Chapter 16: Economic and Social Welfare Policymaking Vocab

Social welfare policies

Policies that provide benefits, cash or in-kind, to individuals, based on either entitlement or means testing.

Unemployment rate

As measured by the Bureau of Labor Statistics, the proportion of the labor force actively seeking work but unable to find jobs.

Underemployment rate

As measured by the Bureau of Labor Statistics, a statistic that includes (1) people who aren’t working and are actively seeking a job, (2 ) those who would like to work but have given up looking, and (3) those who are working part-time because they cannot find a full-time position.

Inflation

A rise in price of goods and services.

Consumer price index

The key measure of inflation—the change in the cost of buying a fixed basket of goods and services.

Laissez-faire

The principle that government should not meddle in the economy.

Monetary policy

Government manipulation of the supply of money in private hands- one of two important tools by which the government can attempt to steer the economy.

Monetarism

An economic theory holding that the supply of money is the key to a nation’s economic health, with too much cash and credit in circulation producing inflation.

Federal Reserve System

The main instrument for making monetary policy in the United States. It was created by Congress in 1913 to regulate the lending practices of banks and thus the money supply.

Fiscal policy

Use of the federal budget-taxes, spending, and borrowing-to influence the economy; along with monetary policy, a main tool by which the government can attempt to steer the economy. Fiscal policy is almost entirely determined by Congress and the president.

Keynesian economic theory

Named after English economist John Maynard Keynes, the theory emphasizing that government spending and deficits can help the economy deal with its ups and downs. Proponents of this theory advocate using the power of government to stimulate the economy when it is lagging.

Supply-side economics

An economic theory, first applied during the Reagan administration, holding that the key task for fiscal policy is to stimulate the supply of goods, as by cutting tax rates. 

Entitlement programs

Government programs providing benefits to qualified individuals regardless of need. 

Means-tested programs

Government programs providing benefits only to individuals who qualify based on specific needs. 

Income distribution

The way the national income is divided into “shares” ranging from the poor to the rich. 

Relative deprivation

A perception by an individual that he or she is not doing well economically in comparison to others.

Income

The amount of money collected between any two points in time.

Wealth

The value of assets owned.

Poverty line

The income threshold below which people are considered poor, based on what a family must spend for an “austere” standard of living, traditionally set at three times the cost of a subsistence diet.

Feminization of poverty

The increasing concentration of poverty among women, especially unmarried women and their children.

Progressive tax

A tax by which the government takes a greater share of the income of the rich than of the poor—for example, when a rich family pays 50 percent of its income in taxes, and a poor family pays 5 percent.

Proportional tax

A tax by which the government takes the same share of income from everyone, rich and poor alike.

Regressive tax

A tax in which the burden falls relatively more heavily on low-income groups than on wealthy taxpayers. The opposite of a progressive tax, in which tax rates increase as income increases.

Earned Income Tax Credit

Also known as the EITC, a refundable federal income tax credit for low- to moderate-income working individuals and families, even if they did not earn enough money to be required to file a tax return.

Transfer payments

Benefits given by the government directly to individuals—either cash transfers, such as Social Security payments, or in-kind transfers, such as food stamps and low-interest college loans.

Social Security Act of 1935

Created both the Social Security program and a national assistance program for poor families.

Personal Responsibility and Work Opportunity Reconciliation Act

The welfare reform law of 1996, which implemented the Temporary Assistance for Needy Families program.

Temporary Assistance for Needy Families

Replacing Aid to Families with Dependent Children as the program for public assistance to needy families, TANF requires people on welfare to find work within two years and sets a lifetime maximum of five years.

Social Security Trust Fund

The “account” into which Social Security employee and employer contributions are “deposited” and used to pay out eligible recipients.