IMF finds U.S. economy is in 'good shape,' but 1 in 7 Americans live in poverty
Posted July 2, 2016
A report released by the International Monetary Fund Wednesday said one in seven people live in poverty, along with one in five children.
“The U.S. economy has repeatedly demonstrated its resilience in the face of financial market volatility, a strengthening dollar and subdued global demand,” the IMF said in its report.
The IMF works to "ensure the stability of the international monetary system," according to its website. Each year, it conducts Article IV Consultations with 189 different nations to evaluate the country's economic standing and make recommendations as necessary.
The IMF releases a Concluding Statement after each consultation and after visiting the United States this year concluded that its economy was in “good shape.” The positive report was a result of the 2.4 million new jobs created in the past year and that unemployment dropped to 4.7 percent — the lowest since the Great Recession in 2007, the report said.
It did however, have some recommendations for the U.S. government and called for an “urgent need to tackle poverty.”
“A more generous earned income tax credit (including eligibility for workers without dependents, those under 25, and older workers who are not yet eligible for Social Security) combined with a higher federal minimum wage would help alleviate poverty,” the report said.
The report also recommended the U.S. adopt immigration reform, increase funding for vocational training programs, ratify the Trans Pacific Partnership and upgrade social programs for the poor, among other things.
But Tim Worstall, a Forbes contributor, wrote Wednesday that the IMF incorrectly calculated the number of impoverished U.S. citizens and is recommending "policies which make just no darn difference."
“No, there aren’t one in seven living in poverty. There’re one in seven below the poverty line, the Official Poverty Measure, and that’s a very different thing indeed,” Worstall wrote. "I have no objection at all to the U.S. welfare state becoming more generous. But it is simply wrong, flat out wrong, to be taking the OPM measures of U.S. poverty and then recommending policies which make just no darn difference. …"
The Official Poverty Measure was created in the 1960s to help federal agencies collect data. It's based on cash incomes, and it sets a threshold based on "the cost of a minimum food diet multiplied by three." Some agencies use the measure to determine who should receive certain federal benefits.
Managing Director of the IMF Christine Lagarde, however, said in a press conference that the report would not focus on the politics of poverty, but rather the impact.
“Not only does poverty create significant social strains, it also eats into labor force participation and undermines the ability to invest in education, to invest in health, to invest in training, and by holding back economic and social mobility it creates not only a poverty impact on this generation, but it certainly can make it more sustainable inter-generationally,” Lagarde said in the conference.
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