Economics Chapter 3
Section 4: Providing a
Safety Net
The Poverty Problem
• The poverty threshold is a relative
figure determined by the federal
government & adjusted periodically
–2009- single parent under 65 with 1
kid, $14,570
–4 person family $22,050
The Government’s Role
• Government tries to provide a safety
net to the very young, very old, sick,
poor, & disabled
–Government programs help to raise
people’s standard of living
The Welfare System
• Began under FDR
• Critics voiced increasing concern about
people becoming dependent on welfare
& being unable or unwilling to get off it
–Income redistribution discourages
productivity, aggravating poverty
Redistribution Programs
• Income data are gathered by the U.S.
Bureau of the Census
–Conducts monthly surveys of
households to track key economic
data- then estimates how many
people are living in poverty
• Cash Transfers
–Temporary Assistance for Needy
Families (TANF)
• Discontinues direct federal welfare
payments to recipients
–Federal money goes to the states,
which design & run their own
welfare programs
• States must adhere to federal rules that
create work incentives & establish a
lifetime limit for benefits
• Program aims to move people from
welfare dependence to the workforce
• Social Security
–Created in 1935
–Provides cash transfers of retirement
income to the elderly & living expenses
to disabled Americans
–Program collects payroll taxes from
current workers & then redistributes
that money to current recipients
• Unemployment Insurance
–Funded by state & federal
government
–Provide money to eligible workers
who lost their jobs
–Workers must show that they have
made efforts to get work during each
week that they receive benefits
• 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
• In- Kind Benefits
–Most common are food
giveaways, food stamps,
subsidized housing, & legal aid
• Medical Benefits
–For elderly, disabled, & poor
–Medicare covers Americans over 65 as
well as disabled
–Medicaid covers some poor people
who are unemployed or not covered by
their employer’s insurance
–Administered under Social Security
• Education
–Federal government funds from
preschool to college
–State & local program aids students
with learning disabilities
–Education programs add to the
nation’s human capital & labor
productivity
• Faith Based Initiatives
–Office of Faith Based & Community
Initiatives to help faith based groups
work more effectively with the federal
government
• Religious organizations have
frequently been among the most
successful groups delivering social
services