State Tax Credits and "Making Work Pay" in Post-Welfare Reform Era

This article outlines the work incentives and income support provided by the federal Earned Income Tax Credit (EITC) and illustrates how state earned income and dependent care credits assist working poor families. State earned income and dependent care tax credits serve as critical complements to the EITC, the federal government's largest antipoverty program. By attending to specific components of each tax credit, state policymakers can maximize state funds that qualify for federal maintenance of effort requirements under the Personal Responsibility and Work Opportunity Reconciliation Act (PROWRA), and they can reinforce positive effects and offset work disincentives stemming from current federal tax parameters.     

Relationships between government size and economic growth: Japan's government reforms and evidence from OECD

This paper examines the relationship between government size and economic growth of 21 industrialized countries. Government size is measured by government final consumption expenditures and transfer payments. The relationship between government consumption is expected to increase GDP growth for developing countries, and reduce it for industrialized countries. Government consumption can contribute to increased economic growth. However, government consumption is likely to expand beyond an efficient level in industrialized countries. In contrast, transfer payments, and social welfare programs are likely to reduce economic growth for most countries. These programs reduce work incentives and encourage tax avoidance activities. Work disincentives and tax avoidance reduce economic growth. These expected relationships are consistent with economic performance and government size for the countries considered here. Inefficiency and excessive government growth are checked by voter feedback as tax burdens exceed the associated benefits. Unfortunately, government program costs and benefits are asymmetrically distributed. The resulting tendency is to expand government programs, particularly programs that benefit a majority of voters at the expense of a minority. This tendency becomes even more acute as the tax system becomes more progressive (i.e., tax burdens become concentrated. Reductions in government size are more likely with stagnant or declining economic growth, and in government programs whose costs are widely shared, compared to programs with widely shared benefits and narrowly shared costs.     

Do conditional cash transfer programs shift votes? Evidence from the Honduran PRAF

How do national social programs influence local voting? This study utilizes the experimental set up of a conditional cash transfer program to show that small, targeted cash transfers can have large electoral effects. The Honduran PRAF program allocated an average of $18 per capita per year to poor households within municipalities that were randomly assigned to receive the program. Although the program was administered at the national level, the program increased an incumbent mayor's re-election probabilities by 39%, without significantly influencing voting behavior in presidential elections. Moreover, the evidence suggests that transferring cash to poor households were more effective at increasing political support than interventions providing public goods for poor villages.     

TOWARD THE PUBLIC INTEREST: REDEFINING RURAL POLICY NEEDS

From the perspective of a political theorist, the author advances a basic concept of the public interest derived from the work of Brian Barry. Policies for rural areas are too often monopolized by agricultural income support programs which go to an assignable interest. They, however, do little to benefit or advantage the bulk of the rural populations whose interests are quite heterogenous.     

Housing vouchers in the United States,great Britain,and the Netherlands: Current issues and future perspectives

Abstract

We compare the current U.S. housing voucher program with the British housing benefit and the Dutch housing allowance programs. After presenting the theory behind income‐related housing support, which underpins both the U.S. and European systems, we compare the three programs with respect to their scope (the budgeted versus the entitlement approach), the relationship between housing support and rent levels, the poverty trap, moral hazards, and administrative problems.

The United States can learn from Great Britain and the Netherlands that a full entitlement program can best promote equity, but given the present political and economic climate, it is unlikely that Congress will adopt such a program anytime soon. Great Britain and the Netherlands can learn from the United States how to design a more efficient tenant subsidy program, one that provides incentives to find less expensive units and promotes family self‐sufficiency through enhanced job‐seeking behavior.     

Improving child support enforcement for children receiving SSI

Less than half of all children who receive Supplemental Security Income (SSI) benefits and live in a single-parent home receive child support services. Although filing for child support is a condition of eligibility for income assistance programs such as Temporary Assistance for Needy Families (TANF), it is not a condition of eligibility for SSI benefits. Requiring single custodial parents applying for SSI on behalf of their children to pursue child support payments might result in more children on SSI receiving child support, and since the Social Security Administration (SSA) excludes one-third of child support when determining benefit amounts, increased receipt of child support would enhance the financial well-being of SSI children. Improving access to data on child support would enhance the integrity of the SSI program by reducing overpayments to children receiving child support. This article looks at the child support provisions in SSI and other means-tested programs and discusses policy options for improving receipt of child support and access to related data. Requiring cooperation with child support enforcement agencies would be consistent with the philosophy that the SSI program should serve as a program of last resort. Whenever possible, both parents should take primary responsibility for their children. While such a requirement has the potential to improve the financial status of children receiving SSI, factors such as their low-income status and their involvement with the TANF program raise questions about how much those children will actually benefit from such a requirement. Even if many additional children do not receive child support, the requirement demonstrates SSA's dedication to the stewardship of the SSI program. However, if custodial parents fail to comply with the requirement, children may be worse off as a result of the requirement. SSA should carefully pursue a requirement to induce cooperation while protecting children to the greatest extent possible. Improving access to child support data would enhance the integrity of the SSI program by reducing overpayments to children receiving child support. Given the reality of limited administrative resources as well as the apparent difficulties of gaining access to the needed child support data, SSA must decide which data matches to pursue and which requirements enhance the program enough to justify the additional resources. Although the options discussed in this article may be chosen independently, there are important interactions to consider. For example, although a requirement to pursue support might result in more children receiving child support, SSA would still rely on parents to report that income unless it was able to gain better access to child support data. Implementing the option to require cooperation with child support enforcement (CSE) agencies could improve verification of income from child support if field offices developed better communication with local CSE offices. However, by itself, it would not have as great an effect on overpayments as would having direct access to child support data. In a 1999 report, the General Accounting Office acknowledged that the potential benefit reductions would be offset by the cost for SSA to administer a child support cooperation requirement and by the costs to the CSE programs to provide services. The report suggested that the goals of promoting parental responsibility and increasing the income of children receiving SSI should be pursued despite the costs. Requiring cooperation may increase administrative costs by $6 million over 5 years and may result in program savings. Gaining access to data may be more expensive and may not prevent overpayments to the same extent as other data-matching workloads on which SSA has placed a priority. SSA should continue to work with federal child support enforcement and with individual states to develop a cost-effective way to identify child support income.     

WELFARE TO WORK PROGRAMS: LESSONS ON RECENT STATE INITIATIVES

Since the federally supported public assistance program became law in 1935, many developments have challenged our perceptions about the employability of welfare mothers and the appropriate design of the AFDC program. A consensus has been building that the AFDC program should be redesigned with the view that employable women and men have a responsibility to work and support their families. The result has been proposals stressing some form of work requirement. Several years ago, the Manpower Demonstration Research Corporation (MDRC) began a five-year social experiment examining current state efforts to restructure the relationship between welfare and work. The MDRC demonstration addresses four questions. First, is it feasible to impose work-related obligations as a condition of reviewing welfare? Second, what do workfare-type programs look like in practice and how do welfare recipients themselves judge the fairness of mandatory requirements? Third, do these initiatives make a difference? Fourth, how do program benefits compare to costs? Issues, findings, and conclusions are related to these questions.     

Housing,Welfare Reform,and Self‐Sufficiency: An Assessment of the Family Self‐Sufficiency Program

Abstract

Recently passed welfare reform legislation may have adverse impacts on the incomes of public and assisted housing residents and hence on the rental income of housing authorities. One way to dampen these impacts is to help welfare‐reliant tenants find jobs. The Family Self‐Sufficiency (FSS) programs sponsored by many housing authorities may be an important means of doing this. This article presents the findings of an early study of the U.S. Department of Housing and Urban Development's FSS program and explores the program's potential for dampening the impacts of welfare reform. The study involved a mail survey of the coordinators of 564 FSS programs.

The survey results indicate a surprising lack of interest in the early FSS program among potential participants. The results also indicate that these programs are inadequately staffed, and that the programs’ potential to dampen the effects of welfare reform are limited by the relatively small percentage of welfare‐reliant residents enrolled.     

Frontiers of social policy in Europe and America

The cumulative growth of social programs and public income distribution is leading to a grave need for policy harmonization, i.e., efforts to take into account interdependencies across formerly distinct areas of public and private activity. This need is particularly severe with regard to income support programs, labor market relations and taxation systems. While any fundamental backlash against the welfare state is unlikely, so too is any comprehensive solution through negative income taxation or other abstract forms of economic planning. Prospects for coping with problems of policy harmonization differ among nations, but all countries face the challenge of building consensus around noneconomic values lying at the heart of social policy. Without this cushion of legitimacy, increased policy complexity and higher public expectations threaten to overwhelm democratic political systems.     

Pathways to work for low‐income workers: The effect of work in the temporary help industry

This paper provides new evidence to inform the policy debate about the effect of a newly important industry—the temporary help industry—on the labor market outcomes of low‐income workers and those workers who are at risk of being on public assistance. The core issue of whether temporary help work harms the long‐term prospects of disadvantaged individuals depends critically on the alternatives available to the worker. Temporary employment results in labor market outcomes that are better than not working at all. For example, while nonemployed public assistance recipients have only a 35 percent chance of being employed a year later, those who were in temporary employment have almost twice the likelihood of being employed in the same period. These findings, if correct, would support the use of temporary agencies by welfare programs. © 2003 by the Association for Public Policy Analysis and Management     

The potential for work enforcement: A study of WIN

Given the impediments around them, can welfare recipients be required to work? Most analysts have answered no. They say the recipients are usually kept from employment by socioeconomic barriers, such as insufficient jobs, and the disincentives to work inherent in welfare. Studies of recent AFDC work programs make them look promising but do not directly address the potential for work enforcement. This article, a cross-sectional study of state WIN programs in 1979, suggests that work requirements could raise work levels substantially despite the impediments. But requirements probably do not improve the quality of jobs recipients are able to get. Therefore, enforcement serves the goal of integration, but to achieve greater economic equality will require additional reforms.     

Public attitudes toward Social Security

In the early years of the Social Security program, public support for old-age pensions was high but knowledge and understanding about benefits and taxes were low. Understanding has greatly increased, even though the program has expanded, and support for Social Security has remained high. Data from the surveys and polls examined in this article indicate that support for Social Security was strong even during the late 1970's and early 1980's, when a fiscal crisis generated a crisis of confidence in the public's perception of the system's ability to pay benefits in the future. The proportion of the American public declaring confidence in the program declined sharply from a large majority with confidence (63 percent) in 1975 to a minority with confidence (39 percent) in 1978. Following the restoration of program financing through the provisions in the 1983 amendments, the trend has reversed. By 1988, nearly one-half of the public expressed confidence in the future of the Social Security program. For the most part, other aspects of public opinion regarding Social Security have shown great stability over the years. The program is popular and has been well-supported. Support for the Government to spend more for Social Security has been consistently high, as has support for benefits to increase with inflation and for benefits to increase even if it means higher taxes. Many individuals rely on income from Social Security or expect to rely on it when they retire. It is clear that the public wants the program to continue. If participation were optional, about three-fourths of the population would stay in the program.     

The Role of Management and Representation in Improving Performance of Disadvantaged Students: An Application of Bum Phillips's “Don Shula Rule”1

Scholars and practitioners within the U.S. education system have focused considerable attention on developing new programs aimed at raising educational achievement for disadvantaged students. New programs are only one way to improve student performance, however; recent work in public administration suggests that public management and implementation practices might also have a large impact on student performance. Existing research shows that managerial networking, managerial quality, and effective personnel management can significantly improve the quality of the education received by disadvantaged students. Additional work highlights the contribution of representative bureaucracy. Because these research agendas have targeted the public administration literature rather than the education policy literature, this article seeks to bring this research back to education policy. Using data from several hundred Texas public school districts, spanning 1995 to 2002, and focusing on disadvantaged student performance (Latinos, blacks, and low‐income students), this article illustrates how both management and processes to enhance the representativeness of teaching faculty produce benefits for disadvantaged students.     

Nonpoor children in head start: Explanations and implications

According to the Head Start Act (1998), children are income‐eligible for the program if their “families' incomes are below the poverty line.” There are a number of statutory exceptions to this general rule and, according to the Head Start Bureau, the result is that about 6 percent of the children in the program are not poor. But the major national surveys of Head Start families report that 30 percent or more of Head Start children are not “poor.” This paper confirms and explains the high proportion of nonpoor children in Head Start: at enrollment, at least 28 percent are not poor; at midyear, at least 32 percent are not poor; and by the end of the program year, at least 34 percent and perhaps more than 50 percent are not poor. Although the presence of some of these nonpoor children seems to be an appropriate or at least understandable aspect of running a national program with Head Start's current organizational structure, the presence of others seems much less warranted and raises substantial questions of horizontal equity. Moreover, taken together, the large number of nonpoor children suggests that the program is not well targeted to fulfill its mission of providing compensatory services to developmentally disadvantaged children—and reveals the essential ambiguity of Head Start's role in the wider world of early care and education. The income and program dynamics that have led to so many nonpoor children being in Head Start are also at work in many other programs, and, thus, our findings demonstrate the need to understand better how income eligibility is determined across various means‐tested programs.     

Budget-Making for Social Purposes

A theory of the budgetary process within public resource allocation has to recognize two basic properties of budgetary behavior and budgetary interaction: variation over time and program variation. Our results indicate that the hypothesis of program variation is worthy of effort, as we find different decision mechanisms operating in the six programs studied, which belong to different categories of public resource allocation. Variation over time is particularly difficult to accommodate within the framework of incrementalist notions: incremental decision rules imply structural stability over time slices. We find the opposite to be true in two of the program types analyzed, the transfer programs and the service programs. Bureaucratic programs may look incremental; however, that may only be an appearance, as a closer analysis of the data indicates that the decision mechanism involves the occurrence of shift-points or non-incremental changes. A theory of the public expenditure process has to take into account both incremental decision strategies and non-incremental ones, which requires an econometric methodology based on the possibility of structural variability. Such a methodology includes the use of both test statistics and estimation techniques suitable to the occurrence of structural variability.     

Civic Engagement and Sustainable Cities in the United States

Over the last decade, at least 42 U.S. cities have elected to pursue sustainable cities programs to improve their livability. Some programs are broad, involving smart growth efforts, and others are narrowly targeted, including bicycle ridership and pesticide-reduction programs. A recurring theme in these cities is the role of public participation in shaping and implementing these programs. In cities where the sustainable cities idea first emerged in local grassroots organizations, such as Seattle, these programs owe their existence to public involvement. Other cities have taken a top-down approach, treating sustainability as a matter for experts rather than ordinary citizens. Civic engagement is manifest both in the development of the sustainability program and as an explicit goal of the sustainability program. This article examines the role of civic engagement in these programs and defines a research agenda by identifying hypotheses about the importance of public involvement in sustainable cities programs.     

Lobbying,political connections and emergency lending by the Federal Reserve

This paper tests whether the political connections of banks were important in explaining participation in the Federal Reserve’s emergency lending programs during the recent financial crisis. Our multivariate tests show that banks that were politically connected—either through lobbying efforts or employment of politically connected individuals—were substantially more likely to participate in the Federal Reserve’s emergency loan programs. In economic terms, participation in these programs was 28–36% more likely for banks that were politically connected than for banks that were not politically connected. In our final set of tests, we attempt to identify a proper explanation for this peculiar relationship. While a broad literature speaks of the moral hazard associated with receiving bailouts, we test whether another type of moral hazard exists in the period preceding the bailout. In particular, we argue that, to the extent that political connections act as synthetic insurance, banks may have engaged in more risky behavior that lead them to the Fed’s emergency lending facilities. Tests seem to confirm this explanation.     

Public housing authorities: Determining an appropriate role in a national preservation strategy

Abstract

This paper examines the obstacles and issues involved in developing a comprehensive preservation agenda for public housing and explores the capacity of public housing authorities (PHAs) to meet the current and future demand for affordable housing. The paper discusses the current challenges facing the public housing program and PHAs and examines the roles and functions PHAs can assume in the current preservation and affordable housing crisis. Six specific roles for PHAs are included: resolving the equity/community dilemma, improving management, articulating modernization needs and carrying out modernization programs, preventing the loss of public housing units through sales and demolition, assuming management of privately owned subsidized housing, and developing new public housing. Although there is also much potential in nonprofits as providers of low‐income housing, they must be joined by PHAs in a comprehensive low‐income housing production and preservation strategy.     

Cash at Your Fingertips: Biometric Technology for Transfers in Developing Countries*

In recent years, interest has soared in the development potential of well‐designed cash transfer programs. One particular application is the use of transfers by resource‐rich countries (as recently initiated by Iran) to distribute rents across their populations. An emerging body of research suggests that the development impact of such programs tends to be positive and that, especially when received by poor individuals or households, they can unlock constraints on economic activities, allowing a further increase in income. This paper considers the use of biometric technology to underpin transfer programs and how new technology is opening up possibilities for effective transfer programs that, up to now, have only been a theoretical option in the institutional conditions that prevail in many developing countries. Once implemented, biometric identification systems can be used to support a wide range of other development initiatives including banking, voting, health care, and general identification systems. The paper reviews some of the programs using these technologies and how it is enabling poor countries to leapfrog rich ones in the area of identity, much as the cellphone revolution did in the area of communications.     

Eligibility for the Medicare buy-in programs, based on a survey of income and program participation simulation.

Medicare buy-in programs are designed to reduce out-of-pocket expenses of beneficiaries with modest income and assets. This article provides estimates of the size of the Medicare beneficiary population eligible for the Qualified Medicare Beneficiary (QMB) program, the Specified Low-Income Medicare Beneficiary (SLMB) program, and the Qualified Individual-1 (QI-1) program. The buy-in programs use the same resource limits (twice those used in the Supplemental Security Income (SSI) program) but different thresholds for determining income eligibility. The QMB program uses 100 percent of the poverty line as the cutoff, QI-1 covers persons above 120 percent but at or below 135 percent of the poverty line, and the SLMB program is in between. Making informed judgments about the rate of participation in the buy-in programs and the need for outreach requires an accurate estimate of the size of the eligible population. If that population is underestimated, policymakers might come to unduly optimistic conclusions about current buy-in participation. In contrast, an overestimate may make current participation seem too low. If policymakers react to an upwardly biased estimate of the eligible population by increasing outreach, they are bound to be disappointed by the results of that effort. Estimates of the eligible population from past studies of the QMB and SLMB programs range from 5.1 million to 9.1 million. In the absence of new information, it is difficult to judge the accuracy of those estimates because the methodologies had substantial shortcomings that might bias the results. The most common shortcomings include the lack of high-quality, monthly income data and the lack of information on assets from the same data file that was used to estimate participation and income eligibility for Medicare. The current study uses the most recently available (as of August 2000) Survey of Income and Program Participation (SIPP) file that is matched to the Social Security Administration's (SSA's) administrative records. The data file covers 1995 information. Estimates were also obtained using 1991 data to assess the sensitivity of eligibility estimates to the year chosen. The SIPP has several major advantages over other data sources because it contains relevant, high-quality information on both income and assets for establishing financial eligibility for the buy-in programs. First, the SIPP collects detailed and conceptually appropriate information on monthly, rather than annual, income and therefore has more complete information about income than do other surveys. As a result, SIPP-based estimates of poverty are substantially lower than estimates based on the Current Population Survey. Second, the SIPP also collects information on assets at the individual level. Thus, the survey provides enough detail to measure the major income and asset exclusions directly. Finally, the SIPP data are matched to SSA administrative records: Medicare eligibility can therefore be accurately measured, and self-reported data on Social Security and SSI benefits can be replaced with more accurate monthly information. Our 1995 simulation estimates that approximately 4.8 million persons in the U.S. noninstitutionalized population were eligible for the QMB program and an additional 1.6 million for the SLMB program. The total--roughly 6.5 million--is within the range of estimates from past studies but is closer to the lower end, suggesting that the eligible population is smaller than was previously believed. When the estimated QI-1 eligible population of 0.9 million is added, the total for the three buy-in programs is 7.4 million. Because the QI-1 program did not exist in 1995, only the estimated 6.5 million QMBs and SLMBs would actually have been eligible to receive benefits. The 7.4 million figure represents the 1995 Medicare beneficiaries who would be eligible for buy-in under program rules for 2000. Adjusting that number to account for increases in the Medicare population between 1995 and 1999 yields an estimated eligible population of 7.8 million in 1999. Compared with other elderly Medicare recipients, eligible elderly QMBs and SLMBs have poorer health, more functional limitations, and higher rates of health care use. Thus, not only are their income resources relatively limited, but their need for potentially expensive medical care is also greater. Similar differences were not found in health, functional limitations, and health care use among disabled participants in the QMB and SLMB programs. Our estimates imply that about 2.5 million noninstitutionalized individuals were eligible for but not enrolled in the QMB and SLMB programs in 1999. That finding suggests that fewer eligibles may be available for targeting by outreach efforts than was previously believed. Outreach may be more difficult than it would be with a larger eligible population. (ABSTRACT TRUNCATED)