US Welfare and Financial Situation

U.S. Welfare and Financial Situation

The situation in the country has changed today and there was little information on living circumstances, experience, health, cognition, and social and emotional development of children even 20 years ago. The information that was available for our understanding of children was also very little and that made it very difficult for us to understand what was happening to children. This resulted in some children being left in great difficulties due to problems of academic, emotional and social nature, while others grew up into responsible adults able to face all the difficulties of the world. The information that was available then was collected by using very well developed techniques and methods that were the results of small studies that were being conducted by psychologists for development. The problem here was that the samples taken were not representative, and thus the results obtained were suited for the laboratory and not practical life. The reflection was that these studies defined more what children could not do than what they could.

Analysis:

Some people are under the impression that it is welfare that causes a major difficulty for the government, but according to Stephen Moore of Cato "Corporate welfare is a large and growing component of the federal budget. These programs have grown almost 10% over the past four years, despite the fact that congressional Republicans pledged an attack against unwarranted business subsidies back in 1995." (America's most costly welfare recipients are Fortune 500 companies) While giving money to a section of the American economy that does not require the money, it also destroys competitiveness in the American economy. The size of the funds used for welfare is as high as $75 billion in all forms of subsidies. When these are eliminated, it would provide funds for the abolition of capital gains tax, or the death tax, reduce the personal income tax, or the corporate income tax, or even provide for a flat tax of 20% for all Americans. (America's most costly welfare recipients are Fortune 500 companies)

While we all agree that the economic situation of the country is difficult now, at the same time the picture as seen from the point of government spending is different. The situation is that all state and local governments are spending more money and employing more people. When they are becoming aware of the current economic difficulties, they are cutting down on public services. According to the National Governors Association, the states are facing the worst financial situation since World War II. Yet, a study by a news organization shows that the major reductions that are taking place are not cuts when one compares the expenditure during the current year with the previous year! The picture is that the states are reducing expenditures from the levels that were approved during the boom time of the American economy. (State, local spending up despite downturn)

As an example, let us take the case of Minnesota. The legislators approved spending based on an increase of 13.4% rise in tax revenue that was expected to take place during the next two years. When the results are about to come, the expected increase is only 6%. As a result, there has to be a cut of $4.6 billion. This means that there has to be cuts from expected spending but no cuts from the actual spending that has taken place earlier. The actual position is that the expenditure has increased even in 2002 by an annual rate of 4.2%. This is lower than the figures that were the results during the stronger periods of the economy, but still an increase. When the concerned figures are adjusted for inflation, the increase in spending is still 3.3%. At the same time, there are large gaps that must be closed and 31 states had to close a gap of $17.5 billion, and this was to be done by June 30 when the budgets end for many states. The next question is the result of this cut down. According to Governors and other senior elected officials, the financial problems are likely to result in layoff of thousand of public workers and cuts in the state operational areas of education, health care and road construction. There are differences between the states and the worst situation is in California. (State, local spending up despite downturn)

According to the Governor there, the state has to make up a shortfall of $35 billion during the course of 18 months. The suggestions were reduction in aid for schools, health care for the poor and elderly and higher taxes on the wealthy. This is certainly making a difference as the spending at the state and local government level has been increasing for many years all over the country, and was not being determined by the good or bad conditions of the economic performance. There had not been any drops since 1944 and the growth had been faster than the rate of inflation from 1982. There was a drop in the rate of spending in the 1990s but the government spending still was on. Even when the corporate profits and cash flow had been declining, the government hiring had been increasing.

Even when the economy became weak the government had still been hiring more persons, and at the level of the states, there had been an increase of 31,000 employees during the course of a year as per the reports of Bureau of Labor Statistics. This is a growth of 0.6%. Local governments had increased their workforces by 189,000 and this represents a growth of 1.4%. These are very high figures, and on the other hand, the employment in private companies decreased by 467,000 which was a reduction of 0.4% of their workforce. The question that comes up now is about the impact of the decreases in workforce, and according to many experts, the reduction will cause a drop in school class sizes, make it difficult for the recipients of welfare to get jobs, and improve the health care facilities for the poor. According to Margy Waller, a welfare reform expert at Brookings Institution, "Government services are often a last resort and cannot be cut without real suffering." (State, local spending up despite downturn)

This brings us to a point where we have to think about implications of poverty on the lives of Americans, even if most of the people do not think much about it. There was a new survey by NPR, the Kaiser Family foundation and Harvard University's School of Government that did a survey and that found only one in ten Americans naming poverty, welfare or similar matters as an important matter for taking action by the government. At the same time, when Americans are directly asked about the significance of poverty, they feel that it is still a major problem in the country. The actual position is that most persons not only think it is 'just a problem' but a major problem. Another one third of the population says that it is a problem, though not a major problem. (Poverty in America)

According to the definitions of the government, now a family of four with an income of more than $17,029 is not poor, but the majority of Americans feel that the level defined by the government is not enough. According to 6-% of Americans, the level of $20,000 a year should be taken as the mark of poverty and 40% of Americans feel that the level separating the poor should be fixed at $25,000 a year. Another important question is the descriptions of difficulties of the poor, according to the people who are described as poor by the government definitions. They feel that their problems are in getting enough money for paying rent, transportation and food. Even when the income levels increase and reach double that level, the perception of the problems remain the same. This is supported by people giving examples saying that they themselves, or some person close to the family did not pay rents in time, or someone they know did not have enough money for food. (Poverty in America)

The reasons for poverty are blamed a lot on the people suffering from it - by about 50% of the Americans. The other half feels that there are circumstances beyond their control which make them poor. The causes for poverty are however well defined by Americans who are within or near the poverty line and they state drug abuse, medical bills, too few jobs or the jobs being part-time or low wage, too many single parent families and too many immigrants as the main reasons. At the lowest levels the cause is viewed to be drug abuse, and the ranking to drug abuse is given at such a high level only by the poorest Americans and the income at a higher level do not think drug abuse is so important a cause of poverty. Another important question is whether the poor Americans really require help from the government, and…