1. Social Welfare Policies

2. I. Social Welfare Subsidies A. Major Social Welfare Programs: 1. Social Security: for elderly, survivors, and disabled (OASDI). There is no means test to qualify for these benefits. One does not have to prove that one lacks the means in order to qualify for benefits. In other words, one does not have to have a low level of income to qualify for these benefits. Even upper income people qualify for benefits if they fall into one of the three categories. Financed by FICA payroll tax. (Federal Insurance Contribution Act)Financed by FICA payroll tax.

3. 2. Medicare: Federal medical coverage for the elderly. No means test. Medicare 3. Unemployment insurance: Payments to the unemployed. No means test. Unemployment insurance 4. Temporary Assistance to Needy Families (TANF): Payments to poor families with children. The program that most people are talking about when they discuss the “welfare system.” Means test.Temporary Assistance to Needy Families 5. Supplemental Security Income (SSI): Cash payments to disabled people whose income level is below a certain amount. Means Test.Supplemental Security Income 6. Food stamps: Coupons given to the poor in order to buy food. Means test. Food stamps 7. Medicaid: Federal medical coverage for the poor on TANF or SSI. Means test. Medicaid

4. B. Two kinds of welfare politics. 1. Majoritarian policies: Everybody benefits from these, and everybody pays. 2. Client policies: Relatively few people benefit, but everybody pays. C. Recent developments in social welfare policy. 1. The Social Security debate and the demographics problem: a. Entitlements threaten to produce massive budget deficits in the future. When Social Security began in 1935, there were 42 people working for every Social Security recipient. Now there are just 3, and by the year 2020 there are projected to be only 2. b. Increasing birth rate during the baby boom era. c. Increasing life expectancy especially due to medical improvements.

5. 2. These demographic statistics have led some to propose reforms for Social Security: a. Increasing the age of recipients to 70. b. Adopting means testing for recipients. c. Reducing the annual “COLA” (cost of living adjustment) for recipients. d. reducing the benefits for recipients. e. Increasing the amount of income that is subject to the Social Security tax. f. Privatizing part of Social Security deductions.

6. D. Welfare has become a huge political issue for the two parties 1. The GOP Contract with America stressed the role of federalism: returning power back to the states by ending the federal entitlement status of various welfare programs, and replacing that with a system of block grants to the states. This would enable states to become “laboratories” and free them up to experiment with what works best for their own particular situations. The GOP argues that states know what is best for them since they are closer to their own people. 2. Republicans have linked the current welfare mess to various social pathologies, such as, a higher illegitimacy rate, a higher rate of single-parent families, higher crime rate, drug problems. They have stressed welfare reform and have claimed that the Democrats have blocked their efforts at reform.

7. 3. Given this political climate, even Democrats have stressed the importance of welfare reform. President Clinton promised to “end welfare as we know it,” and signed a huge welfare reform bill in 1996 that was passed by the Republican Congress. Some of the bill’s highlights: a. Ended the federal entitlement status of various welfare programs. More state authority. Funded by federal block grants and matching state funds. b. Limited welfare payments to no more than five years. c. Welfare recipients must work within two years of applying for benefits. d. Required food stamp recipients to work. e. Prohibited aliens (legal or illegal) from receiving various welfare benefits f. Required teen mothers to live with parents and attend school in order to receive welfare benefits.