Social Welfare Policies
I. Social Welfare Subsidies
A. Major Social Welfare Programs:
1. Social Security: for elderly, survivors, and disabled
(OASDI). There is no means test to qualify for these
benefits. One does not have to prove that one lacks the
means in order to qualify for benefits. In other words, one
does not have to have a low level of income to qualify for
these benefits. Even upper income people qualify for benefits
if they fall into one of the three categories.
Financed by FICA payroll tax. (Federal Insurance Contribution
Act)
2. Medicare: Federal medical coverage for the elderly. No means
test.
3. Unemployment insurance: Payments to the unemployed. No
means test.
4. Temporary Assistance to Needy Families (TANF): Payments to
poor families with children. The program that most people are
talking about when they discuss the “welfare system.” Means
test.
5. Supplemental Security Income (SSI): Cash payments to
disabled people whose income level is below a certain
amount. Means Test.
6. Food stamps: Coupons given to the poor in order to buy food.
Means test.
7. Medicaid: Federal medical coverage for the poor on TANF or
SSI. Means test.
B. Two kinds of welfare politics.
1. Majoritarian policies: Everybody benefits from these, and
everybody pays.
2. Client policies: Relatively few people benefit, but everybody
pays.
C. Recent developments in social welfare policy.
1. The Social Security debate and the demographics problem:
a. Entitlements threaten to produce massive budget
deficits in the future. When Social Security began in 1935,
there were 42 people working for every Social Security
recipient. Now there are just 3, and by the year 2020 there
are projected to be only 2.
b. Increasing birth rate during the baby boom era.
c. Increasing life expectancy especially due to medical
improvements.
2. These demographic statistics have led some to propose
reforms for Social Security:
a. Increasing the age of recipients to 70.
b. Adopting means testing for recipients.
c. Reducing the annual “COLA” (cost of living adjustment) for
recipients.
d. reducing the benefits for recipients.
e. Increasing the amount of income that is subject to the
Social Security tax.
f. Privatizing part of Social Security deductions.
D. Welfare has become a huge political issue for the two parties
1. The GOP Contract with America stressed the role of
federalism: returning power back to the states by ending the
federal entitlement status of various welfare programs, and
replacing that with a system of block grants to the states. This
would enable states to become “laboratories” and free them
up to experiment with what works best for their own
particular situations. The GOP argues that states know what is
best for them since they are closer to their own people.
2. Republicans have linked the current welfare mess to
various social pathologies, such as, a higher illegitimacy rate, a
higher rate of single-parent families, higher crime rate, drug
problems. They have stressed welfare reform and have
claimed that the Democrats have blocked their efforts at
reform.
3. Given this political climate, even Democrats have stressed the
importance of welfare reform. President Clinton promised
to “end welfare as we know it,” and signed a huge welfare
reform bill in 1996 that was passed by the Republican
Congress. Some of the bill’s highlights:
a. Ended the federal entitlement status of various welfare
programs. More state authority. Funded by federal block
grants and matching state funds.
b. Limited welfare payments to no more than five years.
c. Welfare recipients must work within two years of applying
for benefits.
d. Required food stamp recipients to work.
e. Prohibited aliens (legal or illegal) from receiving various
welfare benefits
f. Required teen mothers to live with parents and attend
school in order to receive welfare benefits.