1. Unit 1 Economic Concepts
Chapter 3.4
Economics
Mr. Biggs

2. Providing a Safety Net The Poverty Problem
Wealth is spread unevenly, so some people fall below the poverty threshold.
Poverty threshold - An income below that which is needed to support families or households.
In 2009, the poverty threshold was about $15,000 for a single parent under 65 years old and about $22,000 for a family of four with two children.

3. Redistribution Programs
Government Role
As a society, we feel responsible to the sick, old, young, and those with limited economic opportunities.
What should government do?
How much should the government help?
The Welfare System
The nation’s welfare system began under President Franklin D. Roosevelt following
the Great Depression.
Welfare - Government aid for the poor.
In 1996, Congress made sweeping changes.
Redistribution Programs
The major types of redistribution programs through which the federal government helps the poor and the elderly are as follows:

4. Cash Transfers
Cash transfers - Direct payments of money to the poor, retired, and disabled.
Four programs distribute direct cash transfers:
Temporary Assistance for Needy Families replaced AFDC in early 90s.
Federal government gives money to states to distribute.
Each state has its own program.
For example, WIC.
Social Security - Direct cash to the retired and disabled.
The funding is taken from payroll taxes.
Unemployment Insurance - For those who
lose their jobs.
Comes from state and federal funding sources.
Workers’ Compensation - For workers hurt on
the job.
Employers pay insurance costs.

5. In Kind Benefits Medical Benefits
In kind benefits - Goods or services provided free or at greatly reduced cost.
For example, food giveaways, food stamps, and subsidized housing.
Medical Benefits
Another social service that the US government provides is health insurance for the elderly, the disabled, and the poor.
Medicare is for Americans over 65 years old.
Medicaid covers some poor people who are unemployed or not covered by their employer’s insurance plans.
These are very costly government entitlement programs.

6. Faith-Based Initiatives
Education
Federal, state, and local governments all provide education funding for the poor.
For example, reduced cost lunches and grants.
Education programs make the economy more productive by adding to human capital and labor productivity.
Faith-Based Initiatives
In 2001, faith-based initiatives focused on supporting people in need via charities, community groups, and religious organizations.

7. The End