Class 8 Flashcards
United States frequently describes as a
Welfare state
Introduction:
- the gap between the United States and other western democracies has narrowed
- spending for social programs in other countries has declined or stabilized while it has increased in the u.s.
- increased spending in the US reflects some new programs, but mostly the rising cost of social security
The largest social programs in the US in terms of cost and number of beneficiaries are social insurance programs
- Social security
- Unemployment insurance
- Workers compensation
Means tested or social assistance programs involve significant state and local government expenditures
- “workfare”, food stamps, and supplemental security income (SSI) are available to people whose incomes fall below established thresholds
- some characteristics of social programs make it difficult to reduce them and also produce demands for increases
- the pressures to preserve and enhance the programs will be insistent as the population continues to age
- the republican leadership are attempting to find ways to minimize the role of government
- the deficits resulting from the tax policy changes in 2017 will produce even more pressures to reduce entitlement spending
Social security is the largest federal expenditure program of any type
Social security provides benefits and protection to:
- retired workers
- survivors of workers who die before retirement
- disabled workers and dependents
• Medicare is linked to social security for financing purposes
There are two other significant social insurance programs in the United States:
- Unemployed insurance (state managed, federally subsidized)
- Workers compensation (state managed, employed financed)
• the largest share of social insurance goes to retired workers, but the highest average benefits go to the unemployed, followed by disabled workers
- social changes account for the growing number of social insurance receipts
- social insurance programs are “entitlement programs
Important characteristics of social insurance programs, especially social security, include
- social security is a direct transfer program that taxes working people and their employers and pays out that money beneficiaries
- the programs do relatively little to redistribute income across economic classes
- their purpose is to transfer money across time and across generations
- financing is accomplished through payroll contributions
- the social security tax is a flat tax rather than a progressive one
- social security is an earmarked tax
- in recent years, there has been continuing debate about wether social security will go bankrupt
- the social security system now includes almost all working people
Problems in social security:
- The retirement test
- The fixed retirement age
- The treatment of women and families
- The disability test
Social security and the economy:
- it leads to a disincentive to save and a lower propensity to invest
- this there is less capital accumulation in the U.S. than there otherwise might be
- it also lessens the participation of older workers in the labor force which can have an effect upon total growth and productivity
Financing social security
There is concern over wether social security will be able to live up to its commitments
- only about one third of the population expects reasonable benefits from social security
- the impending retirement of the baby boom cohort threatens to send the system into deficit
- it is estimated that the funds would be exhausted by around 2034
Reforming social security
Proposals to alleviate the financial difficulties of social security
- finance Medicare through general revenues, not a payroll tax
- change the COLA adjustment and timing
- raise the retirement age or make it more flexible
- remove some of the welfare like benefits include all workers in the program
- change from payroll deductions to general revenue
Means tested programs
- require recipients to demonstrate an absence of means to qualify for benefits
- subjects of ideological debate
- criticized for being inadequate and demeaning and also for being excessively bureaucraticand difficult to administer
