Wilson Reading - Social Welfare

7/31/2019 Wilson Reading - Social Welfare

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SocialWelfare

Two Kinds of Welfare Programs

Social Welfare in the United States

Majoritarian Welfare Programs:Social Security and

Medicare # Reforming Majoritarian Welfare Programs

#Client Welfare Programs: Aid to Families withDependent Children # Majoritarian Versus

Client Politics

C H A P T E R

19

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Many groups of senior citizens take day trips from Philadelphia to AtlanticCity, New Jersey, where they stroll or gamble. On the bus ride they are usu-

ally relaxed and talkative, but this wasnt the case in 2005. Then they hadtheir noses buried in a booklet sent to them by the federal government. EntitledMedicare & You, it explained that if they were old enough to be on Medicare, then start-ing in January 2006, Uncle Sam would help them pay for their prescription drugs. Thenew program had a lot of complicated choices, but seniors were helped by a massivegovernment-sponsored public relations program that explained everything to them. Bythe end of 2006, most eligible senior citizens had signed up.

# Two Kinds of Welfare ProgramsAnother welfare program is for certain poor people who get help to buy food by acquir-ing Food Stamps. Mary Summers, an expert on this program at the University of Penn-

sylvania, discovered that even bright college students with easy access to computer-based information systems required nearly four hours to figure out who could apply.She described it as an administrative maze. Unlike with the Medicare prescriptiondrug benefit, however, there has never been a massive public relations campaign to ex-plain how to sign up for the Food Stamps program.

The key difference in this regard involves who benefits. Two kinds of social welfareprograms exist in this country: those that benefit most or all of the people and thosethat help only a small number of them. In the first category are Social Security andMedicare, programs that provide retirement benefits or medical assistance to almostevery citizen who has reached a certain age. In the second are programs such as Medic-aid and Food Stamps that offer help only to people with low incomes.

Legally the difference between the two kinds of programs is that the first have nomeans test(that is, they are available to everyone without regard to income) while the

second are means tested (that is, you must fall below a certain income level to enjoythem). Politically the programs differ in how they get money from the government.The first kind of welfare program represents majoritarian politics: nearly everyonebenefits, nearly everyone pays. The second kind represents client politics: a (relatively)few number of people benefit, but almost everyone pays. The biggest problem facingmajoritarian welfare programs is their cost: who will pay, and how much will they pay?The biggest problem facing client-oriented programs is their legitimacy: who shouldbenefit, and how should they be served?

#

W H O G O V E R N S ?

1. How, if at all, have Americans viewsof governments responsibility to

help the deserving poor changed

over time?2. Why are some government social

welfare programs politically pro-

tected while others are politically

imperiled?

#

T O W H A T E N D S ?

1. What does the Constitution mean bypromote the general Welfare?

2. Should religious groups be eligible

to administer some federal welfare

programs?

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This political difference between these programshas a huge impact on how the government acts in re-gard to them. Social Security and Medicare are sacro-sanct. The thought of making any changes that mightlower the benefits these programs pay is so politically

risky that most politicians never even discuss them.When programs such as these run into trouble becauseof rising expenses (Medicare is in deep trouble today,and Social Security will be in even deeper trouble in afew decades), politicians scramble to look for ways ofmaintaining benefits while hiding the rising costs orpostponing dealing with them. As we shall see later inthis chapter, there has been a sharp growth in the pro-portion of people who are retired and are thus entitledto Social Security and Medicare. To keep benefits flow-ing to these individuals,people who are not retired willhave to pay more and more in taxes. No politicianwants to raise taxes or cut benefits, so they adopt a va-riety of halfhearted measures (like slowly increasing theage at which people can get these benefits) designed topostpone the tough decisions until they are out of of-fice. Today, however, some leaders in each party arecalling for more fundamental and far-reaching re-forms. Shortly after his reelection in 2004, PresidentGeorge W. Bush proposed allowing individuals to vol-untarily invest a portion of their Social Security taxesin personal retirement accounts. The issue became afocus of political debate in the 109th Congress.

Client-based welfare programsthose that aremeans testedare a very different matter. Like many

other client-based programs, their political appealchanges as popular opinion aboutthem changes. Take the old Aid toFamilies with Dependent Children(AFDC) program. When it wasstarted in 1935, people thought ofit as a way of helping poor womenwhose husbands had been killed inwar or had died in mining acci-dents. The goal was to help thesewomen support their children,whohad been made fatherless by deathor disaster. Most people thought

of these women as the innocent victims of a tragedy.No one thought that they would take AFDC for verylong. It was a program to help smooth things over forthem until they could remarry.

About thirty years later,however, the publics opin-ion of AFDC had begun to change. People started to

think that AFDC was paying money to women whohad never married and had no intention of marrying.The government, according to this view, was subsidiz-ing single-parent families,encouraging out-of-wedlockbirths,and creating social dependency. Moreover, some

people thought that African Americans were takingundue advantage of the program. (In fact, when thisopinion emerged, African Americans were still a mi-nority among AFDC recipients.) From the mid-1960sthrough the mid-1990s these views became stronger.AFDC had lost the legitimacy it needed,as a client pro-gram, to survive politically.

Whenever a client program loses political legiti-macy, the program is in trouble. Client politics de-pends on the beneficiaries being thought of aslegitimate.Almost any means-tested program risks los-ing its political legitimacy, because some people willalways wonder whether the program itself causes peo-ple to avoid working in order to claim the benefits.Some people think that about Food Stamps, the pro-gram that gives low-income people free stamps thatthey can exchange for food. There have been a fewpublicized cases of people using food stamps to buyluxury items. But no powerful opposition to the pro-gram has developed, because in general the only thingthe beneficiaries have in common is that they havelow incomes. Many Americans can imagine becom-ing poor, and so they probably are willing to allowsuch a program to operate as part of a government-supplied safety net that might, someday, help them.

But AFDC was a different matter. Having to acceptAFDC was not something the typical taxpayer thoughtwould ever happen to him or her. Moreover, the ben-eficiaries werent just poor; some of them did thingssuch as having babies without getting marriedthatmost Americans thought were simply wrong. The le-gitimacy of AFDC was thus in jeopardy,because it ei-ther made possible or actually encouraged behaviorthat most Americans found improper. As a resultsomething happened to AFDC that almost neverhappens to decades-old government programs: it wasabolished.

In this chapter we provide examples of both ma-

joritarian and client welfare programs and describehow they have been reformed over the years. Thereare far too many social welfare programs to describethem all here; rather the main purpose of this chapteris to explain the key features of the two main kinds ofprograms.

508 Chapter 19 Social Welfare

majoritarianpolitics A policy inwhich almosteverybody benefitsand almosteverybody pays.

client politics Apolicy in which onesmall group benefitsand almosteverybody pays.


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# Social Welfare in theUnited StatesBefore analyzing how these programs came into be-ing, it is first necessary to understand that social wel-

fare policy in the United States is shaped by fourfactors that make it different from what exists inmany other nations. First, Americans have generallytaken a more restrictive view of who is entitled togovernment assistance. Second, America has beenslower than other countries to embrace the welfarestate. Third, we have insisted that the states (and to adegree private enterprise) play a large role in runningwelfare programs. Fourth, nongovernmental organi-zations play a large role in welfare.

The first distinctive feature of the American wel-fare state involves who benefits. To Americans, whobenefits has been a question of who deserves to bene-fit. We have usually insisted that public support begiven only to those who cannot help themselves. Butwhat does it mean to say that a person cannot helphimself or herself? Surely a disabled, blind, elderlywoman deserted by her family cannot do much tohelp herself, but would she still be deserving of pub-lic aid were she merely disabled? Or merely elderly?And to what extent should we require that her familysupport her? As we shall see, American welfare policysince the 1930s has been fundamentally shaped by aslow but steady change in how we have separated thedeserving from the undeserving poor.

That we have always thought this way may makeus forget that there are other ways of thinking aboutwelfare. The major alternative view is to ask not whodeserves help but what each persons fair share ofthe national income is. Seen this way, the role of gov-ernment is to take money from those who have a lotand give it to those who have only a little, until eachperson has, if not the same amount, then at least a fairshare.But defining a fair shareis even more difficultthan defining the deserving poor. Moreover, Amer-icans have generally felt that giving money to peoplewho are already working, or who could work if theychose to, is unfair. In some nationsSweden is an ex-

amplegovernment policy is aimed at redistributingincome from better-off to not-so-well-off persons,without regard to who deserves the money.

Thus Americans base welfare policy on the conceptof help for the deserving poor rather than redistri-bution to produce fair shares.1 They have done so,one suspects, because they believe that citizens should

be encouraged to be self-reliant, that people who workhard will get what they deserve, and that giving moneyto people who could help themselves will produce aclass of welfare chiselers. If Americans believed thatsuccess at work was a matter of luck rather than effortor was dictated by forces over which they had no con-trol, they might support a different concept of welfare.

Moreover, we have always been a bit uneasy aboutgiving money to people. Though we recognize thatmany people through no fault of their own cannotbuy groceries and thus need funds, we would preferthat, to the extent possible, people who deserve help

be given services (education, training, medical care)rather than money. Throughout much of our historyour welfare policies have reflected a general philo-sophical disposition in favor of providing services todeserving persons.

The second striking fact about American welfarepolicy is how late in our history it arrived (at least atthe national level) compared to other nations.By 1935,when Congress passed the Social Security Act, at leasttwenty-two European nations already had similar pro-grams, as did Australia and Japan.2 Germany was thefirst to create a nationwide social security programwhen it developed sickness and maternity insurance

in 1883. Six years later it added old-age insurance andin 1927 unemployment insurance.

England offers perhaps the clearest contrast withthe United States. In 1908 a national system of old-agepensions was set up, followed three years later by aplan for nationwide health and unemployment insur-ance.3 England had a parliamentary regime in which

Social Welfare in the United States 509

Handicapped parking signs are a common reminder of thegovernments interest in social welfare.


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a political party with liberal sentiments and a largemajority had come to power.With authority concen-trated in the hands of the prime minister and hiscabinet, there was virtually no obstacle to institutingmeasures, such as welfare programs, that commended

themselves to party leaders on grounds of either prin-ciple or party advantage. Furthermore, the British La-bour party was then beginning to emerge.Though theparty was still small (it had only thirty seats in Parlia-ment in 1908), its leaders included people who hadbeen influential in formulating welfare programs thatthe leaders of the dominant Liberal party backed.And once these programs were approved, they were inalmost all cases nationally run: there were no state gov-ernments to which authority had to be delegated orwhose different experiences had to be accommodated.

Moreover, the British in 1908 were beginning tothink in terms of social classes, to accept the notion ofan activist government, and to make welfare the cen-tral political issue.Americans at that time also had anactivist leader, Theodore Roosevelt; there was a pro-gressive movement; and labor was well along in itsorganizing drives. But the issues were defined differ-ently in the United States. Progressives, or at leastmost of them, emphasized the reform of the politicalprocessby eliminating corruption, by weakeningthe parties, and by improving the civil serviceandattacked bigness by breaking up industrial trusts.Though some progressives favored the creation of awelfare state, they were a distinct minority. They had

few allies in organized labor (which was skeptical ofpublic welfare programs) and could not overcome thegeneral distrust of big government and the strongpreference for leaving matters of welfare in state hands.In sum, what ordinary politics brought to England in

19081911, only the crisis politicsof 1935 would bring to the UnitedStates. But once started, the pro-grams grew. By 1983 almost one-third of all Americans receivedbenefits from one or more socialwelfare programs.

The third factor involves the de-

gree towhichfederalism hasshapednational welfare policy. Since theConstitution was silent on whetherCongress had the power to spendmoney on welfare and since pow-ers not delegated to Congress werereserved to the states, it was not

until the constitutional reinterpretation of the 1930s(see Chapter 16) that it became clear that the federalgovernment could do anything in the area of socialpolicy. At the same time, federalism meant that anystate so inclined could experiment with welfare pro-

grams. Between 1923 and 1933 thirty states enactedsome form of an old-age pension. By 1935 all but twostates had adopted a mothers pensiona programwhereby a widow with children was given financialassistance, provided that she was a fit mother whoran a suitable home. The poor were given smalldoles by local governments, helped by private chari-ties, or placed in almshouses. Only one state,Wiscon-sin, had an unemployment insurance program.

Politically the state programs had a double-edgedeffect: they provided opponents of a federal welfaresystem with an argument (the states were alreadyproviding welfare assistance),but they also supplied alobby for federal financial assistance (state authori-ties would campaign for national legislation to helpthem out). Some were later to say that the states werethe laboratories for experimentation in welfare pol-icy. When the federal government entered the field in1935, it did so in part by spending money throughthe states, thereby encouraging the formation in thestates of a strong welfare bureaucracy whose laterclaims would be difficult to ignore.

A fourth distinctive feature of welfare policy in theUnited States is that much of it is administered viagrants and contracts to nongovernmental institutions,

both for-profit firms and nonprofit organizations. Forexample, many large national nonprofit organizations,suchas BigBrothers BigSistersof America,YouthBuild,JewishFederation,and CatholicCharities,have receivedlarge federal grants and long participated in the ad-ministration of federal social programs. The 1996 lawthat abolished the Aid to Families with DependentChildren program contained a provision directing thatreligious nonprofit organizations, including smallcommunity-based groups, be permitted to compete forgovernment grants with which to administer federalwelfare-to-work and related policies.The latter provi-sion, known as charitable choice, enjoyed bipartisan

support. The provision prohibited religious organi-zations from using any public funds for proselytizing,religious instruction,or worship services, but also pro-hibited the government from requiring them to re-move religious art or iconography from buildingswheresocial servicedeliveryprograms funded in wholeor in party by Washington might be administered.


charitable choiceName given to fourfederal laws passedin the late 1990sspecifying theconditions underwhich nonprofit

religiousorganizations couldcompete toadminister certainsocial service deliveryand welfareprograms.


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In 2001 President George W. Bushs call to expandthe role of religious organizations in administeringfederal social programs led to a political firestorm.4

Some religious conservatives demanded that the Bushadministration act to permit faith-based organizations

to proselytize with public funds and also allow themto hire only coreligionists if they wished. But somecivil libertarians sought to reduce or eliminate mostexisting public-private partnerships involving religiousorganizations.

Between 2002 and 2003 HHS and HUD grants tofaith-based groups increased 41 percent and 16 per-cent, respectively, and five federal agencies awarded$1.17 billion to such organizations.5 Today,faith-basedorganizations figure ever more prominently in theadministration of welfare-to-work programs in manybig cities, from about 14 percent of all such programsin Los Angeles to about 41 percent in Philadelphia.6

Fewer than one in ten of these urban faith-based or-ganizations give preferences to coreligionists in hir-ing, and virtually all accept beneficiaries without regardto religion.7 This approach reflects mass opinion onthe subject: three-quarters want government to helpfund community-serving, faith-based organizationsand deem them to be more caring and compassion-

ate than professional providers of the same services;but the same three-fourths majority opposes govern-ment support for faith-based programs that requirebeneficiaries to take part in religious practices oronly hire people of the same faith.8

Majoritarian Welfare Programs:Social Security and Medicare

Today, tens of millions of Americans receive food,money, or medicine through programs funded largelyby the federal government (see Figure 19.1).

At the time the Great Depression began, in 1929,the job of providing relief to needy people fell almostentirely to state and local governments or to privatecharities, and even these sources were primarily con-cerned with widows, orphans, and the elderly.9

Hardly any state had a systematic program for sup-

porting the unemployed, though many states pro-vided some kind of help if it was clear that the personwas out of work through no fault of his or her own.When the economy suddenly ground to a near stand-still and the unemployment rate rose to include one-fourth of the work force, private charities and cityrelief programs nearly went bankrupt.


Major Social Welfare Programs

Insurance,or Contributory, ProgramsOld Age, Survivors, and Disability Insurance

(OASDI) Monthly payments to retired or disabled

people and to surviving members of their families.This program, popularly called Social Security, is

paid for by a payroll tax on employers and employ-ees.No means test.

Medicare Federal government pays for part of thecost of medical care for retired or disabled people

covered by Social Security. Paid for by payroll taxeson employees and employers.No means test.

Assistance,or Noncontributory, Programs

Unemployment Insurance (UI) Weekly payments toworkers who have been laid off and cannot find

work. Benefits and requirements determined bystates. Paid for by taxes on employers.No means test.

Temporary Assistance for Needy Families(TANF) Payments to needy families with children.Replaced the old AFDC program. Partially paid for

by block grants from the federal government to thestates.Means test.

Supplemental Security Income (SSI) Cashpayments to aged, blind, or disabled people whose

income is below a certain amount. Paid for fromgeneral federal revenues.Means test.

Food Stamps Vouchers, given to people whoseincome is below a certain level, that can be used to

buy food at grocery stores. Paid for out of generalfederal revenues.Means test.

Medicaid Pays medical expenses of persons receiving

TANF or SSI payments.Means test.

Earned Income Tax Credit Pays cash or tax credit to

poor working families.Means test.


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The election of 1932 produced an overwhelmingcongressional majority for the Democrats and placedFranklin D. Roosevelt in the White House. Almost

immediately a number of emergency measures wereadopted to cope with the depression by supplyingfederal cash to bail out state and local relief agenciesand by creating public works jobs under federal aus-pices. These measures were recognized as temporary

expedients, however, and were unsatisfactory to thosewho believed that the federal government had a per-manent and major responsibility for welfare. Rooseveltcreated the Cabinet Committee on Economic Secu-rity to consider long-term policies. The committeedrew heavily on the experience of European nationsand on the ideas of various American scholars andsocial workers, but it understood that it would haveto adapt these proposals to the realities of Americanpolitics. Chief among these was the widespread beliefthat any direct federal welfare program might be un-constitutional. The Constitution nowhere explicitlygave to Congress the authority to set up an unemploy-ment compensation or old-age retirement program.And even if a welfare program were constitutional,


Recipients(inmillions)

30

AFDC/TANF Food Stamps SSI

25

20

15

10

5

1975 1980 1985 1990 1995 2000 20040

% change

+39.1%

% change

+68.2%

% change53.1%

Figure 19.1 AFDC/TANF, Food Stamps, and SSI

Recipients, 19752004

Note: AFDC/TANF refers to Aid to Families with Dependent Children/Temporary Assistance for Needy Families; TANF replaced AFDC after 1996.SSI refers to Supplemental Security Income.Source: Adapted from U.S. Department of Health and Human Services, Indica-tors of Welfare Dependence: Annual Report to Congress, 2006.

In 1932, unemployed workers line up at a soup kitchenduring the Great Depression.

In 1934, Huey Long, the popular governor ofLouisiana, claimed that Roosevelt was not doingenough to help the common man. But before hecould become a serious threat to Roosevelt in the1936 election, he was assassinated in 1935.


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many believed, it would be wrong because it violatedthe individualistic creed that people should help them-selves unless they were physically unable to do so.

But failure by the Roosevelt administration to pro-duce a comprehensive social security program,his sup-

porters felt, might make the president vulnerable inthe 1936 election to the leaders of various radicalsocial movements. Huey Long of Louisiana was pro-posing a Share Our Wealth plan; Upton Sinclair wasrunning for governor of California on a platformcalling for programs to End Poverty in California;and Dr. Francis E. Townsend was leading an organi-zation of hundreds of thousands of elderly people onwhose behalf he demanded government pensions of$200 a month.

The plan that emerged from the cabinet commit-tee was carefully designed to meet popular demandswithin the framework of popular beliefs and consti-tutional understandings. It called for two kinds of pro-grams: (1) an insurance program for the unemployedand elderly, to which workers would contribute andfrom which they would benefit when they becameunemployed or retired; and (2) an assistance pro-gram for the blind, dependent children,and the aged.(Giving assistance as well as providing insurancefor the aged was necessary because for the first few

years the insurance program would not pay out anybenefits.) The federal government would use its powerto tax to provide the funds, but all of the programs(except for old-age insurance) would be adminis-

tered by the states. Everybody, rich or poor, would beeligible for the insurance programs. Only the poor, asmeasured by a means test (a measure to determinethat incomes are below a certain level), would be eli-gible for the assistance programs. Though bitterly op-posed by some, the resulting Social Security Act passedswiftly and virtually unchanged through Congress. Itwas introduced in January 1935 and signed by Presi-dent Roosevelt in August of that year.

The idea of having the government pay the med-ical and hospital bills of the elderly and the poor hadbeen discussed in Washington since the drafting of theSocial Security Act. President Roosevelt and his Com-

mittee on Economic Security sensed that medical carewould be very controversial, and so health programswere left out of the 1935 bill in order not to jeopard-ize its chances of passage.10

The proponents of the idea did not abandon it,however. Working mostly within the executive branch,they continued to press, sometimes publicly, some-

times behind the scenes, for a national health care plan.Democratic presidents, including Truman, Kennedy,and Johnson, favored it; Republican president Eisen-hower opposed it; Congress was deeply divided onit. The American Medical Association attacked it as

socialized medicine. For thirty years key policy en-trepreneurs, such as Wilbur Cohen, worked to finda formula that would produce a congressional ma-

jority.The first and highest hurdle to overcome, however,

was not Congress as a whole but the House Ways andMeans Committee, especially its powerful chairmanfrom 1958 to 1975, Wilbur Mills of Arkansas. A ma-

jority of the committee members opposed a nationalhealth care program.Some members believed it wrongin principle; others feared that adding a costly healthcomponent to the Social Security system would jeop-ardize the financial solvency and administrative in-tegrity of one of the most popular governmentprograms. By the early 1960s a majority of the Housefavored a health care plan, but without the approvalof Ways and Means it would never reach the floor.

The 1964 elections changed all that. The Johnsonlandslide produced such large Democratic majoritiesin Congress that the composition of the committeeschanged. In particular the mem-bership of the Ways and MeansCommittee was altered. Whereasbefore it had three Democrats forevery two Republicans, after 1964

it had two Democrats for everyone Republican. The House lead-ership saw to it that the new Dem-ocrats on the committee werestrongly committed to a healthcare program. Suddenly the com-mittee had a majority favorableto such a plan, and Mills, realiz-ing that a bill would pass andwanting to help shape its form,changed his position and becamea supporter of what was to be-come Medicare.

The policy entrepreneurs inand out of the government whodrafted the Medicare plan at-tempted to anticipate the majorobjections to it. First, the billwould apply only to the agedthose eligible for Social Security


insurance programA self-financinggovernment programbased on contributionsthat provide benefits tounemployed or retiredpersons.

assistance programA governmentprogram financed bygeneral income taxesthat provides benefitsto poor citizenswithout requiringcontribution fromthem.

means test Anincome qualification

program thatdetermines whetherone is eligible forbenefits undergovernment programsreserved for lower-income groups.


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retirement benefits. This would reassure legislatorsworried about the cost of providing tax-supportedhealth care for everybody. Second,the plan would cover

only hospital expenses, not doctors bills. Since doc-tors were not to be paid by the government, they wouldnot be regulated by it; thus, presumably, the opposi-


How Things Work

Medicare ABCDs

Medicare is a federal health insurance program that

covers most senior citizens age sixty-five or older,some younger people with disabilities, and people

with end-stage renal disease. Today it covers about45 million elderly and disabled persons.

Medicare does not provide benefits for annual

physicals, eyeglasses, hearing aids, long-term nurs-ing home care, or in-home care.

Part A is hospital insurance. Some people pay amonthly premium; others do not.

Part B is medical insurance. The standard monthly

premium in 2007 was $93.50. It gets deducted au-tomatically from your Social Security check.

Part C is called Medicare Advantage Plus. Basically, itsets the terms under which companies that con-tract with the Medicare program must provide

benefits.Part D is prescription-drug coverage. Participation is

voluntary, and the monthly premium depends onhow much coverage you have.

President Lyndon Johnson (left) signs the Medicare Act in 1965 in the company of VicePresident Hubert Humphrey (standing) and former president Harry S Truman (right).


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tion of the American Medical Association would beblunted.

Unexpectedly, however, the Ways and Means Com-mittee broadened the coverage of the plan beyondwhat the administration had thought was politically

feasible.It added sections providing medical assistance,called Medicaid, for the poor (defined as those alreadygetting public assistance payments) and payment ofdoctors bills for the aged (a new part of Medicare).The new, much-enlarged bill passed both houses ofCongress with ease.The key votes pitted a majority ofthe Democrats against a majority of the Republicans.

Reforming Majoritarian WelfarePrograms

Both Social Security and Medicare are changing. Whata majority of the people want will soon cost them moremoney than they can afford. But not every citizen isprepared to do what is necessary to fix this problem,and so the politicians are left in a bind: they mustsave Social Security and Medicare without chang-ing Social Security and Medicare. It will not be easy.

The key problem for Social Security is that, as thepopulation ages, soon there will not be enough peo-ple paying Social Security taxes to provide benefitsfor every retired person. By 2020 there will be fewerthan four workers for every retiree, and the payrolltaxes on these workers would have to more than dou-ble to pay that retirees bills.

At present, Social Security faces a nearly $4 trillionshortfall over the next seventy-five years. There aremany different ideas about how to close the gap andsave the system. Here are a half-dozen proposals thathave been analyzed and debated, some of them morepopular than others with U.S. citizens (see Table 19.1):

1. Raise the retirement age: Under existing law, theage at which a citizen received full or partial SocialSecurity benefits is rising to sixty-seven for peopleborn after 1959. By or before the year 2090, raise itto seventy. This would close the long-term fund-ing gap by about 20 percent.

2. Reduce benefits for high-earners: Today a retiree inthe programs highest wage bracket is eligible for amaximum monthly payment of about $2,120.Over the next several decades, reduce the maxi-mum monthly benefit by about 10 percent. Thischange would close the gap by about 25 percent.

3. Raise payroll taxes: Now both workers and theiremployers pay 6.2% of the workers wages up to

$97,500 in Social Security payroll taxes. Over thenext generation or two, increase that tax to 6.7%.This would eliminate about half of the projectedfunding gap.

4. Increase the wage cap: Presently workers and em-ployers pay Social Security taxes on the first $97,500of wages. Over the next several decades, increasethe wage cap to $150,000.This would close the gapby about half.

5. Have government make investments: Let the govern-ment invest 15 percent of the fund in U.S. Treasury

bonds or certain low-risk stock funds. If begunsoon, this could reduce the gap by about 15 percent.

6. Let individuals make investments: Let people investsome of their Social Security tax payments in privateretirement accounts like stocks or mutual funds,with benefits higher or lower than expected depend-ing on stock market performance. There is no con-sensus on how this proposal might affect the gap.

A national advisory commission proposed the sixthoptionprivate investment accountsto PresidentClinton, but he did not embrace it. Another commis-sion recommended three versions of the option to

President George W. Bush, but he received the reportjust a few months after September 11, 2001. Bush re-vived the plan in 2004, and the 109th Congress beganto debate it in 2005. In 2007,the Democratic-led 110thCongress rebuffed Bushs attempts to bring it up yetagain.

Even though private investment is the third mostpopular option on the list (it is especially popular with


Table 19.1 Public Opinion on Social SecurityReform Options

Reform Option Consider Favor

Raise the retirement age 47% 33%

Reduce benefits for higher-earners 43 28

Raise payroll taxes 72 59

Increase the wage cap 81 71

Have government make investments 54 40

Let individuals make investements 46

Source: Knowledge Networks, survey of a nationally representative

sample of 1,514 adults age twenty-one and older, conducted January

1929, 2007, as reported in Retirement Security Survey Report (Wash-

ington, D.C.: American Association of Retired Persons, February 2007);

and Public Agenda Foundation, Social Security: Bills and Proposals,

2007, at http://www.publicagenda.org/issues/major_proposals, citing

a January 2005 survey by the Pew Research Center of the Pew Charita-

ble Trusts.


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younger voters), every time the idea has gotten backinto the political headlines public opinion has shiftedagainst it.For example, during the debate in 2004 and2005, most surveys found two-thirds or more of allAmericans agreeing that the primary reform goalshould be to keep Social Security as a program thatguarantees every worker a monthly benefit based onhis or her pre-retirement wages. Only eighteen- to

thirty-four-year-olds had majorities favoring lettingworkers invest some of their Social Security contri-butions in private retirement accounts.

The key problems with Medicare are that it costs ahuge amount of money and is not a very efficient wayof paying for health care. When Medicare was enactedin 1965, the government said that by 1990 it wouldcost $12 billion a year. When 1990 rolled around,Medicare actually cost $110 billion. Today it costs over$300 billion a year. As the population gets older andnew (and expensive) life-prolonging technologies aredeveloped, the cost of the program will rise even faster.

Medicare allows people to visit the doctor or go to

the hospital whenever they feel they need to (see thebox on page 514). The doctor or hospital is paid a feefor each visit. This creates three problems: (1) a lot ofpeople use medical services when they dont reallyneed them; (2) some doctors and hospitals overchargethe government for their services; and (3) doctors andhospitals are paid on the basis of a government-

approved payment plan that can change whenever thegovernment wants to save money.

In 1997 a bipartisan commission was formed tosolve the problem of Medicare, but President Clinton,who had helped create it, repudiated its report. Fewpoliticians are willing to propose cost-cutting meas-ures for fear of being burned at the voting booth.

One possible cure is to get rid of Medicare and in-

stead have doctors and hospitals work for the govern-ment. That is done in several countries, and as aresult the citizens of these countries pay less forhealth care than do U.S. citizens (see Table 19.2). But


Mitt Romney, then the Republican governor of Massachu-

setts, signs a bill requiring every state resident to havehealth insurance.

Table 19.2 Post1970 Government Health CareSpending in Ten Countries

Country Average Annual Real

Per-Capita Increase (%)

Australia 4.1

Austria 4.0

Canada 3.1

Germany 3.6

Japan 4.9

Norway 5.3

Spain 5.1

Sweden 2.6

United Kingdom 3.7

United States 5.1

Average 4.1

Source: Laurence Kotlilkoff and Christian Hagist, National Bureau of Eco-

nomic Research, Working paper no. 11833, 2005, reporting OECD data

and rounded averages for the period 19702002, as cited in National

Center for Policy Analysis, Health Care Spending Trends, 2004, table 1.

A girl looks on as her mother displays food stamps.


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many critics argue that government-run health careprovides fewer benefits and slower care and discour-ages aggressive new health care innovations.

A second solution to the problem is to let the eld-erly take their Medicare money and buy health in-

surance from private suppliers, including healthmaintenance organizations (HMOs). This may ormay not be an affordable alternative for individuals.

One day it will become clear that the inevitabili-ties of disease and aging cannot be avoided simplyby spending more money or employing the latest tech-nology.11 For the foreseeable future, however, politi-cians will continue to propose all kinds of health carelegislation. No new health care measures have passed,and only 5 percent of the public ranked poor hospi-tal care/high cost of healthcare as the most impor-tant problem facing this country today, way behindterrorism at 33 percent and economy in general at14 percent,and a far cry from the 28 percent who hadranked health as the countrys number one problemin September 1993.12 But the aging of the baby boompopulation, the continued growth in total govern-ment expenditures on health care, and political pres-sures exerted by powerful interest groups like the AARP(see Chapter 11), among other factors, keep health careissues high on the federal social welfare policy agenda.

Client Welfare Programs: Aid toFamilies with Dependent Children

One part of the Social Security Act of 1935 createdwhat came to be called Aid to Families with Depen-dent Children (AFDC). It was scarcely noticed at thetime. The federal government, in response to the de-pression, promised to provide aid to states that were,in many cases, already running programs to helppoor children who lacked a father.

Because AFDC involved giving federal aid to exist-ing state programs, it allowed the states to define whatconstituted need, to set benefit levels, and to admin-ister the program. Washington did set (and, over the

years, continued to increase) a number of rules gov-erning how the program would work, however. Wash-

ington told the states how to calculate applicantsincomes and required the states to give Medicaid toAFDC recipients. The states had to establish manda-tory job-training programs for many AFDC recipi-ents and to provide child-care programs for workingAFDC parents. Washington also required that womenon AFDC identify their childrens fathers.

In addition to the growing list of requirements,Washington created new programs for which AFDCrecipients were eligible, such as Food Stamps, theEarned Income Tax Credit, or EITC, (a cash grant topoor parents who were working), free school meals,

various forms of housing assistance, and certain otherbenefits. But while all this was happening, publicopinion moved against the AFDC program.

The combination of souring public opinion, in-creasing federal regulations, and a growing roster ofbenefits produced a program that irritated almosteveryone. The states disliked having to conform to agrowing list of federal regulations. The public dislikedthe program because it was viewed as weakening thefamily by encouraging out-of-wedlock births (sinceAFDC recipients received additional benefits for eachnew child). The public worried that AFDC recipientswere working covertly on the side; the data proved thatthis was true of at least half of them in several largecities. AFDC recipients saw that the actual (that is, in-flation-adjusted) value of their AFDC checks was go-ing down.Critics countered that if you added togetherallthe benefits they were receiving(FoodStamps, Med-icaid,housing assistance, and so on), benefit levels wereactually going up. Politicians complained that healthyparents were living off AFDC instead of working. TheAFDC law was revised many times, but never in a waythat satisfied all, or even most, of its critics. ThoughAFDC recipients were only a small fraction of allAmericans, they had become a large political problem.

What made matters worse was that the composi-tion of the people in the program had changed. In1970 about half of the mothers on AFDC were therebecause their husbands had died or divorced them;only a quarter had never been married.13 By 1994 thesituation had changed dramatically: only about aquarter of AFDC mothers werewidowed or divorced, and overhalf had never been married atall. And though most women onAFDC for thefirsttime got off itafter just a few years, almost two-thirds of the women on AFDC at

any given moment had been on itfor eight years or more.

These facts,combined with theincreased proportion of out-of-wedlock births in the country asa whole, made it virtually impos-sible to sustain political support


Earned Income TaxCredit (EITC) Aprovision of a 1975law that entitlesworking families withchildren to receive

money from thegovernment if theirtotal income is below acertain level. Theprogram wasexpanded in the early1990s.


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for what had begun as a noncontroversial clientprogram. In 1996 the program was abolished. It wasreplaced by a block grant program, Temporary Assis-tance for Needy Families (TANF), that set strict fed-eral requirements about work and limited how long

families can receive federally funded benefits. UnderTANF, by 2003, welfare caseloads nationally had de-clined by nearly 60 percent.

# Majoritarian Versus ClientPoliticsThe programs just described illustrate two patternsof policy-making. The old-age pensions created bythe Social Security Act of 1935 and the health care ben-efits created by the Medicare Act of 1965 are examplesofmajoritarian politics: almost everybody benefits, andalmost everybody pays. The TANF program is an ex-ample ofclient politics: a relatively few people benefit,but everybody pays.

Majoritarian Politics When both the benefits and thecosts of a proposed program are widely distributed,the proposal will be adopted if the beneficiaries be-lieve that their benefits will exceed their costs and ifpolitical elites believe that it is legitimate for the fed-eral government to adopt the program.

Initially the benefits people received from the re-tirement program greatly exceeded its costs to them.

Older people were able to get an old-age pension orhealth care even though they had paid in taxes only asmall fraction of what these benefits cost. Social Se-curity and Medicare seemed initially like the nearestthing to a free lunch.

The big debate in 1935 and 1965 was not overwhether the people wanted these programsthepolls showed that they didbut over whether it waslegitimate for the federal government to providethem.14 In 1935 conservatives argued that as desirableas Social Security might be, nothing in the Constitu-tion authorized the federal government to spendmoney for this purpose; welfare, they said, was a pol-

icy area reserved to the states. Liberals rejoined thatthe federal government had an obligation to helppeople avoid poverty in their old age. Besides, theysaid, as an insurance program, retirement benefitswere not really a federal expenditure at all: Washing-ton was merely collecting payments and holdingthem in a trust fund until the people who paid them

were ready to retire. In the midst of the Great Depres-sion and at a time when liberals had large majoritiesin Congress, it was an easy argument to make, and sothe Social Security bill readily crossed over the legiti-macy barrier.

In 1965 the same issues were raised. Conservativesargued that medical care was a private, not a govern-mental,matter and that any federal involvement wouldsubject doctors and hospitals to endless red tape andharm the quality of the doctor-patient relationship.Liberals rejoined that the elderly had health needsthat they could not meet without help and that onlythe federal government had the resources to providethat assistance. Because the 1964 elections, when Lyn-don Johnson defeated Barry Goldwater, had sweptinto the House and Senate large majorities of liberalDemocrats, there was no chance that a conservativecoalition of Republicans and southern Democratscould defeat Medicare, and so it passed.

The votes in Congress on Social Security andMedicare followed party lines. Since the Democraticopponents of these bills were typically conservativesoutherners, the vote followed ideological lines evenmore closely.

Client Politics When the benefits of a proposal are togo to a relatively small group but the public at largepays,we have client politics. Proposals to benefit clientswill pass if the cost to the public at large is not per-ceived to be great and if the client receiving the bene-

fit is thought to be deserving.As noted previously, when AFDC was first en-acted, it was relatively noncontroversial. Originally itseemed intended to help deserving people. In 1935the typical welfare mother was perceived to be awoman living in a small town, whose husband hadbeen killed in a mining accident.Who could object togiving some modest help to a person who was thevictim of circumstances?

Right or wrong, American values on this subjectchanged. Today most Americans believe that able-bodied people on welfare should be made to work fortheir benefits. The work-based welfare provisions of

TANF plainly reflect this belief. In 2002, during thelargely consensual congressional debate over reautho-rizing TANF, even many who had opposed thesestrategies in 1996 (when TANF replaced AFDC) nowsupported them. There remains, however, some pop-ular sentiment for giving welfare recipients job train-ing or even creating government jobs for them. This



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service strategy (providing training and education)is strongly preferred to an income strategy (givingpeople money)unless, of course, the income can becalled insurance.15

Indeed, some critics of welfare, such as CharlesMurray, have argued that AFDC actually increased thenumber of people living in poverty. Murray claimed

that high welfare benefits made it more attractive forsome people to go on welfare than to look for a job andmore attractive for some women to have babies than toget married. This kept them poor. Other scholars havecriticized Murrays thesis. They have argued that thereis no direct evidence that welfare encourages familybreakup and have suggested that the rise in the num-

ber of illegitimate children occurred during a period(the 1970s) when welfare benefits, in real (that is,inflation-adjusted) dollars, were going down.16

In short the clients of theseprograms never acquired in thepublics mind the legitimacy nec-essary for their programs to

prosper. As a result, whereas forforty years it was thought to begood politics to increase old-agebenefits, it increasingly becameconsidered bad politics to doanything but attack, investigate,and curtail welfare programs.

Majoritarian Versus Client Politics 519

Who Governs? To What Ends?

Reforming Majoritarian Education Programs

America is home to about 50 million public school

children. Most citizens, even the elderly and youngadults with no children in public schools, tend tothink of public education in majoritarian terms:

everyone benefits, everyone pays.Until recently, Democrats pretty much owned

this majoritarian issue. With the exception ofsome Democratic mayors, most Democratic lead-

ers have opposed plans to give parents schoolvouchers (public monies that can be used to payfor private or religious school tuitions). Mean-

while, most Republican leaders have favored

vouchers. In 2000, voucher referenda were de-feated soundly in California and Michigan.

Three days after taking office in January 2001,

Republican president George W. Bush proposedan education reform plan that he then describedas the cornerstone of my administration. It con-

tained voucher language and related provisionsthat would have effected sweeping changes in

the Elementary and Secondary Education Act(ESEA). But just a few months into negotiations

on the bill with Senate Democrats, virtually everyaspect of the original Bush plan that could not becredibly couched in majoritarian terms, recon-

ciled with existing ESEA programs, or otherwisejustified as recruiting high-quality teachers, pro-

moting informed parental choice, or improving

the academic achievement of the disadvan-

taged was abandoned.On January 8, 2002, Congress easily passed the

No Child Left Behind Act of 2001. The presidents

major ally in getting the 670-page education re-form plan into law was Democratic senator Ted

Kennedy of Massachusetts. Democrats applaudedthe act mainly for increasing federal education

funding under the ESEA by 49 percent over 2000levels, to over $22 billion a year. Republicans, ledby House conservatives, complained about the

increased ESEA spending and lamented that the

new law did nothing to advance the cause ofschool vouchers. The public, however, gave theBush administration high marks. Shortly after the

president signed the bill into law, polls showedthat, for the first time in many years, most citizensrated Republicans on a par with Democrats in

dealing with education issues.On June 27, 2002, the U.S. Supreme Court de-

clared in the case ofZelman v. Simmons-Harristhat school voucher programs that provide true

private choice are constitutional. It remains to beseen, however, whether political leaders willidentify themselves in the future with school re-

form proposals that are not obviously or strictly inaccord with majoritarian sentiments on educa-

tion policy.

service strategyApolicy providing poorpeople with education

and job training tohelp lift them out ofpoverty.

income strategyApolicy giving poorpeople money to helplift them out of poverty.


15/18

WHAT WOULD YOU DO?

M E M O R A N D U M

To: Ursula Marx, Senate Committee chair

From: Cindy Fried, senior staff member

Subject: Universal Health Care

Legislation

You and the committee have two fairly

distinct sets of options on this universal

health care package.

Arguments for:

1. With more than 47 million

Americans, or one in seven, lacking

health care coverage, the

government needs to enact far-reaching

reform to ensure that everyone receives quality medical care.

2. The soaring cost of health care (which is expected to reach approximately one-

fifth of the federal budget in the next decade) can be contained only by a public

system that has the power to set prices and control costs.

3. Universal health care is a logical expansion of the Medicare and Medicaid

programs created in 1965; nearly half a century later, health care should be a

fundamental right guaranteed for everyone who lives in the United States.

Arguments against:

1. Though many people lack health insurance, most of them get health care in

hospital emergency rooms and from doctors who donate their services.

2. Medical services in the United States are the best in the world, and government

controls on costs will serve only to reduce the quality of care available.

3. In an era of budget deficits and an $8 trillion national debt, the United States

cannot afford to expand social welfare programs.

Your decision:

Support Oppose


UniversalHealthCareGetsStrongBackinginSenateJuly9

WASHINGTON,D.C.A billsponsoringuniversalhealthcareintheUnitedS tatesislikelytobereviewedbythefullSenatenextweek. A ftervigoroushearingsover coverage and costs, the chair of the Senate Committee onHealth, Education, Labor, andPensionssaidthecommitteewouldapprovethebill. Butitfacesanuphillbattleinthemainchamber, asforty-two senators say theywillnot support suchdrastic reform.Publicopinion isdivided, witha recentpollshowing thatAmeri-canswanteveryonetohavebasichealthcare, buttheydonotwantanew health taxtofundtheprogram. . .


16/18

Still, as we stressed in Chapter 17, the politics ofpolicy issues can be affected by changes in peoplesperceptions concerning who bears the burdens andwho receives the benefits. Thus, under TANF, between1996 and 2003, able-bodied adults had a harder time

getting welfare benefits, but welfare-related child-carespending in most states rose by 50 percent or more.17

The average AFDC (and later TANF) benefit amount,adjusted for inflation, has fallen since 1980. In addi-tion, many poor parents who are eligible for an EITCgrant are unaware of the program and so do not re-ceive benefits.

Likewise, the politics of prescription-drug benefitsfor senior citizens soured somewhat in 2004 when

various expert bodies calculated that the latest federalinitiative might cost about $550 billion over the nextdecade (roughly 35 percent more than had previouslybeen estimated),anda totalof $2.5 trillionoverthepro-grams first two decades as baby boomers, a population

that neither suffered through the Great Depression ofthe 1930s nor lived through World War II, reach re-tirement age and milk their Medicare benefits.18

The politics of the policy process is always hard topredict, but in the years just ahead, needy childrenand other at-risk youth might well prove more po-litically popular, and be more widely perceived asdeserving government aid, than baby-boomer re-tirees.

Summary 521

# S U M M A R Y #

We can explain the politics of social welfare policy inAmerica principally in terms of two factors: who ben-efits and who pays, and the beliefs citizens have aboutsocial justice. Neither factor is static: gainers and los-ers vary as the composition of society and the work-ings of the economy change, and beliefs about whodeserves what are modified as attitudes toward work,the family, and the obligations of government change.

The federal government spends far more on ma-joritarian social welfare programs (such as SocialSecurity and Medicare) than on client ones (such as

Food Stamps and EITC). It also promotes the majori-tarian programs and encourages people to participate;it does much less of either with the client programs.

The congressional (as opposed to the parliamen-tary) system of government means that greater politicaleffort and more time are required for the adoption ofa new welfare policy. Federalism means that the stateswill play a large role in determining how any welfareprogram is administered and at what level benefitsare set.

RECONSIDERING WHO GOVERNS?

1. How, if at all, have Americans views of govern-ments responsibility to help the deserving poorchanged over time?

American welfare policy since the 1930s has under-gone a slow but steady change in how it has sepa-rated the deserving from the undeservingpoor.In essence, today we separate them less and aremore willing to have people rely solely on the gov-ernment for help. For example, even before the

New Deal, most Americans would surely havecounted a poor,disabled, blind, elderly woman de-serted by her family as deserving of public aid. To-day, however, many citizens would also favor givingher aid even if she were only disabled, without re-gard to her income or family situation. Likewise,whereas once most Americans were inclined to

provide public aid only if the beneficiarys familyhelped too, today most citizens do not believe instrictly conditioning public aid on family support.

2. Why are some government social welfare pro-grams politically protected while others are po-litically imperiled?

Majoritarian programs (nearly everyone benefits,nearly everyone pays) like Social Security and

Medicare are politically sacrosanct. Client-basedprograms (a relatively few number of people ben-efit, but almost everyone pays) like the now-defunct Aid to Families with Dependent Children(AFDC) are politically shaky. Debates about theformer normally concern only how to keep the ben-efits flowing; debates about the latter often concern


17/18

whether to keep the program ongoing. But cer-tain client-based programs are less politically vul-nerable than othersit all depends on who theclients are, or are widely perceived to be. Medicaidwas protected largely because its clients included

middle-class retirees who received nursing homebenefits and medically needy low-income children.AFDC was targeted because its clients were per-ceived by many to include ablebodied adults whochose to receive public aid rather than go to work.


RECONSIDERING TO WHAT ENDS?

1. What does the Constitution mean by promotethe general Welfare?

The Framers of the Constitution did not mean bythis phrase that government has a duty to providecash assistance or other benefits to citizens in eco-nomic need, or that the president or Congress hasto manage the economy. Rather, they undoubt-edly meant something closer to protect privateproperty and promote public safety and morals.It is difficult, however, to be sure about what theymeant by those words. Some present-day advo-cates for the poor have suggested that the federalgovernment, by enacting laws intended to lift low-income citizens out of poverty, to provide healthcare at public expense, and to guarantee access toaffordable housing, has thereby established a con-

stitutional right to such social welfare programs,services, or supports. There is little constitutionalcase law to support that view.

2. Should religious groups be eligible to administersome federal welfare programs?

Under four Charitable Choice laws the federalgovernment may not discriminate against com-munity-serving faith-based organizations in thegrant-making process, but these organizations arestrictly prohibited from using any public funds toproselytize, provide religious instruction, or per-form worship services; may not hire only coreli-gionists; and must serve all eligible persons withoutregard to religion. The courts have consistentlyupheld its legality and constitutionality.

WORLD WIDE WEB RESOURCES

Social welfare programsMedicare:www.medicare.govSocial Security:www.ssa.govTANF:www.acf.dhhs.gov/programs/ofa/

Views on Social Security reformwww.socialsecurityreform.orgwww.socialsecurity.orgwww.socsec.org


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Summary 523

SUGGESTED READINGS

Derthick, Martha. Policymaking for Social Security. Washington,D.C.: Brookings Institution, 1979. A detailed analysis of howthe Social Security program grew.

Heclo, Hugh.Modern Social Politics in Britain and Sweden. NewHaven, Conn.:Yale University Press, 1974.Comparative analy-sis of how social welfare programs came to Britain andSweden.

Monsma, Stephen V. Putting Faith in Partnerships: Welfare-to-Work in Four Cities. Ann Arbor: The University of MichiganPress, 2004. Careful study of the six different types of organi-zations that administer welfare-to-work programs in big citiestoday.

Moynihan, Daniel Patrick. Family and Nation. New York: Har-court Brace Jovanovich, 1986.Argument for the importance offederal policy to aid families.

Murray, Charles. Losing Ground: American Social Policy,19501980. New York: Basic Books, 1984. An argument thatfederal spending on the poor actually increased poverty dur-ing the 1960s and 1970s.

Wilson, William J. The Truly Disadvantaged. Chicago: Universityof Chicago Press, 1987. Disputes Murrays explanation, argu-ing instead that ghetto poverty is the result of the movementof jobs out of cities.

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