This paper begins by establishing what is meant by "welfare state" by comparing and contrasting the concept with "welfare society" and "welfare system." It then examines the philosophical foundation of welfare states, and gives a brief history of the welfare state from its beginning during the Great Depression up to the most recent legislation, not yet passed, through the U.S. Congress. The paper makes a survey of some studies on the relationship between the welfare state and the nation's economy, and finishes with observations on the current crossroads of the U.S. government in maintaining its welfare policies and programs.
Keywords Aid to Families with Dependent Children (AFDC); Earned Income Tax Credit (EITC); Government Accountability Office (GAO); Gross Domestic Product (GDP); Pay As You Go (PAYG); Temporary Assistance for Needy Families (TANF); Unemployment Insurance (UI); Unemployment Insurance Modernization Act (UIMA); Workfare; Workforce Investment Act (WIA)
Sociology of Politics
Philosophy of the Welfare State
In discussing issues and research around the concept of "the welfare state", we should first establish the boundaries of what constitutes a welfare state. "State" refers to government, and this creates the primary distinction between the terms "welfare state" and "welfare society". In a welfare society, private companies and corporations or various nonprofit organizations and charities may provide money, goods and/or services to citizens in need; in a "welfare state", national or local governments provide these citizens with money, goods or services. The term "welfare system" is often used to include both, the welfare state and the welfare society. Most often in a welfare state, the financing of welfare programs is done through wealth redistribution, meaning a government places a tax on the income of citizens and then uses this tax money to provide for those citizens who cannot purchase basic needs such as food and shelter. As Hamlin (2008) observes, redistribution involves "the imposition of minimum constraints on the level of welfare of any individual — which may be thought of as building an aversion to poverty into the general commitment to welfare" (Hamlin, 2008, p. 122). Thus, "welfare state" generally means that a government creates a "safety net" to supply the minimum standards through various goods and services.
Social security programs such as retirement pension systems are also part of the welfare state, as are many other programs that, at some point, may distribute benefits to citizens who are not necessarily poor. When a welfare state begins to provide benefits to all citizens, such as universal healthcare, then it heads toward the definition of a "socialist state" — though this is often confused with a "totalitarian state" wherein there is only one political party controlling a nation. Socialist tendencies within a democracy blur the line on what constitutes a welfare state, and it is difficult to offer definitive lines between a socialist state and a welfare state. It is fair to say that all socialist states are also welfare states, but not all welfare states are also socialist states.
Hamlin (2008) writes that the first step in developing a welfare concept is to decide what should be "the lowest level of individual welfare which will be tolerated," and then to assist those citizens whom live below that lowest level (Hamlin, 2008, p. 123). For example, in the United States a poverty threshold, or "poverty line," is set by the federal government, and one of the requirements for citizens to receive welfare benefits is that their income is below that poverty line. We should also consider a government's reasons and philosophy when defining a welfare state; Hamlin points out that the underlying reasons and philosophy may cause difficulties in defining what constitutes a welfare state:
We are left, then, with a problem regarding the best way to define a welfare state. Do we categorize states according to the arguments that are taken as valid in considering policies, or do we categorize states according to the policies that are enacted regardless of their origins? Both approaches have their merits, but they should not be confused. Claims of welfare do not necessarily give rise to what are normally regarded as welfare policies, and policies that might seem to be welfare policies may be derived from other starting points (Hamlin, 2008, p. 127).
The birth of the welfare state in Europe is a good case in point. The European beginnings of the welfare state can be traced back to the late 1800s and the Bismarck government in Germany. In the 1880s, Bismarck introduced many of the modern components of the welfare state — social insurance, laws regarding health insurance, accident insurance and insurance to support the disabled and the aged. According to Zika (2007), the Bismarck reforms were intended "primarily for workers and employees, who paid a portion of their wages in order to protect them and their family if they lost their jobs" (p. 32). It seems unlikely that conservative politicians would introduce such welfare state reforms, yet Zika writes that "the intellectuals behind Bismarck's concept of social reforms were not socialists, but conservatives" (Zika, 2008, p. 32). Strong political reasons — reasons not at all related to a welfare philosophy — lay behind Bismarck's welfare reforms. This historical case demonstrates Hamlin's point that defining a welfare state according to its philosophy may not be the same as defining it according to its enacted programs and policies. However, the inception of the welfare state in the United States did have a strong welfare philosophy at its foundation.
History of the U.S. Welfare State
The welfare state in the U.S. began as a means to cope with the Great Depression. The American welfare state has always used what is known as a pay-as-you-go system. This means that the young workers who pay taxes today are not actually paying for their own retirement pensions; rather, they are supplying the government with the funds for today's senior citizen pensions. When today's working generation reaches retirement age, a younger generation of workers will be taxed to pay for those retirement pensions. First introduced in 1935 under President Franklin D. Roosevelt, the most basic pay-as-you-go feature of the American old-age pension system, Social Security, has remained largely unchanged to this day. According to Jensen, the Roosevelt administration pushed through a special Social Security tax in order to help prevent the system from being changed in the future. Roosevelt reasoned that a Social Security tax would give the program "high visibility and support from a public, who inevitably would feel that by paying the tax they had won the right to receive benefits from the system in old age" (Jensen, 2007, p. 148).
Zika points out that the work of British economist John Maynard Keynes was highly influential in forming the modern welfare state. Keynes argued that high unemployment was being caused by technological advances that replace manual labor, and also that the weak purchasing power of the population chronically lowered demand and consumption. Further, Keynes argued that poor fiscal politics of the government was the main factor behind high unemployment. Zika comments that Keynes's theories "lead to the blossoming of the modern social state after the Second World War" (Zika, 2007, p. 32). One of the pillars of the welfare state is unemployment insurance (UI), and the peak for U.S. citizens' receiving UI occurred about a decade after World War II in the 1950s. At that time, nearly 50 percent of people were receiving UI (Peterson, 2008, p. 455).
According to Zika, the 1960s and 1970s were the best years for states with extensive welfare policies and programs. In those years, unemployment was extremely low in Western countries, the standard of living improved greatly for citizens, and the percentage of public expenditures as a part of the gross domestic product (GDP) went up. In the mid 1970s, the oil crisis created economic problems and caused the growth of unemployment to a degree that the postwar generation did not experience. Public expenditures grew at a rate of about 5 percent, while productivity fell. This is when the modern welfare state began facing funding problems. Zika (2007) writes:
"The average growth rate between 1974 and 1984 was lower than two percent. Government spending continued to rise due to growing unemployment and expenditures, while an aging population demanded more social services. At the same time, new revenues were getting harder and harder to find. This was the start of the modern crisis of the so-called welfare states. Since then, problems have grown worse." (Zika, 2007, p. 32)
In the 1970s and 1980s the United States had a program known as Aid to Families with Dependent Children (AFDC). But in the early 1980s, the program began to receive heavy criticism. An increasing number of citizens began to believe that the welfare system was...
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