Providing a Safety Net

The Poverty Problem The wealth has spread unevenly throughout society as the free market has generated wealth. Some people are below the poverty threshold- an income level below that which is needed to support families or households. In 2002—single parent under 65, with one child was $12,120. For a 4 person family (with 2 children) the level was $18,400.

The Governments Role As a society we recognize some responsibilities to the very young, the very old, the sick, the poor, and the disabled. The government tries to provide a safety net to these individuals Since the 1930’s, the main government effort to easy poverty has been to collect taxes from individuals and redistribute some of those funds in the form of welfare. ◦ refers to the government aid for the poor Began under Roosevelt following Great Depression, increased in 1960’s under Johnson’s “War on Poverty”, soared in 70’s and 80’s, in 1996 drastic changes occurred.

Redistribution Programs Income data gathered by U.S. Bureau of the Census (in Labor Department). State and federal governments provide cash transfers (direct payments of money to the poor, disabled, and retired). ◦ Temporary Assistance for Needy Families (TANF)  Replaced earlier welfare program (Aid to Families with Dependent Children or AFDC)  Launched in 1996 as part of welfare reform.  Federal money goes to the states, which design and run their own welfare programs. States must adhere to federal rules that create work incentives and establish a lifetime limit for benefits.

Cont. ◦ Social Security  Created in 1935, during the Great Depression.  Provides cash transfers of retirement income to the elderly and living expenses to disabled Americans.  Collects payroll taxes from current workers and then redistributes that money to current recipients. ◦ Unemployment insurance  Funded jointly by federal and state governments.  Provide $$ to eligible workers who lost their jobs.  Must show that they made efforts to get work. ◦ Worker’s Compensation  State funds to workers injured on the job.  Most employers pay worker’s comp insurance to cover future claims of employees.

In-kind benefits- goods and services provided for free or at greatly reduced prices. ◦ Food giveaways, food stamps, subsidized housing, and legal aid Medical Benefits- administered under Social Security Program ◦ Medicare covers Americans over 65 as well as the disabled. ◦ Medicaid covers some poor people who are unemployed or not covered by their employer’s insurance plan

Education- fed, state and local governments all provide educational opportunities to the poor ◦ Add to the nation’s human capital and labor productivity. Faith-Based Initiatives ◦ George W. Bush announced an initiative to rely on non-governmental support for people in need. ◦ In both houses of congress passed bills enacting some of Bush’s proposals.