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Census: Income rose, middle class grew in 2007

But child poverty also rose, according to the new report.

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However, the Census Bureau's numbers indicate that the gap between the middle class and the wealthy has shrunk. In 2007, the top 5 percent of wage-earners garnered 21.2 percent of all income compared to 22.3 percent in 2006. At the same time the middle class saw its share increase from 14.5 percent to 14.8 percent in 2007. "That's a relatively big change in these numbers," says Zandi.

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The Democrats are sure to compare this survey's numbers to 2000, asking "Are you better off now than you were eight years ago?"

In 2000, the economy was at the end of a long and positive roll. There was a rapid drop in the number of Americans living below the poverty line. "Literally, employers were hiring workers they might not hire in normal economic times," says Sheldon Danziger, professor of public policy at the University of Michigan in Ann Arbor. "We haven't seen those days for the last eight years."

The survey will also have some real effect on some state budgets since federal programs use it to determine the distribution of some $300 billion in grants to state and local governments. "If poverty is up or down in a state it plays a role in the money they get," says Mr. Haskins, a former staff member of the House Ways and Means Committee.

In that case, it might be helpful to the state of Michigan, the only state in the nation to have a decline in real income last year and the only state to have an increase in the poverty rate.

Changes in the poverty level can also have an impact on the federal budget, says Haskins. "If poverty is up, it can be another argument for increasing spending."

He says there are many means-tested programs that could be affected, ranging from Medicaid to the earned-income tax credit.

The data may also play a role in the healthcare debate. The latest numbers indicate that the number of uninsured Americans fell from 47 million to 45.7 million from 2006 to 2007. According to David Johnson, an economist with the Census Bureau, this represented an increase in the number of people on public health insurance, such as Medicaid and Medicare.

In July, Rep. Jim McDermott (D) of Washington held hearings on establishing a modern poverty level, last defined in the 1960s shortly after President Johnson declared his War on Poverty. The thrust of the measure would be the creation of a more accurate measure of food, clothing, and utility costs, which would then be used to determine Americans' income, including their "near cash" benefits such as food stamps. His proposed legislation would also account for geographical differences in the cost of living.

Research librarian Leigh Montgomery contributed to this report

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