Mitt Romney Was Right: We Shouldn't 'Focus' On The Poor

Romney portrait

Photo: Wikicommons

I imagine the politics of this won’t be helpful for Mitt Romney (via CNN):

After winning the Florida primary, GOP presidential nominee hopeful Mitt Romney explains to CNN anchor Soledad O’Brien that he is focused on a particular portion of the American population in his campaign. Romney says, “I’m not concerned about the very poor. We have a safety net there. If it needs a repair , I’ll fix it. I’m not concerned about the very rich…. I’m concerned about the very heart of America, the 90-95 per cent of Americans who right now are struggling.”

O’Brien asked him to clarify his remarks saying, “There are lots of very poor Americans who are struggling who would say, ‘That sounds odd.'” Romney continues, “We will hear from the Democrat party, the plight of the poor…. You can focus on the very poor, that’s not my focus…. The middle income Americans, they’re the folks that are really struggling right now and they need someone that can help get this economy going for them.”

The optics are obviously lousy, a multimillionaire saying he’s unconcerned about those at the bottom. It seems to lack a certain noblesse oblige, especially right now when the poverty statistics seem so bleak. In September, the Census Bureau reported that the percentage of Americans living below the poverty line last year was 15.1 per cent, the highest level since 1993. And measured by total numbers, the 46 million now living in poverty is the largest on record dating back to when the census began tracking poverty in 1959.

But what do we really know about “plight of the poor” in America. There are certainly a lot of misconceptions, once corrected,  cast what Romney said in a totally different light. Here is the reality:

1. In a recent paper, Bruce D. Meyer of the University of Chicago and James X. Sullivan of University of Notre Dame examined the bottom tenth percentile of the distributions of consumption and income from 1980 through 2009..  Now if you classify the bottom half of those below the poverty rate as the “very poor,” you are talking about the bottom 7.5 per cent, not far off from the bottom 10 per cent Meyer and Sullivan examine. This is what they found (bold for emphasis):

Our results show evidence of considerable improvement in material well-being for both the middle class and the poor over the past three decades. …  After incorporating taxes and noncash benefits and adjusting for bias in standard price indices, we show that the tenth percentile of the income distributiongrew by 44 per cent between 1980 and 2009. Even this measure, however, understates improvements at the bottom. The tenth percentile of the consumption distribution grew by 54 per cent during this period. In addition, for those in the bottom income quintile, living units became bigger, and the fraction with any air conditioning doubled. The share of households with amenities such as a dishwasher or clothes dryer also rose noticeably.

And here is a chart reflecting those startling income and consumption findings:

10th percentile of income and consumption, 1980 to 2009

2.  Poverty rates are also much lower when you take benefits and taxes into account and properly measure inflation:

consumption and income poverty rates, 1980 to 2009

3.  Meyer and Sullivan also looked at the housing and automobiles of the American poor over the past 30 years (bold for emphasis):

Their houses have become bigger, rising by 0.16 rooms on average without adjusting for household size, and by half a room when accounting for family size. Square footage rose by over 200 feet unadjusted and more than 250 feet adjusted since 1989. Housing-unit size rose after 1999, but by a smaller amount than over the previous decade. … Over the past three decades, car-ownership rates among the poor grew more noticeably than the rates among the middle class. In 1981, 69 per cent of all households in the bottom quintile owned at least one car. By 2009, 76 per cent of these households owned a car. There is also evidence that the quality of cars owned has increased. Among the poorest households, the fraction of cars with power breaks, power steering, or other features rose sharply between 1981 and 2004. The fraction of cars with air conditioning rose from 47 per cent to 77 per cent between 1980 and 2004. The share of cars with power breaks, power steering, and air conditioning was not very different between the bottom and middle quintiles by 2004.

4. The poor also have far more appliances and consumer electronics than many of their fellow Americans might imagine, according to the Heritage Foundation (using U.S. government data):

amenities among poor families

The focus of Mitt Romney’s campaign is boosting economic growth after a terrible recession and awful recovery. And this is exactly the right emphasis, not more “anti-poverty” programs. Meyer and Sullivan looked at why the material well being of the poor has improved so much during the past three decades

First, here is what helped only a small amount: noncash transfers such as food stamps or housing and school lunch subsidies

Here is what helped a lot more: “The impact of taxes is particularly noticeable for the poor, a substantial share of whom have been lifted out of poverty by more generous tax credits.”

And this is probably most important: “Together, this evidence suggests that other factors, perhaps most importantly economic growth, played a critical role in the improved living standards of the middle class and the poor.”

That’s right, economic growth. Take care about the economy and everyone will benefit, even the poor and very poor.

This post originally appeared at the American Enterprise Institute. 

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