By Idrees Kahloon
Wednesday, December 17, 2025
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.
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.
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.
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