As the key indicator of a nation's ability to provide a minimum standard of living to its citizenry, the rate of poverty appears deceptively simple, allowing its users to easily divide the nation into the relative "haves" and "have nots." For instance, a reported rate of 20 percent informs us that one in five Americans have a standard of living that is deemed inadequate for acquiring basic, minimum needs. More concretely, official poverty statistics are used in a variety of ways to administer public programs, allocate funds across the 50 states and the District of Columbia, and serve as the basis for recommending new policies, with subsequent changes in the rate, both in the aggregate and by population subgroups, used to measure their success or failure. Thus, the rate of poverty forces the public, policy analysts, and politicians to consider how public policies impact the poor. In this capacity, it serves as the official scorecard in our war against poverty.
As Mollie Orshansky, the originator of the official measure, once stated: "It is perhaps more difficult to define poverty as a public issue than in some other context because in a sense such a procedure implies how much of its public funds and civic energy the nation wishes to commit to the task." In other words recognizing and reporting a rate of poverty implies a corresponding commitment on the part of the nation to assist those individuals whose quality of life it considers to be "poor." Thus, a rate that fails to properly measure the total number of poor, or its composition, can misallocate political and budgetary resources, as well as have a profound impact on a nation's psyche. With the arrival of "welfare reform," encapsulated by the Personal Responsibility and Work Opportunity Reconciliation Act (PRWORA) of 1996, which turned over control of much of the nation's safety net to the states, an accurate measure of poverty at the federal and state level is more important than ever.
--Author's executive summary.