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Chapter 15: Q 5. (page 376)
How does the TANF attempt to loosen the poverty trap?
TANF tries to loosen the poverty trap in society through demanding work requirements on which the funding from the government will be utilized and binding the time limits of receiving federal money through TANF by an individual.
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Describe how each of these changes is likely to affect poverty and inequality:
a. Incomes rise for low-income and high-income workers, but rise more for the high-income earners.
b. Incomes fall for low-income and high-income workers, but fall more for high-income earners.
The poverty rate would be substantially lower if the market value of in-kind transfers were added to family income. The largest in-kind transfer is Medicaid, the government health program for the poor. Lets say the program costs \(10,000 per recipient family.
a. If the government gave each recipient family a \)10,000 check instead of enrolling them in the Medicaid program, do you think that most of these families would spend that money to purchase health insurance? Why? (Recall that the poverty level for a family of four is about $25,000.)
b. How does your answer to part (a) affect your view about whether we should determine the poverty rate by valuing in-kind transfers at the price the government pays for them? Explain.
c. How does your answer to part (a) affect your view about whether we should provide assistance to the poor in the form of cash transfers or in-kind transfers? Explain.
This problem uses the analogy of a 鈥渓eaky bucket鈥� 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?
Suppose there are two possible income distributions in a society of ten people. In the first distribution, nine people would have incomes of \(30,000 and one person would have an income of \)10,000. In the second distribution, all ten people would have incomes of $25,000.
a. If the society had the first income distribution, what would be the utilitarian argument for redistributing income?
b. Which income distribution would Rawls consider more equitable? Explain.
c. Which income distribution would Nozick consider more equitable? Explain.
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鈥檚 incentive to work.
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