Proposed Changes to the Official Poverty Measure

29 May 2019
Proposed Changes to the Official Poverty Measure

The Office of Management and Budget (OMB) is accepting comments on the proposal to change the way the federal poverty measure is adjusted for inflation. The official poverty measure was first created in the 1960s by Mollie Orshansky who proposed poverty thresholds relate to the cost of food: any family earning less than three times the USDA estimate for the subsistence food budget is considered poor. In 2018, a family of four (two adults and two children) is considered poor if their income is less than $25,465. The official poverty line is considered too low for most people's understanding of poverty and has faced a fair share of criticism. The current proposal would result in an even lower poverty line. 

The poverty thresholds are adjusted for inflation each year using the Consumer Price Index for Urban Consumers (CPI-U). The Office of Management and Budget is now reevaluating and considering use of a different inflation measure. Economists estimate the alternative version, the Chained CPI-U, will yield a lower estimate of inflation than traditional CPI-U, which means the poverty thresholds would rise at a slower rate. 

The poverty thresholds the Census publishes are the groundwork for the poverty guidelines issued by the Department of Health and Human Services (HHS).  Each year HHS puts out poverty guidelines, which serve as the basis of program eligibility in many assistance programs that help people meet their basic needs. 

Under the new proposal, fewer people would be defined as poor than under the current practice. This would suggest a reduction in poverty that did not actually occur.  Fewer low-income individuals will qualify over time for various forms of assistance. This could potentially take millions of low-income people off the poverty rolls and eventually make fewer people eligible for benefits such as SNAP, Medicaid, CHIP, and Affordable Care Act subsidies, as well as programs like CSBG, Head Start, LIHEAP, Weatherization, and many others.  

These cuts would increase with each passing year. Congressional Budget Office (CBO) estimates that by the tenth year, the cuts across federal health coverage programs would total in billions of dollars. After ten years:

  • More than 250,000 seniors and people with disabilities would either lose their eligibility or receive less help from Medicare’s Part D Low-Income Subsidy Program 
  • More than 300,000 children would lose coverage through Medicaid and CHIP
  • More than 250,000 adults who gained Medicaid coverage from ACA expansion would lose it (source)

Those who work with Community Action and their partners know from daily experience that official poverty estimates greatly understate the true extent of poverty and hardship in America. Using a lower measure of inflation to make annual adjustments will only exacerbate the existing inadequacy of official poverty measures. 

The proposal is now in the public comment period, and members of the public have until June 21st to submit a comment. Comments can be submitted here. If you are a Community Action Agency, please read the comment submitted by the National Community Action Foundation (NCAF).