Grasping Reality on TypePad, by Brad DeLong

Today the Census Bureau reports:

Real median earnings of men age 15 and older who worked full-time, year-round declined 2.3 percent between 2003 and 2004, to $40,798. Women with similar work experience saw their earnings decline by 1.0 percent, to $31,223.... There were 37.0 million people in poverty (12.7 percent) in 2004, up from 35.9 million (12.5 percent) in 2003.... The Midwest was the only region to show an increase in their poverty rate.... The South continued to have the highest poverty rate....

The percentage of the nation’s population without health insurance coverage remained unchanged, at 15.7 percent in 2004. The percentage of people covered by employment-based health insurance declined from 60.4 percent in 2003 to 59.8 percent in 2004. The percentage of people covered by government health insurance programs rose in 2004, from 26.6 percent to 27.2 percent, driven by increases in the percentage of people with Medicaid coverage, from 12.4 percent in 2003 to 12.9 percent in 2004. The proportion and number of uninsured children did not change in 2004, remaining at 11.2 percent or 8.3 million...

Yesterday in the Washington Post's Jonathan Weisman told his readers that they shouldn't believe the Census Bureau:

Measuring the Economy May Not Be as Simple as 1, 2, 3: The Census Bureau tomorrow will release the latest statistics on poverty in the United States, the income level of an average household and the number of Americans still lacking health insurance. Don't believe the numbers.

What reasons does Weisman give to support the lead of his article--to support his warning that we should not believe the numbers in today's report?

1. David Malpass wishes that the Commerce Bureau of Economic Analysis had a change-in-wealth rather than a financing-of-investment definition of saving.
2. A number of those without health insurance could afford it, but prefer to spend their money on other things.
3. Marilyn Bryant, making $20,000 a year in Washington D.C., "earns too much money to qualify for any federal assistance" but has a very low standard of living because she lives in an expensive area and pays $5,000 a year in child support to her ex-husband.
4. Because successive White Houses have stuck with the Orshansky measure of poverty, "officially, the poverty rate has drifted upward since 2000, from 11.3 percent to 12.5 percent in 2003. But a more sophisticated measurement... shows the official rate has consistently understated poverty... the percentage of Americans below the poverty line has risen from 12.8 percent in 2000 to 14.2 percent in 2003."
5. We aren't spending enough money collecting economic statistics, and Rahm Emmanuel thinks we should set up a commission to overhaul our statistical agencies.
6. Successive White Houses have stuck with the simple to calculate and interpret Orshansky poverty measure rather than move to a more accurate but less transparent measure.
7. The Consumer Price Index is a fixed-weight index, rather than a chained-weight cost of living index--and if the government used a cost of living index to index Social Security and tax brackets, we would collect more in taxes and pay out less in benefits.
8. The 45-million count of those without health insurance is overstated by a relatively constant 5 to 10 million.
9. "Since poverty levels are not adjusted for regional costs of living, the working poor in expensive urban centers like Washington are routinely excluded from federal programs because their income lifts them above the official poverty line."

Weisman's reason (1) is simply irrelevant: that David Malpass wishes that Simon Kuznets had set the National Income and Product Accounts in a different way doesn't make the BEA's numbers unbelievable. Reason (2) is irrelevant as well: that some people who lack health insurance could afford to buy it does not make estimates of the number who lack health insurance unbelievable. Reason (3) is also irrelevant: that Congress bases program eligibility on income rather than income minus child support does not make the Census Bureau's numbers wrong. Weisman's reason (4) is simply wrong: there are more sophisticated alternative poverty measures that show higher rates of poverty and measures that show lower rates. All measures, however, do show very similar trends and patterns. Reason (5) is bizarre: we should spend more money collecting economic statistics, but that our estimates are not as detailed and informative as we would wish does not mean mean that we should not believe the numbers we have.

Weisman's reason (6) is a reason to report and consider a range of different poverty-level estimates and concepts, and to be cautious in interpreting reported levels of poverty. But it is not a reason to dismiss the trends and movements in poverty over time that the Census Bureau reports. Reason (7) is a reason to adjust real earnings estimates upward: on the most appropriate cost-of-living index basis, full-time year-round median male real earnings probably fell by only 1.5% rather than 2.3% in 2004. Reason (8) is, once again, a reason to adjust the level of uninsured--but not to doubt the trends in health insurance gaps and in the erosion of the employer-sponsored health-insurance system that we have seen over time.

Only reason (9) is truly cogent in the way that Weisman claims: differences in regional and local costs of living do make comparisions of regional and local poverty estimates unreliable, and do channel less federal poverty-support money to people living in high-cost areas.

The conclusion we should draw? Don't believe Jonathan Weisman. When Weisman says, "Don't believe the numbers" the Census Bureau released today on "poverty... income... and the number of Americans still lacking health insurance," he is not playing it straight. The numbers are quite good. The biases in their levels are relatively small. And they are accurate indicators of changes, trends, and patterns.