Are You “Poor” by Today’s Standards?

• The old poverty line, and the new poverty line…
• Welcome to poverty!…
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Dear Reader,

I train my cannons often against governmental distortion of economic realities — primarily through the torture of statistics.

Today I let loose another salvo.

The poverty line for a nuclear family of four, as the federal government draws it, registers $31,200.

Any household taking in under $31,200 per year wallows in immiserating poverty.

Any household taking in over $31,200 per year escapes the indignity, though perhaps barely.

Yet is a four-member household taking in $40,000, $50,000 or even $80,000 per year out of poverty’s cruel grasp?

How They Calculated Poverty in 1963

Mr. Michael Green is Chief Strategist and Portfolio Manager for Simplify Asset Management.

And he has interrogated the figures. And they collapsed under withering examination:

• This week, while trying to understand why the American middle class feels poorer each year despite healthy GDP growth and low unemployment, I came across a sentence buried in a research paper:
• “The U.S. poverty line is calculated as three times the cost of a minimum food diet in 1963, adjusted for inflation.”
• I read it again. Three times the minimum food budget.
• I felt sick.

Why sick?

It’s Not 1963 Anymore

In 1963, American families consecrated some one-third of their budget to grocery items.

Multiply that figure by three… and there government wiseacres sketched the poverty line.

If a household’s grocery purchases exceeded one-third of its income, it fell beneath the line.

Yet the year is no longer 1963. And American households no longer consecrate one-third of their incomes to grocery items.

Mr. Green:

• Everything changed between 1963 and 2024.
• Housing costs exploded. Healthcare became the largest household expense for many families. Employer coverage shrank while deductibles grew. Childcare became a market, and that market became ruinously expensive. College went from affordable to crippling…
• The labor model shifted. A second income became mandatory to maintain the standard of living that one income formerly provided. But a second income meant childcare became mandatory, which meant two cars became mandatory…
• The composition of household spending transformed completely… food-at-home is no longer 33% of household spending. For most families, it’s 5 to 7 percent.
• Housing now consumes 35 to 45 percent. Healthcare takes 15 to 25 percent. Childcare, for families with young children, can eat 20 to 40 percent.

What’s Today’s Poverty Line?

If $31,200 represents 1963’s poverty line… then what dollar figure represents 2025’s poverty line?

Before revealing the answer, I will dangle you upon my hook. I will have you guess.

Does the answer hover between:

A): $96,000-$106,000

B): $109,000-$119,000

C): $127,000-$137,000

D): $140,000-$150,000

E): $155,000-$165,000

Have you selected your answer?

How to Calculate Poverty

Before I reveal that answer, here is how this Green fellow tackled the question:

• The official poverty line for a family of four… is $31,200. The median household income is roughly $80,000. We have been told, implicitly, that a family earning $80,000 is doing fine — safely above poverty, solidly middle class, perhaps comfortable.
• But if [the] crisis threshold were calculated today using [the same] methodology, that $80,000 family would be living in deep poverty.
• I wanted to see what would happen if I ignored the official stats and simply calculated the cost of existing. I built a Basic Needs budget for a family of four (two earners, two kids). No vacations, no Netflix, no luxury. Just the “Participation Tickets” required to hold a job and raise kids in 2024.

So what is the answer? Which income threshold separates poverty from non-poverty in 2025?

The answer is D — $140,000-$150,000 — in this fellow’s telling at least.

How do you like it? How many Americans peg along in poverty who do not even realize it?

We’re Measuring Starvation, Not Poverty

Mr. Green, in defense of his updated poverty line:

• If you measured income inadequacy today the way [a government bureaucrat] measured it in 1963, the threshold for a family of four wouldn’t be $31,200.
• It would be somewhere between $130,000 and $150,000…
• If the crisis threshold — the floor below which families cannot function — is honestly updated to current spending patterns, it lands at $140,000.
• What does that tell you about the $31,200 line we still use?
• It tells you we are measuring starvation.

Just so. Yet are not material conditions in 2025 far superior to material conditions in 1963?

After all: 1963’s television was a 19”black and white 19” model, yielding more static than picture.

The 2025 television watcher stares into a 65” colorized miracle of clarity.

The typical 1963 automobile lacked air conditioning. AM radio was standard.

In comparison, the 2025 automobile operator rolls around in high opulence.

He enjoys air conditioning, endless entertainment options and whistles and bells.

In certain instances, he need not even operate the automobile.

Here I cite but two examples.

Can we therefore draw adequate parallels between 1963 and 2025?

The Price of Participation, Not Luxury

Mr. Green has considered the objection:

• Economists will look at my $140,000 figure and scream about “hedonic adjustments.” Heck, I will scream at you about them…
• [But] we are not calculating the price of luxury. We are calculating the price of participation.
• To function in 1955 society — to have a job, call a doctor, and be a citizen — you needed a telephone line. That “Participation Ticket” cost $5 a month.
• Adjusted for standard inflation, that $5 should be $58 today.

Yet it is not $58 today. It is $200:

• But you cannot run a household in 2024 on a $58 landline. To function today — to authenticate your bank account, to answer work emails, to check your child’s school portal (which is now digital-only) — you need a smartphone plan and home broadband.
• The cost of that “Participation Ticket” for a family of four is not $58. It’s $200 a month.
• The economists say, “But look at the computing power you get!”
• I say, “Look at the computing power I need!”
• The utility I’m buying is “connection to the economy.” The price of that utility didn’t just keep pace with inflation; it tripled relative to it.

Welcome to Poverty!

I have certain nits to pick with Mr. Green’s calculations.

He likely overestimates average childcare costs, for example. He likewise underestimates the lower real costs of certain consumer items.

His work may contain additional boo-boos.

Thus I call into question his $130,000-$140,000 poverty boundary.

Yet I believe his overall body of work is a solid construction. I believe its foundations are structurally sound.

Thus we can safely erase the federal government’s official $31,200 poverty line.

Let us — conservatively — draw the poverty line instead at $100,000.

And so I announce to many, many self-identified middle class Americans:

Welcome to poverty!

Regards,

Brian Maher

for Freedom Financial News