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The Need For Appropriate Government Response To The Global Financial Crisis

1439 words - 6 pages

Economists called the recent Global Financial Crisis the worst financial crisis since the Stock Market Crash of 1929 and the Great Depression. The United States of America are in a time of recession and increasing numbers of people are finding themselves in need of assistance. Low-income individuals and families are suffering as hours are cut, benefits shrink, and programs they depend on disappear due to state budget cuts. It is imperative that the government find an efficient policy response that benefits as many low-income individuals and families as possible in the next five years.
The most promising and urgent policy response to improve the well-being of low-income individuals and families in the next five years would be to expand the Earned Income Tax Credit (EITC). An expansion of the EITC would increase much needed cash assistance to low-income families without changing the minimum wage, which could lead to additional labor market complications to be discussed later (Neumark, 2009). I recommend raising the maximum benefit levels for families but especially for single adults. Because eligibility for many other programs such as TANF, WIC, child care subsidies, housing assistance, and food stamps are determined by pre-tax income (Henly class lecture, 2009), an EITC expansion would not affect the delicate balance of services that low-income families use to survive. Since the EITC is a federal program (Bane, 2009), the states’ already strained budgets would not be burdened further. An EITC expansion would also benefit a wider variety of people. Currently, low-income individuals with no family ties are eligible for few, if any social welfare benefits (Henly class lecture, 2009). Convicted felons are at an even greater disadvantage; not only is it more difficult for them to secure employment (Pager, 2003), but they are also not included in any social welfare programs due to their criminal histories (Henly class lecture, 2009). Since the EITC is categorized as a tax program instead of a social welfare program (Bane, 2009) and children are not a prerequisite for assistance, and single individuals and individuals with criminal backgrounds would still be able to benefit from any program expansion, as long as they were working.
The underlying belief that those who participate in the labor market are most deserving of aid is an idea that has permeated American attitudes toward poverty and social welfare policy since the colonial era (Patterson, 2000). Structuring a policy around the EITC could reinforce this belief, further marginalizing those who cannot participate in the workforce. Although I believe that an EITC expansion would offer the greatest benefit for the largest number of low-income individuals and families, an obvious criticism is that it would only benefit those who were able to participate in the work force. Undocumented workers who do not file taxes and individuals who are unemployed would not see any returns from the...

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