The American Welfare State

Our substantive topic for the week is what I refer to as social welfare policy and what Peters refers to as income maintenance policy. What's the difference? I would say that social policy is broadly a set of policies that regulate social relationships between citizens. This category of policy includes social welfare policies as well as social policies dealing with issues of gender and sexuality like abortion and gay marriage. Social welfare policies deal with regulating relationships of economic inequality and tend to be redistributive policies. Income maintenance policies are, in my view, the sub-set of social welfare policies that subsidize income. I would argue, for example, that Medicaid is a social welfare policy but would not consider it an income maintenance policy because it is an in-kind benefit. The combination of these redistributive social policies make-up the institution we call the welfare state or welfare system. Of course, you'll see that in Peters' discussion of welfare he does not draw a clear line between income maintenance and in-kind benefits. He discusses policies that could be considered health care and education policies in this chapter.

For simplicity's sake, I am going to focus on two types of "income maintenance" programs, Social Security and Temporary Assistance for Needy Families (TANF) which is the program we usually refer to when we talk about welfare. Both Social Security and TANF have a similar goal, they attempt to redistribute income from taxpayers to individuals or families who are in need of income support. Of course, this is how we think of welfare and not at all how we think of Social Security. The major difference is the structure of the two programs. Social Security is structured as a social insurance program, while TANF is structured as a means-tested program. The welfare systems of some countries like the Scandinavian countries only include social insurance programs. In the United States, we have a mixed welfare state made up of means-tested programs like TANF, food-stamps, and Medicaid, social insurance programs like Social Security, Unemployment Insurance, and Medicare, and corporate and non-profit provided benefits like health insurance, shelters, and soup kitchens.

Social insurance programs like Social Security use the logic of insurance pools that we discussed when we talked about healthcare reform. The idea is that we have uncertainty about how long we will live, if we may become disabled, or if we may lose our jobs. Because we cannot accurately predict these things, and all of us are at risk, we join together into an insurance pool where the workers provide for the disabled, retired, and unemployed with the understanding that we will be provided for when we find ourselves in such a state. By design, social insurance programs have no income eligibility criteria. This ensures that everyone has a stake in the continuation of the program because everyone feels as though they benefit. Of course, we have this idea that we pay for our own Social Security when we are working and get it back when we retire, but this is not actually how the system works.

The genius of social insurance programs is that they build civic trust and a sense of community, and there are strong incentives to continue the program. The first generation who was eligible for Social Security received the best deal because they paid very little into the system and received benefits, but the last generation to pay fully into the system without receiving benefits will be the ultimate losers. Many people in their 20's and early 30's believe that Social Security will not be around for them. This is somewhat disturbing because it can become a self-fulfilling prophecy. The small, technical changes Peters discusses in the chapter can make Social Security solvent, but convincing the young that they will not receive Social Security is one way to eliminate the program without a lot of political risk. Politicians usually make changes to Social Security and Medicare that take effect many years in the future because of the perception that young people do not vote and when they do, they are not paying attention to programs that they will not receive for years to come.

We think about means-tested programs very differently. To qualify for a means-tested programs you have to be low-income and have few assets. Although in theory social mobility means that one has an equal chance of moving downward in class as upward in class, Americans do not believe that being in poverty is something we are all at risk of. We tend to believe that people who qualify for these programs are poor because they have made bad decisions. Means-tested programs tend to be stigmatizing and degrading, and easy political targets. Although we had a welfare rights movement in the 1960's, individuals who qualify for means-tested programs tend to be difficult to mobilize because of the stigma of receipt and the lack of political power held by recipients. On the other hand, means-tested programs at least attempt to target benefits to those most in-need.

The story of welfare is a little more complicated than the story of Social Security. No major changes (aside from expansions to new groups) have been made to Social Security since its creation during the New Deal. In contrast, welfare has been radically changed. Aid to Families with Dependent Children (AFDC), the pre-cursor to TANF, was created at the same time as Social Security. It was created to support widows with children in a time where women were expected to be homemakers and caretakers rather than labor market participants. The program was an entitlement so anyone who qualified had a legal right to receive benefits. This meant that as family structure changed and there were more single-parent households the program became more expensive. As the recipients of those households were portrayed increasingly as lazy, African-American lifetime recipients (which bore little relationship to the reality of program recipients) the program became increasingly unpopular.

In 1996, Bill Clinton's administration "Reformed welfare as we know it" through the Personal Responsibility and Work Opportunity Reconciliation Act (PRWORA). The reforms repealed AFDC and replaced it with TANF. TANF can be considered a "workfare" program where the emphasis is on labor market participation. It also decoupled the receipt of benefits like food-stamps and Medicaid from receipt of TANF (previously, all of these programs had been packaged together). Under TANF, families can only receive benefits for up to two years at any one time and five years over a lifetime. To receive benefits recipients have to either get a job or engage in activities that prepare them for work. Immigrants were basically ruled ineligible to receive either TANF or food stamps. Child support enforcement was an important part of the reform, forcing women receiving TANF to identify and provide information about the fathers of their children to the state. There were also substantial provisions providing funding for marriage promotion among recipients. Finally, TANF provided states with a lot more discretion in program administration than they had under AFDC. States differ significantly in terms of the inclusion and adequacy of their TANF programs.

When PRWORA was passed, opponents of reforms predicted dire consequences. They argued that children would be dying on the streets and poverty and crime would be at all time highs. They also predicted that states would engage in a "race to the bottom" with all states providing the bare minimum to avoid attracting undesirable residents. In reality none of this came to pass. This has been attributed to a few different factors. 1) PRWORA was passed during the late 1990s when the economy was doing well and there was high demand for low-wage, unskilled labor in most states. 2) Bill Clinton also passed a substantial increase to the Earned Income Tax Credit which significantly subsidizes the wages of low-wage families. 3) "Liberal" states provide generous benefits for cultural and social reasons, not just purely self-interested economic reasons. I think we are starting to see some of the problems with TANF in a poor economy. Despite the increase in need due to high, long-term, unemployment associated with the 2008 recession, TANF use has changed very little. This shows that the program has for some reason become unresponsive to family needs. If you want to read more on TANF during the recession, here is a good policy brief on the topic.

Social Security and TANF represent two sides of the coin for addressing poverty. Thanks to Medicare and Social Security, elderly poverty (by official measures) has all but disappeared in the United States. In contrast, child poverty continues to increase. Should we create a social insurance program like a family allowance to address poverty? Should our poverty alleviation policies change in response to the business-cycle? What's the best way to ensure that Social Security persists as an effective social insurance policy targeted at the elderly? Are you convinced that Social Security will not be around when you retire?