"It goes back to 1963. A statistician named Mollie Orshansky, working for the Social Security Administration, was asked to come up with a mathematical equation for determining who was poor by government standards. Not even she thought the formula would stick for generations.
Yearly income would be measured on a cash-only basis — meaning that today’s in-kind benefits, such as food stamps and treatments covered by Medicare, aren’t considered as income.
As for household expenditures, Orshansky determined that a family was destitute if it spent more than a third of its income just to eat, subsisting on a minimum diet.
“I think it was a back-of-the-envelope thing” that Orshansky worked up, said Jeff Hayes, senior researcher for the Institute for Women’s Policy Research, a Washington-based think tank studying employment and poverty issues. “She’d probably be appalled to know her measures still applied.”
Unless Congress takes action to change the rules — unlikely for now, given taxpayer discontent and pressures on public budgets — that old formula will remain the official measure of poverty. It will dictate eligibility for federal assistance, but both the left and the right regard it as something of a joke."