Katherine Gallagher Robbins, Senior Policy Analyst

Policy makers have been talking about deficit reduction for months and one proposal keeps cropping up - changing the way that the cost-of-living adjustment (COLA) is made for Social Security and other federal programs.  These policy makers would replace the current cost of living index with another one that will grow more slowly – the chained CPI.

Here are five things you need to know about the chained CPI:

1. It cuts Social Security benefits.  Adjusting benefits for inflation maintains their value over time.  Using the chained CPI would reduce the value of benefits by about 0.3 percent each year.
2. Cuts get deeper every year.  A reduction of 0.3 percent a year really adds up over time.  The cut in the value of benefits would equal the cost of a week’s worth of food each month by age 80 and nearly two weeks’ worth by 95 for the typical single elderly woman.

This Wednesday, the Census Bureau will release new data on poverty, income, and health insurance in the U.S. in 2011. As we get ready to crunch numbers, we thought it would be helpful to take a deeper look at what these numbers tell us – and don’t tell us – about poverty. Here are a few FAQs on poverty and the Census Bureau data.

What does the poverty rate measure?

The poverty rate measures the percentage of the U.S. population with income below the federal poverty threshold, often referred to as the “poverty line,” for their family size (e.g., $22,811 in 2011 for a family of four with two kids). Income is calculated before taxes and includes only cash income such as earnings, pension/retirement income, Social Security, unemployment benefits, and child support payments.

What doesn’t the poverty rate measure?

A number of federal and state benefits that help support lower-income families are not counted as income in the official poverty measure. “Non-cash benefits” like food stamps (SNAP) and housing assistance, and tax benefits like the Earned Income Tax Credit (EITC) and the Child Tax Credit, do not count as income for purposes of calculating the official poverty rate.

The official poverty measure also does not account for any expenditures, such as those on medical needs or child care, which can be very large for some families and leave them little income to meet other basic needs.