Poverty, Work, Welfare Final

Question 1

Howard says the welfare state in America has three components; name and briefly describe them.

Answer 1

1. Inclusive social insurance programs (like Social Security)
2. Means tested programs like AFDC and Food Stamps.
3. Tax Expenditures

Question 2

Hacker says that the welfare state has three components; name and briefly describe them (Hacker and Howard are not the same).

Answer 2

1. Direct government programs such as OASDI, TANF, Medicare, and Medicaid
2. The “hidden welfare state” of tax expenditures
3. The “private” benefits that are subsidized and regulated by government

Question 3

What are tax expenditures? (Note, there are several different forms). Provide several examples. Which tax expenditures are most costly (in terms of government revenue sacrificed)?

Answer 3

Tax Expenditures – “those revenue losses attributable to provisions of the Federal tax laws which allow a special exclusion, exemption, or deduction from gross income or which provide a special tax credit, a preferential rate of tax or a deferred tax liability.” (According to the Congressional Budget and Impoundment Act of 1974)

1. Employer sponsored health insurance (248B)
2. Preferential Tax Rates on Capital Gains and Dividends (161B)
3. Net Pension contributions and Earnings (137B)
4. State and local taxes (77B)
5. Mortgage Interest (70B)

Question 4

What is the difference between a “marginal tax rate” and an “average tax rate”?

Answer 4

• The average tax rate – total tax / total income

- The marginal tax rate – is the rate paid on the last dollar of taxable income

Question 5

What is the difference between an income tax credit and an income tax deduction? What is the significance of whether or not a tax credit is refundable? Name a refundable federal income tax credit.

Answer 5

• Tax Deduction – a reduction of the income subject to tax
• Tax Credit - Tax credits are subtracted directly from a person’s tax liability; they thus reduce taxes dollar for dollar
  - Refundable tax credit - they can reduce a person’s tax liability below zero.
  - Additional Child Tax Credit
  - Earned Income Tax Credit

Question 6

Is a full-time minimum wage worker (who earns $14,000 annually) who is a head of household and supporting two children likely to owe any federal income tax? Why or why not?

Answer 6

They would pay zero dollars in federal income tax, a person with 2 children can claim three exemptions – one for themselves and one for each of their children totaling $11,700 as well as the standard deduction of $8950. This is more than the person makes, $20,650. Because the earned income tax credit is fully refundable, she can actually go negative and she will get $5,372 back from the IRS.

Question 7

How much federal personal income tax and FICA tax is a married person who earns $50,000 and has four children likely to pay? Why?

Answer 7

The persons would likely pay zero dollars in federal income tax. First they would claim the 6 initials exemptions for each person – $3,900 per exemption for a total of $23,400. Then they would claim the typical credit for a married couple filing jointly, $12,200.At this point their federal income tax is $1,440, before calculating his credits
Then they would take a child tax credit worth $1,000 per child ($4,000.) Because these are credits, they cannot take them ‘negative.’ Now they will take the Additional Child Tax Credit, which is equal to the lesser of the un-allowed Child Tax Credit, or 15% of your earned income above $3,000.
- Their earned income was $50,000…so, $7,050 (15% of $47,000) is the total amount he can claim for the additional child tax credit. However, their ACTC is $2,560, which is what the IRS refunds to them (resulting in a 4% increase in Mike’s income after taxes)

Question 8

List and explain four major tax provisions that are part of the “hidden” welfare state.

Answer 8

1. Mortgage interest rate – the interest you pay on mortgage is deducted from your base income
2. Health insurance and pensions. – The value of private health insurance that you receive from employer is not counted in your tax base. For pensions, the OASDI benefit covers a vast majority of pensions that private companies offer to their employees.
3. Preferential tax rates on capital gains – capital gains is only taxed at 20%, regardless of how much you make from the investments.
4. State and local tax deduction – the value of the state and local taxes that you paid are deducted from your base income.

Question 9

List and explain the four reasons why affluent people are more likely to receive benefits from the hidden welfare state.

Answer 9

1. Higher marginal tax rates increase the value of tax expenditures
2. Affluent people are more likely to have jobs that provide benefits through the hidden welfare state (health care and pensions)
3. Affluent people have money to purchase goods favored by the hidden welfare state (education and homes)
4. Affluent people can hire agents to assure they receive their benefits

Question 10

Explain how and why the hidden welfare state defies the standard narrative about social policy in the U.S., a narrative that focuses on comparing and contrasting social insurance and means-tested transfer programs.

Answer 10

• In the United States:
  - If we look only at what government does…that is, social programs that distribute benefits, the U.S. appears to have a small welfare state
  - But, if we look at tax expenditures, the scope and size of the welfare state in the U.S. becomes comparable to many EU countries.
  - What government does not do is important
• Tax expenditures rarely benefit the poor
  - EITC is an important exception

Question 11

Describe the Earned Income Tax Credit benefit structures. How do children affect the generosity of EITC benefits?

Answer 11

• The benefit structure is like a mountain with a flat top. It has the phase in period, break point 1, a plateau period; break point 2, the phase out period, and then benefits exhausted period.
  
  • Children affect the generosity of benefits tremendously. If you have no children and meet the benefits, the most you could get back is $487. If you have one the maximum benefit is $3250. The more children you have, the more the benefits could increase, but not as much as the increase from no children to 1 child. Each additional child does not add as much onto the potential benefit as the previous.

Question 12

What distinguishes the Earned Income Tax Credit (EITC) from the other means-tested programs we have described?

Answer 12

The first stage of EITC’s benefit structure increases the benefit the more money you make up until a certain point. All other means-tested programs decrease benefits the more money you make.

Question 13

Describe the eligibility conditions for the EITC.

Answer 13

• Must be at least 25 years old and less than 65 years old, if you do not have a qualifying child.
• Must have adjusted gross income must be less than a certain amount
  - $14,340 ($19,680 if married filing jointly) if you do not have a qualifying child
  
  • $37,870 ($43,210 if married filing jointly) if you have one child.
• Must have a valid social security number
• Your filing status cannot be “married filing separately.”
• You must be a US citizen or resident alien all year
• You cannot file from 2555 or 255-EZ (deals with foreign earned income)
• Your investment income must be $3,300 or less.

Question 14

What is a “qualifying child” and how does this relate to EITC eligibility?

Answer 14

• Qualifying Child – must be son, daughter, stepchild or foster child or brother, sister, stepbrother or sister, or niece or nephew
  
  • Must live with you majority of the year in the US
  • In divorce, only one parent can claim qualifying children
• If you have a qualifying child then there are three more rules to eligibility
  
  • Your child must meet the relationship, age, residency, and joint return test.
    1. For age – must be less than 19, or under 24 if a full time student, or permanently and totally disabled – regardless of age.
    2. Must have lived with you for more than half of the year
    3. You child cannot file a joint return for the year
  • Your qualifying child cannot be used by more than one person to claim EITC
  • You cannot be a qualifying child to another taxpayer.

Question 15

What state tax policies tend to make state tax burdens more regressive?

Answer 15

States that rely on sales and excise taxes for revenue rather than a broad-based progressive income tax tend to be the most regressive
- Sales and excise taxes are the most regressive forms of taxation, followed by property taxes, followed by income taxes

Question 16

What state tax policies tend to make state tax burdens more progressive?

Answer 16

• States can have a progressive income tax
  
  • Earned Income Tax Credit
  • Some states offer income tax credits to ensure that low-income families aren’t subject to the personal income tax
• Some states offer an income tax credit to help offset sales and excise taxes that low-income families pay
• Least regressive states are: Delaware, New York, Oregon, Vermont and D.C.

Question 17

What is policy feedback?

Answer 17

• Policy feedback is the concept that policy “causes” politics.
• The development of interests and institutions shape behavior and expectations.
• Policy feedback does three things:
  (1) Creates resistance to change
  (2) Policies can endure even when they no longer make sense
  (3) Policy feedback creates a path dependent process.

Question 18

What role did economic regulation during the Second World War play in the development of healthcare policy in the U.S.?

Answer 18

• During WWII the private system of health insurance became institutionalized
• There was a severe labor shortage during the way so employers expanded fringe benefits, especially healthcare, to attract and retain workers

Question 19

What role did high marginal income tax rates play in the development of healthcare policy in the U.S.?

Answer 19

High marginal income rates made tax preferred benefits attractive

Question 20

What are the characteristics of a path dependent process?

Answer 20

• Self-reinforcing process
• Early choices (in time) are more important because they shape and constraint subsequent choices
• Inertia is crucial and what exists is likely to persist
• “Non-decisions” are important
• Even dysfunctional policies may persist

Question 21

Name and explain the cost-control strategies that firms adopted in the face of rising health care costs?

Answer 21

• Shift from “community rating” to “experience rating”
• Shifting insurance costs to workers (co-pays and deductibles)
• Excluding preconditions
• Employee selection based on experience, expectations
• Dropping coverage altogether

Question 22

What were the three explanations for non-participation among welfare recipients that Soss considered and rejected?

Answer 22

• Soss examines the following explanations for non-participation:
  
  • Personal Traits (REJECTED)
  • Culture of dependency (REJECTED)
  • Satisfaction with welfare (REJECTED)
  • Policy Feedback: the influence of experiences with government may influence their tendency to participate (Accepted)

Question 23

Why does Soss think that AFDC clients are unlikely to participate in politics?

Answer 23

• AFDC participants think that speaking out is ineffective and risky because government is all powerful and arbitrary
• AFDC clients saw agency as a threat:
  
  • Agents have significant discretion
  • People are powerless when confronting government
  • Agency power is used to control people, not to help them

Question 24

What are the four models of government Soss considers to characterize clients’ political beliefs?

Answer 24

• Democratic: Government is open and responsive to the preferences of citizens, who are in meaningful respects politically equal. An established political process governed by laws allows citizens to have influence and hold public officials accountable.
• Capitalist: Government exists to serve rich people and corporations. While it may not literally be the “Executive Committee of the Ruling Class”, government is primarily influenced by economic inequalities. Money and the people who have it govern the political process.
• Complicated: Government is too large and has too many complicated systems and laws. As a result, one public official does not know what another is doing. Officials cannot pay attention to citizens’ real needs, do not respond in a timely manner, and are difficult to influence.
• Autonomous: Government officials do whatever they want, whenever they want. They can evade or change laws if their goals require it. They have to confront one another when they disagree, but important decisions are not swayed by popular actions.

Question 25

What did Soss claim that the influence of Head Start participation suggested about the relationship between AFDC clients’ experiences with government and political participation?

Answer 25

• “In sum, the evidence indicates that Head Start experiences consistently mitigate or supersede the de-mobilizing effects of AFDC.” Page 374
• “The findings presented here suggest that a more participatory program design encourages more positive orientations toward political involvement. Head Start provides clients with evidence that participation can be effective and fulfilling.” Page 374

Question 26

What is internal political efficacy? In Soss’ study, did AFDC clients have similar views about their internal and external political efficacy?

Answer 26

• Internal political efficacy: The belief that they understand and can navigate the political system effectively
• External political efficacy: The feeling the government is responsive to your concerns
• AFDC clients have low level of external efficacy
• AFDC clients have high levels of internal efficacy

Question 27

In what ways is U.S. social policy exceptional according to Hacker?

Answer 27

• The U.S. welfare regime is unusual for the source of welfare spending, not the amount.
  
  • Direct programs such as OASDI, TANF, Medicare, and Medicaid
  • The “hidden welfare state” of tax expenditures
  • The “private benefits that are subsidized and regulated by the government

Question 28

Compare and contrast public and private welfare benefits. How are they different? How are they similar?

Answer 28

• Private Benefits: provide more benefits to the affluent, low visibility and low traceability. Private benefits create policy feedback.

Question 29

What is pension “integration” and how did it influence the development of pension policy in the U.S.?

Answer 29

• Pension Integration was introduced in the Revenue Act of 1942 and aimed to reconcile the relationship between public and private pensions.
• Pension integration helped to create a two-track system in the US, because from 1942-1986 there was a dollar for dollar offset from private pension liability for OASDI benefits. The current rate is 50 cents on each dollar.
• Corporation benefited because private pension liabilities were assumed as a public obligation.
• And pension integration made low-income elderly people “dependent” on Social Security.

Question 30

What is the “privatization of risk” in pension policy?

Answer 30

Risk of retirement income is shifted from corporations to workers, inequality in income distribution is likely to persist into retirement

Question 31

What are the sources of “market failure” in healthcare?

Answer 31

• The sources of market failure in healthcare are the agency problem, moral hazard, and adverse selection.
  - Agency problem - The patient delegates authority to physicians to make decisions in their best interests regarding medical treatment.
  - Moral Hazard - People may engage in more risky behavior, people may consume excessive services
  - Adverse Selection - people who purchase medical insurance are those most likely to need medical care

Question 32

What is “community rating” and why is it significant to health insurance?

Answer 32

The community rating is what allows everyone in a given area to be charged the same rate for services. Community rating is significant to health insurance because it prevents insurers from varying rates based on health status or claims history. It calculates premiums based off of risk factors applying to all persons within the given area.

Question 33

How did the fact that ERISA preempted state regulation of self-insured health plans influence the development of private health care benefits?

Answer 33

The preemption of state regulation of self-insured health plans encouraged employers to self-insure. Risk pools became limited and specific to employers, which created incentives for businesses to control costs as the price of healthcare rose.

Question 34

What effects did ERISA have on pension policies in the private sector?

Answer 34

ERISA contributed to the movement of employers away from defined benefits plans to defined contribution plans. Instead of challenging the public-private framework, it strengthened and fortified it. ERISA continued the reliance on voluntary private benefit system.

Question 35

What is the “destructive competitive logic of private insurance”?

Answer 35

The destructive competitive logic of private insurance (pg. 260) is that business should minimize the expense of health benefits to combat rising medical costs.

Question 36

Briefly list and explain Schneider and Ingram’s typology of target groups.

Answer 36

Schneider and Ingram typology of target groups is that there are four main socially constructed target groups that vary in power and construction.

• The advantaged (e.g. vets, elderly, scientists) are powerful and positively constructed.
• The contenders (e.g. the rich, unions, minorities) are powerful but negatively constructed.
• The dependents (e.g. disabled, mothers, children) are weak but positively constructed.
• The deviants (e.g. criminals, drug addicts, gangs) are weak and negatively constructed.

Question 37

How does the social construction of targets influence policy design?

Answer 37

• Advantaged group will receive clear benefits from policy and the government will take credit for rewarding them.
• The contenders will receive hidden benefits from policy and government will avoid blame for rewarding them.
• The dependents will receive symbolic rewards from policy and government will avoid blame for punishing them.
• The deviants will receive clear punishment from policy and government will claim credit for punishing them.

Question 38

How does the social construction of targets influence policy rationales?

Answer 38

• For the advantaged, benefits are explained by forging an instrumental link between the group’s interest to the public interest. The cost to support the advantaged group is unavoidable.
• For the contenders, the extent of burdens is exaggerated.
• For dependents, benefits are explained using the language of justice, they are not related to the public interest, and burdens are paternalistic.
• For deviants, benefits and burdens are an efficient means to achieve a national purpose.

Question 39

How does the social construction of targets influence policy messages?

Answer 39

• The advantaged hear that their concerns are important.
• The contenders hear that their concerns are controversial.
• The dependents hear that their problems are their own fault and that by only surrendering their autonomy to government can their problems be solved. They must go through shame and stigma.
• The deviants hear that they are bad people who create problems for others.

Question 40

How are the politics of welfare state retrenchment different from the politics of welfare state expansion?

Answer 40

The politics of welfare state retrenchment are different from the politics of welfare state expansion because the politics of the latter involve taking benefits away rather than giving them out.

Question 41

What is negativity bias and how does it affect welfare state retrenchment?

Answer 41

Negativity bias is the tendency for people to be more sensitive to losses than to gains. It affects welfare state retrenchment because the process will become one of blame avoidance rather than credit claiming if the losses will be tangible to a concentrated group and the benefits diffuse.

Question 42

What strategies are political officials likely to use to avoid blame?

Answer 42

Strategies that political officials are likely to use to avoid blame are keeping controversial issues off the agenda, redefining the issue, delaying the consequences, passing the buck, scapegoating, jumping on the bandwagon, circling the wagons, and stopping me before I kill again

Question 43

What are the forces that constrain welfare state retrenchment?

Answer 43

The forces that constrain welfare state retrenchment include the conservative nature of democratic policymaking (the status quo orientation), the high political price that politicians pay for retrenchment policies, and path dependency.

Question 44

Under what circumstances is welfare state retrenchment more likely?

Answer 44

Welfare state retrenchment is more likely when a party enjoys electoral slack, budgetary crises, when visibility can be lowered (possible in societies where power is concentrated, although it will be harder to avoid blame), and when advocates of retrenchment can frame the public debate to favor their position

Question 45

What possible explanations for white opposition to welfare did Gilens consider?

Answer 45

• Economic self-interest
• Individualist beliefs
• Party identification
• Ideology
• Attitudes toward the poor
• Racial attitudes

Question 46

What factors did Gilens argue are most important in explaining white opposition to welfare?

Answer 46

• Most important factor was a negative perception of African–Americans
• Negative attitudes about poor people also were important
• Individualist beliefs (limited government) also mattered
• Party ID and ideology were less important

Question 47

What methods did Gilens use to investigate white opposition to welfare?

Answer 47

• Asked respondents whether or not a welfare mother is likely to try to get a job or likely to have more children to get a larger welfare check
  
  • Experiment randomly varied racial identification of the mother as black or white
  • The identification of the welfare mother as a black woman triggered negative views of welfare recipients and was positively associated with opposition to welfare spending and negative attitudes about welfare

Question 48

How does policy feedback influence the development and actions of interest groups?

Answer 48

• Policy “causes” politics
  
  • The development of interests and institutions that shape behavior and expectations
  • Policy feedback creates resistance to change
  • Policies can endure even when they no longer “make sense”
  • Policy feedback creates a “path dependent” process
• Policy feedback influences development and actions of interests groups because they look to help benefit a specific group of people. They look to sway legislation that will best serve their group of people they work for.
  
  • Example
  • Federal government had limited involvement in pension policy but did shape private pensions through favorable tax treatment
    
    1. Corporations “expense” contributions
    2. Deferred tax liability for workers on contributions and earnings
    3. Exemption (from corporate taxes) of interest income from pension trusts

Question 49

What is a “group centric” policy evaluation (according to Lawrence, Stoker, and Wolman)?

Answer 49

• Group centric – policy makers target one group in order to get legislation through. It has been found that lawmakers are able to manipulate target groups in order to get what they want passed.
• Republicans and conservatives are more likely to adopt group centric evaluations
• The extent to which group-centric evaluations affect support for policies varies across policy domains
• For urban aid, we find that urban aid policies targeted toward positively constructed groups have more public support than does universal policy
• For health care, policies targeted to one of the two positively constructed groups have greater support than does universal policy

Question 50

What is the difference between “strong universalism” and “weak universalism” in Lawrence, Stoker, and Wolman’s research?

Answer 50

• Strong universalism: Universal policy designs are favored over targeted policy designs
• Weak universalism: Universal policy designs are favored over policies that target groups with negative social constructions

Question 51

What according to Lawrence, Stoker, and Wolman distinguish how liberal/democrats and conservative/republicans think about social policy?

Answer 51

• Liberals, and particularly liberal Democrats, are less likely to adopt a group-centric heuristic to evaluate policy
  
  • Consequently, their policy preferences are less influenced by target group specification
  • Self-identified liberals and Democrats often prefer universal policy designs even to designs that target popular groups
• Regardless of the issue under consideration, conservatives (and especially more conservative Republicans) tend to behave in a manner consistent with established theory
  
  • Self-identified conservatives’ responses vary by target groups and their preferences about social policies are consistent with theoretical predictions
  • Policies that target groups held in low esteem are at the bottom, universal policy designs in the middle, and highly regarded groups at the top

Question 52

Does Margalit think that personal circumstances or ideology drive welfare policy opinions? Why? Did Margalit detect differences when comparing republicans and democrats? Explain.

Answer 52

• Labor market experiences, political attitudes, and welfare policy preferences
• Economic shocks were found to have a significant effect on welfare policy preferences
  
  • People who experienced an economic shock were more likely to change their preferences
• The effect was greater for independents and Republicans than it was for Democrats
  
  • Generally, Republicans show lower levels of support for welfare spending
  • By contrast, levels of support among Democrats are already high and cannot move much higher in response to economic shocks

Question 53

What three economic “shocks” does Margalit examine? Name and briefly explain them.

Answer 53

• Economic shocks were found to have a significant effect on welfare policy preferences
  
  • People who experienced an economic shock were more likely to change their preferences
• 3 Economic Shocks:
  
  • Job loss – when people become unemployed
    
    • Job insecurity – people become afraid of becoming unemployed
  • Income decrease – when a persons typical income declines

Question 54

Were the effects that Margalit detected lasting or fleeting? Explain.

Answer 54

• When people re-gained employment or confidence or income, their support for welfare spending declined
  
  • Of course, the groups that were more likely to change originally were also the groups most likely to do so
• Generally then, people who experience economic shocks are likely to be more favorably inclined toward welfare spending
  
  • This is especially true for non-Democrats
  • However, the effect can be fleeting
  • When the economic shock is gone, people tend to revert to their original policy positions

Question 55

How do Rehm, Hacker, and Schlesinger explain the extent to which support for welfare programs is broad or narrow?

Answer 55

• Broad – The greater the positive correlation between risk and income, the greater the support for unemployment insurance
• Narrow – When income and risk are highly correlated, opposition to unemployment benefits is more intense

Question 56

What is the “power-resources” school? (in Rehm, Hacker, and Schlesinger)?

Answer 56

• Political power of the working class…less affluent citizens are thought to favor a more generous welfare state, redistribution through taxes and transfers

Question 57

What is the “revisionist” school? (in Rehm, Hacker, and Schlesinger)?

Answer 57

• Demand for social protection crosses class lines…not only low-income people, but also people with substantial risk of unemployment favor a generous welfare state

Question 58

According to Rehm, Hacker, and Schlesinger, there are two natural political constituencies for the welfare state…identify and define them.

Answer 58

• The support for a welfare state decreases with income

- The support for a welfare state increases with the risk of losing income.

Question 59

Briefly explain Hacker’s critique of Pierson’s work on welfare state retrenchment (from the Hacker article, not the book). How and why does Hacker think Pierson’s analysis was limited?

Answer 59

• By looking at affirmative choices, retrenchment analyses downplayed the ways in which actors may shape and restrict the agenda of debate and prevent some kinds of collective decisions altogether
• Most critical in this regard are deliberate attempts to prevent updating of existing policies to reflect changing social circumstances
  
  • The “defensive” nature of U.S. policymaking process makes playing defense easier

Question 60

Identify and explain the four modes of policy change included in Hacker’s article.

Answer 60

• Drift – changes in the operation or effect of policies that occur without significant changes in those policies’ structure
• Layering – proponents of change work around institutions that have fostered vested
• Conversion – policies are adapted over time rather than replaced or eliminated
• Revision – formal reform, replacement, or elimination of existing policy.
• All these forms of change, if successful, should increase the ability to convert, alter, or eliminate existing policies in the future

Question 61

What is risk privatization (Hacker)?

Answer 61

• To “privatize” risk is to fragment and undermine collective insurance pools that offer reduced cost protection to higher-risk and lower-income citizens in favor of arrangements that leave individuals and families responsible for coping with social risks largely on their own
  
  • Shift risk from public and private institutions onto individuals and families

Question 62

What is Hacker’s “second face” of conservative influence? How does it influence the evolution of the welfare state in the U.S.?

Answer 62

• Exposes an important soft spot in retrenchment scholarship.
• Fragmented constitutional structures have very different implications in the era of retrenchment and expansion. Fragmentation once hindered the passage of large-scale programs now presents an effective barrier to conservative attempts at retrenchment
• The difference between the past and present is that the effects of past choices indeed loom large – is that current struggles take place in the shadows of massive systems of social provision, which pervasively shape the challenges and opportunities that today’s leaders confront.