Governments around the world transfer benefits to their citizens, sometimes as cash and sometimes in the form of in-kind transfers of goods and services. Some economists feel that cash benefits give the biggest boost to the happiness of the recipients, yet most governments choose in-kind transfers as the preferred way to control how aid dollars are used.
A cash transfer is simply a payment from the government to help improve the lives of its citizens. Examples of cash transfer programs in the U.S. include Social Security and unemployment benefits. Cash transfer payments can be made in a lump sum or in many smaller installments. Frequently these are termed unconditional cash transfers, because the government imposes no restrictions on how the aid money may be spent, and the recipients have the greatest freedom over what goods and services they buy.
Goods And Services
An in-kind transfer is also a type of public spending to help specific populations, but in the form of goods and services -- for free or at a reduced rate -- rather than in cash. One example of a U.S. in-kind transfer program is Medicare, which subsidizes health care for senior citizens and the disabled. Veterans' benefits and Stafford student loans are other examples.
By giving in-kind transfers, governments specify how individuals must use public assistance dollars. For example, Stafford student loans can only be used to finance college education, and Medicare benefits only cover the medical costs of those who are taking care of their health. For this reason, in-kind programs have sometimes been deemed “paternalistic” because they dictate that people spend assistance money on things governments deem most necessary. Nevertheless, the vast majority of federal and state assistance programs are in the form of in-kind benefits.
Freedom of Choice
According to Princeton University economics professor Uwe Reinhardt in a 2011 article in “The New York Times,” economists have consistently found that cash transfers make the recipients happier than in-kind benefits. An individual who receives unemployment benefits, for instance, is free to spend that money in any way, whether by defraying immediate living expenses or by investing the money. Some economists also feel it is more efficient to give cash directly to families and let them choose precisely which goods and services they need most.
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