Poverty

by hilzoy

The Center for Budget and Policy Priorities has a new report on the likely effects of the recession on poverty. As you might expect, they aren't pretty:

"Goldman Sachs projects that the unemployment rate will rise to 9 percent by the fourth quarter of 2009 (the firm has increased its forecast for the unemployment rate a couple of times in the last month). If this holds true and the increase in poverty relative to the increase in unemployment is within the range of the last three recessions, the number of poor Americans will rise by 7.5-10.3 million, the number of poor children will rise by 2.6-3.3 million, and the number of children in deep poverty will climb by 1.5-2.0 million.

Already there are signs that the recession is hitting low-income Americans hard. Between September 2006 and October 2008, the unemployment rate for workers age 25 and over who lack a high school diploma — a heavily low-income group — increased from 6.3 percent to 10.3 percent. Yet low-income workers who lose their jobs are less likely to qualify for unemployment benefits than higher-income workers, due to eligibility rules in place in many states that deny benefits to individuals who worked part time or did not earn enough over a "base period" that often excludes workers' most recent employment.

As another sign that poverty is now climbing rapidly, food stamp caseloads have increased dramatically in recent months, rising by 2.6 million people or 9.6 percent between August 2007 and August 2008, the latest month for which data are available. In 25 states, at least one in every five children is receiving food stamps. Because monthly food stamp caseload data are available long before the official Census poverty data for the prior calendar year, rising food stamp caseloads are the best early warning sign of growing poverty.

Furthermore, the nation’s basic cash assistance safety net for very poor people who are jobless is much weaker and less well equipped to meet the challenges that a serious economic downturn poses than it was in previous major recessions."

To put this in perspective, the current unemployment rate (seasonally adjusted) is 6.5%; it was under 5% at the beginning of this year. It reached 9% one month in 1975, and was over 9% for about a year and a half in 1982-3; otherwise, it has not come near that level since the BLS' unemployment statistics start, in 1948. In 2007, the poverty level for an individual was $10,590; for a parent and two kids, it was $16,705. People are described as being in "deep poverty" when they make less than half of that amount. The idea that there will be 1.5-2 million kids in families making half the poverty level is horrifying.

The CBPP suggests a number of ways to help: extending unemployment benefits, rental assistance and food stamps, help to state and local governments, changes in the TANF contingency fund. These are all very good steps that have the additional virtue of being very effective economic stimuli.

I'd like to suggest one further measure aimed at the kids: universal school breakfasts. (Why universal? It saves paperwork, removes stigma, and makes the program much easier to administer.) Besides protecting kids from hunger, school breakfasts also make them more likely to learn and less likely to have behavioral problems. They seem to increase school attendance. We spend lots of time and energy trying to figure out ways to improve our schools; if what we're interested in is kids actually learning, making sure that they have eaten recently is a pretty good way to start.

Even if we take all these steps, though, it's going to be a very tough time.

Comments

[Davis X. Machina]

if what we're interested in is kids actually learning,...

What we as a nation are really interested in is punishing kids for choosing the wrong parents, and using them as sticks to beat those wrong parents with.

This country always loved itself a good proxy war.

[russell]

Some data points, AKA anecdota. I don't know why folks are down on anecdota. IMO "anecdota" equals "B.S. detector".

My wife and I volunteer with some folks at our church to make dinner at a homeless shelter the next town over. We've done this for most of 2008. Every month, the number of dinners we've served has gone up.

When we first did this, the folks who showed up were mostly the kinds of folks you'd expect. Alcoholics and other drug-dependent folks, crazy people, young knucklehead guys who don't quite have their sh*t together yet.

More and more, we see couples and families. Last Saturday, there was a young woman with her two daughters. I'd guess the girls were four and two. Lovely, polite, well-scrubbed and presentable folks. They just didn't have anything to eat.

When we walked out to our car afterwards, we walked past a car full of folks who were spending the night there. By "there", I mean "in the car". It was in the low 20's overnight that night.

The same shelter also hosts a food bank. For the last few months, the lines for food have gotten longer and longer. By which I mean, down the hall, out the door, and around the corner. They regularly run out of food now about halfway through the line.

If it's a cold enough winter here this year, folks will die. They will die because they're poor.

There's food to be had, there are places to live, you can get heating oil by making a phone call. They just don't have the dough.

So they'll die.

Thanks -

[Fraud Guy]

And remember, that 6.5% current/9% future rate is based on the U3 unemployment rate (people currently looking for work who may be eligible for benefits) and excludes discouraged workers (who gave up looking, and our out of benefits) and people unable to work full time, despite working. U6 is already 11.8%, and that includes the above stats.

U6 should be scaring us.

[SadButTrue]

The flip side of this is that a recession or depression is actually pretty good news for the very wealthy. With very few people holding any cash and prices depressed the buying power of wealth is magnified. They can consolidate their positions by buying up real estate and medium sized businesses that will be worth far more on the other side of the depression. So if you're in the top 1/10th of 1%, YIPPEE!!

[Mr Parsifal]

All this could have been avoided if someone had stopped the exportation of American jobs to China, India and Latin America. But our Do-Gooders are only interested in preventing poverty in other countries. Roughing it in Honduras is more fun than roughing it in Detroit. More impressive on a resume too.

[AIMAI]

NPR reported, yesterday, on some Iowa farmer who threw open his field to gleaners expected a couple of thousand. He estimated there were something like 50,000 by the end of the day and they were turning people away the next day. People came out and gleaned--and there must have been tons of stuff--but he was so freaked out by the responsiblity and the sheer immensity of the task and making sure no one was hurt parking along the roads and walking through the fields that he didn't sound like he'd ever do it again. To repeat--the farmer had so much stuff ungleaned, potatoes and things like that, that there was enough for that crowd to take home. And that crowd consisted of people with cars who drove out to some place fairly distant from their homes simply in order to access free food. The hard times are here, but we are not going to hear all about it until the press covers the everyday hunger and desperation of people instead of the "funny" stories like the farmer who was surprised by the number of gleaners.

aimai

[AIMAI]

"...Roughing it in Honduras is more fun than roughing it in Detroit. More impressive on a resume too."

What the? Its the Peace Corps and the backpackers fault that Nafta passed?

aimai

[North]

Philadelphia actually had a universal school breakfast program, and was planning to expand it to more schools; it's the only one in the US. In response to the program's success and the interest from other cities, the USDA scrapped the Universal Feeding program entirely. It was a great program: saved the district money, nearly doubled the rate of use (from 45% to 80%), meant there wasn't much stigma to eating the freebie. Your Bush Administration at work.

The quality of the food provided is a different issue - one I'd like to see addressed eventually, but we do seem to have other things to worry about right now.

[liberal japonicus]

But our Do-Gooders are only interested in preventing poverty in other countries.

Gosh darn it, I knew there was an altruistic reason that Wal-Mart was buying from overseas! Thanks, Mr Parsifal for restoring my faith in big business!

[John Thullen]

Widespread poverty and privation is the best news this country and its very high income earners have seen since 9/11.

The situation may prevent President Obama from rolling back Bush's tax cuts. Raise their taxes and porridge trickle stops. Then where are you you going to find porridge for those breakfasts?

School breakfasts are crumbs off the table of the banquet fed to the few.

[AIMAI]

It bugs me no end that we can't get money for real things, of real benefit, because we are shoring up imaginary money for the wealthy. Can anyone explain to me why we should spend 750 billion with Paulson when we could spend that 750 billion building new schools with kitchens, hiring competent cooks, and feeding all the kids k-8 a wholesome, healthy, whole grain breakfast? The money we spend on the salaries for cooks and nutritionists and school nurses would be real money, that those people would pump back into the economy. As far as I can see the money we've thrown down the rathole has re-emerged in some other universe, in some other swiss bank account. I just don't get it. Couldn't we already have switched to national health care for what we are using to bail out the banks?

aimai

[Chris Curley]

I live in Rhode Island. We're at 9.3% unemployment with projections to hit 10% before the new year. I am fortunate enough to have a job, but I have a housemate (very intelligent, with a college degree) who has been looking for months as his savings dwindles and $80,000 in college loans looms. Forget about layoffs: in the Ocean State right now, no one is hiring.

[mikkel]

SadButTrue: I'm not sure, most of them are leveraged to the hilt. I have a friend that went to school with kids of the very wealthy (I'm talking hundreds of millions of dollars wealthy) and he said that most of their parents have had so much go bad that they are worried about losing it all. It happened in the Great Depression too, and was a great equalizer.

Hilzoy:
Thank you for keeping focus where it should be. I have a feeling we're going to need millions of people to rally for it. This is the most amazing post I've ever read. It is sickening that we can't even spare $50 billion to help the most vulnerable in our society.

[hairshirthedonist]

If it's a cold enough winter here this year, folks will die. They will die because they're poor.

There's food to be had, there are places to live, you can get heating oil by making a phone call. They just don't have the dough.

So they'll die.

But at least they'll be safe from all those would-be terrorists that our highly cost-effective foreign policies have thwarted.

[bangs head on desk]

[wonkie]

There is a more or less permenent tent camp in the National Forest outside the small town nearest to my island. The tent community, mostly native people with drug and alchohol problems, has been there for years.

The new development is the semi-permenent tent residents in the regular campgrounds, comprised of people who have jobs but don't make enough money to pay rent, or recently lost their housing. So far their presence is tolerated by the state park and National Forest folks.

[bitchphd]

the unemployment rate for workers age 25 and over who lack a high school diploma — a heavily low-income group — increased from 6.3 percent to 10.3 percent.

And, because of budgeting problems, a lot of colleges and universities are *cutting* enrollments.

[ThatLeftTurnInABQ]

russell that was a dreadfully depressing comment, and I'm not blaming you as the messenger. Please keep the doses of cold water coming.

Like others above who already commented, I'm simultaneously incredulous and ticked off that with the obscene amounts of money sloshing around in the financial bailout packages we hear about in the news, we can't somehow find a way to skim off enough to help actual cold hungry human beings. That is outrageous and disgusting.

It also is an unspeakable shame that we are somehow managing to simultaneously have a crisis in homelessness and a crisis in empty vacant homes because of foreclosures and evictions. I thought that the reason why we accept some of the negative externalities of our semi-free market was that it does the best possible job of allocating resources, yet this specter of people sleeping in cars or out of doors while perfectly good homes stand empty strike me as an appalling misallocation of resources as well as a human tragedy.

Why can't counties and cities start claiming the empty homes in their area under power of eminent domain and use them for temporary housing for these families, if the vaunted market isn't going to solve this problem?

[ThatLeftTurnInABQ]

One other thing: when we hear about these rising unemployment numbers, don't forget how much higher those numbers would be if we were to also count those who are currently incarcerated, many of them as a result of the War on Some Drugs.

[mikkel]

ThatLeftTurnInABQ: also don't forget to include the broader measures of unemployment such as involuntary part time workers and those that have stopped looking because they couldn't find any jobs. That is up to 11.8% already. An official unemployment rate of 10% will easily push that number closer to 17-18%. Like all economic statistics, things are far worse than the official numbers and aren't directly comparable to prior recession, because they've been changed in the last 15 years.

[The Crafty Trilobite]

Why can't counties and cities start claiming the empty homes in their area under power of eminent domain and use them for temporary housing for these families, if the vaunted market isn't going to solve this problem?

Hear, hear.

The only problem I have with that is rather mean and petty: as a homeowner, I am nervous about the ripple effect on market price of giving away housing. But most likely, converting overpriced single-unit housing into multiple-unit housing would actually increase my value by removing competition for the remaining single-unit stock, while not removing any realistic part of the market for housing. So, go for it.

Actually, I've been saying since October that we should just buy up the excess housing stock and blow it up. Your plan is probably more humane, but mine is more fun.

Either way, several purposes are served
(by 'excess' I mean all those condos and other units built in the last 3 years or so that have been literally standing empty because there was no market for them):

1) Staunch the bleeding of developers and owners, and their lenders, who are currently paying to maintain the empty units b/c they can't find a buyer. Not that they'll be happy, but somebody's got to take a hit, and this is probably the best deal they'll get. And if anybody deserves to take a bath in this market, it's the people who recklessly overbuilt in an inflated market. Most can get relief in bankruptcy.

2) Give the construction companies something to do (conversion or demolition) until Obama's infrastructure projects start.

3) Reduce the oversupply of housing glutting the market, which would hopefully bring supply back into balance with demand and level off housing prices. Prices won't recover right away, but they might just stop falling.

4) Because of (3), more people would have enough value in their homes to qualify for a refi when their ARMs and balloon payments come due in the next 4 years or so, so the consumer panic would ease.

5) Therefore, consumers start buying again, fueling the retail market, creating jobs.

6) Meanwhile, a lower average risk of default on mortgages increases the value of mortgage-backed securities. The purchase of useless property in eminent domain also helps with that -- many mortgages default, but there's much less uncertainty, so banks can better value their own assets and prospective borrowers'.

I know, there are a dozen reasons it wouldn't work out. But I think it may have a better chance than anything the Treasury has tried yet.

[The Crafty Trilobite]

Oops! Italix begone!

[bedtimeforbonzo]

//"So they'll die."//

Makes the bailouts of Citi and AIG and whoever else seem preposterous.

Dare we let one of these die -- or risk another cascading outrage like Lehman.

Dare we socialize a program for the poor that will keep them alive when we are too busy socializing corporate welfare.

[bedtimeforbonzo]

With Detroit being the poster city for unemployment, I wonder what the soup-kitchen lines look like there.

I wonder why -- understanding that the Big Three CEOs flying in their corporate jets made for good, outrageous pictures -- there has been no Film at 11 on the plight of the poor in the world's auto capital.

To those who cavalierly suggest to deny aid to GM and its brethen, I ask: What would a major American city look like with a quarter of its population unemployed?

[Davis X. Machina]

What would a major American city look like with a quarter of its population unemployed?

Cleveland. Or Hartford. Or Baltimore.

[David Moisan]

Don't forget underemployment.

[Gary Farber]

"In 2007, the poverty level for an individual was $10,590; for a parent and two kids, it was $16,705. People are described as being in 'deep poverty' when they make less than half of that amount. The idea that there will be 1.5-2 million kids in families making half the poverty level is horrifying."

Um, I guess. I spent most years of a couple of decades making under $3k or so, and America seemed very unhorrified. It would be nice to think they feel different now, but where were they then?

Maybe they're nicer now. That's nice. Bit old, though. Hard to feel good about it now. Bit late.