Chapter 15: Q 20. (page 377)
What is the safety net?
Safety-net refers to the welfare and anti-poverty programs implemented by the US government for the poor and the near-poor of the country.
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We have discovered that the welfare system discourages recipients from working because the more income they earn, the less welfare benefits they receive. How does the earned income tax credit attempt to loosen the poverty trap?
Briefly explain the differences between TANF, the earned income tax credit, SNAP, and Medicaid.
Exercise 15.2 and Exercise 15.3 asked you to
describe the labor-leisure tradeoff for Jonathon. Since,
in the first example, there is no monetary incentive for
Jonathon to work, explain why he may choose to work
anyway. Explain what the opportunity costs of working
and not working might be for Jonathon in each example.
Using your tables and graphs from Exercise 15.2 and
Exercise 15.3, analyze how the government welfare
system affects Jonathan’s incentive to work.
This problem uses the analogy of a “leaky bucket” to explain one constraint on the redistribution of income.
a. What elements of the U.S. system for redistributing income create the leaks in the bucket? Be specific.
b. Between Republicans and Democrats, who do you think generally believes that the bucket used for redistributing income is leaky? How does that belief affect their views about the amount of income redistribution that the government should undertake?
How does the TANF attempt to loosen the poverty trap?
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