Chapter 19 Social Welfare

Transcription

1 Chapter 19 Social Welfare

2 Social Welfare: Framing the Issue Who should benefit? Who should pay? How important is social justice? As society and the economy changes, the answers to these questions change.

3 We the People of the United States, in Order to...promote the general Welfare... What did the Framers mean? They were not thinking that the government should provide direct aid in cash or services to economically disadvantaged people. They had a broader view of promoting the public good. (safety, morals, property)

4 Public Aid Who deserves it? (Elderly woman, blind, disabled, widowed, childless) What is the minimum quality of life for an American? (social safety net) What form should aid take? (Cash vs. services)

5 Two Kinds of Welfare Programs Majoritarian Politics/Programs Examples Social Security, Medicare No means test Biggest issue cost Client Politics/Programs Examples Medicaid, Food Stamps Means tested Biggest issue legitimacy

6 Social Welfare in the United States United States compared to other nations: A more restrictive view of who is entitled to governmental assistance. Americans have strong belief in economic selfreliance. No need to redistribute wealth to ensure a fair share of economic prosperity. Government should only aid the deserving poor.

7 Social Welfare in the United States United States compared to other nations: Slower to embrace the welfare state. Germany: social security system by England: old age pension system by When U.S. Social Security passed in 1935, twenty-two European nations already had similar programs.

8 Social Welfare in the United States United States compared to other nations: States play a larger role (federalism) U.S. system allows states to experiment with welfare policy. Thirty states enacted old-age pensions before Social Security passed at the federal level.

9 Social Welfare in the United States United States compared to other nations: Non-governmental organizations play a larger role. Government grants are given to NGOs, both for-profit and non-profit. George W. Bush expanded ability of faithbased organizations to receive federal grants.

10 Social Welfare in the United States ENTITLEMENT PROGRAMS Every American who meets the legally defined criteria is entitled to benefit from these programs. Entitlement = right Examples: Social Security and Medicare.

11 Social Security Old Age, Survivors, and Disability Insurance (OASDI) "We put those payroll contributions there so as to give the contributors a legal, moral, and political right to collect their pensions and unemployment benefits. With those taxes in there, no damn politician can ever scrap my social security program." Franklin D. Roosevelt

12 Social Security Late 19 th Century: Most people worked and lived on farms in extended families. 1890: 28% of Americans lived in cities. Economic security = farm & family.

13 Social Security With increased industrialization, more people moved to cities and became wage earners. People had less economic security. 1930: 56% of people lived in cities.

14 Social Security Late 19 th Century: European nations began considering government run social welfare systems. 1889: Germany became first nation to have a national social security retirement program. In the U.S., the Great Depression was the catalyst for development of Social Security system. In 1934, FDR announced his plan.

15 Social Security Congress passed the Social Security Act in 1935, establishing a social insurance plan to guarantee a continued income for retired workers over 65 years of age. 1939: Benefits were expanded to support families of retired workers and those who had a premature death. 1954: Benefits were extended to disabled workers. Congress continued to expand disability benefits during the late 1950s.

16 Social Security Congress has tinkered with the SS system over the decades. Nixon: restructured the bureaucracy. Reagan: Implemented beneficiary reviews to determine continued eligibility, then ended them due to controversy. Clinton: Signed Ticket to Work law allowing SS recipients to continue working while receiving benefits.

17 Social Security George W. Bush: Sought to allow people to create private investment accounts using some of their SS taxes. Highly controversial. Did not have congressional support. Key points made by Bush: There is a need to settle the long-term financial problems of Social Security. Benefits for current recipients should not change. Any significant change in the system should have a national discussion and should be done gradually.

18 Social Security A MAJOR PART OF AMERICAN LIFE One in six Americans receives some form of SS benefits. (~54 million people) 98% of American workers are covered. Nearly all workers are subject to payroll tax. (7.65%)

19 Social Security TROUBLE AHEAD As baby boomers retire, they will drain SS fund faster than American workers are paying into it. By 2020 there will be fewer than two workers for every retiree. Their payroll taxes would have to double. SS faces a $4 trillion shortfall over the next 75 years.

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22 Social Security REFORM IDEAS Raise retirement age (currently 67). Raising age to 70 by Could close gap by 20%. Reduce benefits for high earners by up to 10%. Could close gap by 25%. Raise payroll taxes. Currently at 7.65%. An increase could help close the gap.

23 Social Security REFORM IDEAS Increase wage cap. Wages are taxed up to $97,500. Increasing that to $150,000 could close gap by half. Government invests SS funds in low-risk stocks and bonds. Could close gap by 15%. Individual accounts (Bush s proposal). No agreement on how this would affect the gap.

24 Source: Knowledge Networks, survey of a nationally representative sample of 1,514 adults age twenty-one and older, conducted January 19 29, 2007, as reported in Retirement Security Survey Report (Washington, D.C.: American Association of Retired Persons, February 2007); and Public Agenda Foundation, Social Security: Bills and Proposals, 2007, at org/issues/major proposals, citing a January 2005 survey by the Pew Research Center of the Pew Charitable Trusts.

25 In 1945, President Harry Truman gave a special message to Congress outlining a pre-paid health insurance plan dubbed National Health Insurance. In 1957, the Forand bill was introduced in Congress. It sparked an eight-year debate over a government sponsored health insurance program.

26 The debate focused on two questions: 1. Did the aged in fact need help with medical bills? 2. If yes, what mechanism would be used to pay? The first point was eventually accepted as true. Choices for the second question: 1. Government subsidies for private insurers. 2. Direct government payments through state governments. 3. Health insurance financed and administered through Social Security system.

27 In 1965, President Lyndon B. Johnson, sitting beside former President Harry Truman, used 100 pens to sign Medicare into law as part of a package of the Social Security Amendments of 1965.

28 The cost of Medicare is about $450 billion a year and is rising rapidly. Medicare is so expensive because recipients can see a doctor whenever they need to, receive the services they need to, and the government pays. Today s recipients receive far more in benefits than they paid into the system. (A couple that retires today have paid in an estimated $100,000 and will receive $300,000 in services.)

29 TROUBLE AHEAD The number of retirees relative to workers is increasing as baby boomers retire. People are living longer and will be receiving services for more years after becoming eligible. Medical cost inflation is rampant.

30 The Medicare program as it currently exists is simply unsustainable. It is projected to run out of money within a decade. (* 1998 commission predicted bankruptcy in 2008.) Congress must eventually make significant changes. Recommended reforms: Increase payroll taxes. Reduced payments to doctors and hospitals Cost sharing (reduced benefits) Rep. Paul Ryan: Vouchers to purchase private insurance.

31 Social Welfare in the United States MEANS TEST PROGRAMS Recipients must demonstrate that they meet certain qualifications (low income) Based on need, not right. Examples: TANF and SNAP

32 Medicaid is a public assistance program rather than a social insurance program. Means test: applicants must show they have low incomes. Public assistance program (def): A government benefit funded from general tax revenues but available only to the financially needy. Established by Congress is 1965 when they created Medicare. Administered by states with federal funding. 60% of funding comes from federal government, 40% from states.

33 Rapid rise in cost of health care is putting a major strain on state budgets. Half of all public assistance dollars paid out by the federal government goes to Medicaid. States have had to cut services. Medicaid has been criticized for aiding people who are not eligible. There are an estimated 45 million Americans with incomes too high for Medicaid but too low to cover the cost of health insurance.

34 AFDC and TANF Aid to Families with Dependent Children (AFDC) was founded in 1935 as part of the Social Security Act. Purpose was to help poor children whose father died prematurely. Federal program administered by the states. Over the years, the federal government added more requirements that states had to conform to.

35 AFDC and TANF Public opinion turned against AFDC. Perception that people were living off of welfare. Belief that the system rewarded socially unacceptable behavior (having children out-ofwedlock). 1970: About one-quarter of mothers receiving AFDC had never been married. By 1994: More than half had never been married.

36 AFDC and TANF Political support for AFDC eroded. In 1996, the Republican-led Congress and President Clinton worked together to abolish AFDC and replace it with Temporary Aid for Needy Families (TANF). Goal of TANF was to reduce long-term dependency on welfare. TANF is a block grant program.

37 Temporary Aid for Needy Families (TANF) Eligibility for federal cash assistance is limited to no more than five years in a lifetime. The head of most families on welfare must find work within two years or risk losing benefits. Single parents must work at least 30 hours per week; two-parent households must work hours per week. States receive federal credit if more than 50% of singleparent and 90% of two-parent households are working.

38 Temporary Aid for Needy Families (TANF) Unmarried teenage mothers must remain in school and live with parent/guardian to qualify for welfare benefits Single mothers lose some benefits if they refuse to cooperate in the identification of their child s father. States have ability to determine who is eligible for benefits. In 2009 there were 4,154,000 individuals receiving TANF benefits (1.3% of total U.S. population) at a total cost of $35.8 billion. (1.0% of federal budget)

39 Supplemental Nutrition Assistance Program (SNAP aka food stamps) An in-kind benefit program that ensures recipients will use public funds in a certain way. Intent is to improve the nutrition of poor families. Vouchers can only be spent on groceries. Federal program administered by the Dept. of Agriculture. Number of Americans on food stamps: o 17.3 million in 2001 o 28.2 million in 2008 o 43.2 million in October, 2010 (14% of U.S. pop.)

40 Supplemental Nutrition Assistance Program (SNAP aka food stamps) Criticisms Recipients are stigmatized because other shoppers at cash register know they are welfare cases. Too many undeserving people receive food stamps. Too costly overall.

41 Figure 19.1 AFDC/TANF, Food Stamps, and SSI Recipients Note: AFDC/TANF refers to Aid to Families with Dependent Children/ Temporary Assistance for Needy Families; TANF replaced AFDC after SSI refers to Supplemental Security Income. Source: Adapted from U.S. Department of Health and Human Services, Indicators of Welfare Dependence: Annual Report to Congress, 2006.

42 Education Policy Americans support the principle of equality of opportunity and a good education is widely recognized as a right. U.S. Constitution doesn t include the right to a quality education but many state constitutions do (incl. Virginia). The U.S. invests more heavily in public education at all levels than any other country. Quality of education depends on wealth of locality. Education systems are run by states. Federal government applies pressure by controlling federal funding.

43 Education Policy Head Start Created in 1964 by Dept. of Health, Education & Welfare (now HHS) Purpose is to break the cycle of poverty by preparing economically disadvantaged young children (under 5) for school. Head Start programs promote school readiness by enhancing the social and cognitive development of children through the provision of educational, health, nutritional, social and other services to enrolled children and families. They engage parents in their children's learning and help them in making progress toward their educational, literacy and employment goals. Evidence shows that academic achievement is improved but declines over time.

44 Education Policy No Child Left Behind Controversial program initiated by President George W. Bush and passed by Congress in Requires national testing in reading, math and science and ties federal funding to test results. Schools showing no improvement (AYP) in scores for two years get more federal aid. If no improvement is shown for a third year, funding is decreased and students become eligible to transfer to another school. 100% pass rate for all students on all tests was the original goal.

45 Education Policy No Child Left Behind CRITICISMS NCLB creates unfunded mandates Def. A federal statute or regulation that requires a state or local government to take some action but does not provide necessary funding. Educators: Has forced teachers to teach to the test and ignore real learning. Some states have embraced NCLB as an answer to underperforming schools. Opinion polls show public is split in support for NCLB.

46 Education Policy No Child Left Behind NCLB officially expired in 2007, but until Congress rewrites it remains in effect. President Obama has done little to initiate changes. On March 14, 2011 he publically stated that NCLB needs to be fixed. States now allowed to request waivers from some NCLB requirements.

47 Education Policy School Choice Republican-supported reform proposal. Applies free-market principles to public education system. Idea came from Milton Friedman, a free-market economist. Parents would receive vouchers from the government that could be used at school of their choosing. Low-performing schools would go out of business. Criticism: Underserved low-income students would be the big losers.