At the center of social welfare programs is a need to reduce poverty. Actually, every key industrialized country has put in place some programs meant to transfer part of the country’s GDP to the populace in an effort to uplift the well being of individuals on the lower side of income distribution.
While these programs were meant to reduce the poverty levels, the contrary has actually happened. There are three reasons why this may be happening.
To begin with, while these social welfare programs were meant for the poor, most of it actually end up with the upper and middle classes. For example, over half of tax benefits and transfer payments dispensed in 1991 ended with individuals earning more than $30000.
Secondly, social welfare programs have been known to foster reliance on the benefits rather than encourage the people to work their way out of poverty. The welfare programs pay sufficient amount to keep these people alive but not to get them out of their condition.
Third, if you look at the programs on the broader economic perspective, social welfare programs are known to undermine the country’s economic growth. According to the theory of equality-equity tradeoff, higher progressive taxation rates and increased government benefits lower the incentive to work or invest. This undermines the reason they came to be in the first place.
Recent developments in the social security and Medicare raise doubts about the possibility of the programs being there in the next few years. Rather than use social security income, Cost of living Adjustment based on Chained CPI means eroding the Social Security Income’s buying power which would be detrimental to low income earners. In addition, the proposal to extend the age at which one starts earning raises doubts about the feasibility of the programs in the future. Also, the government’s ability to remit the Social Security and Medicare Benefits has been put to doubt by its inability to raise debt ceiling.
The future seems very bleak for the social security and Medicare programs. Going by the current developments in the government sphere as far as these benefits are concerned, chances are they won’t be there for long.
Friedman, Milton, and Rose Friedman. 1979. Free to Choose. Harcourt Brace Jovanovich
Crook, Clive. 1997. “The Future of the State.” The Economist, 20 September: S1-S48
Castles, Francis G., and Deborah Mitchell. 1993. “Worlds of Welfare and Families of
Nations.” Pp. 93-128 in Families of Nations, edited by Francis G. Castles.Dartmouth.
Proposed Cuts to Social Security and Medicare: What You Need to Know
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