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Tip Sheet for October 2001
The Wealthy Benefit Most from the U.S. Welfare System
The majority of the public believes that only the poor
benefit from government assistance. However, Mimi Abramovitz, DSW, Professor of
Social Work at Hunter College in New York, shows that a three-tiered system of
the welfare system exists in the United States and that it favors the upper
middle class, the wealthy and predominantly large corporations.
In the October issue of Social Work, the flagship journal of the
National Association of Social Workers (NASW), Abramovitz explains the three
tiers of the system:
- The social welfare system—the direct provision of cash and in-kind
benefits to individuals and families, free or at below market cost—is popularly
regarded as serving only the poor. However, social welfare programs serving the
middle and upper class receive more government funding, pay higher benefits, and
face fewer budget cuts than programs just for the poor.
For example, in 1999, $220 billion dollars were spent on income-tested public
assistance serving the poor. However, $730 billion dollars were spent on
entitlement programs such as Social Security and Unemployment Insurance.
From 1995-1997, low income programs received 23 percent of the funding, but
93 percent of the program cuts. Despite the booming economy, most states, during
this time period, continued to cut low-income programs and use the resulting
bedget surplus to lower taxes.
Abramovitz says, "Since colonial times, U.S. public policy has treated as
‘deserving’ people those who work for wages outside the home and formed a
‘proper’ family. On the other hand, it has defined jobless adults as not wanting
to work and single mothers as lazy or immoral and ‘therefore, undeserving’ of
help."
- Fiscal Welfare—the program that provides income support to
individuals and families—indirectly supports people through tax exemptions,
deductions, and credits, also known as "tax expenditures."
According to the U.S. Joint Committee on Taxation (1998 p. 2) a tax
expenditure is defined as "analogous to direct outlay of programs." The two are
considered as alternative means of accomplishing similar budget policy
objectives. Like direct spending, tax expenditures deplete the U.S.
Treasury.
Abramovitz shows through an examination of funding levels, benefit amounts,
and vulnerability to cuts, that the fiscal welfare system also favors
economically advantaged groups.
Tax benefits for the upper-income groups include low-cost government
insurance for ocean-side homes, tax-free investments, reduced capital gains
taxes, and tax deductions for charitable giving, large medical expenses,
investment losses and many other items.
In 1998, the government "spent" approximately $65 billion in mortgage
interest, property taxes, and capital gains deductions for homeowners. In
contrast, the Department of Housing and Urban (HUD) granted $24 billion to
low-income housing and rental subsidies for the poor (U.S. Joint Committee on
Taxation, 1998).
Like the entitlement programs which serve many in middle and upper class, tax
expenditures require neither Congressional appropriations nor reauthorizations
which make them less vulnerable to budget cuts.
The last tier of the welfare system consists of:
- Corporate Welfare or "Aid to Dependent Corporations." Corporate
America accepts government aid by helping companies advertise products, build
new facilities, train their workers, write off the cost of perks and increase
their profits.
In 1999, Abramovitz says, hundreds of corporations, including Microsoft,
avoided paying about $4 billion in federal taxes because of tax provisions that
provide advantages to American companies.
Tax expenditures from 1996 through 2002 are projected to total $519 billion.
The largest business tax break –accelerated depreciation—amounted to $22 billion
in 2000. This loophole allows companies to write off the costs of their
machinery and buildings faster than they wear out.
Abramovitz concludes that the U.S. welfare state contains a variety of
programs for diverse groups and although a large number of people, including
corporations, benefit from government subsidies, the public perception is that
welfare only assists the poor. However, Abramovitz shows that while nearly
"everyone is on welfare," programs for the poor and low-income are just more
visible.
"Everyone is Still on Welfare: The role of
Redistribution in Social Policy,"Mimi Abramovitz, Social
Work, Vol. 46, No. 4, October 2001. Journal may be obtained from NASW
Press, www.naswpress.org.
Supports Necessary to Move People from Welfare to
Work
Research shows that while work is an important path towards improved
well-being for poor families, a successful and humane social welfare policy must
recognize and respond to its limitations. Many former welfare participants will
earn low wages in unstable employment and will require a broad range of supports
to move from welfare to self-sufficiency and improved family well-being.
In the October issue of Social Work, the flagship journal from the
National Association of Social Workers (NASW), the author examines three
propositions that 1) work is the norm, 2) that work is good for families, and 3)
that work leads to self-sufficiency.
The author, Maria Cancian, PhD, associate professor of public affairs and
social work at the University of Wisconsin-Madison, says that most women, poor
and not poor, do not even work 30 hours a week year-round. The welfare to work
programs in most states require mothers with children under six to work an
average of 20 hours a week. Most programs are built around the premise that
women would work a 40 hour workweek.
TANF legislation requires that these mothers adopt a "norm" more easily
embraced by women with higher earning potential, more education, and older
children, Cancian adds.
Most research on the effect of mothers’ work on child well-being provides
limited evidence of low-income families, particularly those moving from welfare
to work.
"Family leave, child care tax credits, and family-friendly company policies
have gained popularity in the last few years. But low income women in low-paying
jobs are unlikely to have access to many of these benefits," Cancian says.
Early evidence suggests that women leaving the welfare rolls find temporary
jobs or jobs with irregular schedules. This has implications for child care and
for transportation. Many of these positions also fail to provide health care
coverage.
According to Cancian, if the goal of welfare reform is to reduce the number
of families receiving benefits, then the current legislation will undoubtedly be
successful. However, if the goal is to move families from poverty and welfare
dependency to self-sufficiency, then the challenge is far greater.
In response to the needs of a safety net, some states are providing child
care subsidies and medical insurance. Because many former welfare recipients
will earn low wages and receive limited benefits, subsidized child care and
health care are important long-term supports. The earned-income tax credit also
plays a role by supplementing low wages. The evidence, according to Cancian,
suggests that many women will require an even broader range of supports if they
are to move their families out of poverty as well as off welfare.
"Rhetoric and Reality of Work-Based Welfare Reform,"
Maria Cancian, PhD, Social
Work, Vol. 46, No. 4, October 2001. To obtain a journal, order from NASW
Press, www.naswpress.org.
The National Association of Social Workers (NASW), in
Washington, DC, is the largest membership organization of professional social
workers with 153,000 members. It promotes, develops and protects the practice of
social work and social workers. NASW also seeks to enhance the well being of
individuals, families and communities through its work and through its
advocacy.
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