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Chapter 15: Social Welfare Policymaking |
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WHAT IS SOCIAL WELFARE POLICY AND WHY IS IT SO CONTROVERSIAL?
The vast differences in the wealth and income of citizens in the United States raise a host of questions related to why such differences exist and what the appropriate policy response should be. Social welfare policies attempt to provide assistance and support to specific groups in society. Social welfare policies consist of two kinds of programs. First are the entitlement programs. The two biggest entitlement programs are Social Security and Medicare. Means-tested programs, on the other hand, provide benefits selectively only to people with specific needs. Here is where the political battleground lies. To be eligible for means-tested programs, people have to prove that they qualify for them. Entitlement programs are rarely controversial in America and often overwhelmingly popular. Means-tested programs generate powerful political controversy. This chapter emphasizes that these policies are determined as part of a political process, where some interests are represented more than others.
INCOME, POVERTY, AND PUBLIC POLICY
The Census Bureau reported that in 2002 the median American household income was $42,409-that is, half of American households made more, and half less than this amount. No industrialized country, though, has wider extremes of income than the United States.
The concept of income distribution describes the share of national income earned by various groups in the United States. The distribution of income across segments of the American population is quite uneven.
Income is the amount of money collected between any two points in time (such as a week or a year); wealth is the amount already owned (such as stocks, bonds, bank accounts, cars, and houses). Studies of wealth display even more inequality than those of income.
To count the poor, the U.S. Bureau of Census has established the poverty line, which takes into account what a family must spend to maintain an "austere" standard of living. For 2003, the Census Bureau defined a family of three as falling below the poverty level if it had an annual income below $14,824; that year 12.1 percent of all Americans were living in poverty.
Poverty in America is concentrated among a few groups. More than one-third of single-parent, female-headed families live below the poverty line. Large percentages of some groups are poor, including African Americans, Hispanics, young Americans, inner city residents, and rural residents. Because of the high incidence of poverty among unmarried mothers and their children, experts on poverty often describe the problem today as the feminization of poverty.
The government spends one out of every three dollars in the American economy, and thus has a major impact on its citizens' wealth and income. In particular, there are two principal ways in which government can affect a person's income: government can manipulate incomes through its taxing powers, and government can affect income through its expenditure policies.
The best evidence indicates that the overall incidence of taxes in America is proportional, not regressive or progressive. This occurs because regressive state and local taxes are counterbalanced by more progressive federal taxes. Government spending policies can also affect a person's income. Benefits from government are called transfer payments because they transfer money from the general treasury to those in specific need. Government can also give an "in-kind payment," something with cash value that is not cash itself (such as food stamps or a low-interest loan for college education).
HELPING THE POOR? SOCIAL POLICY AND POVERTY
For centuries societies considered family welfare to be a private concern. With the growth of large, depersonalized cities and the requirements of the urban workforce, government was impelled to take a more active role in social welfare support.
A major change in how Americans viewed government's role in providing social welfare came during the Great Depression. After the onset of the Depression in 1929, many Americans began to think that governments must do more to protect their citizens against economic downturns. The federal government responded to this change by passing the Social Security Act of 1935, one of the most significant pieces of social welfare legislation of all time. Other programs such as Medicare were added later.
The 1960s brought an outpouring of federal programs to help the poor and the elderly, to create economic opportunities for those at the lower rungs of the economic ladder, and to reduce discrimination against minorities. Many of these programs were established during the presidency of Lyndon B. Johnson (1963-1969), whose administration coined the term the "Great Society" for these policy initiatives.
The entitlement programs-aimed primarily at the elderly-had strong political support. Advocates of greater spending for poverty programs had a more difficult time. In the 1980s President Reagan chose to target poverty programs as one major way to cut government spending. This action served his own ideological beliefs of less government and more self-sufficiency. The president rallied public opinion and worked to create congressional coalitions to support these efforts.
Political scientist Martin Gilens found that Americans tend to see welfare recipients (wrongly) as overwhelmingly African-American. Welfare attitudes are strongly influenced by whether they viewed African Americans as lazy or not. Negative views of African American welfare mothers were more politically potent and generated greater opposition to welfare than comparative views of white welfare mothers.
In August 1996 President Clinton signed a welfare reform bill that was supported by congressional Republicans but was opposed by half of congressional Democrats. The major provisions of the bill included giving each state a fixed amount of money to run its own welfare program; requiring people on welfare to find jobs within two years or lose their benefits; and setting a lifetime maximum of five years on welfare.
Symbolically, the welfare reform policies also changed the name of "welfare as we knew it." Cash payments to poor families were once called Aid to Families With Dependent Children (AFDC). After welfare reform, they were known as Temporary Assistance to Needy Families (TANF), today's name for the means-tested aid for the poorest of the poor. TANF benefits like AFDC are small and declining. The average recipient family collects about $363 monthly in TANF benefits.
A hotly debated question has been how the revamped system will work now that the welfare safety net no longer exists to catch someone who has failed to find a job after being on welfare for two years. Between the Act's signing in 1996 until 2002, the number of welfare recipients declined from 12.2 million to 5.3 million, a drop of 58 percent. Proponents of the reforms point to these figures as proof that the new system is working as intended. Opponents of these changes argue that the decline in the welfare rolls is due to the strong economic growth of recent years and warn of impending disaster the next time a recession strikes. President Bush has pushed one more welfare reform: getting married. The evidence on whether we won the "war on poverty" is mixed. But the proportion of the population that is poor has not declined since the 1960s, and the income distribution is skewed even more heavily in favor of a small number of wealthy individuals.
LIVING ON BORROWED TIME: SOCIAL SECURITY
The long-term sustainability of entitlement programs, particularly Social Security and Medicare, is a matter of much current debate. At some point-about 2038 unless something changes-payouts will exceed income. Technically the Social Security system will be bankrupt. No solution is a politically pleasant one. Cutting benefits to retirees is no more popular than raising taxes on working contributors.
Social Security, the most expensive public policy in the United States, began modestly enough as a "pay-as-you-go" plan during Franklin Roosevelt's New Deal. Social Security grew over the years, in large part because it worked. More than 90 percent of people polled, year after year, support Social Security. Still, for the cost of a tiny administrative fee to run it, Social Security got the elderly off the bottom of the poverty ladder. In 1965, Congress tacked onto Social Security a new program, Medicare, to assist the elderly with medical costs. By the turn of the twenty-first century, Social Security and Medicare had become the most expensive public policies in the history of the world. In a decade, they will consume more than half the federal budget.
Here is how Social Security works. Government taxes workers and their employers a percent of the employee's income up to a maximum. Both employee and employer contributions are paid into the Social Security Trust Fund. Current Social Security payroll taxes are 12.4 percent. Thus, for the moment, more money is going into the trust fund than is being paid out.
Essential to this arithmetic is the ratio of workers to beneficiaries. The more retirees, relative to workers, the thinner the Social Security blanket stretches. If instead of 3.4 workers per beneficiaries, there are only two, then the math changes. The cost to each worker rises from 10.5 percent of earnings to 18 percent of earnings (36/2=18) and Social Security turns from black to red ink.
The future of social welfare policies is just as complex and controversial in other democratic countries. Most industrial nations not only provide social policy benefits but also are usually more generous with them than the U.S. government. Americans tend to see poverty and social welfare needs as individual rather than governmental concerns, whereas European nations tend to support greater governmental responsibility for these problems. Also, Europeans often have a more positive attitude toward government, whereas Americans are more likely to distrust government action in areas such as social welfare policy.
Still, there are huge costs to these generous welfare programs. Taxes commensurate with the benefits of social policy are common in Western European nations, where taxes far exceed those in the United States. Income taxes in European countries approach (or even exceed) 50 percent. As in the United States, there has been a backlash against the welfare state in Europe.
UNDERSTANDING SOCIAL WELFARE POLICY
Policymaking in the United States is very incremental in nature, building on past policies. Although government benefits are difficult to enact, the nature of democratic politics makes it difficult to withdraw them once they are established.
Large government programs require large organizations to administer them. Past democratic conflicts and compromises in the social welfare policy area have given America a huge social welfare bureaucracy at all levels of government. The appropriate way to evaluate these administrative systems is not to focus on their scope or expense alone, but to weigh their scope and expense against the conduct of their mission, the goals and accomplishments of these programs, and the extent to which private non-governmental entities could realistically be depended on to help.
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