Poverty: The Bigger Picture

Economies should be judged on a simple measure: their ability to generate a rising standard of living for all members of society, including the people at the bottom.

From that perspective, the latest income and poverty measures, released by the Census Bureau on Sept. 24, send two messages. First, it's clear from the numbers that 2001 was a bad year for everyone. The combination of recession, a falling stock market, and the terrorist attacks drove down real median household income by 2.2%. Household income for blacks fell by 3.4%, and for Hispanic households by 1.6%. The poverty rate moved up, as well.

But the other message, which Washington should not forget, is that the policy measures of the 1990s--including welfare reform, budget discipline, free trade, and a focus on business investment--produced major gains for most of the population, despite the slump of the past year. Compare the recessionary 2001 with 1990, the first year of the previous recession. During those 11 years, real median household incomes rose by 7%. The gains were even bigger for minorities: 20% for blacks and 15% for Hispanics.

Perhaps more important, the poverty rate declined from 13.5% in 1990 to 11.7% in 2001. Much of the gain came from groups where poverty had long seemed intractable. The black poverty rate, for example, had been stuck above 30% for as long as the Census Bureau had been calculating the numbers. But it dropped below that level in 1995, and despite small uptick in 2001, the poverty rate for blacks fell to 22.7%. This is still much higher than that of whites, but much better than in the 1970s and 1980s.

That doesn't mean there aren't real problems that need fixing, including corporate crime, a capacity glut in telecom, and an overhang of bad debts in the financial system. But whatever we think about the excesses of the 1990s, they produced real gains for a lot of people who had been denied the fruits of economic growth in the past. That's the sort of achievement policymakers should aim for in the future as well.

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