Trump Administration Proposal to Shrink the Poverty Line Means More Hardship for Californians

The Trump Administration has quietly announced a proposal to change the way the federal poverty line is updated each year for inflation. This proposal is far more than a minor technical change affecting government statistics — it would cut low-income Californians’ access to health care, basic nutrition, and other essential needs. These consequences arise because the federal poverty line forms the basis of criteria that determine whether individuals are eligible to access many vital public supports that are funded (at least in part) by federal dollars — like public health insurance through Medi-Cal, food assistance through CalFresh, and home energy assistance through the Low Income Home Energy Assistance Program (LIHEAP). As a result, changing the method for updating the poverty line as proposed would threaten low-income Californians’ ability to meet their most basic needs.

The Trump Administration’s under-the-radar proposal, included in a notice requesting public comments issued by the Office of Management and Budget (OMB), puts forward the idea of updating the Census Bureau’s official poverty thresholds, or poverty line, using an alternative measure of inflation in place of the inflation measure currently used to update the thresholds each year (the Consumer Price Index for All Urban Consumers, or CPI-U). Two alternative inflation measures specifically mentioned as options are the chained Consumer Price Index (the chained CPI, or C-CPI-U) or the Personal Consumption Expenditures Price Index (PCE Price Index). Using either of these alternative inflation measures would make the poverty thresholds increase more slowly over time. There are several reasons that this proposed change would actually make the federal poverty line less accurate rather than more accurate as a measure of basic economic security. What is more, the Trump Administration is explicitly not requesting input to understand how this change would affect people’s access to vital public supports that help address families’ and individuals’ most basic needs.

Slowing Down the Annual Increase in the Poverty Line Would Make It Less Accurate, Not More Accurate, Especially in California

Switching to a slower-rising inflation measure to update the federal poverty line each year would make the official poverty thresholds less accurate as a measure of a minimum adequate level of economic security. The federal poverty line is already far lower than the basic cost to support a family, particularly in California, where the cost of living is high in many regions. According to the Budget Center’s Making Ends Meet analysis, the statewide average cost of a basic family budget for a working single parent with two children — including housing and utilities, food, child care, health care, transportation, taxes, and miscellaneous other basic necessities — totals nearly $66,000 (in 2017 dollars), while the 2017 official poverty threshold for the same family was only $19,749. In the most expensive parts of the state the cost of basic needs is much higher — as much as $103,423 for this same family in San Francisco County, or more than five times the federal poverty line. Even in Fresno County, a county with relatively low costs, the basic family budget for a single parent with two children is more than $50,000, or two and a half times the poverty line. Slowing down the rate by which the poverty thresholds are updated each year would only make this disconnect worse.

The slower-rising chained CPI and PCE Price Index are also unlikely to be more accurate ways to measure inflation specifically for low-income households, or to update a poverty threshold, which represents a minimum level of resources to meet basic needs. The largest basic needs expense in a household budget is typically housing, and housing costs in California in recent years have increased much faster than even the standard CPI-U inflation measure currently used to update the federal poverty line. While the CPI-U rose by 21.6% from 2006 to 2017, median household rent in California rose by 41.6%, or nearly twice as fast. Research has shown that costs for the overall bundle of goods typically purchased by low-income households have risen faster than costs for the goods typically purchased by higher-income households. Also, the reason that the chained CPI increases more slowly than the standard CPI-U inflation measure used currently to update the poverty line is because the chained CPI assumes that consumers will trade more expensive items for similar less expensive items as prices change (e.g., they will buy chicken instead of beef if the price of beef rises). The PCE Price Index makes the same assumption. However, housing and child care are typically the two largest expenses in the basic family budgets for working families, and both are items where it is unlikely that families can easily switch to a similar, lower-cost alternative if they face an increase in price.

The Trump Administration has framed considering alternative inflation measures as an important technical question for accurate calculation of the federal poverty line, but research on ways to improve the measurement of poverty has not identified slowing down the annual inflation update as a key strategy. An expert panel of the National Academy of Sciences examined many technical aspects of the official federal poverty measure in 1995 and issued recommendations for improving the government measure of poverty, resulting in the creation of the Supplemental Poverty Measure (SPM). The SPM poverty line is higher than the official poverty line for most people, particularly in California. For example, the SPM poverty threshold for a family of two adults and two children who rent their home in the Los Angeles metropolitan area was $34,308 in 2017, while the official federal poverty threshold for the same family was only $24,858. The SPM incorporates many other improvements to measuring poverty. (See the Budget Center poverty explainer webinar for more details on the SPM.) If the objective is to improve poverty measurement, it would make more sense to consider all of these types of improvements rather than focusing on just one item, the choice of inflation measure. This is particularly true because switching to one of the proposed alternative inflation measures alone would cause the poverty thresholds to shrink over time, when research provides more support for increasing the thresholds.

Changing the Way the Poverty Thresholds Are Updated Could Reduce Low-Income Californians’ Access to Vital Public Supports

This proposal would have serious, concrete consequences in the lives of low-income individuals and families. That is because the federal poverty thresholds are the basis for the federal poverty guidelines that are used to determine eligibility, benefits, and funding levels for a wide variety of public supports and federal grants that help families and individuals meet their basic needs. Millions of Californians with low incomes are enrolled in Medi-Cal (known as Medicaid at the federal level) for public health insurance, for example, and millions of Californians access CalFresh food assistance (known as the Supplemental Nutrition Assistance Program, or SNAP, at the federal level) to meet their basic need for food. To be eligible to access these public supports, a family’s or individual’s income must be less than the federal poverty guideline or a multiple of it. Slowing down the annual increase in the poverty guidelines would result in fewer Californians eligible to access these critical public supports over time, with a small impact at first but a large impact over the long term.

The Public Can Submit Comments on This Proposal Now

The public has until Friday, June 21 to submit comments to the Office of Management and Budget via an online submission form  on this proposed change to how the poverty line is updated each year for inflation. Individuals and organizations are encouraged to share the implications of the proposal for their households or those they serve, keeping comments substantive and unique, with at least 70% of the content different from other submitted comments. The Trump Administration explicitly did not request public comments on how the proposed change to the poverty thresholds would affect the federal poverty guidelines and eligibility for vital public supports. However, organizations can draw attention to the importance of this cascading effect of the proposal by describing what questions the federal government should take the time to research, and what additional input the government should solicit and consider, before deciding whether to move forward with the change.

The poverty line is more than a measure, and ensuring that low-income Californians have access to vital public supports such as health care and food assistance, and that those benefits are not diminished over time under the guise of a technical change, should be a priority for all Californians.