1. Consider two welfare programs:

The first is a conventional program: the weekly guaranteed benefit (=G) with no labor income is $160; the implicit tax rate (=t) (how much benefits are reduced for each dollar of labor income earned) is 100%; the level of disregard (=D) (how much one can earn before benefits are reduced) is 0; and the available wage rate (W) is $8 per hour.

The second is a newer TANF style program where: G=$160; t=2/3 (66.7%); D=$80; and W=$8.

1. Show the budget constraints of the two programs assuming 100 available hours in the week (be as specific as possible in terms of dollar amounts and hours). Where is the break-even point for each?
2. Consider two people: Under the first welfare program, one works zero hours; the other works 40 hours. Compare the potential labor supply effects of the introduction of the TANF program for the two people.
3. How, if at all, will your answers to (b) change if G is reduced to $120 in the TANF program (a verbal answer is fine)?