As government spending across western democracies has increased to combat a three-year-old financial crisis, government debt has become the target of new fiscal scrutiny. Developed nations had enjoyed access to fairly inexpensive credit and were able to cover expenses that exceeded revenues. The European Union debt crisis, austerity measures, and the debt debate in the US have now become the reality of developed nations. The cuts and reforms welfare programs experience as governments try to rein in deficits will depend on compromises, one of the foundations of democracy. With adequate reforms to both the funding and the image of welfare state, welfare programs can survive for future generations.
The Development and Growth of the Welfare State
Bismarck created the first modern welfare state in the 1880s, when he introduced old age pensions, accident insurance, medical care and unemployment insurance, services that would become the cornerstone of future government programs across the West. However, it was not until the Great Depression that the welfare state gained momentum elsewhere. Specifically, the great need for support services arising out of the ever-increasing number of the unemployed called for a change from selective provisions of social services to a more comprehensive coverage of the population.
Prosperity following the Second World War enabled Western nations, in particular the United States, to implement and fund various social programs. Increased profits and thus corporate tax revenues, as well as an increase in the young, working population and the parallel rise in real wages, created a foundation for program funding. Lyndon B. Johnson’s “Great Society” further extended welfare programs, riding on the prosperity of the era.
Economic and Population Cycles Cause Havoc
Most of the welfare programs in the developed world were implemented during a period that Kenneth Galbraith called “The Affluent Society.” Today, most nations are struggling to recover from the financial crisis of 2008,while dealing with deepening debt problems. Longer life expectancies and slumping fertility rates, which began to drop as early as the 1970s, are decreasing the size of the working age population which pays for the costs of pensions and healthcare for a rapidly growing senior population. Evelyne Huber, professor at University of North Carolina, Chapel Hill and co-author of Development and Crisis of the Welfare State, told the HPR, “Governments can be faulted for not adapting.” That failure to adapt to the demographic change has exacerbated the funding problem.
Cultural Perspective: The Unique American Position
In 1976, Ronald Reagan told a tale of a woman from Chicago’s South Side who was arrested for welfare fraud. He spoke of her “eighty names, thirty addresses, twelve Social Security cards.” The “Welfare Queen” had become a national image playing on the growing fear of American taxpayers that their money is not going to the needy but the greedy. The exaggeration of the extent of welfare fraud changed the image of a welfare recipient from an unemployed “down-on-his-luck” citizen, to a lazy criminal, free riding on the average American’s hard earned money.
Adding to this negative view of the welfare recipient is the American core political belief in individualism. Julia Isaacs, author of “International Comparisons of Economic Mobility,” has found that more than two-thirds of Americans agree that “people are rewarded for intelligence and skills”, the highest proportion of the 27 countries surveyed. “Widespread belief in one’s ability to get ahead may explain why Americans are more accepting of economic inequality than are people in other countries,” states Isaacs. It may also explain why only 33% of Americans believe that the government should be involved in reducing income disparities, or why even low earning Americans are averse to increasing taxes for the top earners. There is a sense of optimism in the United States that birth status is not a predictor of success.
In contrast, Sweden’s embrace of social welfare programs has created a society with broad support for these programs. John. D. Stephens, co-author of Development and Crisis of the Welfare State argues that countries with universal social programs tend to have a more favorable view of welfare overall. “The programs produce the culture,” Stephans notes. Thus, most of Sweden’s programs, namely medicine and daycare for all children, enjoy broad support. Similar universal programs, public education and the pension system, enjoy a similar reaction in the United States. By making welfare programs more universal, Sweden has avoided class tensions with regards to welfare programs.
Meeting Expectations
The first step to improve the sustainability of welfare programs will be to improve their financial strength. Ron Haskins, senior fellow at the Brookings Institute, told the HPR, “Western democracies are struggling to find a balance between solidarity [with welfare programs] and fiscal reality.” Many experts propose raising the retirement age to make Social Security sustainable. Medicare and Medicaid remain the greatest obstacles. Huber proposed more government control as a way to limit growing costs that are threatening these programs. The 2010 health care debate shows that such a course would be fraught with intense opposition.
Yet, there is a more fundamental cultural issue that must be resolved to pave way for sustainable welfare programs in the future. Both the image of social services and the image of their recipients must change. With stricter regulation, and more efficient delivery of services, the government must instill a sense of reliability that taxpayer money is going to sympathetic recipients and that the system is not vulnerable to fraud. By providing universal benefits, Americans could feel that welfare is beneficial to the entire society and embedded within our culture.
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