[Budget of the United States Government]
[VI. Investing in the Common Good: Program Performance in Federal Functions]
[25. Income Security]
[From the U.S. Government Publishing Office, www.gpo.gov]
25. INCOME SECURITY
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Table 25-1. FEDERAL RESOURCES IN SUPPORT OF INCOME SECURITY
(In millions of dollars)
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Estimate
Function 600 1998 -----------------------------------------------------------
Actual 1999 2000 2001 2002 2003 2004
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Spending:
Discretionary Budget Authority.......... 29,748 32,819 32,652 36,396 36,196 36,196 36,196
Mandatory Outlays:
Existing law.......................... 192,303 202,410 214,844 223,419 232,353 240,912 250,073
Proposed legislation.................. ........ ........ 829 1,879 2,205 2,164 2,816
Credit Activity:
Direct loan disbursements............... 35 21 7 N/A N/A N/A N/A
Guaranteed loans........................ 24 88 85 N/A N/A N/A N/A
Tax Expenditures:
Existing law............................ 117,906 132,388 135,291 138,642 141,850 144,946 147,757
Proposed legislation.................... ........ 27 277 817 807 779 656
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N/A=Not available
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The Federal Government provides about $248 billion a year in cash or
in-kind benefits to individuals through income security programs,
including about $164 billion for programs in this chapter generally
defined as part of the ``social safety net.'' Since the 1930s, these
safety net programs, plus Social Security, Medicare, Medicaid, and
housing assistance (each discussed in other chapters in this Section),
have grown enough in size and coverage so that even in the worst
economic times, most Americans can count on some form of minimum support
to prevent destitution.
The remaining $84 billion for income security programs include
retirement and disability insurance (excluding Social Security, which is
described in Chapter 26), Federal activity related to private pensions
and Federal employee retirement and disability programs.
Major Public Benefit Programs
The largest means-tested income security programs are Food Stamps,
Supplemental Security Income (SSI), Temporary Assistance for Needy
Families (TANF), and the Earned Income Tax Credit (EITC). The various
kinds of low-income housing assistance are discussed in Chapter 19,
``Commerce and Housing Credit.'' These programs, along with unemployment
compensation (which is not means-tested), form the backbone of cash and
in-kind ``safety net'' assistance in the Income Security function.
The major income security programs are managed by four of the High
Impact Agencies (see Section IV, ``Improving Performance through Better
Management''), agencies designated as such because they interact the
most with the American people and businesses. These agencies are the
Food and Nutrition Service, the Administration on Children and Families,
the Social Security Administration, and the Internal Revenue Service.
Nutrition Assistance
Federal nutrition assistance programs are managed by the Department of
Agriculture's Food and Nutrition Service (FNS). The largest of all
means-tested income security programs is the Food Stamp Program. In
addition, FNS administers the Special Supplemental Nutrition Program for
Women, Infants and
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Children, and the National School Lunch and Breakfast Programs.
Food Stamps: Food Stamps help most low-income people get a more
nutritious diet. In an average month in 1998, 19.8 million people, or
8.2 million households, received benefits and that year, the program
provided total benefits of $17 billion. In 2000, the program will
provide an average projected benefit of $75 to 20.1 million persons each
month. Food Stamps is the only Nation-wide, low-income assistance
program available to essentially all financially-needy households that
does not impose non-financial criteria, such as whether households
include children or elderly persons. (The new welfare law limits the
eligibility of non-citizens as well as the number of months that
childless, able-bodied individuals can receive benefits while
unemployed.)
In 2000, FNS will expand the number of States using
Electronic Benefits Transfer (EBT) to issue Food Stamp
benefits to 42 percent, compared to 36 percent in 1998,
improving the delivery of benefits, and increasing the ability
to track benefits redemption as a fraud prevention tool.
Nutrition Program for Women, Infants and Children (WIC): WIC provides
nutrition assistance, nutrition education and counseling, and health and
immunization referrals to low-income women, infants and children. The
program reached an average of 7.4 million people each month in 1998. The
budget proposes $4.1 billion to serve 7.5 million people through 2000
fulfilling the President's goal of full participation in WIC.
In 2000, FNS, together with State public health agencies,
will increase the incidence of breast-feeding among WIC
mothers to 36 percent, compared to 34 percent in 1998.
Child Nutrition Programs: The National School Lunch and Breakfast
Programs provide free or low-cost nutritious meals to children in
participating schools. In 2000, the programs will serve an estimated
27.3 million lunches daily.
In 2000, FNS' goal is that school districts will have reduced
the average percent of calories from saturated fat in school
lunches to 10 percent, compared to 11 percent in elementary
schools and 12 percent in secondary schools in 1998.
Income Assistance to Aged, Blind, and Disabled Individuals
The SSI program, administered by the Social Security Administration
(SSA), provides benefits to needy aged, blind, and disabled adults and
children. In 1998, 6.3 million individuals received $27.3 billion in
benefits. In 2000, an estimated 6.3 million individuals will receive a
total of $28.7 billion in SSI benefits. Eligibility rules and payment
standards are uniform across the Nation. Average monthly benefit
payments range from $242 for aged adults to $430 for blind and disabled
children. Most States supplement the SSI benefit.
In 2000, SSA will process 66 percent of initial SSI aged
claims within 14 days of the filing date. SSA estimates that
only 54 percent of these claims met this goal in 1998. In
future years, the agency's goal is to continue to increase the
proportion of SSI aged claims processed within 14 days.
Income Assistance to Families
Major income assistance for low-income families is provided through
the TANF program, administered by the Department of Health and Human
Service's Administration for Children and Families (ACF) and the Earned
Income Tax Credit, administered by the Internal Revenue Service. In
addition, ACF administers the Child Support Enforcement Program and the
Child Care and Development Fund. Other income security programs run by
ACF include refugee assistance and low-income home energy assistance.
Temporary Assistance for Needy Families: In the 1996 welfare reform
law, the President and Congress enacted TANF as the successor to the 60-
year-old Aid to Families with Dependent Children (AFDC) program. TANF,
for which the Federal Government allocates about $16.5 billion each
year, is designed to meet the President's goal of dramatically changing
the Nation's welfare system into one that requires and rewards work in
exchange for time-limited assistance. The TANF program gives States
broad flexibility to set
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eligibility criteria and to determine the types of assistance they
provide.
The strong work focus of welfare reform and the economy have
enabled ACF to meet its goal of moving one million welfare
recipients into new employment before its 2000 goal date.
Using new program data, ACF will continue to develop measures
of high performance in the areas of job retention and earnings
gains.
Individual Development Accounts (IDAs): The budget includes $20
million for IDAs, to empower low-income individuals to save for a first
home, post-secondary education, or to start a new business. ACF will
select sites to administer this program in 1999. Performance measures
will be developed based on the design of these programs.
Child Support Enforcement: The Child Support Enforcement Program
establishes and enforces the support obligations owed by noncustodial
parents to their children. In 1998, the Federal Government provided $2.6
billion to State and local governments to help them run this program.
The Federal Government retained more than $1.3 billion in TANF-related
collections from the States, making the net cost of this program to the
Federal Government $1.2 billion. In 2000, estimated Federal costs net of
TANF collections will be $1.9 billion. In 2000, the budget provides an
additional $6.5 million to the Departments of Health and Human Services
and Justice to investigate and prosecute noncustodial parents who owe
large sums of child support.
By October 2000, ACF will increase parents' financial support
for their children by increasing the amount of total child
support collections to $20.8 billion, an increase of 40
percent over 1998 and 160 percent over 1992. The agency's goal
is to maximize child support collections for all families
served in the program.
Child Care: The Child Care and Development Fund provides grants to
States for the purposes of providing low-income families with financial
assistance for child care, improving the quality and availability of
child care, and establishing, expanding or conducting early childhood
development programs and before- and after-school programs. Federal
child care funding has risen by 80 percent under this Administration,
providing child care services for 1.25 million children from low-income
working families or whose parents are moving from welfare to work.
In addition to the $173 million increase for child care quality
already provided by Congress for 2000, the President also proposes a
2000 increase of $1.2 billion for child care subsidies as well as a new
$600 million Early Learning Fund for grants to communities to improve
early childhood education and the quality and safety of child care for
children under five years old. For the proposed Early Learning Fund, ACF
will measure the type of quality and safety activities funded and will
work to establish performance measures that focus on language
development, emergent literacy, and other child development outcomes and
aspects of school readines.
Access to high-quality, affordable child care is critical to the
achievement of self-sufficiency by TANF recipients and low-income
working families. ACF is currently developing performance measures and
baseline data for the program's twin goals of increasing access to
affordable care and improving the quality of care to promote children's
development.
In 2000, the Child Care and Development Fund, including new
funds, will provide child care assistance to an additional
500,000 low-income children over 1999.
Earned Income Tax Credit: The EITC, a refundable tax credit for low-
income workers, has two broad goals: (1) to encourage families to move
from welfare to work by making work pay; and (2) to reward work so
parents who work full-time do not have to raise their children in
poverty. In 1998, the EITC provided $29.6 billion in credits for low-
income tax filers, including spending on both tax refunds and reduced
tax receipts. For every dollar that low-income workers earn--up to
certain limits--they receive between seven and 40 cents as a tax credit.
In 1998, the EITC provided an average credit of nearly $1,584 to nearly
20 million workers and their families. In 2000, an estimated 20 million
families will receive an average credit of $1,644.
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Unemployment Compensation
Unemployment Compensation, administered by the Department of Labor's
Employment and Training Administration, provides benefits, which are
taxable, to individuals who are temporarily out of work and whose
employer has previously paid payroll taxes to the program. The State
payroll taxes finance the basic benefits out of a dedicated trust fund.
States set benefit levels and eligibility criteria, which are not means-
tested. Regular benefits are typically available for up to 26 weeks of
unemployment. In 1998, about 7.1 million persons claimed unemployment
benefits that averaged $191 weekly. In 2000, an estimated 8.3 million
persons will receive an average benefit of $210 a week.
Benefits are available to experienced workers who lose their jobs
through no fault of their own. Thus, unemployment compensation does not
cover all of the unemployed in any given month. In 1998, on average, the
``insured unemployed'' represented about 36 percent of the estimated
total number of unemployed. Those who are not covered include new labor
force entrants, re-entrants with no recent job experience, and those who
quit their jobs voluntarily without good cause and, thus, are not
eligible for benefits. However, others do not receive benefits because
State laws restrict eligibility or because the unemployed worker is not
aware of the program.
In 2000, DOL's goal is that all States will meet the
Secretary's standard for promptness in paying worker claims by
providing 87 percent of initial intrastate payments and 70
percent of interstate payments within 14 days in States with a
waiting period and within 21 days in States without a waiting
period. In 1998, 78 percent of States met the interstate
standard and 90 percent met the intrastate standard.
Effects of Income Security Programs
Federal safety net programs have a major effect on reducing poverty.
Chapter 26, ``Social Security,'' explores the impact of Social Security
alone on the income and poverty of the elderly. This section looks at
the cumulative impact across the major programs.
For purposes of this discussion, Government benefits includes both
means-tested and social insurance benefits. Means-tested benefits
include AFDC, SSI, certain veterans pensions, Food Stamps, child
nutrition meals subsidies, rental assistance, and State-funded general
assistance. Medicare and Medicaid greatly help eligible families who
need medical services during the year, but experts do not agree about
how much additional income Medicare or Medicaid coverage represents to
the covered. Consequently, those benefits are not included in the
analysis that follows. Social insurance benefits include Social
Security, railroad retirement, veterans compensation, unemployment
compensation, Pell Grants, and workers' compensation. The definition of
income for this discussion (cash and in-kind benefits), and the notion
of pre- and post-Government transfers, do not match the Census Bureau's
definitions for developing official poverty statistics. Census counts
income from cash alone, including Government transfers.
Reducing Numbers of People in Poverty: Based on special tabulations
from the March 1998 Current Population Survey (CPS), 56.4 million people
were poor in 1997 before accounting for the effect of Government
programs. After accounting for Government transfer programs and taxes,
the number of poor fell to 29.8 million, a drop of 47 percent.
Reducing the Poverty Gap: The poverty gap is the amount by which the
incomes of all poor people fall below the poverty line. Before counting
Government benefits, the poverty gap was $205.7 billion in 1997.
Benefits from Government programs cut it by $139 billion, or 68 percent.
Employee Retirement Benefits
Federal Employee Retirement Benefits: The Civil Service Retirement and
Disability Program provides a defined benefit pension for 1.9 million
Federal civilian employees and 800,000 U.S. Postal Service employees. In
1998, the program paid $43 billion in benefits to 1.7 million retirees
and 600,000 survivors. Along with the defined benefit, employees can
participate in a defined contribution plan--the Thrift Savings Plan
(TSP). Employees hired since 1983 are also covered by
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Social Security. The budget proposal to increase pension portability
includes provisions that would allow newly-hired Federal employees to
participate immediately in, and to roll over private sector accounts
into, the TSP. (For a discussion of military retirement programs, see
Chapter 27, ``Veterans Benefits and Services.'' For a discussion of
performance measures for this program, see Chapter 29 ``General
Government.'')
Private Pensions: The Department of Labor's Pension and Welfare
Benefits Administration (PWBA) establishes and enforces safeguards to
protect the roughly $3.5 trillion in pension assets. Also at the
Department of Labor, the Pension Benefit Guaranty Corporation (PBGC)
protects the pension benefits of about 42 million workers and retirees
who earn traditional (i.e., ``defined benefit'') pensions. Through its
early warning program, PBGC also works with solvent companies to more
fully fund their pension promises, and has protected the benefits of
more than 1.6 million people since its inception eight years ago. The
budget proposes a new, simplified defined benefit plan for small
businesses that PBGC will insure. The budget also proposes new rules to
improve the audits of private pension plans to ensure that promised
benefits are secure. In 2000:
PWBA will more speedily process the exemptions that allow
certain financial transactions that are needed by pension
plans, reducing the time taken by 5.6 percent from the 1998
average of 179 days.
PBGC will more quickly replace the initial calculation with
the final dollar levels of its pension benefits, reducing the
time taken by about 13 percent from seven to eight years,
which is the 1998 level.
Tax Treatment of Retirement Savings: The Federal Government encourages
retirement savings by providing income tax benefits. Generally, earnings
devoted to workplace pension plans and to many traditional individual
retirement accounts (IRAs) receive beneficial tax treatment in the year
earned and ordinarily are taxed only in retirement, when lower tax rates
usually prevail. Moreover, taxpayers can defer taxes on the interest and
other gains that add value to these retirement accounts. For the newer
Roth IRA accounts, contributions are made from after-tax earnings, with
no tax deduction. However, account earnings are free from tax when the
account is used in retirement. These tax incentives amount to $99
billion in 2000--one of the three largest sets of preferences in the
income tax system.