Bloomberg News

Decline in U.S. Income Raises Stakes in 2012 Presidential Race

September 14, 2011

Sept. 14 (Bloomberg) -- U.S. household income fell to its lowest level in more than a decade in 2010 and poverty rose to a 17-year high, setting the stage for the debate over jobs and the economy that will dominate the 2012 presidential race.

Median household income declined 2.3 percent, and the proportion of people living in poverty last year climbed to 15.1 percent, or almost one in six Americans, from 14.3 percent in 2009, a U.S. Census Bureau report yesterday showed.

Income and poverty issues are at the heart of the political discussion in Washington, with President Barack Obama pushing a $447 billion jobs proposal and a special congressional committee deliberating over $1.5 trillion in deficit cuts. Policy makers are wrestling with the question of whether to extend initiatives designed to address hardship stemming from the recession, the nation’s worst economic slump in seven decades.

“All of that raises the stakes for the decisions that President Obama and Congress will make in coming months,” Robert Greenstein, president of the Center on Budget and Policy Priorities in Washington, said in a statement.

The census report underscored that middle-class Americans continued to struggle during the recovery. Those trends may worsen this year as the economy weakened.

“I can’t think of ways the picture could be much worse,” said Ron Haskins, a senior fellow at the Brookings Institution in Washington. “We have had more than a decade of difficult numbers. It’s not about to end.”

Lowest Since 1996

Yearly median household income reached its lowest level since 1996, slipping to $49,445 from $50,599 the year before. The 46.2 million Americans living in poverty was the highest in the 52 years since the Census Bureau began gathering that statistic and was up from 43.6 million in 2009.

“The distress the consumers are feeling now is historic in its scope,” said Mark Cole, chief operating officer at CredAbility, a provider of non-profit credit counseling.

An index that tracks the financial condition of the average household published by Atlanta-based CredAbility hit a low in the fourth quarter of 2009. Out of the 31 years CredAbility has measured consumer distress, the worst rankings have occurred in the last 13 quarters.

The number of Americans who didn’t work at least one week out of the year increased to 86 million from 83 million in 2009, said Trudi Renwick, chief of the Census Bureau’s poverty statistics branch. If unemployment insurance benefits were excluded from income, 3.2 million more Americans would have been in poverty, the Census Bureau said.

Obama’s ‘Broken Promise’

The Republican National Committee issued a statement highlighting the report as evidence of Obama’s “broken promise on poverty” and the failure of his economic policies.

The home state of Texas Governor Rick Perry, the frontrunner in the contest for the Republican presidential nomination, saw its poverty rate climb to 18.4 percent from 17.3 percent and had the sixth-highest rate among the 50 states.

Americans’ financial difficulties add urgency to the arguments in Washington and statehouses across the U.S. over budget cuts to programs designed to protect families from falling into poverty. The census figures showed the third consecutive annual increase in the U.S. poverty rate.

That trend won’t reverse itself without “concerted action” on the part of policy makers, said Melissa Boteach, who leads a campaign to reduce poverty at the Center for American Progress, a Washington-based research group with ties to the Obama administration.

Falling Income

Since 2007, the year before the recession, median household income has fallen 6.4 percent, the Census Bureau said. The number continued to decline even as the U.S. economy expanded 3 percent in 2010. Growth has slowed this year to an annual rate of less than 1 percent, sparking concern that the financial plight of families will intensify and hamper the recovery.

The data show that in 2010, a year when corporate profits were soaring and the economy was pulling out of recession, Americans saw their fortunes decline. The earnings of women who worked full time were about 77 percent of those of men, about the same gap as in 2009.

“Even in good economic times, the number of Americans who were struggling to make ends meet and had declining income was going in the wrong direction,” said Boteach. “People are right to have some frustration that the economic gains of the last decade, when they were happening, weren’t shared.”

U.S. households have little to cheer about as job creation stagnated last month and hourly wages retreated. The unemployment rate has hovered at or above 9 percent for more than two years. Consumer confidence fell to the second-lowest level this year for the week that ended Sept. 4.

Recouping Losses

Since the low point in the labor market downturn in February 2010, nonfarm payrolls have increased by 1.9 million, showing that without stronger growth, it will take years to recoup about 8.7 million jobs lost as a result of the recession that began in December 2007 and ended in June 2009.

The 2010 figures “tell us how the changing economic conditions have really impacted the American family.” said Robert Groves, director of the Census Bureau, on a conference call with reporters.

The numbers are part of an annual report on income, poverty and health insurance released by the Census Bureau. The data are based on a survey of about 100,000 addresses that’s used as the primary source of figures about the nation’s labor force.

As defined by the Office of Management and Budget and updated for inflation using the Consumer Price Index, the weighted average poverty threshold for a family of four in 2010 was $22,314.

Declines in Midwest

Among ethnic groups, median income declined for white and black households, and changes in Hispanic and Asian households weren’t statistically significant. Incomes declined in the Midwest, South and West and were little changed in the Northeast.

Adding to the woes is the number of Americans without health insurance. It increased to 49.9 million from 49 million, or about 16.3 percent of the population, though the bureau said the change wasn’t statistically significant. The overall percentage of people with insurance didn’t change.

The number of Americans with private insurance was 195.9 million, unchanged from 2009, the bureau said. The number enrolled in public programs including Medicaid and Medicare grew to 31 percent, or 95 million, from 93.2 million in 2009.

Medicaid enrolled about 48.6 million people last year, the bureau said, or 15.9 percent of the population. The figures were little changed from 2009.

--With assistance from Frank Bass in Washington and Alex Wayne in New York. Editors: Mark McQuillan, Flynn McRoberts

To contact the reporter on this story: Catherine Dodge in Washington at cdodge1@bloomberg.net

To contact the editor responsible for this story: Mark Silva at msilva34@bloomberg.net


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