(correlation coefficient, –.55) and positively correlated with the 1989 state per capita income (correlation coefficient, .67).5 However, there is considerable variation in benefit levels among the states that is not explained by differences in income. Peterson and Rom (1989) and Plotnick and Winters (1985) show that differences in AFDC benefits across states relate to a variety of political, ethnic, and economic differences.

For the nation as a whole, it would be hard to argue that the United States lacks sufficient revenue-generating ability to provide assistance to families below the poverty level. But the country's funding resources are not unlimited, and there are many demands on them. Assistance programs must compete with all other uses of taxpayers' funds.

Targeting Strategies and Preferences

In order to maximize the effectiveness of limited funds and achieve other policy goals, there may be reasons to target assistance payments to particular groups, even though simple measurement of need would not necessarily identify them as unique. For example, because of the long-term social cost of children growing up in economic deprivation, it may be sensible to concentrate assistance dollars on poor families with children, even though other groups have need that is just as great.

There are many examples of targeting in current programs. The Earned Income Tax Credit (EITC) was originally targeted to working poor families with children and was recently expanded to cover childless workers as well (see Appendix D). Food stamps offers another example of targeting, in that the program is designed to provide a more secure safety net for the elderly and disabled than for other people. This feature operates through the definition of countable income, which permits more generous deductions for households with elderly and disabled members in determining eligibility and benefits. Also, there is a higher asset limit for households with an elderly member (see Appendix D).

Another approach would be to concentrate scarce assistance dollars on the poorest families (the "worst off" among the poor), even though helping the families closest to the poverty line (the "best off" among the poor) would achieve the fastest reduction in measured need. In other words, although the strategy of helping the poorest poor will not produce as large a reduction in measured need per dollar spent as helping other poor people, it may be the best strategy to reduce poverty.

5  

The correlations were carried out by using data on AFDC benefits from U.S. House of Representatives (1990:553-555) and data on state poverty rates and per capita incomes from the 1990 census (Bureau of the Census, 1993d: Tables 733, 741).



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