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Katrina Reveals Poverty Reality

Stories of the grinding poverty among the survivors of Hurricane Katrina in New Orleans vividly illustrate what many say is a forgotten truth of modern American life — that pockets of desperate poverty still exist in a country of unsurpassed wealth and privilege.

Underscoring that reality, a report by the U.S. Census Bureau (search) released the same week Katrina hit the nation's southeast announced that the national poverty rate rose for the fourth straight year despite continuing growth in production and political rhetoric that the nation's economy is on the upswing.

Click here to read the U.S. Census Bureau's report.

According to that report, the number of Americans living under the poverty line grew by 1.1 million in 2004 for a total of 37 million people nationwide. That equals 12.7 percent of the total U.S. population. It is the fourth annual increase.

"[Poverty] is a problem in America that hasn't gone away — it just went underground for a while, and it shouldn't have," said Sheila Zedlewski, director of the Urban Institute's Income and Benefits Policy Center.

Through images of the predominantly black residents of New Orleans pleading for help, leaving destroyed homes with nothing but the clothes on their backs, America got a wake-up call according to Sheldon Danziger at the National Poverty Center at the University of Michigan.

"People are putting these things together, and it will be interesting to see if the attention of the public stays on this," he said. "As a country we'd like to think we moved beyond it, but in reality, [poverty] is still a substantial problem."

Others caution against putting too much weight into the new numbers, pointing out that they do not reflect the public assistance low-income individuals and families receive, like Medicaid (search) and welfare, and do not distinguished between truly impoverished individuals and those who are temporarily poor.

The poverty rate began to climb in 2000, the year it hit a 26-year low of 11.3 percent of Americans living under the poverty level, according to U.S Census Bureau figures. That was the lowest point since 1974, when the number was 11.2 percent. The highest point of poverty in recent times was in 1993 at 15.1 percent. Before that, was in 1983, at 15.2 percent.

In 2004, according to the latest study, the poverty rate among African Americans remained the same — at 24.7 percent. Hispanics also saw no change in their poverty rate at 21.9, while whites saw an increase, from 8.2 percent to 8.6 percent. Asian Americans experienced the only decrease, from 11.8 percent to 9.8 percent.

The poverty rate among American families remained at 10.2 percent of the population in 2004. The Office of Budget and Management (search) defines a family of two adults and two children with a median household income of $19,157 or less as living in poverty; or a family of two with no children, making $12,649 a year.

Median household income went unchanged in 2004, according to the census bureau, at $44,389. Blacks continue to have the lowest median income among all ethnic and racial groups, making $30,134 annually.

Wages earned among Americans, however, declined in 2004. For men over 15 working full-time, year round, the real median earnings declined 2.3 percent from 2003, to $40,798. For women with similar work experiences, wages declined by 1 percent to $31,223.

And while unemployment has gone down from 5.5 percent in August 2004 to 4.9 percent in August this year, unemployment among blacks is still the highest in the country, at 9.6 percent in August compared to 4.2 percent for whites and 5.8 for Hispanics.

In New Orleans, where blacks make up 67 percent of the population, 27 percent of the residents are living below poverty level according to a recent study by Total Community Action, Inc. (search), a public advocacy group based in New Orleans.

Click here to read that study.

But some warn that the new census bureau figures may not be an ideal measure, given that they do not take into account the impact of public assistance on a household, or recent tax cuts and child tax credits. Others say the poverty rate had been in steady decline since the early 1990's and see the recent increases as the tail end of the 2000 recession.

"It's a bit unfortunate to link the hurricane with the issue of poverty in this country," as though there has been no reduction in poverty since the 1980's, said Rey Hederman, senior policy analyst for the Heritage Foundation.

Since a high point in 1983 the poverty rate for the U.S has been on a decline, aside from the four years following the brief recession in 1989 and the most recent hike, according to the Census Bureau.

Like other economic analysts, Hederman believes the growth in productivity in the U.S economy will eventually produce more jobs and higher incomes for workers.

But so far, Hederman admits, that hasn't happened.

"We've got strong productive growth but wages have been relatively stagnant. It's a bit of a paradox as to why it hasn't happened sooner," said Phillip Swagel of the American Enterprise Institute, who blames, in part, the Internet bust six years ago.

Nonetheless, he calls today's economy "the most golden era for productivity growth" in more than 50 years.

"In the short term, it means that firms have been able to produce more without hiring more people," Swagel continued. "But in the long term, it will mean that wages and income will go up. It takes time for that relationship to take hold."

But on Wednesday, the Congressional Budget Office (search) announced that hurricane's damage to the southeast could reduce national economic growth by nearly a percent at time when forecasters were hoping for a three to four percent increase by the end of the year. It also expects a loss of 400,000 jobs in the labor market.

Some say that inner cities that have never fully recovered from past economic recessions will no doubt be the hardest hit.

"I think for the last 25 years, we have had an economy where most of the gains have been concentrated in a small percentage of the workforce," said Danziger. "[The] rising tide has not lifted all boats, the economy has shifted so that a smaller portion of the population gets the increases, and the rest is simply happy to have jobs that experience no wage increase or income increases."

According to the recent Total Community Action study, poverty rates have remained stagnant in New Orleans in the last 40 years and even without the near total destruction of the city, have been the highest in the nation.

"It would be ironic that it would take a disaster like this to focus [national attention] on this,"

Rep. Mel Watt, R-N.C., and member of the Congressional Black Caucus (search), told FOXNews.com, "Every area of our lives these disparities exist and we have tried to focus on them all year."

Minority populations left behind in many cities often suffer from bad schools and are at a real disadvantage compared to their suburban middle class and affluent counterparts, say experts.

"The poverty differences by education, by race, by central city versus the suburbs, are long standing," said Danziger, who also said that by leaving New Orleans' most disadvantaged, immobile residents behind the hurricane "clearly brought that into stark contrast."

The Urban Institute’s Zedlewski admits that over the last several years more resources have been focused on the symptoms of poverty — poor education and healthcare.

"If you look at the long haul it is true progress has been made," she said, adding that more needs to be done, particularly in the African American community, regarding single motherhood, the high rate of incarcerated males and investing in adult education.

Swagel, who recently left his job as chief of staff for the White House Council of Economic Advisors (search), believes the current administration has put into place policies — notably tax cuts — that have stimulated growth and are benefiting middle and lower income families the most.

"I would say our policies are on the right track," he said. "They are working in the right direction, and we should not reverse course when things are improving."

Watt doesn't buy the tax cut stimulus scenario. "As soon as this President came in and passing these massive tax cuts, [the poverty rate] turned and went in the opposite direction," he said. "This administration is about supporting people of higher income and it makes no bones about it."

Meanwhile, thousands of displaced people from New Orleans are looking for jobs, and trying to begin new lives in places like Houston and Baton Rouge. Poverty advocates hope that in the long term, available education and job training opportunities, as well as the higher wages that have been promised by economists, aren't out of reach.