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Welfare policies help those in economic need. These programs are also known as public assistance. The basic method of distributing public assistance funds is via income transfer: The government takes money from wealthier citizens through taxes, then gives some of that money to citizens with low or no income. Because funds are redistributed from the rich to the poor, we call such policies redistributive policies.

Poverty in America

The U.S. government established a standard for dealing with income inequality during President Lyndon Johnson’s War on Poverty in the 1960s. This standard, known as the poverty line, determined that those families that earn less than three times their annual budget for food would be considered poor and in need of public assistance.

Example: In January 2009, the U.S. Department of Health and Human Services determined the national poverty line to be approximately $22,000 for a family of four.

Debating the Standard

Many people argue that the federal poverty standard is inaccurate because it focuses so much on the cost of food and not enough on housing costs. These critics claim that because housing prices have risen faster than food prices, the poverty standard does not accurately measure how much money a family needs to survive. According to these critics, there are substantially more poor people in the United States than the current standard suggests.

Basic Welfare Programs

Welfare consists of a variety of policies with different goals:

  • Supplemental Security Income (SSI): Offers aid to elderly and disabled people who do not qualify for social security benefits
  • Food stamps: Gives low-income people coupons with which to purchase food
  • Earned Income Tax Credit (EITC): Refunds some or all of a family’s social security taxes
  • Public housing: Creates and subsidizes apartments and other dwellings for low-income families
  • Rent vouchers: Provides grants to low-income individuals to help defray housing costs
  • Medicaid: Provides low-cost medical care to those on welfare

Corporate Welfare

The federal government has many policies designed to stimulate the economy by assisting businesses. For instance, the government subsidizes some agricultural products and offers tax credits for various types of research. Critics of such programs accuse the government of promulgating “corporate welfare.”

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