Income Maintenance

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Income Maintenance

• Ch. 11 Income Maintenance Social Security and
  Welfare (Peters)
• An Introduction to TANF http//www.centeronbudg
  et.org/1-22-02tanf2.htm
• Assessing the New Federalism Eight Years
  Later, Section 1 (Introduction and Section 1)
  http//www.urban.org/UploadedPDF/311198_ANF_EightY
  earsLater.pdf
•  
• Point Counterpoint Does Social Security need
  to be fixed, and if so, are PRAs the
• answer?
• http//www.cbpp.org/pubs/socsec.htm
• http//www.heritage.org/Research/SocialSecurity/bg
  1811.cfm
•  
•  
• Debate 4 (Friday, March 2nd) Has welfare reform
  (PWORA 1996) helped or hurt the poor?

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Social Welfare Programs in the United States

• Social Insurance
• universal in coverage eligibility based on
  contribution
• Public Assistance
• categorical eligibility based on need
  (means-tested)

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Social Welfare Programs in the United States

• Social Security Act of 1935
• Social Insurance
• Old Age Insurance (OAI) (Social Security)
• Unemployment Insurance(UI)
• Public Assistance
• Aid to Families with Dependent Children (ADC)
• Old Age Assistance (OAA)
• Aid to the Blind (AB)

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Social Security (OASDI)

• Original structure of OAI
• employee employer
• payroll tax
• self-financing
• original tax rate of 1, MTW3,000, MAT30
• no taxes collected until 1937, no benefits paid
  until 1940-42

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Social Security (OASDI)

• Eligibility
• 1935 retired workers, 65 y/o
• excluded roughly 50 of work force (agricultural,
  domestic, self-employed)

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Social Security (OASDI)

• Extensions of OAI
• 1939 survivors and dependents of retired/insured
  workers
• Early 1950s added agricultural, domestic and
  self-employed
• 1956 Disability insurance added totally and
  permanently disabled
• Since 1956 OASDI
• Today 90 of labor force permanently covered
  (10 years of payroll taxes)
• Largest social program in federal budget
• Administered by SSA (independent agency)

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Social Security (OASDI)

• Benefits
• Based on Average Indexed Monthly Earnings
  (AIME)
• In calculation of AIME, wages corrected for
  inflation, lowest five years dropped
• AIME is used to calculate the Primary Insurance
  Amount (PIA), basic benefit 65y/o
• For a person retiring in 2006, PIA is calculated
  as
• 90 of the first 656 of AIME, plus
• 32 of AIME over 656 through 3,955 plus
• 15 of AIME over 3,955
• Maximum benefit 2006 2,053

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Aggregate Income of the Aged
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Social Security (OASDI)

• Financing
• Payroll taxes employee share has increased
  significantly over time - today 6.2
• Tax rate only applied up to Maximum Taxable
  Wages - 2006 94,200
• Social Security taxes are regressive

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Social Security (OASDI)

• Problems with Social Security
• Total Benefits Number of retirees X Benefit
  per Retiree
• Total benefits have increased dramatically -
  Graying of America(65) 1900-4.1,
  1990-12.6, 2030-21
• Increases in benefits (COLAs)
• Total Revenues Tax Rate X Number of Workers X
  Wage Level

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Social Security (OASDI)

• 2006 Report of Social Security Board of Trustees
• 2017 OASDI benefits will begin to exceed tax
  revenues
• The balance of the trust fund will peak in 2026
• The trust fund will be exhausted in 2040
• After the trust fund is exhausted, Social
  Securitys tax revenue will be sufficient to pay
  74 percent of promised benefits.  This percentage
  will fall gradually to 70 percent of benefits in
  2080.

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Social Security (OASDI)

• Proposed Solutions
• Index normal retirement age to life expectancy
• Life expectancy 193559, Today74
• Increase taxes on Benefits for upper income
  retirees (taxes introduced 1983)
• Increase Payroll Tax rate
• Decrease/slow down increases in benefits
• Invest trust fund surplus in private markets
• Privatization allow workers to invest payroll
  taxes in private accounts

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Unemployment Compensation/Insurance

• temporary benefits to recent and involuntarily
  unemployed
• Fed. Govt Department of Labor
• States are responsible for most eligibility
  details
• how long one worked
• how recently
• minimum salary

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Unemployment Compensation/Insurance

• Eligibility
• must register with U.S. Employment Service
• actively seeking work
• must accept suitable job if found (can refuse
  if wage too low, requires union membership, or
  requires being strikebreaker)
• 97 of jobs potentially covered but most
  unemployed do NOT receive benefits (36)
• benefits run out
• dont apply
• fired for misconduct
• other reasons

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Unemployment Compensation/Insurance

• Financing / Benefits
• employers pay into federal unemployment trust
  fund - account for each state
• states get back about 85-90 of payroll taxes to
  pay out in benefits
• length of receipt is based on complex formula
  (depends on work history varies by state)
• can be extended 13 weeks (federal state funds)
  if unemployment is high
• amount of benefit dependent on past earnings
  (avg. about 50)

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Public Assistance Programs

• Cash benefits
• TANF
• SSI
• In-Kind benefits
• Medicaid
• Food Stamps
• Misc. other (housing, nutrition, etc.)

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Food Stamps

• 1964 Food Stamp Act
• 1973 all communities reqd to adopt
• federal govt pays all benefits and shares
  administrative costs
• about 24 million recipients (2004)
• avg. benefit is about 86 per person (2004)
  (overview of FSP)

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Food Stamp Recipients, 2004
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Food Stamp Recipients, 2004
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Social Welfare Programs and the Poverty Gap
Source Ziliak (2003)
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Supplemental Security Income (SSI)

• Purpose To provide cash assistance to the aged,
  blind and disabled who are poor
• Historical Origins
• Social Security Act of 1935 (OAA AB)
• ATPD (1950)
• Nixon consolidated and federalized OAA, AB and
  ATPD in 1974

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Supplemental Security Income (SSI)

• Administration and Financing
• Administered by SSA
• Financed by federal government (general revenue)
• States have an option to supplement

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Supplemental Security Income (SSI)

• Eligibility
• All recipients must pass income test/assets test
• Aged 65 years old
• Blind no better than 20/200 vision, or tunnel
  vision of 20 degrees or less in the better eye
  with a corrective lens
• Disabled Adults are considered disabled if they
  cannot work because of a medically determined
  physical or mental impairment expected to result
  in death or that has lasted or can be expected to
  last for a continuous period of at least 12
  months.

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Supplemental Security Income (SSI)
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Supplemental Security Income (SSI)
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Temporary Assistance for Needy Families (TANF)

• Historical Development
• Social Security Act 1935 (ADC)
• Numerous attempts to reform AFDC (including FSA
  of 1988)
• PRWORA - TANF(1996) welfare reform

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Temporary Assistance for Needy Families (TANF)

• Population potentially eligible
• Originally poor children (1935-50)
• Children single parent (1950-67) (AFDC)
• Children parent(s) (1967-88)
• Children parents (1988-96)

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Temporary Assistance for Needy Families (TANF)

• Calculation of Payments
• income test, assets
• Payment Max. benefit level - net family income
• Allowed deductions from income (e.g. work
  expenses, child care, and some earnings)
• No minimum benefit level
• No COLAs

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Significant Features of TANF (Compared to AFDC)

• Block grants (based on 1994-1995 spending)
• 75 MOE
• Time limits
• lifetime limit 60 months
• Work reqs
• Must be enforced after 2 years
• cant enforce if no child care provided
• Some recipients may be exempted
• Work participation rates (all families)
• 2002 50
• Unwed mothers
• Allows Family Cap
• Benefits denied based on felony drug conviction
  (possession, use, distribution)

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