Chapter 16: Economic and Social Welfare Policymaking

Economic Policymaking

-Two Major Worries: Unemployment and Inflation
-Policies for Controlling the Economy
-Why It Is Hard to Control the Economy?

2 major worries: Unemployment and Inflation

-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%

Policies for Controlling the Economy

-Laissez-faire
-Monetary policy and the "fed"
-Federal Reserve Board
-Meets in secret; not accountable to Congress
-Manipulating the amount of money

Policies for Controlling the Economy

Fiscal policy: Keynesian v. supply-side economics
Taxing, spending, borrowing
Keynesian economic theory
Supply-side economics

Why It Is Hard to Control the Economy

-"Political business cycle"
-Presidents control economy to win elections
-Private sector dominates economy
-Federal government is ¼ of GDP
-Impact of government policies gradual

lais·sez-faire

a policy or attitude of letting things take their own course, without interfering

Laissez Faire

Is detrimental to economic growth and prosperity

Types of Social Welfare Policies

Biggest government expense
Only 17% goes to poor

Types of Social Welfare Policies

A. Entitlement programs:
Social Security, Medicare
Largest and most expensive

B. Means-tested programs:
Food stamps, Medicaid
Fear of dependency

Which of the following is an example of an entitlement program?

Medicare

Income, Poverty, and Public Policy

-Who's Getting What?
-Who's Poor in America?
-How Public Policy Affects Income

Fun Fact

The Occupy movement attempts to draw attention to the economic problems of the 99% of Americans who are not in the elite 1% wealth bracket.

Who's Getting What?

-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%

Who's Poor in America?

-Poverty line
$11,139 in 2010
-46.6 million Americans poor in 2010
15.2% of population
-Demographics of poverty
Feminization of poverty

How Public Policy Affects Income

-Taxation
Progressive
Proportional
Regressive

-Government Expenditures
Transfer payments
Social security, unemployment benefits, food stamps, etc

What percentage of Americans live below the poverty line?

15.2%

Helping the Poor? Social Policy and the Needy

-"Welfare" as We Knew It
-Ending Welfare as We Knew It: The Welfare Reform of 1996

"Welfare" as We Knew It

-FDR's New Deal programs
-Social Security Act of 1935
-AFDC
-Johnson's War on Poverty
-Food stamps

-Republican's war on dependency
-"Welfare queens"
-Deadbeat dads
- The undeserving poor/African Americans

Ending Welfare as We Knew It: The Welfare Reform of 1996

- 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

Which of the following was a goal of welfare reform?

Reduce the number of people receiving welfare benefits

Social Security: Living on Borrowed Time

-Growth of Social Security
-Reforming Social Security

Growth of Social Security

-Popular program
-Modest benefits
Average $1,229/month
-Most expensive public policy
-But fiscally sound
-Surplus depleting since 2010
-What is the solution?

Reforming 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 Which of the following was a Social Security reform proposed by President Bush

Divert funds to stock market

Social Welfare Policy Elsewhere

The European welfare state
Taxes and benefits
Individual v. government responsibility

What is the main difference in the American and European attitudes toward poverty?

Americans believe poverty is your own fault
Europeans believe poverty is a result of circumstances beyond your control

Understanding Economic and Social Welfare Policymaking

-Democracy and Economic and Social Welfare Policies
- Economic and Social Welfare Policies and the Scope of Government

Democracy and Economic and Social Welfare Policies

- Problems of free enterprise addressed via democracy
-Government regulation demanded
-Limits to economic freedom
- Groups unequal in political resources
-Policy inertia

Economic and Social Welfare Policies and the Scope of Government

- 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

Economic and Social Welfare Policies and the Scope of Government

-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

The viewpoint that the welfare state is too large and serves an undeserving clientele is likely to be espoused by

conservative