American Economic Statistics Are Terrible – Poverty Rate Is Really 2%

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As we know there are any number of people who would plan the economy and our lives for us. This always, but always, running up against the Hayekian problem of knowledge and the pretence of having it.

Take something as simple as the poverty rate over in the US. Vast sums of money must be taxed off one lot of people in order to be sent to another because poverty is 13 or 14% of the population. Even, over 20% of all children.

One problem with all of this being that this is measuring poverty before near all of the things that are done to reduce poverty – Worstall’s Fallacy writ large. Child poverty, when we include the effect of Medicaid, Section 8 vouchers, the EITC, food stamps, the rest, falls to some 2 to 3% which most of us would take as being pretty good for government work.

The other problem being that our underlying measures of inflation and the like are really pretty terrible.

When corrected for documented price overstatements, real average hourly earnings from 1975 to 2017 are shown to have risen some 52%, not 6%—an additional $6.77 an hour. Real median household income increased 68%, not 21%—$17,060 more annually. Gross domestic product grew 253% rather than 216%—$6,312 of additional output per capita. Productivity expanded 142% rather than 117%—$10 of additional value for every hour worked. And published poverty incidence fell by almost half. Combined with the 67% drop in poverty that comes from accounting for all government transfers, poverty incidence sank from 12.3% to about 2%.

This being only one of the problems with planning of course. If our ideas of where we are now are near irretrievably screwed up then we’ve simply not the information to decide what to do next, do we?