for black and white. Nearly two-thirds of black families fall into the bottom forty percent of the overall population. Only one of every five black families falls into the top forty per cent. Or to put that another way, while white median family income is a tad higher now than in 1980, black median family income is over $500 lower after adjusting for inflation.

What the figures also show is that not only has the number of poor grown (in 1978 there were about 25 million people below the poverty line, today there are nearly 34 million), but that those who are poor have gotten poorer. The typical poor family is farther below the poverty line.

The Working Poor

Another factor of recent years affecting the rise in poverty is a very serious decline in wages. Larger and larger numbers of people who work remain poor. The number of people who work full-time year-round and are still poor has increased by two-thirds just since 1978, and now exceeds two million persons.

The increasing numbers of working poor are related to the growing weakness of labor unions, foreign competition and the shift from manufacturing to service jobs. Just as important is the unprecedented stagnation of the minimum wage. The minimum has not been adjusted now in nearly five years. The minimum wage has fallen twenty-five percent in relation to inflation since January 1981.

What does a declining minimum wage mean if you work forty hours a week, fifty-two weeks a year for $3.35 an hour? In 1978 if you were a member of a family of four in which one wage-earner worked full-time and year-round at the minimum wage, your family would have been $1,150 below the poverty line. The same situation in a family of three would have put that family above the poverty line.

Today, a family of four with a single wage-earner working forty hours a week, fifty-two weeks a year, finds itself $4,000 below the poverty line. Today, a family of three–for instance, a minimum wage earning mother of two children–working full-time, year-round, is $1,600 below the poverty line. A family of two (a full-time working mother and one child) is about forty or fifty dollars below the poverty line. These families are falling further below the poverty line each year because the minimum wage is not being adjusted for inflation.

And, it’s not just the minimum wage. Many workers are paid fifty cents or a dollar above the minimum. Families are working, they are trying, but they are remaining in poverty.

The Unkindest Cuts

Now, these are some of the basic situations that confront us. And what has the federal response been? To cut the very programs which give the most help to the working poor while, at the same time, using the money cut from domestic programs to finance the continuing military build-up.

While the programs affected are many in number and their effect is often life-saving–Medicaid, Aid to Families with Dependent Children (AFDC), food stamps, SSI, low-income housing, low-income energy assistance, legal servi-

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ces and so forth (about thirty programs in all)–their budgets are actually quite small. If you add together all of the programs targeted for low income persons, you’re talking about one-tenth of the federal budget. Yet that one-tenth of the federal budget bore thirty percent of the budget cuts enacted from 1981 through 1983, when the bulk of the domestic reductions were made. In other words, the low income programs shouldered three times their share. No other part of the federal budget has been cut as deeply. And, many of these programs stand to be cut deeply again in fiscal year 1987, if the Administration has its way.

Let’s take a couple of areas and highlight what has happened.

In the AFDC program, the Reagan Administration says the cuts have been “successful.” Yet, this past July, the General Accounting Office came out with a major report on the impact of the cuts in AFDC. The GAO found 440,000 families-nearly all of them working, female-headed families-had been cut from AFDC. Many of those families were poor even before being cut. Many more were made poor.

In many states the families cut from AFDC also lost Medicaid coverage. An estimated 700,000 children lost Medicaid coverage.

When the GAO looked further, it found that the average family that was cut from AFDC had lost between $1,500 and $2,500 dollars a year in benefits. The GAO determined that between twenty and fifty percent of the families that were cut now have no health care coverage for themselves or their children.

About half the families reported having run out of food at least once and having no money to buy more. Over one-quarter of these families had some utility shut-off at least once after being dropped from AFDC.

This GAO study did not even examine the effects of all the cuts in the AFDC program, such as the denial of AFDC

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benefits during the first five months of pregnancy to a woman pregnant with her first child. This, despite knowledge that prenatal care during early periods of pregnancy is quite important to healthy growth.

And then, there are other program areas. The cuts that have been made in low-income housing are truly staggering. Not only did we raise the rents for everybody in public and subsidized housing twenty-five percent or more, but in many cases we cut their food stamps and their AFDC benefits as well. We cut back on federal support for construction and rehabilation of low-income housing units. We are now losing about a half a million low-income units a year nationwide, due to rent increases, condominium conversion, abandonment, decay and so forth.

As recently as the mid-1970s, federal money was paying for the construction or rehabilitation of over 300,000 units a year. That’s been cut by two-thirds. The 1987 budget as proposed by the Reagan Administration provides no funds for any further construction or rehabilitation of low-income housing.

Nor has most of the impact of past housing cuts yet been felt. The shortage of low-income housing today is nothing like it will be ten years from now, when the forward-funded housing of the Ford and Carter administrations trickles out. The low-income housing situation is expected to will be substantially worse ten years from now.

Despite statements of Reagan Administration officials that their proposed 1987 budget will protect low income Americans, the proposals included in the President’s latest budget request will, if enacted, represent the deepest cuts in programs for the poor since the large reductions enacted 1981. An analysis of the 1987 Reagan budget reveals that spending for programs for the poor would be cut $8.2 billion next year from current levels. Virtually every low income entitlement program would be cut. Two million elderly persons living below the poverty line would be required to pay more out of their own incomes for Medicare.

The President’s 1987 budget calls for “recisions” (cancellations) of $7 billion already appropriated by Congress in fiscal year 1986 for some fifteen low income programs and for the elimination–next year–of fourteen low income programs. Among those set for extinction and of particular importance to poor people in the South are legal services, community services block grants, rural rental housing loans, rural home ownership loans, rural water and sewer grants.

And, while the 1987 budget proposal would exact a substantial toll on poor families and low income elderly persons, appropriations for the military would increase by $34 billion–a rise of eight percent after inflation. As in past years of the Reagan Administration, cuts in domestic programs in the 1987 budget would not only bear nearly all of the brunt of reducing the deficit, they would also finance the ongoing military build-up.

Robert Greenstein is director of the Center on Budget and Policy Priorities. For more information about the Center and its work, write to 236 Massachusetts Ave., NE, .Suite 305, Washington, DC 20002. 202-544-O591. Mr Greenstein’s remarks printed here are revised from his talk at the 1985 annual meeting of the Southern Regional Council.