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Income up, but there's a catch

Data show households are earning more by working longer. Also, 5% more people lack health insurance.

August 29, 2007|Peter G. Gosselin and Ricardo Alonso-Zaldivar | Times Staff Writers

WASHINGTON — The U.S. economy produced slight improvement in income and poverty levels last year, but failed to bring widespread benefits as the number of people without health insurance climbed to 47 million, according to a major report released Tuesday that reflects the nation's underlying economic anxieties.

In its annual report on poverty, income and health insurance, the Census Bureau said that median household income rose slightly to $48,201, but mainly because people were working longer hours, not because they were being paid more.

The nation's official poverty rate inched down to 12.3%. Again, the improvement was not broad-based, but the result of gains among a single segment of the population: older people.

The number of people without health insurance jumped by 2.2 million, or about 5%, the biggest increase since 2002. And a trend of steady progress in reducing the number of uninsured children seemingly lurched into reverse, as more than 600,000 youths were added to the rolls of the uninsured, an increase of nearly 8%.

The bleak statistic on children is released at a time when President Bush is threatening to veto legislation that would expand a health insurance program for children of the working poor, and that seemed certain to galvanize opposition to the administration's stand.

The economy's performance on issues of such importance as income and health coverage helps explain Americans' persistent pessimism about their circumstances, including a sharp drop in consumer confidence reported Tuesday by the Conference Board, a business research group.

"As John Kennedy pointed out: 'A rising tide raises all boats,' " said Jared Bernstein, a senior economist with the liberal Economic Policy Institute in Washington. "What the census numbers reveal is that while most boats got a little lift last year, the big gains of the recovery have accrued to the yachts."

Bush portrayed the numbers as a vindication of his economic policies of low taxes and minimal regulation. "The census data show that income gains in 2006 were substantial and widespread across all income categories. And the largest percentage income gains occurred for people in the bottom 20% of incomes," the president said in a statement.

Some analysts said that what Bush failed to note was that, in dollar terms, the gains near the top were 10 times those in the bottom 20%, and for most Americans, improvement was not the result of raises, but more work.

"The president is right that incomes rose and rose across the board," said Rebecca M. Blank, a University of Michigan public policy professor who has written extensively on money and poverty. "But what the census data suggests is that earnings actually fell, which means the whole story is about people working harder and longer hours.

"This is one of the reasons people are not feeling good about this economic expansion," Blank said.

Conservative commentators said the new numbers pictured a standard economic recovery, pointing out that household income had made it most of the way back to its pre-2001 recession levels and the poverty rate was lower than in most years of the boom-time 1990s.

"What we're seeing is a fairly typical pattern for this stage of an economic recovery," said Stuart M. Butler, director of economic and domestic studies at the conservative Heritage Foundation. "It's not a particularly weak one."

But a comparison of census numbers for post-recession recoveries over the last 2 1/2 decades suggests that the last five years have been an unusually weak period. Even with the recent decline, the poverty rate is still six-tenths of a point higher than it was in 2001. Median household income is two-tenths of a point higher. By contrast, during the first five years after the 1982 recession, poverty fell by 1.6 percentage points and income grew by 9.3 percentage points.

The new health coverage numbers disappointed experts across the political spectrum.

"I'm disheartened by this report," said economist Joseph Antos, of the business-oriented American Enterprise Institute. "There is nothing that has happened in the economy or in the health insurance world that would have made me think we would have this large an increase" in the number of uninsured.

Presidential contenders, particularly Democrats, have been focusing on the uninsured, and the new census figures were already playing a role in the campaign by late Tuesday, with candidates citing them as evidence of the need for change.

Sen. Hillary Rodham Clinton (D-N.Y.) said Tuesday that the number of uninsured was an "even deeper outrage today" than when she and her husband, President Clinton, unsuccessfully tried to pass coverage for all in the 1990s.

Last week, Republican Mitt Romney, former governor of Massachusetts, became the latest candidate to unveil his healthcare principles.

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