Chapter 16

Chapter 16: 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

Chapter Outline and Learning
Objectives
• LO 16.1: Compare and contrast entitlement
and means-tested social welfare programs.
• LO 16.2: Assess the extent of economic
inequality in America and the role of
government in lessening it.

Objectives
• Helping the Poor? Social Policy and the Ne
• LO 16.3: Trace the changes over time in
major federal welfare programs.

Objectives
• Social Security: Living on Borrowed Time
• LO 16.4: Outline how America’s Social
Security program works and the challenge
of keeping it financially solvent in the
coming years.

Objectives
• LO 16.5: Distinguish American social
welfare policy from that of other
established democracies.
• LO 16.6: Assess the impact of social
welfare policies on democracy and the
scope of government in America.

Types of Social Welfare Policies
LO 16.1: Compare and contrast
entitlement and means-tested social
welfare programs.
• Social Welfare Policies
• Policies that provide benefits, cash or in-
kind to individuals based on either
entitlement or means testing.
To Learning Objectives

Types of Social Welfare Policies
• 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.
LO 16.1

LO 16.1

Income, Poverty, and Public Policy
LO 16.2: 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.

• Who’s Getting What?
• Who’s Poor in America?
• How Public Policy Affects Income
LO 16.2

• 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.
LO 16.2

LO 16.2

• 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.
LO 16.2

• 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%.
LO 16.2

• 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.
• 43.6 million people, or 14.3% of population,
were poor in 2009 according to Census
Bureau.
LO 16.2

• 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.
LO 16.2

• 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.
LO 16.2

• 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%.
LO 16.2

(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 low-
income groups than on wealthy taxpayers.
LO 16.2

(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.
LO 16.2

(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.
LO 16.2

Helping the Poor? Social Policy and
the Needy
LO 16.3: 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

the Needy
• “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.
LO 16.3

the Needy
• “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.
LO 16.3

the Needy
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.
LO 16.3

the Needy
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.
LO 16.3

LO 16.3

Social Security: Living on Borrowed
Time
LO 16.4: 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

Time
• The Growth of Social Security
• In 2010, average monthly check for retired
workers was $1,100.
• 1st
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.
LO 16.4

Time
• The Growth of Social Security (cont.)
• Current payroll taxes are 12.4%.
• Workers contribute 6.2% of their wages up
to $106,800, and their employers match it.
• Trust Fund must invest money in U.S.
Treasury bonds, which has been earning
about 6% a year.
LO 16.4

Time
• 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).
LO 16.4

Time
• 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.
LO 16.4

LO 16.4

Social Welfare Policy Elsewhere
LO 16.5: 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 is the United States.
• Greater generosity is evident in programs
related to health, child care, unemployment
compensation, and the elderly.

• We see poverty and welfare as
individual concerns but 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.
LO 16.5

• Europeans often have a more positive
attitude toward government.
• Americans are more likely to distrust
government action in areas such as
social welfare policy.
LO 16.5

• 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 the level of benefits and shrinking
populations.
LO 16.5

Understanding Social Welfare Policy
LO 16.6: 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

• 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.
LO 16.6

• 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.
LO 16.6

• 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.
LO 16.6

LO 16.1
Summary
• 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.

LO 16.1
Summary
(cont.)
• Because entitlement programs can provide
benefits to everyone, they are generally
more popular with the public than means-
tested programs.

Which of the following is
characterized as an entitlement
program?
A. Medicaid
B. Medicare
C. Supplemental Security Income
D. Children’s Health Insurance
Program
LO 16.1

LO 16.2
Summary
• 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.

LO 16.2
Summary
(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.

Among which of the following
groups is poverty most common?
A. Unmarried women with children
B. Inner-city residents
C. African Americans
D. Hispanics
LO 16.2

LO 16.3
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 was reduced in scope by the
Reagan administration.

LO 16.3
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.

One consequence of the welfare
reform legislation passed in 1996
is that
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.
LO 16.3

LO 16.4
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.

LO 16.4
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 solven, and the government will
soon face the painful choice between
raising taxes or cutting benefits to senior
citizens.

is currently the
most expensive social welfare
policy in the United States.
A. Social Security
B. Food Stamps
C. Unemployment Compensation
D. Temporary Aid To Needy Families
LO 16.4

LO 16.5
Summary
• 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.

LO 16.5
Summary
(cont.)
• Taxes in Europe have to be higher than
taxes in the United States in order to pay
for these benefits.

Most nations tend to be much
more generous with social welfare
programs than the United States is.
A. African
B. American
C. Middle East
D. European
LO 16.5

LO 16.6
Summary
• 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.

LO 16.6
Summary
(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.

Political participation affects the
distribution of
in the United States.
A. income and poverty
B. social welfare benefits
C. wealth and property
D. all of the above
LO 16.6

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: http://www.census.gov/prod/2009pubs/p60-236.pdf.
• 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 2009. Used with permission. Updated by the
authors for Australia, which implemented their first paid family leave in
2011.

Photo Credits
• 528: AP Photos
• 530: Getty Images
• 532T: Mario Thoma/Getty Images
• 532B: Varley Charlie/Sipa
• 536: Andy Singer
• 538: Carmle Zucka/The New York Times/Redux
• 544: Alex Wong/Getty Images

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