[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]


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                          23.  INCOME SECURITY

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                          Table 23-1.  Federal Resources in Support of Income Security
                                            (In millions of dollars)
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                                                                               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.

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   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.

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   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.
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