Democrats have an interesting quandary because the poor aren't quite as poor anymore

According to WSJ editorial writer's interpretation of statistics prepared in conjunction with a new study by the Congressional Budget Office, America's poor have become quite a bit better off. On average, the findings showed that low-wage households with children had incomes (after inflation) that were more than one-third higher in 2005 than in 1991.

This new reality could pose quite a problem for Presidential Democratic Candidates like John Edwards who continue to talk about our country as "two Americas," and take glory in reinforcing the commonly believed stereotype of the U.S. Economy as a richer-take-all scenario.

After looking deeper into the facts, it seems clear that this traditional pillar of any democratic campaign run (how the poor are taken advantage of and need protection) just might not work as well this time around. Among all families with children, the poorest fifth had the fastest overall earnings growth over the last 15 years. The poorest even had higher earnings growth than the richest 20 percent.

Yet, what's more interesting is that according to CBO experts, this dramatic rise in income is actually due to a number of reasons, including one that the Dems can clearly take credit for. Welfare reform has created a catalyst for some two million welfare mothers to find jobs and nearly double their income since the law began under Clinton. Far from being a disaster for the poor, this law has proven to be a boon. CBO also contributes this dramatic change to a combination of expansion of the earned income tax credit and wage gains that were made from a tight labor market.

Clearly, poor people still face serious economic woes. But, with the release of this official data, it will be interesting to see how the Democratic Party and its presidential candidates will react. The typical response one could expect is for the Dems to just showcase other "official" studies that somehow show just the opposite reality for the poor. Then, as always, it becomes a war of conflicting data, with each party canceling out each other's message and all impact surrounding this topic will become completely watered down.

Instead, the Democrats could take a progressive stance by taking credit for the rise of the under-privileged class (imagine that) and use this new found information as a powerful crutch to discuss their plans for continuing this ascension of lower class levels. Instead of the across the board “woe is them” negative theme, the smarter candidates would articulate how Democratic policies have been behind this tremendous shift for the have-nots and they can impassionedly campaign to do whatever it takes (once in office) to achieve even greater results. 

Maybe I’m naïve, but it seems like the Democrats could use a big push up hill. So, let’s see…

Comments

[PrefersQuiznos]

"A statistician is a person who stands in a bucket of ice water, sticks their head in an oven and says 'on average, I feel fine!'" - K.Dunnigan

Mr. Moed, it is a tad disingenuous of you to cite a "study by the Congressional Budget Office" as the basis for the argument you forward in this blog. In fact this blog is based upon a WSJ author's conclusive interpretation of statistics generated by the CBO. Indeed it is the WSJ that has concluded that "America's poor have become quite a bit better off." I find the WSJ's choice statistical sample (low-wage households with children) curious given a WSJ article by Greg Ip which says: "In 2004, the median income for a man in his 30s, a good predictor of his lifetime earnings, was $35,010, ... 12% less than for men in their 30s in 1974." How do you reconcile the forgoing with your "better off" conclusion. If men make less but households make more, perhaps the study indicates that more women are having to go to work so that their families can make ends meet. I doubt the moms and kids would agree with you that they are better off. Two earners instead of one and the families income is only one third more, is that really "better off?"

[ed]

PreferQuiznos,

There was nothing disingenuous about my post. This is based on a Wall Street Journal editorial. But, it is my belief, that this publication (and editor) are often very accurate in their reporting.

That said, you have a valid point that is quite reasonable. Research findings can be quite superficial depending upon the nature of the actual study.

[PrefersQuiznos]

I meant no offense Ed, and the fact remains that it wasn't the CBO's study that came to the "better off" conclusion--it was a WSJ editorial writer based on his dubious interpretation of statistics.

The following is an edit to the first line of your blog which makes it less inaccurate: "According to a [a WSJ editorial writer's interpretation of statistics prepared in conjunction with a] new study by the Congressional Budget Office, America's poor have become quite a bit better off."
I agree that the WSJ's reporting is peerless, the editorial board, however, has an agenda--and freely admits it.

[Steven Zweig]

PreferQuiznos makes a good point--I think I remember seeing statistics that there has been a rise in dual-income households specifically because two incomes are increasingly required to make ends meet.

In addition, does that study compare earnings per hour worked, then and now? If not, it may also be hiding a rise in a person having to work more hours--whether at the same job, or by holding down more than 1 job--to make enough money. Again, I could be remembering wrong, but I have a recollection of seeing statistics that more people are having to patch together several jobs, because one job just doesn't cut it.

(One reason has been the continuing replacement of higher-paying manufacturing jobs w/lower paying service jobs; someone who could support a family on the production line can't necessarily do so just with a security or retail job.)

In addition, the use of inflation as tool to make comparisons hides the rise in alot of very significant costs that I don't think (though I could be wrong) are effectively factored into determining inflation. Just to use one very critical example, the cost of health insurance has gone up much faster than inflation, at the same time that companies increasingly make employees shoulder a larger percentage of it and/or insurance plans require larger copayments. The cost of health insurance alone can begger a family--as can the cost of being caught without it.

There have been more outsourcings and offshorings of jobs. This creates greater uncertainty for wage earners. Also, there has been a steady shift from defined benefit pensions and retirement plans to 401(k)s. This disadvantages lower-wage earners, who *can't* save enough of their salaries (after covering necessary costs) to ensure retirement.

Finally, I've not read that WSJ editorial myself, but when it compares upper-wage earners to lower, is it taking into account equity-based compensation (e.g stock and options) as well as wealth (securities again; also real estate and other investments). For that matter, is it even taking into account variable and incentive compensation, like bonuses, or just salary and wages? Pretty much every article and analysis I've read other than WSJ states that the gap between the haves and have-nots in terms of wealth has soared over the last 10+ years. Thus, it's possible that growth in income compensation for the top has slowed because they are increasingly making their money in other ways.

[ed]

Prefer Quiznos,

I stand corrected and will make your suggested changes. Thx