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Activity #4A: Welfare Reform
Welfare reform has shifted the focus of government assistance to the poor from cash benefits to services designed to help poor people get and keep jobs. Cash assistance now counts for less than half of all spending under TANF. Instead, states are using their welfare dollars to help meet the transportation needs of welfare recipients to get to work, address drug abuse and mental health problems, and provide childcare for single parents. Welfare reform has helped reduce the welfare rolls, but it has not eliminated poverty.

Go to the web site of (Link opens in a new window) and read this article.
Also go to the web site of The Brookings Institution (Link opens in a new window) and read this article (These two articles are also available in Doc Sharing under Module 4).

Q 1. What responsibility does the U.S. government have to the poor? Are the opportunities provided for the poor in the American system sufficient to justify the responsibilities they are expected to live up to? Do you think welfare is working or not? Is welfare reform a success? Why or why not? (You are required to write 100-150 words).

Activity #4B: Social Security Reform
Without a doubt, Social Security is the “third rail” of American politics. A supremely popular program, Social Security is in financial trouble. As the baby boomers retire, there will be fewer workers to fund the system resulting, according to some prominent estimates, in the eventual financial insolvency of Social Security. Even today, Social Security is the single biggest piece of the federal budget; the large influx of retirees from the baby boomers coupled with longer life expectancies is putting a very real strain on the system. Given that Social Security is a promise the federal government makes to the American people, members of Congress and various presidents often discuss ways to reform Social Security. Nearly every option is unpopular with some segment of society. Suggestions include raising the retirement age to seventy years old, paying lower benefits to wealthier individuals, allowing people to invest their Social Security obligations into the stock market via their own personal retirement accounts, cutting benefits across the board, raising Social Security payroll taxes, and raising Social Security taxes on the wealthy. Of course, most of these potential solutions are political non-starters given the power of organized interests and general public opinion that has been resistant to change when it comes to Social Security policy. Regardless of the political problem that Social Security reform has been, policymakers will eventually have to address the program by making potentially unpopular choices to help ensure Social Security’s long-term solvency.

Q 2-1. Examine the 16 policy options presented below and rank-order (from #1 to #16) the options from most preferred to least preferred.

Policy Options

Your Rank

Change the Taxation of Earnings


01. Increase the payroll tax rate by 1% in 2012

02. Increase the payroll tax rate by 2% over 20 years

03. Increase the payroll tax rate by 3% over 60 years

04. Eliminate the taxable maximum

05. Raise the taxable maximum to cover 90% of earnings

Change the Benefit Formula


06. Raise from 35 to 38 the years of earnings included in the Average Indexed Monthly Earnings

07. Index earnings in the Average Indexed Monthly Earnings to prices

08. Reduce all Primary Insurance Amount factors by 15%

09. Reduce the top two Primary Insurance Amount factors to roughly one-third

10. Reduce the top Primary Insurance Amount factor by one-third

Increase Benefits for Low Earners


11. Introduce a new poverty-related minimum benefit

12. Enhance low-earners’ benefits on the basis of years worked

Raise the Full Retirement Age


13. Raise the Full Retirement Age to 70

14. Index the Full Retirement Age to changes in longevity

Reduce Cost-Of-Living Adjustments


15. Reduce COLAs by 0.5%

16. Base COLAs on the changed CPI-U

Q 2-2. Who are the winners and losers associated with most preferred policy option that you chose? (You are required to write 100-150 words).

Q 2-3. What are the likely political impediments to most preferred policy option that you chose? (You are required to write 100-150 words).