US adds 3.8 million more to ranks of the poor as poverty rate jumps

US poverty rate hit 14.3 percent last year, up from 13.2 percent in 2008. The jump bring the number of the poor to its highest level since 1959, five years before the Johnson-era War on Poverty.

The deepest recession in modern times has sharply increased the ranks of the poor during the past year, with 1 in 7 people in America officially counted as living in poverty.

The news from a US Census Bureau report released Thursday underscores how deeply the Great Recession has affected the nation's standard of living. The key findings of report, which compared income, poverty rate, and health-care insurance coverage in 2009 with 2008 numbers, include the following.

1) Some 43.6 million people were living in poverty last year – the highest number since 1959, five years before President Lyndon Johnson declared his War on Poverty. The poverty rate was 14.3 percent, up from 13.2 percent in 2008 and the highest level since 1994. Hispanic households took the hardest hit: Their poverty rate rose 2.1 percent from 2008's level, compared with a 1.1 percent jump in the rate for blacks and whites. (The US government considers an annual income of $21,756 to be the poverty line for a family of four.)

2) A record number of Americans, 50.7 million, were not covered by health-care insurance in 2009. At the same time the survey was being taken, Congress passed President Obama’s contentious health-care reform law.

3) The median household income was $49,800 last year, about the same as in 2008. This "hold steady" figure for income may reflect the fact that many people were helped by the government safety net, such as unemployment insurance, which Congress repeatedly extended and which kept some 3.3 million people out of poverty, according to the Census data.

The data, contained in a statistic-thick 87-page report, are likely to have widespread implications for policymakers, say economists and analysts. Here is how some of them interpret the numbers.

• The poverty rate is likely to rise further, predicts Isabel Sawhill, a senior fellow at the Brookings Institution in Washington, in a new analysis. The rate will approach 16 percent and stay high for most of this decade, she says. The recession will add some 10 million people, including 6 million children, to the poverty rolls.

Robert Greenstein, executive director of the Center on Budget and Policy Priorities in Washington, writes in an analysis that in the past three recessions the poverty rate has not fallen until a year after the unemployment rate began to fall.

• Some advocates for the poor hope the new data spur Congress to ameliorate the situation for the needy. One way would be to renew the Emergency Contingency Fund (ECF), part of the Temporary Assistance for Needy Families, which expires at the end of this month. The fund, targeted to low-income individuals, pays employers to take on workers.

“It helps pay for the cost of bringing a new person on,” says Rachel Gragg, federal policy director at the National Skills Coalition, which is lobbying Congress to extend the program for another year at a cost of $2.5 billion. “Most states say they will have to stop their existing programs if it’s not extended,” she says.

Another program designed to help low-income people, the Earned Income Tax Credit (or Making Work Pay program), is set to expire, too, on Dec. 31. “With this report, extending that could be a discussion item,” says economist Richard DeKaser of Woodley Park Research in Washington. “With poverty at its highest level, you could argue the least fortunate should be shielded from a tax burden.”

• Congress may want to delve deeper into safety net programs such as TANF and Medicaid, suggests Ron Haskins, a fellow at the Brookings Institution. Lawmakers are likely to find that Medicaid has “expanded like mad” because fewer Americans now have private health-care coverage. “It’s functioning like a good safety net program,” he says, adding that the same can be said for food stamps. But, he says, Congress might want to examine TANF, which replaced welfare, to examine why the program hasn't grown, even with higher poverty. “No one knows why,” he says.

• After the November election, Congress may dissect the data to determine how to reduce the budget deficit, says Mark Zandi, chief economist at Moody’s Economy.com in West Chester, Pa. “The National Commission on Fiscal Responsibility and Reform in December may want to tie how to pay for fiscal austerity to the distribution of income and wealth,” he says. “Where is the burden going to fall?”

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Upcoming releases of census data: As required by law, the apportionment counts from the 2010 Census will be delivered to the president on or before Dec. 31, 2010. This report will include the number of seats in the US House of Representatives for each state. For further information on the scheduled release of census data, click here.

[Editor's note: The headline of this story was changed to accurately represent the number of millions who are newly classified as poor.]