WELFAREDefinition of WelfareTypes of WelfareTypes of Participants in Welfare Programs in the U.S.Justification for Government InterventionSocial Welfare: ‘‘Well-being’’Social Welfare FunctionsWhy Government intervention?Why not Government Intervention?Comparisons of Government InterventionReasons for DifferencesHistory of Welfare Programs in the United StatesOrigins of Government WelfareBeginning of Welfare Programs in the United StatesReasons for implementation of Social Welfare programs in the 1930’s US.Welfare and “The Great Society”Slide 17Slide 18Impact of Welfare Programs on the Economy of the U.S.Food Stamp Program Participation and CostsSlide 21Slide 22CostsCurrent Legislation and Recent ReformsFood Stamp Act of 1977Slide 26Reforms of the Early 1980sThe Mid to Late 1980sThe Hunger Prevention Act of 1988 and the Mickey Leland Memorial Domestic Hunger Relief Act of 19901993 Mickey Leland Childhood Hunger Relief ActThe Personal Responsibility and Work Opportunities Reconciliation Act of 1996Slide 322001 Agriculture Appropriations BillThe Farm Bill of 2002Consequences of the Farm BillDiscussion QuestionsBibliographyWELFAREWELFAREKellen SchullKellen SchullShannon EklundShannon EklundAmanda HongAmanda HongPresented October 25, 2006 Econ 4211Definition of WelfareDefinition of Welfare►WelfareWelfare -is financial assistance paid by -is financial assistance paid by the government to individuals and the government to individuals and families who are unwilling or unable to families who are unwilling or unable to support themselves alone, and/or are support themselves alone, and/or are perceived by the government to be able perceived by the government to be able to function more effectively with financial to function more effectively with financial assistance. assistance. ►Welfare in this context is not the same as Welfare in this context is not the same as the measure of economic well-being the measure of economic well-beingTypes of WelfareTypes of Welfare►Cash welfareCash welfare are welfare programs are welfare programs that provide cash benefits to recipients.that provide cash benefits to recipients.►In-kind welfareIn-kind welfare are welfare programs are welfare programs that deliver goods rather than cash to that deliver goods rather than cash to recipients.recipients.Medical care, food, and housing are all Medical care, food, and housing are all examples.examples.Types of Participants in Welfare Types of Participants in Welfare Programs in the U.S.Programs in the U.S.►Categorical welfareCategorical welfare means welfare means welfare programs are restricted by some programs are restricted by some demographic characteristic.demographic characteristic.Single motherhood or disability are examples.Single motherhood or disability are examples.►Means-tested welfareMeans-tested welfare are welfare are welfare programs that are restricted only by income programs that are restricted only by income and asset levels.and asset levels.For example, programs that restrict eligibility to For example, programs that restrict eligibility to those under 100% of the poverty line.those under 100% of the poverty line.Justification for Justification for Government InterventionGovernment InterventionSocial Welfare: ‘‘Well-being’’Social Welfare: ‘‘Well-being’’►Society cares about the well-being of all its Society cares about the well-being of all its members.members.►Social welfare may be maximized by Social welfare may be maximized by redistribution from high-income individuals redistribution from high-income individuals to low-income individuals.to low-income individuals.►Low income individuals have a higher Low income individuals have a higher Marginal Propensity to Consume (MRC) and Marginal Propensity to Consume (MRC) and thus may increase economic activity. thus may increase economic activity.Social Welfare FunctionsSocial Welfare Functions►Utilitarian SWFUtilitarian SWF SWF = USWF = U11 + U + U22 + … + … +U+UNN-Utilities of all -Utilities of all individuals are given individuals are given equal weight; equal weight; Summed to get total Summed to get total social welfare. social welfare. ►Rawlsian SWFRawlsian SWFSW = min (USW = min (U11, U, U22, …,U, …,UNN))-Social welfare is -Social welfare is determined by the determined by the minimum utility in minimum utility in society, maximized society, maximized by maximizing by maximizing welfare of worst off welfare of worst off person. person.Why Why GovernmentGovernment intervention?intervention?►Not likely to be an adequate market of redistribution Not likely to be an adequate market of redistribution in the Private sector.in the Private sector.►Seen by many as the role of the government: The Seen by many as the role of the government: The Welfare State.Welfare State.►Take the burden off of families and individuals and Take the burden off of families and individuals and place it on society.place it on society.►Increase and promote consumption and economic Increase and promote consumption and economic activity.activity.Why not Government Why not Government Intervention?Intervention?►Promotes “free riders and moral hazards.” Promotes “free riders and moral hazards.” ►Decreases economic activityDecreases economic activity►Costs to society is enormousCosts to society is enormous►Promotes rather than gets rid of social illsPromotes rather than gets rid of social ills►Increases the size and power of GovernmentIncreases the size and power of GovernmentComparisons of Government Comparisons of Government InterventionIntervention►Transfers and other social benefits in U.S. 11 % of GDP in 1999 compared with 20 % in Germany and France. ►European Union average as a whole of transfers and other social benefits is 18 % of GDPReasons for DifferencesReasons for Differences►Many Americans believe there is more social mobility in the US than in Europe, and if those with less income expect that in the future they will have more income, they will not value the protection that a safety-net or a developed welfare state provides compared to if their weren’t these expectations.►Also it has to do with societal views as a whole on those who are less fortunate. In America many view the poor as being lazy and having the ability to escape poverty if they wanted to. ►For example, according to the World Values Survey, whereas 70 % of West Germans express the belief