A new report from the National Academies of Science, Engineering, and Medicine (NASEM), An Updated Measure of Poverty: (Re)Drawing the Line, has hit Washington with something of a splash. Its proposals deserve a warm welcome across the political spectrum. Unfortunately, they are not always getting it from the conservative side of the aisle.
The AEI’s Kevin Corinth sees the NASEM proposals as a path to adding billions of dollars to federal spending. Congressional testimony by economist Bruce Meyer takes NASEM to task for outright partisan bias. Yet in their more analytical writing, these and other conservative critics offer many of the same criticisms of the obsolete methods that constitute the current approach to measuring poverty. As I will explain below, many of their recommendations for improvements are in harmony with the NASEM report. Examples include the need for better treatment of healthcare costs, the inclusion of in-kind benefits in resource measures, and greater use of administrative data rather than surveys.
After some reading, I have come to think that the disconnect
between the critics’ political negative reaction to the NASEM report and their accurate
analysis of flaws in current poverty measures has less to do with the
conceptual basis of the new proposals and more with the way they should be put
to work. That comes more clearly into focus if we distinguish between what we
might call the tracking and the treatment functions,
or macro and micro functions, of poverty
measurement.
The tracking function has an analytic focus. It is a matter
of assessing how many people are poor at a given time and tracing how their
number varies in response to changes in policies and economic conditions. The
treatment function, in contrast, has an administrative focus. It sets a poverty
threshold that can be used to determine who is eligible for specific government
programs and what their benefits will be.
There are parallels in the tracking and treatment methods
that were developed during the Covid-19 pandemic. By early in 2020, it was
clear to public health officials that something big was happening, but slow and
expensive testing made it hard to track how and where the SARS-CoV-2 virus was
spreading. Later, as tests became faster and more accurate, tracking improved.
Wastewater testing made it possible to track the spread of the virus to whole
communities even before cases began to show up in hospitals. As time went by,
improved testing methods also led to better treatment decisions at the micro
level. For example, faster and more accurate home antigen tests enabled
effective use of treatments like Paxlovid, which works best if taken soon after
symptoms develop.
Poverty measurement, like testing for viruses, also plays essential roles in both tracking and treatment. For maximum effectiveness, what we need is a poverty measure that can be used at both the macro and micro level. The measures now in use are highly flawed in both applications. Both the NASEM report itself and the works of its critics offer useful ideas about where we need to go. The following sections will deal first with the tracking function, then with the treatment function, and then with what needs to be done to devise a poverty measure suitable for both uses.
