ECONOMICS STUDY GUIDE

26 SOCIAL PROGRAMS

As a young child, your parents or guardians provided for your needs and wants.

As you grow into adulthood, you are most likely discovering that the person who provides most of your needs is probably you!

Whether or not you succeed at providing all of your own needs depends on many factors.

If you are unable to provide the necessities of life for yourself, there are certain "safety nets" that will hopefully keep you from total financial ruin.

If for some reason a person is having difficulty coping with the reality of the financial, physical, or social pressures of the world today, there is a myriad of agencies that were designed specifically to help with certain needs.

There are support groups for alcoholism, drug addiction, and many other kinds of dependency support groups.

There are health clubs and support groups for people who need help with diet, nutrition, or other health problems.

We have a multitude of government agencies that provide financial help for people during times of economic crisis.

There was a time in our country, however, when there were no agencies or programs to help someone in need.

People had to depend on themselves or their families to provide any financial or emotional support in times of a crisis.

This was especially true when America was in the middle of the Great Depression.

Do you remember how the Great Depression changed the role of the federal government both in an economic and political sense?

The programs of the New Deal implemented both social and economic assistance from the federal government to the states and private citizens of the United States.

Just before, during, and after the events of the 1920s and 30s, America was in a very bad economic situation.

One out of every four persons was without work.

Many people had lost their life's savings in securities, the Stock Market crash and in banks that had failed.

The beginning of significant social programs and reform began with the election of Franklin Delano Roosevelt as President of the United States in 1932.

He immediately set out to formulate plans to rebuild the national economy and get the country back into a progressive movement after the devastating financial crisis our country faced during the 1920s and '30s.

President Roosevelt, or FDR, was the founder and author of a program known as the New Deal, or the Restructuring Act.

The New Deal contained programs for financial and social rebuilding.

In 1933, Roosevelt initiated a number of legislative acts that would lead to rebuilding the economy and at the same time provide assistance to people in great need.

One of Roosevelt's first acts focused on getting the banking industry back into business.

It was during this time that the Federal Deposit Insurance Corporation system and other regulatory agencies came into existence.

The system of checks and balances enacted through that program began to make it nearly impossible to have another period of time like that of the 1920s and '30s.

Before 1933, and particularly during the period 1929-33, bank failures were not uncommon.

If a bank overextended itself in creating credit or if several of its important loans could not be repaid, depositors in the bank would frequently become panicky and begin to make large withdrawals - to make a run on the bank.

Because the bank had only a fraction of its deposits backed by currency (fractional reserves as opposed to 100 percent reserves), the bank would soon be unable to meet withdrawals and most depositors would lose their money.

If the bank could borrow money from another bank to pay those withdrawing money, people's confidence would return and they would probably redeposit their money.

Most frequently, a bank merely needed time to improve its cash position by calling in some of its loans and not making additional ones.

In 1933, the number of bank failures reached a peak, forcing the federal government to intervene and close the banks temporarily.

To help restore the public's confidence and strengthen the banking community, Congress passed legislation setting up the Federal Deposit Insurance Corporation.

This corporation, an agency of the federal government, now insures over 90% of all bank deposits up to $100,000 per deposit.

The FDIC has built up its insurance fund by charging a small percentage on the total deposits of member banks.

Another priority was the development of the Tennessee Valley Authority, which regulated the holding companies and kept them from dominating national utilities.

Under the Tennessee Valley Authority, dams were built where they were needed to provide electric power to people in that area.

At the same time, regulations were placed on business and industry that stopped child labor in factories and led to conditions in workplaces that were safe and sanitary.

Another major program that was developed at this time was the National Social Security Administration.

The idea behind this organization was to keep Americans from sinking into poverty and despair that many people faced after the Depression.

The Social Security program is actually a national or central insurance company that is managed by the government.

This program is financed by a percentage of each individual's income that is withheld in the form of FICA taxes.

To qualify to receive Social Security funds, a person must be a certain age (either 62 or 65), retired from work, a surviving child, or qualified for unemployment, disability, or welfare.

Social Security Administration

This agency administers several major elements of the Social Security programs, especially to persons covered under the program when they retire or become permanently disabled, or to their dependents or survivors.

Still another program initiated by Roosevelt was the CCC - the Civilian Conservation Corps.

This was usually comprised of young men who did not have jobs but were capable of hard work.

The CCC became a very popular group that sent people all over the country to help build dams, parks, plant trees, or do anything else that could provide long-term conservation of national resources.

Chances are that there is evidence of work done by this agency in the majority of states in the country.

Let's examine some modern day social programs that are available through government agencies.

The historical role of government in the economy can be classified into the following five areas:

Government as a help to business with tariffs, land grants to railroads etc..

Government intervention to enforce competition with antitrust laws, etc.

Government as a help to weak economic groups with minimum wage laws, and child labor laws, etc.

Government as a producer in the absence of business venture, such as the public works projects during the Great Depression, etc.

Government as a stabilizer, by changing the supply and demand through control of the money supply, etc.

How much should government be involved in the economy?

How much should government be involved in the economy?

Most Americans, accepting the free enterprise system, agree that government should the necessary steps to preserve capitalism.

Protecting property, ensuring enforcement of contracts, and assuring economic freedom require government involvement.

Most citizens agree that the government must have the right to protect the consumer from monopolistic power.

However, sharp differences of opinion exist concerning the government regulation of the market.

Department of Justice

Antitrust Division - Handles court cases involving violations of antitrust laws, other federal laws covering business practices.

Tax Division - Handles both civil and criminal cases arising out of the tax laws; most often, acts as the in-court attorney for the Internal Revenue Service.

Federal Bureau of Investigation (FBI) - Investigates most cases involving violations of federal criminal laws; pursues and arrests most persons suspected of or charged with federal crimes.

Department of Agriculture

Animal and Plant Health Inspection Service - Conducts inspections to prevent, control, or eradicate animal and plant pests and diseases; licenses and regulates the manufacture and sale of chemical and non-chemical products used in the prevention of the treatment animal and plant pests and diseases.

Food and Nutrition Service - Administers the food stamp program (which provides coupons to low-income persons and families to increase their food purchasing power); provides grants and/or foodstuffs for several other food assistance programs (most notably, the National School Lunch Program).

Food Safety and Inspection Service - Inspects food and meat processing plants, grading their products under federal laws and making sure that those products are safe, of good quality, and properly labeled.

Department of Commerce

Minority Business Development Agency - Promotes and coordinates federal and other public and private efforts to help organize and strengthen businesses owned and operated by members of minority groups and furnishes technical assistance to minority firms.

Bureau of Economic Analysis - Collects, analyzes, and publishes data to provide a reliable and detailed picture of the structure, condition, and prospects of the nation's economy; makes continuing reports on the gross national product (the GNP, the total national output of goods and services, measured in dollar terms).

The Department of Labor

Employment and Training Administration.

Through the United States Employment Service, the federal government assists the states in the operation of a system of local employment offices for unemployed workers.

Employment Standards Administration

Enforces minimum wage and maximum hours laws, enforces laws prohibiting discrimination in employment on all federal or federally-supported construction projects.

Occupational Health and Safety Administration - Enforces federal laws, setting minimum safety and health standards in most work situations.

Mine Safety and Health Administration - Enforces federal laws setting minimum safety and health standards for mining operation.

The Bureau of Labor Statistics - Collects, analyzes, and publishes data on employment, unemployment, hours of work, wages, and prices.

Department of Health and Human Services

Office of Human Development Services - Makes grants and gives other support to state and local programs to provide social services to older and handicapped persons.

Public Health Service - Conducts research and treatment programs for the prevention and control of communicable diseases.

Health Care Financing Administration - Administers two other major elements of the Social Security program.

(1) Medicare - a health insurance program for most elderly persons.

2. Medicaid - a federal grant program, to assist the states in the payment of hospital, medical, and other health care bills for the poor.

Department of Housing and Urban Development

Assistant Secretary for Community Planning and Development - Administers several grant programs to aid state and local governments efforts to improve housing conditions in urban areas (example, water, sewer, slum clearance projects).

Assistant Secretary for Housing (Federal Housing Commissioner),

Administers several programs, including:

1. mortgage insurance programs - in which the government guarantees loans made by private lenders (mortgages) for the purchase of private housing (mostly single-family residences and such multifamily units as apartment houses and condominiums).
2. loan programs - to help both public and private borrowers finance housing projects for the elderly and the handicapped.
3. The Rent Supplement Program - in which Housing and Urban Development pays a portion of the monthly rents of low-income families.

Office of Radioactive Waste Management - Conducts research on and manages federal programs for the storage and disposal of high-level radioactive waste and spent nuclear fuel.

Economic Regulatory Administration - Enforces laws regulating aspects of energy production, sale and use (e.g., laws regulating drilling on leased federal lands, placing controls on fossil fuel exports, requiring increased industrial use of coal in place of oil and natural gas).