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ocial welfare policy is best viewed through the providing tax credits for couples earning less S lens of political economy (i.e., the interaction of than $200,000 annually. economic, political, and ideological forces). This • Jump-start the economy through a $700 billion chapter provides an overview of the American wel- stimulus package that included $25 billion for fare state through that lens. In particular, it exam- infrastructure projects as well as $25 billion for ines various definitions of social welfare policy, the state and local governments. relationship between social policy and social prob- • Introduce progressivity in the withholding tax lems, and the values and ideologies that drive social by adding a tax of 2 to 4 percent for individuals welfare in the United States. In addition, the chap- whose incomes exceed $250,000 a year. ter examines the effects of ideology on the U.S. wel- • Require that all children have health insurance, fare state, including the important roles played by prohibit insurance companies from refusing to conservatism and liberalism (and their variations) insure people with pre-existing conditions, and in shaping welfare policy. An understanding of mandate that employers provide health insur- social welfare policy requires the ability to grasp the ance to workers or pay into a health insurance economic justifications and consequences that fund. underlie policy decisions. As such, this chapter con- • Spend $10 billion to expand and improve pre- tains a brief introduction to Keynesianism, free school education and $12 billion for higher edu- market economics, socialism, and communitarian- cation in the form of a $4,000 refundable tax ism, among others. credit in exchange for 100 hours of community American social welfare is in transition. Starting service.1 with the Social Security Act of 1935, liberals argued that federal social programs were the best way to While liberal pundits hailed the resurgence of “a help the disadvantaged. Now, after 70 years of exper- vast new progressive movement,”2 structural limits imenting with the welfare state, a discernible shift would certain restrain Obama’s ambitions. Massive has occurred. The conservatism of U.S. culture— deficits left by the second Bush administration com- so evident in the Reagan, Bush (both Bushes), and pounded by a looming recession mean that eco- even Clinton presidencies—has left private institu- nomic issues will not only trump other priorities, but tions to shoulder more of the welfare burden. For that reduced tax revenues will impede the ability of proponents of social justice, the suggestion that the the government to meet existing obligations let alone private sector should assume more responsibility for expand social programs. Moreover, the Republicans welfare represents a retreat from the hard-won gov- can filibuster Democratic initiatives in the Senate ernmental social legislation that provided essential that are perceived as being particularly generous. benefits to millions of Americans. Justifiably, these Obama’s centrist inclinations will help build biparti- groups fear the loss of basic goods and services dur- san support for his legislative agenda. This was evi- ing the transition in social welfare. dent in his understanding of welfare reform. The political trajectory shifted with the 2008 Acknowledging that “conservatives—and Bill election. The election of Barack Obama as the 44th Clinton—were right” to scrap the Aid to Families with President of the United States not only broke a Dependent Children program, Obama also recog- racial barrier but also swept away the strident nized that welfare reform had “swelled the ranks of conservatism that had defined the presidency of the working poor.” Consequently, he argued that a George W. Bush. Winning 52 percent of the vote and post-welfare reform anti-poverty policy must entail increasing Democratic majorities in both chambers increasing the Earned Income Tax Credit for low- of Congress, the Obama victory heartened liberals income working families, but also expanding com- who anticipated an expansion of government social munity-based health and education as well as law programs. Obama’s platform was crafted to appeal enforcement.3 Clearly, economic and political cir- to middle-class voters who had lost ground econom- cumstances will test the new president’s leadership in ically during the second Bush presidency and managing domestic affairs and therein social welfare. included the following objectives: Despite the Democratic victory in 2008, struc- tural features of the American welfare state militate • Increase capital gains taxes on individuals against a major expansion of government, per se. making more than $250,000 per year while A pluralistic mix of private and public services is an M01_KARG7080_SE_06_C01.QXD 1/22/09 10:55 AM Page 3

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overriding feature of U.S. social welfare. As in other through privatization. Yet past advocates of social realms, such as education, in social welfare private justice such as Jane Addams, Whitney Young Jr., institutions coexist alongside those of the public and Wilbur Cohen, to name a few, interpreted the sector. U.S. social welfare has a noble tradition of inadequacy of social welfare provision and the con- voluntary citizen groups taking the initiative to fusion of their times as an opportunity to further solve local problems. Today, private voluntary social justice. It remains for another generation of groups provide important services to AIDS patients, welfare professionals to demonstrate the same the homeless, immigrants, victims of domestic vio- imagination, perseverance, and courage to advance lence, and refugees. social welfare in the years ahead. Those accepting Social welfare has become big business. this challenge will need to be familiar with the vari- During the last 30 years, the number of human ous meanings of social welfare policy, differing service corporations—for-profit firms providing political and economic explanations of social wel- social welfare through the marketplace—has fare, and the multiple interest groups that have increased dramatically. Human service corpora- emerged within the U.S. social welfare system. tions are prominent in long-term nursing care, health maintenance, child day care, psychiatric and substance abuse services, and even correc- tions. For many welfare professionals, the privatiz- Definitions of Social ing of social services is troubling, occurring as it does at a time when government has reduced its Welfare Policy commitment to social programs. Yet human serv- ice corporations will likely continue to be promi- The English social scientist Richard Titmuss nent players in shaping the nation’s social welfare defined social services as “a series of collective policies. As long as U.S. culture is democratic and interventions that contribute to the general welfare capitalistic, entrepreneurs will be free to establish by assigning claims from one set of people who are social welfare services in the private sector, both as said to produce or earn the national income to nonprofit agencies and as for-profit corporations. another set of people who may merit compassion The mixed welfare economy of the United and charity.”4 Welfare policy, whether it is the prod- States, in which the voluntary, governmental, and uct of governmental, voluntary, or corporate institu- corporate sectors coexist, poses important ques- tions, is concerned with allocating goods, services, tions for social welfare policy. To what extent can and opportunities to enhance social functioning. voluntary groups be held responsible for public wel- William Epstein defined social policy as “social fare, given their limited fiscal resources? For which action sanctioned by society.”5 Social policy can groups of people, if any, should government divest also be defined as the formal and consistent order- itself of responsibility? Can human service corpora- ing of human affairs. Social welfare policy, a sub- tions care for poor and multiproblem clients while set of social policy, regulates the provision of bene- continuing to generate profits? Equally important, fits to people to meet basic life needs, such as how can welfare professionals shape coherent social employment, income, food, housing, health care, welfare policies, given the fragmentation inherent and relationships.6 in such pluralism? Clearly, the answers to these Social welfare policy is influenced by the con- questions have much to say about how social wel- text in which benefits are provided. For example, fare programs are perceived by human service pro- social welfare is often associated with legislatively fessionals, their clients, and the taxpayers who con- mandated programs of the governmental sector, tinue to subsidize social programs. such as Temporary Assistance for Needy Families The multitude of questions posed by the transi- (TANF). In the TANF program, social welfare policy tion of social welfare in this country is daunting. consists of the rules by which the federal and state Temporarily satisfied by the draconian 1996 welfare governments apportion cash benefits to an econom- reform bill (and the dramatic cuts in the nation’s ically disadvantaged population. TANF benefits are public assistance rolls), conservatives later shifted derived from general revenue taxes (often paid by their attention to “reforming” social insurance pro- citizens who are better off). But this is a simpli- grams such as Social Security and Medicare fication of benefits provided to those deemed needy. M01_KARG7080_SE_06_C01.QXD 1/22/09 10:55 AM Page 4

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Benefits provided through governmental social following definitions: Governmental social welfare welfare policy include cash, along with noncash or policy refers to decisions made by the state; voluntary in-kind benefits, including personal social services.7 social welfare policy refers to decisions reached by Cash benefits can be further divided into social nonprofit agencies; and corporate social welfare policy insurance and public assistance grants (discussed in refers to decisions made by for-profit firms. depth in Chapter 11). In-kind benefits (provided as proxies for cash) include such benefits as food stamps; Medicaid; housing vouchers; Women, Infants, and Children Social Problems and Social (WIC) coupons; and low-income energy assistance. Welfare Policy Personal social services are designed to enhance rela- tionships between people as well as institutions, such as individual, family, and mental health treatment; Social welfare policy often develops in response to child welfare services; rehabilitation counseling; and social problems. The relationship between social so forth. Although complicated, this classification problems and social welfare policy is not linear, and reflects a common theme—the redistribution of not all social problems result in social welfare poli- resources from the better-off to the more disadvan- cies. In many instances, existing social welfare poli- taged. This redistributional aspect of social welfare cies are funded at ineffectual levels. For example, policy is generally accepted by those who view social the Child Abuse Prevention and Treatment Act of welfare as a legitimate function of the state. 1974 was designed to ameliorate the problem of Governmental social welfare policy is often referred child abuse, yet underbudgeting left Child to as “public” policy because it is the result of deci- Protective Service (CPS) workers in a catch-22 situ- sions reached through a legislative process intended ation. The act required CPS workers to promptly to represent the entire population. investigate child abuse reports, but agencies had But social welfare is also provided by non- inadequate staff resources to deal with the skyrock- governmental entities, in which case social welfare eting number of complaints. Caught in a resources policy is a manifestation of “private” policy. For crunch, many CPS workers were unable to properly example, a nonprofit agency with a high demand for investigate allegations of abuse, resulting in many its services and limited resources may establish a children dying or undergoing serious injury. waiting list as agency policy. As other agencies Social welfare is not merely an expression of adopt the same strategy for rationing services, social altruism; it contributes to the maintenance clients begin to pile up on waiting lists and some and survival of society. In this respect, social welfare are eventually denied services. Or consider the prac- policy helps hold together a society that may fracture tice of “dumping,” a policy that has been used by along social, political, and economic stress lines. some private health care providers to abruptly Social welfare policy is also useful in enforcing social transfer uninsured patients to public hospitals control, especially as a proxy for more coercive meas- while they are suffering from traumatic injuries. ures such as law enforcement and the courts.8 When Patients can—and sometimes do—die as a result of the basic minimum needs of the disadvantaged are private social welfare policy. met, they are less inclined to revolt against the unequal Because U.S. social welfare has been shaped by distribution of resources. Social welfare policies also policies of governmental and nonprofit agencies, subsidize employers, because welfare benefits sup- confusion exists about the role of for-profit social plement low and nonlivable wages, thereby main- service firms. The distinction between the public and taining a work incentive. If wages are insufficient to private sectors was traditionally marked by the meet basic food, clothing, and shelter needs, little boundary between governmental and nonprofit incentive exists for workplace participation. agencies. Profit-making firms are “private” non- Without social welfare, like earned income tax cred- governmental entities that differ from the traditional it (EITC), employers would have to raise wages and private voluntary agencies because they operate on a prices for consumers. Social welfare also supports for-profit basis. Within private social welfare, it is important industries, such as agriculture (food therefore important to distinguish between policies stamps), housing (Section 8 and various other hous- of for-profit and of nonprofit organizations. A logical ing programs), and health care (Medicaid and way to redraw the social welfare map is to adopt the Medicare). If social welfare benefits were suddenly M01_KARG7080_SE_06_C01.QXD 1/22/09 10:55 AM Page 5

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eliminated, a segment of U.S. business would col- funding for public agencies. The conservative focus lapse and prices for commodities and services on cutting taxes—evident in the dramatic tax cuts of would rise dramatically. Social welfare benefits help the last Bush administration—led to reductions in maintain stable price structures and economic public revenues and hence reductions for social pro- growth. grams. In response to diminishing revenues, public Social welfare policies also relieve the social agencies adjust in predictable ways, such as cutting and economic dislocations caused by the uneven qualified staff and expecting existing staff to do nature of economic development. For example, one more with less, utilizing less-qualified and lower- of the main features of capitalism and economic paid staff, promoting short-term or group interven- globalism is a constantly changing economy where tions designed to cheaply process more clients, and jobs are created in one sector and lost (or exported) freezing or reducing the salaries and benefits for in another. The result is large islands of unemploy- professional staff. Combined, these strategies help ment as workers transition from one employment shape an agency geared to processing more clients sector to the other or are lost in the shuffle. Myriad rather than helping individual ones. Hence, what a social welfare programs, such as unemployment trained social worker can accomplish depends, in insurance and food stamps, help soften the transi- part, on the available resources within the agency. tion. Without such social benefits, fundamental Although not obvious at first glance, many questions would also arise about the moral nature social workers in private practice who depend on of U.S. society. Finally, social welfare policies are a managed care for reimbursement experience simi- means for rectifying past and current injustices. For lar constraints. Specifically, managed care plans example, affirmative action was designed to remedy dictate how much a social worker will be paid and the historical discrimination that denied large num- how often they will see a client; accordingly, care bers of Americans access to economic opportunities management dictates the kinds of interventions that and positions of power. School breakfast and lunch will be practical in the allotted time. In fact, these programs, teacher incentive pay, and other policies policies have as much impact on what social work- are designed to help ameliorate the unequal distri- ers do in their day-to-day work as the microlevel bution of resources between underfunded inner-city theories taught in much of social work education. and better-funded suburban school systems. Accepted agency policy also helps to dictate what is taught in direct social work practice. Social Work and Social Policy Values, Ideology, and Social Social work practice is driven by social policies that Welfare Policy dictate how the work is done, with whom, for how much, and toward what ends. For example, a social worker employed in a public mental health center Social welfare policies are shaped by a set of social may have a caseload of well over 200 clients. Given and personal values that reflect the preferences of that caseload size, it is unlikely that the worker can those in decision-making capacities. According to engage in any kind of sustained therapeutic interven- David Gil, “Choices in social welfare policy are tion with clients because the size of the caseload heavily influenced by the dominant beliefs, values, permits little more than case tracking. Or consider ideologies, customs, and traditions of the cultural the worker who must find employment for mothers and political elites recruited mainly from among the on public assistance about to lose benefits because of more powerful and privileged strata.”9 Charles the imposition of time limits, but who are unlikely to Prigmore and Charles Atherton list no fewer than locate adequate work because of high area unem- 15 values that influence social welfare policy: ployment. In these instances, economic (i.e., under- achievement and success, activity and work, public funding) and political factors contribute to policies morality, humanitarian concerns, efficiency and that determine the ability of the worker and agency practicality, material comfort, equality, freedom, to accomplish their jobs. external conformity, science and secular rationality, An ideological preference among policymakers nationalism and patriotism, democracy and self- for private sector social services has resulted in less determination, individualism, racism and group M01_KARG7080_SE_06_C01.QXD 1/22/09 10:55 AM Page 6

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superiority, and belief in progress.10 How these val- adherents of one orientation hold sway in decision- ues are played out in the realm of social welfare is making bodies. the domain of the policy analyst. Despite the best of Ideology even more strongly influences social intentions, social welfare policy is rarely based on a welfare policy during periods of threat, such as the rational set of assumptions and reliable research. current “War on Terror.” In this instance, social wel- One view of a worthwhile social policy is that it fare policy fades into the background as the per- should leave no one worse off and at least one per- ceived need for personal and national security takes son better off, at least as that person judges his or center stage. U.S. social history has been intermit- her needs. In the real world of policy that rarely tently shattered when oppressed groups assert their occurs. More often than not, policy is a zero-sum rights in the face of mainstream norms. Such peri- game, in which some people are advantaged at the ods of social unrest strain the capacity of conven- expense of others. In fact, it can be argued that tional ideologies to explain social problems and major social policies are based on values, not on the offer solutions. Sometimes social unrest is met with careful consideration of alternative policies. force, as during the period of the great labor strikes Of course, there are serious consequences when of 1877. In other instances, such as the Great social welfare policy is determined to a high degree Depression, social unrest is met with expanding by values. Since the late 1970s, social welfare policy social welfare programs. has been largely shaped by values that emphasize self-sufficiency, work, and the omniscience of the marketplace. Because policymakers expected disad- vantaged people to be more independent, supports The Political Economy of from government social programs were significant- ly cut. Although these reductions saved money in American Social Welfare the short run, most of the beneficiaries whose sup- ports fell to the budget ax were children. Eventually, The term political economy refers to the interac- cuts in social programs may well lead to greater tion of political and economic theories in under- expenditures, as the generation of children who standing society. The political economy of the have gone without essential services begin to United States has been labeled democratic require programs to remedy problems associated capitalism—an open and representative form of with poor maternal and infant health care, poverty, government that coexists with a market economy. In illiteracy, and family disorganization. Although in that context, social welfare policy plays an impor- 2006 the U.S. ranked fourth internationally in pur- tant role in stabilizing society by modifying the play chasing power parity (what a family income can of market forces and softening the social and eco- actually buy in a given country), it ranked 22nd in nomic inequities that the market generates.12 To public spending on family benefits.11 that end, two sets of activities are necessary: state Social values are organized through the lens of provision of social services (benefits of cash, in-kind ideology. Simply put, an ideology is the framework benefits, and personal social services) and state reg- of commonly held beliefs through which we view ulation of private activities to alter (and sometimes the world. It is a set of assumptions about how the improve) the lives of citizens. Social welfare bolsters world works: what has value, what is worth living ideology by helping to remedy the problems associ- and dying for, what is good and true, and what is ated with economic dislocation, thereby allowing right. For the most part, these beliefs are rarely society to remain in a state of more or less con- examined and are simply assumed to be true. trolled balance. Hence, the ideological tenets around which society As noted earlier, the U.S. welfare state is driven is organized exist as a collective social conscious- by political economy. Ideally, the political economy ness that defines the world for its members. All soci- of the welfare state should be viewed as an integrat- eties reproduce themselves partly by reproducing ed fabric of politics and economics, but in reality, their ideology; in this way, each generation accepts some schools of thought or movements contain more the basic ideological suppositions of the preceding political than economic content, and vice versa. For one. When widely held ideological beliefs are ques- example, most economic schools of thought contain tioned, society often reacts with strong sanctions. sufficient political implications to qualify them as Ideological trends influence social welfare when both economic and political dogmas. Conversely, M01_KARG7080_SE_06_C01.QXD 1/22/09 10:55 AM Page 7

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most political schools of thought contain significant economic content. It is therefore often difficult to separate political from economic schools of thought. For the purposes of this chapter, though, we will organize the political economy of U.S. wel- fare into two separate categories: (1) predominantly economic schools of thought and (2) predominantly political schools of thought. The careful reader will find a significant overlap among and between these categories.

The U.S. Economic Continuum

In large measure, economics forms the backbone of the political system. For example, we would not have the modern welfare state without the con- tributions of economist John Maynard Keynes. Conversely, we would not have the conservative movement without the contributions of classical or free market economists such as Adam Smith or John Maynard Keynes is best known as the eco- Milton Friedman. Virtually every political move- nomic architect of the modern welfare state. ment is somehow grounded in economic thought. The three major schools of economics that have tra- ditionally dominated American economic thought recessions, modern economies were recession are Keynesian economics; classical or free market prone and had difficulty providing full employment. economics (and its variants); and, to a lesser degree, According to Keynes, periodic and volatile eco- democratic socialism. nomic situations that cause high unemployment are primarily caused by instability in investment expen- ditures. The government can stabilize and correct Keynesian Economics recessionary or inflationary trends by increasing or Keynesian economics drives liberalism and most decreasing total spending on output. Governments welfare state ideologies. John Maynard Keynes’ eco- can accomplish this by increasing or decreasing nomic theories formed the substructure and foun- taxes (thereby increasing or decreasing consump- dation of the modern welfare state, and virtually all tion) and by the transfer of public goods or services. welfare societies are built along his principles. For Keynes, a “good” government is an activist gov- Sometimes called demand or consumer-side eco- ernment in economic matters, especially when the nomics, this model emerged from Keynes’s 1936 economy gets out of full employment mode. book, The General Theory of Employment, Interest Keynesians believe that social welfare expenditures and Money. are investments in human capital that eventually An Englishman, Keynes took the classical increase the national wealth (e.g., by increasing pro- model of economic analysis (self-regulating mar- ductivity) and thereby boost everyone’s net income. kets, perfect competition, the laws of supply and Keynes’s doctrine emerged from his attempt to demand, etc.) and added the insight that macroeco- understand the nature of recessions and depressions. nomic stabilization by government is necessary to Specifically, he saw recessions and depressions as keep the economic clock ticking smoothly.13 He emerging from businesses’ loss of confidence in rejected the idea that a perfectly competitive econo- investments (e.g., focusing on risk rather than gain), my tended automatically toward full employment which in turn causes the hoarding of cash. This loss and that the government should not interfere in the of confidence eventually leads to a shortage of money process. Keynes argued that instead of being self- as everyone tries to hoard cash simultaneously. correcting and readily able to pull themselves out of Keynes’s answer to this problem is that government M01_KARG7080_SE_06_C01.QXD 1/22/09 10:56 AM Page 8

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should make it possible for people to satisfy their instituting late shopping hours or even 24/7 busi- economic needs without cutting their spending, nesses that make it impossible for small family- which prevents the spiral of shrinking incomes and owned businesses to compete. shrinking spending. Simply put, in a depression the The ascendance of the conservative economic government should print more money and get it into (and social) argument accelerated after 1973, when circulation.14 the rise in living standards began to slow for most Keynes also understood that this monetary pol- Americans. Conservatives blamed this economic icy alone would not suffice if a recession got out of slowdown on governmental policies—specifically, control, as in the depression of the 1930s. In a deficit spending, high taxes, and excessive regula- depression, businesses and households will not tions.17 In a clever sleight of hand, government went increase spending regardless of how much cash from having the responsibility to address economic they have. To help an economy exit this trap, gov- problems (à la Keynes) to being the cause of them. ernment must do what the private sector will not— Milton Friedman, considered by some to be the namely, spend. This spending can take the form of father of modern conservative economics, was one public works projects (financed by borrowing) or of of Keynes’s more ardent critics. In opposition to direct governmental subsidization of demand (wel- Keynes, Friedman argued that using fiscal and fare entitlements). To be fair, Keynes saw public monetary policy to smooth out the business cycle is spending only as a last resort to be employed if harmful to the economy and worsens economic monetary expansion failed. Moreover, he sought an instability.18 He contended that the Depression did economic balance: Print money and spend in a not occur because people were hoarding money; recession; stop printing and stop spending once it is rather, there was a fall in the quantity of money in over. Keynes understood that too much money in circulation. Friedman argues that Keynesian eco- circulation, especially in times of high production nomic policies must be replaced by simple mone- and full employment, leads to inflation. Although tary rules (hence the term monetarism). In effect, he relatively simple, Keynes’s theories represent one of believes that the role of government is to keep the the great insights of twentieth-century economic money supply growing steadily at a rate consistent thought.15 These ideas also formed the economic with stable prices and long-term economic basis for the modern welfare state. growth.19 Friedman counseled against active efforts to stabilize the economy. Instead of pumping money Conservative or Free Market Economics into the economy, government should simply make Whereas liberalism is guided by Keynesian eco- sure enough cash is in circulation. He called for a nomics, the conservative view of social welfare is relatively inactive government in economic affairs guided by free market economics. It is predicated that did not try to manage or intervene in the busi- on a belief in the existence of many small buyers ness cycle. For Friedman, welfare spending existed and sellers who exchange homogeneous products only for altruistic rather than economic reasons.20 with perfect information in a setting in which each To the right of Milton Friedman is Robert Lucas, can freely enter and exit the marketplace at will.16 1994 Nobel Prize winner and developer of the “the- None of these assumptions hold in the real world of ory of rational expectations.” Lucas argued that economics. For instance, the free market model Friedman’s monetary policy was still too interven- does not address the dominance of distribution net- tionist and would invariably do more harm than works by a single retailer like Wal-Mart. There is good.21 nothing in the free market model that addresses the Developing outside of conventional economics, lack of equitable distribution of knowledge, experi- supply-side economics enjoyed considerable pop- ence, opportunity, and access to resources enjoyed ularity during the early 1980s. Led by Robert Barth, by buyers and sellers. The free market model editorial page head of the Wall Street Journal, ignores theft, fraud, and deception in cases like supply-siders were journalists, policymakers, and Enron, and it ignores the competitive advantages maverick economists who argued that demand-side that accrue through lobbying and special interest policies and monetary policies were ineffective.22 negotiations like Halliburton’s no competition bids They maintained that the incentive effects of for Iraq reconstruction projects. It also ignores the reduced taxation would be so large that tax cuts power of large retailers in controlling the market by would dramatically increase economic activity to M01_KARG7080_SE_06_C01.QXD 1/22/09 10:56 AM Page 9

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the point where tax revenues would rise rather than believe that economic growth helps everyone fall. (Former president George H. W. Bush referred because overall prosperity creates more jobs, to this as voodoo economics in 1980.23) Specifically, income, and goods, and these eventually filter down supply-siders argued that tax cuts would lead to a to the poor. For conservative economists, investment large increase in labor supply and investment and is the key to prosperity and the engine that drives the therefore to a large expansion in economic output. economic machine. Accordingly, many conservative The budget deficit would not be problematic economists favor tax breaks for the wealthy based on because taxes, increased savings, and higher eco- the premise that such breaks will result in more dis- nomic output would offset the deficit. In the early posable after-tax income freed up for investment. 1980s, supply-siders seized power from the High taxes are an impediment to economic progress Keynesians and mainstream conservative econo- because they channel money into “public” invest- mists, many of whom believed in the same things ments and away from “private” investments. but wanted to move more slowly.24 In the neoconservative paradigm, opportunity is Although some supporters preferred to think of based on one’s relationship to the marketplace. Thus, supply-side economics as pure economics, the theory legitimate rewards can occur only through market- contained enough political implications to qualify as place participation. In contrast to liberals who a political as well as an economic approach. Supply- emphasize mutual self-interest, interdependence, and side economics provided the rationale for the punish- social equity, conservative economists argue that the ing cuts in social programs executed under the highest form of social good is realized by the maxi- Reagan administration. mization of self-interest. In the conservative view (as Despite their popularity in the early years of the epitomized by author Ayn Rand27), the best society is Reagan administration, supply-side ideas fell out of one in which everyone actively pursues their own favor when it became evident that massive tax cuts good. Through a leap of faith, the maximization of for the wealthy and corporations did not result in self-interest can somehow be transformed into a increased capital formation and economic activity. mutual good. This premise was proved false by the Instead, the wealthy spent their tax savings on luxury 2008 global economic crisis. This premise was proved items, and corporations used tax savings to pur- false by the 2008 global economic crisis. chase other companies in a merger mania that took Conservative economists maintain not only that Wall Street by surprise. Other corporations took high taxation and government regulation of busi- advantage of temporary tax savings to transfer their ness serve as disincentives to investment, but that operations abroad, further reducing the supply of individual claims on social insurance and public high-paying industrial jobs in the United States. For welfare grants discourage work. Together these fac- these and other reasons, the budget deficit grew tors lead to a decline in economic growth and an from about $50 billion a year in the Carter term to increase in the expectations of beneficiaries of wel- $352 billion a year in 1992.25 Although the term fare programs. For conservatives, the only way to “supply-side economics” fell out of favor by the late correct the irrationality of governmental social pro- 1980s, many of its basic tenets, such as massive tax grams is to eliminate them. Charles Murray has cuts and cuts in social welfare spending, were suggested that the entire federal assistance and adopted by the G. W. Bush administration. The income support structure for working-aged persons result mirrored the earlier effects of supply-side (Medicaid, the former Aid to Families with policies: huge federal and state budget shortfalls, Dependent Children [AFDC], food stamps, etc.) corporate hoarding, greater economic inequality, should be scrapped. This would leave working-aged and stagnant wages.26 persons no recourse except to actively engage in the Conservative economists argue that large social job market or turn to family, friends, or privately welfare programs—including unemployment bene- funded services.28 fits and public service jobs—are detrimental to the Many conservative economists argue that society in two ways. First, government social pro- economic insecurity is an important part of the grams erode the work ethic by supporting those not entrepreneurial spirit. Unless people are compelled in the labor force. Second, because they are funded to work, they will choose leisure over work. by taxes, public sector social welfare programs Conversely, providing economic security for large divert money that could otherwise be invested in the numbers of people through welfare programs leads private sector. These conservative economists to diminished ambition and fosters an unhealthy M01_KARG7080_SE_06_C01.QXD 1/22/09 10:56 AM Page 10

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dependence on the state. Conservatives further an essential part of a superior economy. Greenspan argue that self-realization can occur only through further admitted that “I made a mistake in presum- marketplace participation. Hence, social programs ing that the self-interests of organizations, specifical- harm rather than help the most vulnerable mem- ly banks and others, were . . . capable of protecting bers of society. This belief in the need for economic their own shareholders and their equity in the insecurity forms the basis for the 1996 welfare firms.”30 This was an amazing series of admissions reform bill that includes a maximum time limit on from the man known as the “oracle”—or the one welfare benefits. thought of as being almost infallible in his economic Some conservative economists are influenced acumen. More importantly, Greenspan’s admissions by “public choice” theory. The public choice repudiated the belief that largely unregulated free school gained adherents among conservative ana- markets inevitably yield superior economic gain. lysts as faith ebbed in supply-side theories. Not The initial event triggering the 2008 global eco- widely known outside academic circles until its nomic crisis was the collapse of the U.S. housing major proponent, James Buchanan, was awarded market and the realization that domestic and for- the Nobel Prize for economics in 1986, the public eign banks and investment houses and institutions choice model states that public sector bureaucrats were holding hundreds of billions of dollars of sub- are self-interested utility-maximizers, and that prime mortgages (i.e., mortgages given to less cred- strong incentives exist for interest groups to make itworthy borrowers) that were essentially toxic debt demands on government. The resulting conces- with little hope of repayment. Moreover, investors sions from this arrangement flow directly to the realized that many subprime mortgages were interest group and their costs are spread among all underpriced in terms of risk. Specifically, the high- taxpayers. Initial concessions lead to demands for er interest rate charged to credit-challenged bor- further concessions, which are likely to be forth- rowers was below the real interest rate that would coming so long as interest groups are vociferous in have been required to justify the higher risk. their demands. Under such an incentive system, Underpricing risk has been a major factor in the different interests are also encouraged to band subprime mortgage crisis. together to make demands, because there is no rea- It is overly simplistic to blame the economic cri- son for one interest group to oppose the demands sis solely on subprime loans or on families who took of others. But while demands for goods and servic- out mortgages they could not repay. Multiple factors es increase, revenues tend to decrease. This hap- converged to create the economic crisis, including pens because interest groups resist paying taxes the largely unregulated derivatives market and directed specifically toward them and because no various other forms of dodgy financial instruments. interest group has much incentive to support gen- Derivatives are used by major banks and businesses eral taxes. The result of this scenario is predictable: to hedge risk or engage in speculation. They are Strong demands for government benefits accom- financial instruments whose value depends on that of panied by declining revenues lead to government an underlying commodity, bond, equity, or currency. borrowing, which in turn results in large budget Investors purchase derivatives to bet on the future deficits.29 Adherents of public choice theory view (or as a hedge against the potential adverse impacts social welfare as a series of endless concessions to of an investment), to mitigate a risk associated with disadvantaged groups that will eventually bank- an underlying security, to protect against interest rate rupt the government. or stock market changes, and so forth. Derivatives are sold by hedge funds, investment houses, insur- ance companies, and banks. Derivatives are used in a The Global Economic Crisis and the variety of areas. For example, credit derivatives can involve a contract between two parties that allows Flaws in the Free Market Argument one of them to transfer their credit risk to the other. In a rare occurrence in 2008, Alan Greenspan, the The party transferring the risk pays a fee to the party former 18-year Federal Reserve chairman, admitted that assumes it. he “made a mistake” in trusting free markets to reg- All forms of derivatives are risky investments ulate themselves without government oversight. He since they are basically big bets made in amounts also conceded a serious philosophical flaw in his (often in the billions) that are astounding even to thinking. Namely, that an unfettered free market is financially sophisticated investors. Like all forms of M01_KARG7080_SE_06_C01.QXD 1/22/09 10:56 AM Page 11

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gambling, derivatives only work if the casino has $123 billion at AIG’s disposal.35 Not wanting to be the money to meet their obligation to bettors. In left out of the party, U.S. automakers also pressed for turn, the system collapses if the house lacks the cash taxpayer subsidized loans.36 (i.e., it has a liquidity problem) to pay winners. The After much jockeying, Congress finally approved 2008 economic crisis was partly precipitated by the a $700 billion (a number that swelled to $825 billion) derivatives market (which hedged bets on portfolios bailout for Wall Street in September 2008. Despite that included subprime mortgages) and the result- this bailout, world markets continued to convulse ing liquidity problem. with uncertainty. Frightened by increased market instability, the Federal Reserve further cut the U.S. Trying to Save the Economy The precursor to prime rate, a strategy that seemed to have little the massive federal bailout of Wall Street and the effect. Taken together, these bailout obligations banking industry began in February 2008 when for- added up to more than $1 trillion, barring a few bil- mer president G. W. Bush signed the $168 billion lion here and there. stimulus package giving tax rebates to more than With the exception of Bush’s tax stimulus pack- 130 million households.31 Bush administration offi- age, the bailouts and financial help were largely cials hoped the tax package would be sufficient to directed at the supply side of the economy.37 kick-start the economy and steer it away from a full- blown recession. He was obviously wrong. Can the U.S. Government Pay the Bill? To put Shortly thereafter, federal loans and bailout pro- things into perspective, the proposed $825 billion posals came at an almost dizzying pace. In March bailout (inflated by pork) was more than the U.S. 2008, the Federal Reserve enticed JP Morgan with a government spent on defense ($549 billion), Social $29 billion credit line to take over the failing Bear Security ($581 billion), or Medicare and Medicaid Stearns investment house.32 One financial institution ($561 billion) in 2007. after another failed or was taken over. Later in 2008, Much of the money to pay for the bailouts will Bank of America bought Countrywide Mortgage (the come from foreign investors who purchase U.S. largest U.S. mortgage lender with assets of $209 bil- Treasury bills. As long as foreign investors are con- lion) for a paltry $4.1 billion in stock. Fearing that fident in the ability of the United States to solve its Merrill Lynch was next, CEO John Thain quickly sold problems, the country can borrow. All bets are off if out to Bank of America. In another stunning move, their faith in the United States is shaken, or if for- JP Morgan Chase (the third largest U.S. bank) eign investors begin to prefer hard assets like cheap bought Washington Mutual (WaMu), the nation’s buildings, land, or factories over paper. largest thrift bank, after it was seized by federal reg- Foreign investors are closely watching U.S. eco- ulators. Meanwhile, Wells Fargo was busy acquiring nomic data. In 2008, the U.S. gross domestic prod- Wachovia Bank for $15.1 billion in stock.33 uct (GDP) was $14 trillion—the highest in the When Freddie Mac and Fannie Mae were facing world. However, the International Monetary Fund a bankruptcy that threatened to further destabilize (IMF) predicted U.S. economic growth to be 0.6% in an already devastated housing market, the Feds 2008 or half that of other industrialized nations like came to the rescue by buying up to $200 billion of Germany, the UK, France, Spain, Japan, and stock (including bad mortgage debt). Since Freddie Canada.38 Moreover, the 2008 U.S. budget deficit Mac and Fannie Mae guarantee $5.4 trillion in out- was $410 billion, an amount that significantly standing mortgage debt, the costs of the bailout added to the existing national debt of $10 trillion.39 could eventually run even higher, especially given By 2009, government spending on bailouts and the 1.3 million homes in foreclosure in 2008.34 loans could exceed $1.4 trillion or about 10 percent While the Feds let the investment banking house of the GDP, adding 13 percent to the national debt. Lehman Brothers die (the largest bankruptcy in U.S. The national debt could total a whopping 81 per- history), they relented with American International cent of the GDP. If Wall Street is not properly reg- Group (AIG)—the world’s largest insurer—by pro- ulated, or if the structural problems are deeper viding a two-year $85 billion line of credit. In return, than anticipated, current bailout attempts will the federal government took control of some of AIG’s likely fail. equity and assets. In September 2008, the Central The 2008 economic crisis led to profound Bank lent AIG an additional $37.8 billion. In total, consequences for the nation and its social welfare by late 2008 the U.S. government had put about system. The semi-nationalization of large chunks of M01_KARG7080_SE_06_C01.QXD 1/23/09 1:13 PM Page 12

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the U.S. banking system calls into question the long- vatives for obvious reasons, such as the primary term belief in the sanctity of the marketplace and the importance they place on markets, their belief in viability of laissez-faire capitalism. Even more amaz- subordinating individual interests to market forces, ing is that the semi-nationalization of the banking and their overall social conservatism. system occurred under the former Bush administra- Left-wing theorists maintain that the failure of tion. Regardless, the financial crisis will also prove a capitalism has led to political movements that have punishing experience for nonprofit human service pressured institutions to respond with increased organizations that depend on individual and founda- social welfare services. They believe that real social tion philanthropy as well as government agencies welfare must be structural and can be accomplished that rely on tax revenues. Not surprisingly, the col- only by redistributing resources. In a just society lapse of Wall Street will chill any subsequent debate where goods, resources, and opportunities are made around privatizing Social Security (see Chapter 10). available to everyone, all but the most specific forms of welfare (health care, rehabilitation, coun- seling, etc.) would be unnecessary. In this radical Democratic Socialism worldview, poverty is directly linked to structural After a long dormant period, the cobwebs of socialism inequality: People need welfare because they are were dusted off in the 2008 presidential election when exploited and denied access to resources. In an John McCain falsely accused Barack Obama of being unjust society, welfare functions as a substitute, a socialist. Democratic socialism (as opposed to old albeit a puny one, for social justice.40 Soviet-style socialism) is based on the belief that rad- Some socialists argue that social welfare is an ical economic change can occur within a democratic ingenious arrangement on the part of business to context. While eschewing capitalism, democratic have the public assume the costs caused by the social socialists, such as the late Michael Harrington, have a and economic dislocations inherent in capitalism. fundamental belief in the democratic process. According to these theorists, social welfare expendi- Democratic socialism sharply veers from tures “socialize” the costs of capitalist production by Keynesianism and conservative economics. Speci- making public the costs of private enterprise. Thus, fically, Keynesians basically believe in the market social welfare serves both the needs of people and the economy but want to make it more responsive to needs of capitalism. For other socialists, social human needs by smoothing out the rough edges. welfare programs support an unjust economic sys- Conservatives believe that the economy should be tem that, in turn, continues to generate problems left alone except for a few minor tweaks, such as requiring social programs. For these radicals, social regulating the money flow. Other conservative econ- welfare programs function like junk food for the omists argue that the market should be left totally impoverished: They provide just enough sustenance alone. On balance, both Keynesians and economic to discourage revolution but not enough to make a conservatives have a basic faith that capitalism can real difference in the lives of the poor. Within this advance the public good and be made compatible radical framework, social welfare is seen as a form of with human needs. In that sense, Keynesians and social control. Frances Fox Piven and Richard economic conservatives have more in common with Cloward summarize the socialist argument: each other than Keynesians have with socialists. Proponents of socialism argue that the funda- Relief arrangements are ancillary to economic mental nature of capitalism is anathema to advanc- arrangements. Their chief function is to regulate ing the public good. Socialists contend that a sys- labor, and they do that in two general ways. First, when mass unemployment leads to outbreaks of tur- tem predicated on pursuing profit and individual moil, relief programs are ordinarily initiated or self-interest can lead only to greater inequality. The expanded to absorb or control enough of the unem- creation of a just society requires a fundamental ployed to restore order; then, as turbulence subsides, transformation of the economic system, and the the relief system contracts, expelling those who are pursuit of profit and self-interest must be replaced needed to populate the labor markets.41 by the collective pursuit of the common good. Not surprisingly, socialists rebuff Keynesians because In place of liberal welfare reforms, the radical of their inherent belief that economic problems can vision proposes that the entire social, political, and be fixed by simple technicalities instead of major economic system undergo a major overhaul. In the institutional change. Socialists differ from conser- radical context, real welfare reform (i.e., a complete M01_KARG7080_SE_06_C01.QXD 1/22/09 10:56 AM Page 13

CHAPTER 1 Social Policy and the American Welfare State 13 redistribution of goods, income, and services) can Liberalism and occur only within a socialist economic system. Left-of-Center Movements

Liberalism Since Franklin Delano Roosevelt’s The U.S. Political Continuum New Deal, advocates of liberalism have argued for advancing the public good by promoting an expand- Various understandings of the political economy ing economy coupled with the growth of universal, produce differing conceptions of the ultimate public non-means–tested social welfare and health pro- good. Competition among ideas about the public grams. Traditional liberals used Keynesian concepts good and the welfare state has long been a knotty as the economic justification for building the wel- issue in the political economy of the United States. fare state. As such, the general direction of policy Because shifts in government policy are driven from the 1930s to the early 1970s was for the feder- largely by an ideologically determined view of the al government to assume greater amounts of public good, any policy analysis must be based on responsibility for the public good. whose definition is being examined. In a democrat- American liberals established the welfare ic capitalist society, beliefs about the public good state with the passage of the Social Security Act often vary depending on the proponent’s position in of 1935. Harry Hopkins—a social worker, the head of the social order. the Federal Emergency Relief Administration, a confi- The major American ideologies, (neo)liberalism dant of President Roosevelt, a co-architect of the New and (neo)conservatism, hold vastly different views of Deal, and a consummate political operative—devel- social welfare and the public good. Conservatives oped the calculus for American liberalism: “tax, tax; believe that the public good is best served when indi- spend, spend; elect, elect.”42 This liberal approach was viduals and families meet their needs through mar- elegant in its simplicity: The government taxes the ketplace participation. Accordingly, conservatives wealthy, thereby securing the necessary revenues to prefer private sector approaches over governmental fund social programs for workers and the poor. This welfare and advocate for smaller government social approach dominated social policy for almost 50 years. welfare programs. Conservatives are not antiwelfare In fact, it was so successful that by 1980 social welfare per se; they simply believe that government should accounted for 57 percent of all federal expenditures.43 have a minimal role (i.e., serve as a “safety net”) in By the mid-1960s, the welfare state had become ensuring the social welfare of citizens. Traditional an important fixture in America’s social landscape, liberals, on the other hand, view government as the and politicians sought to expand its benefits to only institution capable of bringing a measure of more constituents. Focusing on the expansion of social justice to millions of Americans who cannot middle-class programs such as Federal Housing fully participate in the U.S. mainstream because of Administration (FHA) home mortgages, federally obstacles such as racism, poverty, and sexism. insured student loans, Medicare, and veterans’ Traditional liberals therefore view governmental pensions, liberal policymakers secured the political social welfare programs as a key component in pro- loyalty of the middle class. Even conservative politi- moting the public good. One of the major differences cians respected voter support for the middle-class between conservatives and liberals lies in their dif- welfare state, and not surprisingly, the largest fering perceptions of how the public good is expansion of social welfare spending occurred enhanced or hurt by welfare state programs. under Richard Nixon, a Republican president. The understanding of “the public good” is Yet the promise of the U.S. welfare state to pro- lodged in the political and ideological continuum vide social protection similar to that in industrialized that makes up the U.S. political economy. An appre- European nations never materialized. By the mid- ciation of this requires an understanding of the 1970s, the hope of traditional liberals to build a wel- interaction of schools of political thought and how fare state mirroring those of northern Europe had they evolved. These ideological tenets also shape the been replaced by an incremental approach that nar- platforms of the major political parties and can be rowly focused on consolidating and fine-tuning the divided into two categories: (1) liberalism and left- programs of the Social Security Act. One reason for of-center movements, and (2) traditional conserva- this failure was the ambivalence of many Americans tives and the far right. toward centralized government. “The emphasis M01_KARG7080_SE_06_C01.QXD 1/27/09 10:29 AM Page 14

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The defeat of Jimmy Carter and the election of a Republican Senate in 1980 forced many liberal Democrats to reevaluate their party’s traditional posi- tion on domestic policy. This reexamination, which Charles Peters christened “neoliberalism” to differen- tiate it from old-style liberalism, attracted only a small following in the early 1980s.45 However, by the mid-1990s, most leading Democrats could be classi- fied as neoliberal. Randall Rothenberg charted signs of the influence of neoliberalism on the Democratic domestic policy platform as early as 1982, when he observed that the party’s midterm convention did not endorse a large-scale federal jobs program, did not endorse a plan for national health insurance, and did not submit a plan for a guaranteed annual income.46 In the late 1980s, a cadre of prominent main- stream Democrats established the Democratic Leadership Council (DLC). In part, their goal was to wrest control of the Democratic Party from tradition- al liberals and to create a new Democratic Party that was more attuned to the beliefs of the traditional core voters. In 1989 the DLC released The New Barack Obama was elected president of the Orleans Declaration: A Democratic Agenda for the United States in 2008. 1990s, which promised that Democratic Party poli- tics would shift toward a middle ground combining a corporatist economic analysis with Democratic com- consistently has been on the local, the pluralistic, the passion. Two of the founders of the DLC were Al Gore voluntary, and the business-like over the national, the and Bill Clinton, who chaired the DLC just before universal, the legally entitled, and the governmental,” announcing his presidential candidacy.47 President observed policy analyst Marc Bendick.44 Obama’s campaign platform and cabinet-level Liberalism lost ground for another reason. The appointments point to him also being largely in the Social Security Act of 1935—the hallmark of neoliberal camp. American liberalism—was primarily a self-financing Compared to traditional liberals, neoliberals social insurance program that rewarded working were more forgiving of the behavior of large corpora- people. Public assistance programs that contained tions and were opposed to economic protectionism. less political capital and were therefore a better Grounded in realpolitik, neoliberals viewed the New measure of public compassion, were rigorously Deal approach (with the exception of Social Security) means tested, sparse in their benefits, and operated as too expensive and antiquated to address the mood by the less than generous states. For example, of voters and the new global realities. Consequently, although Social Security benefits were indexed to the neoliberals distanced themselves from the large-scale cost of living in the mid-1970s, AFDC benefits deteri- governmental welfare programs associated with orated so badly that about half its value was lost Democrats since the New Deal. Like their neoconser- between 1975 and 1992. At the same time that Social vative counterparts, they called for reliance on per- Security reforms reduced the elderly poverty rate by sonal responsibility, work, and thrift as an alternative 50 percent, the plight of poor families worsened. to governmental programs. Accordingly, their wel- Neoliberalism By the late 1970s, the liberal belief fare proposals emphasized labor market participa- that the welfare state was the best mechanism to tion (workfare), personal responsibility (time-limited advance the public good was in retreat. What welfare benefits), family obligations (child support remained of traditional liberalism was replaced by a enforcement), and frugality in governmental spend- neoliberalism that was more cautious of government, ing. They argued for reduced governmental spending less antagonistic toward big business, and more skep- while encouraging businesses to assume more tical about the value of universal entitlements. responsibility for the welfare of the population. M01_KARG7080_SE_06_C01.QXD 1/22/09 10:56 AM Page 15

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Former Secretary of Labor Robert Reich advo- offers a philosophical rationale for neoliberalism: cated a postliberal formulation that replaced social “We should speak of a positive welfare, to which indi- welfare entitlements with investments in human viduals and other agencies besides government con- capital. Public spending was divided into “good” tribute—and which is functional for wealth creation. and “bad” categories: “Bad” was unproductive The guideline for investment is human capital wher- expenditures on welfare and price supports; “good” ever possible, rather than the direct provision of eco- was investments in human capital, such as educa- nomic maintenance. In place of the welfare state, we tion, research, and job training.48 should put the social investment state, operating in Neoliberalism altered the traditional liberal the context of a positive welfare society.”49 concept of the public good. Instead of viewing the interests of large corporations as antithetical to The Self-Reliance School A perspective gaining the best interests of society, neoliberals argued for influence in economically distressed areas and in free trade, less regulation, and a more laissez-faire developing countries is the self-reliance school.50 approach to social problems. They also viewed long- This school maintains that industrial economic mod- time Democratic Party supporters, such as labor els are irrelevant to the economic needs of poor com- unions, with caution. For example, when labor munities and are often damaging to the spiritual life of unions fought to stop NAFTA (the North American people.51 Adherents of self-reliance repudiate the Free Trade Agreement), former President Clinton emphasis of Western economic philosophies on eco- continued to endorse it, despite labor’s threats to nomic growth and the belief that the quality of life can oppose his reelection bid in 1996. The same was be measured by material acquisitions. These political true for the GATT (General Agreement on Tariffs economists stress a balanced economy based on the and Trade) agreement. In both instances, Clinton real needs of people, production designed for internal was firmly aligned with conservative Democrats consumption rather than export, productive technolo- and Republicans. Traditional liberal Democrats gies that are congruent with the culture and back- found themselves alone, bereft of support from the ground of the population, the use of appropriate and first Democratic White House in 14 years. In effect, manageable technologies, and a small-scale and the new shapers of the public good had systemati- decentralized form of economic organization.52 cally excluded key actors of the old liberal coalition. Simply put, proponents of self-reliance postulate that The neoliberal view of the public good reflects a more is less and less is more. The objective of self- kind of postmodern perspective. For neoliberals, the reliance is the creation of a no-poverty society in public good is elusive, and its form is fluid. which economic life is organized around issues of sub- Definitions of the public good change as a social sistence rather than trade and economic expansion. order evolves and new power relationships emerge. Accepting a world of finite resources and inherent lim- Thus, neoliberals do not define the public good as itations to economic growth, proponents argue that tethered to industrial era allegiances but look to a the true question of social and economic development postindustrial society composed of new opportuni- is not what people think they want or need but what ties and new institutional forms. they require for survival. The self-reliance school Neoliberalism, then, is more a political strategy accepts the need for social welfare programs that ame- and pragmatic mode of operation than a political liorate the dislocations caused by industrialization, philosophy embodying a firm view of the public but it prefers low-technology and local solutions to good. This is both its strength and its weakness. social problems. This contrasts with the conventional Specifically, the strength of neoliberalism lies in its wisdom of the welfare state, which is predicated on a ability to compromise and therefore to accomplish prescribed set of programs on a national scale, admin- things. Its weakness is that when faced with an ide- istered by large bureaucracies using sophisticated ological critique, neoliberals are incapable of formu- management systems. lating a cogent ideological response. When G. W. Bush argued for staying the course in 2004, voters Classical Conservatives knew exactly what he meant even if they disagreed with him. When Clinton argued for staying the and the Far Right course in 1994, the public were unsure of the course. In the American and British contexts, neoliber- Classic Conservatism Former conservative politi- alism represents a “third way.” Anthony Giddens cal leaders such as Nelson Rockefeller, Richard M01_KARG7080_SE_06_C01.QXD 1/27/09 10:31 AM Page 16

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stated that “I have been, and am still, a traditional conservative, focusing on three general freedoms— economic, social, and political. . . . The conservative movement is founded on the simple tenet that people have the right to live life as they please, as long as they don’t hurt anyone else in the process.”53 Following that line of reason, Goldwater’s outspoken support of homosexuals in the military was directly opposed to the principles of neoconservatives. Regarding reproductive freedom, classical conserva- tives might challenge cultural conservatives on vari- ous measures that limit or ban abortions. From the late 1970s onward, factions within the conservative movement became more pronounced. Old-style conservatives such as Nelson Rockefeller, Barry Goldwater, and William Cohen, who were more concerned with foreign policy than with domestic issues, were replaced by a new breed of cultural conservatives, such as Dick Armey, Newt Gingrich, Phil Gramm, and Sam Brownback. These cultural conservatives were committed to reversing Senator John McCain was defeated by Barack 50 years of liberal influence in social policy. How Obama in the 2008 presidential election. the cultural conservatives came to shape social pol- icy warrants elaboration, although it is first impor- Nixon, and Barry Goldwater represented traditional tant to examine neoconservatives, the forerunners conservatism. Few traditional conservatives occupy of cultural conservatism. important leadership positions in the Republican party, as most have been replaced by cultural con- Neoconservatism Before the 1970s, conserva- servatives. Other conservatives like John McCain tives were content to merely snipe at welfare pro- have had to spin their message to try to gain the grams, reserving their attention for areas more con- approval of cultural conservatives. sistent with their traditional concerns such as the On one level, all conservatives agree on impor- economy, defense spending, and foreign affairs. tant values relating to social policy. Beneath this However, by the mid-1970s, younger conservative agreement, however, important differences exist intellectuals recognized that the conservative among various conservative factions. stance toward social welfare was myopic because Older, traditional conservatives diverge with the welfare was too important to be lightly dismissed. newer cultural conservatives on a range of social Consequently, neoconservatives sought to arrest issues. First, as strict constitutionalists, traditional or the growth in governmental welfare programs classical conservatives believe strongly in the separa- while simultaneously transferring as much welfare tion of church and state. They see prayer and religion responsibility as possible from government to the as personal choices in which government has no con- private sector.54 They faulted government programs stitutional right to intervene. Second, although both for a breakdown in the mutual obligation between classical conservatives and cultural conservatives groups; the lack of attention to how programs were supposedly advocate for a weaker federal govern- operated and benefits awarded; the dependency of ment, cultural conservatives also demand that the recipients; and the growth of the welfare industry federal government use its power to implement their and its special interest groups, particularly profes- domestic agenda in areas they consider immoral, sional associations.55 To counter the liberal goals of such as abortion and homosexuality. full employment, national health care, and a guar- Third, classical conservatives are more socially anteed annual income, neoconservatives main- liberal than their cultural counterparts. For example, tained that high unemployment was good for the the late Barry Goldwater, a conservative icon and for- economy, that health care should remain in the pri- mer U.S. senator and 1964 presidential candidate, vate marketplace, and that competitive income M01_KARG7080_SE_06_C01.QXD 1/23/09 1:15 PM Page 17

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structures were critical to productivity. They conservatives cleverly promoted a dual attitude argued that income inequality was socially desir- toward the role of government. Mimicking their able because social policies that promote equality classical conservative predecessors in demanding a encourage coercion, limit individual freedom, and laissez-faire approach to economics, they steadfastly damage the economy.56 refused to translate that orientation to social affairs. The neoconservative attack on the welfare state Instead, cultural conservatives argued for social con- was so well crafted because many neoconservatives, formity and a level of governmental intrusion into among them Irving Kristol and Norman Podhoretz, private affairs that made most classical conservatives were former liberals who had developed misgivings gag. In contrast to the classical conservative skepti- about the welfare state and joined the conservative cism about blending religion and politics, cultural movement in protest. Neoconservatives were effec- conservatives opportunistically embraced the rising tive in critiquing the welfare state, in large measure tide of fundamentalist religion. As a measure of their because they were so familiar with its philosophical success, this cobbled-together coalition of economic origins. (One commentator classified them as liber- conservatives, right-wing Christians, and opportunis- als who had been mugged.) Despite their opposition tic politicians had by the late 1980s virtually decimat- to the welfare state, former liberals found their new ed what remained of Republican liberalism, whose conservative home anything but tidy. Born out of an adherents had become an endangered species like urban environment, neoconservatives fashioned liberal Democrats. themselves as cosmopolitan intellectuals and free Cultural conservatives view the state as the cause thinkers. Social issues such as abortion, school of rather than the solution to social problems. With prayer, and the like were not a hot button item for the exception of protecting people (police and this movement. defense) and property, cultural conservatives argue By the late 1970s, the position occupied by neo- that the very existence of the state is antithetical to the conservatives in the conservative movement began to public good because government interferes with the be usurped by the emerging cultural conservatives. maximization of individual self-interest. Hence, their Although the neoconservatives provided the intellec- posture toward government is adversarial, except tual wedge that fractured the liberal consensus when the state is used to further their social agenda. around the welfare state, cultural conservatives, such Even though cultural conservatives argue for a mini- as Trent Lott and Tom DeLay, attained the leadership malist state, they have been willing to compromise positions necessary to take down what was left of the these libertarian leanings by adopting the agenda of institutional structure of liberal public philosophy. traditionalists in myriad social issues such as school Properly understood, neoconservatism is at odds prayer, abortion, sexual orientation, and drug testing. with the culturally conservative Republican agenda. The conservative agenda of the 1980s was four- The rift between the more urbane neoconservatives fold: (1) end the liberal hegemony in social policy, and the cultural conservatives was illustrated by (2) reroute public policy through the private sector, (3) John McCain’s choice of Sarah Palin as his vice pres- curtail costly social programs that lessen profits and idential running mate in 2008. Neoconservatives restrict the global competitiveness of corporations, and such as David Brooks, David Frum, Christopher (4) preclude the possibility of a resurgence in social Buckley, and others abhorred the choice of Palin programs. In tandem with this agenda, conservative whom they saw as unqualified but also as represent- presidents such as Reagan and the two Bushes prohib- ing the culturally conservative faction of the party ited the future growth of the welfare state by employ- that believed in creationism, and were opposed to ing multiple strategies such as tax policy and federal abortion regardless of the circumstances. budget deficits that precluded any form of significant public spending. As such, few responsible politicians Cultural Conservatism The neoconservative assault would argue for increased social welfare spending on liberal social policy was soon taken over by cultur- given the 2008 federal debt of around $10 trillion. al conservatives, who raged against governmental In 1994, frustrated voters seemed ready to give intrusion in the marketplace while simultaneously cultural conservatives control of the Senate and the attempting to use the authority of government to House. Cultural conservatives had learned from past advance their social objectives in the areas of mistakes. Instead of toying with incremental policies, antiwelfare planks, sexual abstinence, school prayer, they proposed bold new social initiatives that were abortion, and antigay rights proposals. Cultural incorporated into the Contract with America M01_KARG7080_SE_06_C01.QXD 1/23/09 1:16 PM Page 18

18 PART 1 American Social Welfare Policy Spotlight 1.1

Two groups that exemplify the differences between The Moral Majority liberal and conservative political movements are the Traditionalists are characterized by conservative Green Party and the Moral Majority. evangelical groups such as the Moral Majority. The Moral Majority and other traditional groups The Green Party believe that God’s laws must be translated into pol- Ten key values serve as guiding principles for the itics, and “higher laws” must become the laws of Green Party—grassroots democracy, social justice the state. Traditionalists are highly critical of gov- and equal opportunity, ecological wisdom, nonvio- ernmental social programs, which they associate lence, decentralization, community-based econom- with a liberal social philosophy that is eroding tra- ics and economic justice, feminism and gender ditional social institutions, particularly the family equity, respect for diversity, personal and global and the church. To learn more about the Moral responsibility, and future focus and sustainability. Majority platform, visit the group’s website at To learn more about these key values, go to the www.faithandvalues.us. Green Party’s website at www.gp.org/tenkey.html.

(designed to alter most of the safety net programs only defensive weapons. Libertarians are highly within a two-year period), a document signed by more critical of taxation because it fuels governmental than 300 House Republicans in 1994.57 The crowning growth. Apart from advocating minimal taxation victory of the conservative movement occurred with earmarked for defense and police activities, they the passage of the Personal Responsibility and Work oppose the income tax. Because libertarians empha- Opportunity Reconciliation Act (PRWORA) in 1996. size individual freedom and personal responsibility, they advocate the decriminalization of narcotics Libertarianism Libertarians reflect another per- and believe that government should intercede in spective. Specifically, this school of thought believes social affairs only when an individual’s behavior in virtually no government regulation. threatens the safety of another.

We, the members of the Libertarian Party, challenge the cult of the omnipotent state and defend the rights of the individual. We hold that all individuals . . . have the right to live in whatever manner they choose, so The Welfare Philosophers long as they do not forcibly interfere with the equal right of others to live in whatever manner they choose. and the Neoconservative We . . . hold that governments . . . must not violate the Think Tanks rights of any individual: namely, (1) the right to life— accordingly we support the prohibition of the initia- tion of physical force against others; (2) the right to Many welfare professionals envisioned a U.S. wel- liberty of speech and action—accordingly we oppose fare state based on a European model.59 This vision all attempts . . . [at] . . . government censorship in was shared by virtually every social welfare scholar any form; and (3) . . . we oppose all government writing in the late 1960s and early 1970s.60 In turn, interference with private property. . . .58 most social workers supported a liberal welfare phi- Libertarians argue that governmental growth losophy grounded in a system of national social pro- occurs at the expense of individual freedom. They grams that would be deployed as more citizens also believe that the proper role for government is to demanded greater services and benefits. This frame- provide a police force and a military that possesses work was informed by European welfare states, M01_KARG7080_SE_06_C01.QXD 1/22/09 10:56 AM Page 19

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especially the Scandinavian variant that spread Neuhaus to prepare a theoretical analysis of U.S. health care, housing, income benefits, and employ- society. Berger and Neuhaus’s To Empower People: ment opportunities equitably across the The Role of Mediating Structures in Public Policy population.61 It also led Richard Titmuss to hope identified the fundamental problem confronting the that the welfare state, as an instrument of govern- culture, such as the growth of megastructures (big ment, would eventually lead to a “welfare world.”62 government, big business, big labor, and profession- For U.S. welfare philosophers, government pro- al bureaucracies), and the corresponding diminu- grams that restricted the caprices of capitalism tion in the value of the individual. The route to were both desirable and inevitable. In their classic empowerment was to revitalize “mediating struc- Industrial Society and Social Welfare, Harold tures,” among them the neighborhood, family, Wilensky and Charles Lebeaux suggested that church, and voluntary associations.66 In a subse- “under continuing industrialization all institutions quent analysis, an AEI scholar recategorized the will be oriented toward and evaluated in terms of corporation from a megastructure to a mediating social welfare aims. The ‘welfare state’ will become structure, thus leaving the basic institutions of lib- the ‘welfare society,’ and both will be more reality eral social reform—government, the professions, than epithet.”63 and labor—as the sources of mass alienation.67 Despite the widespread acceptance of this liber- Not to be outdone, the Heritage Foundation al vision, an alternative vision arose that questioned featured Out of the Poverty Trap: A Conservative the fundamental nature of welfare and social servic- Strategy for Welfare Reform by Stuart Butler and es. Throughout the 1970s and 1980s, conservatives Anna Kondratas.68 Following along the same lines, (especially right-wing think tanks, or conservative the Free Congress Research and Education policy institutes) busily made proposals for welfare Foundation proposed reforming welfare through reform. In fact, no conservative policy institute “cultural conservatism;” that is, by reinforcing could prove its mettle until it produced a plan to “traditional values such as delayed gratification, clean up “the welfare mess.” The Hoover Institution work and saving, commitment to family and to the at Stanford University helped shape the early conser- next generation, education and training, self- vative position on welfare. “There is no inherent rea- improvement, and rejection of crime, drugs, and son that Americans should look to government for casual sex.”69 those goods and services that can be individually A handful of other works also served as beach- acquired,” argued Hoover’s Alvin Rabushka, who heads for the conservative assault on the liberal wel- listed four strategies for reforming welfare: (1) let fare state. George Gilder’s Wealth and Poverty users pay, (2) contract for services, (3) fund mandat- argued that beneficent welfare programs represent- ed services through the states, and (4) emphasize ed a “moral hazard” that insulated people against private substitution.64 Martin Anderson, a Hoover risks essential to capitalism and thus contributed to senior fellow and later a domestic policy adviser to dependency.70 Martin Anderson concluded that the Reagan administration, elaborated the conserva- income calculations should include the cash equiv- tive position on welfare in terms of the need to (1) alent of in-kind benefits, such as food stamps, reaffirm the need-only philosophical approach to Medicaid, and housing vouchers, thus effectively welfare and state it as explicit national policy; (2) lowering the poverty rate by 40 percent.71 Taken increase efforts to eliminate fraud; (3) establish and together, these ideas and recommendations provided enforce a fair, clear work requirement; (4) remove a potent critique of liberal governmental welfare inappropriate beneficiaries from the welfare rolls; programs. Unlike classical conservatives of an earli- (5) enforce support of dependents by those who have er generation, neoconservatives not only did their the responsibility and are shirking it; (6) improve the homework on social welfare policy but they also efficiency and effectiveness of welfare administra- prepared proposals for welfare reform. tion; and (7) shift more responsibility from the fed- As Peter Kindle earlier pointed out in a supple- eral government to state and local governments and ment to this book, perhaps the most enduring change private institutions.65 These recommendations engineered by the conservative movement is what formed the backbone of the 1996 PRWORA. Jacob Hacker calls the “Great Risk Shift.”72 The Another conservative think tank, the American private ownership of property and the acceptance of Enterprise Institute (AEI), commissioned sociolo- personal responsibility have long been core American gist Peter Berger and theologian Richard John values, which partly explains why opposition to M01_KARG7080_SE_06_C01.QXD 1/22/09 10:56 AM Page 20

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former President Bush’s “ownership society” has not a focus on income; it also must attend to the shift- materialized until recently. In The Great Risk Shift, ing dynamics of risk. As such, progressive social Hacker exposes Bush’s ownership society and the welfare policies must help to mitigate the degree of Republican Party’s emphasis on personal responsibil- risk the individual family must bear. ity as the code for shifting economic risk away from government and corporations and onto the back of the American family. Conclusion Simply put, private and public support mecha- nisms have fallen behind the pace of change in con- temporary society. Almost half of marriages end in John Judis and Michael Lind argue that “Ultimately divorce. Over a third of employed Americans say American economic policy must meet a single test: that they are frequently worried about losing their Does it, in the long run, tend to raise or depress the jobs. Structural changes in the nature of employ- incomes of most Americans? A policy that tends to ment, primarily seen in a shift away from manufac- impoverish the ordinary American is a failure, no turing to the lower-paying service sector, have left matter what its alleged benefits are for U.S. corpo- many without the skills needed for new jobs or the rations or for humanity as a whole.”76 To this we resources to retrain. The likelihood of family would add: “What are the effects of an economic income dropping 50% has almost tripled since the policy on the social health of the nation?” 1970s; personal bankruptcies and home foreclo- Researchers at Fordham University’s Institute for sures have increased by a factor of five; and over Innovation in Social Policy contend that the nation’s any two-year period more than 80 million quality of life has become unhinged from its eco- Americans go without health insurance coverage.73 nomic growth. “We really have to begin to reassess During a 30-year period in which middle-class this notion that the gross domestic product—the incomes have been stagnant, the need for increased overall growth of the society—necessarily is going economic security has been met by neglect from pri- to produce improvements in the quality of life.”77 vate and public institutions.74 Constructing an Index for Social Health that The risk shift is happening in almost all sectors. encompassed governmental data from 1970 to 1993, Corporate retirement programs are shifting away researchers found that in six categories—children in from defined benefit plans in which retirees are poverty, child abuse, health insurance coverage, guaranteed a set retirement income to defined con- average weekly earnings adjusted for inflation, out- tribution plans in which retirement depends on the of-pocket health costs for senior citizens, and the investment savvy of the employees’ investments. gap between rich and poor—“social health” hit its Whether these changes will help or hurt the individ- lowest point in 1993. These indicators have wors- ual depends on many factors, but it is clear that it is ened in the years since 1993, and we presume that a shift in risk from corporation to the individual the downward trend continues. worker. A corollary question is “What’s the economy for, The absence of universal health care has under- anyway?” In other words, do we exist to serve the scored the importance of employer-provided health economy or should the economy serve us? insurance; however, the increasing instability of Economists often talk about the gross national employment often means that job transitions are product (GNP) or gross domestic product (GDP), accompanied by the inability to acquire health cov- productivity, and overall economic growth as if they erage. Conservatives have proposed Health Savings were religious truths. Discussions typically revolve Accounts as a means of activating market forces to around how to best grow the economy, not whether control health costs, but they reflect another risk the economy should grow. Meanwhile, too little of shift from the corporation to the individual worker. the economic discussion involves environmental The former Bush administration suggested the sustainability or quality of life issues. John de Graaf elimination of employer-provided health insurance has addressed these issues in Affluenza (the film and in favor of tax deductions for health insurance pre- the book) as have other authors in various forms. miums, yet another shifting of risk from corpora- (See Spotlight 1.2.) tions to the individual or family.75 An important As this chapter has demonstrated, social wel- implication of Hacker’s argument is that good social fare in the United States is characterized by a high welfare policy analysis can no longer be restricted to degree of diversity and is not a monolithic, highly M01_KARG7080_SE_06_C01.QXD 1/22/09 10:56 AM Page 21

CHAPTER 1 Social Policy and the American Welfare State 21 Spotlight 1.2

What’s The Economy For, Anyway? slightly better in education. Our unemployment rate looks pretty low, unless you count those 2.3 million by John de Graaf people we’ve got behind bars, an incarceration rate In the global economy, it seems everyone is dissatis- 7 to 10 times as high as Europe’s. fied and looking for different models. One by one, Since 1970, Europeans have traded a portion of Latin American countries are moving from Right to their productivity gains for free time instead of Left. On the other hand, in Europe, the parties of stuff, a trade that pays off in many ways. New stud- social democracy have been losing ground to the ies show that long working hours, the norm in the Center (Europe’s “right-wing” parties would be United States, contribute to poor health, weakened Centrist or Left in the United States), one after family and community bonds, and environmental another. damage. Americans, far less healthy than All of this frenetic searching begs the funda- Europeans, spend twice as much for health care per mental question: What’s the Economy for, Anyway? person. In fact, we spend nearly half the world’s How much stock can we take in the Dow Jones? Is total health care budget, an amount that will reach the Gross Domestic Product the measure (the gross- 20 percent of our GDP by 2010—with the worst out- er the better), and stuff the stuff, of happiness? Is comes. Yet, all of that spending counts as a plus the good life the goods life? when it comes to GDP. The leisure that Europeans If so, then there’s little doubt that the freer- enjoy, the long meals and café conversations, the market regimes win big. U.S. per capita GDP is still long walks and bike rides, count only as wasted 30 percent higher than the average in Western time, adding not a single point to GDP. La dolce vita, Europe, just as it was a generation ago. We’ve got by that measure, is for losers. bigger homes, bigger cars, and more high-definition But which countries come out on top in meas- televisions. On the other hand if we measure success ures of quality of life? It’s the northern European by the happiness, health, fairness and sustainability nations, those that combine a strong social safety of economies, the picture looks very different. net with shorter working hours, high but progres- I’ve been doing a little number-crunching lately, sive tax rates and strong environmental regulations. comparing data from such sources as the 2007 The pattern is as clear as can be. OECD (Organization for Economic Cooperation I have found no one who refutes these figures. and Development) Fact Book, the World Health They simply explain them away by saying that the Organization, and the UN (United Nations) Human United States can’t be like Europe. Why not? Development Index, trying to see how countries are One argument for why the United States can’t doing in real, empirical terms when it comes to even have such things as paid maternity leave—a health, quality of life, justice, and sustainability. The reality in every country on the globe except the results, I’m afraid, would come as a shock to those United States, Swaziland, Lesotho, Liberia, and who look to the United States as the model of eco- Papua New Guinea—is that we’re so affected by nomic success. globalization. But with its massive domestic market, Let me do a few of the numbers: compared, for the United States is just about the least affected by example, to western European nations, the United globalization of all industrial countries. States ranks worst or next-to-worst when it comes American conservatives argue that Europeans to child welfare, health care, poverty, income equal- can’t continue to compete in the global economy. But

ity, pollution, CO2 emissions, ecological footprint, according to the World Economic Forum, over the personal savings, income and pension security, bal- past few years, four of the six most globally competi- ance of payments, municipal waste, development tive countries have been in Europe. Even American assistance, longevity, infant mortality, child abuse, businesses invest five times as much each year in depression, anxiety, obesity, murder, incarceration, Germany as they do in China and more in Belgium motor vehicle fatalities, and leisure time. We do than in India. And they make money doing it. M01_KARG7080_SE_06_C01.QXD 1/22/09 10:56 AM Page 22

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When all else fails, there’s the final appeal: the have all fallen sharply in comparison with those in United States may not be very healthy, fair or sus- Europe. The conservative economic revolution has tainable, but it’s “the land of opportunity,” where produced a gush-up instead of a “trickle-down.” For anyone can make it big if they’re willing to work most of us, the “ownership society,” emphasizing pri- hard enough. Yet a recent study finds that vatization, deregulation and massive tax cuts for the Americans actually have only about one-half to one- wealthy, is really a “you’re on your ownership” society. third as much chance as Europeans of escaping To make America better, our President tells us, low-income lives and rising to the top. we must do even more of these things, making tax The steady drone from some European busi- cuts for the wealthy permanent, for example. But ness leaders about the American economic miracle the working definition of insanity is to keep doing masks what should be obvious—they’d like to join the same things hoping for a different result. our CEOs in making 400 times as much as their If we want to build societies that really work for average workers, instead of the miserable 30 to 40 people, we need to ask, “What’s the Economy for, times as much they now make. Their voices speak Anyway?” And then we need to separate the real louder than those of the average European citizen, results from the myths, shed a little of our American who enjoys his or her six weeks of vacation, restful hubris and start looking at how other countries are meals, family leave, health care, sick pay, free col- actually edging us out by providing policies that lege education, and secure pension plan. succeed. That way lies a happier, healthier, more Since Ronald Reagan declared that “government just and sustainable world. cannot be the solution because government is the John De Graaf is a documentary filmmaker and coauthor (with problem,” indices of American quality of life, fairness, David Wann, Thomas Naylor, and Vicki Robin) of Affluenza: The All- economic security, and environmental sustainability Consuming Epidemic (San Francisco Berrett-Koehler, 2005)

centralized, well-coordinated system of programs. decades, federal social welfare initiatives played a Rather, a great variety of organizations provide a dominant role in the nation’s welfare effort. Still, wide range of benefits and services to different states continued to manage important social wel- client populations. The vast array of social welfare fare programs, such as mental health, corrections, organizations contributes to what is commonly and social services. Over time, the relationship called “the welfare mess.” Consequently, different between the federal government and the states has programs serving different groups through different changed. From the New Deal of the 1930s through procedures have engendered an impenetrable tangle the Great Society of the 1960s, federal welfare pro- of institutional red tape that is problematic for grams expanded, forming the American version of administrators, human service professionals, and the “welfare state.” Beginning in the 1980s, the clients. Reagan administration sought to return more of the The complexity of U.S. social welfare policy can responsibility for welfare to the states, a process be attributed to several cultural influences, some of called devolution.78 This devolution was furthered which are peculiar to the American experience. For by the Clinton administration with the signing of instance, the U.S. Constitution outlines a federal the PRWORA. system whereby states vest certain functions in A second confounding element can be attrib- the national government. Although the states have uted to the relatively open character of U.S. society. assumed primary responsibility for social welfare Often referred to as a melting pot, the national cul- through much of U.S. history, this changed with ture is a protean brew of immigrant groups that Franklin Delano Roosevelt’s New Deal which ush- competed with one another to become an estab- ered in a raft of federal programs. Over subsequent lished part of national life.79 A staggering influx of M01_KARG7080_SE_06_C01.QXD 1/22/09 10:56 AM Page 23

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Europeans in the late nineteenth century gave way firestorm of fundamentalism has swept across the to waves of Hispanics and Asians entering the nation, attracting the allegiance of groups associated United States a century later.80 Historically, social with evangelicalism. The traditionalist movement welfare programs have played an important role in flexed its muscles through the elections of Ronald the acculturation of these groups. At the same time, Reagan, the two Bush administrations, the installation many ethnic groups brought with them their own of a Republican Senate in the early 1980s and a con- fraternal and community associations, which not servative House of Representatives in 1994, and an only provide welfare benefits to members of the effective grassroots mobilization that challenged gov- community but also serve to maintain its norms. ernment policies on issues ranging from the family to Other groups that have exerted important influ- affirmative action. By the early 1990s, social conser- ences on U.S. social welfare are African Americans, vatism had begun to influence Democratic party the aged, women, and Native Americans. The very leaders, traditional supporters of government welfare pluralism of U.S. society—a diverse collection of programs. To reestablish credibility in an increasingly peoples, each with somewhat different needs— conservative political milieu, liberals distanced contributes to the complexity of social welfare. themselves from the large-scale government welfare Third, the economic system exacerbates the programs they had been associated with since the complexity of social welfare. The U.S. economy is New Deal. In place of these programs, many liberals predominantly capitalist, with most goods and serv- called for a reliance on personal responsibility, work, ices being owned, produced, and distributed and thrift. through the marketplace. In a capitalist economy, Conservative public sentiment has served as a people are expected to meet their basic needs in the backdrop for the debate on the future of welfare marketplace through labor force participation. policy.82 An ascendant conservatism has not only When people are unable to participate fully in the checked further expansion of federal social pro- labor market, social programs are deployed to sup- grams, but the unprecedented tax cuts engineered port these groups. These programs take various by the former Bush administration threatened to forms. Many are governmental programs. Private dry up the revenues upon which social programs sector programs often complement those of the are dependent. The magnitude of this cannot be public sector. Within the private sector, two organi- overstated: The tax cuts of the George W. Bush zational forms are common—nonprofit organ- presidency eliminated the federal surplus; after izations and for-profit corporations. Often these September 11, 2001, Social Security and Medicare private sector organizations coexist, proximate to funds that had been set aside for retiring baby one another.81 boomers were diverted to national security. As a Finally, various religious or faith-based organiza- result, the unfunded obligations of Social Security tions strongly influence social welfare in the United and Medicare and those of the federal retirement States. This is seen most clearly in the range of faith- programs totaled $16.7 trillion in 2007.83 The based agencies that offer social services, such as impact of this on social programs is profound, and Jewish Family Services, Lutheran Social Services, the future solvency of social insurances for retirees Catholic Charities, and the Salvation Army. In many would require a 91 percent increase in the with- cases, religious-based agencies provide services to holding tax or an 81 percent increase in the income groups that would not otherwise receive them. Today tax paid by individuals. If future workers reject many faith-based agencies receive federal funds for such tax increases, pressure will build to convert various services they provide to the public. It is likely Social Security and Medicare to means-tested, wel- that this trend will grow. fare programs. “This is the death trap of the welfare The complexity of social welfare in the United state,” concluded Paul Samuelson, “here and in States helps account for changes in welfare policies Europe and Asia.”84 Given these developments, and programs. For example, since 1980 a convergence welfare professionals face a formidable challenge: of social, political, and economic forces has led to a How can basic goods and services be brought to reappraisal of welfare. Liberal and conservative schol- vulnerable populations within a context of such ars have questioned the dominance of government complexity and uncertainty? programs in welfare provision. At the same time, a M01_KARG7080_SE_06_C01.QXD 1/22/09 10:56 AM Page 24

24 PART 1 American Social Welfare Policy Discussion Questions

1. According to the authors, American social wel- would come closest to being classified as moder- fare is undergoing a transition. Which ideolo- ate? Why? gies, schools of political economy, and interest 4. The chapter argues that in large measure social groups within social welfare stand to gain most policy dictates social work practice. Do you from this transition? agree with that premise? Explain your position. 2. Ideology tends to parallel schools of political Can you think of any instances (historic or oth- economy. How would classical conservatives erwise) in which social work practice has led to and liberals address current social welfare changes in social welfare policy? issues such as health care, long-term care for the 5. In your opinion, which schools of economic aged, and substance abuse? How would neocon- and political thought are the most compatible servatives and neoliberals diverge from tradi- with social work practice? Why? What are the tional conservatives and liberals on these issues? incompatibilities in the various schools of 3. Which schools of political, social, and thought with macro- and micro-level social economic thought discussed in this chapter work and practice?

Notes

1. Glenn Kessler and Amy Goldstein, “A Guide to the 12. Claus Offe, Contradictions of the Welfare State Candidates’ Positions,” Washington Post (November (Cambridge, MA: MIT Press, 1984). 3, 2008), pp. A10–A11. 13. John Maynard Keynes, The General Theory of 2. E. J. Dionne Jr., “The Opening Obama Saw,” Employment, Interest and Money (London: Macmillan, Washington Post (November 3, 2008), p. A21. 1936). 3. Barack Obama, The Audacity of Hope (New York: 14. Paul R. Krugman, Peddling Prosperity: Economic Three Rivers, 2006), pp. 256–257. Sense and Nonsense in the Age of Diminished 4. Richard Titmuss, Essays on the Welfare State Expectations (New York: W.W. Norton, 1994). (Boston: Beacon Press, 1963), p. 16. 15. Ibid. 5. Contained in personal correspondence between 16. In their book Economics for Social Workers: The David Stoesz and William Epstein, April 2000. Application of Economic Theory to Social Policy and 6. Education would logically be included here, except the Human Services (New York: Columbia University that in the American experience it has been treated Press, 2001), Michael Anthony Lewis and Karl separately. Widerquist identify four conditions that must hold 7. See Alfred Kahn, Social Policy and Social Services for a free market to exist. (New York: Random House, 1979). 17. Ibid. 8. Frances Fox Piven and Richard Cloward, Regulating 18. Milton Friedman, Money Mischief: Episodes in the Poor (New York: Vintage, 1971). Monetary History (New York: Harcourt Brace, 1992). 9. David Gil, Unraveling Social Policy (Boston: 19. Milton Friedman, Capitalism and Freedom (Chicago: Shenkman, 1981), p. 32. University of Chicago Press, 1962). 10. Charles Prigmore and Charles Atherton, Social 20. Ibid. Welfare Policy (Lexington, MA: D.C. Heath, 1979), pp. 21. Robert E. Lucas, Studies in Business Cycle Theory 25–31. (Cambridge, MA: MIT Press, 1981). 11. World Development Indicators Database, World 22. Krugman, Peddling Prosperity. Bank, September 2007. Retrieved 2008, from 23. Ibid. http://siteresources.worldbank.org/DATASTATISTICS/ 24. Ibid. Resources/GNIPC.pdf; and OECD Family Database, 25. Congressional Budget Office, The Economic and Social Policy Division, Directorate of Employment, Budget Outlook: Fiscal Years 1993–1997 (Washington, Labour and Social Affairs, Public Spending on Family DC: Congressional Budget Office, 1992), p. 28. Benefits, January 1, 2007. Retrieved March 29, 2008, 26. See Beth Shulman, The Betrayal of Work: How Low from www.oecd.org/dataoecd/45/46/37864391.pdf Wage Jobs Fail 35 Million Americans (New York: The M01_KARG7080_SE_06_C01.QXD 1/22/09 10:56 AM Page 25

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New Press, 2003); Lawrence Mishel, Jared Bernstein, Mimeographed paper, Michigan State University and John Schmitt, The State of Working America School of Social Work, ca. 1978. 2000/2001 (Ithaca, NY: Cornell University Press, 41. Piven and Cloward, Regulating the Poor, pp. 3–4. 2001); and Jared Bernstein, “Economic Growth Not 42. Harry Hopkins, Spending to Save: The Complete Story Reaching Middle- and Lower Wage Earners,” of Relief (Seattle: University of Washington Press, January 28, 2004, retrieved 2004, from www.epinet 1936). .org/content.cfm/webfeatures_snapshots 43. Neil Gilbert, Harry Specht, and Paul Terrell, 27. See Ayn Rand, The Fountainhead (New York: New Dimensions of Social Welfare Policy (Englewood American Library, 50th Anniversary Edition, 1996); Cliffs, NJ: Prentice Hall, 1993). Atlas Shrugged (New York: Signet Book; 35th 44. Marc Bendick, Privatizing the Delivery of Social Anniversary Edition, 1996). Welfare Service (Washington, DC: National Conference 28. Charles Murray, Losing Ground (New York: Basic on Social Welfare, 1985), p. 1. Books, 1984), pp. 227–228. 45. Charles Peters, “A New Politics,” Public Welfare 41, 29. Privatization: Toward More Effective Government no. 2 (Spring 1983), pp. 34, 36. (Washington, DC: U.S. Government Printing Office, 46. Randall Rothenberg, The Neoliberals (New York: 1988), pp. 233–234. Simon & Schuster, 1984), pp. 244–245. 30. Michael Grynbaum, “Greenspan Concedes Error on 47. David Stoesz, Small Change (New York: Longman, Regulation,” New York Times, October 23, 2008, 1995). p. 1. 48. Robert Reich, The Next American Frontier (New 31. CNN News, “Taxpayers Would Get Checks under York: Times Books, 1983). Economic Stimulus Plan,” January 24, 2008. 49. Anthony Giddens, The Third Way (Cambridge, MA: Retrieved October 25, 2008, from http://edition.cnn. Polity Press, 1999), p. 117. com/2008/POLITICS/01/24/economic.stimulus/ 50. Bruce Stokes, Helping Ourselves: Local Solutions to 32. Edmund L. Andrews, “Fed Acts to Rescue Financial Global Problems (New York: W.W. Norton, 1981). Markets,” New York Times, March 17, 2008, p. 4. 51. Sugata Dasgupta, “Towards a No-Poverty Society,” 33. Mark Landler, “U.S. Is Said to Be Urging New Mergers Social Development Issues 12 (Winter 1983), in Banking,” New York Times, October 20, 2008, pp. 85–93. p. 18. 52. Some of these economic principles were addressed 34. Greg Morcroft, “Treasury Set to Bail Out Fannie Mae, by E. F. Schumacher in Small Is Beautiful (New York: Freddie Mac,” MarketWatch, September 6, 2008. Harper & Row, 1973). Retrieved October 25, 2008, from www.marketwatch. 53. Barry M. Goldwater, The Conscience of a Conservative 35. Matthew Karnitschnig, Deborah Solomon, Liam (New York: Putnam, 1960), pp. 109–110. Pleven, and Jon E. Hilsenrath, “U.S. to Take Over 54. See Peter Steinfels, The Neoconservatives (New York: AIG in $85 Billion Bailout,” Wall Street Journal, Simon & Schuster, 1979). September 16, 2008, p. 10; The Associated Press, 55. Interview with Stuart Butler, Director of Domestic “AIG Borrows $90.3 Billion from Federal Reserve,” Policy at the Heritage Foundation, October 4, 1984. BusinessWeek, October 24, 2008, p. 2. 56. Alan Walker, “The Strategy of Inequality: Poverty and 36. Paul Wallis, “$25 Billion Fed Loan to Car Industry; Income Distribution in Britain 1979–89,” in I. Taylor It’s Not a Bailout, Says Detroit,” Digital Business (ed.), The Social Effects of Free Market Policies (Sussex, Journal, September 29, 2008. Retrieved October 25, England: Harvester-Wheatsheaf, 1990), pp. 43–66. 2008, from www.digitaljournal.com/article/260441 57. Kristen Geiss-Curran, Sha’ari Garfinkle, Fred Knocke, 37. Uwe E. Reinhardt, “Does the Democrats’ Stimulus Terri Lively, and Sue McCullough, “The Contract with Package Make Economic Sense?” New York Times, America and the Budget Battle,” unpublished manu- October 24, 2008, p. 16. script, University of Houston, Spring 1996. 38. Subir Lall, “World Economic Outlook: IMF Predicts 58. The Libertarian Party, “Statement of Principles,” Slower World Growth Amid Serious Market Crisis,” Washington, DC, 1996. IMFSurvey, April 9, 2008. Retrieved October 23, 59. Daniel Patrick Moynihan, Came the Revolution (New 2008, from www.imf.org/external/pubs/ft/survey/so/ York: Harcourt Brace Jovanovich, 1988), p. 291. 2008/RES040908A.htm 60. See Harold Wilensky and Charles Lebeaux, Industrial 39. Associated Press, “2008 U.S. Budget Deficit Bleeding Society and Social Welfare (New York: Free Press, Red Ink First 4 Months of Budget Year at Nearly 1965); and Mimi Abramovitz, “The Privatization of $88B, Double Amount Recorded For Same 2007 the Welfare State,” Social Work 31 (July–August Period,” CBS News, February 12, 2008. Retrieved 1986), pp. 257–264. October 24, 2008, from www.cbsnews.com/stories/ 61. R. Erikson, E. Hansen, S. Ringen, and H. Uusitalo, The 2008/02/12/national/main3822385.shtml Scandinavian Model (Armonk, NY: M.E. Sharpe, 1987). 40. Jeffry Galper, “Introduction of Radical Theory and 62. Richard Titmuss, Commitment to Welfare (New York: Practice in Social Work Education: Social Policy.” Pantheon, 1968), p. 127. M01_KARG7080_SE_06_C01.QXD 1/22/09 10:56 AM Page 26

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63. Wilensky and Lebeaux, Industrial Society and Social 75. Julie Appleby, “Bush Unveils Health Plan Tied to Welfare, p. 147. Tax Deduction,” USA Today, January 24, 2007. 64. Alvin Rabushka, “Tax and Spending Limits,” in Peter Retrieved March 17, 2007, from www.usatoday.com Duignan and Alvin Rabushka (eds.), The United 76. John Judis and Michael Lind, “For a New States in the 1980s (Stanford, CA: Hoover Institution, Nationalism,” The New Republic (March 27, 1995), 1980), pp. 104–106. p. 26. 65. Martin Anderson, “Welfare Reform,” in Peter 77. Mitchell Landsberg, “Nation’s Social Health Duignan and Alvin Rabushka (eds.), The United Declined in ‘93,” Houston Chronicle (October 16, States in the 1980s, pp. 171–176. 1995), p. 1C. 66. Peter Berger and John Neuhaus, To Empower People: 78. Domestic Policy Council, Up from Dependency The Role of Mediating Structures in Public Policy (Washington, DC: White House Domestic Policy (Washington, DC: American Enterprise Institute, Council, December 1986). 1977). 79. For a classic description of the assimilation phenome- 67. Michael Novak, Toward a Theology of the Corporation non, see Nathan Glazer and Daniel Patrick Moynihan, (Washington, DC: American Enterprise Institute, Beyond the Melting Pot (Cambridge, MA: MIT Press, 1981), p. 5. 1970). 68. Stuart Butler and Anna Kondratas, Out of the Poverty 80. Thomas Muller et al., The Fourth Wave (Washington, Trap: A Conservative Strategy for Welfare Reform (New DC: Urban Institute, 1985). York: Free Press, 1987). 81. The three auspices of social welfare in the United 69. William Lind and William Marshner, Cultural States have been termed the “mixed economy of wel- Conservatism: Toward a New National Agenda fare.” See Sheila Kamerman, “The New Mixed (Washington, DC: Free Congress Research and Economy of Welfare,” Social Work 28 (January– Education Foundation, 1987), p. 83. February 1983), pp. 43–50. 70. George Gilder, Wealth and Poverty (New York: Basic 82. For further details, see David Stoesz, “The Books, 1981), p. 118. Functional Conception of Social Welfare,” Social 71. Anderson, “Welfare Reform,” p. 145. Work 34 (March 1989), pp. 86–91. 72. Jacob. S. Hacker, The Great Risk Shift: The Assault on 83. U.S. Treasury Office of Economic Policy, “The 2008 American Jobs, Families, Health Care, and Retirement Annual Report of the Board of Trustees of the Federal (New York: Oxford University Press, 2006). Hospital Insurance and Federal Supplementary 73. Ibid. Medical Insurance Trust Funds,” March 25, 2008. 74. Lawrence Mischel, Jared Bernstein, and Sylkvia Retrieved March 26, 2008, from www.treas.gov/ Allegretto, The State of Working America 2004/2005 offices/economic-policy/social_security.shtml (Ithaca, NY: IRL Press, 2005). 84. Paul Samuelson, “The Deficit Chicken Hawks,” Washington Post (October 10, 2003), p. A27.