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Chapter 18: Social Welfare

Policymaking

• Types of Social Welfare Policies

• Income, Poverty, and Public Policy

• Helping the Poor? Social Policy and the

Needy

• Social Security: Living on Borrowed Time

• Social Welfare Policy Elsewhere

• Understanding Social Welfare Policy

• Summary


Chapter Outline and Learning

Objectives


• LO 18.1: Compare and contrast entitlement

and means-tested social welfare programs.


• LO 18.2: Assess the extent of economic

inequality in America and the role of

government in lessening it.



Objectives

• Helping the Poor? Social Policy and the

Needy

• LO 18.3: Trace the changes over time in

major federal welfare programs.



Objectives

• Social Security: Living on Borrowed

Time

• LO 18.4: Outline how America’s Social

Security program works and the challenge

of keeping it financially solvent in the

coming years.



Objectives


• LO 18.5: Distinguish American social

welfare policy from that of other

established democracies.


• LO 18.6: Assess the impact of social

welfare policies on democracy and the

scope of government in America.

Types of Social Welfare Policies LO 18.1: Compare and contrast entitlement

and means-tested social welfare programs.

• Social Welfare Policies

• Policies that provide benefits, cash or in-

kind, to individuals, based on either

entitlement or means testing.

To Learning Objectives Copyright © 2011 Pearson Education, Inc. Publishing as Longman


Types of Social Welfare Policies

• Entitlement Programs

• Government programs providing benefits

to qualified individuals regardless of need.

• Means-Tested Programs

• Government programs providing benefits

only to individuals who qualify based on

specific needs.

LO 18.1

To Learning Objectives


LO 18.1

Income, Poverty, and Public Policy LO 18.2: Assess the extent of economic

inequality in America and the role of

government in lessening it.

• U.S. has one of the world’s highest

per capita incomes.

• According to Census Bureau in 2009,

the median U.S. household income

was $49,777.

• No industrialized country has wider

extremes of income than the United

States. To Learning Objectives



Income, Poverty, and Public Policy

• Who’s Getting What?

• Who’s Poor in America?

• How Public Policy Affects Income

LO 18.2




• Who’s Getting What?

• Income distribution – The way the

national income is divided into “shares”

ranging from the poor to the rich.

• In 2008, people whose income placed

them in the lowest 20% of households got

3.4% of nation’s income and those in the

highest 20% got half of nation’s income.


LO 18.2


LO 18.2



• Who’s Getting What? (cont.)

• In recent decades, the share of the highest

fifth has grown while those of the lowest

fifths have gotten smaller.

• Relative deprivation – A person perceives

that he or she is not doing well

economically in comparison to others.


LO 18.2



• Who’s Getting What? (cont.)

• Income – The amount of money collected

between any two points in time.

• Wealth – Value of assets owned, such as

stocks, bonds, bank accounts, cars, and

houses.

• ⅓ of wealth is held by 1% of the

population, ⅓ is held by 9%, and ⅓ is held

by 90%.


LO 18.2



• Who’s Poor in America?

• Poverty line – Income below this amount

means people are poor, based on what a

family must spend for an “austere”

standard of living, set at three times the

cost of a subsistence diet.

• 43.6 million people, or 14.3% of population,

were poor in 2009, according to Census

Bureau.


LO 18.2



• Who’s Poor in America? (cont.)

• In 2009, the poverty threshold for a single

adult was $11,161, for two adults it was

$14,366, and for a single parent with two

children it was $17,268.

• Poverty rates are higher for African

Americans, Hispanics, unmarried women,

children, and inner-city residents.


LO 18.2


LO 18.2



• Who’s Poor in America? (cont.)

• Feminization of poverty – The increasing

concentration of poverty among women,

especially unmarried women and their

children.

• Poverty rate for female-headed families is

almost 30%, as opposed to less than 6%

for families with two parents.


LO 18.2




• Progressive tax – A tax by which the

government takes a greater share of the

income of the rich than of the poor.

• For example, when a rich family pays 50%

of its income in taxes, and a poor family

pays 5%.


LO 18.2




(cont.)

• Proportional tax – A tax takes the same

share of income from everyone, rich and

poor alike.

• Regressive tax – A tax in which the

burden falls relatively more heavily on low-

income groups than on wealthy taxpayers.


LO 18.2




(cont.)

• Earned Income Tax Credit – A refundable

federal income tax credit for low income

working individuals and families.

• In 2010, workers raising 1 child with

incomes less than $16,420 could get up to

$3,043 in EITC.


LO 18.2




(cont.)

• Transfer payments – Benefits given by

the government directly to individuals

either cash transfers, such as Social

Security payments, or in-kind transfers,

such as food stamps and low-interest

college loans.


LO 18.2


LO 18.2

Helping the Poor? Social Policy and

the Needy LO 18.3: Trace the changes over time in

major federal welfare programs.

• “Welfare” As We Knew It

• Ending Welfare As We Knew It: The

Welfare Reform of 1996




the Needy

• “Welfare” As We Knew It

• Social Security Act of 1935 created the

Social Security program and the Aid to

Families with Dependent Children

program.

• In 1964 President Lyndon Johnson

declared a War on Poverty, and added

welfare programs to the policies that fight

poverty.

LO 18.3




the Needy

• “Welfare” As We Knew It (cont.)

• In 1981, President Ronald Reagan

declared war on antipoverty programs, and

persuaded Congress to cut welfare

benefits and lower the number of

Americans on the welfare rolls by arguing

that welfare had proved to be a failure.


LO 18.3



the Needy


Welfare Reform of 1996

• Personal Responsibility and Work

Opportunity Reconciliation Act is the

welfare reform law of 1996, which

implemented the Temporary Assistance

for Needy Families (TANF) program.


LO 18.3



the Needy


Welfare Reform of 1996 (cont.)

• TANF replaced Aid to Families with

Dependent Children as the program for

public assistance to needy families.

• TANF requires people on welfare to find

work in 2 years and sets a lifetime

maximum of 5 years.


LO 18.3


LO 18.3

Social Security: Living on Borrowed

Time LO 18.4: Outline how America’s Social

Security program works and the challenge

of keeping it financially solvent in the

coming years.

• The Growth of Social Security

• Reforming Social Security




Time

• The Growth of Social Security

• In 2010, average monthly check for retired

workers was $1,100.

• 1st check was $22.54 in 1936 to Ida Fuller

of Brattleboro, VT.

• Social Security Trust Fund – The

account that Social Security contributions

are put into and used to pay eligible

recipients.

LO 18.4




Time

• The Growth of Social Security (cont.)

• Current payroll taxes are 12.4%.

• Workers contribute 6.2% of their wages up

to $102,000, and their employers match it.

• Trust Fund must invest money in U.S.

Treasury bonds, which has been earning

about 6% a year.


LO 18.4



Time

• The Growth of Social Security (cont.)

• Social Security – Most expensive public

policy in the U.S.A.!

• A recipient’s benefits require a Social

Security payroll tax of 10.3% per worker

(31/3 = 10.3).

• Cost to each worker may rise to 15.5% of

earnings (31/2 = 15.5).


LO 18.4


LO 18.4



Time

• Reforming Social Security

• President Bush – Proposed diverting ⅓ of

individuals’ Social Security contribution to

private retirement funds, such as a private

account, a stock, a bond, or another

investment.

• President Obama – More likely to propose

raising payroll taxes.


LO 18.4


LO 18.4

Social Welfare Policy Elsewhere LO 18.5: Distinguish American social

welfare policy from that of other established

democracies.

• Most industrial nations tend to be far

more generous with social welfare

programs than the United States.

• Greater generosity is evident in programs

related to health, child care, unemployment

compensation, and the elderly.



Social Welfare Policy Elsewhere

• We see poverty and welfare as

individual concerns, and Europeans

support greater governmental

responsibility for these problems.

• 71% of Americans believe that the poor

could escape poverty if they worked hard

enough, compared to 40% of Europeans.


LO 18.5



• Europeans often have a more positive

attitude toward government.

• Americans are more likely to distrust

government action in areas such as

social welfare policy.


LO 18.5



• Europeans pay a high price for

generous benefits.

• Tax rates in Western European nations far

exceed those in the United States; in some

cases top tax rates exceed 50% of income.

• Funding problems are greater in Europe

due to level of benefits and shrinking

populations.


LO 18.5

Understanding Social Welfare Policy LO 18.6: Assess the impact of social welfare

policies on democracy and the scope of

government in America.

• Democracy and Social Welfare

• Social Welfare Policy and the Scope

of Government



Understanding Social Welfare Policy

• Democracy and Social Welfare

• In the social welfare policy arena, the

competing groups are often quite unequal

in terms of political resources.

• The elderly are relatively well organized

and often have the resources needed to

wield significant influence in support of

programs they desire.

LO 18.6




• Democracy and Social Welfare (cont.)

• The elderly are usually successful in

protecting and expanding their programs.

• Influencing political decisions is more

difficult for the poor because they vote less

frequently and lack strong, focused

organizations and money.


LO 18.6



• Social Welfare Policy and the Scope

of Government

• Nothing more clearly accounts for the

growth of government than social welfare

spending.

• Growth of government is driven by the

growth of social welfare.

• American social welfare system grows

generation by generation. To Learning Objectives

LO 18.6


LO 18.1 Summary


• Means-tested social welfare programs

provide benefits only to people who qualify

for them based on specific needs.

• In contrast, entitlement programs provide

benefits to individuals without regard to

need.



LO 18.1 Summary


(cont.)

• Because entitlement programs can provide

benefits to everyone, they are generally

more popular with the public than means-

tested programs.



Which of the following is characterized as

an entitlement program?

A. Medicaid

B. Medicare

C. Supplemental Security Income

D. Children’s Health Insurance

Program

LO 18.1



Which of the following is characterized as

an entitlement program?

A. Medicaid

B. Medicare

C. Supplemental Security Income

D. Children’s Health Insurance

Program


LO 18.1


LO 18.2 Summary


• Despite America’s affluence, the disparity

between incomes is quite substantial and

has been increasing in recent decades.

• America’s means-tested social welfare

programs help to reduce inequality by

helping the poorest individuals.



LO 18.2 Summary


(cont.)

• Progressive taxes, such as the federal

income tax, also alleviate inequality by

taking a bigger bite out of the rich than the

middle class.



Among which of the following groups

is poverty most common?

A. Unmarried women with children

B. Inner-city residents

C. African Americans

D. Hispanics

LO 18.2



Among which of the following groups

is poverty most common?

A. Unmarried women with children

B. Inner-city residents

C. African Americans

D. Hispanics


LO 18.2


LO 18.3 Summary

• Helping the Poor? Social Policy and

the Needy

• The Aid to Families with Dependent

Children (AFDC) program was begun

during FDR’s New Deal, greatly expanded

during the period of LBJ’s Great Society,

and then reduced in scope by the Reagan

administration.



LO 18.3 Summary

• Helping the Poor? Social Policy and the Needy (cont.)

• In 1992, when Bill Clinton ran for president he promised to end welfare as we know it, and it happened in 1996 when the AFDC program was replaced by TANF.

• Under the new law recipients of aid can only be on welfare rolls for 2 consecutive years and 5 years during their lifetime.



One consequence of the welfare reform

legislation passed in 1996 is that

A. benefits for the poor have increased.

B. the number of families receiving aid has increased.

C. the role of state governments in welfare has increased.

D. the number of years for which families are eligible for benefits has increased.

LO 18.3



One consequence of the welfare reform

legislation passed in 1996 is that

A. benefits for the poor have increased.

B. the number of families receiving aid has increased.

C. the role of state governments in welfare has increased.

D. the number of years for which families are eligible for benefits has increased.


LO 18.3


LO 18.4 Summary


Time

• The Social Security program collects a

payroll tax from workers and their

employers each month and pays out

monthly benefits to retirees.

• It has proved to be a highly successful and

popular program.



LO 18.4 Summary


Time (cont.)

• Demographic trends have Social Security

in danger, soon there will not be enough

workers per beneficiary to keep the

program solvent, and the government will

soon face the painful choice between

raising taxes or cutting benefits to senior

citizens.



is currently the

most expensive social welfare policy

in the United States.

A. Social Security

B. Food Stamps

C. Unemployment Compensation

D. Temporary Aid To Needy Families

LO 18.4



is currently the

most expensive social welfare policy


A. Social Security

B. Food Stamps

C. Unemployment Compensation

D. Temporary Aid To Needy Families


LO 18.4


LO 18.5 Summary


• Most established democracies have more expensive and generous social welfare programs than does the United States.

• European governments provide citizens with benefits, such as paid parental leave upon the birth of a child, that are unheard of in the United States.



LO 18.5 Summary


(cont.)

• Taxes in Europe have to be higher than

taxes in the United States in order to pay

for these benefits.



Most nations tend to be much


programs than the United States is.

A. African

B. American

C. Middle East

D. European

LO 18.5



Most nations tend to be much


programs than the United States is.

A. African

B. American

C. Middle East

D. European


LO 18.5


LO 18.6 Summary


• Groups with ample political resources tend

to get more of what they want in the battle

over social welfare policies.

• The elderly have been very successful in

preserving their Social Security and

Medicare benefits.



LO 18.6 Summary


(cont.)

• The poor have faced difficulties getting

more funding for TANF.

• Overall, the growth in social welfare

spending, particularly for Social Security

and Medicare, accounts for much of the

increase in the scope of government in

recent decades.



Political participation affects the

distribution of


A. income and poverty

B. social welfare benefits

C. wealth and property

D. all of the above

LO 18.6



Political participation affects the

distribution of


A. income and poverty

B. social welfare benefits

C. wealth and property

D. all of the above


LO 18.6


Text Credits

• U.S. Census Bureau. The 2008 data can be found in the Census

Bureau’s report entitled “Income, Poverty, and Health Insurance

Coverage in the United States: 2008,” p. 10. This report is posted

online at: http://www.census.gov/prod/2009pubs/p60-236.pdf. U.S.

Census Bureau, “Income, Poverty, and Health Insurance Coverage in

the United States: 2008,” p. 14. “Indicators of Welfare Dependence.”

• U.S. Department of Health and Human Services. Annual Report to

Congress, 2008; updated by authors based on caseload data reported

by the U.S. Department of Health and Human Services’ Administration

for Children and Families.

• Rebecca Ray et al., “Parental Leave Policies: Assessing Generosity

and Gender Equality,” Report of the Center for Economic and Policy

Research, p. 6. June 2009. Used with permission. Updated by the

authors for Australia, which implemented their first paid leave in 2011.


Photo Credits

• 524: AP Photos

• 525T: Getty Images;

• 525TC: Mario Thoma/Getty Images

• 525TB: Carmel Zucka/Getty Images

• 525B: Alex Wong/Getty Images

• 526: Getty Images

• 529T: Mario Thoma/Getty Images

• 529B: Varley Charlie/Sipa

• 531: Andy Singer

• 534: Carmel Zucka/The New York Times/Redux

• 538: Alex Wong/Getty Images

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