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Tuesday, July 26, 2011

Heritage Tries to Mislead Us on How Swell Poverty Is

A little late getting to this (I've had unexpected travel), but Matt Yglesias makes an important point I wanted to expand upon. That is, just because you can afford a number of modern conveniences doesn't mean you're not poor. Similarly, people don't go bankrupt because they can't afford a TV, but because of medical bills (62% in 2007) or job loss.


Yglesias: The Heritage Foundation is out with the latest version of its annual poor people aren't poor because electronics are cheap report.....A serious person would follow this up with a discussion of relative prices. Over the past 50 years, televisions have gotten a lot cheaper and college has gotten a lot more expensive. Consequently, even a low income person can reliably obtain a level of television-based entertainment that would blow the mind of a millionaire from 1961. At the same time, if you’re looking to live in a safe neighborhood with good public schools in a metropolitan area with decent job opportunities you’re going to find that this is quite expensive. Health care has become incredibly expensive.


How much more expensive? For higher education costs, the College Board presents this table of how far above the general inflation rate college costs have grown. Remember, these are tacked on top of the general inflation rate. Thus, over the 30-year period public four-year universities have gotten 3 1/2 times as expensive in real (inflation-adjusted) terms, for example.


Tuition and Fees



Tuition and Fees and Room and Board


Private Nonprofit Four-Year
Public Four-Year
Public Two-Year

Private Nonprofit Four-Year
Public Four-Year
1980-81 to 1990-91
5.1%
4.2%
3.9%

4.3%
2.3%
1990-91 to 2000-01
2.6%
3.3%
3.2%

2.2%
2.3%
2000-01 to 2010-11
3.0%
5.6%
2.7%

2.8%
4.2%

Average annual rate of growth of published prices in inflation-adjusted dollars over a 10-year period. For example, from 2000-01 to 2010-11, average published tuition and fees at private four-year colleges rose by an average of 3.0% per year beyond increases in the Consumer Price Index.

Let's now compare overall inflation with health care inflation (inflation tables are at: http://data.bls.gov/cgi-bin/surveymost?cu). The CPI-U (consumer price index – urban) for all items was 225.722 in June 2011, compared to 37.8 in January 1970 (1982-84=100), meaning that urban prices were 5.97 times as high as 41 years earlier. By contrast, the CPI-U for medical care rose to more than 12 times as high over the same period, from 32.7 to 399.552. No wonder health care costs have caused problems for so many people.

To sum up, the economic problems facing poor or middle-class people aren't related to spending on frivolities, which are largely low-cost. Instead, they come from what one's health insurance company will or won't pay for, whether you have a job or not, and whether you can afford the housing and education to give your children a better life. The Heritage folks, while giddily pointing out that the poor in America see doctors, also support deep cuts (“entitlement reform”) to the programs that make that possible in the first place. Have they no shame?

7 comments:

  1. Greetings Prof. Thomas,

    saw a link from DailyKos and decided to drop by.

    Want to give you a big thumbs up for starting this blog and fighting back against those who want to destroy America's middle class!

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  2. No. They have no shame.

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  3. shame is for people who want the debate to reflect reality.

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  4. Just read some posts on your blog. Good work.

    The other things I dont like about this particular subject/report, and this is from my own personal experience, is that almost every major appliance or electronic item I replace, and hence get rid of the old one, I have given it away to friends or family who otherwise could not afford one. Does them receiving a TV or microwave for free mean they are not poor. No!

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  5. Good points, though I must point out that misleading is what the Heritage Foundation does.

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  6. No, the Heritage people have no shame. They have always been shameless liars.

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  7. I loved it when all those if-we-were-still-just-a-little-bit-better-off-we-would-be-at-the-mall shoppers suddenly discovered freecycle, Goodwill, etc. Where do you think so many of us have been shopping all along? Welcome to the club. Now, because at some point in your past you were able to afford a bauble or two, you can be resented for needing help, too.

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