EDITORIAL: Poverty numbers

Democrats in recent years have used concerns about “inequality” to attack free-market capitalism, a system that has created the wealthiest country in the history of the world. But as more in-depth analysis reveals, criticisms of wealth “disparities” are often based on incomplete data about household finances.

For 2025, the U.S. poverty rate was estimated at 11.1 percent. But this metric ignores the dozens of welfare and wealth transfer programs created as part of the social safety net. The federal government redistributes billions of dollars “to the lowest quintile of Americans through food stamps, housing vouchers, Medicaid, child tax credits, Section 8 housing subsidies and dozens of other programs,” Andrew Heaton of reason.com reports. “But almost none of that is factored into inequality statistics.”

Indeed, Phil Gramm and John Early noted in a December Wall Street Journal commentary that “government payments for social benefits rose by $1.5 trillion” between 2019 and 2021, yet this didn’t dent the official poverty rate at all because the government doesn’t consider these benefits as part of household income. “When all benefits are counted,” Mr. Gramm and Mr. Early report, “the percentage of Americans living in poverty falls to only 2.5 percent.”

The statistics also don’t count state or local benefits. Mr. Heaton notes that, when you include all such assistance, “the average household in the bottom quintile ... receives around $40,000 per year in cash and in-kind support —income that simply disappears from inequality charts.”

Some of this does show up in what economists call “consumer expenditure” statistics, which measure household consumption of goods and services. If poorer households had only the income available from meager salaries on which to live, that would be reflected in household consumption patterns. But the most recent numbers available tell a different story. In 2010, for instance, U.S. households in the bottom income quintile reported spending five times their income of various goods. “This means that widely reported federal poverty stats exclude about 80 percent of the material resources of low-income households,” James D. Agresti of The Heartland Institute points out.

Mr. Gramm and Mr. Early note that these numbers align with a study by Notre Dame and University of Chicago economists who found that “only 2.8 percent of households in 2017 were consuming at or below the actual poverty consumption level.” They also highlight the fact that income statistics reveal how upward mobility remains alive and well in the United States — over the past 60 years, nearly 75 percent of U.S. households have been part of the highest income quintile for at least one year.

None of this is to minimize the “affordability” concerns now roiling the political debate or the challenges families face stretching their take-home pay. But any discussion about “inequality” should at least reflect an accurate statistical landscape that recognizes the scope of the U.S. safety net — and the dangers to our liberties inherent in virtually every progressive alternative to capitalism that pushes equal outcomes rather than equal opportunity.