Economics U$A: 21st Century Edition
Reducing Poverty (Microeconomics)
After the Great Depression President Franklin D. Roosevelt put forth a social security program, using money from employer/employee wages. In 1996 President Bill Clinton signed the Welfare Reform Act, providing childcare assistance for mothers in the work force. The Perry School for Community Services, a Washington, D.C. poverty-reduction program, offers after-school programs for kids and vocational programs for adults, including recently released convicts. These stories all deal with differences in income and how public policy and private funding is used to reduce poverty.
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To examine some of the causes of differences in income, and to describe and analyze some of the government policies that attempt to reduce poverty.
- To make the viewer aware of the two basic types of government programs: those that seek to reduce the causes of poverty (such as training and education programs, antidiscrimination policies, the prevention of unemployment or disability, and day care), and those that reduce the symptoms of poverty (such as Social Security, insuring unemployment and disability, welfare, Medicare and Medicaid, public housing, and food stamps).
- To show how the Social Security program is designed, how it developed from an insurance program to a transfer program, and how it helped to reduce poverty.
- To show the goals and problems of job-training programs for the poor.
- To show that in-kind benefits are not as economically efficient for the individual as cash benefits, but promote the consumption of merit goods.
- To show that programs that attempt to create a more equitable distribution of income often have harmful unintended effects because of hidden incentives and disincentives (e.g., breaking up families, high implicit marginal tax rates).
- To show that the ongoing inequality of economic outcomes between U.S. Caucasians and African Americans, and U.S. Caucasians and Hispanics, is a result of entrenched inequality of opportunities, and that individuals given opportunities for education and employment can rise out of poverty.
Meet the Series Experts
Social scientist expert on the welfare state and a key player in the creation of New Deal and Great Society programs. He began as a research assistant during the drafting of the Social Security Act and rose to become Director of the Bureau of Research and Statistics in charge of program development and legislative coordination with Congress for the Social Security Board. In 1956, he became Professor of Public Welfare Administration at the University of Michigan, until President John F. Kennedy appointed him Assistant Secretary for Legislation of Health, Education, and Welfare. President Lyndon B. Johnson elevated him to Under Secretary in 1965, then to U.S. Secretary of Health, Education, and Welfare, in 1968. Years later, his name would be synonymous with the creation of Medicare. Mr. Cohen received his B.A. from the University of Wisconsin.
Co-Director of the Center on Children and Families at the Brookings Institution and Senior Advisor to President George W. Bush for Welfare Policy. Previously, he spent 14 years on the staff of the House Ways and Means Human Resources Subcommittee, as Welfare Counsel and Staff Director. Earlier, he did research at the Child Development Center at the University of North Carolina (UNC), Chapel Hill; taught history and education at UNC, Charlotte; and taught developmental psychology at Duke University. He was the editor of the Green Book, a compendium of the nation’s social programs; editor of The Future of Children, a journal on policy issues that affect children and families; and co-editor of several books on welfare and education. Dr. Haskins received his B.A., M.A. in Education, and Ph.D. in Developmental Psychology at UNC, Chapel Hill.
Executive Director of the National Academy for State Health Policy and former Director of the Urban Institute’s “Assessing the New Federalism” project. He held a cabinet position as Executive Director of the Colorado Department of Health Care Policy and Financing, was a health policy adviser to Colorado Governor Roy Romer, and was Assistant General Counsel in the Massachusetts Department of Medical Security. He is co-editor of two books, author of many articles in peer-reviewed journals, and member of the editorial boards of Health Affairs, the Institute of Medicine’s Board on Health Care Services, the Commonwealth Fund’s Commission on a High-Performance Health System, and the Kaiser Commission on Medicaid and the Uninsured. Mr. Weil received his B.A. from the University of California at Berkeley, M.A. in Public Policy from the John F. Kennedy School of Government, and J.D. from Harvard Law School.
Arthur F. Burns Fellow in Financial Policy Studies at the American Enterprise Institute (AEI) and Co-Director of AEI’s program on financial policy studies, specializing in banking, insurance, and securities regulation. Earlier, as General Counsel of the U.S. Treasury Department, he had a significant role in developing proposals for the deregulation of the financial services industry. He also served as White House Counsel to President Ronald Reagan. His books include: Ronald Reagan: The Power of Conviction and the Success of His Presidency; Competitive Equity: A Better Way to Organize Mutual Funds; Privatizing Fannie Mae, Freddie Mac and the Federal Home Loan Banks; The GAAP Gap: Corporate Disclosure in the Internet Age; and Optional Federal Chartering and Regulation of Insurance Companies. Mr. Wallison attended the Capitol Page School and received his B.A. from Harvard University and L.L.B. from Harvard Law School.
What's your Economics IQ?
5. The following table shows a payment schedule for a hypothetical negative income tax program. Based on this table, we can conclude that…
A family with an income of $3,000 will pay no taxes at all. A family at this level may receive income. The third option might be true, but we cannot conclude that without further information. The tax structure seems to be progressive since taxes rise with income.
- cash vs. in-kind transfers
Reconciling the utility of providing either a) money; or b) goods, commodities, or services.
Making an economic distinction in a market.
- disincentives to work
Any factors discouraging the making or saving of money.
- investment in human capital
Allocating resources based on the skills of employees.
- marginal tax rate
The proportion of an extra dollar of income that must be paid in taxes.
- means test
Measures need based on income and assets.
- social insurance program
Government-sponsored arrangement whereby: a) the benefits, eligibility requirements, and other aspects of the program are defined by statute; b) explicit provision is made to account for the income and expenses (often through a trust fund); c) it is funded by taxes or premiums paid by (or on behalf of) participants (although additional sources of funding may be provided as well), and; d) the program serves a defined population, and participation is either compulsory or the program is heavily enough subsidized that most individuals choose to participate.