Chapter 19: Domestic Policy

Copyright © Houghton Mifflin Company. All rights reserved.19 | 2 The Development of the American Welfare State The most controversial purpose of government is the promotion of social and economic equality

Copyright © Houghton Mifflin Company. All rights reserved.19 | 3 The Development of the American Welfare State Every modern nation can be characterized as a welfare state –Welfare state: a nation in which the government assumes responsibility for the welfare of its citizens by providing a wide array of public services and redistributing income to reduce social inequality –Social welfare programs: government programs that provide the minimum living standards necessary for all citizens

Copyright © Houghton Mifflin Company. All rights reserved.19 | 4 The Development of the American Welfare State The Great Depression: the longest and deepest setback the American economy has ever experienced; began with the stock market crash on October 24, 1929 and did not end until the start of World War II

Copyright © Houghton Mifflin Company. All rights reserved.19 | 5 The Development of the American Welfare State The New Deal –The New Deal: the measures adopted by the Roosevelt administration to alleviate the Depression –Had 2 phases Boosting farm prices and lowering unemployment Helping the forgotten and dispossessed

Copyright © Houghton Mifflin Company. All rights reserved.19 | 6 The Development of the American Welfare State The Great Society –Great Society: President Lyndon Johnson’s broad array of programs designed to redress political, social and economic inequality –War on Poverty: part of Lyndon Johnson’s Great Society program, intended to eradicate poverty within 10 years

Copyright © Houghton Mifflin Company. All rights reserved.19 | 7 The Development of the American Welfare State Retrenchment and Reform –Arguments that War on Poverty had failed helped Reagan win in 1980 Shifted emphasis from economic equality to economic freedom Ended era of growth in promotion of social welfare –Clinton worked to reform the system –G.W. Bush has led greatest expansion of the system for seniors with passage of Medicare Part D

Copyright © Houghton Mifflin Company. All rights reserved.19 | 8 Social Security Social Insurance –Social insurance: a government-backed guarantee against loss by individuals without regard to need –Social security: social insurance that provides economic assistance to persons faced with unemployment, disability, or old age; financed by taxes on employers and employees

Copyright © Houghton Mifflin Company. All rights reserved.19 | 9 Social Security Origins of Social Security –Social Security Act of 1935: the law that provided for social security and is the basis for modern American social welfare –Developed 3 approaches to the problem of dependence

Copyright © Houghton Mifflin Company. All rights reserved.19 | 10 Social Security How Social Security Works –Revenues for old-age retirement security go into their own trust fund Full benefits begin at age 65 Benefits will begin at age 67 for people born after 1938 –Social Security is not a form of savings Today’s workers support today’s beneficiaries Ratio of workers to recipients is decreasing –Social Security is a tax program, not a savings program –Declining birth rates or economic depression could endanger benefits now scheduled to be paid to retirees

Copyright © Houghton Mifflin Company. All rights reserved.19 | 11 Social Security Who Pays? Who Benefits –Cost-of-living Adjustments (COLAs) Increase benefits received by retirees Increase dollar amount of contributors’ wages subject to tax –Stagflation in the 1970 Stagflation: high unemployment coupled with high inflation Increased benefits and decreased revenue base

Copyright © Houghton Mifflin Company. All rights reserved.19 | 12 Social Security Social Security Reform –Most Americans do not believe Social Security will have money to pay benefits when they retire –Both parties have tried to capitalize on Social Security reform –Plans for major reform have been put on hold –The President’s Commission on Strengthening Social Security Federally appointed bipartisan commission Recommended 3 approaches; all embraced personal retirement accounts Reforms were not implemented

Copyright © Houghton Mifflin Company. All rights reserved.19 | 13 Day of Reckoning

Copyright © Houghton Mifflin Company. All rights reserved.19 | 14 Public Assistance Introduction –Public assistance: government aid to individuals who can demonstrate a need for that aid Commonly referred to as welfare Poor are not the only ones who receive government assistance

Copyright © Houghton Mifflin Company. All rights reserved.19 | 15 Public Assistance Introduction –4 types of categorical assistance programs under the Social Security Act Old age assistance for the needy elderly Aid to the needy blind Aid to needy families with dependent children Aid to the totally and permanently disabled Programs have become entitlements: benefits to which everyone has a legal right and the government cannot deny

Copyright © Houghton Mifflin Company. All rights reserved.19 | 16 Public Assistance Poverty in the United States –Until 1996, the national government distributed funds to states in proportion to the number of people in each state with incomes below the federally-defined poverty level Poverty level: the minimum cash income that will provide for a family’s basic needs; calculated as three times the cost of a market basket of food that provides a minimally nutritious diet Useful standard because it allows us to measure progress combating poverty

Copyright © Houghton Mifflin Company. All rights reserved.19 | 17 Public Assistance Poverty in the United States –Poverty rate has generally declined since the mid-1960s –Feminization of poverty: term applied to the fact that a growing percentage of all poor Americans are women or the dependents of women –Poverty level is adjusted every year to reflect change in consumer prices

Copyright © Houghton Mifflin Company. All rights reserved.19 | 18 Public Assistance Welfare Reform –Temporary Assistance for Needy Families Temporary Assistance for Needy Families Act: a 1996 national act that abolished the longtime welfare policy, AFDC (Aid to Families with Dependent Children); TANF gives the states much more control over welfare policy Adult recipients have to become employed within 2 years Families can receive no more than 5 years of benefits in a lifetime

Copyright © Houghton Mifflin Company. All rights reserved.19 | 19 Public Assistance Welfare Reform –Devolving power to the states was a prime force in the reform effort –Results of TANF Number of families receiving benefits has declined and remained relatively low Most former recipients have not been able to find jobs that pay good wages and offer benefits –The recession of 2001 was an important test for TANF

Copyright © Houghton Mifflin Company. All rights reserved.19 | 20 Families on Welfare,

Copyright © Houghton Mifflin Company. All rights reserved.19 | 21 Health Care The United States is the only major industrialized nation without a universal health- care system Cost and Access –Access to Care In 2005: 45.8 million people uninsured (15.7% of population) Americans living in rural areas do not have easy access to doctors or hospitals

Copyright © Houghton Mifflin Company. All rights reserved.19 | 22 Health Care Cost and Access –Cost In 2004: health care spending was $1.9 trillion (more than 16% of GDP) Among industrial nations, U.S. spends largest percentage of its economy on health care

Copyright © Houghton Mifflin Company. All rights reserved.19 | 23 Health Care Cost and Access –Key healthcare goals Make healthcare available to more people (ideally, everyone) Control ballooning cost Dilemma: weigh greater equality and cost controls against loss of freedom in markets for health care and in choosing a doctor

Copyright © Houghton Mifflin Company. All rights reserved.19 | 24 Health Care Cost and Access –Changes in the Health Insurance Industry Americans used to carry only catastrophic coverage insurance Realization that preventing illness was cheaper than curing it Health maintenance organizations (HMOs) and preferred provider organizations (PPOs) were developed

Copyright © Houghton Mifflin Company. All rights reserved.19 | 25 Health Care Medicare –Medicare: a health-insurance program serving primarily persons aged 65 or older Also covers people who are disabled Covers people with end-stage renal disease 2003: 41 million people covered; cost $271 billion

Copyright © Houghton Mifflin Company. All rights reserved.19 | 26 Health Care –Coverage Part A of the Medicare program pays for care in facilities such as hospitals Part B of the Medicare program pays for doctor’s services and outpatient hospital care –Participants in Part B pay a premium –The remaining costs are paid by the government Part D (Medicare and Prescription Drug Modernization Act) created a new prescription drug coverage option –Cost of Medicare program increases at rates in excess of cost of living

Copyright © Houghton Mifflin Company. All rights reserved.19 | 27 Health Care Medicaid –Medicaid: a need-based comprehensive medical and hospitalization program –States and national government share responsibility for Medicaid –Blind, disabled and elderly populations account for nearly half of Medicaid expenditures

Copyright © Houghton Mifflin Company. All rights reserved.19 | 28 Education Responsibility for schooling resides with state and local governments Concerns Motivating Change –Equity Elementary and Secondary Education Act of 1965: the federal government’s primary law to assist the nation’s elementary and secondary schools; part of Lyndon Johnson’s Great Society program Provided direct national aid to local school districts to improve educational opportunities of the economically disadvantaged Promised improvements have been elusive

Copyright © Houghton Mifflin Company. All rights reserved.19 | 29 Education Concerns Motivating Change –National Security and Prosperity Globalization means nations are competing to attract highly educated and skilled workers Connection between education and national security dates back to National Defense Education Act of 1958 In 1983s, A Nation at Risk created momentum for reform

Copyright © Houghton Mifflin Company. All rights reserved.19 | 30 Education Values and Reform –Reform and Equality Providing better teachers Funding commensurate with need in urban and rural areas –Reform and Freedom Charter schools Voucher Plans

Copyright © Houghton Mifflin Company. All rights reserved.19 | 31 Education No Child Left Behind Act of 2001 –No Child Left Behind Act: latest reauthorization of Elementary and Secondary Education Act –Requires that all states guarantee their students are performing at proficient levels in reading and math by 2014 –Includes provisions to offer more school choice to parents whose children attend schools that fail to meet Adequate Yearly Progress targets

Copyright © Houghton Mifflin Company. All rights reserved.19 | 32 Education No Child Left Behind Act of 2001 –Provides added flexibility for schools districts to use certain types of federal funds –In early phases of implementation –Has not been funded at levels agreed to when the bill was passed

Copyright © Houghton Mifflin Company. All rights reserved.19 | 33 Benefits and Fairness The national government provides two types of benefits –Means-tested benefits: conditional benefits provided by a government to individuals whose income falls below a designated threshold –Non-means-tested benefits: benefits provided by government to all citizens, regardless of income; Medicare and social security are examples

Copyright © Houghton Mifflin Company. All rights reserved.19 | 34 Benefits and Fairness Some people argue that non-means-tested benefits are not fair: some people need benefits, and others do not Transforming some non-means-tested benefits into means-tested benefits means focusing on where to place the income level below which a program will apply