The US Welfare System Politics and Policy

Transcription

1 The US Welfare System Politics and Policy 1. Last week: Comparative: Move from previous week s focus on Oregon specifically to a global, comparative perspective: how the US compares with other nations in terms of inequality and in terms of policy Notes, etc. from last week s lecture as actually delivered available on course web site 2. This week: US welfare policy over time, especially factors contributing to the US practices and policies, leading up to the 1996 welfare reforms Assignment distributed due in two weeks 3. Next week: Putting the changes into practice, both nationally and in Oregon End up back in Oregon, with how Oregon is changing welfare; conclusions and guest speaker Story in Three Acts: Act 1: US welfare developments leading to the 1935 Social Security acts Act 2: Developments in welfare policy and politics , resulting in welfare policy changes in 1996 Act 3: Implementing (that is, carrying out) the 1996 changes discuss this next week Reminder: Last week: US greater willingness than most other advanced industrial nations to tolerate high levels of inequality, so fewer policies that sharply reduce inequality Reasons go back hundreds of years in American history: see Cammisa, From Rhetoric to Reform?, esp. ch 2 read the history in that chapter carefully Several core elements in US orientation toward inequality, poverty, and poverty policy Strongly individualist orientation: self sufficiency, Lone Ranger, succeed on own; individuals including the poor are responsible for their own fate Generally negative view toward government, going back to the time of King George and the founding of the nation; US has separation of powers/checks and balances (nearly all other democratic nations have a parliamentary system) in order to reduce the power of government, to limit its potential misuse; but note that general views about, say, government, may differ from specific views about, for example, individual government programs, or views of regulation in the abstract may differ from views of specific areas of regulation, for example environmental regulations uswelf, printed May 2, 2000

2 Evaluations of Selected Public and Private Organizations and Institutions, 1997, in Percent (Pew Research Center for People and Press) Federal Government in Washington Your state government Your local government The Military News Media Business Corporations % 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Very favorable Mostly favorable Mostly unfavorable Very unfavorable Can't rate, etc. Evaluations of Selected National Government Agencies, 1997, in Percent (Pew Center for People and Press) DOD FDA Dept of Ed IRS Soc Sec Adm Postal Service EPA FBI % 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Very favorable Mostly favorable Mostly unfavorable Very unfavorable Can't rate, etc. uswelf, page 2, printed May 2, 2000

3 Evaluations of Government Regulation, 1997, in Percent (Pew Research Center for People and Press) When something is run by the government, it is usually inefficient and wasteful The federal government controls too much of our daily lives Government regulation of business usually does more harm than good There need to be stricter laws and regulations to protect the environment % 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Completely agree Mostly agree Mostly disagree Comletely disagree Don't know, no answer Negative view of government is coupled with generally a very positive view of business; for example, people tend to know and be much more angry about the pay of members of Congress about $140,000 per year than they are likely to know or be angry about compensation of corporate CEOs, averaging about $10 million a year for top 500 corporations. (As discussed in class, each of us probably pays Peter Jennings of ABC TV news about the same as a California resident pays each of that state s US senators, through taxes for Congress and through buying products advertised on ABC for Peter Jennings yet we recognize we pay Congress with our money but do not feel the same about Peter Jennings). And part of this very positive view of business tends to be a high regard for the market as natural, in which government should not intervene. uswelf, page 3, printed May 2, 2000

4 All these reinforce the US tolerance for relatively high levels of inequality and resistance to government efforts to reduce the market-produced natural inequality. This is in contrast to most other advanced industrial democratic nations. The Great Depression of the 1930s, though, raised questions about the adequacy of state and local aid, stimulated national government involvement That national government policy, though, reinforced earlier distinctions. The Social Security Act of 1935 developed two sets of programs, one aimed at the deserving poor social insurance programs and one aimed as the undeserving poor public assistance programs Dual Welfare system which has persisted until now: Social insurance is more generous (larger benefits per recipient), and involves much larger spending in total, and yet more popular example, Social Security Public assistance is less generous (smaller benefits per recipient0, and involves much smaller spending in total, yet less popular example, welfare (AFDC/TANF) Detailed discussion of both parts of the dual welfare system System (table at the end) think carefully how the differences result in very different politics; and think carefully about our own reactions to each of these Spending (table at the end) note that social insurance programs tend to involve much larger expenditures Effects of overall system Poverty reduction by age group: this graph shows poverty level before the effect of government policy and the poverty level after taking into account the effects of policy, e.g., AFDC or food stamps; US national government policy reduces poverty much more among the elderly than among any other group of the population uswelf, page 4, printed May 2, 2000

5 Policy causes of poverty reduction: this graph shows how much each policy contributes to the reduction in poverty for that group Changes over time in policy effect on poverty reduction: these two graphs show changes over time in the reduction in poverty due to government policy; note that policies generally reduced poverty more in the 1970s than in the 1980s-1990s uswelf, page 5, printed May 2, 2000

6 Carefully study reasons for reduction consider the alternative policy orientations, their effects, and their politics Some direct poverty policy, for example, effects of AFDC/TANF or of food stamps Some effects of the tax system; federal tax somewhat progressive, with some redistributive effect: Effective (actual) tax rate (1998 estimate) Tax bracket (marginal tax rate) Percent of families Cumulative percent of families Average pretax income Average federal income tax Tax as percent of income (average) 0% $11,578 $-490 Not Applicable 15% ,118 2, % 28% ,117 10, % 31% ,445 24, % 36% ,333 51, % 39.6% , , % Source of data: U. S. House Committee on Ways and Means, 1998 Green Book: Background Material and Data on Programs..., Table 13-22, p. 894, from Congressional Budget Office Tax Simulation Model, estimated for 1998, for all families; total exceeds because of rounding. Data from original source except tax as percent of income calculated. Changes in the politics of welfare, especially in relation to public opinion Cammisa describes developments from the 1960s to the 1990s read those discussions carefully: Johnson and Great Society Medicare, for example, began in 1965 Nixon and proposed Negative Income Tax an effort to replace welfare, to reduce the welfare bureaucracy and aid the poor through the tax system; Congress did not pass these proposals Reagan proposals, which sharply differed in goals and method from Nixon proposals, though both Republicans he much more negative toward government help for the poor through welfare than was Nixon uswelf, page 6, printed May 2, 2000

7 Public opinion 1972 and 1994, the year of Republican victory in congressional elections (Gallup data, using the question shown at the top of each graph) uswelf, page 7, printed May 2, 2000

8 How do we account for the sharp change in public opinion, the sharp reduction in support for welfare? To understand the debate, first must emphasize underlying issue about welfare, specifically divergent views of the causes of poverty (see discussion in Cammisa, From Rhetoric to Reform?) Personal causes: individuals responsible for their own fate; if they are poor, it is their fault (though some deserving poor) Structural: many/most of the causes of poverty are beyond individual control The debate has varied, but in recent years, the personal explanation which also fits with US individualist orientation seems to have become the dominant view in affecting public debate, and to stimulate efforts to control or reduce welfare Why is this so, with the resulting change in public opinion about welfare from 1970s to the 1990s? Reasons for changes What has NOT changed to cause changed public opinion 1) Welfare spending it could be that welfare spending sharply increased, and it did, but not disproportionately in relation to the large increases in social insurance spending (see the table showing spending figures for 1970 and 2000 at the end) 2) Welfare family size: It could have been that people became more angry about welfare because welfare families kept becoming larger and larger, but as Cammisa states, family size in welfare families fell, from 3.0 children in 1970 to less than 2 in recent years 3) Benefit levels: It could have been that welfare benefit levels rose sharply, so people became more angry about those high benefits; but in inflation-adjusted dollars, AFDC benefits actually fell, especially in contrast to automatically-adjusted Social Security benefits uswelf, page 8, printed May 2, 2000

9 4) Income distribution: It could have been that income distribution became more equal, so people less concerned about poverty, but actually became less equal after 1968 peak Caution about percent and percentage point: If the income share of the bottom quintile of the population falls from, say, 5% to 4% of total income, that 1 percentage point drop is a 20% drop (1/5 = 20%); it is easy to minimize changes by saying, for example, it was only a 1% change when in reality the 1 percentage point change was a 20% change 5) Minimum wage did change during this time, but the peak in inflation-adjusted dollars was 1968 (which, possibly coincidentally, was the year of least US inequality) and in real terms the minimum wage fell from that point on uswelf, page 9, printed May 2, 2000

10 6) Some poverty reduction did occur, especially for the elderly (earlier graph-handout) What DID change to cause changed public opinion Note that each of items 1-6 above is factual, but perceptions of those facts may have been inaccurate, so the following items emphasize sources of change in perceptions that is, what people believe to be factually correct; so what did change? 1) Slowed rate of economic growth and increase in size of deficit/national debt did occur (the annual federal deficit was $290 billion in 1992 now a surplus of $100+ billion). Because most among the public exaggerate the size of national government welfare spending, the larger deficit may have stimulated people to blame excessive welfare spending, even though AFDC/TANF and food stamps each actually about 1% of federal budget. And slowed economic growth may have made this excess seem even worse. 2) Political leader views, especially Republicans but also Democrats, who emphasized difficulties and problems with welfare rather than defending it; example, President Reagan talked about the Chicago welfare queen (drove a Cadillac, many children, lived well) Note: Political actions by leaders result from combination of: a) Ideological views, that is, what is good for the nation liberals more likely to accept government actions to reduce inequality and conservatives more likely to argue that market should determine inequality, with minimal/no government effort to affect it b) Self/party interest, that is, what will help/hurt self, party, other party, etc. c) Political leaders normally propose what fits with their ideology but also that helps self/party; in other words, not act against ideology but propose actions that both fit ideology and help self/party interest Return to this again in relation to 1996 actions 3) Opinion media: Example: Reader s Digest (conservative) ran negative articles on features of welfare, for example, about the average welfare family that had many more children, was better off financially, was almost always minority, and in other ways served to stimulate resentment among readers about welfare cheats who lived off the government while the rest of us worked hard to produce the taxes that supported them Another example: Articles on the size of welfare spending, which combines education, social insurance, and public assistance to show social welfare spending, a very large number. Even though most people think of welfare only as public assistance, this very large number gives the impression of absolutely huge welfare spending 4) News media: increasingly black portrayals of welfare in the 1950s and 1960s the poor often portrayed as white, while in 1970s and later increasingly portrayed as non-white, especially black, even though that distorts actual composition of those on welfare This media portrayal, coupled with widespread public view that non-whites less committed to work ethic and so less likely to be deserving increased the image of welfare recipients as undeserving (see Martin Gilens, Why Americans Hate Welfare [University of Chicago Press, 1999], on reserve spring quarter for PS 419) Graph 5.1 shows the percent of African-Americans on welfare reached a peak of about 45% in 1973 and before that and after that was significantly lower, for example, less than 40% in 1995 Graph 5.3 shows that during most of the period since the 1960s newsmagazine photos and TV news disproportionately show non-whites (especially African-Americans) in illustrating welfare uswelf, page 10, printed May 2, 2000

11 Table 6.1 shows that those who think most welfare recipients are black differ sharply from those who think most welfare recipients are white (63% vs. 40% think people are on welfare primarily because of lack of effort on their own part; 31% vs. 69% think most people on welfare want to work, and 36% vs. 64% think most people on welfare really need it) [Not related to this specific point but useful for reference: Figure 9. shows percent reduction in poverty due to government taxes and transfer programs; the US ranks lowest among 16 democratic nations shown, about 30% reduction; next lowest is Australia about 45% reduction, then Canada and Britain 50% reduction; all others are 60% to 80% reduction (Belgium and Sweden are the highest, each slightly over 80% reduction)] All this resulted in increasing pressure during the 1980s and 1990s to change welfare as we know it the terms Bill Clinton used in criticizing welfare and suggesting he would change it The 1996 welfare reform, called officially the Personal Responsibility and Work Opportunity Reconciliation Act (PRWORA) Both ideology and self interest as noted earlier played a role in political actions on welfare in 1996 Ideology: View of what should be done/what is good policy liberals and conservatives Interest: What individuals/groups/parties hope to gain or prevent losing Party interest by Republicans in putting President Clinton on the defensive on the politically popular issue of changing welfare Political interest of Bob Dole in pointing to a promise Bill Clinton broke, if he did not sign the bill so Dole actually had a self interest in proposing a welfare reform bill that President Clinton would refuse to sign Party interest by Democrats in showing they reformed welfare Political interest of President Clinton in showing he delivered on his promise of ending welfare as we know it (also not alienating liberal Democrats who opposed the bill) a) Clinton much more conservative than many Democrats on this issue b) In addition, some language boxed him in (according to David Ellwood, one of his welfare advisors), e.g., two years and you re off contrast with two years and you work. Republicans could use Clinton s language to put additional pressure on him. For both parties, voter pressure to change welfare because of very negative image of welfare Neither party any longer represents interests of lower-income people, for two reasons: 1) turnout among low-income voters has declined, so fewer and fewer low income people vote. This reduces incentives for either party to appeal to them for votes. It becomes a vicious cycle: low income people don t vote so less reason to appeal to them by proposing programs that would help them, so even less reason for low-income people to vote because they do not see any serious differences between the two parties on this. 2) Both Democrats and Republicans appeal to middle- and upper-income donors for campaign funding. Proposing policies that appeal to low-income voters might alienate upper-income people who provide campaign funds, so stop proposing policies that might appeal to low-income voters. Traditionally Democrats appealed to the bottom part of the income scale for voters, but these two factors reduced the desire and/or ability of Democrats to propose policies that would aim to help low income voters (now low-income non-voters), so now neither party really represents their interests and both have incentives to propose policies that might cut benefits for this group. uswelf, page 11, printed May 2, 2000

12 All these factors set the political context for the 1996 developments 1996 actions: See Cammisa, From Rhetoric to Reform?, ch 4 on politics and the political process in relation to the 1996 changes. Do not worry about details of the stages in House and Senate, but have a good sense of the political calculations and interests and of the end result of the process that is, the resulting legislation. Contents of PRWORA: See Cammisa, ch 5, especially Table 5.2 on provisions of the Act Some core changes: 1) No longer an entitlement (define) 2) Reductions in some benefits, but especially time limits 3) Greater state flexibility (issue of relative power poor less powerful at state levels) 4) Some groups restricted, e.g., immigrants (though some changes since 1996) Next time: Implementation putting the law into practice: What has happened since 1996 actions, both national and Oregon uswelf, page 12, printed May 2, 2000

13 Dual Welfare System in the United States Major Components of the Dual Welfare System, by Types of Assistance Required Type of Assistance Required (billions of dollars, 1998, est.; national amount only) Social Insurance (Regular Middle Class System) Response of Welfare System Public Assistance (Poor People s System) Unemployment benefits, supplementary income Unemployment compensation (approximate 1999 natl govt outlays: $23.2 billion) Temporary Assistance for Needy Families (TANF; $15.8); General Assistance (state-level) Survivors benefits Social Security survivors benefits TANF (see above) Old-age benefits Social Security old age benefits ($337.7; including survivors); additional income tax exemptions for elderly and related tax provisions; exclusions of pensions and related income tax provisions Public assistance; Supplementary Security Income (SSI; $26.8)) Medical benefits Food benefits Housing benefits Disability benefits Major Differences Between the Two Systems Language/labels (camouflage) Medicare ($222.4); federal income tax deductions Farm subsidies ($18.4; does not include research support) Income tax deductions for homeowners ($89.6), formerly FHA and related programs Social Security (disability benefits; $51.2); workman s compensation; sick pay; including tax adjustment Positive: insurance, compensation, parity, etc. Medicaid ($108.5); clinic and emergency room care Surplus food distribution; food stamps ($21.2); WIC ($4.0) Public housing; other housing programs for the poor ($23.2 total) Public assistance; Supplemental Security Income (see old age) Negative: relief, welfare, charity, assistance, etc. Level of government National or national-state Local (with national funds) Funding Contributory; trust funds Non-contributory; general revenues Eligibility Not means-tested Means-tested (be sufficiently poor) Incentive effects Inverse to need, e.g. tax breaks, subsidies; if earn more, not cut benefit Disincentive to earn if earn more, the benefit becomes smaller Intervention in personal/family life Stigma (shame) level Rarely intrude, e.g., no one tells a Social Security recipient how he or she can use the benefits or monitors how they spend No stigma or shame attached to receiving these benefits Tells what to buy (goods or transfers); affect composition of families; welfare workers monitor behavior of welfare recipients Generally high level of stigma, shame by recipients Note: The former AFDC (Aid to Families with Dependent Children) was changed to TANF (Temporary Assistance for Needy Families) by 1996 legislation. Outlay data from Budget of the US Fiscal Year This table adapted from A. Dale Tussing, Poverty in a Dual Economy [St. Martin s Press, 1975], especially ch. 4. uswelf, page 13, printed May 2, 2000

14 Table 11.3 is from the Budget of the United States 2001 Historical Tables Table OUTLAYS FOR PAYMENTS FOR INDIVIDUALS BY CATEGORY AND MAJOR PROGRAM: (in millions of dollars) Program estimate Total Direct Grants Total Direct Grants Social security and railroad retirement: Social security: old age and survivors insurance 336, , , ,972 Social security: disability insurance 50,622 50,622 54,190 54,190 Railroad retirement (excl. social security) 4,429 4,429 4,565 4,565 Total, social security and railroad retirement 391, , , ,727 Federal employees retirement and insurance: Military retirement 31,889 31,889 32,941 32,941 Civil service retirement 43,828 43,828 45,345 45,345 Veterans service-connected compensation 17,963 17,963 20,757 20,757 Other 1,601 1,601 1,703 1,703 Total, federal employees retirement and insurance 95,281 95, , ,746 Unemployment assistance 21,736 21,736 22,224 22,224 Medical care: Medicare: hospital insurance 129, , , ,352 Medicare: supplementary medical insurance 79,008 79,008 87,972 87,972 State children's health insurance ,300 1,300 Medicaid [largest federal public assistance program] 108, , , ,117 Indian health 2,198 2,198 2,381 2,381 Hospital and medical care for veterans 18,353 18, ,855 18, Other 5,922 2,260 3,662 6,695 2,649 4,046 Total, medical care 343, , , , , ,852 Assistance to students: Veterans education benefits 1,643 1,643 1,736 1,736 Student assistance-department of Education and other 11,049 11, ,957 12, Total, assistance to students 12,692 12, ,693 14, Housing assistance 22,731 3,931 18,800 23,964 8,450 15,514 Food and nutrition assistance: Food stamp program (including Puerto Rico) 19,005 15,643 3,362 19,727 16,010 3,717 Child nutrition and special milk programs 8, ,740 9, ,211 Supplemental feeding programs (WIC and CSFP) 3,942 3,942 4, ,059 Commodity donations and other 1, , Total, food and nutrition assistance 33,037 15,797 17,240 34,058 16,150 17,908 Public assistance and related programs: Supplemental security income program 26,698 26,698 29,946 29,946 Family support payments to States and TANF 16,917 16,917 18,049 18,049 Low income home energy assistance 1,176 1,176 1,242 1,242 Earned income tax credit 25,632 25,632 25,676 25,676 Legal services Payments to States for daycare assistance 3, ,283 3, ,562 Veterans non-service connected pensions 3,076 3,076 3,053 3,053 Other public assistance Total, public assistance and related programs 77,528 56,152 21,376 82,386 59,533 22,853 All other payments for individuals: Coal miners and black lung benefits -2,157-2,157 1,251 1,251 Veterans insurance and burial benefits Payments to Japanese American WWII internees 6 6 Refugee assistance and other 2,636 1,521 1,115 2,838 1,627 1,211 Total, all other payments for individuals ,115 4,219 3,008 1,211 Total, payments for individuals 998, , ,136 1,055, , ,385 uswelf, page 14, printed May 2, 2000

15 National Government Payments to Individuals in 1970 and 2000, in dollars of 2000 (Note: Social insurance in regular type; public assistance in italics) Year 1970 (billions) Year 2000 (billions) Social security and railroad retirement: Social security: old age and survivors insurance $118.3 $349.0 Social security: disability insurance $12.4 $54.2 Railroad retirement (excl. social security) $4.4 $4.6 Total, social security and railroad retirement $135.0 $407.7 Federal employees retirement and insurance: Military retirement $12.6 $32.9 Civil service retirement $12.1 $45.3 Veterans service-connected compensation $13.1 $20.8 Other $0.8 $1.7 Total, federal employees retirement and insurance $38.5 $100.7 Unemployment assistance $13.6 $22.2 Medical care: Medicare: hospital insurance $21.2 $132.4 Medicare: supplementary medical insurance $8.7 $88.0 State children's health insurance $0 $1.3 Medicaid $12.0 $116.1 Indian health $0.5 $2.4 Hospital and medical care for veterans $7.6 $18.9 Other $3.0 $6.7 Total, medical care $53.0 $365.7 Assistance to students: Veterans education benefits $4.5 $1.7 Student assistance-department of Education and other $2.2 $13.0 Total, assistance to students $6.7 $14.7 Housing assistance (direct pay; see tax treatment below * ) $2.1 $24.0 Food and nutrition assistance: Food stamp program (including Puerto Rico) $2.5 $19.7 Child nutrition and special milk programs $1.7 $9.4 Supplemental feeding programs (WIC and CSFP) $0 $4.1 Commodity donations and other $0 $0.9 Total, food and nutrition assistance $4.2 $34.1 Public assistance and related programs: Supplemental security income program $0 $29.9 AFDC (1970); Family support payments to States and TANF $18.2 $18.0 Low income home energy assistance $0 $1.2 Earned income tax credit $0 $25.7 Legal services $0 $0.3 Payments to States for daycare assistance $0 $3.6 Veterans non-service connected pensions $9.9 $3.1 Other public assistance $0 $0.6 Total, public assistance and related programs $28.2 $82.4 All other payments for individuals: Coal miners and black lung benefits $0 $1.3 Veterans insurance and burial benefits $0.3 $0.1 Refugee assistance and other $3.8 $2.8 Total, all other payments for individuals $4.2 $4.2 Total, payments for individuals $285.5 $1,055.7 REFERENCE: Total national government outlays (spending) $861.9 $1,789.6 Total public assistance and Medicaid $46.5 $256.5 Public assistance and Medicaid as percent of outlays 5.4% 14.3% Total other (social insurance, retirement, and similar) $239.0 $799.2 Social insurance, retirement as percent of outlays 27.7% 44.7% * Federal income tax reductions for home ownership not available $100.5 Payments to individuals as percent of outlays 33.1% 59.0% uswelf, page 15, printed May 2, 2000