Is the War on Poverty Really Over?

The Council of Economic Advisers recently released a report that began with the startling statement that the War on Poverty is over and has ended in victory. Properly measured, says the CEA, the poverty rate has fallen to just 3 percent.

Can such a low poverty rate, less than a quarter of the official measure (12.7 percent for 2017), be in any way credible? The answer turns out to be both “yes” and “no.”

There are, in fact, many different measures of the poverty rate. In addition to the official measure, the Census Bureau also publishes a modernized version called the Supplemental Poverty Measure, estimated at 13.97 percent for 2016. The Organization for Economic Cooperation and Development, a club of 36 middle- and high-income democratic countries, defines poverty as earning less than half of a country’s median income. By that definition, the U.S. poverty rate is 16.8 percent, the third highest in the OECD. Only Israel and Turkey have higher poverty rates.

The official U.S. poverty measure was devised in the late 1950s. Its creators began by estimating the cost of a minimum healthy diet. They observed that poor families, on average, spent about a third of their income on food, so they estimated that an income equal to three times the cost of the minimum diet would be adequate to provide food plus other necessities. Income was defined as money income…