1. EXPENDITURE PROGRAMS FOR THE POOR
CHAPTER 13
EXPENDITURE PROGRAMS FOR THE POOR

2. 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.

3. 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

4. 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

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

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

7. Analysis of Work IncentivesD
|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

8. Analysis of Work IncentivesD
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

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

10. Work Requirements
Workfare
TANF
Mandated work

11. Time Limits
Lifetime
Per spell of welfare

12. Family Structure
Marriage
Childbearing

13. National versus State Administration
Race to the Bottom
State experimentation

14. Earned Income Tax Credit

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

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

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

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

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

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

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

22. Programs to Enhance Earnings
Education
Head Start
Employment and Training

23. 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].

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