Only In America Do We Over-Report Poverty

I am almost made speechless by this…ALMOST but not quite…

Do you know what the government’s OFFICIAL source for poverty statistics is? No? I did not either until I happened upon a piece of research in my study of retirement income planning.

Turns out the government’s OFFICIAL source for poverty statistics is the Consumer Population Survey (CPS).

Now, I’d image the information the government gleams from the CPS is quite important as things like the poverty level are used throughout our tax code and all sorts of government agency data to determine who qualifies for what kind of aid.

In fact, much of Obamacare subsidies are based on poverty level data. Shoot, the proposed Social Security legislation I talked about recently uses 125% of the poverty level as its floor for benefits!

Logically then given the poverty level in America is so important to government spending and given the CPS is the OFFICIAL source of government statistics on poverty, one would make the assumption the CPS data is true, no???

Yes, that’s a very safe assumption to make as literally billions upon billions of dollars are riding on this information being correct. And, guess what???? The CPS data is WRONG! And not just by a little bit, it’s WRONG BIG TIME!!!

“The CPS defines income as money received on a regular basis, excluding capital gains. Prior studies have found that the CPS understates the resources households have access to in retirement. One reason is that – unlike defined benefit (DB) plans – defined contribution (DC) plans, such as 401(k)s and IRAs, accrue account balances and generally do not pay out regular income streams. In response to researcher concerns, the Census redesigned the 2015 CPS, adding and re-ordering questions to better assess sources of income for older and lower-income households.”

Did you get all that? The CPS was not including irregular distributions from retirement plans as sources of income in their reports. No big deal, right? I mean, it’s only the OFFICIAL government statistics.

And after years of under-reporting income they “fixed” the problem in 2015. Yet even with the “fix”:
“the CPS severely underreports income from retirement plans and thus overall income, an issue the redesign does not seem to have corrected.”

“Come on Josh, that’s not big deal. I mean, really, how many impoverished people have retirement accounts to begin with?”
You may be right. Maybe that’s a small mistake. But we can agree that most, if not ALL, retirees have Social Security income, no?

And here the amazing CPS does it…AGAIN!

“The CPS, on the other hand, understates Social Security income at all points in the income distribution. For these households, the CPS understates income from Social Security by about 20 percent.”

The CPS, have I said it’s the OFFICIAL statistical reporting for the government poverty data, under reports Social Security income by 20%!

Thus, I think it’s safe the say the CPS is meaningless when it comes to reporting poverty in the US. Yet, it’s used as if it’s the Gospel itself! And the scary thing is researchers have known this…for years!

“it has been well documented that the CPS underreports retirement income relative to other sources (Schieber, 1995; Woods, 1996; Czajka and Denmead, 2008; Fisher, 2008; Davies and Fisher, 2009; Iams and Purcell, 2013; Munnell and Chen, 2014; and Miller and Schieber, 2014).

Look, my friends, once you take the Red Pill, so to speak, there’s no coming back. You will begin to see clearly, similar to the Devils prey in The Screwtape Letters who stayed faithful to God and at his time of death could finally see clearly how pitiful the Devil is, and the corollary of course, how glorious Is God’s love for him.

So,may I suggest you unsubscribe from this email list NOW if you don’t want to be made aware and prefer to stay ignorant? Ignorant does not mean stupid, by the way. It just means not to know, almost agnostic. And there is peace in ignorance, trust me there is. Thus the saying “Ignorance is bliss.” It’s true.

But the reason I left my well-paying, easy, job at USAA was because I tried to write an article about some fallacies in financial planning and was shut down by my leaders. They’d rather clients remained ignorant than informed and I simply couldn’t’t tolerate that anymore.

A long, long time ago, I wrote an article in the local business journal about how fees hurt returns. My boss at that time let me have it, threatening to fire me. That was in 2002. Again, he, who stood to reap the reward for the ignorance of his clients, wanted that ignorance to remain. It was good for business.


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