Part Two Social Welfare Policymaking

The U.S. has one of the largest income gaps in the world because income distribution is extremely unequal among different economic classes. The degree of government involvement in issues of poverty has resulted in a major political debate. The biggest factor is how people view the poor ▫As lazy people who avoid work ▫Disadvantaged people with no opportunity to advance their economic situation

Income: Defining the rich and the poor The rich have not only more income but also greater wealth in the form of stocks and other assets. One percent of the total population possesses more than one-third of all wealth in the United States. The assets of that 1 percent are actually higher than the total worth of 90 percent of Americans The poor are viewed as “undeserving” if they abuse the system or have created conditions of poverty themselves.

Income: Defining the rich and the poor Many view the poor as receiving too much government money. The poor are viewed as “deserving” if a family member has lost its breadwinner or has a legitimate reason, such as disability, for not being able to work.

Income: Defining the rich and the poor Most government funds are given through entitlement programs to people who are not poor. Eligibility for means-tested programs depends on how narrowly poverty is defined. Poverty is defined by the government as family income that falls below the poverty line. African Americans, Hispanics, people living in the inner cities and unmarried women tend to be the group most affected with poverty.

Income: Defining Government Involvement There are three types of taxes: ▫Progressive – taxes the wealth a higher rate ▫Proportional taxes – same rate ▫Regressive taxes – tax people of lower incomes a higher rate State sales taxes are somewhat regressive, but the effect is counterbalanced by progressive federal income taxes.

Income: Defining Government Involvement Earned Income Tax Credit: Provides very low- income workers with a cash credit, even if they paid no federal income tax. Expenditures, Transfer Payments: given by the government directly to citizens. ▫Examples are food stamps, financial aid grants, social security and Medicare benefits.  The elderly receive the most in transfer payments through social security.

The Evolution of American Social Welfare programs The Great Depression proved that poverty can be beyond anyone’s control and encouraged the government to become more involved in welfare. Social Security began under the New Deal (Social Security Act of 1935) The poor became part of the Democratic Party Coalition.

The Evolution of American Social Welfare programs President Johnson initiated many Great Socety programs to fight the war on poverty during the civil rights era. President Reagan cut the growth of many of these programs in the 1980s.

The Evolution of American Social Welfare programs The system underwent a major overhaul during the Clinton administration (Personal Responsibility and Work Opportunity Reconciliation Act of 1996). ▫Under the reforms:  families receive small payments with a maximum of two years to find employment, people have a lifetime maximum of five years on welfare.  States have more latitude and discretion in operating their own welfare programs. Welfare reform brought with it a name change form the cash payments to families from Aid to Families with Dependent Children (AFDC) to Temporary Assistance for Needy Families (TANF)

The Future of Social Welfare policy Social Security: ▫It is possible that the system will go bankrupt during the twenty-first century. ▫More people will be of retirement age, fewer people will be working, and the cost of living is rising, so monthly payments will increase. ▫Either taxes will have to be raised or benefits will have to be cut.

The Future of Social Welfare policy Means-tested programs: ▫Antipoverty programs have had mixed effects on lowering poverty rates; economic growth distributed across incomes has been more effective.

Review Questions _____ refer(s) to the “shares” of the national income earned by various groups. A.Entitlements B.Income distribution C.Wealth D.Taxable income E.Profits

Review Questions Which of the following is an accurate statement about social welfare policy? I.The current system encourages beneficiaries to seek employment II.Programs have usually expanded under Republican presidents III.Most social welfare programs are noncontroversial IV.The government gives more money to nonpoor than to people below the poverty line A.I only B.II only C.I and IV only D.I, II, and IV only E.II, III and IV only

Review Questions Which of the following groups has consistently had the highest rates of poverty? A.Asian Americans B.African Americans C.Hispanic Americans D.Southern Whites E.Non-Hispanic White Americans

Review Questions All of the following are examples of means- tested programs EXCEPT A.Temporary Assistance for Needy Families B.Children’s Health Insurance Program C.Food Stamps D.Medicaid E.Social Security