The worst of the lingering aftermath of the recession is likely over, but deep cuts to government spending could undo the fragile climb back and precipitate another crisis for low- to middle-income Americans, analysts said in response to new data released by the U.S. Census Bureau on Wednesday.
The proportion of Americans who live in poverty stayed about the same last year after three years of increases, and median income levels slowed their decline between 2010 and 2011, the data showed. The census report measured income, poverty and health care coverage rates in the United States last year.
“The good news is that the bad news is not quite so bad,” said Richard Burkhauser, a Cornell University professor who participated in a discussion on the census data release at the Brookings Institution in Washington, D.C.
At the same time, the proportion of Americans covered by some form of health insurance went up for the first time since 2000, an increase that Gary Burtless, a Brookings economist, attributed to expanded participation in Medicaid and Medicare, and to a provision in the Affordable Care Act that allows young people to stay on their parents’ plans until the age of 26.
Between 2000 and 2010, the percentage of Americans with health insurance fell by more than 2 points, Burtless said. That downward trend broke last year, when coverage rates rose by 0.6 points, or 1.3 million people, to 84.3 percent of the U.S. population, census data showed.
In particular, young adults between the ages of 19 and 25 accounted for 40 percent of the newly covered population, according to an analysis by the Center for Budget and Policy Priorities. That demographic showed a significant 2.2 percent increase in health insurance coverage, according to the Census Bureau blog.
Yesterday’s census report showed that 46.2 million people lived in poverty in the United States in 2011, about 15 percent of the population. Statistically, that’s about the same as the 2010 poverty rate of 15.1 percent, the bureau said. In 2007, before the recession hit, the poverty level was 13 percent.
However, several analysts have pointed out that the poverty measure used by the Census Bureau in this report has not changed since the 1960s and does not account for adjustments for standard of living. For example, it does not take consider in-cash government assistance for food stamps, housing or medical care, which can make a significant difference in people’s quality of life. When one takes into account such government “transfers,” as the census calls them, the rate of poverty usually falls. The Census Bureau will release supplemental data in November that adjusts for more than 50 sources of income and which is considered a more reliable indicator of poverty.
The census figures on median income released Wednesday show that although the recession officially ended in 2009, the hangover has continued. “Historically, it’s the case that median income continues to fall a year or so after the ending of the official recession, and this has been no exception,” Burkauser said.
Between 2010 and 2011, real median income fell by 1.5 percent to $50,054, the second consecutive decline but a smaller one than the 2.3 percent reduction between 2009 and 2010, Burkhauser said. He credited government assistance in the form of tax refunds, tax credits and cash assistance with helping to stem the decline in real income for the median American.
Both Burtless and Isabel V. Sawhill, co-director of Brookings’ Center on Children and Families, expressed concern at the historic levels of income inequality evident in the census data. Poverty rates in recent years, even before the recession hit four years ago, were several percentage points higher than those in the 1970s, Sawhill said – a shift that she laid at the feet of growing income inequality. The census data showed that even as incomes for people at the bottom of the income scale declined, incomes for those in the top 20 percent went up.
One reason is that big businesses in the United States are doing very well, Burtless pointed out. “The stock market reflects a very real improvement in the profitability of businesses, and people who derive a chunk of their income from these investments have fared better these last couple of years than people who depend on wages for their income,” he said. “Big businesses are making profits now like they were in the peak of the last economic expansion.”
Several analysts cautioned, however, that it could take many years for the poverty rate and median income to return to pre-recession levels, especially with the looming threat of cuts to government spending to balance the federal deficit.
Sawhill pointed out that many tax refunds and credits that helped stem last year’s decline in median income are based on temporary measures like the payroll tax reduction, while the government programs that help low-income people stay afloat have been targeted for spending cuts by Congress. With cost cutting on the horizon no matter who comes to power, the government’s fight against poverty is likely to go in the “wrong direction” in the next few years, analysts warned.
How badly the poor fare depends on who is elected to power in November, Sawhill said.
“Democrats are more likely to preserve programs for those at the bottom,” she said. “Just look at the Ryan budget versus the OMB Obama budget.”