Introduction The long-term objective of the World Trade Organization's (WTO's) Agreement on Agriculture (AoA) is to establish a fair and market-oriented agricultural trading system. The principal approach for achieving this goal is, first, to achieve specific binding commitments by all WTO members in each of the three pillars of agricultural trade policy reformâmarket access, domestic support, and export subsidiesâand second, to provide for substantial progressive reductions in domestic agricultural support and border protection from foreign products. As a signatory member of the WTO agreements, the United States has committed to abide by WTO rules and disciplines, including those that govern domestic farm policy as spelled out in the AoA. Since the WTO was established on January 1, 1995, the United States has generally met its WTO commitments, including spending limits on market-distorting types of farm program outlays. What Is the Issue? Direct payments to producers under U.S. farm support programs are cumulative, and compliance with WTO commitments is based on annual spending levels. The addition of large, ad hoc trade assistance payments to producers in 2018 and 2019, on top of existing farm program support, has raised concerns by some U.S. trading partners, as well as market watchers and policymakers, that U.S. domestic farm subsidy outlays in those two years might exceed the annual spending limit of $19.1 billion agreed to as part of U.S. commitments to the WTO. Report Objectives This report examines whether the United States might exceed its WTO spending limit. As background, this report briefly reviews the WTO rules and disciplines on farm program spending. Then, it reviews the types of U.S. farm programs that are subject to WTO disciplinesâin particular, it focuses on programs that make direct payments to producers based on agricultural production activities. The review of farm programs includes a discussion of how U.S. compliance may be affected by changes made to U.S. farm programs under the 2018 farm bill (the Agricultural Improvement Act of 2018, P.L. 115-334 ), as well as by the two rounds of ad hoc direct payments made under the Market Facilitation Program initiated by the Secretary of Agriculture in 2018 and 2019 under other statutory authorities. The nature and timing of U.S. farm support program outlays are discussed in the context of relevant WTO commitmentsâin particular, how different types of program outlays are notified to the WTO and how they might count against the aggregate U.S. spending limit. Finally, this report examines current projections about farm program outlays for 2018-2019 and assesses the possibility of whether U.S. farm program spending might exceed the $19.1 billion spending limit in those years. WTO Disciplines on Farm Program Spending Farm support programs can violate WTO commitments in two principal ways: first, by exceeding spending limits on certain market-distorting programs, or second, by generating market distortions that spill over into the international marketplace and cause significant adverse effects for other market participants. In general, U.S. farm support outlays should be evaluated against both of these criteria for a potential violation of WTO commitments. However, this report focuses on the first potential pathway for a violation: excessive spending. AoA Defines Spending Disciplines WTO member nations have agreed to limit spending on their most market-distorting farm policies. The WTO's AoA spells out the rules for countries to determine whether their policies are potentially trade-distorting, how to calculate the costs of any distortion, and how to report those costs to the WTO in a public and transparent manner. (See the text box "WTO Classification of Domestic Support" below. More detail on WTO classifications of domestic support is provided in two appendices to this report: Appendix A , "WTO Domestic Support Commitments," and Appendix B , "U.S. Domestic Support Notifications.") Domestic farm subsidies under the AoA are measured using a specially defined indicator, the "Aggregate Measure of Support" (AMS). AMS encompasses two types of support provided as a benefit to agricultural producers: product-specific support (that is, benefits linked to a specific commodity) and non-product-specific support (general benefits not linked to a specific commodity). This distinction is important for evaluating compliance, as discussed below. In addition, some types of programs are not subject to spending limits under WTO commitments. The United States, along with 27 other original members of the WTO, agreed to establish ceilings for their non-exempt AMS, referred to as the amber box. The U.S. ceiling for amber box spending has been fixed at $19.1 billion since 2000. If the United States were to exceed its WTO annual spending limit, then U.S. farm support programs could be vulnerable to challenge by another WTO member under the WTO's dispute settlement rules. Some Program Spending May Be Exempt from Disciplines Not all farm support program outlays count against amber box spending limits. Certain domestic support outlays may be exempt from counting against the amber box spending limit if they meet one of four possible conditions ( Appendix A ). First, if a program's outlays are considered to be minimally or non-trade distorting (in accordance with specific criteria listed in Annex 2 of the AoA), then they may qualify as green box programs and not be included in the AMS. Second, if program spending is market-distorting but has offsetting features that limit the production associated with support payments, then they may qualify as blue box programs and not be included in the AMS. Finally, if AMS outlays are sufficiently small relative to the value of the outputâmeasured as a share of either product-specific or non-product-specific outputâthen they are not included in the amber box. In addition to these exemptions, the timing of outlays across crop, calendar, or marketing years may also influence the calculation of total AMS spending for any given year and help avoid exceeding the amber box spending limit during a particular time period. U.S. Farm Support Programs The U.S. Department of Agriculture (USDA) implements four general types of farm programs that provide payments (classified as AMS) directly to individual producers: Traditional farm p rograms authorized under Title I of the 2018 farm bill ( P.L. 115-334 ). These include the Market Assistance Loan (MAL), Agricultural Risk Coverage (ARC), Price Loss Coverage (PLC), Dairy Margin Coverage (DMC), and sugar programs. Payments under these programs during crop years 2014-2018 were authorized by the 2014 farm bill ( P.L. 113-79 ). These programs were modified by the 2018 farm bill and include payments made for crop years 2019-2023. Because of the way their payments are triggered, outlays under the MAL, DMC, and sugar programs are notified as product-specific AMS, whereas ARC and PLC payments are notified as non-product-specific AMS. Permanent disaster assistance programs include the Livestock Forage Disaster Program (LFP), Livestock Indemnity Program (LIP), Tree Assistance Program (TAP), and Emergency Assistance for Livestock, Honeybees, and Farm-Raised Fish Program (ELAP). Payments under all of these permanent disaster assistance programs are coupled to producer choices and notified as product-specific AMS. The federal crop insurance program provides premium subsidies to producers. Premium subsidies are statutorily defined as a percentage of a policy's total premium, and premiums vary with insured units, coverage levels, and crop values. Since 2012, USDA has notified crop insurance premium subsidies to the WTO as product-specific AMS, since they are coupled to producer crop choices. A d hoc programs may be authorized by the Secretary of Agriculture, outside of Congress, using authority under the Commodity Credit Corporation (CCC) Charter Act to make payments in support of U.S. agriculture. Two such programs are the trade assistance programs of 2018 and 2019. USDA has not yet notified any trade assistance payments to the WTO, nor has USDA announced the WTO classification it intends to use for such payments. Payments under U.S. conservation programs are generally deemed non-market-distorting and are notified as green box, where they are not subject to any spending limit. The traditional revenue support programs, as well as the disaster assistance and ad hoc payment programs, are implemented by USDA's Farm Service Agency (FSA) using mandatory CCC funding. The federal crop insurance program is implemented by USDA's Risk Management Agency (RMA) using mandatory funding from the Federal Crop Insurance Corporation. Farm Program Changes Under the 2018 Farm Bill The United States has instituted several farm program changes since early 2018 that could bring increased scrutiny from other WTO members. With respect to the current incarnation of traditional farm support programs, most were established under previous farm bills. They were reauthorized by the 2018 farm bill but with some modifications that might alter their treatment under WTO disciplines. In general, the 2018 farm bill incrementally shifts farm safety net outlays away from decoupled programs and toward coupled (and more market-distorting) programs. This was done by raising support levels for certain existing coupled programs, removing several of the coupled programs from individual farm payment limit requirements, and expanding the potential pool of family-farm payment recipients, thus weakening payment limit restrictions. Similarly, federal crop insurance coverage was expanded under the 2018 farm bill, thus increasing the potential for greater premium subsidy outlays. Coupled, Product-Specific Support Levels Raised for Selected Commodities The 2018 farm bill increased statutory, product-specific MAL rates for several program crops. MAL payments are coupled directly to actual harvested production (subject to a producer's participation choice). MAL payments may be triggered when the local market price for a MAL commodity falls below its statutory MAL rate. Raising the MAL loan rate has two effects: It increases the probability of triggering a coupled MAL payment when market prices are declining, but it decreases the maximum potential payment under the decoupled PLC program associated with that commodity. The potential for increased MAL payments has become more relevant under the 2018 farm bill, because all MAL benefits were removed from counting against annual USDA producer payment limits. Furthermore, the 2018 farm bill raised support levels for participating dairy producers under the DMC program. DMC payments are triggered when the monthly average of a formula-determined margin, between milk prices and feed costs per unit, falls below a producer-selected margin coverage level. DMC payments are made on a farm-level historical milk production base. Milk producers must participate in the DMC to be eligible for payments. Thus, DMC payments are treated as coupled. DMC, like its predecessorâthe Margin Protection Programâoperates without any limit on payments received. Coupled payments can influence producer production choices in favor of those farm activities expected to receive larger support payments. If such payments represent a significant share of a commodity's farm value and result in surplus production that moves into international markets, then they could attract the attention of competitor nations. Such spillovers, if measurably harmful to foreign export competitors or producers, could lead to challenges under the WTO's dispute settlement process. Decoupled, Non-Product-Specific Support Potentially Expanded Under ARC and PLC Of the direct payment programs, the ARC and PLC programs are partially decoupled from producer behavior: Payments are made to a portion (85%) of historical base acres irrespective of current-year plantings. However, ARC and PLC payment calculations use current market-year prices to determine if a payment has been triggered, thus partially coupling them to market conditions. The partial decoupling of both ARC and PLC is in deference to WTO rules that view decoupled payments as less distorting of markets than coupled payments. Furthermore, ARC's use of a moving average formula based on historical prices and yields is also in response to a WTO panel finding (under dispute settlement) to consider market conditions in setting program support levels. In contrast, PLC's use of a statutorily fixed reference price ignores market conditions. Similarly, ARC's revenue formula uses the PLC reference price as a floor price. Thus, ARC only reflects market conditions when prices are above PLC reference prices. As a result, both ARC and PLC could be market distorting when market prices are below the statutory reference prices for prolonged periods. By basing ARC and PLC payments on historical acres rather than current planted acres (i.e., current crop choices), the payments are partially decoupled, and USDA notified them as non-product-specific. As a result, ARC and PLC payments have been excluded from counting against amber box spending limits in the WTO since their origin in 2014 under the non-product-specific de minimis exclusion. PLC Program Changes That Expand Potential Payments Two changes to the PLC program under the 2018 farm bill include the option for producers to update their program yields (used in the PLC payment formula) and an escalator provision that could potentially raise a covered commodity's effective reference price (used in both the PLC and ARC payment rate) by as much as 115% of the statutory PLC reference price based on 85% of the five-year Olympic average of farm prices. Both of these options would likely be used by producers only when they offer the potential to expand program payments. ARC Program Changes That Expand Potential Payments The 2018 farm bill also specifies several changes to the ARC program. Among the changes, ARC will use a trend-adjusted yield to calculate its revenue guarantee. In addition, the five-year Olympic average county yield calculations will increase the yield floor (substituted into the formula for each year where the actual county yield is lower) to 80%, up from 70%, of the transitional county yield. This yield calculation is used to calculate the ARC benchmark county revenue guarantee. Both of these yield modifications have the potential to raise ARC revenue guarantees for producers, thus increasing the potential for payments when actual current-year yields or prices turn downward. Joint ARC and PLC Changes The 2018 farm bill offers producers the option in 2019 of switching between ARC and PLC coverage, on a commodity-by-commodity basis, effective for both 2019 and 2020. Beginning in 2021, producers again have the option to switch between ARC and PLC but on an annual basis for each of 2021, 2022, and 2023. This flexibility could allow producers to benefit from current market information to select the program, ARC or PLC, that offers the greatest potential to make payments. Both ARC and PLC payments are subject to annual USDA farm payment limits under the 2018 farm bill (unchanged from the 2014 farm bill). Several Product-Specific Payment Programs Exempted from Payment Limits In a change from previous farm policy, the 2018 farm bill removed several coupled, direct payment programs from annual farm payment limit requirements. These include benefits under MAL and the three permanent disaster assistance programs: LIP, TAP, and ELAP. DMC, like its predecessorâthe Margin Protection Programâoperates without any farm payment limit. All of these programs make product-specific amber box payments. The absence of a limit on benefits received by an individual farmer under these programs represents the potential for unlimited, fully coupled outlays that count against the U.S. amber box limit unless exempted under the PS de minimis exemption. Higher DMC and MAL support levels increase the potential for higher program payments during a market downturn when prices are lower. Weak market conditions and relatively low commodity prices (below MAL loan rates) would be needed to trigger payments under MAL. DMC payments are triggered by weak farm milk prices relative to feed costs. In contrast, disaster payments are triggered by natural disasters or other qualifying perils occurring at the farm level. Potential Pool of Payment Beneficiaries Expanded The 2018 farm bill made no changes to the "actively engaged in farming" criteria used to determine whether an individual is eligible for farm program payments. However, it modified the criteria for farm program eligibility. The definition of family farm is expanded to include first cousins, nieces, and nephews, thus increasing the potential pool of individuals eligible for individual payment limits on family farming operations. With respect to payment limits and the adjusted gross income (AGI) criteria, the 2018 farm bill left both the payment limit of $125,000 per individual ($250,000 per married couple) and the AGI threshold of $900,000 unchanged. Minor Increase to Sugar MAL Rate The U.S. sugar program does not rely on direct payments from USDA, and no changes were made to this status under the 2018 farm bill. Instead, USDA provides indirect price support via MAL loans to processors at statutorily fixed prices (which were raised 5% by the 2018 farm bill), while limiting both the amount of sugar supplied for food use in the U.S. market and the amount of sugar that may enter the United States under a series of tariff rate quotas. In its 2016 notification of domestic support to the WTO (the most recent notification year), USDA notified the implicit cost of the sugar program at $1.5 billion in market price support. The change in the sugar MAL rate is not expected to influence the United States' implicit sugar cost notification. Federal Crop Insurance Direct Support Expanded Federally subsidized crop insurance is available for over 100 agricultural commoditiesâincluding both program commodities and others. Federal crop insurance is permanently authorized by the Federal Crop Insurance Act (7 U.S.C. 1501 et seq. ) but is periodically modified by new farm legislation. The principal subsidy component of federal crop insurance is a premium subsidy that has paid for an average of 63% of the cost of buying crop insurance since 2014. Premiums (and premium subsidies) vary with the type of policy, insured unit, and coverage level selected. Thus, both the premium and its subsidy component are coupled to producer behavior. In its annual notifications to the WTO of domestic support outlays, USDA has declared the premium subsidies as product-specific direct payments to producers (i.e., product-specific AMS). The 2018 farm bill expanded the federally subsidized crop insurance program. In addition, the 2018 farm bill extended the authority for catastrophic policies to forage and grazing crops and grasses. It allows producers to purchase separate crop insurance policies for crops that can be both grazed and mechanically harvested on the same acres and to receive independent indemnities for each intended use. Annual USDA premium subsidiesâwhich have averaged $6.2 billion per year since 2014âcount against the U.S. amber box spending limit of $19.1 billion but are subject to potential exclusion at the commodity level under the product-specific de minimis exemption. Large Payments Expected Under Ad Hoc Trade Aid Programs During 2018 and 2019, the Secretary of Agriculture has used his authority under the CCC Charter Act to initiate two ad hoc trade assistance programs. USDA initiated the trade aid packages as part of the Administration's effort to provide short-term assistance to farmers in response to foreign trade retaliation targeting U.S. agricultural products. The first trade aid package was announced on July 24, 2018. It targeted production for selected agricultural commodities in 2018 and was valued at up to $12 billion. The second trade aid package was announced on May 23, 2019. It targeted production for an expanded list of commodities and was valued at up to an additional $16 billion. According to USDA, the two trade aid packages are structured in a similar manner and include three principal components ( Table 1 ): The Market F acilitation P rogram (MFP) provides direct payments to producers of certain USDA-specified commodities. MFP payments are administered by FSA. The Food P urchase and D istribution P rogram (FPDP) is intended to purchase unexpected surpluses of affected commodities such as fruits, nuts, rice, legumes, beef, pork, milk, and other specified products for redistribution through federal nutrition assistance programs. It is administered by USDA's Agricultural Marketing Service. The Agricultural Trade P romotion (ATP) program provides funding to assist in developing new export markets for affected U.S. farm products. It is administered by the USDA's Foreign Agriculture Service in conjunction with the private sector. The two years of trade assistance are valued at a combined $28 billion ( Table 1 ). The largest part of the aid is two years of MFP payments valued at a combined $24.5 billion. The United States has yet to notify spending to the WTO under any of the trade assistance programs, so the exact WTO spending classification is currently unknown. However, past practice can serve as a useful guide for the likely notification. The FPDP and ATP programs for 2018 and 2019 are expected to be implemented in a similar manner during both years. USDA outlays under food purchase and distribution programs have historically been notified to the WTO as green box compliant and thus not subject to any spending limit. Trade promotion programs, such as ATP, are not notified under domestic support, because they do not involve direct payments to producers. Thus, the FPDP and ATP programs are not expected to affect the United States' ability to meet its WTO commitments. However, the anticipated large outlays under the MFP programs have raised questions. Payments under the two MFP programs are structured differently during 2018 and 2019. As a result, they are likely to be notified under different WTO classifications. The specific manner of determining how payments are made to individual producers is likely to determine their WTO status. 2018 MFP Payments Are Likely to Be Notified as Product-Specific AMS USDA's MFP payments for 2018 are based on each farm's harvested production of eligible crops during 2018 times a fixed per-unit payment rate. Payments to dairy are based on historical production, while hog payments use midyear inventory data. Under this specification, 2018 MFP payments are likely to be notified as coupled, product-specific AMS and count against the U.S. annual spending limit of $19.1 billion (unless they are exempted under the product-specific de minimis exemption). USDA initially announced potential 2018 MFP payments of up to $10 billion. As of August 22, 2019, USDA reported that $8.59 billion in MFP payments had already been distributed to producers, including $7.07 billion to soybean producers, $483 million to cotton, $245 million to sorghum, $241 million to wheat, $182 million to dairy, $156 million to hogs, $133 million to corn, $42 million to fresh sweet cherries, and $20 million to shelled almonds. These MFP payments have to be added to all other non-exempt, product-specific payments for each of these commodities and then be evaluated against their individual product-specific de minimis exemptions. Both MFP payment caps and AGI criteria are relevant. However, the FY2019 Supplemental Appropriations for Disaster Relief Act ( P.L. 116-20 ) altered the AGI requirement as it applies to MFP payments such that it may be waived if at least 75% of AGI is from farming, ranching, or forestry-related activities. To the extent that producers expect similar MFP payments to occur in future years, product-specific payments can become market distorting in favor of those commodities with higher per-unit payments and subject to potential WTO challenge. 2019 MFP Payments Are Likely to Be Notified as Non-Product-Specific AMS USDA is making MFP payments for the 2019 trade assistance program under a different formulation that avoids identifying payments with a specific crop. Instead, the underlying product-specific MFP payment rates are weighted at the county level by historical planted acres and yields to produce a single per-acre MFP payment rate for the entire county. This county-specific rate is then applied to each producer's total planted acres for all eligible commodities within that county, irrespective of the share of planted acres for any particular crop. Thus, payments are coupled to a producer's having planted at least one eligible commodity within the county, but they are independent of which commodity or commodities were planted. Under this specification, the 2019 MFP payments would appear to be coupled to planted acresâa producer has to plant an eligible crop to get a paymentâbut non-product-specific, thus possibly notifiable as non-product-specific AMS. Will U.S. Farm Spending Comply with WTO Limits in 2018 and 2019? The United States has notified its farm program support outlays through the crop year 2016. Under a normal timeline, USDA would notify spending for the crop year 2017 in the fall of 2019. Notification of domestic support for crop year 2018 would not be expected before 2020. Similarly, notification of domestic support outlays for crop year 2019 is not expected before 2021. U.S. compliance with WTO spending limits for 2018 and 2019 cannot be definitively known until notifications for those crop years have been released. As a result, the delay in notification may inhibit or deter another WTO member from bringing a case, assuming that MFP payments are not extended beyond 2019. This section analyzes available data on U.S. farm program payments for crop years 2017, 2018, and 2019 to evaluate the potential for the United States to remain in compliance with its amber box spending limit of $19.1 billion, particularly with the addition of large MFP payments in 2018 and 2019. There are several questions that will largely determine whether the United States remains in compliance with its amber box spending limit. 1. How will USDA classify the MFP payments for 2018 and 2019 in its notifications to the WTO? 2. How will market conditions and commodity prices evolve in 2019 with respect to final crop values and product-specific de minimis exemptions? 3. What will be the final value of total U.S. farm output in 2019 for evaluating the 5% non-product-specific de minimis exemption threshold against total non-product-specific AMS outlays? 4. How will market conditions affect decoupled ARC and PLC payments and total non-product-specific outlays in 2019? 5. Will the U.S.-China trade dispute continue into 2020, and if so, will a third year of trade assistance be in the offing? In response to the first question, the 2018 MFP payments appear to be coupled, product-specific AMS, whereas 2019 MFP payments appear to be non-product-specific AMS. Thus, different de minimis exemptions will be important for these two programs when evaluating compliance in 2018 and 2019. Sources for Farm Program Outlay Data for 2018 and 2019 To conduct an analysis of the potential WTO compliance of U.S. farm program spending for 2017, 2018, and 2019, data are drawn from several sources. Whenever available, actual USDA program outlays are used. For example, FSA estimates DMC outlays for 2019 at approximately $300 million. Federal crop insurance premium subsidy outlays are available for the 2018 and 2019 crop years from USDA's RMA. When actual data are unavailable for any major farm program (most notably under ARC and PLC), then the projected spending data from the Congressional Budget Office (CBO) baseline for farm programs are used. Wherever values are not available from either USDA or CBO, then the 2017 value is repeated for 2018 and 2019. With respect to MFP program outlays, USDA has not released any official payment data on outlays under the 2018 or 2019 MFP programs, although some information has been released episodically to various news media (for example, see footnote 42 ). CRS relies on those media reports for information on 2018 MFP payments. Final MFP payments for 2018 are projected by CRS at $8.7 billion. The full $14.5 billion for 2019 MFP payments is incorporated into the WTO notification projection for 2019. Compliance Hinges on the Non-Product-Specific De Minimis Threshold According to this analysis, U.S. amber box spending for 2018, projected at over $14 billion, fits within the U.S. spending limit of $19.1 billion ( Table 2 ). However, if realized, this would be the largest U.S. amber box notification since 2001 ( Figure 1 ). Large product-specific outlays to soybeans (projected at $8.275 billion), wheat ($1.153 billion), cotton ($990 million), and peanuts ($231 million) in particular exceed their product-specific de minimis exemptions and contribute to the large amber box projection for 2018. A more uncertain result is found for 2019. The expansion of MFP payments to $14.5 billion in 2019, and their shift to a non-product-specific WTO classification, suggests that the United States may potentially approach or exceed its $19.1 billion amber box spending limit. In this analysis, U.S. compliance with WTO spending limits in 2019 depends on how eventual aggregate non-product-specific outlays compare with the final 5% non-product-specific de minimis threshold as evidenced by the two scenarios presented in Table 2 and discussed below. Scenario 1: Non-Product-Specific Outlays Not Exempted Under De Minimis Under scenario 1, the value of total U.S. farm output for 2019 is projected at $378 billion ( Figure 1 ). This is roughly equivalent to a three-year average of $377.954 billion for crop years 2014-2016. If realized, the $378 billion in total farm output would yield a 5% non-product-specific de minimis threshold of $18.9 billion. Total non-product-specific outlays for 2019 are projected at $18.92 billionâjust in excess of the non-product-specific de minimis exemption threshold. As a result, the full $18.92 billion of non-product-specific AMS would count against the amber box spending limit. When combined with the projected $5.119 billion in product-specific, non-exempt AMS outlays, total U.S. amber box outlays in 2019 would be a projected $24.039 billionâin excess of the $19.1 billion spending limit. Scenario 2: Non-Product-Specific Outlays Exempted Under De Minimis Under scenario 2, an entirely different result is produced with only a minor increase in the projected value of total U.S. farm output at $380 billion ( Figure 2 ), up $2 billion from scenarioÂ 1. The choice of $380 billion in the total output value in scenario 2 highlights the sensitivity between compliance and noncompliance based on a small (0.53%) change in total output value between the two scenarios. In this scenario, the 5% non-product-specific de minimis threshold is $19 billion, and the entire projected non-product-specific AMS total of $18.92 billion would be exempted from counting against the amber box spending limit. As a result, total U.S. amber box outlays under scenario 2 would be equal to the projected product-specific, non-exempt AMS total of $5.119 billionâwithin the amber box spending limit. Other Potentially Influential Factors Other factors that could alter this analysis are the final realized 2019 market year average farm prices and county revenue values used to determine outlays for major program crops under the MAL, PLC, and ARC programs. Also, crop yields for corn and soybeans in 2019 are still uncertain due to the delayed planting and late crop progress in several important growing regions. Better-than-expected yields or higher-than-expected harvests could push market prices lower, whereas lower yield or harvest estimates could help to raise farm prices. Also, a continuation or possibly a deepening of the U.S.-China trade dispute could keep downward pressure on commodity markets. If the final price and revenue values are lower than currently projected, then program payments under ARC and PLC could be larger than those used in this analysis. This could increase aggregate non-product-specific outlays and increase the possibility of exceeding the 2019 amber box spending limit. At the same time, lower market values, if realized, would contribute to a lower total valuation for U.S. farm output and a subsequent lower 5% non-product-specific de minimis threshold for aggregate non-product-specific outlays to surpass, thus affecting the potential non-product-specific de minimis exemption status. In contrast, resolution of the U.S.-China trade dispute and an improved demand outlook could have the opposite effect of raising prices and commodity output values while lowering payments under countercyclical farm programs such as MAL, PLC, and ARC. Conclusion According to the scenarios developed in this analysis, including a projected set of market conditions, the United States may potentially exceed its cumulative amber box spending limit of $19.1 billion in 2019. Excessive amber box payments in 2019 could result from the addition of large MFP payments to the traditional decoupled revenue support programs ARC and PLC. However, this analysis found that U.S. compliance with WTO amber box spending limits was very sensitive to a change in market conditions and market valuations. Noncompliance hinges on many key market factors that are currently unknown but would have to occur in such a manner as to broadly depress commodity prices through the 2019 marketing year (which extends through August 31, 2020, for corn and soybeans). Another crucial uncertainty is how the U.S.-China trade disputeâwith its deleterious effects on U.S. agricultural marketsâwill evolve. Resolution of the U.S.-China trade dispute and an improved demand outlook could lead to higher commodity prices and output values while lowering payments under countercyclical farm programs such as MAL, PLC, and ARC. Such a turn of events could help facilitate U.S. compliance with its WTO spending limits. Appendix A. WTO Domestic Support Commitments WTO member nations have agreed to limit spending on their market-distorting farm policies. With respect to farm program outlays, the AoA spells out the rules for countries to determine whether their policies are potentially trade-distorting, how to calculate the costs of any distortion, and how to report those costs to the WTO in a public and transparent manner. Aggregate Measure of Support (AMS) Domestic support is measured in monetary terms and expressed as the AMS. Domestic support includes both direct and indirect support in favor of agricultural producersâin other words, it includes any government measure that benefits producers, including revenue support, input subsidies, and marketing-cost reductions. Domestic subsidies include both budgetary outlays and revenue forgone by governments. Such support is measured at both the national and subnational level (i.e., state, county, or other local level). Producer-paid fees are deducted from the AMS. Domestic support should be calculated as closely as practical to the point of first sale of the basic agricultural product concernedâpreferably at the farm gate. Support measures directed at processors should be included to the extent that such measures benefit producers. AMS encompasses two types of support provided as a benefit to agricultural producers: product-specific support (that is, benefits linked to a specific commodity) and non-product-specific support (a general benefit not linked to a specific commodity). Certain AMS outlays may be exempt from counting against any WTO spending limit if they comply with criteria defined under either the green or blue box or if their sum is sufficiently small as to be deemed benign under the de minimis exemption. (Exemptions are described below.) Amber Box Outlays Non-exempt AMS outlays are referred to (or classified) as "amber box" spending and subject to a strict spending limit. Under WTO commitments, cumulative U.S. amber box outlays are limited to $19.1 billion annually. Goal of AMS Exemptions By leaving no constraint on green or blue box compliant spending, while imposing limits on amber box spending, the WTO's AoA classification structure encourages countries to design their domestic farm support programs to be more green and blue box compliant and less market-distorting. Green Box Exemptions Green box programs are minimally or non-trade-distorting and are not included in the AMSâthus they are not subject to any spending limits. Examples of green box programs include domestic food assistance programs, conservation and environmental programs, and general services such as research, inspection services, and extension activities. In its most recent notification to the WTO, the United States declared $119.5 billion in outlays for programs that met green box criteria during the 2016 crop year. A key to evaluating whether a program's annual outlays qualify for the green box exemption is to assess how payments are triggered. If payments are fully decoupled from producer behavior and market conditions and instead are based on some other independent criteria such as historical planted acres, then they could potentially be excluded from the AMS under the green box criteria. For example, Direct Payment outlays under the 1996, 2002, and 2008 farm bills were fully decoupled and thus exempted from the AMS under green box criteria. If, instead, payments are coupled to current producer behavior (such as planted acres or harvested output) or to market conditions (such as price movements or trade levels), then they likely are not eligible for exemption from the AMS under green box criteria. Blue Box Exemptions Blue box programs are described as market-distorting but production-limiting. Blue box programs generally have a supply-control feature that partially offsets their trade-distorting effects. For example, payments may be based on either a fixed area or yield or a fixed number of livestock or are made on less than 85% of base production. As such, blue box programs are not included in the AMSâthus they are not subject to any spending limits. The United States has not notified any program spending under the blue box criteria since 1995. De Minimis Exemptions from AMS Programs outlays that fail to meet green or blue box criteria are part of the AMS. However, there are two additional exemptions that may prevent AMS outlays for certain programs from counting against the amber box spending limit. If AMS spending is sufficiently small (as described below), then it is deemed to be benign and excluded from counting under the AMS's amber box. There are two types of de minimis exemptions: product-specific and non-product-specific. Product-specific outlays include all coupled outlays that are linked to the current planting or production of a specific commodity. Under the product-specific de minimis exemption, if total product-specific program outlays for a commodity are less than 5% of the value of production for that commodity, then such spending may be excluded from the country's AMS. Product-specific outlays are evaluated on a commodity-by-commodity basis against the 5% de minimis threshold. N on- product -specific outlays include all AMS outlays that are decoupled from the specific commodities that are actually produced but are coupled to a non-commodity-specific measure such as market conditions or national average prices. All non-commodity-specific AMS outlays are aggregated and evaluated against 5% of the total value of U.S. agricultural output. Coupled, Product-Specific Payments If the payment is based on the planted or harvested area or output of a specific commodity during the crop year, then program payments would be coupled directly to farmer behavior. Such payments would likely be notified as product-specific AMS spending and would count against the amber box ceiling. However, product-specific payments could potentially be excluded from counting against the AMS total by the product-specific de minimis exclusionâif they are less than 5% of the value of that specific commodity's output during that crop year. Coupled or Partially Coupled, Non-Product-Specific Payments If the payment is based on a formula that pools the planted or harvested area or output of several commoditiesâfor example, as a single county-level paymentâbut where the farmer need only have produced at least one of the pooled commodities to be eligible for the full county payment, then the payment could potentially be notified as coupled, non-product-specific AMS. Both ARC and PLC outlays on base acres are notified this way. However, ARC and PLC payments made on generic base under the 2014 farm bill were notified as commodity-specific payments, since the farmer had to plant the specific crop to receive a payment. If the payment is based on a historical measure such as planted or harvested acres or output for some past period of time, but where some production of an eligible crop must occur during the current crop year to be eligible for a payment, then the payments would likely be notified as partially decoupled, non-product-specific payments. Annual Notification of Compliance To provide for monitoring and compliance of WTO policy commitments, each WTO member is expected to submit annual notification reports of domestic support program spending within the context of the agreed-to WTO commitments. However, there is no enforcement mechanism or penalty for late notifications. The annual period used by each WTO memberâcalendar, fiscal, or marketing yearâis specified in the "schedule of concessions" (also referred to as the country schedule). The WTO's Committee on Agriculture reviews the annual notifications. However, the notification reports are public documentsâthey are posted online by the WTO where they are available for review (and possible challenge) by any other member or third party. Appendix B. U.S. Domestic Support Notifications The most recent U.S. notification to the WTO of domestic support outlays (made on October 31, 2018) is for the 2016 crop year. The majority of U.S. domestic agricultural program outlays have been categorized as indirect support that adhere to green box criteria ($119.5 billion) and thus have not been subject to any payment limit. In addition, the United States has traditionally relied on the de minimis exemptions to exempt substantial program outlays from counting against the amber box spending limit. In 2016, the United States notified $16 billion in AMS outlays (prior to applying eligible exemptions), including $8.6 billion of product-specific spending and $7.4 billion of non-product-specific spending. However, the United States notified $12.2 billion in de minimis exemptions, thus reducing the original $16 billion AMS to just $3.8 billion in amber box spending to count against the $19.1 billion spending limit. With respect to the non-product-specific de minimis exemption, the total value of U.S. national agricultural output in 2016 was $355.5 billion. As a result, the 5% de minimis non-product-specific threshold was $17.8 billion. Since non-product-specific outlays of $7.4 billion were well below this threshold, they were exempted in total from counting against the amber box spending limit. In addition, the United States notified $4.8 billion in product-specific de minimis exemptions. An example of a product-specific de minimis exemption is corn. In 2016, U.S. corn production was valued at $51.3 billion. Thus the product-specific 5% value threshold for corn was $2.565 billion. The United States notified $2.345 billion in AMS for corn in 2016, but since it was less than the 5% threshold, the entire amount was exempted from counting against the amber box limit. Similarly, product-specific exemptions for other crops made up the difference for the $4.8 billion in total product-specific exemptions. The De Minimis Exemption Aids U.S. Compliance Since 1995, the United States has stayed within its amber box spending limits ( Figure B-1 ), but this compliance has hinged on use of the de minimis exemptions in a number of years (e.g., 1999-2001 and 2005) to exclude substantial AMS spending from counting against the amber box limit. Since the 2002 farm bill ( P.L. 107-171 ), the United States has designed several of its major farm revenue support programs to meet non-product-specific criteria. Since the non-product-specific de minimis exemption threshold is measured as a share of the total value of U.S. agricultural output, it is associated with a very large exemption threshold. From 2010 to 2016, the value of total U.S. agricultural output has averaged $376.8 billion, which implies an average non-product-specific 5% de minimis threshold of $18.8 billion. The manner by which the United States has notified its amber box outlaysâthat is, non-product-specific versus product-specificâhas changed over the years (particularly for federal crop insurance subsidies) in such a way as to facilitate compliance with the amber box spending limit. Generally, non-product-specific de minimis exemptions are much larger than product-specific de minimis exemptions ( Figure B-1 ). Since 201 0, non-product-specific de minimis exclusions have averaged $4.8 billion annually, compared with average product-specific exclusions of $3.8 billion. The largest non-product-specific exemption was reached in 2011, when $7.5 billion in net crop insurance indemnities was exempted. In 2011, U.S. agricultural output value was $380.8 billion, which, in turn, yielded a non-product-specific 5% value threshold of $19.0 billion. Starting in 2012, USDA switched to notifying crop insurance premium subsidies for each individual insured commodity as product-specific. Since then, crop insurance premiums are evaluated at the individual crop level and eligible to be exempted under the product-specific de minimis exemption if they do not exceed 5% of the value of that commodity's output when combined with other PS outlays for that commodity. Since 2012, over $5 billion in product-specific crop insurance premium subsidies have been exempted each year. As a result of this crop insurance notification switch, coupled with relatively high farm prices during 2012 and 2013 that reduced payments on the non-product-specific revenue support programs, product-specific de minimis exemptions surpassed non-product-specific exemptions during those two years. Then, starting in 2014, under program changes authorized by the 2014 farm bill ( P.L. 113-79 ), the value of non-product-specific exemptions again surpassed product-specific exemptions. This was driven by large non-product-specific outlays under the new, decoupled revenue support programs ARC (which incorporated high farm prices into its payment formula) and PLC. Annual ARC and PLC outlays averaged a combined $6.7 billion during 2014-2016, including $4.7 billion for ARC and $2.0 billion for PLC.


Introduction The poverty rate among Americans aged 65 and older has declined by almost 70% in the past five decades. In 2017, 4.7 million people aged 65 and older had income below the federal poverty thresholds. The poverty rate (i.e., the percentage who were in poverty) among the aged fell from 28.5% in 1966 to 9.2% in 2017. Several government programs have contributed to older Americans' increased incomes, including Old Age, Survivor and Disability Insurance (OASDI, commonly known as Social Security) and Supplemental Security Income (SSI). However, certain groups of older Americans, such as widows, divorced women, and never married men and women, are still vulnerable to poverty. Congress may be interested in the effect of existing programs that reduce poverty, as well as potential proposals aimed at improving income among vulnerable groups of older Americans. This report presents the time trends and current status of poverty rates among Americans aged 65 and older, as well as poverty rates among different demographic groups of the aged. This report also summarizes federal programs that may provide income to the aged poor. Over the past several decades, criticisms of the official poverty measure have led to the development of an alternative research measure called the Supplemental Poverty Measure (SPM), which the Census Bureau also computes and releases. This report compares the official aged poverty measure with the SPM and provides statistics measuring the impact of federal cash benefits (mainly Social Security and SSI), taxes, and in-kind benefits (such as housing, energy, and food assistance) on aged poverty. How the Official Poverty Measure Is Computed Poverty status is determined by comparing a measure of a family's resources against a measure of its needs. Families whose resources are less than a dollar amount representing an austere level of "needs" are considered to be in poverty. However, defining resources and needs is not straightforward. The official poverty measure is based on 48 dollar amounts called poverty thresholds that vary by family size and composition, but not by geographic area. These official thresholds were developed in the 1960s, were based on food consumption in 1955 and food costs in 1961, and are updated annually for inflation. As such, they reflect a level of deprivation based on a restrictive food budget, but are not based on a full measurement of families' and individuals' needs and their associated costs. Family resources are measured in dollars and are based on cash income before taxes. All poverty data presented in this report are estimates based on a survey, and like all survey estimates, they are subject to sampling and nonsampling error. The poverty research community has discussed the official poverty measure's limitations for decades. Its use of pretax income renders it unhelpful in gauging tax credits' effects on the low-income population. It does not consider in-kind (noncash) benefits, such as housing subsidies as income, and as a result cannot (on its own) illustrate such benefits' effects on the poor population. Although the measure of need represented by the thresholds is updated every year for overall inflation, it may not accurately reflect the current costs of basic needs, because prices for goods and services related to basic needs may not rise at the same rate as prices for luxury items. Since the official measure's initial development, new data sources have offered more detail on the goods and services families consume, but developing an approach that defines basic needs and determines available resources for families to spend on those needs has taken decades of research and discussion. The SPM resulted from that research, and is described briefly in the section, " The Supplemental Poverty Measure ." Notwithstanding the official measure's limitations, for more than 50 years, it has provided a consistent measure of poverty in the United States, with few methodological changes over that time, and it is based on empirical measures of need (food budgets and food consumption, albeit in 1961 and 1955, respectively) . For these reasons, trends for the aged population based on the official measure are discussed below. Poverty Status of the Aged The proportion of Americans aged 65 and older who lived in poverty has declined significantly in the past 50 years. In 1966, 28.5% of Americans aged 65 and older had family incomes below the poverty thresholds. By 2017, the poverty rate among older Americans had dropped to 9.2% (see Figure 1 ). However, whereas the proportion of persons aged 65 and older who live in poverty has fallen over the past five decades, the number of aged poor has increased since the mid-1970s as the total number of elderly people has grown. In 1974, 3.1 million people aged 65 and older had income below the federal poverty thresholds, whereas in 2017, 4.7 million people aged 65 and older had income below the thresholds. The poverty rate for Americans aged 65 and older historically was higher than the rates for adults aged 18 to 64 and children under the age of 18, but today it is the lowest among those three age groups. In 1966, the poverty rate among persons aged 65 and older was 28.5%, compared with 10.5% among adults aged 18 to 64 and 17.6% among children under the age of 18. In 1974, the aged poverty rate fell below the rate among children under the age of 18, and by the early 1990s, the aged poverty rate had fallen below the rate among adults aged 18 to 64. The elderly poverty rate has remained lower than the nonelderly adult poverty rate since that time. The poverty rate among Americans aged 65 and older was 9.2% in 2017, which was lower than the 11.2% poverty rate among adults aged 18 to 64 and the 17.5% poverty rate among children under 18 years old (see Figure 2 ). Poverty Among the Aged by Demographic Characteristics Poverty status among Americans aged 65 and older generally varies across different demographic groups. This section describes the aged population's poverty status for selected demographic characteristics based on age groups, gender, marital status, and race and Hispanic origin. Age People aged 80 and older have a higher poverty rate than older Americans under the age of 80. Figure 3 displays the percentage of Americans aged 65 and older who were in poverty by age groups from 1975 to 2017. In 1975, the poverty rate among individuals who were in the oldest age group (80 and older) was 21.5%, compared with 16.4% among Americans aged 75-79, 14.4% among those aged 70-74, and 12.5% among those aged 65-69. Poverty rates declined over the past 40 years, and in 2017, approximately 11.6% of people aged 80 and older lived in poverty (a 10 percentage-point reduction from 1975), but the share was still higher than the 9.3% poverty rate among individuals aged 75-79, 8.6% among those aged 70-74, and 7.9% among those aged 65-69. Individuals aged 80 and older might be more vulnerable to income risks because they are more likely to have lower or no earnings (as they phase out of the labor force), exhaust existing retirement resources, have reduced purchasing power in certain defined benefit pensions, and incur higher medical expenses. Women aged 80 and older had the highest poverty rate among elderly women and men in all age groups (see Figure 4 ). In 1975, the poverty rate among women aged 80 and older was 25.1%, compared with 15.2% among men in the same age group and 14.9% among women aged 65-69. In 2017, the poverty rate of women aged 80 and older declined to 13.5%, compared with 8.7% among men in the same age group and 8.6% among women aged 65-69. Poverty status among individuals aged 80 and older varies depending on whether the person is living with other family members. Poverty rates for those living with other family members in 2017 were less than half the rates for those living alone. In 2017, the poverty rate for men aged 80 and older was 6.3% if they lived with other family members, and 15.5% if they lived alone (see Figure 5 ). In the same year, the poverty rate for women aged 80 and older was about 8.2% if they lived with other family members and 18.6% if they lived alone. Marital Status Americans aged 65 and older who were married and living together at the time of the survey generally had a lower poverty rate than those who were not married (see Figure 6 ). In 1975, about 53.0% of individuals aged 65 and older were married and living together, and this percentage was slightly higher at 56.8% in 2017. Approximately 8.2% of married Americans aged 65 and older and living together had family incomes below the federal poverty threshold in 1975, and this rate declined to 4.4% in 2017. During the same period, the poverty rate among aged nonmarried Americans decreased from 23.4% to 15.5%. Figure 7 shows the poverty rate in 2017 by gender and marital status at the survey time. Married couples generally have significantly lower poverty rates than nonmarried individuals, and widowed and divorced women aged 65 or older are more likely to be in poverty than their male counterparts. Among women aged 65 and older, about 4.3% of married women had total incomes below the official poverty threshold in 2017, compared with 13.9% of widows, 15.8% of divorced women, and 21.5% of never-married women. In contrast with the widowed and divorced men in this age group, who are less likely to be poor than widowed and divorced women, poverty rates are also high among never-married men, at a rate of 22.5% in 2017. In 2017, roughly 10% of individuals aged 65 and older lived in families with children under 18 years old. Poverty rates among aged men and women varied by the presence of children in the family (see Figure 8 ), although not always in the same direction. Among married men and women, a relatively higher share of those with children lived in poverty (8.0% for men and 7.5% for women) than those without any child (4.2% for men and 4.1% for women). Similarly, among never-married individuals, those with children also had higher poverty rates (25.4% for men and 22.7% for women) than those without children (22.4% for men and 21.4% for women). However, while widows and divorced women with children had higher poverty rates (14.8% and 17.9%, respectively) than those without children (13.8% and 15.6%, respectively), among men the pattern was reversed: 8.1% of widowers with children and 7.9% of divorced men with children were in poverty, lower than their childless counterparts (10.1% and 13.2%, respectively). Race and Hispanic Origin18 Poverty rates vary by race and Hispanic origin, as shown in Figure 9 . In surveys, Hispanic origin is asked separately from race; accordingly, persons identifying as Hispanic may be of any race. The poverty rate for Americans aged 65 and older has decreased among persons identifying as black or African American alone, non-Hispanic white alone, and Hispanic from 1975 to 2017. Among aged African Americans, the poverty rate decreased from 36.3% in 1975 to 19.3% in 2017; among the aged non-Hispanic white population, from 13.0% to 7.0%; and among the aged Hispanic population, from 27.7% to 17.0%. During the period for which data are available, the poverty rate for the aged Asian population ranged between 10.0% and 16.0% with no consistent directional trend. As shown in Figure 10 , among the racial and Hispanic origin groups, in 2017, the poverty rate was lowest among the aged non-Hispanic white population (5.8% for men and 8.0% for women) and highest among the aged black population (16.1% for men and 21.5% for women). Federal Programs for the Aged Poor Social Security and Supplemental Security Income (SSI) are the two main federal programs that provide cash benefits to the aged poor. In 2017, Social Security accounted for 78.3% of total money income among aged individuals whose family incomes were below 100% of the poverty threshold and 81.3% among those with family incomes below 125% of the poverty threshold (see Table 1 ). In the same year, SSI and other cash public assistance accounted for 11.0% of the total money income for aged individuals whose family incomes were below 100% of the poverty threshold and 7.6% for those with family incomes below 125% of the poverty threshold. Social Security is a federal social insurance program that provides benefits to insured workers and their eligible family members, provided the workers worked in jobs covered by Social Security for a sufficient number of years and meet certain other criteria. Social Security is not designed solely for the poor, but benefits are weighted to replace a greater share of career-average earnings for low-paid workers than for high-paid workers. One study suggests that increased Social Security benefits explained most of the decline in poverty among the aged that occurred during 1967 to 2000 (see Figure 1 ). Social Security benefits alone, however, would not be sufficient to eliminate poverty for a large number of older Americans. The poverty rate among Social Security beneficiaries aged 65 and older was 6.5% in 2017. Although the Social Security program contains a special minimum benefit provision that increases benefits to workers who have many years of low earnings and meet certain other criteria, this provision has virtually no effect on the benefits paid to today's new retirees. According to the Census Bureau's analysis, 30.0% of Americans aged 65 and older would live in poverty without Social Security benefits, holding other resources and expenses constant. SSI is a federal assistance program that provides monthly cash benefits to aged, blind, and disabled individuals who have limited income and assets. The program is intended to provide a minimum level of income to adults who have difficulty meeting their basic living expenses due to age or disability and who have little or no Social Security or other income. Some studies show that the SSI program does not provide effective income protection for the oldest Americans. For example, the maximum SSI benefit in 2017 was 75% of the poverty threshold for an elderly single person and 89% of the poverty threshold for an elderly married couple. Thus, aged SSI recipients may still be impoverished. Furthermore, the maximum SSI benefit is more generous for married couples, who are less likely to need assistance than elderly single individuals. Some researchers also suggest that restructuring the Social Security special minimum benefit provision could be more effective in alleviating poverty than making certain reforms to the SSI program, although a combination of reforms to both programs could be useful if regular Social Security benefits are greatly reduced in the future. The federal government also provides certain noncash benefits to help the elderly poor, such as housing subsidies and Supplemental Nutrition Assistance Program (SNAP) benefits. Congress funds housing subsidy programs, ranging from public housing to government subsidies to renters, to help poor and vulnerable populations meet their housing needs. SNAP is designed primarily to increase the food purchasing power of eligible low-income households to help them buy a nutritionally adequate low-cost diet. Individuals aged 65 and older may also receive a small portion of income from some other federal programs, including refundable tax credits, school meals, Temporary Assistance for Needy Families (TANF), the Low Income Home Energy Assistance Program (LIHEAP), unemployment insurance, workers' compensation, and the Special Supplemental Nutrition Program for Women, Infants and Children (WIC). The official poverty measure is of limited value for analyzing various federal programs' effects on poverty status among the aged population, but the Supplemental Poverty Measure (SPM), discussed in the following section, addresses some of those impacts. The Supplemental Poverty Measure The official poverty measure was developed in the 1960s and was established by the Bureau of the Budget (later the Office of Management and Budget, OMB) for measuring the official poverty rate in the United States. Under the official poverty measure, an individual is counted as poor if his or her family's pretax money income falls below the poverty threshold. One of the main criticisms of the official poverty measure is that pretax money income excludes the value of government noncash benefits (such as health insurance, SNAP, or housing assistance) provided either privately or publicly. It also does not consider taxes paid to federal, state, or local governments, or tax benefits (such as the Earned Income Tax Credit) that families might receive. The Census Bureau's SPM was designed to address the official poverty measure's limitations and has been published since 2011. The SPM poverty thresholds measure a standard of living based on expenditures for food, clothing, shelter, and utilities (FCSU) and "a little more" for other expenses. Its thresholdsâdollar amounts related to the level of need for a familyâvary by whether the family rents, owns a home with a mortgage, or owns a home without a mortgage (the latter of which is more common among the aged population than it is among younger populations). It computes the amount of resources available after taxes, includes the values of noncash benefits, and subtracts some expenses (such as work-related expenses and medical out-of-pocket expenses, the latter of which tend to be higher among the aged than among younger populations). In 2017, the most recent data available, the SPM poverty rate for persons aged 65 and older was 14.1% in 2017, compared with 9.2% using the official poverty measure. This higher poverty rate results largely from higher medical out-of-pocket costs among the aged, in spite of lower housing expenses among the aged, who are more likely to have paid off their mortgages. Income Sources' Impact on Poverty of the Aged Per the SPM The data presented in Figure 11 illustrate how changing the definition of the SPM to exclude a particular resource or expenditure can affect the SPM poverty rate among Americans aged 65 and older. The data do not consider the behavioral effects that may occur if the resource or cost were to be eliminated in reality. Social Security has the greatest effect, by far, on the poverty status of the aged population. Removing Social Security as a resource while holding the other resources and expenditures constant would increase the SPM aged poverty rate by more than 34.6%. Among the other resources, SSI, housing subsidies, and SNAP had the next-largest impacts on the SPM poverty rate, but were a full order of magnitude smaller (around a single percentage point instead of tens of percentage points). The remaining resources affected the SPM poverty rate by much less than one percentage point. Three of the resources shown are related to child rearing (child support, school lunch, and WIC), and tax credits are often targeted to families with children. Households headed by people aged 65 and older are less likely than nonelderly households to have children present in the family. Among the expenses considered in the SPM but not considered in the official measure, medical out-of-pocket costs had the largest effect: deducting those costs from family income raised the SPM poverty rate by 5.4%. Given that the aged population tends to have greater medical need and higher out-of-pocket health care costs than younger populations, it is perhaps not surprising that medical costs had a larger effect than the other costs shown in the figure. The remaining costs were largely related to work, and, congruent with the aged population's lower likelihood to be working compared with younger populations, these costs affected the aged population's SPM poverty rate by less than one percentage point. Additional Considerations Poverty Not Measured for Certain Populations Approximately 1.2 million persons in nursing homes are aged 65 or older. Poverty status is not measured for the institutionalized population, which includes persons in nursing homes, prisons, or military personnel living on base. This exclusion is not trivial considering that the population in nursing homes is about one-fourth as large as the 4.7 million persons aged 65 or older who were in poverty in 2017. Health Status Not Directly Included in Poverty Measures Poverty is used as a measure of well-being, but it measures only economic well-being and does not directly include a person's health status. Health status may influence the amount and types of income a person receives (by affecting, for example, ability to work or receive disability benefits) and is thus considered indirectly. However, the noneconomic aspect of well-being that comes from good health is not considered in the poverty measures discussed in this report. Furthermore, in the SPM, medical out-of-pocket expenses are considered, but the overall value of health insurance programs to the individual, which may well exceed out-of-pocket costs for medical care or insurance premiums, is not. Considering that Medicaid is an important vehicle for long-term care, the benefits Medicaid provides to the aged population could be characterized as fulfilling needs that are not solely medical in nature, but have economic value as well.