Welfare & Income Policy November 29, 2017 Dr. Michael Sullivan. FEDERAL GOVERNMENT GOVT 2305 MoWe 5:30 6:50 MoWe 7 8:30

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1 Welfare & Income Policy November 29, 2017 Dr. Michael Sullivan FEDERAL GOVERNMENT GOVT 2305 MoWe 5:30 6:50 MoWe 7 8:30

2 Unit 3 Upcoming In Class Topic & Reading Assignments Assignments Due Dates 5:30 pm 6:50 pm Class 7:00 pm 8:20 pm Class Check Canvass Grades for Any Missing Assignments

3 Current Events, Recent Events, & Review The Basics Social Welfare Policies Income Policies Upcoming Assignments

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5 Current Events, Recent Events, & Review The Basics Social Welfare Policies Income Policies Upcoming Assignments

6 Economic class People who share the same economic status In small groups, answer the following questions: 1. What economic classes exist in the United States? 2. What are the primary characteristics of these economic classes? 3. What is life like in each economic class? tank/2016/05/11/are you in the american middle class/

7 Economic class 3 Classifications in the United States Upper income households incomes greater than $125,000* Middle income households incomes ranging from about $42,000 to $125,000* Lower income households incomes less than $42,000* (*all figures computed for three person households, adjusted for the cost of living in a metropolitan area, and expressed in dollars). tank/2016/05/11/are you in the american middle class/

8 Economic class Growing Disparity Between Haves & Have Nots shrinking middle class a closelook at changes within metropolitan areas/st_ _middle class geo 01/ shrinking middle class a closelook at changes within metropolitan areas/st_ _middle class geo 01/ poverty problem/405700/

9 Economic class Growing Disparity Between Haves & Have Nots Income Share of America s Lower, Middle, and Upper Economic Classes, 1970 and 2015 Inflation Adjusted Annual Income, 1970 to 2010 Between 1970 and 2015, the nation s income shifted to the upper class, such that it now gets nearly half of all income that Americans receive each year. Note: Middle income households are those whose annual household income is two thirds to double the U.S. median household income after incomes have been adjusted for household size. In terms of 2014 U.S. dollars, this amounts to $42,000 to $126,000 annually for a household of three. Lower income households have adjusted incomes below $42,000 while upper income households have adjusted incomes above $126,000. During the 40 years beginning in 1970, the bottom 60 percent of income earners had virtually no increase in their real income, whereas those in the top 40 percent, and particularly those at the very top, had large increases in their real income. Note: Dollar amounts are expressed in 2010 dollars to eliminate the effect of inflation on changes in wages.

10 Growing Disparity Between Haves & Have Nots Why? What to Do About It? Globalization Government Technology 1 2 Narrow Gap Between Rich & Poor Incentives to Help Poor Make Lives Better Watch Video inequality worse/index.html & fill in items above. Source: Pew Research Center, 2015.

11 What Should Government Do To Address This Issue? It depends on. Most Republicans link a person s financial standing to their own hard work or the lack of it. Most Democrats say that whether someone is rich or poor is more attributable to circumstances beyond their control.

12 The Partisan Divide Political parties are far apart on income policy Democrats press for increased taxes on the wealthy Matter of fairness Republicans insist taxes stymie economic growth Lobbying sector favors upper income interests

13 Current Events, Recent Events, & Review The Basics Social Welfare Policies Income Policies Upcoming Assignments

14 Welfare Politics and Policies Roughly one in seven American families lives in poverty More poverty than other fully industrialized democracies Poverty line: set at the annual cost of a thrifty food budget multiplied by three 2016, roughly $24,000 for a family of four America s poor are concentrated in certain groups Children More urban and rural residents than suburbanites Minority group members Single parent, female headed families

15 Child Poverty Rates Based on the government defined poverty line, about one in five American children live in poverty. However, poverty is spread unevenly among the states. Jump to long image description Source: U.S. Census Bureau, 2016.

16 Public Assistance Programs Welfare policy was originally the purview of the states Offered few welfare services Individuals were expected to fend for themselves Federal government s role has since expanded The Great Depression Welfare programs initially opposed by Republican leaders Most were meant to be temporary Antipoverty programs of the 1960s Food stamps Subsidized housing Medicaid Affordable Care Act of 2010

17 Development of U.S. Social Security Programs 1935 Social Security Old Age Insurance; Unemployment Insurance; and Public Assistance programs for needy aged, and blind (replaced by the SSI program in 1972); and Aid to Families with Dependent Children (replaced with block grants for Temporary Assistance for Needy Families in 1996) 1934 Railroad Retirement System 1937 Public Housing 1939 Social Security Old Age and Survivors Insurance 1946 National School Lunch Program 1950 Aid to the Permanently and Totally Disabled (replaced by the SSI program in 1972) 1956 Social Security Disability Insurance 1960 Medical Assistance for the Aged (replaced by Medicaid in 1965) 1964 Food Stamp Program 1965 Medicare and Medicaid Programs 1966 School Breakfast Program 1969 Black Lung Benefits Program 1972 Supplemental Security Income Program 1974 Special Supplemental Food Program for Women, Infants, and Children (WIC) 1975 Earned Income Tax Credit 1981 Low Income Home Energy Assistance 1996 Temporary Assistance for Needy Families

18 Public Assistance Programs Public assistance: funded with general tax revenues and available only to those in financial need (Temporary Assistance for Needy Families (TANF); Medicaid; food stamps) Eligibility is established by a means test Most public assistance programs are funded by the federal government but administered by the states In kind benefits: not cash; can be used only for certain things, such as in the case of food stamps

19 Welfare Reform Act of 1996 The Welfare Reform Act of 1996 placed a five year limit on welfare eligibility and requires able bodied recipients to take job training and apply for work. The legislation has had a dramatic impact on the welfare rolls. Source: U.S. Department of Health and Human Services, 2016.

20 Social Insurance Programs Social insurance: eligibility restricted to individuals who pay special payroll taxes while working Unemployment insurance Social security Medicare Entitlement program: any individual who meets the eligibility criteria is entitled to the benefit Social security and Medicare are entirely federal programs that are highly efficient Social insurance programs are widely supported Heavily funded Benefits provided to individuals of all income levels Seen as an earned entitlement

21 WHY? Public Support for Spending on Social Security and Poverty Programs Americans are much more supportive of social security spending than they are of antipoverty program spending. Sources: CBS News poll, 2014 for social security data; Rasmussen poll, 2012 for poverty data.

22 The American Way of Promoting Economic Security American traditions shape policies Limited government, personal liberty, and self reliance Emphasis on the economic marketplace Higher level of income inequality and poverty than other Western democracies All democratic societies promote economic security Higher priority in European democracies Differences between the European and American approaches stem from historical and cultural differences

23 Politics of Welfare Policy Public assistance programs have less public support Receive less funding Restricted to people of low income Seen as a hand out Such programs are a political target, especially with increased party polarization Temporary Assistance for Needy Families (TANF) Because the Earned Income Tax Credit (EITC) is a benefit for low income workers Seen as a reward for working

24 Government s Social Welfare Role In few areas have the differences between the Republican and Democratic parties been more consistent over the years than their positions on the use of government as an instrument of economic security. Source: Pew Research Center for the People & the Press survey, February 22, 2013.

25 Current Events, Recent Events, & Review The Basics Social Welfare Policies Income Policies Upcoming Assignments

26 In 2015, women earned 83% of what men earned, according to a Pew Research Center analysis of median hourly earnings of both full- and part-time U.S. workers. Should US Government Intervene to fix this? Based on this estimate, it would take an extra 44 days of work for women to earn what men did in Gender gap in pay has narrowed since 1980, particularly among younger workers, but it still persists. But for adults ages 25 to 34, the 2015 wage gap is smaller. Women in this group earned 90 cents for every dollar a man in the same age group earned

27 Income Politics and Policies America s economic boom following World War II launched an era of shared prosperity Good paying jobs Rising levels of home ownership Increasing college graduation rates Situation has changed Middle class is shrinking; and the plight of the lower class is worse Upper class now account for about a fifth of Americans and receive half the nation s income

28 The Shifting Income Distribution Great Depression brought enormous changes Progressive income tax: tax where the marginal tax rate increases as income rises Postwar booming economy Collective bargaining rights GI Bill Income nearly doubled in every income category 1970s to the present Middle class income stagnates while top earners grow

29 Parallel Changes Top earners have done well in recent decades primarily due to tax policy In the period after World War II, tax policy kept inequality in check Gap widened in the 1980s with the presidency of Ronald Reagan and his pursuit of supply side economics Tax cuts were also pursued by president George W. Bush High earners also benefited from a cut in the capital gains tax: the tax individuals pay on gains in capital investments Note the income gains from the Reagan and Bush tax cuts came from government borrowing

30 Parallel Changes (2) Wage stagnation in recent decades is mainly a result of changes in the nation s job market No change in real income since 1970 Dominance of American goods and services following World War II gradually gave way to a competitive global market Union membership has declined Job growth has primarily been in the service sector Lower wages Decreased economic activity potential

31 Taxation ugh_millionaires_to_pay_for_all_your_socialism.html What Do You Support?

32 Current Events, Recent Events, & Review The Basics Social Welfare Policies Income Policies Upcoming Assignments

33 Unit 3 Upcoming In Class Topic & Reading Assignments Assignments Due Dates 5:30 pm 6:50 pm Class 7:00 pm 8:20 pm Class

34 Long image descriptions APPENDIX A McGraw Hill Education

35 Critical Thinking The Supreme Court has held that American children are entitled to an adequate education but not an equal education. Explain the difference. Contrast social insurance benefits and public assistance benefits. How do they differ in terms of how individuals qualify to get a benefit? How do they differ in terms of the level of public support they have? How has U.S. social welfare policy been influenced by America s federal system of government and by Americans belief in individualism?

36 Parallel Changes Top earners have done well in recent decades primarily due to tax policy In the period after World War II, tax policy kept inequality in check Gap widened in the 1980s with the presidency of Ronald Reagan and his pursuit of supply side economics Tax cuts were also pursued by president George W. Bush High earners also benefited from a cut in the capital gains tax: the tax individuals pay on gains in capital investments Note the income gains from the Reagan and Bush tax cuts came from government borrowing

37 Figure 16 3 Cumulative Income Tax Savings from Bush Era Tax Cuts, The Bush era tax cuts were in effect for nine years and resulted in tax savings for all income groups, but high income households had by far the biggest tax savings. Households with incomes in the top fifth in the nation saved an average of $62,682 in taxes. The top 1 percent saved $522,062. Source: Center on Budget and Policy Priorities, based on constant FY2012 dollars.

38 Parallel Changes (2) Wage stagnation in recent decades is mainly a result of changes in the nation s job market No change in real income since 1970 Dominance of American goods and services following World War II gradually gave way to a competitive global market Union membership has declined Job growth has primarily been in the service sector Lower wages Decreased economic activity potential

39 Education Politics and Policies Nearly all Americans endorse the principle of equality of opportunity: that all people should have a reasonable chance to succeed if they make the effort Americans do not start life on an equal footing Equality of opportunity is the ideal driving public education

40 Public Education: Leveling through the Schools Free education for all children was a contentious idea Wealthy interests feared a challenge to their power Egalitarians believed it would enable ordinary people to get ahead U.S. curriculum is relatively standardized, though it has never been a uniform experience Seeks to broadly education American children Quality reflects the wealth of the community Supreme Court has ruled the states must provide an adequate education, not necessarily one that is equal across communities

41 Education Performance In the most recent Organization for Economic Cooperation and Development (OECD) assessment of student performance in reading, math, and science, the United States ranked 36 out of 65 countries, trailing nearly ever Asian and western European country. Source: Organization for Economic Cooperation and Development, 2014.

42 The Federal Government s Role in Education Policy Education is mainly the responsibility of state and local governments; but since the 1960s the federal government has played a larger role 1965 Elementary and Secondary Education Act Head Start 1965 Higher Education Act Pell Grants Federal student loans

43 Figure 16 6 Student Loan and Credit Card Debt In recent decades, state and local governments have reduced their spending on public colleges and universities, which has shifted a larger share of the cost to students. Student loan debt in the United States now exceeds what Americans owe on their credit cards. Source: Federal Reserve Bank of New York; figures are for 2014.

44 The Federal Government s Role in Education Policy (2) As with welfare, Democrats and Republicans disagree on federal education policy Democrats are inclined to increase federal spending Republicans prefer market like mechanisms Charter schools Common Core State Standards Initiative Bipartisan support for Every Student Succeeds Act Replaced No Child Left Behind Act Funded through $25 billion in federal assistance each year to the states

45 Child Poverty Rates Appendix More than 25% of children are living in poverty in Alabama, Arizona, Arkansas, Georgia, Kentucky, Louisiana, Mississippi, New Mexico, Tennessee, West Virginia, and the District of Columbia. 20.1% to 25% of children are living in poverty in California, Florida, Illinois, Indiana, Maine, Nevada, North Carolina, Ohio, Oklahoma, South Carolina, and Texas. 15.1% to 20% of children are living in poverty in Alaska, Colorado, Delaware, Hawaii, Kansas, Massachusetts, Michigan, Montana, Nebraska, New Jersey, New York, Oregon, Pennsylvania, Rhode Island, South Dakota, Washington, and Wisconsin. 15% or less of children are living in poverty in Connecticut, Idaho, Iowa, Maryland, Minnesota, Missouri, New Hampshire, North Dakota, Utah, Vermont, Virginia, and Wyoming. Jump back to slide containing original image