Chapter Summary

This chapter examines the issue of poverty and some of the major programs implemented by the United States to address concerns related to low income levels. To better understand the social welfare programs, one first needs to know something about poverty in the United States. More than 46 million people were impoverished in 2012, the highest number since data have been recorded on it. One in five impoverished individuals were children under age 18. The U.S. Census is updating its measure of poverty to more accurately reflect social and economic realities, which may increase the poverty rate substantially. Some conservatives believe that poverty is a choice—that there is a culture of poverty in which people who have been raised in poverty know how to be poor and work the system to their benefit. While the federal government establishes the poverty level, another measure is the Gini coefficient, reflecting the distribution of income, in which more people at lower income ranges are put at risk of poverty. The disparity of income between the very rich and the average American has grown in recent years, leading to social movements such as Occupy Wall Street.

Many U.S. social programs have attempted to deal with poverty. Social Security, the single largest federal government program today, addresses poverty among the elderly. It is a social insurance entitlement program in which income is redistributed across age groups, everyone contributes and later expects to benefit at retirement. Because of this, Social Security is viewed more favorably by the public than welfare programs. The program is funded through a tax on employers and individuals. Demographic projections show that too few working taxpayers are contributing to Social Security, and funding may not be able to cover pending Baby-Boomer retirements. Some criticize gender and income inequities in the program, which is politically risky to reform due to the strong interest by older Americans, a group that votes at higher rates than other demographic groups. As a result, only minor reforms have occurred, including delaying Cost of Living Adjustments (COLA).

There are several prominent welfare programs for which people qualify by meeting a means test of having income below a certain level. The Supplemental Nutrition Assistance Program (SNAP) provides families with financial assistance for food. Temporary Assistance for Needy Families (TANF), formerly known as Aid to Families with Dependent Children (AFDC), provides aid to those with low incomes and requires recipients to work. The effectiveness of this program is being evaluated; while welfare caseloads have declined, many people who have found employment still live in poverty. The Earned Income Tax Credit (EITC) supplements the wages of working poor.

Welfare reforms continue to be proposed with no major overhauls. President Obama recently increased the minimum wage for workers under federal government contracts. Reforms to Social Security, a program projected to go insolvent in 2033, will require either reduced costs (by providing fewer benefits) or increased revenues (by increasing taxes). These policy reforms must consider effectiveness, efficiency, and political feasibility evaluative criteria.