Close reading means that we read something very attentively, paying a lot of attention to it. Ideally, we should also underline important parts and make annotations - so the correct answer is indeed "annotating" - making notes and comments on the text.
The following sentence best paraphrases the passage:
"Swift maintains that, if asked, people who have lived in poverty their entire lives would say that they would rather have been sold for food at one year of age."
