PSC 101 Tuman Week 5 Lecture Notes
PSC 101 Tuman Week 5 Lecture Notes PSC 101
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This 4 page Class Notes was uploaded by Stephanie Smith on Tuesday August 16, 2016. The Class Notes belongs to PSC 101 at University of Nevada - Las Vegas taught by John Tuman in Fall 2016. Since its upload, it has received 5 views. For similar materials see Intro American Politics in Politica science at University of Nevada - Las Vegas.
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Date Created: 08/16/16
Wk 5 Monday I. TANF - conclusion A. Effects of reform 1. Trends in beneﬁts a) 2015 median beneﬁt across all states for a family of 3 (2 kids, 1 parent): $429 / month (*for this section he repeated several times that we need to remember that these numbers have not been adjusted for inﬂation over time since the reform in 1996) (1) In 14 states a family of 3 got $300 or less (2) some of these families are eligible for other beneﬁts (a) Most overlap with: i) SNAP (Nutrition program which we call food stamps) ii) Median value of SNAP beneﬁts was $400/month b) 1996-2014 (1) In 1996 TANF covered 66 out of 100 poor families (2) 2014 TANF covered 23 out of 100 poor families (3) this demonstrates that the proportion of poor families covered by TANF beneﬁts has decreased 2. Trend in caseload a) In 1996: 12.6 million total number of individuals on TANF program, of that 8.6 million were children b) In 2015: 2.8 million total people, aka huge decline c) Hypothesis about explanation for the huge decline: (1) Employment - work requirements (2) Time limits / sanctions - individuals either timed out, or failed to meet a program requirement and were made ineligible (3) Entry berries - people not applying because the criteria have become more difﬁcult to meet (4) Conducted both observational and experimental studies from 1996-2002: (a) Grogger and Karoly: looked at 35 experimental studies and tried to parse out which factors explained the decrease over time (b) Found that time limits and sanctions explain most of the change (c) What happens in labor markets does not affect the number of people on the program 3. Denison and Klerma 1996-2002 a) Try to answer question about whether work requirements help lift people out of poverty (1) the bulk of the evidence pointed to the fact that work requirements did not help people get out of poverty (a) Most people had: i) a highschool diploma or less ii) non-continuous work history iii) minimum wage (1) These people did not have enough earning potential to be lifted out of poverty, which is what made the work requirements ineffective in lifting people out of poverty (they did not acquire any new skills or get job training) 4. What do states spend TANF funds on? a) 2014: (1) 26% of funds spent on income support (2) 24% job training / childcare (3) 30% “other” (a) couples counseling (b) anti-abortion “pregnancy counseling” (c) early childhood education (Head Start) (d) Financial aid for college students - substitution (states did not want to raise taxes for ﬁnancial aid, so they use TANF funds) b) “takeaway for the exam” [according to Tuman himself] is that when states were given a block grant for funds and then authority on how to spend the money, states end up on spending the TANF funds in “creative” ways, as shown above c) II. Social Security (we will learn why it is more difﬁcult to reform an entitlement program than a program like welfare) A. Background 1. History of the program a) 1935: Social Security Act (retirees, survivors, unemployment insurance, which is cooperative) b) 1972: SSI beneﬁts SSI (disability) c) Other Program provisions (Medicare, veterans’ disability, black lung) 2. Assumptions of Policy-Makers a) Savings of workers (1) clear data show that employees do not save for retirement or emergencies unless they are forced or strongly motivated to (2) Retirement programs in the private sector did not exist when Social Security was founded b) Adequacy of private sector or non-proﬁt coverage (charities) c) Male “breadwinner” model B. Program Structure and Coverage 1. Payroll tax (Federal Insurance Contributions Act, or FICA tax). a) 6.2% on $118,500 (employee) b) 6.2% on $118,500 (employer) c) (Medicare is 1.45% each on all income; individuals $200,000 pay 0.9% or more). 2. Ear-marked tax a) The FICA tax goes into a trust fund, administered by at the Social Security Administration. Surpluses may only be invested in government securities (Federal bonds). US general federal revenues may not be used to support Social Security. 3. Distributive effects a) High income workers receive less as a % of pre-retirement income compared low-income; but because the FICA tax is capped, high income employees pay less as a % of income in the tax. 4. Coverage a) June 2013 (1) All beneﬁciaries 57,469,232 (2) Retired Workers and dependents 40,298,999 (3) Survivors 6,216,500 (4) Disabled workers and dependents 10,953,733 C. Challenges Facing the Program 1. Demographic Change a) Shrinking Workforce (1) US Fertility Decline (a) Fertility rate (births per 1,000 women, ages 15-44, by year) i) 1946 101.9 ii) 1956 121 iii) 1964 104.7 iv) 1980 68.4 v) 1990 70.9 vi) 2000 67.5 vii) 2010 66.2 (b) Source: Centers for Disease Control and Prevention (2) Reduction in growth rate in US labor force. Most growth from entry of “Baby Boomers” and women in the labro force has already occurred. (a) Labor force in the US grew at an annual rate of 1.7% during the 1960’s, but slowed to 1.1% in the 1990s. (CPS data) (b) Average annual growth in labor force is projected at 0.6% for the next 50 years Wk 5 Tuesday (c) The US is not alone, Demographers forecast that Japan’s labor force will experience a 12% decline between 2000 and 2020 (d) Because social security depends on contributions from current workers to support retirees, the trend in the labor force will create problems. In 1960, the ratio of covered workers to retirees was 5.1 to 1. This fell to 3.2 to 1 in 1980, and has remained about 2.9 to 1 in 2010. b) Baby Boomers (1) Baby Boomers- the cohort born between 1946 and 1964 - Since 2010, about 10,000 “Boomers” per day will reach the age of 65. AS a result, the share of the US population aged 65 or older will increase from approximately 13% in 2010 to 17% in 2030. After that, most Boomers will be at or close to retirement age (although note that the Boomers born after 1960 must already wait until age 67 to claim full beneﬁts). c) Life expectancy (1) Demographers estimate that in 1935, average life expectancy for people age 65 was 12.5 years. By 2012, life expectancy increased by 20.4 years for women reaching age 65, and about 18 years for men. This will increase again through 2030. Still, recent data suggest that Boomers are more prone to diabetes and other risk factors. 2. Cost a) Cost of the program is affected by the cost-of-living adjustment (COLA). Due to the Great Recession, and low inﬂation, the COLA did not increase in 2010 and 2011. But prior increases have expanded cost. b) In 2012, the mean (average) Social Security beneﬁt for a retired individual was $1,230. the maximum beneﬁt in 2013 for an individual claiming beneﬁts at age 65 was $2,533 (if age 70, $3,350). 3. Projected Deﬁcit a) If we leave the ﬁnancing for the program the way it is, there will be a deﬁcit at some point. The program would then only be able to pay out 80% of beneﬁts. D. Reform Proposals 1. Raise Retirement Age 2. Slow Growth in Beneﬁts (refers to cost of living adjustment) 3. Raise Payroll Tax a) Increase or eliminate the cap on income subject to the FICA tax b) Increase the rate, or make it progressive 4. Radical Suggestions a) Stock Market Investment (1) would create volatility in the market (2) putting gov funds into private companies - agenda issues (3) market correction risk b) Partial Privatization (1) If you are 50 or older, the employee can take the required 6.2% and save it for himself. The gov would make sure that wherever you saved / invested this money was approved. These companies would have to be regulated and licensed. The employer would still pay the required amount into social security. (2) This would not solve the ﬁscal deﬁcit. To guarantee traditional social security, Congress would have to pass a supplemental tax. c) Full Privatization (1) Eliminate Social Security Administration; both employees and employers still have to contribute, everything goes into private investment. E. Politics of Reform 1. AFDC / TANF —> reform 2. Social Security —> No reform 3. Pluralism a) (Groups on demand side, Politicians on supply side) b) Children and people under AFDC (1) not organized into an interest group c) the largest interest group in the country is the AARP (their biggest priority is keeping social security the way it is) [exacerbated by the fact that old people move where it is warm, often to swing states such as Nevada and Florida]