Slide 1Copyright © Pearson Education, Inc.Chapter 3, Section 4

Chapter 3.4: Government Income Redistribution ProgramsChapter 3.4: Government Income Redistribution Programs

Ch 3 Essential Question:• What role should government play in a free

market economy?

Redistribute income

Slide 2Copyright © Pearson Education, Inc.Chapter 3, Section 4

ObjectivesObjectives

1. Explain the U.S. political debate on ways to fight poverty.

2. Identify the main programs through which the government redistributes income.

Slide 3Copyright © Pearson Education, Inc.Chapter 3, Section 4

IntroductionIntroduction

• How does government redistribute income?

– To help certain groups of people, government programs taxes some people and redistributes it to others.

– Income Redistribution programs:

• Cash transfers

• In-kind benefits

• Medical and educational benefits (Financial Aid)

– Provided by Federal, State and Local govt to young, poor, disabled and elderly

– Programs that help low-income people are called welfare

Slide 4Copyright © Pearson Education, Inc.Chapter 3, Section 4

Welfare: Redistribution of IncomeCash Transfer ProgramsWelfare: Redistribution of IncomeCash Transfer Programs• Social Security

– collects money from current workers and redistributes funds to retired and disabled persons

• Unemployment Insurance

– Provides money to workers who have lost their jobs as long as recipients offer proof that they have made efforts to get work.

– This help is only temporary, offering benefits for only 26 weeks in most states.

• Worker’s Compensation

– Provides state funds to workers injured on the job.

Slide 5Copyright © Pearson Education, Inc.Chapter 3, Section 4

Welfare: Redistribution of IncomeCash Transfer ProgramsWelfare: Redistribution of IncomeCash Transfer Programs• Both of these programs are targeted at low-income

people

• Temporary Assistance for Needy Families (TANF) –

– sends welfare payments directly to the states, which design and run their own welfare programs

– Tied to working or more stringent conditions

• Conditional Cash Transfer programs

– Payments are tied to conditions (looking for work, taking your kids to the doctor, going to school, etc.)

• Paper Project, Bolsa Familia

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• In-Kind Benefits programs distribute actual goods/services to low-income people, not money

• Link/Food stamps– Qualified people

receive assistance with their monthly food purchases

Welfare: Redistribution of IncomeIn-Kind Benefits ProgramsWelfare: Redistribution of IncomeIn-Kind Benefits Programs

Slide 7Copyright © Pearson Education, Inc.Chapter 3, Section 4

• Subsidized housing/Section 8– Qualified people are allowed to rent housing

for less than the regular rent

• Legal aid– Qualified people receive legal advice at no

charge

Welfare: Redistribution of IncomeIn-Kind Benefits ProgramsWelfare: Redistribution of IncomeIn-Kind Benefits Programs

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• Medical Benefits– Medicare: care for the elderly; hugely increasing

expense for the government. Needs reform.– Medicaid: care for the poor and uninsured

• Educational Benefits– The government also funds educational programs from

preschool to college.– Early Childhood: Jumpstart– K-12: Sports, extracurricular, academic programs– College: Public Land-Grant Universities, Financial Aid

(Pell grants, Perkins, Stafford loans)

Welfare: Redistribution of IncomeMedical and Educational BenefitsWelfare: Redistribution of IncomeMedical and Educational Benefits

Slide 9Copyright © Pearson Education, Inc.Chapter 3, Section 4

Welfare: Redistribution of IncomeExamplesWelfare: Redistribution of IncomeExamples

• Write down two government redistribution programs your family or you benefit from currently or in the near future.

• What kind of redistribution programs are they?

Slide 10Copyright © Pearson Education, Inc.Chapter 3, Section 4

Debate Over Income Redistribution ProgramsDebate Over Income Redistribution Programs• Everyone thinks government should provide some

safety nets

• Supporters say we need to help those less fortunate; especially low-income, young, unemployed and elderly

• Critics of welfare claim that it discourages productivity by providing disincentives to work and further aggravates poverty.

– In 1996, welfare reforms led to the TANF programs that limited the amount of time people could receive welfare payments and gave states more freedom to experiment with antipoverty programs.

Slide 11Copyright © Pearson Education, Inc.Chapter 3, Section 4

ObjectivesObjectives

1. Explain the U.S. political debate on ways to fight poverty.

2. Identify the main programs through which the government redistributes income.Cash Transfer programs (Social security, workers comp, unemployment, TANF)

In-Kind Benefits (Food stamps, Public housing)

Medical and Educational (Medicare/Medicaid, Financial Aid)

Slide 12Copyright © Pearson Education, Inc.Chapter 3, Section 4

Key TermsKey Terms• poverty threshold: an income level below that

which is needed to support families and households

• welfare: government aid to the poor

• cash transfers: direct payment of money by the government to the poor, disabled, or retired people (Social Security, Unemployment Insurance)

• in-kind benefits: goods and services provided for free or greatly reduced prices (Food Stamps, Section 8, Medicare/Medicaid)