McGraw-Hill/Irwin Copyright © 2008 by The McGraw-Hill Companies, Inc. All rights reserved. CHAPTER 13 EXPENDITURE PROGRAMS FOR THE POOR

13-2 A Quick Look at Welfare Spending  Means-tested  Cash versus in-kind assistance  Anti-poverty impact of non-means-tested programs ProgramFederalState and Local Medical care$163.8$118.7 Cash aid Food benefits Housing benefits Education Services Jobs/training Energy aid Source: Burke [2003, p. 3]. Figures are for 2002.

13-3 TANF  Aid to Families with Dependent Children ( )  TANF-Temporary Assistance for Needy Families (1996- ) No entitlement Time limits Work requirement Block grants to states Benefit reduction rates

13-4 Work Incentives B = G – tE B = 0 if E = G/t The Basic Trade-offs G – basic grant if not working t – rate at which grant reduced when recipient earns money B – benefit received

13-5 w* Analysis of Work Incentives Hours of leisure per month Income per month 0T a Time Endowment D |Slope| = w b c 2w

13-6 Analysis of Work Incentives Hours of leisure per month Income per month 0T D |Slope| = w i ii iii E1E1 F G LeisureWork Income

13-7 Analysis of Work Incentives Hours of leisure per month Income per month (= earnings + transfers) 0T D |Slope| = w Q F G S $100 V |Slope| = 3/4w K Hours before TANF Hours after TANF

13-8 Analysis of Work Incentives Hours of leisure per month Income per month (= earnings + transfers) 0T D P F G $338 R P1P1 Budget constraint with t = 100% S 0 hours of work selected

13-9 Analysis of Work Incentives Hours of leisure per month Income per month (= earnings + transfers) 0T D P M G R E2E2 Hours worked

13-10 Work Requirements  Workfare  TANF Mandated work

13-11 Time Limits  Lifetime  Per spell of welfare

13-12 Family Structure  Marriage  Childbearing

13-13 National versus State Administration  Race to the Bottom  State experimentation

13-14 Earned Income Tax Credit

13-15 Empirical Evidence: The Effect of the Earned Income Tax Credit on Labor Supply  Labor force participation  Work hours

13-16 Supplemental Security Income  SSI versus conventional welfare Uniform minimum federal guarantee Benefit levels Work incentives

13-17 Medicaid  How Medicaid works  Crowding Out  The Medicaid Notch  Medicaid and Health

13-18 The Medicaid Notch Hours of leisure per year Income per year 0T D M N R S X Z $1,000

13-19 Unemployment Insurance  Why does government insure against unemployment? Adverse selection Moral hazard  Benefits Gross replacement rate  Financing Experience rated  Effects on Unemployment

13-20 Food Stamps and Child Nutrition  How food stamps work  Foods stamps as an in-kind transfer  Participation rates

13-21 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

13-22 Programs to Enhance Earnings  Education Head Start  Employment and Training

13-23 Overview Source: Holt [2005, Part D, Figure 1]. Figure 13.10: Estimated effective marginal tax rates for a one-parent, two-child household residing in Wisconsin (2000)

13-24 New Ideas  Replace current hodgepodge with single cash assistance program  Benefit levels  Faith-based social services