Howard R. Burke ECO405 014016 Mid Term Exam Pt. II 1a. In the U.S.

we examine poverty in reference to absolute income levels, which permits the identification of people who live below a designated poverty level of income. Millions who are not in poverty are relatively poor. Poverty, in our country, is essentially a distribution problem. To establish a poverty threshold, the U.S. government first determined the monetary cost of a nutritionally sound minimum diet. Second, the cost of the minimum diet was multiplied by 3 to allow for expenditures on all other goods and services. There are many factors that cause poverty. Among them are: income inequality, wage determination, discrimination, occupational discrimination, lack of education and/or training. The old welfare system demanded growing budget requirements for programs that did not appear to reduce the poverty level. Critics of the old system contended that it emphasized financial support and didnt encourage recipients to remedy the causes of their poverty. Still others said that the system created a welfare dependency that resulted in a permanent underclass. The two major themes of the new welfare system is that (1) There are time limits on how long a person or family may receive benefits and (2) Those who receive public assistance are required to work. The basic idea of the Earned Income Tax Credit is to reduce the total taxes paid by poor workers by providing them a refundable credit against their annual federal income tax liability. The Negative Income Tax Structure allows households with income below a predetermined level to forego an income tax liability and receive a subsidy based on their income and the normal tax rate. Both programs are designed to reduce poverty and dependence on government aid. The Negative Income Tax Proposal is simpler than the EITC and easier to employ. Although the U.S. spends ranks high on the list of educational expenditures, students in this country perform very poorly in key subjects such as math and science when compared to the scholastic achievements by students of other countries. This holds true even when comparing U.S. students against students of poor nations. To rectify this situation it has been proposed that smaller classrooms and increased teacher salaries would have a positive effect on education. Tuition subsidies could be considered fair in that they allow families would not otherwise be able to afford additional education the opportunity to do so.

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These families will be able to afford additional units of education, and the society as a whole will benefit. Some might consider the tuition subsidy unfair because the taxpayers ultimately have to foot the bill between the cost of the education a family can afford and the cost of an additional unit of education, or what society sees as the worth of that additional unit of education. 2c. Voucher programs provide students in poor performing public schools the opportunity to attend other schools and carry with them the state funding that the poor performing school would have received for those students. Voucher programs provide great benefits in that they (1) Allow the freedom of choice to seek out the highest possible level of education. (2) Allow parents, groups or organizations to create schools that foster superior academic achievement. The costs of the voucher program are not merely monetary. (1) Such a program would most likely produce creamskimming, or rather, benefit those who are from well-to-do families and have a greater access to information and (2) Such a program would might exacerbate the problem of social segregation as such families might choose schools based most likely on their social, cultural, ethnic or religious affiliation. BONUS 1. By far the marijuana legalization issue interested me more than any other problem or issue discussed this semester. I have long studied the subject of marijuanas history in this country. America had used marijuana (hemp) successfully as a textile and a medicine for decades in this country. To understand how this substance changed from being considered valuable and looked at in a positive light to its unfortunate prohibition and the subsequent effects of illegality are astounding! The text views the legalization issue from an economic standpoint. I have always supported marijuana legalization or at the very least, decriminalization. Levying fines against those caught with an amount not exceeding state or federal guidelines would go a long way to preventing backlog in courts and overcrowding in correctional facilities. However, if marijuana were to be legalized, it would usher in an economic upturn which would benefit society. If it were legal, business could be set up to dispense the product. Costs for business licenses would generate revenues locally, statewide and at the federal level. Obviously, profits from these businesses would also be taxable. Competition among businesses would regulate the price in the market, and remove the high cost associated with the illegality of the product. Having to cultivate, and transport illegal substances significantly adds to the cost of providing it to consumers. More importantly, the violence that surrounds the subculture of trafficking illegal substances would be removed. This would save taxpayers the billions of dollars spent annually by the U.S government for the War on Drugs. The saved money

could be spent on Healthcare Reform or support for education in public schools.