EXPENDITURE PROGRAMS FOR THE POOR CHAPTER 13 EXPENDITURE PROGRAMS FOR THE POOR

A Quick Look at Welfare Spending Means-tested Cash versus in-kind assistance Anti-poverty impact of non-means-tested programs Program Federal State and Local Medical care $163.8 $118.7 Cash aid 82.4 19.7 Food benefits 36.8 2.5 Housing benefits 34.8 0.7 Education 28.8 1.7 Services 17.5 4.7 Jobs/training 6.9 0.9 Energy aid 2.0 0.1 Source: Burke [2003, p. 3]. Figures are for 2002.

TANF Aid to Families with Dependent Children (1935-96) TANF-Temporary Assistance for Needy Families (1996- ) No entitlement Time limits Work requirement Block grants to states Benefit reduction rates

Work Incentives The Basic Trade-offs B = G – tE Work Incentives The Basic Trade-offs G – basic grant if not working t – rate at which grant reduced when recipient earns money B – benefit received B = G – tE B = 0 if E = G/t the higher G, the higher t higher G or lower t leads to a higher breakeven E which raises the costs of the system and includes more people

Analysis of Work Incentives D |Slope| = w Income per month c Time Endowment b 2w w* a T Hours of leisure per month

Analysis of Work Incentives D |Slope| = w Income per month E1 G iii ii Income Leisure Work i F T Hours of leisure per month

Analysis of Work Incentives D |Slope| = w Income per month (= earnings + transfers) |Slope| = 3/4w S G Hours after TANF Hours before TANF Q $100 V F K T Hours of leisure per month

Analysis of Work Incentives D Budget constraint with t = 100% 0 hours of work selected P1 Income per month (= earnings + transfers) P S R G $338 F T Hours of leisure per month

Analysis of Work Incentives D E2 Income per month (= earnings + transfers) P R G Hours worked M T Hours of leisure per month

Work Requirements Workfare TANF Mandated work

Time Limits Lifetime Per spell of welfare

Family Structure Marriage Childbearing

National versus State Administration Race to the Bottom State experimentation

Earned Income Tax Credit

Empirical Evidence: The Effect of the Earned Income Tax Credit on Labor Supply Labor force participation Work hours

Supplemental Security Income SSI versus conventional welfare Uniform minimum federal guarantee Benefit levels Work incentives

Medicaid How Medicaid works Crowding Out The Medicaid Notch Medicaid and Health

The Medicaid Notch M Income per year D R S Z N $1,000 X T X T Hours of leisure per year

Unemployment Insurance Why does government insure against unemployment? Adverse selection Moral hazard Benefits Gross replacement rate Financing Experience rated Effects on Unemployment

Food Stamps and Child Nutrition How food stamps work Foods stamps as an in-kind transfer Participation rates

Housing Assistance How housing assistance works Housing subsidies Section 8 certificates Voucher programs Impact on stock of housing Public housing and economic self-sufficiency of inhabitants

Programs to Enhance Earnings Education Head Start Employment and Training

Overview Figure 13.10: Estimated effective marginal tax rates for a one-parent, two-child household residing in Wisconsin (2000) Source: Holt [2005, Part D, Figure 1].

New Ideas Replace current hodgepodge with single cash assistance program Benefit levels Faith-based social services