POLITICS: PennAve

Report: Almost half of U.S. families earning below 250 percent of poverty level

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Brookings Institution,Entitlements,PennAve,Joseph Lawler,Economy,Poverty

More than half of American families live on less than $60,000 a year, and almost half have earnings that are just two and a half times the federal poverty level, according to a study released by the Hamilton Project on Wednesday, when President Obama is scheduled to take the podium to draw renewed attention to income inequality in America.

The study is meant to draw attention to the conditions faced by "the struggling lower middle class" of Americans who are not technically impoverished and are mostly working but still face economic hardship and are at risk of falling below the official poverty line, which is $23,550 this year for a family of four, according to the Census Bureau.

It comes out the same day that Obama is slated to give a speech the White House is billing as a follow-up to his 2011 speech in Osawatomie, Kan., in which he sketched out an economic agenda that included counteracting rising inequality and stagnating wages and "rebuilding the middle class." On the campaign trail in 2012, Obama referred to "middle out" economics -- that is, the idea that economic growth is fostered by strengthening the middle class -- as the guiding principle of his economic policy.

The Hamilton Project, a left-of-center outfit associated with the Brookings Institution in Washington, adds some context to the state of the lower-middle class with Tuesday's report.

The study's four authors write that this group, comprising families who earn between $15,000 and $60,000 depending on family size, are "not officially poor" but still "experience limited economic security. One major setback could thrust them into economic chaos."

The report assembles facts that mark struggling lower-income families as separate from poor families, and facing distinct challenges. Among them:

• Unlike poor families, which are predominantly headed by single mothers, more than half of families earning between 100-250 percent of the federal poverty level are headed by married couples.

• While only 12 percent of the heads of struggling lower-income families are bachelor's degree earners, almost half received some college education.

• In 37 states and the District of Columbia, more than one child in four faces food insecurity, meaning that he faces limited or uncertain access to adequate food.

• The struggling middle class faces the highest marginal tax rates of any group because of the way transfer payments and support programs like Medicaid and the Earned Income Tax Credit phase out as earnings increase. Ten percent of families with earnings between 100 and 149 percent of the poverty level have marginal tax rates of 60 percent or higher.

• That problem is especially acute for single parents, who can face marginal tax rates as high as 95 percent if they earn slightly more than the poverty level.

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