Economic and Social Welfare Policymaking 16

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16 Economic and Social Welfare Policymaking

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Unemployment rate 10% in Great Recession

Underemployment rate

Tracked by Bureau of Labor Statistics (BLS)

Inflation Rise in price of goods and services

Consumer price index (CPI)

Averages 4%

16.1 Two Major Worries:

Unemployment and Inflation


Laissez-faire

Monetary policy and the "fed" Federal Reserve Board

Meets in secret; not accountable to Congress

Manipulating the amount of money

16.1 Policies for Controlling the

Economy


Fiscal policy: Keynesian v. supply-side

economics Taxing, spending, borrowing

Keynesian economic theory

Supply-side economics

16.1 Policies for Controlling the

Economy

Keynesian Economic Theory (Liberal)

• Governments active participation in economy

• Expansionary Fiscal Policy

– Government spending stimulates economy

– Cutting taxes another way government can create demand

• Contractionary Fiscal Policy

– Government can decrease demand by cutting spending and increasing taxes

Supply- Side Economics( Conservative)

• Decreasing government involvement in economy

– People will be forced to work and save more

• Cutting taxes increases the money supply


16.1 FIGURE 16.1 How the Obama

administration's predictions of the impact of

the 2009 stimulus plan went awry


"Political business cycle" Presidents control economy to win elections

Private sector dominates economy Federal government is ¼ of GDP

Impact of government policies gradual

16.1 Why It Is Hard to Control the

Economy


16.1 16.1 Laissez-faire economic theory

holds that government intervention in

the economy

a. Is needed during recessions and

depressions

b. Is key to preventing inflation

c. Is detrimental to economic growth and

prosperity

d. Is necessary only when interest rates

are too high


16.1 16.1 Laissez-faire economic theory

holds that government intervention in

the economy

a. Is needed during recessions and

depressions

b. Is key to preventing inflation

c. Is detrimental to economic growth

and prosperity

d. Is necessary only when interest rates

are too high


Biggest government expense

Only 17% goes to poor

16.2 Types of Social Welfare

Policies


Entitlement programs Social Security, Medicare

Largest and most expensive


Policies


Means-tested programs Food stamps, Medicaid

Fear of dependency


Policies


16.2 16.2 Which of the following is an

example of an entitlement program?

a. Food stamps

b. Medicaid

c. Postal service

d. Medicare


16.2 16.2 Which of the following is an

example of an entitlement program?

a. Food stamps

b. Medicaid

c. Postal service

d. Medicare


Income distribution Sense of justice and equality in a democracy

Relative deprivation increasing

Wealth versus income Income is amount collected in given time

Wealth is value of assets

1/3 of wealth held by 1%

1/3 held by 90%

16.3 Who's Getting What?


16.3 FIGURE 16.2 Increase in income inequality

and the rise of the top 1%


Poverty line $11,139 in 2010

46.6 million Americans poor in 2010 15.2% of population

Demographics of poverty Feminization of poverty

16.3 Who's Poor in America?


16.3 If landmass were divided like wealth


16.3 FIGURE 16.3 Poverty rates for persons with

selected characteristics: A comparison of the

official and supplemental measures


Taxation Progressive

Proportional

Regressive

16.3 How Public Policy Affects

Income

– Progressive taxation - hits upper income brackets more heavily • Graduated income tax

– Proportional taxation – hits upper and lower brackets equally

– Regressive taxation - hits lower income brackets more heavily • Sales tax


Government Expenditures Transfer payments – Redistributive Policies

Social security, unemployment benefits, food stamps, etc.

16.3 How Public Policy Affects

Income


16.3 TABLE 16.1 The major social welfare programs


16.3 16.3 What percentage of Americans

live below the poverty line?

a. 5.3%

b. 10%

c. 15.2%

d. 25.6%


16.3 16.3 What percentage of Americans

live below the poverty line?

a. 5.3%

b. 10%

c. 15.2%

d. 25.6%


Personal Responsibility and Work

Opportunity Reconciliation Act (PRWORA) States would run their own programs

Two year limit for benefits

Lifetime maximum of 5 years

From AFDC to TANF

Reforms were effective Benefit dollar amounts declined

Number of recipients declined

16.4 Ending Welfare as We Knew It:

The Welfare Reform of 1996


16.4 FIGURE 16.4: How welfare reform

drastically reduced the welfare rolls


16.4 16.4 Which of the following was a

goal of welfare reform?

a. Reduce the number of people living in

poverty

b. Reduce the number of children who lack

medical insurance

c. Reduce the number of people receiving

welfare benefits

d. Reduce the need for job training to get

people off welfare



goal of welfare reform?

a. Reduce the number of people living in

poverty

b. Reduce the number of children who lack

medical insurance

c. Reduce the number of people

receiving welfare benefits

d. Reduce the need for job training to get

people off welfare


Popular program

Modest benefits Average $1,229/month

Most expensive public policy But fiscally sound

Surplus depleting since 2010

16.5 Growth of Social Security


Politically difficult Older Americans have high voting rate

Reform proposals Bush: Put 1/3 into private investments

Obama

Increase age to receive benefits

Lower inflation raises

Reduce benefits for wealthy recipients

Raise contribution amounts

16.5 Reforming Social Security



Social Security reform proposed by

President Bush?

a. Lower age to receive benefits

b. Increase contributions

c. Raise age to receive benefits

d. Divert funds to stock market



Social Security reform proposed by

President Bush?

a. Lower age to receive benefits

b. Increase contributions

c. Raise age to receive benefits

d. Divert funds to stock market


The European welfare state

Taxes and benefits

Individual v. government responsibility

16.6 Social Welfare Policy

Elsewhere


16.6 16.6 What is the main difference in

the American and European attitudes

toward poverty?

a. Americans believe poverty is your own

fault

b. Europeans believe poverty is a result of

circumstances beyond your control

c. Both A & B

d. Neither A nor B


16.6 16.6 What is the main difference in

the American and European attitudes

toward poverty?

a. Americans believe poverty is your own

fault

b. Europeans believe poverty is a result of

circumstances beyond your control

c. Both A & B

d. Neither A nor B


Problems of free enterprise addressed

via democracy Government regulation demanded

Limits to economic freedom

Groups unequal in political resources Policy inertia

16.7 Democracy and Economic

and Social Welfare Policies


Liberals and conservatives disagree Liberals advocate more govt. intervention

Conservatives want less

Welfare state too big or too small? Depends which side you are on

16.7 Economic and Social Welfare

Policies and the Scope of

Government


16.7 16.7 The viewpoint that the welfare

state is too large and serves an

undeserving clientele is likely to be

espoused by

a. A liberal

b. A conservative

c. Both

d. Neither


16.7 The viewpoint that the welfare

state is too large and serves an

undeserving clientele is likely to be

espoused by

a. A liberal

b. A conservative

c. Both

d. Neither

16.7

Economic and Social Welfare Policymaking 16

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