This presentation covers the federal programs to support low-income Americans, sometimes called antipoverty or welfare programs.
Welfare is not a single program like Social Security or Medicare and this presentation will show you the various programs and who uses them.
We will call the aggregated programs the antipoverty or welfare system.
Slide 2
Overall the federal government spent $3.8 trillion in fiscal year 2012. Welfare Programs totaled $357 billion of that amount, not including Medicaid which is shown separately. Medicaid is the health care system for low-income Americans and can also be considered as welfare.
This Schedule represents just federal expenditures, not state, local or charities. State and local governments spent another $174 billion on welfare.
The Welfare Programs are the third largest entitlement after Social Security and Medicare and is even bigger than Medicaid or Unemployment.
The Welfare Programs only include programs to directly support the poor. It does not include things like agriculture, EPA, Dept of energy, etc. Those costs are down in the “other” category.
The makeup of the Welfare Programs is presented on the next slide.
Slide 3
The Welfare System is made up of 13 separate federal programs to help the poor, listed on the slide.
All of the programs provide assistance to the poor in some manner - often cash. The basis for qualification is low-income below certain standards as set by the program – therefore they are often called “means tested”. The programs are not available to higher income Americans and therefore they all represent welfare or anti-poverty programs, they exist solely for the benefit of low-income Americans.
A summary of the Programs follows:
Negative income tax – These represent two tax credits that actually distribute cash to individuals that pay no income tax. They are the earned income tax credit (EITC) and the child tax credit. Not many people know the IRS is one of the largest welfare programs in the U.S., but it is.
SNAP is the new name for the food stamp program. It stands for Supplemental Nutritional Assistance Program. The program distributes debit cards (called EBT cards) to the poor to buy food in local grocery and food outlets.
Housing Assistance is support for rent and housing to the poor. It includes a myriad of programs from public housing to rent vouchers. It also includes Community Planning which distributes grants to cities for things like homeless shelters.
SSI is Supplemental Security Income – This program distributes cash on a monthly basis to the disabled, blind and those over 65 years of age.
Pell grants support college tuition for low-income families.
TANF is Temporary Assistance for Needy Families. It is a combined federal and state program that pays cash to families with the goal of getting the families economically independent over a five year period.
Child Nutrition is the school lunch, breakfast and after school programs.
WIC is high protein food for Women, Infants and Children. Pregnant women and children under 6 years old are eligible.
Child Care includes day care and after school programs.
Lifeline program gives a subsidy to low income households to pay their phone bill, including covering cell phones. This program is often called the Obama phone due to its rapid expansion over recent years.
LIHEAP is the Low Income Home Energy Assistance Program. The program helps with utility bills, both heating and cooling.
The details of each of the programs, their history and cost is presented in the Website – FederalSafetyNet.com
The cost of the Welfare System is $357 billion, now let’s talk about who uses the Welfare Programs. But first we need to understand how the government measures poverty in the United States.
Slide 4
Poverty is measured and reported by the Census Bureau each year using what they call the Poverty Thresholds – here they are for 2012. They are based on the size of a household or family and that family’s income from wages, self-employment or investment income.
If a single person has outside income less than $11,484 the government labels them as in poverty. Over that amount and they are not in poverty.
A two person household can share rent and other expenses so the poverty threshold is only about $3,000 higher for a two person household than for a single person household – and so on as the household grows in size.
When we talk about moving people out of poverty we mean moving them to an annual income equal to or above these amounts.
Slide 5
Each year the Census Bureau reports the number of people in poverty. This means how many people have outside income below the poverty thresholds?
In 2012, 15% of the population of the United States was in poverty.
The government also tells us how much income those individuals made and then how far they were below the poverty threshold. They do that for every person and household in America. The average “gap” is shown on the slide for individuals and families.
So we can do the math. Take the number of individual’s times their average shortfall plus the number of families times their average shortfall and we get approximately $178 billion. That’s the cost to move all Americans out of poverty and is the second figure that is important in a discussion of the welfare system in the United States.
Slide 6
So if it costs $178 billion to move all Americans out of poverty and we spent $357 billion, where did all the money go and for what purpose? Note that this spending does not include Medicaid of $269 billion or state and local government expenditures of $174 billion. It also doesn’t include all the money spent in charities around the nation. When all that is considered it is shocking how much money we spend on anti-poverty programs nation-wide.
Where does all this money go? The “extra” can be explained by three items. The first one is shown on the next slide.
Slide 7
The first place that some of the “extra” goes is to users of the Welfare Programs who are above the poverty line. These are individuals with income greater than the poverty thresholds that qualify for and receive benefits.
Here are three examples of qualification parameters.
To get food stamps an individual can have income up to 130% of the poverty threshold. Why 130%? That is just the level Congress used in setting up the program. Evidently 100% was thought of as too low and so the lawmakers used 130%.
WIC uses a cut off of 185% of poverty. This program distributes milk to mothers and infants. Why is food at 130% but milk at 185%? They are independent programs set up that way.
Rental Assistance uses a formula based on the median income in a locality for income qualification. That can lead to individuals over the poverty threshold getting rental assistance.
These are just three examples - all 13 programs have different qualification parameters, most of them above the poverty threshold to some degree. The result is a very inconsistent definition of those in need. The end result is that some Americans above the poverty threshold get benefits –or we could say that some people in the middle class get welfare benefits.
Slide 8
The second reason that the $357 billion is greater than the $178 billion is that some folks who are below the poverty threshold receive enough benefits that it takes them to well above the poverty threshold.
The first bullet point means that the income a person receives from a welfare program is not used to qualify for another program. So, for instance, if you get food stamps and housing you can still get school lunches.
There is not a maximum number of programs a person can qualify for and there is no maximum benefit a person can receive.
The result is that some people qualify for lots of programs and others do not. So some people start below the poverty level and receive enough program benefits that they are taken well above the poverty threshold.
In the website is an example of a family of four making $20,000 a year that is propelled well in excess of $35,000 per year from the welfare system. They come out better than families making $30,000 on their own.
There is very little information tabulated at the federal level as to who gets how many program benefits and where they end up in total income. Each of the programs has good information on their user base but it is not combined such that so we know the cumulative use of the welfare system.
As a result we are very inconsistent with the support we give to the poor and many of the benefits go to the middle class.
Slide 9
The third reason the $358 billion is higher than the $178 billion is the administrative costs to run 12 separate programs is high.
Overall the 13 programs are run by 8 large federal agencies.
There is very little sharing of data – most are independently run for their own purpose and design.
The programs represent a very difficult set of bureaucracies for the poor to manage. It’s really an unfair system when looked at from the poor. They need to become experts at different rules, methods, payment schemes, timeframes, applications and agencies. It’s a full time job to manage this system if you are a poor person.
The cost of running such a system is high and requires thousands of federal employees.
In the website is a page on Welfare Fraud where it is estimated via the general accounting office and other government reports that about 9% of welfare payments are improperly made. This occurs because the programs are very complicated and run by disparate agencies.
Slide 10
What is FederalSafetyNet.com all about?
Our first goal is to educate of the public about the Welfare Programs so that we can push at the grassroots level for meaningful change.
The most important point is that the Welfare System should be viewed in its entirety. We need to look at all the programs as one system and not as individual programs addressing individual needs as Washington currently does. When we view it on a combined basis we see that the system is:
Ineffective
Expensive
Unfair
Slide 11
The system is ineffective for several reasons.
First if all it doesn’t “make work pay”. “Make work pay” means that the welfare system should encourage work by allowing the worker to improve their quality of life as they work and earn more. If by getting a job the welfare recipient looses greater benefits than they get in earnings then they are not motivated to work. This can only be accomplished by the coordination of all programs. Today the combined programs discourage work.
Second, the programs discourage marriage. If a single mother with kids marries a man with a minimum wage job the loss in benefits is great enough that many opt not to marry.
The programs generally don’t require a level of effort or responsibility attached to them. Nor are there time limits or goals attached. This means the programs are just handouts with no expectation or motivation to move recipients to an independent life.
The TANF program seeks to move individuals into the workforce over a 5 year period. But this is the rare exception and demonstrates why the system must be viewed in whole. It doesn’t work to have one program designed to get recipients into the workforce but none of the others with such a requirement.
As a result the poverty level in the U.S. has remained generally flat since 1965, even though we have added programs and costs over that period of time. This is shown on the next slide.
Slide 12
Here is the historic poverty level of the United States from 1960 to 2012, the most recent data available.
The blue line on the graph shows the percentage of Americans in poverty each year. Since about 1968 or for the last 45 years the “poverty line” has generally been flat at between 12% – 15% of the total population being in poverty.
The red bars show the spending per person in poverty over the same years. In 1960 we spent about $445 per person in poverty. These numbers have been adjusted for the impacts of inflation over the years. In 2012 we spent $13,054 per person in poverty. That is over $50,000 for a family of four.
Welfare benefits have acted as a “hand out” and made many lives easier for those in poverty. But the programs don’t encourage independence and responsibility and have not been effective at moving people out of a poverty status.
Slide 13
The federal welfare system is not only ineffective it is also expensive.
As we’ve discussed the combined use of Welfare Programs is not coordinated or calibrated to income or poverty levels.
There is no cap on combined benefits.
As we discussed, administrative costs are high because there are 13 unique programs administered in 8 independent agencies.
Slide 14
The Welfare System is unfair.
As we’ve discussed, the programs are not consistent in qualification standards.
The system is also very bureaucratic and hard to use
Some poor people are on waiting lists for benefits such as housing and child care.
Others simply don’t apply for aid because they don’t know it is available or can’t navigate the complex system.
Slide15
Education is our first goal which should then lead to our second goal – a push at the grassroots level for meaningful change.
Step one is to recognize that we have a problem. Most Americans already know that. In a Rasmussen poll conducted in 2011, 49% of Americans feel our welfare system actually increases the level of poverty in America and another 19% say the programs have no impact on the level of poverty. That means fully two-thirds of the nation believe our programs have no impact or do more harm than good.
Step 2 is to push for a change in the debate on welfare to look at the system in whole. Until we do that we will never have a system that is coordinated and makes sense. In 1996 we got our arms around the TANF Program with welfare reform, but SNAP, Housing and other programs were left out of the reform. It is only when we address the system in full that we can make a system that makes sense.
Step 3 is to define reform. The Website has a suggested reform that would create a logical, simplified system that would get more resources to the poor and save the U.S. $100 billion a year.
Many conservatives would like to see welfare eliminated at the federal level. That is not realistic based on public opinion. Many progressives would like to see the expansion of programs to include many more people and benefits. That is also not realistic based on the public’s concern for high deficit spending.
Step 4 is to push Congress to write a bill and a President to sign it.
Slide 16 - In conclusion
Most Americans feel our government welfare system is out of control and ineffective. Most of us have personal experience leading us to this conclusion or know someone who has. Hopefully this presentation has shown, from a top down view, why the system doesn’t work. It’s time for welfare reform.
Change can save billions of dollars for our federal government at a time when our budget and deficit are much challenged.
Change can also help the poor with “tough love” - programs that motivate and give the poor more dignity. Rarely can we save dollars and make programs stronger but this is one of those times.
Change will probably only come from a grassroots initiative. Washington won’t push for such change.
Help us spread the word.
Point people to the website
Send letters to your Congressman – templates are available on the website
Thank you for your time and interest!
[Note – a great closing is to read the quote from Benjamin Franklin. His words written over two hundred years ago are amazingly relevant today. See the Poverty Quotes page in the website]
