Chapter 3
Section 2
Welfare- any government aid to
the poor.
There are two types of Welfare
Programs:
Cash Transfers and In-Kind Benefits
Cash transfers- direct payments of money
to eligible poor people.
The following programs distribute direct
cash transfers: Temporary Assistance for
Needy Families, Social Security,
Unemployment insurance, and Workers
compensation.
In-kind benefits- goods and services
provided for free or at greatly reduced
prices.
Poverty threshold- an income level below
that which is needed to support families
or households.
-The poverty thresholds are created by the
states and are based on 2 factors:
1-Size of Family (no more than two adults)
2-Income Level for the entire household
-If a families income level falls below the poverty
threshold then they can qualify for welfare
assistance
• Since free markets reward the most
economically productive the less fortunate
often suffer.
• As a society we recognize some
responsibilities to the very young, and very
old, the sick, poor, and disabled.
• The government tries to provide a safety net.
•Various federal, state, and local government
programs help to raise people’s standards of
living.
•Since 1930’s the main government effort to
ease poverty has been to collect taxes from
individuals and redistribute some of those
funds in the form of welfare.
• Many of these programs were started in the
1930’s due to the Great Depression and the
economic suffering that went along with it.
•Welfare spending increases considerably in
the 1960’s. This is because President John F.
Kennedy visited the Appalachian Mountain
Region and saw a poverty there like he had
never seen before. He declared a National
War on Poverty. After his assassination his
Vice President, Lyndon Johnson took over and
continued this War on Poverty. The War on
Poverty opened the door for more people to
receive assistance in welfare programs and
there were also two new programs created
during this time that added to the total costs.
•Welfare payments soared In the 1970’s and
1980’s due to the fact that more people had
easier access to receive welfare monies.
•In 1990’s critics of welfare voiced increased
concern about people becoming dependent.
•In 1996 the U.S. Congress made sweeping
changes in the welfare system. Mainly by
putting the states in control of many programs
that the federal government used to run.
However, the federal government would still
run Social Security and Medicare.
TANF
•Temporary Assistance to Needy
Families
•This program grew out of the 1990s
debate about how to ease poverty
while decreasing government
payments to the poor
•TANF replaced the earlier welfare
program, Aid to Families with
Dependent Children
• Launched in 1996 as part of
comprehensive welfare reform TANF
discontinues direct federal welfare
payments to recipients.
• States must adhere to federal rules that
create work incentives and establish a
lifetime limit for benefits .
• The reform moves people from welfare
dependence to the work force.
• The Social Security program was
created in 1935, during the depths of
the great depression, when many of
the elderly lost their life savings and
had no income.
• Social Security provides direct cash
transfers of retirement income to the
elderly and living expenses to
disabled.
• Unemployment insurance is a cash
transfer which is funded jointly by federal
and state governments .
• Unemployment insurance provides
money to eligible workers who have at
least lost one of their jobs . It is not for
those who have quit a job but rather
have been either fired or laid off.
• Workers must show that they have made
efforts to go get work during each week
to get money for Unemployment.
• Workers compensation provides a cash
transfer of state funds to workers injured on
the job.
• Most employers must pay workers
compensation insurance to cover any
future claims their employees might make .
• Workers Compensation has become more
and more expensive as medical expenses
and the number of reported on the job
injuries have increased.
• In 1950 social security extended
to 10.5 million more recipients
and went from ADC to AFDC.
• In 1965, the Medical Care Act
created Medicare for retirees and
the disabled and Medicaid for
those who qualify based on the
poverty threshold.
• In 1970 Medicare spent around
20 billion. In 1975 they spent
around 22 billion. In 1980 they
spent around 45 billion. In 1985
they spent around 75 billion. In
1990 they spent around 102
billion. In 1995 they spent around
190 billion. In 2000 they spent
around 249 billion.
1.What program was
created in 1935 to
mainly help the elderly?
A.) Unemployment
B.) Social security
C.) workers compensation
2. How does welfare
attempt to raise poor
people’s standard of
living?
3. Why does
poverty exist in a
free market
economy?
4. What is the
difference
between cash
transfers and inkind benefits?
5. How is Social
Security an
example of
income
redistribution?
6. What are some
of the trade-off
involved in
spending on
social programs?
7. Summarize the
U.S political
debate on ways
to fight poverty.
8. Describe the main
programs through
which the
government
redistributes
income.
9. Assume that the poverty threshold
is $8,480 for an individual and
$11,235 for a two-person
household. Based on a 40-hour
week, how much would you need
to earn per hour in order to be
above the poverty threshold
for..(a) an individual and (b) a twoperson household?
10. An old adage states, “Give a
person a fish, feed him for a
day; teach a person how to
fish, feed him for a lifetime.”
Do any of the government
programs in this section
reflect this saying? Explain
your answer.