Poverty up, income down, except for top 5 percent

It’s no surprise that poverty is up and income down during this recession. The really bad news is that poverty rates are higher than in the 1970s, the top 5 percent of households gained at the expense of everyone else, and government policy is making things worse.

According to new Census Bureau data for 2001, 33 million Americans are poor in this richest nation on earth. That’s more than the combined population of the District of Columbia plus 21 states: Alaska, Arkansas, Delaware, Hawaii, Idaho, Iowa, Kansas, Maine, Mississippi, Montana, Nebraska, Nevada, New Hampshire, New Mexico, North Dakota, Rhode Island, South Dakota, Utah, Vermont, West Virginia and Wyoming.

In 2001, 11.7 percent of Americans were considered poor – despite the record-breaking ten-year economic expansion that ended in March 2001 – compared with a low of 11.1 percent in 1973. Child poverty rates were 16.3 percent (one out of six children) in 2001, 14.4 percent in 1973, and a low of 14 percent in 1969. It’s inexcusable that more Americans are poor in a country that is much richer than it was three decades ago.

The situation is even worse than it looks because the poverty measure has gotten more out of touch with reality since the 1960s when it was established. You were not counted as poor in 2001 unless you had pre-tax incomes below these thresholds: $9,214 for a person under 65 years old, $8,494 for a person 65 and older, $10,705 for a couple 65 and older, $11,859 for a couple under 65, $12,207 for an adult and child, $14,255 for a couple with one child, and $17,960 for a couple with two children.

Do you think a family of four with an income of $17,960 can meet basic needs such as housing, health care and food? How about childcare? What about a senior living on $8,494? How much does that cover beyond rent?

Being counted as poor means you are regularly choosing between eating and heating, health care and childcare. On average, households need more than double the official poverty threshold to meet basic needs.

Instead of going up, incomes are going down. Median pre-tax household income fell by more than $900 from $43,162 in 2000 to $42,228 in 2001 (half are below the median, half are above it).

Income dropped everywhere but the top. The average income of the top 5 percent rose from $259,445 in 2000 to $260,464 in 2001. Income at the top is actually understated because the Census Bureau excludes capital gains, for example, which go disproportionately to the wealthy.

Inequality has grown substantially. In 1967, the lowest fifth of households had 4 percent of aggregate income, the middle fifth had 17.3 percent and the top fifth had 43.8 percent. In 2001, the lowest fifth had 3.5 percent, the middle fifth had 14.6 percent and the top fifth had 50.1 percent. The top 5 percent of households had 17.5 percent of the income in 1967 and 22.4 percent in 2001.

Do you want to give tax cuts to the top 5 percent? Our government does. The top 5 percent is scheduled for $587 billion in tax cuts during 2001-2010, according to Citizens for Tax Justice, with most of it ($477 billion) going to the top 1 percent, whose incomes average more than $1 million.

If the tax cuts go forward, the top 1 percent will see an average tax cut of $342,472 (36 percent of the total tax cuts) during 2001-2010. The bottom 20 percent will save just $744 (1.5 percent of the total) – and lose much more to cutbacks in health care and other essential services.

Do you want to give a tax cut to Oracle CEO Larry Ellison, who hauled in $706 million last year – the combined annual income of 16,719 typical households?

How about a tax cut for Tyco’s indicted ex-CEO Dennis Kozlowski, who spent more than the typical full-time working man’s annual income of $38,275 on a traveling toilette box, dog umbrella stand, coat hangers, a notebook and a gilt metal wastebasket? The typical full-time working woman’s income of $29,215 doesn’t even cover the first two items.

Millions of Americans have lost their jobs to recession, Sept. 11 and CEO greed. The nation’s poorest are already paying for unaffordable tax cuts through cutbacks in childcare, Medicaid and more. Seniors were promised prescription drug coverage. Why should their promises be broken to keep tax cuts “promised” to the rich? They should not.



Holly Sklar is coauthor of “Raise the Floor: Wages and Policies That Work for All Of Us.” She can be reached at hsklar@aol.com