Social Policy: History (1980 to Present)
Abstract and Keywords
With the election of President Ronald Reagan in 1980 the United States entered an era of social policy development shaped in large measure by themes associated with political conservatism: privatization, federalism, work-linked benefits, personal responsibility, and “family values.” These themes have resulted in changes to the basic structure of American social welfare that will persist into the 21st century.
The American Social Welfare Model
The distinctiveness of the American model is often described in negative comparative terms: The United States does not have a European style welfare state and is usually described as an example of an “individualist/market” model of welfare provision (Esping-Anderson, 1990). The United States is far less generous to the poor in terms of social benefits, far less protective of low-wage workers, does not have a comprehensive public structure for health finance or social services, has less progressive taxation overall, and has somewhat higher levels of inequality and poverty (and most certainly severe poverty). The Organization for Economic Cooperation and Development analysis of net social expenditure demonstrated that the United States in 2003 spent 31.1% of its net national disposable income on social welfare, a figure far above the average expenditure of 28.5% by most industrialized countries and ranking the United States in total social expenditure about on the same level as the United Kingdom and the Netherlands, two countries normally placed in the “welfare state” category (http://www.oecd.org/dataoecd/14/23/38143827.xls). As Hacker (2002, p. 7) points out, American social provision does not stand out in international comparison in regard to “…the level of spending but the source” of that spending.
In the United States, then, a large share of the social welfare expenditure shouldered by the governments of most industrialized countries is instead the responsibility of the private sector, both corporate and nonprofit.
More than half of that cost is accounted for by employer spending for health insurance. The remainder is largely employer-based pension programs, employer-matched IRAs, and sickness, accident, and disability payments. Taking out these mostly work-linked private social welfare expenditures leaves the United States as one of the lower ranking nations in regard to public social welfare expenditure per capita, along with Australia and New Zealand. But consider as well that the great bulk of those public expenditures in the United States funds an effectively “work based” benefit structure, with Social Security retirement, Medicare, and Medicaid benefits alone accounting for nearly 90% of total public spending. It is this direction of spending toward the working and middle classes that reduces the antipoverty effect of U.S. social welfare dollars.
In general then, the United States has moved since 1980 even further away from the “welfare state” and toward what Gilbert dubs the “enabling state,” a system of social welfare with a primary focus on “public support for private responsibility” (Gilbert, 2004, p. 43), meaning promoting work rather than protecting labor, privatization rather than public provision, and selectivity rather than universal entitlement.
The Social and Political Context of Reagan Era Policy
Reagan came into office after two decades that witnessed what Patterson (2000, p. 153) called the “unsung revolution”: a dramatic decrease in the numbers and proportion of the poor and a “stunning enlargement” of social welfare programs and expenditures. In 1961 nearly 40 million Americans fell below the Census Bureau defined poverty standard, 22% of the population; by 1976, there were 24.6 million Americans in poverty, about 12% of the total population. Liberals also liked to point to the fact that the poverty measure did not take into account “income” from in-kind programs such as Food Stamps and Medicaid, both of which grew substantially in this period, and counting these programs as cash benefits the poverty rate could be reduced by an additional one third or more. But this decline in poverty had a price. Expenditures in social benefit programs increased in these years from about 8% of GNP in 1960 to nearly 17% in 1974. Social Security retirement benefits and Medicare led the way, but there were also dramatic cost increases in Medicaid, Food Stamps, and Aid to Families with Dependent Children. The “old welfare” of social benefit transfer payments had finally struck and it was effective and costly, but not soul satisfying. America wanted to reduce poverty through the “new welfare,” promised in the Kennedy and Johnson years in the 1960s. What America had in mind was something more akin to that envisioned by the “War on Poverty,” the reduction of poverty through increased opportunity and human investment. The old welfare had brought a level of poverty reduction unimaginable to earlier reformers, but it submitted a sizable financial and cultural bill.
Despite the hostility expressed toward governmental social welfare in general, the Reagan administration did recognize the need for “a safety net for the truly needy” and did not, in the end, make a frontal assault on the basic structure of social welfare. The administration had the opportunity to do so in the early 1080s when the Social Security system was faced with dire predictions based on income and payouts to the various trust funds in the Social Insurance system. Older persons had increased as a percentage of the population, the post-WWII baby-boom wave was on the way, and low birth rates suggested proportionately far fewer workers making FICA contributions in the future. The social security system was said to be facing “bankruptcy,” and President Reagan, who had more than once characterized social security as a “pyramid scheme,” seemed to have a once-in-a-century political opportunity. But a recession was on, the Republican Party counted on older voters, and preliminary efforts to cut benefits in Social Security and Medicare had been rebuffed. So, in 1981 the President appointed the bipartisan Greenspan commission to study Social Security (http://www.ssa.gov/history/reports/gspan.html). The commission recommended that the retirement age be moved, in increments, to 67, that benefits of persons with incomes above a certain specified level be taxed, and that COLA adjustments be delayed. Together, these changes, adopted in 1983, substantially shored up the system, producing a large surplus in the retirement trust account by the early 1990s. President Reagan, perhaps the most ideologically conservative U.S. president in the century, had, ironically, strengthened the center piece of the American welfare system.
The administration succeeded in 1981 in passing the Omnibus Budget Reconciliation Act, a comprehensive piece of legislation that substantially cut funding for social services, generally tightened eligibility requirements in a number of federal benefit programs in order to focus on the “truly needy,” and created seven block grant areas to states greatly increasing state governmental latitude. OMBRA was a piece of an overall strategy of creating budgetary shortages through popular tax reductions that would then force congress into cuts.
In regard to “welfare,” popularly identified entirely with AFDC, the White House Policy Office concluded that work incentives had had little impact on labor force participation of AFDC adult recipients and, so, sought to encourage states to implement “workfare” requirements that would exchange work, however modest in hours and type, for benefits. In addition, the administration promoted state experimentation through granting waivers from federal regulation a policy that would come to have great impact in the following administration of George H. W. Bush. Consistent with the administration's “individual responsibility” theme, the White House strongly supported child support enforcement, producing higher levels of federal support and cooperation with states (Patterson, 2000, p. 234).
Total federal outlays for social welfare continued to increase under President Reagan, but the rate of increase was down to an annual 5–6% from the 10% typical of the previous decade. As federal expenditures slowed, however, state and local governmental costs continued to rise, and many states and localities found that their share of various social programs, often in the form of mandated expenditure levels, required substantial increases in taxes and reduced budgetary flexibility (Katz, 1986, p. 274).
The human and social service sector, overall, grew substantially in the 1980s, much of this growth occurring in the voluntary and for-profit sectors. Title XX of the Social Security Act had allowed rapid expansion of contracting with private providers for services in the 1970s and 80s, and despite caps on spending and effective cuts in allocations in the Reagan era, the private sector, overall, grew in numbers of agencies and organizations, employees and budgets.
On the for-profit side human service corporations in hospitals, nursing homes, home health care, and day care emerged as major actors in service delivery and management. The Reagan administration supported “privatization” with considerable rhetoric, the appointment of a privatization commission, and some operational and policy decisions (President's Commission on Privatization, 1988). In the United States privatization most often refers to use of market forces to deliver publicly funded services in a way that provides for choice, competition, and cost constraint, and diminishes state investment in permanent facilities, services, and personnel. The postal services, garbage collection, park management, data management, air traffic control, weather information, housing finance, and similar others have all been the target of privatization efforts. Conservatives, having a great deal of faith in the ability of economic markets and little faith in planning and administration, have also proposed vouchers in education, health-care, housing, and social services. In some areas, notably food programs, special education, and housing, vouchers have become more widely utilized, and as noted earlier, private provision is the norm in health services.
In the last months of his presidency, Ronald Reagan signed the Family Support Act of 1988. This legislation authored primarily by Democratic Sen. Daniel Moynihan and supported more vigorously by Democrats than by Republicans, incorporated all of the Reagan era themes in regard to assistance to the poor: work, family, and personal accountability. In signing the act the President said that despite the “best of intentions” the Federal Government had in the past “usurped” parental responsibilities and had “reinforced dependency” and separated welfare recipients from the “mainstream” of society.
The Family Support Act, heralded as a major welfare reform, required states to meet progressive targets in the participation of AFDC adult recipients in “job opportunity and basic skills” (JOBS), linked Medicaid eligibility to AFDC, provided transitional Medicaid for those leaving AFDC rolls, increased federal support for child care where necessary to support JOBS participation, and, yet again, strengthened child support enforcement. The Act in retrospect was doomed by the late 1980s recession, which created huge deficits in state budgets and prevented many of them from funding the JOBS and associated child care programs. AFDC rolls rather than decreasing rose precipitously in 1989–1991, causing federal expenditures to reach record levels—$23 billions in 1992.
The Reagan years, then, witnessed a rather persistent and effective political attack on “welfare state” ideology, a significant reduction of federal, and to a degree state, funding in the social services, and an increased importance of the voluntary and for-profit sectors. The Reagan years established very clearly the policy preference for work-based programs and the linking of eligibility to “worthiness” measured by work participation.
Policy Developments of George H. W. Bush
George Bush became President in 1988, after eight years as Vice President, promising a “kinder and gentler” America, which many understood to be a mild criticism of the previous administration. Bush strongly voiced support for the private nonprofit sector in social welfare and introduced the term “thousand points of light” in his inaugural address. On the public expenditure side, the tax reductions of the mid-1980s combined with Gramm-Rudman-Hollings deficit controls and the President's campaign pledge of no new taxes kept a firm grip on even the most modest of program intentions. The administration did have success in shaping a new Civil Rights Act of 1991, which expanded somewhat the rights of those discriminated against to seek relief.
But the most notable of the social policy developments in the G. H. W. Bush years was the passage of the Americans with Disabilities Act of 1990, which dramatically increased protection from discrimination in housing, work, and public accommodation for the disabled. Overall, however, the thawing of the cold war, the collapse of the Soviet Union, the overthrow of Noriega in Panama, and the first Iraq war would give the Bush administration a strong foreign policy flavor. In the meantime, the economy slipped into recession, and the Los Angeles riots, after the first Rodney King arrest and beating case was tried in 1992, reminded everyone that the problems of race and poverty were very much with us.
The Clinton Years
President Bill Clinton, elected in 1992, had campaigned on a promise to reform the nation's health-care system and to “end welfare as we know it,” and as former Governor of Arkansas he had direct experience with many domestic social welfare problems. He appointed a more diverse, and decidedly more domestically oriented, cabinet, and with his wife Hillary at his side, sought to tackle a number of social matters. In the first year of the Clinton administration the most evident of these was Health Care. Emphasizing basic principles, including universality of coverage and cost control, the administration proposed a far-reaching health scheme that would enroll all Americans in a “health alliance” that would seek provider bids on a basic insurance package. For the first time, it would have created a genuinely national health-care structure within the American government. As a result of strong opposition, the effort was not achieved (Mizrahi, 1997).
The Clinton administration supported a major expansion of the EITC, the Earned Income Tax Credit, a policy dating back to the Nixon administration, which allowed lower income workers to credit selected work-related expenses against the federal tax obligation. If the credit exceeds the tax obligation the credit is “refundable.” The administration, continuing the policy of the Republican years to allow state waivers, granted permission to Wisconsin to implement a bipartisan “Wisconsin Works” program complete with benefit time limits and detailed work requirements. The expansion of EITC and the emergence of state reforms such as Wisconsin's would anticipate the architecture of the coming major welfare reform.
The Clinton administration would work diligently with the conservative Republican majority elected to the House of Representatives in 1994, which had, under the leadership of House Speaker Newt Gingrich, crafted a guiding policy document called “The Contract with America”. After considerable effort, Congress would pass in 1996 and the President would sign the Personal Responsibility and Work Opportunity Act, which would create the Temporary Assistance to Needy Families (TANF) program. The new program incorporated work requirements and time limits. The time limits allowed 2 years of benefits prior to work as defined by the legislation and a 5-year lifetime maximum of benefits. States are allowed a 20% caseload exemption from time limits, but at this writing no state has utilized this provision.
The act is usually regarded as a great political success, with both political parties claiming credit for the dramatic decline in welfare caseload and the associated increase on labor force participation. As policy the program represents a radical shift from the original Aid to Dependent Children construct that was, after all, a child welfare provision designed clearly to keep women out of the labor market and at home in a parental role.
The success of welfare reform for the great bulk of the poor depends upon an effective system of work support that would “make work pay.” The most important of these programs are the minimum wage, the Earned Income Tax Credit, the child tax credit, income supplement programs conducted by states, food stamps, health insurance, child support enforcement, and child care. A recent study by the Congressional Budget Office (2007) showed that numerous expansions of these programs since the mid-1980s have increased by a factor of more than 8 the value of federal work support benefits now being paid to working families. If American social policy for the poor is going to be work-based in character these programs will continue to play the critical role in maintaining work incentives and in supplementing earned income so that working families can provide a minimum living standard for their children.
Another important element in the Clinton administration's efforts was creation of The State Children's Health Insurance Program (SCHIP), included in the Balanced Budget Act of 1997. Title XXI of the Social Security Act had allocated about $20 billion over 5 years to help states insure more children. SCHIP continues to receive considerable attention as states implement or continue to expand and refine their initial SCHIP plans. SCHIP plans have been approved in all 50 states, the District of Columbia, and 5 territories (http://www.cms.hhs.gov/home/schip.asp).
The George W. Bush Years
Bush, the son of the 41st President came into office after a controversial election against Al Gore because Gore won the popular vote and the Supreme Court stopped the recount (Bush v. Gore, 531 U.S. 98, 2000). He promised Compassionate Conservatism, a doctrine supporting sensitivity to social issues but a nonstatist response to them emphasizing private, community-based action most especially from faith-based, charitable organizations.
Just 8 months into the new presidency, the events of September 11, 2001, gave the administration a focus and urgency in international matters. Afghanistan, and then Iraq, would come to represent the administration's central focus in combating radical Islamic actions and “remodeling” the Middle East. This would prove to be the context for many of the most controversial elements of administration policy and operations, from reorganizing the armed services to contracting with Halliburton, and would overshadow for the entire period of the Bush presidency domestic policy matters.
President George Bush's 2003 tax proposals offered a sweeping package of tax cuts and incentives primarily of benefit to higher income brackets. There was some tax relief for married couples and an increase in the tax deduction for families with children, but $364 billion out of the $674 billion “economic stimulus” tax plan would be devoted to eliminating the tax on dividends when the poorest fifth of Americans have an average of $25 in dividend income.
The Bush administration addressed the problem of Americans not seeming to be competitive in public education with other high GDP nations and persistent racial and socioeconomic gaps in tested school performance in supporting the No Child Left Behind legislation, passed with considerable bipartisan support in late 2001 (http://www.ed.gov/policy/elsec/leg/esea02/index.html). The act provides increased federal funding for schools in return for states to establish mandatory testing by subject and a public rating system on school performance. It gives parents the option to transfer their children from low-performing schools. Although the policy is hailed by many as moving the United States finally toward the sort of national educational standards typical in other countries, the state variations in testing and the general resistance to standard outcome measures by teacher groups combined with lower levels of funding than originally promised have plagued the policy from the beginning.
In early 2002 the President established the New Freedom Commission on mental health. The report of that commission (http://www.mentalhealthcommission.gov) recommends far more extensive screening for mental illness and emotional disturbance, especially for children and with a focus on schools and institutions and generally supports the privatization of mental health services.
The Medicare Prescription Drug Improvement and Modernization Act of 2003 created a prescription drug benefit beginning January 2006. Some 44 million seniors and disabled persons would participate notwithstanding a complex system of coverage with limits at different points, which from a liberal perspective was not considered generous (although future cost projections through 2016 exceed $500 billion). There is specific provision against the Medicare administration “negotiating” for favorable pharmaceutical prices (as does the Veteran's Administration for example); nevertheless, the history of social welfare policy suggests that benefits provided to a substantial portion of a politically active aging population may expand over time.
Despite these domestic initiatives, the election of 2004 against Democratic opponent John Kerry became one dominated by national security, with few substantive issues of national policy, foreign or domestic, dividing them. There were undercurrents of “moral” issues (gay marriage bans were on the ballot in 11 states) and “character” (Kerry and the Swift Boat and Bush and his National Guard experience) but the relatively close election (51% to Kerry's 48%) seemed to turn on security issues.
If 9/11 and its aftermath provided a context for the Bush White House to develop a focus, identity, and considerable early public support, it would be another disaster (again just months after the election) that would come to define the second term. Hurricane Katrina, in August of 2005, devastated New Orleans and the Gulf Coast and would provide the lowest moment in the administration's domestic political life. Katrina proved to be a public administrative disaster, with state and federal agencies, as well as local governments, proving unable to communicate and coordinate. But more than that it was a political disaster, with the White House appearing both confused and disinterested. Quite in contrast to the 9/11 George Bush who was visibly “in charge” and whose policy development (however unsuccessful in some aspects) was both rapid and clear, this time the President and his administration seemed deaf to political reality. The impact of Katrina, combined with the declining fortunes in Iraq, has created a circumstance that has not allowed the Bush administration to pursue aggressively any major policy developments in social welfare.
An example of the administration's political incapacity is Social Security Reform. In December 2001, an administration commission charged with addressing the long-term financing problems of the Social Security program introduced three possible plans for privatizing the existing federal Old Age, Survivors, and Disability Insurance. The administration supported the report's recommendation which would cut benefits compared to current law by replacing “wage indexing” with “price indexing,” resulting in a benefit cut that would save billions over time presuming the official inflation index would be lower than earnings increases over time. The report also recommended the creation of private investment accounts financed by diverting a relatively small portion of a worker's Social Security payroll taxes into a private account managed, within limits, as one may manage an IRA. There are potential long-term public cost savings to this plan and potential increase in retirement support for long-term contributors to this scheme but the short-term volatility of financial markets also creates the possibility for reducing the very thing promised in 1935, security. Nevertheless, the political opposition and his own unpopularity due in part to a continuing and costly (in terms of lives and money) war in Iraq and Afghanistan have kept any proposals from moving forward.
Another example of administrative reform intention that has not developed political gravity is immigration reform. The Bush White House has, from the beginning, sought some sort of resolution to the current contradiction of having strict immigration controls in the context of rather porous borders and a demand for labor in the United States that greatly exceeds that in Mexico and Latin America. President Bush called for legislation strengthening security along the U.S.–Mexico border, involving both an increase in Border Patrol agents and the building of a wall in a lengthy section of the border, combined with a renewed and expanded guest-worker program and a process that would allow some of the more than 11 million illegal immigrants already in the United States to work their way toward citizenship, by paying fines and back taxes, working in a job “for a number of years,” and learning English. But the administration and supporters of “comprehensive immigration reform” were stymied in Congress in the summer of 2007.
The reauthorization of the TANF provision of the 1996 welfare reform occurred in the 2005 Deficit Reduction Act which keeps the principal elements of TANF intact. It does provide $200 million in new federal funding for child care and, in a central element of political compromise, increases the “charitable choice” faith-based initiatives associated with TANF-related social services and work placement and support. In an immigration related aspect of the law individuals are required to present documentation of citizenship or nationality when they apply for Medicaid benefits.
What we know from the history of American social welfare is that although there have been moments of dramatic political departure, those swings usually produce far less, in a policy sense, than may be expected either right or left. The basic elements of what Wilensky and Lebaux (1958) labeled the “culture of capitalism” are still with us, meaning a pervasive and strong belief in the United States as a society of opportunity and individual initiative and responsibility. The new economy, being postindustrial, has washed away many of the labor structural factors that create class identity and politics, and the new politics of “identity” (race, gender, sexual orientation) tend to cut across economic interests and undermine a traditional welfare state agenda. In addition, the increasing population diversity of the United States combined with the continuing effects of a federal governmental structure all suggest that we will not see an American version of a recognizable “welfare state” no matter which party occupies the White House or controls Congress.
Work-based social benefits and privatization of public and social services, while associated with the Reagan Republican political era that may be in decline, are so based on elements of American culture, governmental and economic organization that they will still be very much with us. There is reason to believe that the United States will move toward some sort of national health policy and structure, but one can be assured that it will incorporate both a financing and delivery system that keeps the private provision of health services and the private, usually occupationally based, system of health finance largely intact. So powerful is the health industry and its critical actors in the United States that we can be assured, as well, that social services will be both increasingly defined in terms of “health” and that the delivery and financing structures will look very much like the physical health industry.
Lord Beveridge observed in the 1940s that the object of social welfare (and government more broadly) was not the “glory of rulers or of races” but the “happiness of the common man.” Perhaps this is a point on which to end this consideration of the recent decades of American social welfare development. Social policy is ultimately an expression of a positive ideal of a decent society providing opportunity for human meaning and satisfaction. Social policy is an expression of the search for that ideal and the fierce competition over definitions, means, and winners and losers. That competition rests on the differential values of security and humanitarianism on the one hand and self-reliance and competitiveness on the other. The continuous compromise between these two that is American social welfare will, no doubt, persist.
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