Statistics on Lies, Cursed Lies and Child Poverty
The phrase “lies, damn lies and statistics” is used almost exclusively in public policy debates. Putting numbers on a question gives the speaker an air of authority and precision, but often comes at the expense of fuller context. Indeed, outright dishonesty is much less common than self-deception and the universal human tendency to seek evidence that confirms one’s prejudices.
Take into account amazing statistic that 8 in 10 Americans live paycheck to paycheck. This may not be wrong, but it hardly does anything meaningful about the precariousness of the American working class. Instead of, it turns out to be a rather literal measure of the fraction of workers who spend their entire salary, even if it goes to college and retirement savings. That is, a person earning six digits and having a big 401 (k) would still be considered to be living “paycheck to paycheck” under this measure simply because they have. a lifestyle with high consumption. I doubt that’s what the progressive crusader who retweets this statistic uncritically has in mind.
Of course, conservative political freaks are no less vulnerable to confirmation bias in the opposite direction. Take Angela Rachidi from the American Enterprise Institute’s Poverty Alleviation Program. While on vacation, Rachidi posted a blog post titled “Poverty Reduction from Expanded Child Tax Credit is Disappointing.” The post was based on the November 2021 release of the “real-time” monthly estimate of the Official Poverty Measure (OPM) produced by the University of Chicago and the University of Chicago’s Economic Opportunities Lab. Our Lady :
Notably, the Chicago / Notre Dame poverty rate follows the official measure of poverty, which means it does not include in-kind government benefits, such as food aid. But this should reflect the monthly CTC payments – so the last point above is worth highlighting [emphasis added]. Supporters of an expanded child tax credit predicted earlier this year that it would cut child poverty from 39 to 42 percent and cut deep child poverty in half. The monthly child poverty rate fluctuates during this period according to the graph above, but we do not see a sharp and steady decline in the magnitude suggested by advocates.
As the co-author of one of the studies it is linked to, I admit that it would sound pretty damning. The expansion of the child tax credit has increased the after-tax income of poor families by thousands of dollars, yet its impact on poverty seems almost invisible in the data! How can that be?
The problem is, Rachidi is wrong to claim that the OPM “should reflect the monthly payments of the CTC”. Although the OPM has certain sources of transfer income, such as social security and unemployment benefit, it does not not include refundable tax credits like the CTC or Earned Income Tax Credit. The Supplementary Poverty Measure (SPM), on the other hand, aims to quantify the US poverty rate after tax and transfer, and therefore Is it that include refundable tax credits in its measurement of household resources. As it turns out, the similar monthly SPM estimate produced by Columbia University’s Center on Poverty and Social Policy reveals that the CLC alone lifted 3.8 million children out of poverty in November 2021, a reduction in child poverty of around 30%!
Like a commentator on Twitter, put it,
Today, 30% is less than 39%, but it is still more than the modest impact initially suggested by Rachidi. The main reason the impact on poverty did not reach initial estimates is that advocacy efforts to help eligible families to enroll in the CTC are still ongoing. While enrollments have increased dramatically since payments began in July, preliminary IRS data suggests a few million children have yet to be affected. These are usually the poorest families, so increased participation in the program remains essential to maximize the impact of CTC on long-term poverty.
Our study of the impact of the CTC on poverty was carried out using data from 2019 and did not attempt to model the effects of the pandemic, let alone subsequent relief plans. For example, the latest census data shows that pandemic-related Unemployment Insurance (UI) benefits reduced OPM’s poverty rate by 1.4 percentage points. A lower benchmark poverty rate could have reduced the impact of the CTC on the poverty of the SPM somewhat compared to estimates based on data prior to the expansion of UI. Nonetheless, we maintain our estimate as a reasonable measure of the impact of the CTC on poverty in a so-called “normal” year – arguably the most relevant statistic for assessing whether reform should be made permanent.
Unfortunately, this is not the first time that Rachidi has confused AEI readers about the evidence regarding child benefit. As it turns out, this is a particularly egregious case – a glaring factual error at the height of a controversial legislative debate – and one that has yet to be corrected. While this is far from general knowledge, the difference between official and supplemental poverty measures should be basic knowledge for any American poverty expert. We just hope that Rachidi was not mistaken on purpose and will be more attentive in the future.
Photo credit: iStock