Poverty slipped in US last year as economy generated more jobs
The number of poor in the United States has started falling again. That's mainly because of lower unemployment with economic recovery. Although official figures will not be available for a few months, two Princeton economics professors, Rebecca M. Blank and Alan S. Blinder, estimate that poverty took a large tumble last year to 13.5 percent of the population, down from 15.2 percent in 1983.
If a recession eventually comes, poverty could rise again. But if the recovery continues this year, as most economists expect, poverty should decline further. Moreover, the administration's proposed tax reforms should help the poor, either by removing them from any income tax burden or reducing their taxes. Treasury Secretary James A. Baker III says 2 million low-income taxpayers will be knocked off the tax rolls if the tax plan is enacted.
``We are offering a ladder of opportunity for every family that feels trapped, a ladder of opportunity to grab hold of and to climb out of poverty forever,'' President Reagan said last week in his speech on tax reform.
Yet during most of President Reagan's first administration, poverty rose rapidly.
``The poor have taken it on the chin,'' says Mr. Blinder.
What hurt the poor most was deep recession, with its accompanying high unemployment. But the poor were also harmed financially by cuts in welfare and the rise in social security taxes.
Because of statistical delays, most studies are still indicating rising poverty -- and it likely does remain above the 11.7 percent rate that prevailed in 1979, during the Carter administration.
It may also be that poverty among children has continued to grow, even during some years of economic recovery. A recent study by the Congressional Budget Office and the Congressional Research Service showed that child poverty has grown ``deeper and more widespread'' in the past decade. About 13.8 million children, representing 22.2 percent of Americans under age 18, were from poor families in 1983, the study shows.
It remains to be seen whether continued recovery in 1984 and some signs of greater family stability have helped decrease the child poverty rate. But poverty has declined among the elderly, helped by social security payments.
The Reagan administration, aware of the image of Republicans as the party of the rich, knows all this. In an effort to provide some equity for the poor and perhaps alter that image, the administration's tax reform proposal boosts the personal tax exemption. Moreover, the plan calls for an increase in the earned income-tax credit, which applies to the working poor. Both changes are relatively advantageous to the poor.
Overall in its tax plan, the Reagan administration has accepted the argument that by stimulating economic activity, benefits will eventually trickle down to those less well off through the creation of new and better jobs.
Until the trickle-down happens, however, the poor must struggle with the impact of two recent back-to-back recessions.
Professors Blank and Blinder have examined the effect of government programs, taxation, and economic policy on poverty in recent years. Their findings, in a new working paper for the National Bureau of Economic Research, are revealing.
The Reagan administration's fight against inflation, they say, has hit the poor more than those better off. Blank and Blinder disagree with the argument of some economists that inflation is ``the cruelest tax,'' victimizing the poor more than other groups. The poor, they say, actually suffer a disproportionate share of the burden, not from inflation, but when unemployment is used to wring inflation out of the system.
``The poor . . . have good reason to fear the recessions that lie ahead,'' they write.
As evidence, they point to the history of the individual poverty rate. It falls in good times and rises in bad.
During the long expansion of the 1960s, those below the poverty line dropped from about 22 percent of the population in 1961 to about 12 percent in 1969.
Poverty increased during 1969-70 recession, but during the '71-73 expansion it fell to a historic low of 11.1 percent.
The deep recession of 1973-75 pushed poverty up to 12.3 percent. Recovery brought another drop. But back-to-back recessions in 1980 and 1981-82 raised poverty from 11.7 percent in 1979 to 15 percent in 1982 and 15.2 percent in '83.
``When times are bad, less productive workers with lower skills are likely to be laid off first and to bear the brunt of unemployment,'' the authors note. ``Unemployment, not inflation, has the strongest bearing on the well-being of the poor.''