Free markets tend to spread wealth unevenly. This leaves some people below the poverty threshold. The poverty threshold is the minimum level of income, as determined by the government, that is needed to support a household. To help ease poverty, the government collects tax money and redistributes it to people who are poor or otherwise in need. This kind of aid is known as welfare.

     In the 1990s, welfare programs became subject to much debate. Critics charged that people were becoming dependent on their welfare payments and were not doing enough to help themselves.

     Despite these debates, welfare programs continue to function in the United States. One major program is Temporary Aid to Needy Families (TANF). It uses cash transfers, direct payments of money, to help poor people. Money provided by the federal government goes to the states, which design their own welfare programs. Another major program is Social Security, which provides cash transfers to the elderly retired and to people who are disabled. It is funded from taxes on people’s wages. The government also provides in-kind benefits—goods and services provided for free or at very low prices. Examples of in-kind benefits include food stamps and subsidized housing. Another important social service that the government provides is health insurance. Medicare, which provides aid to the elderly, and Medicaid, which assists the poor, are two health insurance programs.