My Life Is a Lie: How a Broken Benchmark Broke America : hackernews

[–] ignirtoq@feddit.online 13 points 4 hours ago

This is an amazing breakdown of how catastrophically bad the definition of the federal poverty line is in the modern economy. They use sound logic and data to calculate that the value should not be around $31,000, but in fact closer to $140,000.

With this foundation, they revisit common graphs that economists trot out to "prove" life has objectively improved for the majority of Americans in the last 60 years, and show that they actually show the opposite. Those graphs are built on top of the poverty line, and that calculation is bunk, so the whole argument crumbles.

The obvious next step would be to calculate the improved poverty line at key points in America's last 6 decades and generate corrected graphs, but that seems like a monumental effort. I feel like someone could make that into a dissertation.

[–] Maiq@piefed.social 13 points 6 hours ago

“The U.S. poverty line is calculated as three times the cost of a minimum food diet in 1963, adjusted for inflation."

[–] maxwellfire@lemmy.world -3 points 3 hours ago* (last edited 3 hours ago) (2 children)

Like some people said on HN, the premise of this is based on a misunderstanding of how the poverty line is calculated. They don't take each year's grocery expenses and multiply by 3. Instead they take the same 1963 figure and adjust it each year for inflation generally. This means if was an accurate estimate then and the inflation calculation is correct, then it should remain roughly accurate

[–] August27th@lemmy.ca 3 points 1 hour ago (1 children)

Like some people said on HN, the premise of this is based on a misunderstanding of how the poverty line is calculated.

Look, just because some people on HN turned their brain off, it doesn't mean you have to listen to them. It's clear if they said this, they read a tenth of the article at most and then jumped to conclusions. The misunderstanding is theirs, and now yours unless you read and grok the whole article.

They don't take each year's grocery expenses and multiply by 3.

Indeed they do not.

Instead they take the same 1963 figure and adjust it each year for inflation generally.

Okay. But what underpins the 1963 figure? That's his whole point. The figure effectively looked at one variable and assumes that several related others remain static for 60 years.

This means if [it] was an accurate estimate then and the inflation calculation is correct, then it should remain roughly accurate

If it were instead adjusted for inflation since 1910, and the poverty line was based on horse maintenance expenses x3, because it made sense at the time, and it was an accurate estimate then, would this have remained roughly accurate to today? Neigh way José.

The benchmark is not keeping up with modern expenses, nor does it factor in changes to known 1963 variables that the benchmark still presumes are static, effectively pegged at 1963 values.

Just read the whole article. Your future depends on it.

[–] maxwellfire@lemmy.world 1 points 28 minutes ago

To be fair, I did only read about the first 1/3 of the article before I got too annoyed at it and checked the HN comments to see if anyone had the same frustrations I did. I've now gone back and read the whole article, and my skepticism for their numbers/calculations remains throughout. I agree with their point generally, that there's a benefits cliff that undermines the effectiveness of the social safety net, but the way that they get there feels like them pulling numbers out of nowhere.

Also, you're still making the same mistake that the author did by saying that it assumes that other variables remain static for 60 years. That's not how this calculation is done. The previous value is multiplied by the change in CPI, which is a measure of the inflation. That inflation measure includes increases in housing, food, etc. Which is the way in which those other variables are coupled back into the metric.

Your horse example actually demonstrates this, but in the opposite way to what you're saying.

Imagine that 3x horse expenses was a really good metric for how much you needed to survive in 1910. Let's say that worked out to 1k a year (making numbers up). At this point we don't have to care how this number was derived, since it's a really good metric for the poverty line in 1910. Now we take this 1k number and multiple it by the inflation since 1910. Not the inflation in horse maintenance costs (which would be what you're describing), but the general inflation overall. We arrive at some number. Horse maintenance is now essentially 0% of the average cost of living, but that won't make this metric incorrect. Imagine that the metric was instead based on 10x the cost of clothes. And that also worked out to about 1k. It's not like when we multiply this 1k by the CPI change, we're going to end up with a different number than the 1k*CPI we got from horse maintenance costs. How the original number was derived is not relevant to its current accuracy. This is the fallacy that both you and the article are making.

The more correct question to be asking is why does CPI not account for the cost of living changes we see. Not dunking on a formula because you misunderstand it.

[–] ignirtoq@feddit.online 13 points 3 hours ago (1 children)

That would only be true if what people had to spend their money on stayed the same, and the author goes through great detail showing that the individual components of what people have to spend their money on to "exist" (i.e. a minimum cost of economic participation) have changed drastically in 60 years. Not only that, some of those pieces (child care, health care, higher education) have increased in cost breathtakingly faster than inflation. Sure, you could reduce that to a statement that "therefore the inflation metric is wrong," but the author goes on to show what a better, more representative metric would look like and tell us about the economy, and that's a good discussion mostly orthogonal to whether the inflation calculation is correct.

[–] maxwellfire@lemmy.world -2 points 2 hours ago* (last edited 1 hour ago) (2 children)

I think you're making the same mistake.

It does not depend at all on people's mandatory expenses remaining the same items, just that the inflation metric captures the increase in their expense overall.

Do you agree that the 3x food was roughly accurate in 1963? If you do, then it doesn't matter at all how the number was calculated. Because we're not re-doing the same calculation with modern numbers. We're instead just increasing that number by the inflation rate.

I agree that some of those things have increased much faster than inflation, but some things have increased much slower than inflation, and necessarily so, or the inflation metric itself would be much higher. Like food. Food has gotten a lot cheaper, which cancels out some of the increase in housing prices. Inflation overall gives a much better assessment of the increase in the cost of living than the author gives it credit for. It's certainly not perfect. It might be missing some overall rising costs by including the decline in prices for non-necessities. But that effect is much smaller than 5x that the author claims the metric is off by.

Edit: I'm not arguing that the poverty line calculation is good, or an accurate assessment of the minimum cost of living. I was just annoyed that the logic that the article was using to argue against it was flawed. (In addition to their use of incorrect quotes, averages instead of medians, etc. Averages in particular always is frustrating since income inequality is always also a big point people make, and that necessarily means that average cost of say rent or a home will be skewed high)

[–] Lodespawn@aussie.zone 3 points 1 hour ago* (last edited 1 hour ago) (1 children)

You've missed the point and doubled down on missing it. The 3x metric was right in 1963, but 3x food is still the same metric used to calculate the poverty line. Food has increased by inflation sure, but as the author says, food doesn't account for 3x the household budget, instead of 33% it's more like 7 percent. So the poverty line is way off.

The author then goes on to highlight issues with getting from the current poverty line which is mitigated by government subsidies, to that actual poverty line where you need to put in significant extra effort while seeing no actual gains until you reach it.

[–] maxwellfire@lemmy.world 1 points 45 minutes ago (1 children)

I think you're misunderstanding my argument. We're not applying the inflation of food to the previous metric. We're applying the overall inflation of all costs. Which is way higher than the food inflation. And includes much (but not all) of the increase in housing/etc costs that people have to pay. I think there's probably a lot to dive into about why CPI isn't measuring the true cost of living increases, but this article fails to get to that discussion because it misunderstands the calculations.

[–] Lodespawn@aussie.zone 1 points 41 minutes ago (1 children)

Inflation is a single percentage based on the total cost of living so applying it to the old poverty line calculation results in a poverty line that is still based on 3x the cost of food.

[–] maxwellfire@lemmy.world 1 points 20 minutes ago* (last edited 18 minutes ago)

Inflation is a single percentage based on total cost of living: I agree. But I don't agree at all that your second point follows from your first? Imagine the original calculation was based on the cost people spent on bell bottom pants each year. And that happened to be accurate at the time (and therefore ended up with an original number similar to the food calculation). If we adjusted that number for inflation, would you say that the new number was still based on the cost of bell bottoms (even though the number would be equal to the one "based on food"). And if so, how can you say that the same number was "based on food" and "based on bell bottoms" at the same time?

[–] LesserAbe@lemmy.world 2 points 1 hour ago (1 children)

I get you're saying that they adjust the 1963 cost for inflation. (vs tripling today's cost of food) I can't agree if that was enough in that time, because how would I know? But sure, let's say it was. It doesn't follow that adjusted for inflation it would be enough now.

As the author wrote, there seems to be significantly more inflation in other expenses than in food. Doing the math on what we think are reasonable expenses can show what a "real" poverty line is.

[–] maxwellfire@lemmy.world 1 points 50 minutes ago* (last edited 7 minutes ago)

I think we agree. The poverty line wasn't "enough" in 1963 either, it was instead a line below which it wasn't possible to really live without assistance. I agree with the author of the article that the poverty line is misused as standing for what's "enough" when it doesn't represent that (edit: and I also agree that it doesn't seem to have tracked some of the actual increases in costs of living). I just took issue with their misrepresentation of the math of how it's calculated and what it means. I also think there's a more interesting conversation to be had about why the inflation metric (CPI) misses the perceived increase in costs of living, but this article did not discuss that. Yes it explained that various things had gotten more expensive, but not why those aren't being tracked by CPI (which includes housing costs, etc).

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