Chapter 3.4: Government Income Redistribution Programs Ch 3 Essential Question: What role should government play in a free market economy? Redistribute income 1

Objectives Explain the U.S. political debate on ways to fight poverty. Identify the main programs through which the government redistributes income.

Introduction How does government redistribute income? To help certain groups of people, government programs taxes some people and redistributes it to others. Income Redistribution programs: Cash transfers In-kind benefits Medical and educational benefits (Financial Aid) Provided by Federal, State and Local govt to young, poor, disabled and elderly Programs that help low-income people are called welfare

Welfare: Redistribution of Income Cash Transfer Programs Social Security collects money from current workers and redistributes funds to retired and disabled persons Unemployment Insurance Provides money to workers who have lost their jobs as long as recipients offer proof that they have made efforts to get work. This help is only temporary, offering benefits for only 26 weeks in most states. Worker’s Compensation Provides state funds to workers injured on the job.

Welfare: Redistribution of Income Cash Transfer Programs Both of these programs are targeted at low-income people Temporary Assistance for Needy Families (TANF) – sends welfare payments directly to the states, which design and run their own welfare programs Tied to working or more stringent conditions Conditional Cash Transfer programs Payments are tied to conditions (looking for work, taking your kids to the doctor, going to school, etc.) Paper Project, Bolsa Familia

Welfare: Redistribution of Income In-Kind Benefits Programs In-Kind Benefits programs distribute actual goods/services to low-income people, not money Link/Food stamps Qualified people receive assistance with their monthly food purchases

Welfare: Redistribution of Income In-Kind Benefits Programs Subsidized housing/Section 8 Qualified people are allowed to rent housing for less than the regular rent Legal aid Qualified people receive legal advice at no charge

Welfare: Redistribution of Income Medical and Educational Benefits Medical Benefits Medicare: care for the elderly; hugely increasing expense for the government. Needs reform. Medicaid: care for the poor and uninsured Educational Benefits The government also funds educational programs from preschool to college. Early Childhood: Jumpstart K-12: Sports, extracurricular, academic programs College: Public Land-Grant Universities, Financial Aid (Pell grants, Perkins, Stafford loans)

Welfare: Redistribution of Income Examples Write down two government redistribution programs your family or you benefit from currently or in the near future. What kind of redistribution programs are they? 9

Debate Over Income Redistribution Programs Everyone thinks government should provide some safety nets Supporters say we need to help those less fortunate; especially low-income, young, unemployed and elderly Critics of welfare claim that it discourages productivity by providing disincentives to work and further aggravates poverty. In 1996, welfare reforms led to the TANF programs that limited the amount of time people could receive welfare payments and gave states more freedom to experiment with antipoverty programs.

Objectives Explain the U.S. political debate on ways to fight poverty. Identify the main programs through which the government redistributes income. Cash Transfer programs (Social security, workers comp, unemployment, TANF) In-Kind Benefits (Food stamps, Public housing) Medical and Educational (Medicare/Medicaid, Financial Aid)

Key Terms poverty threshold: an income level below that which is needed to support families and households welfare: government aid to the poor cash transfers: direct payment of money by the government to the poor, disabled, or retired people (Social Security, Unemployment Insurance) in-kind benefits: goods and services provided for free or greatly reduced prices (Food Stamps, Section 8, Medicare/Medicaid)