Record Number of Americans in Poverty

Median Household income sags, dragging more down and making specter of government cutbacks scarier.

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As if the United States needed any further evidence that the recovery is not a recovery. The nation's economy has grown, however slowly, since December 2009, but new data from the Census Bureau highlight the sad but unsurprising truth that for many Americans, the recovery never happened, and relief is not in sight. It also highlights the precarious situation that Congress must address in tackling deficit reduction.

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The Census data show that in 2010, real median household income decreased by 2.3 percent from 2009. The nation saw the largest total number of people living in poverty since the Census began tracking the data in 1959—46.2 million—contributing to a poverty rate of 15.1 percent, up 0.8 percentage points from 2009. In households headed by women with children and no husbands present, the poverty rate is a stunning 40.7 percent.

Additionally, a more detailed look at the numbers shows some of the more staggering realities of poverty in the United States. For example, more than 1 in 5 children under 18 are living in poverty, defined as $22,113 for a family of four with two children. In households headed by women with no husbands present, the poverty rate is a stunning 40.7 percent. The share of Americans living in "deep poverty"—that is, below 50 percent of the poverty line—has also reached historic levels, 6.7 percent, the highest level on record. Inequality is also on the rise; the lowest quintile of Americans in terms of income makes 3.3 percent of the nation's income, the lowest ever measured under the bureau's current measurement system for that data, instituted in 1967. Meanwhile, the top 20 percent of earners make 49.3 percent of the nation's income, a near-record high.

The prospects for relief look grim, says Robert Greenstein, president of the Center on Budget and Policy Priorities, which works on policy and programs that affect low- and moderate-income Americans. "Poverty may rise even higher in 2011 and 2012. Analysts expect unemployment to remain high over this period, and after recessions, poverty typically is slower to decline than unemployment," he told reporters during a conference call today. As unemployment is stubbornly high and job growth has slowed to zero, this suggests that poverty rates will only continue to climb in the foreseeable future.

Greenstein also acknowledges another large problem facing the economy: that of skyrocketing deficits. "The nation needs strong, long-term deficit reduction, but policymakers can achieve it without increasing poverty," he says.

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The figures illustrate the impossible dilemma facing lawmakers. While large deficits and high debt might threaten the economy, so, too, does an impoverished population, and government spending keeps many Americans from hardship. The Census numbers show the extent to which government transfers to individuals keep poverty from spiraling out of control. Unemployment benefits keep 3.2 million Americans out of poverty. Without Social Security income, 20.3 million Americans would find themselves below the poverty line. And even as private insurance coverage continues to drop steadily, government insurance coverage continues to grow, now covering 31 percent of Americans.

Of course, politicians are not going to cut Social Security benefits anytime soon. But the data do show how vital government benefits are to the larger economy, says Chris Christopher, senior principal economist at IHS Insight. "Government transfer payments are vital to keeping poverty less severe. Most of them spend that money," he says, whereas a wealthy person receiving a tax cut, for example, might be more likely to save that money. "You have government programs basically keeping people out of poverty, or just having people consume things."

The data thus bear heavily on current policy debates. A key portion of President Obama's new jobs plan, for example, focuses on once again extending unemployment benefits. It would seem, then, that extending those benefits is a no-brainer. But those benefits may have to be extended several times over, as returning to full employment could take a particularly long time.

Corrected on 09/16/11: An earlier version of this article misstated the scope of the Census’ newest poverty figures. The figures show the greatest number of Americans in poverty on record. The figures also show that households with children, headed by women with no husbands present, experience a 40.7 percent poverty rate.