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Welfare in America

The US government has benn trying to get rid of expensive government poverty programs because they simply haven’t worked: It,s an argument that is stirring dp plenty of controversy. 

A 20-year crusade to wipe out poverty in America has cost government at all levels hundreds of billions of dollars, but a rising chorus of critics is asking some hard questions

Could it be that this money has been wasted and that the poor are actually worse off? Indeed, have millions of people become more deeply mired in poverty bccause of the very programs designed to help them?

Social Security Social Security in the United States cuuendy refers to the federal Old-Age, Survivors, and Disability Insurance (OASDI) program.

The original Social Security Act (1935) and the current version of the Act, as amended encompass several social wel&Lre and social insurance programs. The larger and better known programs are:

• Federal Old-Age, Survivors, and Disability Insurance
• Unemployment benefits
• Temporary Assistance for Needy Families
• Health Insurance for Agd and Disabled (Medicare)
• Grants to States for Medical Assistance Programs (Medicaid)
• State Children's Health Insurance Program (SCHIP)
• Supplemental Security Income (SSI)

U.S. Social Security is a social insurance program funded throu^i dedicated payroll taxes called Federal Insurance Contributions Aa(FICA). Tax deposits are formally entrusted to Federal Old-Age and Survivors Insurance Trust Fund, or Federal Disability Insurance Trust Fund, Federal Hospital Insurance Trust Fund or the Federal Supplementary Medical Insurance Trust Fund. The main part of the program is sometimes abbreviated OASDI (Old Age, Survivors, and Disability Insurance) or RSDI (Redrement, Survivors, and Disability Insurance). When initially signed into law by President Franklin D. Roosevelt in 1935 as part of his New Deal, the term Social Security covered unemployment insurance as well. The term, in everyday speech, is used to refer only to the benefits for retirement, disability, survivorship, and death, which arc the four main benefits provided by traditional private-sector pension plans. In 2004 the U.S. Social Security system paid out almost $500 billion in benefits. By dollars paid, the U.S. Social Security program is the largest government program in the world and the sin^e greatest expenditure in the federal budget,with 20.8% for social security, compared to 20.5% for dbcredonary defense and 20.1% for Medicare/Medicaid. Social Security is currently the largest social insurance program in the U.S., constituting 37% of government expenditure and 7°fo of the gross domestic product and is currently esdmated to keep roughly 40% of all Americans age 65 or older out of poverty.

Social Security privatization became a major political issue for more than three decades during the presidencies of Gerald Ford, Jimmy Gaiter, Ronald Reagan, George H. W. Bush, Bill Clinton, and George W. Bush.

Criticism of the Program 1. claim that it discriminates against the poor and middle-class Some critics say that Social Security redistributes wealth firom the poor to the wealthy. Workers must pay 12.4%, including a 6.2% employer contribution, on their wages below the Social Security Wage Base ($102,000 in 2008), but no tax on income in excess of this amount. Therefore, high earners pay a lower percentage of their total income because of the income caps; because of this, payroll taxes are often viewed as being regressive. Furthermore, wealthier individuals gienerally have hi^ier life expectancies and thus may expect to receive larger benefits for a longer period than poorer taxpayers.

2. claim that politicians exempted themselves from the tax Critics of Social Security have said that the politicians who created Social Security exempted themselves from having to pay the Social Security tax. When the federal government created Social Security, all federal employees, including the President and members of Congress, were exempt from havii^ to pay the Social Security tax, and they received ho Social Security benefits. This law was changed by the Social Security Amendments of 1983, which brou^it within the Social Security system all members of Congress, the President and the Vice President, federal judges, and certain exccudvc-level political appointees, as well as all federal employees hired in any capacity on or after January 1,1984.

3. claim that the government lied about the maximum tax Other critics claim that the federal government has broken its own promise regarding the maximum

Social Security tax. According to a 1936 pamphlet on the Social Security website, the federal government promised the following maximum level of taxation for Social Security, “…beginning in 1949, twelve years from now, you and your en^>loycr will each pay 3 cents on each dollar you earn, up to $3,000 a year. That is the most you will ever pay.”

However, according to the Social Security website, by the year 2008, the tax rate was 6.2% cach for the employer and employee, and the maximum income level that was subject to the tax was $102,000 raising the bar to $6,324 maximum contribution by both employee and employer (total $12,648).

According to the Social Security website, “The tax rate in the original 1935 law was 1% each on the employer and the employee, on the first $3,000 of earnings. This rate was increased on a regular schedule in four steps so that by 1949 the rate would be 3% each on the first $3,000. The figure was never $1,400, and the rate was never fixed for all time at 1%.'

4. claim that it gives a low rate of return Other critics of Social Security claim that it gives a low rate of return, compared to what is obtained through private retirement accounts. For example, critics point out that under the Social Security laws as they existed at that dme, several thousand employees of Galveston County, Texas, were allowed to opt out of the Social Security program in the early 1980s, and have their money placed in a private retirement plan instead. While employees who earned $50,000 per year would have collected $1,302 per month in Social Security benefits, the private plan paid them $6,843 per month. While employees who earned $20,000 per year would have collected $775 per month in Social Security benefits, the private plan paid them $2,740 per month, at interest rates prevailing in 1996.

5. claim that it is a pyramid or Ponzi scheme Some critics argue that Social Security is a pyramid scheme. Social Security has been a pyramid scheme from the beginning. Those who paid in first received money from those who paid in second — and so on, generation after generation. This was great so long as the small generation when Social Security began was being supported by larger generations resulting from the baby boom.

But, like all pyramid schemes, the whole thing is in big trouble once the pyramid stops growing. When the baby boomers retire,that will be the moment of truth — or of more artful lies.

Supporters of Social Security say that despite its regressive tax formula, Social Security benefits arc calculated using a progressive benefit formula that replaces a much higher percentage of low-incomc workers* prc -retirement income than chat of hi^ier - income workers (althou^i these low-income workers pay a higher percentage of thcir prc-retirement income). They also point to numerous studies chat show that, relative to high^income workers, Social Security disability and survivor benefits paid on behalf of low-income workers more than oSset any retirement benefits that may be lost becausc of shorter life expectancy. Other research asserts that survivor benefits, allegedly an of&et, actually exacerbate the problem because survivor benefits arc denied to single individuals, including widow(er〉s married less than nine months (cxcept in certain situations), divorced widow (cr)s married less than 10 years, and cohabiting or same-sex couples,unless they arc legally married in their state of residence.

American Health Care Providers and Current Medical Issues

Health care in the United States is provided by many separate legal entities. Health care facilities arc largely owned and operated by the private sector. Health insurance is primarily provided by the private sector’ with the exception of programs such as Medicare, Medicaid, TRICARE, the Children’s Health Insurance Program and the Veterans Health Administration.

At least 15% of the population is completely uninsured, and a substantial additional portion of the population is “nderinsurcd”,or less than fully insured for medical costs they mi逆it incur. More money per person is spent on health care in the United States than in any other nation in the world, and a greater percentage of total income in the nation is spent on health care in the U.S. than in any United Nations member state except for East Timor. Despite the fact that not all citizens are covered, the United States has the third hi^icst public healthcare expenditure per capita. A 2001 study in five states found that Mcdical debt contributed to 62% of all personal bankruptcies. Since then, health costs and the numbers of uninsured and underinsured have increased.

Active debate about health care reform in the United States concerns questions of a right to health care, access, fairness, eiBdency, cost, and quality. Many have argued chat the system does not deliver equivalent value for the money spent. The US pays twice as much yet lags behind other wealthy nations in such measures as in&nt mortality and life expectancy, though the relation between these statistics to the system itself is debated. Currently, the U*S. has a higher infant mortality rate than most of the world’s industrialized nations. The USA’s life expectancy lags 42nd in the world, after most rich nations, lagging last of the G5 (Japan, France, Germany, UK, USA) and just after Chile (35ch) and Cuba (37th). The USA’s life expectancy is ranked 50th in the world after the European Union (40th). The World Health Organization (WHO), in 2000, ranked the U.S. health care system as the hi^iest in cost, Brst in responsiveness, 37th in overall performance, and 72nd by overall level of health (among 191 member nations induded in the study). A 2008 report by the Commonwealth Fund ranked the United States last in the quality of health care among the 19 compared countries.

According to the Institute of Medicine of the National Academy of Sciences, the United States is the “only wealthy, industrialized nation that does not ensure chat all citizens have coveragie” (i.e. some kind of insurance). The same Institute of Medicine report notes that “Lack of health insurance causes roughly 18,000 unnecessary deaths every year in the United States' while a 2009 Harvard study published in the American Journal of Public Health found a much higher figure of more than 44,800 excess deaths annually in the United States due to Americans lacking health insurance. More broadly, the total number of people in the United States, whether insured or uninsured, who die because of lack of medical care was estimated in a 1997 analysis to be nearly 100,000 per year.

What Those Billions Buy?

With the exception of AFDC and public housing, which date to Depression days, most of today’s major welfare programs are the children of a single President, Lyndon Johnson. Among his creations: Food stamps, Medicaid, **Hcad Start,w Job Corps and medicare.

But if Johnson gave birth to these programs, his successors, with coaxing from Congress,nurtured them and added a few of their own, including expanded housing-subsidy programs,home-energy assistance, and Supplemental Security Income (SSI) for the blind,disabled and low-incomc aged.

Altogether, federal poverty programs have grown from 4.4 billion dollars in 1965 to more than 150 billion when medicare — the health program for the elderly 一 is included. Who benefits most from these efforts? On this, experts are nearly unanimous: The elderly. Combined with the 1972 provision to give annual increases in Social Security benefits based on the cost of living, programs for the poor and medicare have lifted hundreds of thousands of elderly people out of poverty. In 1966,there were 5.1 million elderly poor 一 17.9 percent of all poor Americans. Today, the elderly poor number 3.7 million, or 10.5 percent of the poor. A Census Bureau study shows that when benefits such as food stamps and subsidized housing are counted, only 1 elderly person in 30 is poor.

Beyond programs for the elderly, however, agreement over the effectiveness of government welfare programs begins to break down. Each month brings some new report of fraud or waste, and rising administrative costs use up sdll more dollars. In the fiscal year ended September 30, administrative costs associated with eight major andpoverty programs exceeded 4 billion dollars — about half the cost of the entire AFDC budget.

Yet certain programs arc yielding good results. A report on the special supplemental food program for Women, Infants and Children (WIC) found that “the proportion of infants who mi^it die at birth because of low weight decreased by as much as 20 percent” because of the program. This fall, a report by a Michigan research foundation gave high marks to Head Start, a 1-billion-dollar program that offers education and nutritional help to about 440,000 needy preschoolers. Other compensatory-education programs for older children arc credited with helping to boost the number of blacks attending college from 227,000 in 1960 to about 1.2 million today. For example, about 60 percent of Upward Bound high-school students go on to college.

More controversial is the Job Corps, which takes disadvantaged youngsters age 16 lo 22 out of their neighborhoods and puts them in residential centers for counseling, remedial education and job training. The cost per trainee, say critics, can equal a year’s tuition at Harvard University. Yet defenders say taxpayers should look at the long-term costs of not reaching such youths. Says a researcher at the Urban Institute in Washington: “For every $1 spent on Job Corps, the government gets back 1.48 from income taxes paid by graduates, plus savings from reduced costs resulting from crime, welfare benefits and unemployment insurance. Job Corps really ought to be expanded.M

The program, which costs 610 million annually, reaches 88,000 youngsters, a relatively small number considering an unemployment rate of 40 percent among black teenagers, who make up the bulk of trainees.

The Welfare Reform Act of 19%

On August 22, 1996, President Clinton signed into law the Personal Responsibility and Work Opportunity Reconciliation Act of 1996,Public Law 104-193, better known as the Welfare Reform Bill. This 丨aw changes how governmental financial assistance is administered, which includes: changing federal funding to states from an open-ended entitlement to a series of block grant allocations; sets dme limits on entitlements and cash assistance to welferc recipients; requires most welfare recipients to engage in job activities (this includes work experience, community service, job training, vocational education); changes the disability definitions for Supplemental Security Income (SSI) for children who apply; mandates states to establish methods to enforce collection of unpaid parental child support; denies many legal immigrants from collecting SSI and food stands; consolidates all child care programs into the Child Care and Development Block Grant, and changes foodstamp recertification requirements.

Welfare Trap A study of welfare recipients by David Ellwood and Mary Jo Bane of Harvard University found that about 60 percent were in the midst of a poverty spell lasting eight or more years. Estimates of the longterm-poor population 一 the so-called undcrdass 一 range firom as few as 5 million to as many as 18 million. Those most likely to depend on welfare for long periods; say Ellwood and Bane, include high-school dropouts, nonwhites, unwed mothers, mothers with many children and women who had not earned any income before going on AFDC. Other analysts add households headed by the disabled and the very old to this category.

The “feminization” of the poor, however, may well be the biggest cause of persistent poverty. There are now 3.6 million poor famihes with a female head of household一 up 82 percent from 1960. Such households comprise nearly half of all poor families, and they dominate the relief rolls in certain areas.

Among minorities, the situation is pardculaiiy serious. Blacks and Hispanics account for atrrtost80 percent of the 477,000 since-parent AFDC families in Los Ai^eles County. Nearly all these house- holds are headed by females. A report by the National Urban League on the state of black America notes that 70 percent of all poor black children live in female-headed households and that more than 80 percent of babies bom to black teenagers are illegitimate. A child growing up in such circumstances has two strikes on him or her from the start, and may well grow into adulthood as a member of a growing sector of our society perpetually without gainfiil employment or any hope of ever escaping the dutches of poverty.

This trend has been even more evident in the last five years amid the mass layoffs in factory jobs brought on by recession and the drive by companies to cut costs throu^i automation. Life on the street is based on a fragile, subsistence-level truce between dignity and desolation. Other street people sell clothes acquired by sifting throu^i garbage, iile some gather leftovers £rom kindly restaurateurs. Less than 5 per cent had any kind of income. Many do qualify for public assistance, but few receive it The requirements of social agencies often pose an insurmountable obstacle, pardculaiiy since many of the homeless arc “in desperately poor mental health. And many simply have come to prefer the streets to what the study describes as the “deplorable conditions’’ of many public shelters.

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