How much do we REALLY spend on Welfare?

Whenever you see a pie graph that is meant to represent all government spending.  You will probably see a graph like the one at US Government Spending or the one at Wikipedia which shows that “Welfare” spending is 12% of the federal budget.  The problem with that is that the government has no spending category called “Welfare”.   Therefore, what somebody calls “Welfare” is somewhat subjective and undefinable.

The Office of Management and Budget(OMB) does have a spending category called “Income Security”.  The two pie graphs I linked to in the introduction just take that entire category and divides it by total spending to get 12%.  In 2009 accounts categorized as “income security” accounted for 533$ billion in spending.  According to the government printing offices’ historical tables, table 3.2: Oulays by Function and Subfunction, that spending is broken down into 6 distinct subfunctions.

  1. General retirement and disability insurance
  2. Federal employee retirement and disability
  3. Unemployment compensation
  4. Housing assistance
  5. Food and nutrition assistance
  6. Other income security

But as I described in a previous post, 3 out of the 6 income security subfunctions go to pensions and unemployment – things that must be earned by working and paying into.

The 3 remaining subfunctions cost a combined 284$ billion dollars, but even that doesn’t tell the whole story.  Over the last week I’ve taken a more detailed look at each of these subfunctions to get an idea of how that money is spent.  What I found was that even in the remaining subfunctions, Food and Nutrition, Housing Assistance, and Other that not all of that spending was spent on the poor.

When I analyzed the “Other” income security subfunction, I  graphed how that money was spent by categorizing that spending into 4 different categories:

  1. Not Directed at PoorEarned: Welfare not targeted to poor.  The poor may use these programs, but just being poor will not qualify you for these programs.
  2. Direct:  Welfare that’s Direct money to the poor
  3. In-direct: Money paid to 3rd parties on behalf of the poor
  4. Poor & Middle Class: These are tax rebates that poor and most middle class people qualify for and use.

I would now like to extend that analysis to the entire 533$ billion that the U.S. government spent on “income security”.  Here’s how the numbers break down.

Amount of Income Security Spending(in millions) by Type

(Click chart for Larger Image. See The Numbers for  this Chart)

As you can see the vast majority of the money spent in the “Income Security” function of the government is spent on programs not directed at the poor or programs where the income must be earned.  If you want to know how I categorized everything, here’s how I did it:

  • Unemployment and Pensions are classified as not-directed at poorEarned.
  • For Food & Nutrition, WIC & SNAP(Food Stamps) are “Direct”, School lunches are “non-direct”, the rest are “not-directed at poor”
  • For Housing Assistance, I categorized the temporary “new homeowner” credit as “Poor & Middle Class” and the rest as non-direct
  • For the rest you can read my previous post on how I broke down “Other Income Security

If you would like more details on why I categorized the programs as such, I suggest you read my previous posts: Income Security, Food and Nutrition, Housing Assistance, and Other Income Security.

If you total up the direct and non-direct spending categories which are all the programs that are meant to help the poor, you will see that the federal government only spent 191$ billion on “welfare” for the poor.  That would be 5.5% of the unified budget.  I counted off-budget programs since the pie graphs in the beginning counted social security and other “off-budget” accounts.  If you only want to go with on-budget expenditures it’s 6.4%, still a far cry from the 12% that most internet graphs will show you.  Just for fun I decided to graph those numbers.  Feel free to copy these graphs to show anyone who thinks we actually spend 12% of the federal budget helping the poor.

Welfare Spending as percentage of Entire 2009 Budget Welfare Spending as percentage of 2009 on-budget expenses

(Click charts for Larger Images.)

Source for all numbers is the Public Budget Database

Other Income Security Programs

The federal budget has a Subfunction of the “Income Security” function called “Other Income Security”. It is for all the programs that don’t fit one of the other 5 subcategories.  These “other programs” cost 154.3 billion dollars.  Here’s a look at what these programs are and what they cost.

Cost of "Other" Income Security Programs (in millions)
(Click chart for Larger Image. See The Numbers for  this Chart)

Here’s a brief description of each of the sections:

  • TANF is the Temporary Assistance for Needy Family program(18$ billion).  Before 1996 this was known as “AFDC”.  It’s probably the program that most people think of when they think of “Welfare”.  It gives money directly to people to spend.
  • SSI Disability is the collection of all SSI accounts(44.5$ billion).  It is disability insurance paid to people who cannot work and have no other income
  • Foster Care covers both Foster Care and Adoption services(7$ billion)
  • Child Care Enforcement is only the cost of enforcing Child Support minus the Federal Share of Child Support Collections(3$ billion)
  • The biggest expense is Tax Rebates.  There are a number of tax credits mostly targeting the poor(70$).
  • Other Non-Direct Welfare are programs that help the poor, but unlike TANF they do not give money directly to its recipients(12$ billion).

There’s a lot of different programs in those last 2 categories so let’s look at them individually.

Here’s how the 70$ billion in returned tax credits break down:

Tax Rebate Expenses from 2009(Click chart for Larger Image. See The Numbers for this Chart)

The biggest expense is the Earned Income tax credit which is a tax rebate for people who work, but don’t earn enough to get out of poverty.  Same with Making work pay.  The other tax credits are all credits that you don’t necessarily have to be poor to receive.

As for the “Other non-direct welfare” programs, here’s how that 12$ billion in spending broke down in 2009.

Other Non-Direct Welfare Program Costs

(Click chart for Larger Image. See The Numbers for this Chart)

Except for the Refugee Entrant program all of these programs are targeted only at the poor.  Contingency was part of the ARRA(Stimilus package) money to help bolster some of the welfare programs.  Child care and Energy Assistance help pay for child care and home heating for the poor, but that money goes directly to the providers.  Finally, CRTA is a program that monitors several of the child welfare programs for improvement(including child care and Child Support Enforcement)

There’s a lot of programs here.  So let’s regroup these programs into the type of help they provide and who they are intended to help.

  1. Not Directed at PoorEarned: Welfare not targeted to poor(foster careadoption, SSI Disability, Child Care Enforcement, Refugee assistance, and other family programs charged to the Child Care Enforcement account).  The poor may use these programs, but just being poor will not qualify you for these programs and non-poor use as well.
  2. Direct:  Welfare that’s Direct money to the poor (TANF)
  3. In-direct: Money paid to 3rd parties on behalf of the poor(Energy Assistance, free child care, CRTA, the stimulus expansion(contingency), and the two tax credits “Making Work Pay” and “Earned Income”)
  4. Poor & Middle Class: These are tax rebates that poor and middle class people qualify for and use.

Here’s how much we spend on each type of welfare programs in the”other income security” subfunction.
Cost of the Types of Welfare("other income")

(Click chart for Larger Image. See The Numbers for this Chart)

In my next post I’m going to combine these numbers with what I found in the other sub categories of “Income Security”(Nutrition and Housing) to get a true picture of the U.S. welfare system.

Six Food and Nutrition Assistance Programs

The federal budget has a Subfunction of the “Income Security” called “Food & Nutrition Assistance”. This subfunction costs 79 billion dollars. What is that money being used for? Despite there being 15 accounts listed under the subfunction “Food & Nutrition Assistance”, there are actually only 6 total programs taking up a combined total of 79 billion dollars. The six programs and their relative cost are below.
Cost of Food Nutrition Programs

As you can see the Supplemental Nutrition Assistance Program(SNAP) makes up almost 70% of the spending. This is what most people know as food stamps. The next biggest categories are Child Nutrition Programs and WIC. The former is basically the school lunch program, and WIC is basically SNAP, but specialized for women and infant children. All three of these programs are designed to help feed the poor and combined account for 98% of the spending in this category.

Of the remaining programs, here’s a brief overview of each of them.

Section 32, the “Funds for Strengthening Markets, Income, and Supply” is a program used by the Secretary of Agriculture was a program form the depression. It was the program the government used to buy excesses in agricultural output to stabilize prices. It’s purchases normally went to shelters and food banks. 80 years later not much has changed. The reason it’s labeled as “Nutrition Assistance” is because the food it buys normally goes to support the other 5 food programs.

“Emergency Food & Shelter” isn’t a welfare program for the poor. It’s the only program of the six that isn’t. It pays for the food that FEMA delivers to disaster sites. Being that it’s only 284 million dollars, (a rounding error by federal government standards) this entire subfunction may as well be considered “Welfare”.

The last program, the “Commodity Assistance Program” is the smallest welfare program. It is a collection of funds to deliver buy food for various soup kitchens and emergency stores.

So there you have it, unlike the housing programs, 99.9% of the funds labeled “Food & Nutrition Assistance” in the “income security” function are in fact welfare programs.

36 Housing Assistance Programs

I started studying all the accounts listed under the OMB “Housing Assistance” program. Of the 41 accounts it looks like there are 36 different accounts for various housing assistance programs from 2009. That’s right, 36 different accounts. And on top of that, one of those accounts is “Other Assisted Housing Programs” meaning that there are even more programs than the 36 listed at the account level.

Of those, most are meant to help the poor get into some type of housing (as you probably would expect). In fact, in 2009 only one program’s purpose didn’t have something to do with that. That was the temporary first-time home-buyers housing credit. That cost came to just over 9 billion. So of the 51 Billion our government spent on housing assistance, only 42 billion of it actually goes to help the poor.

Something I find curious is the 6 accounts related to the “Rural Housing Service”. Not that they exist or that there’s 6 of them, but the fact that it’s a part of the Dept. of Agriculture instead of HUD. The Bureau cost 1.1 billion dollars on housing assistance and 1.5 billion for everything that it does. While it is a minuscule program, i’d like to know more about it. I’ll research it more in the future.

Another curious program is the Affordable Housing Program. It costs 152 million and doesn’t really seem to do anything. It’s only been on the books since FY1990 when it cost 13 million. It’s price tag went up slowly until 2008 when it cost 354 million. Then in FY2009 it went down to 152 million which is the projected cost for the next couple years. I did some googleing and found out that the program is part of the FDIC(Federal Deposit Insurance Corporation). It looks like the program is meant to sell FDIC held properties(presumably taken from a bank liquidation) and sell them to landlords at a reduced rate as long as that landlord promises to have reduced cost rent for some of the properties. Being that the website says there are “no properties for sale”, I assume that the 152 million that the program costs is related to making sure that landlords fulfill their part of the bargain. At a cost of 152 million, it is even more minuscule than the “Rural Housing Service”, however it still seems like a program that costs more than it’s worth. I’ll be researching more into this program in the future as well.

One last thing that gets me is not the amount we spend on housing assistance for the poor, but how many housing programs there are. Fortunately, most of the accounts are pretty small(By Federal Government standards, I’m going to say half a billion is “small”). It just seems like there could be some way to consolidate all of them and save a few million or even a billion. After all, save a few hundred million dollars here and a billion dollars there, and pretty soon we’re talking some serious cash!

(Click Here to see my Notes on the Housing Assistance Programs)

Income Security

Looking at the Outlays Historical table, I see an expense group labeled “income security”. This is what most people would probably (and improperly) label as “Welfare”. However, there is a lot more going on in that category than just so-called “Welfare”. The six major subfunctions are:

  • Federal employee retirement and disability
  • Food and nutrition assistance
  • General retirement and disability insurance (excluding social security)
  • Housing assistance
  • Other income security
  • Unemployment compensation

Of the 533 billion that the government spent on “income security” in FY2009, here is the amount the government spent on each of the 6 subfunctions.

(Click Chart for larger view. Click Here for the Numbers )

As you can see a large portion of “income security” has nothing to do with “Welfare”. There are two subfunctions having only to do with pension and disability claims of federal employees and some private sector empoyees(I would like to dive in further on this in a future post). I doubt that many would call “Unemployment” as “Welfare”, since you have to first work and pay into it for a certain amount of time to qualify for it. Also, it’s meant to only be temporary.

So, of the three remaining subfunctions, combined they come up to 284 billion in federal spending. That means that if we got rid of every single welfare program in the federal budget, the budget deficit would still be over a trillion dollars. Wow! What a mess we’ve gotten ourselves into…

In future posts I’d like to examine each of those 3 subfunctions more carefully.