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The Dilemma of a Bifurcated Social Policy

Sreya SarkarCascade Commentary

Summary

The root of the contemporary American dilemma about how much to spend on welfare programs lies in the fact that, in this country, “social security” and “welfare” are manifestations of a fragmented and bifurcated social policy framework. Americans always have been ambivalent about nationalized social provisions, just as they are toward concentrated political authority.

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The root of the contemporary American dilemma about how much to spend on welfare programs lies in the fact that, in this country, “social security” and “welfare” are manifestations of a fragmented and bifurcated social policy framework. Americans always have been ambivalent about nationalized social provisions, just as they are toward concentrated political authority. The United States prefers a fusion of functions and division of power, while Europe has developed differentiation of functions and centralization of power. We have always looked to the Constitution and the “rule of law” as the axis of fundamental sovereignty.

The U.S. always has been called an “incomplete welfare state,” as it never created fully national or comprehensive social programs along European lines. But what has been often overlooked is that this country has developed some important social policies that are distinctive to it. The trajectory along which this country has traveled to arrive at its present social policy programs has been strikingly different from that of European welfare states.

“The trajectory along which this country has traveled to arrive at its present social policy programs has been strikingly different from that of European welfare states.”

Early American “social policy” won local support for the most inclusive system of primary and secondary public education in the industrializing world. It also included generous local, state and federal benefits for elderly Civil War veterans and their dependents. The U.S. became a precocious social spending state at the beginning of the twentieth century. In the early 1920s, American women created voluntary association alliances and promoted maternalist social policies in the states and in Congress. During the mid-twentieth century, America’s unevenly bureaucratized and democratized federal government, however, impeded social democratic class politics here. This restricted inclusive provisions for the poor.

Yet, the expansion of many public benefits for the broad working and middle strata was allowed, and programs like Social Security were accepted by the public. They were readily supported, even when it meant paying more federal taxes, as in the case of social security’s contributory retirement insurance. This is because Americans are most comfortable accepting those benefits from government which are widely distributed and fit well with their independent private pursuits.

The poor in America have benefited the most from public social provision when they have been included in relatively universal programs along with the middle class. When left to themselves, however, indigent minorities have suffered the most from the divisions encouraged by the continuing dilemma of Americans about the role of government in national life. Therefore, the fate of the poor here is tied to the possibilities for their inclusion in political coalitions that transcend class and race.

This is the reason for the deep divide between universal programs like “Social Security” and a class-specific one like the “welfare” programs. The bifurcation was implicit in the original Social Security Act. The framers of Social Security made sure that unemployment and old-age insurance would start paying benefits only after workers and employers had paid taxes for many years.

“It is important to look at fresh policy initiatives that reward work, create access to opportunities and are sustainable.”

The federal welfare provisions designed specifically for the poor developed in the 1930s in the form of Aid to Families with Dependent Children (AFDC) during the Great Depression. In subsequent decades, Congress added several new programs, but they were supposed to be temporary in scope. In 1996 Temporary Aid for Needy Families (TANF) was created to replace AFDC and shift families from welfare to work.

The transient nature of the American welfare programs is explained somewhat by the intention of the framers of the Social Security program. They hoped that, over time, most Americans would earn protections from contributory social insurance programs and cease to need public assistance. But the transition from “welfare” to “Social Security” was not that smooth. Although Social Security has had universal acceptance, it is now evident that Social Security is not a sustainable program. Current projections show a $13 trillion gap between the benefits promised to future retirees and the actual amount of taxes collected under the Social Security program.

It is essential to consider fresh policy initiatives that would end this bifurcation and make incorporation of welfare dependent people in mainstream social programs easier. Individual Development Accounts (IDAs) are one such program spawned by the asset-building movement to help low-wage workers save. IDAs are matched savings accounts in which low-wage workers deposit money and have it matched by public or private sources. It can be used only for selected purposes like home purchase, education or business start-up. In some states, including Oregon, IDAs can also be used to purchase cars to improve access to employment and thereby to increase income. IDAs have universal acceptance, as they are an offshoot of the broader asset-building federal tax policy which assists middle- and high-income workers and rewards work.

But IDAs still have one problem. They require new sources of revenue for the match and put additional pressure on taxpayers. In contrast, revamping several existing use-it-or lose-it programs like Unemployment Insurance and food stamps, allowing leftover funds to go into a savings account for the recipients using the programs. Such an arrangement can provide the match money for IDAs or other asset building initiatives without having to raise funds from new sources.

It may take a while to identify the best practice in the field of asset building for the low-wage population. However, policy experts are now designing inclusive social policy initiatives consistent with Americans’ value of work and upward mobility. It is important to look at fresh policy initiatives that reward work, create access to opportunities and are sustainable.

Sreya Sarkar is Director of the Wheels to Wealth Project at Cascade Policy Institute, Oregon’s premier public policy research center. To read other publications of the Wheels to
Wealth Project, visit www.cascadepolicy.org.

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