Copyright 2011 Pearson Education, Inc. Publishing as Longman

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3 Chapter 18: Social Welfare Policymaking Types of Social Welfare Policies Income, Poverty, and Public Policy Helping the Poor? Social Policy and the Needy Social Security: Living on Borrowed Time Social Welfare Policy Elsewhere Understanding Social Welfare Policy Summary

4 Chapter Outline and Learning Objectives Types of Social Welfare Policies LO 18.1: Compare and contrast entitlement and means-tested social welfare programs. Income, Poverty, and Public Policy LO 18.2: Assess the extent of economic inequality in America and the role of government in lessening it.

5 Chapter Outline and Learning Objectives Helping the Poor? Social Policy and the Needy LO 18.3: Trace the changes over time in major federal welfare programs.

6 Chapter Outline and Learning Objectives Social Security: Living on Borrowed Time LO 18.4: Outline how America s Social Security program works and the challenge of keeping it financially solvent in the coming years.

7 Chapter Outline and Learning Objectives Social Welfare Policy Elsewhere LO 18.5: Distinguish American social welfare policy from that of other established democracies. Understanding Social Welfare Policy LO 18.6: Assess the impact of social welfare policies on democracy and the scope of government in America.

8 Types of Social Welfare Policies LO 18.1: Compare and contrast entitlement and means-tested social welfare programs. Social Welfare Policies Policies that provide benefits, cash or inkind, to individuals, based on either entitlement or means testing.

9 Types of Social Welfare Policies LO 18.1 Entitlement Programs Government programs providing benefits to qualified individuals regardless of need. Means-Tested Programs Government programs providing benefits only to individuals who qualify based on specific needs.

10 LO 18.1

11 Income, Poverty, and Public Policy LO 18.2: Assess the extent of economic inequality in America and the role of government in lessening it. U.S. has one of the world s highest per capita incomes. According to Census Bureau in 2009, the median U.S. household income was $49,777. No industrialized country has wider extremes of income than the United States.

12 Income, Poverty, and Public Policy LO 18.2 Who s Getting What? Who s Poor in America? How Public Policy Affects Income

13 Income, Poverty, and Public Policy LO 18.2 Who s Getting What? Income distribution The way the national income is divided into shares ranging from the poor to the rich. In 2008, people whose income placed them in the lowest 20% of households got 3.4% of nation s income and those in the highest 20% got half of nation s income.

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15 Income, Poverty, and Public Policy LO 18.2 Who s Getting What? (cont.) In recent decades, the share of the highest fifth has grown while those of the lowest fifths have gotten smaller. Relative deprivation A person perceives that he or she is not doing well economically in comparison to others.

16 Income, Poverty, and Public Policy LO 18.2 Who s Getting What? (cont.) Income The amount of money collected between any two points in time. Wealth Value of assets owned, such as stocks, bonds, bank accounts, cars, and houses. ⅓ of wealth is held by 1% of the population, ⅓ is held by 9%, and ⅓ is held by 90%.

17 Income, Poverty, and Public Policy LO 18.2 Who s Poor in America? Poverty line Income below this amount means people are poor, based on what a family must spend for an austere standard of living, set at three times the cost of a subsistence diet million people, or 14.3% of population, were poor in 2009, according to Census Bureau.

18 Income, Poverty, and Public Policy LO 18.2 Who s Poor in America? (cont.) In 2009, the poverty threshold for a single adult was $11,161, for two adults it was $14,366, and for a single parent with two children it was $17,268. Poverty rates are higher for African Americans, Hispanics, unmarried women, children, and inner-city residents.

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21 Income, Poverty, and Public Policy LO 18.2 Who s Poor in America? (cont.) Feminization of poverty The increasing concentration of poverty among women, especially unmarried women and their children. Poverty rate for female-headed families is almost 30%, as opposed to less than 6% for families with two parents.

22 Income, Poverty, and Public Policy LO 18.2 How Public Policy Affects Income Progressive tax A tax by which the government takes a greater share of the income of the rich than of the poor. For example, when a rich family pays 50% of its income in taxes, and a poor family pays 5%.

23 Income, Poverty, and Public Policy LO 18.2 How Public Policy Affects Income (cont.) Proportional tax A tax takes the same share of income from everyone, rich and poor alike. Regressive tax A tax in which the burden falls relatively more heavily on lowincome groups than on wealthy taxpayers.

24 Income, Poverty, and Public Policy LO 18.2 How Public Policy Affects Income (cont.) Earned Income Tax Credit A refundable federal income tax credit for low income working individuals and families. In 2010, workers raising 1 child with incomes less than $16,420 could get up to $3,043 in EITC.

25 Income, Poverty, and Public Policy LO 18.2 How Public Policy Affects Income (cont.) Transfer payments Benefits given by the government directly to individuals either cash transfers, such as Social Security payments, or in-kind transfers, such as food stamps and low-interest college loans.

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27 LO 18.2

28 Helping the Poor? Social Policy and the Needy LO 18.3: Trace the changes over time in major federal welfare programs. Welfare As We Knew It Ending Welfare As We Knew It: The Welfare Reform of 1996

29 Helping the Poor? Social Policy and the Needy LO 18.3 Welfare As We Knew It Social Security Act of 1935 created the Social Security program and the Aid to Families with Dependent Children program. In 1964 President Lyndon Johnson declared a War on Poverty, and added welfare programs to the policies that fight poverty.

30 Helping the Poor? Social Policy and the Needy LO 18.3 Welfare As We Knew It (cont.) In 1981, President Ronald Reagan declared war on antipoverty programs, and persuaded Congress to cut welfare benefits and lower the number of Americans on the welfare rolls by arguing that welfare had proved to be a failure.

31 Helping the Poor? Social Policy and the Needy LO 18.3 Ending Welfare As We Knew It: The Welfare Reform of 1996 Personal Responsibility and Work Opportunity Reconciliation Act is the welfare reform law of 1996, which implemented the Temporary Assistance for Needy Families (TANF) program.

32 Helping the Poor? Social Policy and the Needy LO 18.3 Ending Welfare As We Knew It: The Welfare Reform of 1996 (cont.) TANF replaced Aid to Families with Dependent Children as the program for public assistance to needy families. TANF requires people on welfare to find work in 2 years and sets a lifetime maximum of 5 years.

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34 LO 18.3

35 Social Security: Living on Borrowed Time LO 18.4: Outline how America s Social Security program works and the challenge of keeping it financially solvent in the coming years. The Growth of Social Security Reforming Social Security

36 Social Security: Living on Borrowed Time LO 18.4 The Growth of Social Security In 2010, average monthly check for retired workers was $1, st check was $22.54 in 1936 to Ida Fuller of Brattleboro, VT. Social Security Trust Fund The account that Social Security contributions are put into and used to pay eligible recipients.

37 Social Security: Living on Borrowed Time LO 18.4 The Growth of Social Security (cont.) Current payroll taxes are 12.4%. Workers contribute 6.2% of their wages up to $102,000, and their employers match it. Trust Fund must invest money in U.S. Treasury bonds, which has been earning about 6% a year.

38 Social Security: Living on Borrowed Time LO 18.4 The Growth of Social Security (cont.) Social Security Most expensive public policy in the U.S.A.! A recipient s benefits require a Social Security payroll tax of 10.3% per worker (31/3 = 10.3). Cost to each worker may rise to 15.5% of earnings (31/2 = 15.5).

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40 Social Security: Living on Borrowed Time LO 18.4 Reforming Social Security President Bush Proposed diverting ⅓ of individuals Social Security contribution to private retirement funds, such as a private account, a stock, a bond, or another investment. President Obama More likely to propose raising payroll taxes.

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42 Social Welfare Policy Elsewhere LO 18.5: Distinguish American social welfare policy from that of other established democracies. Most industrial nations tend to be far more generous with social welfare programs than the United States. Greater generosity is evident in programs related to health, child care, unemployment compensation, and the elderly.

43 Social Welfare Policy Elsewhere LO 18.5 We see poverty and welfare as individual concerns, and Europeans support greater governmental responsibility for these problems. 71% of Americans believe that the poor could escape poverty if they worked hard enough, compared to 40% of Europeans.

44 Social Welfare Policy Elsewhere LO 18.5 Europeans often have a more positive attitude toward government. Americans are more likely to distrust government action in areas such as social welfare policy.

45 Social Welfare Policy Elsewhere LO 18.5 Europeans pay a high price for generous benefits. Tax rates in Western European nations far exceed those in the United States; in some cases top tax rates exceed 50% of income. Funding problems are greater in Europe due to level of benefits and shrinking populations.

46 Understanding Social Welfare Policy LO 18.6: Assess the impact of social welfare policies on democracy and the scope of government in America. Democracy and Social Welfare Social Welfare Policy and the Scope of Government

47 Understanding Social Welfare Policy LO 18.6 Democracy and Social Welfare In the social welfare policy arena, the competing groups are often quite unequal in terms of political resources. The elderly are relatively well organized and often have the resources needed to wield significant influence in support of programs they desire.

48 Understanding Social Welfare Policy LO 18.6 Democracy and Social Welfare (cont.) The elderly are usually successful in protecting and expanding their programs. Influencing political decisions is more difficult for the poor because they vote less frequently and lack strong, focused organizations and money.

49 Understanding Social Welfare Policy LO 18.6 Social Welfare Policy and the Scope of Government Nothing more clearly accounts for the growth of government than social welfare spending. Growth of government is driven by the growth of social welfare. American social welfare system grows generation by generation.

50 LO 18.1 Summary Types of Social Welfare Policies Means-tested social welfare programs provide benefits only to people who qualify for them based on specific needs. In contrast, entitlement programs provide benefits to individuals without regard to need.

51 LO 18.1 Summary Types of Social Welfare Policies (cont.) Because entitlement programs can provide benefits to everyone, they are generally more popular with the public than meanstested programs.

52 LO 18.1 Which of the following is characterized as an entitlement program? A. Medicaid B. Medicare C. Supplemental Security Income D. Children s Health Insurance Program

53 LO 18.1 Which of the following is characterized as an entitlement program? A. Medicaid B. Medicare C. Supplemental Security Income D. Children s Health Insurance Program

54 LO 18.2 Summary Income, Poverty, and Public Policy Despite America s affluence, the disparity between incomes is quite substantial and has been increasing in recent decades. America s means-tested social welfare programs help to reduce inequality by helping the poorest individuals.

55 LO 18.2 Summary Income, Poverty, and Public Policy (cont.) Progressive taxes, such as the federal income tax, also alleviate inequality by taking a bigger bite out of the rich than the middle class.

56 Among which of the following groups is poverty most common? LO 18.2 A. Unmarried women with children B. Inner-city residents C. African Americans D. Hispanics

57 Among which of the following groups is poverty most common? LO 18.2 A. Unmarried women with children B. Inner-city residents C. African Americans D. Hispanics

58 LO 18.3 Summary Helping the Poor? Social Policy and the Needy The Aid to Families with Dependent Children (AFDC) program was begun during FDR s New Deal, greatly expanded during the period of LBJ s Great Society, and then reduced in scope by the Reagan administration.

59 LO 18.3 Summary Helping the Poor? Social Policy and the Needy (cont.) In 1992, when Bill Clinton ran for president he promised to end welfare as we know it, and it happened in 1996 when the AFDC program was replaced by TANF. Under the new law recipients of aid can only be on welfare rolls for 2 consecutive years and 5 years during their lifetime.

60 One consequence of the welfare reform legislation passed in 1996 is that LO 18.3 A. benefits for the poor have increased. B. the number of families receiving aid has increased. C. the role of state governments in welfare has increased. D. the number of years for which families are eligible for benefits has increased.

61 One consequence of the welfare reform legislation passed in 1996 is that LO 18.3 A. benefits for the poor have increased. B. the number of families receiving aid has increased. C. the role of state governments in welfare has increased. D. the number of years for which families are eligible for benefits has increased.

62 LO 18.4 Summary Social Security: Living on Borrowed Time The Social Security program collects a payroll tax from workers and their employers each month and pays out monthly benefits to retirees. It has proved to be a highly successful and popular program.

63 LO 18.4 Summary Social Security: Living on Borrowed Time (cont.) Demographic trends have Social Security in danger, soon there will not be enough workers per beneficiary to keep the program solvent, and the government will soon face the painful choice between raising taxes or cutting benefits to senior citizens.

64 is currently the most expensive social welfare policy in the United States. LO 18.4 A. Social Security B. Food Stamps C. Unemployment Compensation D. Temporary Aid To Needy Families

65 is currently the most expensive social welfare policy in the United States. LO 18.4 A. Social Security B. Food Stamps C. Unemployment Compensation D. Temporary Aid To Needy Families

66 LO 18.5 Summary Social Welfare Policy Elsewhere Most established democracies have more expensive and generous social welfare programs than does the United States. European governments provide citizens with benefits, such as paid parental leave upon the birth of a child, that are unheard of in the United States.

67 LO 18.5 Summary Social Welfare Policy Elsewhere (cont.) Taxes in Europe have to be higher than taxes in the United States in order to pay for these benefits.

68 Most nations tend to be much more generous with social welfare programs than the United States is. LO 18.5 A. African B. American C. Middle East D. European

69 Most nations tend to be much more generous with social welfare programs than the United States is. LO 18.5 A. African B. American C. Middle East D. European

70 LO 18.6 Summary Understanding Social Welfare Policy Groups with ample political resources tend to get more of what they want in the battle over social welfare policies. The elderly have been very successful in preserving their Social Security and Medicare benefits.

71 LO 18.6 Summary Understanding Social Welfare Policy (cont.) The poor have faced difficulties getting more funding for TANF. Overall, the growth in social welfare spending, particularly for Social Security and Medicare, accounts for much of the increase in the scope of government in recent decades.

72 Political participation affects the distribution of in the United States. LO 18.6 A. income and poverty B. social welfare benefits C. wealth and property D. all of the above

73 Political participation affects the distribution of in the United States. LO 18.6 A. income and poverty B. social welfare benefits C. wealth and property D. all of the above

74 Text Credits U.S. Census Bureau. The 2008 data can be found in the Census Bureau s report entitled Income, Poverty, and Health Insurance Coverage in the United States: 2008, p. 10. This report is posted online at: U.S. Census Bureau, Income, Poverty, and Health Insurance Coverage in the United States: 2008, p. 14. Indicators of Welfare Dependence. U.S. Department of Health and Human Services. Annual Report to Congress, 2008; updated by authors based on caseload data reported by the U.S. Department of Health and Human Services Administration for Children and Families. Rebecca Ray et al., Parental Leave Policies: Assessing Generosity and Gender Equality, Report of the Center for Economic and Policy Research, p. 6. June Used with permission. Updated by the authors for Australia, which implemented their first paid leave in 2011.

75 Photo Credits 524: AP Photos 525T: Getty Images; 525TC: Mario Thoma/Getty Images 525TB: Carmel Zucka/Getty Images 525B: Alex Wong/Getty Images 526: Getty Images 529T: Mario Thoma/Getty Images 529B: Varley Charlie/Sipa 531: Andy Singer 534: Carmel Zucka/The New York Times/Redux 538: Alex Wong/Getty Images