Welfare Programs

1
Welfare Programs

• Todays readings
• Schiller Ch 12, Welfare Programs
• House Ways and Means Committee 2004 Green Book,
  http//www.gpoaccess.gov/wmprints/green/2004.html
  
• DeParle, Ch 15 Caseworker XM128W Milwaukee,
  1998-2000

2
Next TimeMonday, April 2, 2007

• Readings
• DeParle, Ch 16 Boyfriends Milwaukee, Spring 1999

3
Todays Questions

• What means-tested welfare programs are available
  for poor people in the United States?
• How much do these programs cost?
• How many people are helped by these programs?
• How are welfare benefits determined?

4
What means-tested welfare programs are available
for poor people in the U.S.?

• Federal and State governments funded 85 welfare
  programs in FY 2002 at a total cost of 522
  billion.
• Federal Share 71
• State and Local Share 29
• The means-tested programs fall into 8 different
  categories.
• Source for Slides 3-24 House Ways and Means
  Committee 2004 Green Book, http//www.gpoaccess.go
  v/wmprints/green/2004.html

5
Eight Categories of Welfare Programs and Total
Costs, 2002

• Medical Aid 282 billion, 54
• Cash Aid 102 billion, 20
• Food Aid 39 billion, 7
• Housing Aid 36 billion, 7
• Education Aid 30 billion, 6
• Other Services 22 billion, 5
• Jobs and Training Aid 8 billion, 2
• Energy Aid 2 billion, 0.3

6
Medical Aid--282 billion
7
Cash Aid--102 billion
8
Food Aid--39 billion
9
Housing Aid--36 billion
10
Housing Aid, cont.
11
Education Aid--30 billion
12
Other Services--22 billion
13
Jobs and Training Aid--8 billion
14
Energy Aid--2 billion
15
Analysis of spending

• 54 cents of every welfare dollar went for medical
  assistance
• 80 of State and Local dollars went to medical
  aid
• Spending in each of 6 programs exceeds 10
  billion and accounts for 77 percent of total
  spending.

16
7 largest programs by amount spent

• Medicaid (258 billion)
• SSI (39 billion)
• EITC (28 billion)
• Food Stamps (24 billion)
• TANF cash, ,services, child care, and work
  activities (24 billion)
• Section 8 low-income housing assistance (18
  billion)
• Pell Grants (11)

17
Trends in Spending

• Real spending for cash and non-cash programs
  increased by 523 percent from FY1968 to FY2002.
• Real spending for cash and non-cash programs
  increase 36 percent between FY1992 and FY2002.
• Average annual rate of growth over this 32 year
  period was 5.5 percent.
• The U.S. population increased by 43 percent over
  this period.
• Real total per capita spending grew from 416 in
  FY1968 to 1,826 in FY 2002.

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19
Spending Trends by Type of Aid FY1968-FY2002
(Constant FY 2002 Dollars)
MedicalCashFoodHousing Aid.88 x Total
Spending
20
Trends in Spending by Level of Government,
FY1968-FY2002 (Constant FY 2002 Dollars)
21
Trends in Federal SpendingFY1968-FY2002
(Constant FY 2002 Dollars)

• Real Federal spending climbed from 60 billion in
  FY1968 to 373 billion in FY 2002, an increase of
  529 percent.
• Cash aid was the leading form of Federal welfare
  until 1980 when medical aid overtook it.

22
Trends in State and Local SpendingFY1968-FY2002
(Constant FY 2002 Dollars)

• State and Local real spending climbed from 24.5
  billion in FY1968 to 149 billion in FY2002, an
  increase of 508 percent.
• Medical assistance overcame cash aid as the
  leading form of income-tested assistance in1976.

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Share of Federal Budget used for Income-Tested
Aid, FY1968-2002
25
Participation in Means-tested Programs, 2002

• We do not have an unduplicated count of welfare
  beneficiaries
• Average 2002 monthly numbers
• Medicaid 50.9 million persons
• Food stamps 20.2 million recipients
• SSI 6.9 million recipients
• TANF 5.1million recipients
• EITC 16.8 million tax filers

26
Source CBO Economic and Budget Issue Brief,
Changes in Participation in Means-Tested
Programs http//www.cbo.gov/ftpdocs/63xx/doc6302/
04-20-Means-Tested.pdf
27
Predicting Future Participation

• Assuming no legislative changes, future levels of
  participation in means-tested welfare programs
  will depend on
• Demographic trends
• Distribution of income
• The state of the economy

28
Participation in Means-tested Programs by Poor
Persons, 2002

• Census Bureau found 23 million poor persons (two
  out of every three with pre-tax money income
  below the poverty threshold) lived in a household
  that received means-tested assistance.
• Percent of the poverty population living in a
  household that received
• Medicaid 53 percent
• Food Stamps 33 percent
• cash assistance 22 percent
• Subsidized or public housing 18 percent

29
Participation by Total Population, 2002

• Percent of the total population living in a
  household that received
• Medicaid 19 percent
• Food Stamps 6 percent
• cash assistance 7 percent
• Subsidized or public housing 4 percent
• Some form of major means-tested aid 25 percent

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Eligibility vs. Participation

• To be eligible, a person, family or household
  must satisfy conditions regarding
• Citizenship
• Demographic characteristics (children present?)
• Countable income
• Accumulated wealth (assets including cars, homes,
  insurance policies, bank accounts)
• Employment status

31
Eligibility vs. Participation

• Participation refers to actual receipt of cash,
  non-cash benefits, or services.
• Not all eligible persons participate.
• Participation rates participating
  population/eligible population
• Participation levels/rates depend upon
• Demographic trends, labor market conditions,
  distribution of income, health care costs, and
  the level of benefits.

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Eligibility vs. Participation, cont

• An individuals decision depends on the net
  benefits of participation
• Net benefitsGross Benefits-Costs
• Gross Benefits include
• Primary benefits (cash, non-cash, services)
• Secondary benefits (eligibility for subsequent
  programs depends on enrollment in the primary
  program)
• Costs include
• Hassle
• Transportation
• documentation
• Stigma

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How are benefits determined?

• Generic formula
• BG - t(E-DE) - (U-DU), where
• BBenefit level
• GMaximum benefit (other income0)
• Tmarginal tax rate
• Egross earnings
• DEearnings disregard
• Unon-earnings incomes (pensions, interest)
• DUnon-earnings disregard

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35
Source House Ways and Means Committee 2004
Green Book, pp. 38-39 http//www.gpoaccess.gov/wmp
rints/green/2004.html
36
How are benefits determined?, cont.

• Note that in the preceding table grants vary with
  family size up to 6 persons.
• Example using Texas
• Assume a mother of two works 30 hours a week for
  4.2 weeks each month at the minimum wage 5.85
  per hour. She has no other income.
• B201-.67(737-30)201- 474-273
• Source Work Related Provisions of State TANF
  Plans http//www.acf.dhhs.gov/programs/ofa/WRKREL.
  HTM

37
A footnote

• On May 25, 2007, President Bush signed a spending
  bill that, among other things, amended the FLSA
  to increase the federal minimum wage in three
  steps
• to 5.85 per hour effective July 24, 2007
• to 6.55 per hour effective July 24, 2008 and
• to 7.25 per hour effective July 24, 2009.

38
Footnote, cont.Federal Minimum Wage History

• Effective Date Hourly Wage
• 10/24/1938 0.25
• 10/24/1939 0.30
• 10/24/1945 0.40
• 01/25/1950 0.75
• 03/01/1956 1.00
• 09/03/1961 1.15
• 09/03/1963 1.25
• 02/01/1967 1.40
• 02/01/1968 1.60
• 05/01/1974 2.00
• 01/01/1975 2.10

• Effective Date Hourly Wage
• 01/01/1976 2.30
• 01/01/1978 2.65
• 01/01/1979 2.90
• 01/01/1980 3.10
• 01/01/1981 3.35
• 04/01/1990 3.80
• 04/01/1991 4.25
• 10/01/1996 4.75
• 09/01/1997 5.15
• 07/24/2007 5.85
• 07/24/2008 6.55
• 07/24/2009 7.25

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Benefit Calculation, cont.

• In the previous example, the mother would not
  receive a benefit. Negative benefits are raised
  to 0.
• At the level of work hours (30) required by
  Federal law for a TANF mother to qualify as a
  work recipient, our Texas mother is not eligible
  for benefits. At what level of earnings could
  she receive benefits?

40
Calculating Break-even Level of Earnings

• Recall that BG - t(E-DE) - (U-DU).
• Set B0, and solve for E
• Generally, EBG/t D, when U0.
• In our example, the Texas mother would be
  eligible for cash benefits if her earnings were
  less than 330.
• EB201/.6730
• EB330
• She loses eligibility if she works more than
  15.25 hours per week.

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43
Source House Ways and Means Committee 2004
Green Book, pp.36-37, http//www.gpoaccess.gov/wmp
rints/green/2004.html
44
Source CBO Economic and Budget Issue Brief,
Changes in Participation in Means-Tested
Programs http//www.cbo.gov/ftpdocs/63xx/doc6302/
04-20-Means-Tested.pdf
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47
Source House Ways and Means Committee 2004
Green Book, pp.45-47, http//www.gpoaccess.gov/wmp
rints/green/2004.html
48
Source House Ways and Means Committee 2004 Green
Book, p. 89 http//www.gpoaccess.gov/wmprints/gree
n/2004.html