Chapter 17: Domestic Policy

Part II (pp. 631-648)

Social Welfare Policies Today: Income Security Programs

• Protect people against loss of income due to retirement, disability, unemployment or deal or absence of family breadwinner– Non-means-based programs: program where benefits are

provided irrespective of the income or means of recipients

– Old age, survivors, and disability insurance– Social Security– Unemployment

– Means-tested programs: Income security program intended to assist those whose incomes fall below a designated level

– Supplemental Security Income– TANF– Family and Child Support Act

Social Security

• Current workers pay a tax that goes directly towards providing benefits for retirees

• 2004 7.65% on all wages up to $87,900– Regressive tax: captures larger proportions of

incomes from lower- and middle-income individuals– Flat tax: everybody pays the same fraction of income

in taxes (i.e. 5% on all incomes)– Progressive tax: tax where lower-income entities pay

a lower fraction of their income in taxes than do higher-income entities.

Here's how it works:Let's say the tax is $800 dollars per year. Under this Regressive Tax system, that's $800 for everyone, regardless of their income.If you have a part-time job and earn $2,600 per year, an $800 tax bill means you're paying about 30% of your income in taxes.

If you earn $8,000 a year working at the local movie theater, you get to watch all the latest flicks, but you're not going to be buying a yacht or retiring anytime soon. $800 in taxes means you're paying 10% of your income in taxes.

If your cousin with the business degree earns $80,000 a year at some big company in town, $800 translates to just 1% of her income. 

 

Social Security

• Strains on the system:– graying” of America– Baby Boomers reaching retirement age– Lower birth rate– Increased life expectancies

• Possible solutions– Privatization – Cut benefits

Welfare Reform of 1996

• Personal Responsibility and Work Opportunity Reconciliation Act of 1996– Required single mothers with a child over

five years of age to work within two years of receiving funds

– Included a provision that unmarried mothers under the age of 18 be required to live with an adult and attend school in order to receive welfare benefits

Welfare Reform of 1996• Temporary Assistance for Need Families

– Guidelines for states to follow• Recipients participating in work activities

– Employment – Job-readiness assistance– Community service– Education

• “self-sufficiency”

Food Stamp Program

• Initial program was an effort to expand the domestic market for farm commodities -1939-1943– Provided the poor with the ability to buy

more food, thus increasing demand for American agricultural produce

– Average participant’s monthly disbursement: $93 in food stamps

The Effectiveness of Income Security Programs

• Entitlement programs– Income security programs to which all those meeting

eligibility criteria are entitled– Spending for such programs is mandatory

• Funds must be provided for them unless laws creating the programs are changed

• Difficult to control spending for this reason– Discretionary Spending: expenditures that Congress can

choose to make.

Health Care

– Medicare • Administered by Department of Heath and

Human Services• Part A: automatic at age 65• Part B: optional; covers payment for items not

covered by part A• Covers persons receiving Social Security• Baby Boomers – strain on system

Health Care

– Medicaid• Provides comprehensive health care to all who

qualify as needy• Jointly financed by national and state governments• Some variation by state in terms of who is covered

Health Care

• Affordable Care Act (2010)– Aka Obama Care– Most significant overhaul to health care since

Medicare and Medicaid– Prohibits insurers from denying coverage to

individuals with pre-existing conditions – Minimum standards for health insurance

policies– All people to be covered by insurance– Upheld by the Supreme Court in 2012

Cost of Health Care

• Medicare and Medicaid vastly exceeded early estimates

• Resulted in ballooning costs of health care– People are living longer– Range of practices has increased

Public Education• 2003: national, state, and local

governments in U.S. collected more than $400 billion to spend on public education (K-12)– 48.7% from state governments– 42.8% from local governments– 8.5% from the national government

• Great variation across states in spending per student

Public Education• Federal aid to education

– Goals 2000– No Child Left Behind

• Inequality in spending among school districts

• Voucher plans – Supreme Court upheld use in Zelman v.

Simmons-Harris

Public Education: Voucher Plans and Charter Schools

• Charter Schools– Permit some institutions (those with

charters) to operate beyond the reach of school boards

– Break the monopoly exercised by centralized school boards and allow students as well as parents to exercise choice