The Welfare State

The Welfare State

A Cost Benefit Analysis The role of welfare within our society has always been controversial. This problem emphasizes the need to understand the roles of variable factors when pertaining to the subject of welfare within our society. The proposed analysis will address the phenomenon of welfare assistance and several factors which may contribute to the increase or decrease of welfare assistance to the poor in 4 ways: (1) by defining major concepts and any other concepts about which there is likely to be misunderstanding (2) by further examining the past history pertaining to the subject of welfare assistance within the United States; (3) by developing the formulation of a hypothesis which will provide for an explanation of welfare; and finally (4) determining whether or not the benefits of welfare assistance outweigh the cost. Ultimately, the purpose of this research analysis is to investigate variable factors that may contribute to the increase or decrease of welfare assistance. This cost benefit analysis is an attempt to explain the tentative assumptions of others pertaining to the subject of welfare, in order to determine and explain the relationship of welfare to the economic cost and benefits. Cost-Benefit Analysis Before welfare assistance can be analyzed there is a need to define the terms that will be used. Policies like welfare assistance are worthwhile only if the benefits to society are greater than the costs. When choosing among a set of policies, the policy with the greatest net benefit (benefit over cost) should be chosen. Hence, this is where the term cost-benefit analysis comes from. Cost-benefit analysis is a technique for determining the optimal level of an economic activity such as welfare. In general, an activity such as welfare assistance should be expanded as long as it leads to greater benefits than costs. In purely economic terms, does the benefit of welfare assistance justify the costs of welfare assistance? (Mishan 13) Why Use Cost-benefit Analysis? Since 1981, government agencies have been required to perform cost-benefit analyses called Regulatory Impact Analyses (RIA's) for all major regulations within the United States. Many statutes require that cost-benefit analysis be undertaken and the results be reported to Congress (Mishan 2). Cost-benefit analysis can also be a good way to measure how effective a policy such as welfare assistance has been, or to find ways in which a program can be improved. But, regardless of how it is used, the preparation of a cost benefit analysis provides a useful framework for consideration of the possible effects of a proposed policy. Past History of Welfare Assistance One of the first welfare programs to provide income support to the poor was a federally backed plan called the Aid to Dependent Children (ADC) program. This legislation was introduced with the establishment of the Social Security program during the Great Depression. (Rowley, and Peacock 43) The ADC program which had started nearly sixty years ago is now better known as the Aid to Families with Dependent Children (AFDC) program, which provided a federal entitlement to economic support for single parents with children younger than 18 who fell below a threshold of assets and income (Rowley, and Peacock 44). Federal guidelines allowed for each state to set its own predetermined needs standards for families of different sizes and living locations. Both the federal government and the states supplied funding for the AFDC program (Rowley, and Peacock 50). In 1996 Congress adopted the Temporary Aid to Needy Families (TANF) program by enacting the Personal Responsibility and Work Opportunity Reconciliation Act which ultimately changed the structure of federal financial assistance to the states thereby abolishing the AFDC program. Another social welfare program was the Supplemental Security Income (SSI) program. Congress established the Supplemental Security Income program in 1972, with payments beginning in January 1974. It replaced the former Federal-State programs of Old-Age Assistance (OAA), Aid to the Blind (AB), and Aid to the Permanently and Totally Disabled (APTD)( Myles, and Pierson 9). An individual may have qualified for payments on the basis of age, blindness, or disability. Any person aged 65 or older was also eligible. President Richard Nixon enacted the Supplemental Security Income program with the signing of the Supplemental Social Insurance Act. The benefits under this program were originally targeted to the elderly who did not qualify for social security and the blind and disabled whose income and assets fell below the specified thresholds. A third major welfare assistance program is the Medicaid program. The Medicaid program is a health care support program targeted toward the poor. Medicaid was originally suppose to provide the same health care to the poor as privately insured Americans received with their