The Poverty Line is not Trendy

Michael Green, a Wall Street strategist, recently ignited a storm on social media by suggesting that the federal poverty threshold should include individuals earning up to $140,000 annually. He initially made this claim on his Substack and later in The Free Press. Experts such as Scott Winship, Jeremy Horpedahl, Noah Smith, and Tyler Cowen have widely criticized the statement, highlighting significant errors in his reasoning and calculations.

In a subsequent Substack post, Green clarified that the "$140K" figure was not the main focus of his argument. He admitted that his math and geographic assumptions were flawed, noting that his original example relied on the cost of living in Essex County, New Jersey, one of the most expensive areas in the U.S. Despite stepping back from the exact figure, Green argued that many middle-class families feel financially strained today, rendering traditional poverty measures less meaningful.

Critics counter that the federal poverty line cannot be defined by perception alone. Even well-off families can experience financial pressure without qualifying as impoverished. Green continues to conflate the concepts of middle-class strain and poverty, claiming that the poverty line serves as a gateway to the middle classa notion that does not reflect reality. Median housing prices, for example, do not define poverty, and tradeoffs in lifestyle choices are a normal part of life.

Green also argues that rising home values trap homeowners. He claims that someone owning a $1 million house cannot be considered wealthy if the replacement home costs the same. Analysts point out that homeowners can downsize or relocate to lower-cost areas, which demonstrates that tradeoffs are manageable. Green appears aware of these choices but suggests that government intervention should remove them entirely for higher earners.

A central flaw in Green's analysis is his reliance on the Cost of Thriving Index by Oren Cass, which claims the average male worker cannot meet household needs in 52 weeks. This index ignores taxes, family subsidies, and women's earnings contributions, leading to misleading conclusions. Adjusted for these factors, the cost of thriving has actually decreased since 1985.

Child care costs, often highlighted by Green, also do not justify expanding the poverty line to six-figure earners. First, having children inherently involves financial tradeoffs. Second, Green extrapolates peak early childhood expenses as if they persist indefinitely. Third, structural reformssuch as easing zoning laws or reducing excessive licensing requirementscould make child care more affordable without increasing government payouts. Simply providing more federal funds would worsen supply shortages and inflate costs.

Ultimately, Greens proposal risks misdirecting resources. Subsidizing affluent households would raise prices, strain taxpayers, and do little for genuinely low-income families trying to move up the economic ladder. Policies addressing actual poverty and improving affordability for everyone are more effective than redefining poverty based on subjective financial stress.

Source: Reason.com

Author: Sophia Brooks