Section 5 Final

How does the federal government measure poverty, and how does the federal poverty line work?

The federal government uses the federal poverty line adjusted for household family size to measure poverty, rather than looking at it from an income distribution perspective. Deep poverty is measured as a household income less than half of the federal poverty amount. The federal poverty line is adjusted for the number of people in a family, family composition, and year-to-year inflation. You are considered below the poverty line if your household makes less annually than a certain amount for the 48 contiguous states.

How has welfare policy changed in the United States over time?

In the 1930s, there was the Great Depression and the New Deal. Social Security was created in 1935 in response. In the 1960s, there were President Johnson’s “Great Society” and “War on Poverty” programs. In the 1980s and 1990s, there was welfare policy polarization and reform. Currently, welfare policy is defined by economic and demographic challenges to Social Security.

What is the “welfare state?”

It is the collection of policies a nation has to promote and protect the economic and social well-being of its citizens.

What is Social Security, how is it perceived, and what is the major economic problem facing the program?

Social Security is a government entitlement program that provides money for retired workers and their beneficiaries, as well as disabled workers. It is the single largest federal program and was enacted as part of FDR’s New Deal in 1935. It is viewed as a social insurance program, because individuals pay into a fund and expect to receive money back when they reach an eligible criteria. It is overwhelmingly popular among Americans, and is viewed as a return of an individual’s own invested funds rather than a government handout. The major economic problem facing the program is its solvency. There is a decreasing amount of contributing workers and an increasing amount of beneficiaries, meaning there isn’t enough money to keep the system going.

What are the two main goals of Social Security?

1. The more you earn and contribute, the more you get in benefits.

2. Ensure that low-income individuals have minimal financial protection.

Both are accomplished, but high earners don’t get proportionally more in benefit.

How do social security taxes work?

Social Security is funded through a federal income tax. Since 1985, employers and employees each contribute a 6.2% income tax towards Social Security. The annual contribution is capped at an income level adjusted for inflation, making the tax regressive (which means that the highest earned pay a lower rate).

What is the federal welfare system?

It is a diverse network of policies designed to support individuals facing poverty. It includes means-tested programs. It is much more politically polarizing, because they are often seen as a “government handout” and are more politically unpopular among conservatives.

What is a “means-tested” program?

They are social programs in which recipients must meet an income test in order to qualify for benefits.

What are tax expenditures and how are they used in the welfare state?

They are subsidies in the tax code that achieve social goals by lowering the cost of home ownership, child raising, employer-provided health insurance, and retirement pensions, etc. through reduced taxation. This includes subsidies for employee benefits and tax breaks, such as those for mortgage interest, childcare, charitable donations, and more. There are major social welfare tax policy programs, including the Earned Tax Income Credit (a tax credit for people who work but have low wages, reducing the amount of taxes they owe or providing a refund) and the Child Tax Credit.