Welfare State - Poverty

Welfare State - Poverty - Federal Expenditures The federal...

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1 Federal Expenditures The federal government spent about $3.5 billion last year The 4 biggest federal budget categories are x Defense and Security at about 20% x Medicare, Medicaid, and CHIP at about 21% o Medicare – provides medical benefits for persons over 65 and older. o Medicaid – provides means-tested health benefits to low-income adults and children o CHIP – program that provides means-tested health benefits to low-income families with children (administered and partially funded by states). x Social Security at about 20% - provides income benefits to qualifying retirees, disabled persons, and survivors. x Safety Net Programs at about 14% - Includes o Temporary Assistance to Needy Families (TANF) – provides cash and other assistance to low-income families with children o EITC (the refundable part) o Child Tax Credit (the refundable part). o Supplemental Security Program – provides cash benefits for older and disabled Americans that do not qualify for Social Security o Unemployment Insurance – provides temporary benefits for unemployed workers. o Food Stamp Program – provides vouchers to low income families that can be used to purchase groceries
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3 With exception to defense and security these program areas could be classified as part of the Welfare State The Welfare State – a collection of government programs designed to alleviate economics hardship. Government transfer – a government payment to an individual or family Some of the programs are means-tested poverty programs and some are less targeted social insurance programs Means-tested – eligibility depends on income or assets. Poverty program – a government program designed to aid the poor. Social insurance program – a government program designed to provide protection against unpredictable financial distress.
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4 Rationale for the Welfare State x Diminishing marginal utility of income – if a family making $500,000 per year is taxed to provide a government transfer to a family making $5,000 per year, the family making $500,000 per year will be only slightly worse off, but the family making $5,000 per year will be made much better off. Illustration: Charles Barkley after being fined $10,000 by the NBA for spitting on a fan: “50 million takeaway 10 thousand is still 50 million” x There are social costs to poverty x Alleviating economic insecurity social insurance programs help alleviate economic insecurity by taxing individuals and families to transfers to individuals and families that have suffered an unpredictable financial distress (i.e. disability, the loss of a job, death, ect). Problems that the Welfare State Addresses x Poverty x Economic inequality x Economic insecurity
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5 Poverty x How is poverty defined in the US? o
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Welfare State - Poverty - Federal Expenditures The federal...

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