    [Budget of the United States Government]
    [V. Investing in the Common Good: Program Performance in Federal Functions]
    [23. Income Security]
    [From the U.S. Government Publishing Office, www.gpo.gov]

    [[Page 255]]

                              23.  INCOME SECURITY

      ----------------------------------------------------------------------

                              Table 23-1.  Federal Resources in Support of Income Security
                                                (In millions of dollars)
    ----------------------------------------------------------------------------------------------------------------
                                                                                   Estimate
                   Function 600                   1999   -----------------------------------------------------------
                                                 Actual     2000      2001      2002      2003      2004      2005
    ----------------------------------------------------------------------------------------------------------------
    Spending:
      Discretionary Budget Authority..........    32,741    29,844    41,332    41,332    41,825    42,864    43,804
      Mandatory Outlays:
        Existing law..........................   197,753   207,357   217,157   229,744   240,925   251,069   263,282
        Proposed legislation..................  ........     2,190    -1,603       899     1,474     3,046     3,148
    Credit Activity:
      Direct loan disbursements...............        17        14        20       N/A       N/A       N/A       N/A
      Guaranteed loans........................        17        95        83       N/A       N/A       N/A       N/A
    Tax Expenditures:
      Existing law............................   140,290   147,665   153,085   159,305   165,585   172,115   178,850
      Proposed legislation....................  ........         5     2,648     4,605     7,876    10,363    16,389
    ----------------------------------------------------------------------------------------------------------------
    N/A = Not available.

      ----------------------------------------------------------------------
       The Federal Government provides about $257 billion a year in cash or
    in-kind benefits to individuals through income security programs,
    including those 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 income security programs also include retirement and disability
    insurance (excluding Social Security, which is described in Chapter 24),
    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 17,
    ``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 agencies that
    broadly interact 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 these
    programs is the Food Stamp Program. In addition, FNS administers the
    Special Supplemental Nutrition Program for Women, Infants, and Children,
    and the National School Lunch and School Breakfast Programs.
       Food Stamps: Food Stamps help most low-income people get a more
    nutritious diet. In an average month in 1999, 18.2 million people, or
    7.7 million households, received

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    benefits and in that year, the program provided total benefits of $15.8
    billion.
       In 2001, the program will provide an average projected
              benefit of $77 to 18.6 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 1996
              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 2001, FNS will expand the number of States using
              Electronic Benefits Transfer to issue 82 percent of Food Stamp
              benefits, compared to 69 percent in 1999, improving the
              delivery of benefits, and increasing the ability to track
              benefits redemption as a fraud prevention tool.
       Special Supplemental Nutrition Program for Women, Infants, and
    Children (WIC): WIC provides vouchers for nutritious supplemental food
    packages, nutrition education and counseling, and health and
    immunization referrals to low-income women, infants, and children. The
    program reached an average of over 7.3 million people each month in
    1999. Funding in 2000 is sufficient to serve 7.4 million women, infants,
    and children monthly, and the budget proposes $4.1 billion to serve 7.5
    million people by the end of 2001, fulfilling the President's goal of
    full participation in WIC. Results of the National Partnership for
    Reinventing Government's first Government-wide customer satisfaction
    survey show that WIC was one of the top-scoring Government programs,
    receiving especially high scores for the eligibility determination
    process.
       In 2000, FNS, together with State public health agencies,
              will increase the incidence of breast-feeding among WIC
              mothers to 42 percent, compared to 34 percent in 1996.
       Child Nutrition Programs: The National School Lunch and School
    Breakfast Programs provide free or low-cost nutritious meals to children
    in participating schools.
      In 2001, the programs will serve an estimated 27.8 million
              lunches daily. By 2005, FNS aims to reduce the average percent
              of calories from saturated fat in school lunches to 10
              percent, down from 15 percent in 1993.

     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 1999, 6.3 million individuals received $28.1 billion in
    benefits. In 2001, an estimated 6.4 million individuals will receive a
    total of $30.5 billion in SSI benefits. Eligibility rules and payment
    standards are uniform across the Nation. In 1999, average monthly
    benefit payments ranged from $247 for aged adults to $444 for blind and
    disabled children. Most States supplement the SSI benefit.
       In 2001, SSA will process 66 percent of initial SSI claims by
              individuals over age 65 within 14 days of the filing date. In
              1999, almost 63 percent of these claims met this goal, a
              substantial increase from 54 percent in 1998. In future years,
              the agency's goal is to continue to increase the proportion of
              these SSI claims processed within 14 days.
       In 2001, SSA will improve the SSI payment accuracy rate to
              95.5 percent, up from 94.8 percent in 1999.

     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
    Services 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 (TANF): In the 1996 welfare
    reform law, the President and Congress enacted TANF as the successor to
    the 60-year-old Aid to

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    Families with Dependent Children (AFDC) program. TANF, for which the
    Federal Government allocates about $16.8 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 eligibility criteria and to determine the types of assistance
    they provide. With fewer families receiving cash assistance, States can
    use the flexibility in TANF to help low-income working families retain
    and advance in their jobs.
       The strong work focus of welfare reform and the economy
              enabled ACF to meet its goal of moving one million welfare
              recipients into new employment before its 2000 goal date. In
              1997, States reported an average earnings increase of 23
              percent for former welfare recipients over a period of two
              quarters. In 2001, ACF will work with States to increase
              earnings for former welfare recipients by 30 percent.
       In 2001, ACF, in coordination with the Health Care Financing
              Administration (HCFA), will increase the percentage of
              eligible individuals who remain enrolled in Medicaid or the
              Children's Health Insurance Program (CHIP) six months after
              leaving TANF.
       Individual Development Accounts (IDAs): The budget includes $25
    million in grants for IDAs, to empower low-income individuals to save
    for a first home, postsecondary education, or to start a new business.
    ACF selected sites to administer this program in late 1999.
       Child Support Enforcement: The Child Support Enforcement Program
    establishes and enforces the support obligations owed by noncustodial
    parents to their children. In 1998, the number of paternities
    established rose to nearly 1.5 billion, and child support collections
    have nearly doubled since the President took office, to an estimated
    $15.5 billion in 1999. In 1999, the Federal Government provided $3.0
    billion to State and local governments to help them run the program. The
    Federal Government retained $1.3 billion in TANF-related collections
    from the States, making the net cost of this program to the Federal
    Government $1.7 billion. In 2001, estimated Federal costs net of TANF
    collections will be $2.2 billion.
       The budget includes several proposals to increase child support
    collections and to direct more of these payments to low-income families.
    The budget proposes new measures to collect child support from parents
    who owe past-due support, and to bring delinquent non-custodial parents
    into compliance. The budget would allow States to pay all child support
    collected on behalf of former welfare families directly to the family,
    and would provide Federal matching funds for child support that States
    pass-through to families receiving welfare, above States' current
    efforts. (For a discussion of this budget's child support proposals, see
    Chapter 2, ``Supporting Working Families.'')
       In 2001, ACF will increase the child support collection rate
              to 71 percent, compared to 51 percent in 1998.
       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 more than doubled under this Administration,
    providing child care services in 1999 for approximately 1.75 million
    children from low-income working families or whose parents are moving
    from welfare to work.
       The budget proposes a 2001 increase of $817 million for child care
    subsidies as well as a new $600 million Early Learning Fund to provide
    grants to communities to improve school readiness by fostering the
    cognitive, physical, social, and emotional development of children under
    five years old. For the proposed Early Learning Fund, ACF will evaluate
    the range of school readiness activities funded and will work with the
    Department of Education and the States to establish performance goals
    and indicators that focus on educational outcomes and quality factors,
    such as provider training and low child-to-staff ratios, that are
    associated with enhanced school readiness.

    [[Page 258]]

       Access to high-quality, affordable child care is critical to the
    achievement of self-sufficiency by TANF recipients and low-income
    working families. Over the past year, ACF has worked with States to
    develop a new set of performance measures and ACF will continue to
    collect baseline data for the program's goals of increasing access to
    affordable care and improving the quality of care to promote children's
    development. For example, in order to increase access to affordable
    care, ACF aims to decrease the average percentage of family income spent
    on child care co-payments by families receiving Federal subsidies. In
    order to improve the quality of care, ACF will increase the number of
    facilities that are accredited by a nationally recognized early
    childhood development professional organization.
       In 2001, the Child Care and Development Fund, including new
              funds, will provide child care assistance to an estimated
              300,000 additional low-income children over the 1.92 million
              children estimated to receive assistance in 2000.
      Child and Dependent Care Tax Credit (DCTC): The DCTC helps
    approximately six million families cover their child care costs each
    year. Under current law, taxpayers may receive a nonrefundable tax
    credit for a percentage of certain child care expenses they pay in order
    to work. The budget proposes to increase the credit amount for middle-
    income families and to make the DCTC refundable beginning in 2003 so
    that for the first time low-income working families will be able to
    receive the maximum credit. In addition, this proposal would provide
    assistance to parents who care for their infants themselves and would
    simplify eligibility by eliminating the household maintenance test.
      Earned Income Tax Credit (EITC): 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 1999, the EITC provided $30.5 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 1999, the EITC provided an average credit of nearly $1,600 to 19
    million workers and their families. In 2001, an estimated 19 million
    families will receive an average credit of $1,680.
       This budget includes a 10-year, $23.6 billion proposal to expand the
    EITC to provide tax relief for 6.8 million working families by
    increasing the credit received by larger families, providing marriage
    penalty relief, and reducing marginal tax rates. This proposal would
    increase the maximum credit for families with three or more children by
    approximately $500 in order to help roughly 2.1 million low- and
    moderate-income families. Approximately 5.4 million families with two or
    more children would also benefit from a slower phaseout rate, so parents
    could keep more of what they earn even as their earnings increase. The
    proposal would also provide marriage penalty relief for two-earner
    couples in the form of an average credit increase of $250. In addition,
    the proposal would simplify the rules for counting nontaxable earned
    income. (For a more detailed description of the proposal, see Chapter 2,
    ``Supporting Working Families.'')

     Unemployment Compensation

       Unemployment Compensation, overseen by the Department of Labor's
    Employment and Training Administration, provides benefits to individuals
    who are temporarily out of work through no fault of their own 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; benefits are not
    means-tested and are taxable. Regular benefits are typically available
    for up to 26 weeks of unemployment. In 1999, about 7.2 million persons
    claimed unemployment benefits that averaged $202 weekly. In 2001, an
    estimated 7.8 million persons will receive an average benefit of $219 a
    week.
       In 2001, DOL's goal is that all States will meet the
              Secretary's standard for promptness in paying worker claims by
              providing 92 percent of initial intrastate payments

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              and 81 percent of interstate payments within 14 days in States
              with a waiting period and within 21 days in States without a
              waiting period. In 1999, 90 percent of States met the
              intrastate standard and 78 percent met the interstate
              standard.

     Effects of Income Security Programs

       Federal safety net programs have a major effect on reducing poverty.
    Chapter 24, ``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 TANF, 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 to value Medicare or Medicaid coverage as additional income to
    beneficiaries. 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 1999 Current Population Survey (CPS), 54.5 million people
    were poor in 1998 before accounting for the effect of Government
    programs. After accounting for Government transfer programs and taxes,
    the number of poor fell to 28.4 million, a drop of nearly 50 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 $200 billion in 1998. Benefits
    from Government programs cut it by $134 billion, or 67 percent.

     Employee Retirement Benefits

      Railroad Retirement Benefits: The Railroad Retirement Board
    administers retirement, survivor, unemployment and sickness insurance
    benefits for qualified railroad workers and their families. In 1999,
    about $8.2 billion in retirement-survivor benefits were paid to about
    748,000 individuals, while about $95 million in unemployment and
    sickness benefits, net of current-year recoveries, were paid to some
    33,800 individuals. At the end of 1999, the average monthly benefit paid
    to a retired employee was $1,344; the maximum biweekly rate for
    unemployment and sickness benefits was $460.
      Rail employment is not covered under the Social Security program,
    though some beneficiaries may have other employment that makes them
    eligible for benefits under the Social Security Old Age, Survivor and
    Disability Insurance programs. While the railroad retirement system has
    remained separate from the Social Security program, the two systems are
    similarly structured and closely coordinated with regard to earnings
    credits, benefit payments, and taxes. (For a discussion of the Social
    Security program, see Chapter 24, ``Social Security.'')
       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 1999, the program paid $44 billion in benefits to 1.7
    million retirees and 630,000 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
    Social Security. The budget proposes to repeal the higher employee
    retirement contributions required by the Balanced Budget Act of 1997,
    and again proposes to allow Federal employees to participate immediately
    in, and to roll over private sector accounts into, the TSP.
       From 1993 to 1999, customer service and satisfaction with the
              retirement program have improved significantly. For example,

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              average processing times have been cut from nine days to three
              days for interim annuity payments, from 51 days to 32 days for
              CSRS final annuity payments, and from 31 days to 14 days for
              CSRS survivor annuity payments. Annuitant satisfaction with
              various services has improved from the 70 to 80 percent range
              to nearly 90 percent or greater. The goal is to maintain or
              improve each of these performance goals in 2001.
       Private Pensions: The Department of Labor's Pension and Welfare
    Benefits Administration (PWBA) establishes and enforces safeguards to
    protect the roughly $4.3 trillion in pension assets. Private pension
    plans currently list more than 91 million participants, including both
    workers and retirees. 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 two 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 an initiative whereby PWBA will
    intercede to protect pension benefits for employees whose employers file
    for bankruptcy. In 2001:
       PWBA will recover more benefits through customer assistance--
              an estimated $54 million compared to $15 million in 1995.
              Also, PWBA will more speedily process the exemptions that
              allow certain financial transactions that are needed by
              pension plans, reducing the time taken to 200 days, a 17-
              percent improvement from the 1999 average of 242 days.
       PBGC will more quickly complete setting dollar levels for
              benefits in the pension plans it takes over. These benefits
              must be calculated differently for different former employees.
              (Retirees receive an estimated amount until the process is
              complete.) The time taken for final calculation will drop to
              between three and four years, down from an average of six
              years in 1997.
       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. All
    the pension and retirement-saving tax incentives amount to $115 billion
    in 2001--decidedly the largest set of preferences in the income tax
    system.