THE DEVELOPMENT OF U.S. SOCIAL POLICIES

USW 31, October 29, 2014

Theda Skocpol

• Overview of major phases in the development of U.S. social provision; and U.S. in comparative perspective.

• Next two lectures: social policies and new realities; health care reform and inequality.

What images and ideas do these phrases bring to mind?

“Welfare”

“Welfare state”

“Welfare state” has an ambiguous meaning in the United States. Scholars use this term to refer to the entire pattern of social expenditures in a nation (and some include indirect “tax expenditures” and “tax credits”).

But in everdAmerican popular discourse, “welfare” refers to programs targeted on the poor alone. Such programs have not been very well supported in U.S. democracy, and the term “welfare” often has a negative connotation -- in contrast to “social security” which has a positive ring for most Americans.

THE POLITICAL FORMULA FOR GENEROUS AND SUSTAINED PUBLIC SOCIAL SPENDING IN THE UNITED STATES

Benefits for service: successful programs reward or prepare individuals for service to the nation/community.

Broad constituencies: successful programs include the middle class along with the poor.

Partnerships between government and citizens’ associations: grow up to support and expand inclusive programs.

Reliable public revenues: the most successful programs have access to dedicated taxes or growing national taxes.

MAJOR DIRECT SOCIAL EXPENDITURES IN U.S. DEMOCRACY

Public schooling: primary and secondary schools spread across localities and states from the in the early 19th century.

Programs for mothers and children: mothers pensions, workplace regulations spread across states in 1910s, and the federal government created the Children’s Bureau and the 1921 Sheppard-Towner Act.

“Social Security” old-age insurance: launched in 1935 as part of the Act with that name. Expanded in steps 1939 to 1956 to cover survivors, virtually all employees, and include disability benefits.

GI Bill of 1944: offered WWII veterans generous education, family, and employment benefits, and loans for homes, farms and businesses.

Medicare and Medicaid in 1965; Affordable Care 2010ff: to fund health insurance for elderly and lower income people.

The political basis for sustainable social provision fell apart after the 1960s

racialized conflicts over affirmative action and welfare for the poor.

generational gaps and the missing middle – few programs for working-aged adults and their children.

advocacy groups pushed social spending for children or the elderly, but unions and broad citizens’ associations went into decline.

resistance to taxation grew, and indirect tax subsidies became the major route for expanded social provision

Source: Jacob Hacker, The Divided Welfare State, p. 30.

SINCE 1975, "HIDDEN" U.S. TAX EXPENDITURES HAVE GROWN MORE RAPIDLY THAN VISIBLE, DIRECT SOCIAL EXPENDITURES

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Hidden Tax Expenditures Visible Direct Expenditures

High social expenditures flowing from the "Great Society" and Nixon years

Reagan/Bush cutbacks

CONTEMPORARY U.S. WELFARE STATE

Source: Christopher Howard, The Hidden Welfare State (1997).

0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0%

Australia

Canada

Denmark

Finland

Germany

Ireland

Italy

Netherlands

Sweden

United Kingdom

United States

After-Tax Public and Private Social Expenditures , 1995

Public

Private

Percent of Gross Domestic Product

Source: Jacob Hacker, The Divided Welfare State, p.15. Education expenditures not included.

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2

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After-Tax Public and Private Social Spending, 1995

Source: Jacob Hacker.

Public and Private Social Expenditures as Percent of Gross Domestic Product, 2007

Source: Jacob Hacker.

Private Expenditures as a Share of Total Social Spending, 2007

Source: Jacob Hacker.

Largest U.S. Tax Expenditures, 2013

0 20 40 60 80 100 120 140 160 180 200

Exclusion for Employer-sponsored Health Insurance

Mortgage Interest Deduction

401(k) Plans

Lower Rate on Capital Gains

Pensions (defined benefit)

Exclusion of Net Imputed Rental Income

Deduction for State and Local Taxes

Tax Deferral for Multinationals

Charitable Deduction

Tax-Exempt Bonds

Billions of dollars

Source: L. Burman and M. Phaup, from U.S. Budget Analytical Perspectives, FY 2013.

Source: Christopher Howard, THE HIDDENWELFARE STATE (1997).

Despite the recent expansion of the Earned Income Tax Credit (EITC), which primarily benefits the less-well-off, most “hidden welfare state” tax expenditures go to the privileged.

Tax credits and refunds are also harder for the poor to understand and use -- and difficult to use for popular political mobilization.

$0 $500 $1,000 $1,500 $2,000 $2,500

Less than $15,000

$15,000-$19,999

$20,000-$29,000

$30,000-$39,999

$40,000-$49,000

$50,000-74,999

$75,000-$99,000

$100,000 or more

Average Tax Subsidy for Health Insurance for Families at Various Income Levels, 1998

Source: Jacob Hacker, The Divided Welfare State, Table 1.4, p. 39.

Tax Expenditures as a Percentage of After-Tax Income for Different Groups of U.S. Income Earners, 2007

0 2 4 6 8 10 12 14 16

Refundable Credits

Nonrefundable Credits

Above-LineDeductions

Itemized Deductions

Exclusions

Capital Gains,Dividends

ALL PROVISIONSTop 1% Earners

Top Fifth Earners

Middle Fifth Earners

Bottom Fifth Earners

Source: Burman, Geissler, and Toder, Amer. Econ .Review 2008.

Irv Garfinkel, Lee Rainwater, & Timothy Smeeding

Inequality at Harvard 2/14/11

• Widely Believed Half Truths/Nonsense – The welfare state is a drag on productivity.– The US has an unusually small welfare state.– The US always has been a welfare state

laggard.• The Truth

– The socialized programs of welfare states complement capitalism and enrich nations.

– The US welfare state is quite large.– For most of the 19th & 20th Century, US was a

leader in education, the most productive part of the welfare state. We no longer lead.

Gross Size of Welfare States in 1900 (with and without education)

Source: Lindert, P. (2005) Growing public: Social spending and economic growth since the eighteenth century.

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1

1.5

2

2.5

Australia^ Canada^ U.K. U.S.A. Belgium* France Germany* Italy Netherlands Spain^ Finland* Norway Sweden

% o

f G

DP

social w elfare ex penditures

education ex penditures

Social Welfare Transfers as a Percent of GDP

(with and without employer-provided benefits)

Source: OECD, FY2001

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5

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15

20

25

30

35

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45

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Australia Canada Ireland U.K. U.S.A. Belgium France Italy Germany Netherlands Spain Finland Norw ay Sw eden

% o

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DP

other in-kind

other cash

education

health

pension

Source: OECD, FY2001

Social Welfare Transfers in US $ Per Person

(with and without employer-provided benefits)

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2000

4000

6000

8000

10000

12000

14000

16000

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SSN Briefs on Tax ExpendituresAvailable at http://www.scholarsstrategynetwork.org

• Christopher Howard, “Tax Expenditures: What They Are and Who Benefits.”

• Leonard E. Burman and Marvin M. Phaup, “Could Reducing Tax Expenditures Tame the Federal Debt?”

• Suzanne Mettler, “Why Americans Can’t See Government – And Why It Matters.”