Americans Can’t Believe How Rich They Are

How much does an American family of four need to earn to avoid poverty? According to the Census Bureau, $32,130. But what if it were really $140,000? Late last month, the investor and Substack writer Michael Green advanced this attention-grabbing claim, which implies that a majority of Americans are living in poverty today. He argued, further, that families earning $40,000 to $100,000 were stuck in a “valley of death” because “benefits disappear faster than wages rise.” These figures have launched a thousand subsequent takes—most of them skeptical but some sympathetic. Chris Arnade, the author of the book Dignity: Seeking Respect in Back Row America, wrote that “the core of its argument is correct” because too many people in “the ‘aspirational bottom’ are being squeezed.”

Under modest examination, Green’s empirical claims fall apart. But they bespeak a troubling trend among the commentariat—and even some scholars—of exaggerating the extent of poverty in America. Social-justice discourse, whether about environmentalism, racism, sexism, or poverty, has a tendency to advance maximalist claims as a sign of maximal concern. The intention is usually to express solidarity with the oppressed. But collapsing the distinction between the actual poor and the lower-middle class obscures more than it helps. And talking about poverty as intractable or unfixable is a kind of demotivational speaking.

Green’s miscalculations start in an understandable place: his bewilderment when he realizes that the American government’s official poverty line is arbitrary. As the War on Poverty was beginning in the 1960s, the federal government needed to properly define the enemy. The task fell to Mollie Orshansky, an economist at the Social Security Administration. Orshansky estimated the cost of the minimum amount of food needed to sustain a family, then—based on original surveys showing that poor families spent one-third of their income on food—multiplied the cost by three. Today’s official poverty thresholds, which vary by household size and other factors, are the result of taking those monetary values and indexing them for inflation.

Green argues that because families spend a smaller portion of their income on food today, the real multiplier should not be three, but 16. That gets him to a poverty line in the neighborhood of $140,000. This number fails common sense, but Green defends its soundness by calculating the basic cost of modern living, including child care, housing, and health care. He does so by pointing to data aggregated from the MIT Living Wage Calculator based on expenses in Essex County, New Jersey, which suggest that a family of four with two working members would need to earn $136,500 a year. Yet Essex County is a high-cost-of-living area whose expenses are not at all representative of the country. He later modified his estimate to $94,000 using data from Lynchburg, Virginia—a level still triple the official poverty measure. Green told me he stands by his analysis, and believes critics are attacking him to avoid addressing the rise in inequality and lack of progressivity in the tax code.

[Read: The world really is getting better]

Many economists and sociologists who study poverty understand that the federal threshold is flawed, and seek to improve its measurement. First, the problems: The official poverty measure has accounted for very few variations in cost of living; it’s the same in rural Louisiana as it is in San Francisco. It also does not capture transfers such as the earned-income and child tax credits—probably the most important anti-poverty programs currently operating—and excludes the value of food stamps and health insurance provided through Medicaid. As a result, although the official poverty measure is a fine tool to gauge a family’s eligibility for benefits, it is a bad way to measure actual poverty once those programs have gone into effect.

A lot of work has been put into creating poverty measures that can capture deprivation after accounting for welfare benefits. The most important of these is the “supplemental poverty measure,” which the Census Bureau began reporting in 2011. The supplemental poverty measure includes benefit programs ignored by the official poverty measure and accounts for regional differences in cost of living, as well as necessary health- and child-care expenses. Analysis by the Columbia Center on Poverty and Social Policy found that the United States had an overall poverty rate in 2024 of 12.9 percent. The center’s calculations also show what the welfare state actually accomplishes: Without it, the poverty rate that year would have been nearly double, at 23.7 percent. And they show how much poverty has declined over the decades. The share of adults in poverty is down roughly 30 percent from 1967; for children, it is down 35 percent; and among the elderly, it is down about 60 percent.

But admission of progress against poverty seems to be anathema. In 2019, when Joe Biden was running for president, he claimed that “almost half” of Americans were living in poverty. His campaign cited numbers from the Poor People’s Campaign, which argued that 43 percent of Americans were poor. This statistic turned out to be a category error: Americans living below 200 percent of the poverty level are classified as “poor or low-income.” (But this standard perhaps helps explain the Biden administration’s ironclad pledge to not increase taxes on Americans making less than $400,000—as though this were the dividing line for the middle class.)

A cottage industry of other indexes insists that huge swaths of the country not currently classified as poor deserve that consideration. One report based on the MIT Living Wage Calculator argued that only 56 percent of full-time workers in the United States are making a living wage. The charity United Way has constructed an index called ALICE, which implies that 42 percent of American households are either in poverty or unable to afford basic necessities. There are right-coded spin-offs of the idea too: The Cost-of-Thriving Index put out by the heterodox-conservative think tank American Compass argues that to support a family of four, a full-time working man would need to work 62 weeks a year. To paraphrase Daniel Patrick Moynihan, this is a collective effort of defining poverty upward.

Even prominent academics are not immune to this tendency. In his best-selling 2023 book, Poverty, by America, the Princeton sociologist Matthew Desmond argues that “poverty persists because some wish and will it to.” Desmond claims that there has been a “lack of progress on poverty” because the share of Americans below the official poverty level has fluctuated between 10 and 15 percent for decades. He pays less attention to the supplemental poverty measure—the one actually capable of measuring progress that’s due to government policy—which shows significant improvement.

The acclaimed book $2.00 a Day, by the researchers Kathryn Edin, of Princeton, and H. Luke Shaefer, of the University of Michigan, argued that millions of Americans were living on less than $2 a day—an extremely low standard of poverty that the World Bank used in reference to developing countries. The economist Bruce Meyer and his colleagues subsequently debunked this premise, finding that the reported calculation was an artifact from the underreporting of benefits such as food stamps in income surveys. Once you account for them, Meyer and his colleagues argued, more than 90 percent of such households originally labeled extremely poor turned out to be misclassified.

[Anne Kim: The rise of Poverty Inc.]

The tendency toward declinism—the idea that poverty cannot simply be bad, but rather must be getting worse—generates ineffective policy because it obscures the extent to which redistribution of money already works as intended. But its psychological appeal is worth scrutinizing. Americans are dour about an economy that is enviable to other countries. Consumer confidence today is as low as it was during the Great Recession—despite the fact that real median household income is 19 percent higher than it was in 2009 (and the S&P 500 is roughly 10 times its nadir in March that year). The culprits are the recent bout of inflation and the inaccessibility of the housing market, which have soured most Americans’ perceptions of the economy. This economic discontent propelled Donald Trump back into office in 2024; Democrats hope that the same force can push his party out of office in 2026. “There’s this past-five-year problem that gets translated into a past-50-years problem,” Scott Winship, of the American Enterprise Institute, told me. “It strengthens all of these strong nostalgia-laden claims about life being better 50 years ago.”

Complacency about poverty isn’t required. Though much progress has been made against child poverty, the present level is still too high. But it is remediable by, for example, expanding child tax credits at the federal and state levels and creating baby-bond programs that build wealth that is accessible upon a child reaching adulthood. These achievable goals are obscured by assertions that households with six-figure salaries are the truly disadvantaged, or that “late capitalism” inevitably requires Dickensian exploitation of the poor. It breeds fatalism among the already convinced and disbelief among the critics. Exaggerating poverty hinders, rather than hastens, its eradication.