THE MEANING OF PUBLIC ASSISTANCE
ECONOMIC IMPACT OF PUBLIC ASSISTANCE
THE U.S. PUBLIC ASSISTANCE RECORD
At any point in time, some members of an affluent or poor society may be unable to fully support themselves due to a variety of circumstances, including adverse economic conditions (e.g., unemployment), health problems (physical or mental infirmity), changes in family circumstances (e.g., births, deaths, divorce), age factors (e.g., youth, advanced age), and natural disasters. In these situations, the government, in fulfilling its role as enhancer of the well-being of its citizens, may intervene by providing assistance to the affected individuals or families. For the sake of long-term viability, however, it is important to design a system that encourages able-bodied adult public assistance beneficiaries to become self-supporting again. Because public assistance programs seek to provide an economic or social safety net to the disadvantaged or vulnerable members of society, it is not surprising that such programs are subjects of extensive public policy debates in democratic societies. These debates focus on the long-run viability of specific public assistance programs, on distributional impacts, on whether public assistance encourages or discourages job-seeking and childbearing, and on whether or not programs help beneficiaries escape from poverty and welfare dependence, as well as the extent to which governments should be providing such programs.
The governments of the United States, Canada, Japan, and other industrialized countries have developed comprehensive public assistance programs over the years to assist the poor and needy financially or through medical care, employment training, and a variety of other programs. Because of their comprehensive public assistance programs, these countries are labeled welfare states. The sociologists James Rice, Robert Goodin, and Antti Parpo (2006) have articulated some ways in which welfare states contribute to people’s well-being.
THE MEANING OF PUBLIC ASSISTANCE
To many people, public assistance is synonymous with welfare benefits (and because the latter is often perceived negatively, so too is the former). Strictly speaking, public assistance is broader than welfare; it includes cash benefits (e.g., social assistance), direct “in-kind” provision of goods and services (e.g., food stamps, child care services), and tax breaks (e.g., tax credits for families with dependent children). The designation public arises from the fact that some level of government (central, state, or local) controls the relevant financial flows; thus, benefits provided by private charities are not considered public assistance, except in cases where public expenditures are channeled through private charities. Three salient aspects of public assistance programs follow from the above definition. First, the assistance is intended to be provided for the direct benefit of needy individuals or families. Second, because some level of government controls the relevant financial flows, the governments in power influence such expenditures. Third, the benefits, which can be cash, in kind, or in the form of tax breaks, must address some social or economic goal.
Since the 1930s many specialized public assistance programs for low-income households, seniors, youth, the sick and handicapped, and the unemployed have been launched in the United States, in response to changing economic and social conditions. A partial list of such programs includes the Food Stamp Program (FSP), Medicaid, Supplemental Security Income (SSI), Aid to Families with Dependent Children (AFDC), Temporary Assistance to Needy Families (TANF), General Assistance (GA), Job Opportunities and Basic Skills (JOBS), Earned Income Tax Credit (EITC), and the Low Income Home Energy Assistance Plan (LIHEAP). TANF (which replaced AFDC) is what is commonly referred to as welfare ; it assists needy families with dependent children, whereas SSI is designed to assist the blind, aged, and disabled. Most of these programs are means-tested (or income-tested)—that is, benefit eligibility is restricted to individuals or households whose income and/or assets are valued below some threshold level. For example, Medicaid provides medical assistance for only certain low-income individuals and households, and FSP ensures provision of adequate nutrition to low-income individuals and households by supplementing their food budget.
According to statistics provided by the U.S. Social Security Administration (2006), in 2002 there were 49.754 million recipients of Medicaid, at a total cost of $213.491 billion; an average of 5.058 million recipients of TANF/AFDC per month, at a total cost of $9.717 billion; an average of 19.094 million recipients of food stamps, at a total cost of $18.257 billion; and 6.940 million recipients of SSI in December 2002, at a cost of $34.567 billion.
ECONOMIC IMPACT OF PUBLIC ASSISTANCE
Public assistance programs are designed to achieve economic and social goals. Two such goals are noteworthy. First, the provision of public assistance is a step toward creating an egalitarian society in which all citizens enjoy a reasonably decent standard of living. Second, public assistance spending may serve as a tool for regulating demand, structuring the labor market, and stabilizing the economy.
Opponents of public assistance programs claim, among other things, that such programs provide disincentives to work and incentives to bear children. These programs also, they assert, divert scarce resources away from productive uses (e.g., investment) to unproductive social services and contribute toward creating a large number of poor and welfare-dependent individuals and families. These viewpoints have motivated extensive empirical research on the economic and social impacts of specific U.S. public assistance programs. The conclusions of this research have been mixed: For example, case study research by the economist Barbara Wolfe (2002) found that work-effort disincentives exist in both TANF and AFDC. The economists Dean Jolliffe, Craig Gundersen, Laura Tiehen, and Joshua Winicki (2005) examined the impact of FSP on child poverty and found that food stamp benefits lead to large reductions in the poverty gap. The sociologists Taryn Lindhorst and Ronald Mancoske (2006) tracked TANF recipients who were involuntarily removed from welfare rolls, as a result of the increased use of sanctions and time limits on welfare, and identified several negative social and economic effects.
THE U.S. PUBLIC ASSISTANCE RECORD
How does the United States fare relative to other industrialized Organization for Economic Cooperation and Development (OECD) countries in terms of commitment to supporting the standard of living of poor and needy individuals and families? Ideally, comparison should be made on the basis of an examination of the gross (before-tax) total public expenditures on each public assistance program as a ratio of the size of the economy as measured by gross domestic product (GDP), with higher values indicating greater commitment. Although public assistance programs in different countries share the common goal of assisting the poor and needy, there are significant cross-country variations in program design, which makes international comparison problematical. To deal with this problem, the OECD has attempted to create a comprehensive database of internationally comparable data on public social expenditures, which include expenditures on public assistance programs, in the OECD countries. The database focuses on nine social policy areas: namely, old age, survivors, incapacity-related benefits, health, family, active labor market policies, unemployment, housing, and other social policy areas. Because most public assistance programs are means-tested, public expenditures on means-tested programs as percentages of GDP provide a good sense of how levels of public assistance, in particular, compare.
Table 1 shows the gross (before-tax) total public social expenditures and total expenditures on means-tested programs as percentages of GDP for several OECD
|Total Public Social Expenditure and Total Expenditure on Means-Tested Programs as a Percentage of GDP for Selected OECD Countries (2003)|
|Country||Public Social (% GDP)||Means-tested (% GDP)|
|SOURCE: OECD (2007).|
countries, as reported by OECD (2007). It is apparent from the table that the United States fares poorly in relation to most industrialized OECD countries, especially the Nordic countries, when gross public social expenditures are considered. In fact, the United States falls below the OECD average for every year between 1990 and 2003. Sweden’s total public social expenditure as a percentage of GDP, which is the highest among the OECD countries for every year between 1990 and 2003, is about twice that of the United States. Another interesting feature of the table is that the total U.S. public social expenditure is very comparable to that of Japan, with both falling below the OECD average. A slightly different story emerges when means-tested programs, which are characteristic of most public assistance programs, are considered. For means-tested programs, the United States and Japan also fall below the OECD average and both countries fare much worse than Australia, Canada, New Zealand, Finland, Ireland, and the United Kingdom.
SEE ALSO Compensation, Unemployment; Medicaid; Medicare; National Health Insurance; Poverty; Public Health; Social Welfare System; Transfer Payments; Welfare State
Jolliffe, Dean, Craig Gundersen, Laura Tiehen, and Joshua Winicki. 2005. Food Stamp Benefits and Child Poverty. American Journal of Agricultural Economics 87 (3): 569-581.
Lindhorst, Taryn, and Ronald J. Mancoske. 2006. The Social and Economic Impact of Sanctions and Time Limits on Recipients of Temporary Assistance to Needy Families. Journal of Sociology and Social Welfare 33 (1): 93–114.
Midgley, James. 2001. The United States: Welfare, Work, and Development. International Journal of Social Welfare 10 (4): 284–293.
Organization for Economic Cooperation and Development. 2007. OECD Social Expenditure Database (SOCX2007), 1980–2003. http://www.oecd.org/statistics/social/.
Ozawa, Martha N. 2004. Social Welfare Spending on Family Benefits in the United States and Sweden: A Comparative Study. Family Relations 53 (3): 301–309.
Rice, James Mahmud, Robert E. Goodin, and Antti Parpo. 2006. The Temporal Welfare State: A Crossnational Comparison. Journal of Public Policy 26 (3): 195–228.
U.S. Social Security Administration. 2006. Annual Statistical Supplement 2005. http://www.ssa.gov/policy/docs/statcomps/supplement/2005/.
Wolfe, Barbara L. 2002. Incentives, Challenges, and Dilemmas of TANF: A Case Study. Journal of Policy Analysis and Management 21 (4): 577–586.