William_T._Bianco,_David_T._Canon]_American_Polit

580 Chapter 16Chapter 16 || Social PolicySocial Policy

the Cato Institute, a libertarian think tank, as “any government spending program

that provides unique benefits or advantages to specific companies or industries. That

includes programs that provide direct grants to businesses, programs that provide

research and other services for industries, and programs that provide subsidized loans

or insurance to companies.” The Cato Institute estimates that there are more than

100 corporate welfare programs in the federal budget, including crop subsidies to large

corporate farmers and tax deductions for oil companies to encourage exploration and

drilling, with annual expenditures of more than $100 billion.^21 Liberal groups such as

Citizens for Tax Justice estimate levels of corporate welfare at nearly three times that

amount. Clearly, there is much more to welfare policies than programs for the poor.

Nonetheless, the social programs described in this chapter are very important for

reducing income inequality. The nonpartisan Congressional Budget Office shows that

means-tested transfers, such as Medicaid, food stamps, and Supplemental Security

Income (SSI), and federal taxes cause household incomes to be more evenly distributed. In

2014, the most recent year included in its 2018 study, transfers and taxes increased average

income for the bottom quintile by $12,000 to $31,000, while they decreased the income

of the highest quintile by $74,000 to $207,000.^22 Figure 16.2 shows how the income of the

bottom quintile, and to some extent the second through fourth quintiles, has increased

much more than it would have without our social policies and progressive taxes.

Partisanship and income inequality

These statistics generate different reactions among politicians and are a good reminder

that politics is conflictual. Republicans, on the one hand, argue that the best way to

address poverty is through supply-side tax cuts that promote the creation of capital,

FIGURE

16.1

30

25

35

40

45

50

1917 1927 1937 1947 1957 1967 1977 1987 1997 2007 2014

60%

Percentage of all income earned by the wealthiest 10%

Source: Thomas Piketty and Emmanuel Saez, “Income Inequality in the United States, 1913–1998,” Quarterly

Journal of Economics, 118:1 (2003): 1–39. (Longer updated version published in A. B. Atkinson and Thomas Piketty,

eds., Top Incomes over the Twentieth Century: A Contrast between European and English Speaking Countries

[Oxford: Oxford University Press, 2007].) (Tables and figures updated to 2015 in Excel format, June 2016, https://

eml.berkeley.edu/~saez/ [accessed 7/3/18].)

Percentage

of All Income

Earned by the

Wealthiest

10 Percent,

1917– 2 01 4*

Income inequality in the United

States today is higher than ever. The

wealthiest 10 percent of Americans

now receive 50.4 percent of all U.S.

income. How will this inequality affect

the outcomes of social policy?

* Includes capital gains. This figure

shows the most recent data available.

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