Statistics with a grain of perspective
The release last week of new statistics regarding the extent of poverty in the United States brings to mind the proper and improper use of statistics. It also underlines the difficulty one faces in making long-range economic changes in a political setting that judges success on a short-range basis.
The statistics of themselves should not be ignored. They indicate, at least through 1982, a growing level of hardship for many Americans. They show that the number of families living below an officially defined hardship level ($4,900 for a single person, $9,862 for a family of four) had risen from 1979, when it was 11.7 percent, to 15 percent in 1982. That 15 percent amounts to 34 million people. The statistics also indicate that if noncash benefits such as food stamps and medicaid were included, the poverty level had also risen; in fact it had risen even more dramatically, from 6.8 percent to 10 percent.
The period being measured included two recessions - the short 1980 experience and the longer one that was just ending at the close of 1982. It would seem a truism that those in need must increase in number during a recession. Moreover, the intention of the Reagan administration to cut back on many welfare programs, to restrict them more closely to those in greatest need, also had a minor effect on these statistics. The Census Bureau said general economic conditions accounted for most of the change, however.
Since this is an election year, we have most likely not heard the end of these statistics. They will be made use of by Mr. Reagan's opponents, just as Reagan can be expected to make use of statistics showing a major drop in inflation and a rising rate of employment.
Whether income-support programs have been cut back too much or not, it is clearly not the intention of nor in the interest of any administration to increase the level of discomfort of the American public. The question, however, is whether a political system that has elections every few years can in fact effect a long-range switch in policy. It can, if enough of the public understands and approves of the policy change and its expected results.
The aim of the Reagan program was not to increase unemployment or the numbers of people living in poverty, but to create the conditions for sustained, noninfla-tionary growth well into the future. After almost a decade of rising inflation and two years of 13 percent inflation, the only way expectations regarding price levels could be changed was to let the nation go through a period of economic adjustment. This is now past us, and if the economy continues to recover and unemployment to drop throughout 1984, the public will probably overlook statistics such as these disturbing ones regarding poverty.
The point is that statistics may be entirely accurate, but within the context of their use be misleading. This instance of poverty statistics is but one example. The President himself is prone to discuss the decline in inflation and the drop in interest rates. His policies deserve full credit for the drop in inflation. Most major recessions have a healthy effect on price levels.
When it comes to discussing interest rates, which he frequently says have been cut in half since he took office, he is not telling the entire story. Rates were at a brief, historic peak early in 1981, and were one reason the economy eventually went into another recession. But coming down from the 20 percent level to 11 or 12 percent does not reduce them to levels that anyone 10 years ago would have thought reasonable. Moreover, with the decline in inflation, the real, or inflation-adjusted, rates are at historically high levels even now. One reason for this is the administration's unwillingness to deal with the budget deficit for the serious problem it is and the belief of large investors that either inflation will again heat up or the nation will go through another credit crunch sometime next year.
Thus, to say that interest rates have been cut in half during the Reagan administration is perhaps just as misleading (although perfectly correct as far as it goes) as to claim that poverty levels have increased.
Some of the public understands the verbal shortcuts politicians use to make a point or take credit. But not everyone does. So it may be useful to point out the ''environment'' within which any set of numbers can be most fairly considered.