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"Definitions of Social Welfare Policy

The English social scientist Richard Titmuss defined social services as “a series of collective interventions that contribute to the general welfare by assigning claims from one set of people who are said to produce or earn the national income to another set of people who may merit compassion and charity.”8 Welfare policy, whether it is the product of governmental, voluntary, or corporate institutions, is concerned with allocating goods, services, and opportunities to enhance social functioning.

William Epstein defined social policy as “social action sanctioned by society.”9 Social policy can also be defined as the formal and consistent ordering of human affairs. Social welfare policy, a subset of social policy, regulates the provision of benefits to people to meet basic life needs, such as employment, income, food, housing, health care, and relationships.

Social welfare policy is influenced by the context in which benefits are provided. For example, social welfare is often associated with legislatively mandated programs of the governmental sector, such as Temporary Assistance for Needy Families (TANF). In the TANF program, social welfare policy consists of the rules by which the federal and state governments apportion cash benefits to an economically disadvantaged population. TANF benefits are derived from general revenue taxes (often paid by citizens who are better-off). But this is a simplification of benefits provided to those deemed needy. Benefits provided through governmental social welfare policy include cash, along with noncash or in-kind benefits, including personal social services.10 Cash benefits can be further divided into social insurance and public assistance grants (discussed in depth in Chapters 10 and 11).

In-kind benefits (provided as proxies for cash) include benefits such as food stamps; Medicaid; housing vouchers; Women, Infants, and Children (WIC) coupons; and low-income energy assistance. Personal social services are designed to enhance relationships between people as well as institutions, such as individual, family, and mental health treatment; child welfare services; rehabilitation counseling; and so forth. Although complicated, this classification reflects a common theme—the redistribution of resources from the better-off to the more disadvantaged. This redistributive aspect of social welfare policy is generally accepted by those who view social welfare as a legitimate function of the state. Governmental social welfare policy is often referred to as “public” policy because it is the result of decisions reached through a legislative process intended to represent the entire population.

But social welfare is also provided by nongovernmental entities, in which case social welfare policy is a manifestation of “private” policy. For example, a nonprofit agency with a high demand for its services and limited resources may establish a waiting list as agency policy. As other agencies adopt the same strategy for rationing services, clients begin to pile up on waiting lists, and some are eventually denied services. Or consider the practice of “dumping,” a policy that has been used by some private health care providers to abruptly transfer uninsured patients to public hospitals while they are suffering from traumatic injuries. Rescission refers to terminating an insurance policy due to concealment, misrepresentation, or fraud. In health insurance, it refers to terminating a policy following the diagnosis of an expensive illness, with the insurance company claiming the policyholder withheld relevant information about a pre-existing medical condition. Although partially limited by the Patient Protection and Affordable Care Act of 2010, it continues in some form by some insurance companies. Patients sometimes die as a result of private social welfare policy.

Because U.S. social welfare has been shaped by policies of governmental and nonprofit agencies, confusion exists about the role of for-profit social service firms. The distinction between the public and private sectors was traditionally marked by the boundary between governmental and nonprofit agencies. Profit-making firms are “private” nongovernmental entities that differ from the traditional private voluntary agencies because they operate on a for-profit basis. Within private social welfare, it is therefore necessary to distinguish between policies of for-profit and nonprofit organizations. A logical way to redraw the social welfare map is to adopt the following definitions: Governmental social welfare policy refers to decisions made by the state, voluntary social welfare policy refers to decisions reached by nonprofit agencies, and corporate social welfare policy refers to decisions made by for-profit firms."

"Social Problems and Social Welfare Policy

Social welfare policy often develops in response to social problems. The relationship between social problems and social welfare policy is not linear, and not all social problems result in social welfare policies. Or, social welfare policies are funded at such low levels that they are ineffectual. For example, the Child Abuse Prevention and Treatment Act of 1974 was designed to ameliorate the problem of child abuse, yet underbudgeting left Child Protective Service (CPS) workers unable to promptly investigate the increase in child abuse reports, resulting in many children dying or undergoing serious injury.

Social welfare is an expression of social altruism that contributes to the maintenance and survival of society by helping to hold together a society that can fracture along social, political, and economic stress lines. Social welfare policy is also useful in enforcing social control, especially as a proxy for more coercive law-based measures.11 Simply put, the poor are less likely to revolt against the unequal distribution of wealth and privilege when their basic needs are met. Social welfare benefits also subsidize employers by supplementing low and non-livable wages, thereby maintaining a work incentive. Without social welfare benefits like earned income tax credit (EITC), employers would have to raise wages and therefore consumer prices. Social welfare benefits also support key industries, such as agriculture (food stamps), housing (e.g., Section 8), and health care (e.g., Medicaid and Medicare). If welfare benefits were suddenly eliminated, several U.S. businesses would collapse, and prices for many goods and services would rise. Social welfare benefits help stabilize prices and maintain economic growth.

Social welfare policies also relieve the social and economic dislocations caused by the uneven nature of economic development under capitalism. For example, one of the main features of capitalism is a constantly changing economy where jobs are created in one sector and lost (or exported) in another, thereby resulting in large islands of unemployed workers. Examples of this include closing Blockbuster, Borders, Radio Shack, Circuit City, and other retail store outlets. The increased use of scanners in supermarkets will result in fewer cashiers. Myriad social welfare programs, such as unemployment insurance and food stamps, help soften the transition. Finally, social welfare policies are a means for rectifying past and present injustices. For example, affirmative action policies were designed to remedy the historical discrimination that denied large numbers of Americans access to economic opportunities and power. Teacher incentive pay and other educational policies are designed to help ameliorate the unequal distribution of resources between underfunded urban and better-funded suburban school systems."

"Social Work and Social Policy

Social work practice is driven by social policies that dictate how the work is done, with whom, for how much, and toward what ends. For example, a social worker in a public mental health center may have a caseload in excess of 200 clients. The size of that caseload makes it unlikely that the worker will be able to engage in any kind of sustained therapeutic intervention beyond case management. Or consider the case worker who—in the midst of high unemployment—must find employment for recipient mothers about to lose benefits due to mandatory time limits. In these and other instances, economic and political factors structure the work of agencies and impede the ability of workers to succeed in their job.

An ideological preference among policymakers for private sector social services has resulted in less funding for public agencies. In response to diminishing revenues, public agencies adjust in predictable ways, such as cutting staff (or replacing them with lower paid and less qualified workers) and expecting existing staff to do more with less. In addition, they promote short-term (or drug-based) interventions to more cheaply process clients. Cuts are made by freezing or reducing the salaries and benefits of professional staff. In large part, the accomplishments of social workers depend on available agency resources.

Social workers in private practice that depend on managed care experience similar constraints. For instance, managed care plans dictate how much a social worker will be paid and how many times they will be permitted to see a client. Accordingly, these plans structure the kinds of interventions that can be realistically implemented in the allotted time. Governmental and agency policies structure the day-to-day work of social work."

"Values, Ideology, and Social Welfare Policy

Social welfare policies are shaped by a set of social and personal values that reflect the preferences of those in decision-making capacities. According to David Gil, “choices in social welfare policy are heavily influenced by the dominant beliefs, values, ideologies, customs, and traditions of the cultural and political elites recruited mainly from among the more powerful and privileged strata.”12 How these values are played out in the realm of social welfare is the domain of the policy analyst. As Chapter 3 illustrates, social welfare policy is rarely based on a rational set of assumptions backed up by valid research.

The Pareto Optimality is a state whereby making one person or group better-off through the allocation of resources is impossible without making another person or group worse off. A Pareto Improvement occurs when a person or group is made better-off through the allocation of resources without making another person or group worse off. In the real world of social policy, the Pareto Optimality is typically the dominant mode.

Social policy is typically a zero-sum game whereby some people are advantaged at the expense of others. Or, at least they perceive themselves as being treated unfairly. For example, the upper 1 percent of Americans bring home nearly a quarter of the U.S. income every year and control 40 percent of the nation’s wealth.13 Despite their privilege, many see increased taxes and regulation as an unfair infringement and an attack on the most productive members of society.14 Although not directly affected, some groups see the recent U.S. Supreme Court ruling legalizing gay marriage as an assault on their religious freedom and principles.

Recent U.S. social welfare policy has been largely shaped by values around self-sufficiency, work, and the omniscience of the marketplace. As policymakers expected disadvantaged people to be more independent, support for government social programs was cut to presumably discourage dependency. Although these cuts saved money in the short run, most of them fell squarely on the shoulders of children. Eventually, cuts in social programs can lead to greater expenditures as the generation of children who have gone without essential services begins to require programs to remedy problems associated with poor maternal and infant health care, poverty, illiteracy, and family disorganization. In 2011, the International Monetary Fund (IMF) ranked the United States 32nd in public spending on family benefits, just above Lithuania, Latvia, Greece, Malta, Mexico, Chile, and Korea.15

Social values are organized through the lens of ideology. Simply put, an ideology is the framework of commonly held beliefs through which we view the world. It is a set of assumptions about how the world works: what has value, what is worth living and dying for, what is good and true, and what is right. For the most part, these beliefs are rarely examined and are simply assumed to be true. Hence, the ideological tenets around which society is organized exist as a collective social consciousness that defines the world for its members. All societies reproduce themselves partly by reproducing their ideology; in this way, each generation accepts the basic ideological suppositions of the preceding one. When widely held ideological beliefs are questioned, society often reacts with strong sanctions. Ideological trends influence social welfare when adherents of one orientation hold sway in decision-making bodies.

The hold of ideology on social policy is especially strong in times of threat, such as the “War on Terror.” In this instance, social welfare policy fades into the background as the perceived need for national security takes center stage. The social history of the United States has seen periods where oppressed groups assert their rights in the face of mainstream norms. Sometimes social unrest is met with force, such as in the labor strikes of 1877, while at other times, such as the Great Depression, it is met with the expansion of social welfare programs."

"The Political Economy of American Social Welfare

The term political economy refers to the interaction of political and economic theories in understanding society. The political economy of the United States has been labeled democratic capitalism—a representative form of government that coexists with a market economy. Social welfare policy plays an important role in stabilizing society by modifying the play of market forces and softening the social and economic inequalities generated by the marketplace.16 To that end, two sets of activities are necessary: state provision of social services (benefits of cash, in-kind benefits, and personal social services) and state regulation of private activities to alter (and sometimes improve) the lives of citizens. Social welfare bolsters social stability by helping to mitigate the problems associated with economic dislocation, thereby allowing society to remain in a state of more or less controlled balance.

John Maynard Keynes is best known as the economic architect of the modern welfare state.

Source: Pictorial Press Ltd/Alamy Stock Photo

Ideally, the political economy of the welfare state should be an integrated fabric of politics and economics; but in reality, some schools of thought contain more political than economic content, and vice versa. For example, most economic theories contain sufficient political implications to qualify them as both economic and political. Conversely, most political schools of thought contain significant economic content. It is therefore difficult to separate political from economic schools of thought. For the purposes of this chapter, we will organize the political economy of U.S. welfare into two separate categories: (1) predominantly economic schools of thought and (2) predominantly political schools of thought. Nevertheless, the reader will find a significant overlap among and between these categories."

"The U.S. Economic Continuum

In large measure, economics forms the backbone of the political system. For example, the modern welfare state would not exist without the contribution of economist John Maynard Keynes. Conversely, the conservative movement would be weaker without the contribution of classical or free market economists such as Adam Smith and Milton Friedman. Virtually every political movement is somehow grounded in economic thought. The three major schools that have traditionally dominated American thought are Keynesian economics; classical or free market economics (and its variants); and to a lesser degree, democratic socialism.

Keynesian Economics

Keynesian economics drives liberalism and most welfare state ideologies. John Maynard Keynes’ economic theories formed the substructure and foundation of the modern welfare state, and virtually all welfare societies are built along his principles. Sometimes called demand or consumer-side economics, this model emerged from Keynes’s 1936 book, The General Theory of Employment, Interest and Money.

An Englishman, Keynes took the classical model of economic analysis (self-regulating markets, perfect competition, the laws of supply and demand, etc.) and added the insight that macroeconomic stabilization by government is necessary to keep the economic clock ticking smoothly.17 He rejected the idea that a perfectly competitive economy tended automatically toward full employment and that the government should not interfere in the process. Keynes argued that instead of being self-correcting and readily able to pull themselves out of recessions, modern economies were recession prone and had difficulty providing full employment.

According to Keynes, periodic and volatile economic situations that cause high unemployment are primarily caused by the instability in investment expenditures. The government can stabilize and correct recessionary or inflationary trends by increasing or decreasing total spending on output. Governments can accomplish this by increasing or decreasing taxes (thereby increasing or decreasing consumption) and by the transfer of public goods or services. For Keynes, a “good” government is an activist government in economic matters, especially when the economy gets out of full employment mode. Keynesians believe that social welfare expenditures are investments in human capital that eventually increase the national wealth (e.g., by increasing productivity) and thereby boost everyone’s net income.

Keynes’s doctrine emerged from his attempt to understand the nature of recessions and depressions. Specifically, he saw recessions and depressions as emerging from businesses’ loss of confidence in investments (e.g., focusing on risk rather than gain), which in turn causes the hoarding of cash. This loss of confidence eventually leads to a shortage of money as everyone tries to hoard cash simultaneously. Keynes’s answer to this problem was that government should make it possible for people to satisfy their economic needs without cutting their spending, which prevents the spiral of shrinking incomes and shrinking spending. Simply put, in a depression the government should print more money and get it into circulation.18

Keynes also understood that this monetary policy alone would not suffice if a recession spiraled out of control, as in the Great Depression of the 1930s. He pointed to a liquidity trap whereby people hoard cash because they expect deflation (a decrease—extreme in a depression—in the price of goods or services), insufficient consumer or industry demand, or some catastrophe such as war. In a depression, businesses and households fail to increase spending regardless of how much cash they have. To help an economy exit this trap, government must do what the private sector will not—namely, spend. This spending can take the form of public works projects (financed by borrowing) or direct governmental subsidization of demand (welfare entitlements). To be fair, Keynes saw public spending only as a last resort to be employed if monetary expansion failed. Moreover, he sought an economic balance: Print money and spend in a recession; stop printing and stop spending once it is over. Keynes understood that too much money in circulation, especially in times of high production and full employment, leads to inflation. Although relatively simple, Keynes’s theories represent one of the great insights of twentieth-century economic thought.19 These ideas also formed the economic basis for the modern welfare state."

"Conservative or Free Market Economics

Whereas liberalism is guided by Keynesian economics, the conservative view of social welfare is guided by free market economics.

Adam Smith is known as the father of modern capitalism, and conservative economics was arguably born in The Wealth of Nations. Smith believed in the “invisible hand” of the marketplace, or in other words, the view that the economic system was automatic, and when left undisturbed by government or other forces, it would self-regulate, thereby ensuring maximum economic efficiency. This self-regulation, however, would be threatened by monopolies, preferential tax structures, or other treatment that favors one group over another. To ensure efficiency, markets had to be left alone. Smith believed the main measure of a nation’s wealth was in the goods and services it produced and traded (the forerunner of gross domestic product), which would lead to further economic growth. Within Smith’s economic paradigm, the proper role of government was defense, the creation and maintenance of public infrastructure, public safety and education. In turn, these activities would be financed by a fair system of taxation. 20

Although friends with John Maynard Keynes, Friedrich Hayek was his intellectual adversary. Representing the Austrian economic school, Hayek focused on the business cycle. He believed that markets were organic, and any interference with their spontaneous order would hamper their efficient operation. Hayek argued that the major problem for an economy is how people’s actions are coordinated. He observed that free markets effectively and spontaneously (i.e., not part of anyone’s plan) coordinated people’s actions. Hayek believed that the market evolved as the result of human actions in the context of economic exchanges.21

Hayek was also a realist who understood that markets are not necessarily perfect. One problem he observed was based on the increase in the money supply by central banks. In particular, the increased money supply drives down interest rates thereby making credit artificially cheap. This leads to “malinvestments” (i.e., bad business investments) that would not occur without a distorted price signal from the market. For instance, driven by cheap credit, investors may build what turns out to be half-filled shopping malls or new commercial buildings in an already saturated market. The dot.com and housing bubbles are examples of malinvestments. Hayek saw recessions and depressions as part of a necessary readjustment. For him, the best way to avoid busts was to avoid the booms that cause them. In contrast to the economic activism of Keynesianism, Hayek’s strategy for the Great Depression was to allow only minimal regulation of market functions since the market is too complex to engage in any serious forecasting. Moreover, government interference not only worsens the situation, but leads to further economic chaos.22

Watch this video for an entertaining contrast of Keynes’ and Hayek’s viewpoints.

www.youtube.com/watch?v=d0nERTFo-Sk

Free market economics is predicated on a belief in the existence of many small buyers and sellers who exchange homogeneous products with perfect information in a setting in which each can freely enter and exit the marketplace at will.23 As an ideal type, none of these assumptions hold in the real world of economics. For instance, the free market model does not address the dominance of distribution networks by a single retailer like Walmart. There is nothing in the free market model that addresses the lack of equitable distribution of knowledge, experience, opportunity, and access to resources enjoyed by buyers and sellers. The free market model ignores theft, fraud, and deception in cases like Enron, and it ignores the competitive advantages that accrue through lobbying and special interest negotiations like Halliburton’s no competition bids for Iraq reconstruction projects. It also ignores the power of large retailers to control the market by instituting late shopping hours or 24/7 businesses that make it impossible for small family-owned businesses to compete. In short, an unregulated market economy becomes monopolistic as more of the market is taken over by fewer enterprises.

The ascendance of the conservative economic (and social) argument accelerated after 1973, when the rise in living standards began to slow for most Americans. Conservatives blamed this economic slowdown on governmental policies—specifically, deficit spending, high taxes, and excessive regulations.24 In a clever sleight of hand, government went from having the responsibility to address economic problems (à la Keynes) to being the cause of them.

Milton Friedman, considered by some to be the father of modern conservative economics, was one of Keynes’s more ardent critics. In opposition to Keynes, Friedman argued that using fiscal and monetary policy to smooth out the business cycle is harmful to the economy and worsens economic instability.25 He contended that the Depression did not occur because people were hoarding money; rather, there was a fall in the quantity of money in circulation. Friedman argued that Keynesian economic policies must be replaced by simple monetary rules (hence the term monetarism). In effect, he believed that the role of government was to keep the money supply growing steadily at a rate consistent with stable prices and long-term economic growth.26

Friedman counseled against active efforts to stabilize the economy. Instead of pumping money into the economy, government should simply make sure enough cash is in circulation. He called for a relatively inactive government in economic affairs that did not try to manage or intervene in the business cycle. For Friedman, welfare spending existed only for altruistic rather than economic reasons.27 To the right of Milton Friedman was Robert Lucas, 1994 Nobel Prize winner and developer of the “theory of rational expectations.” Lucas argued that Friedman’s monetary policy was still too interventionist and would invariably do more harm than good.28

Developing outside of conventional economics, supply-side economics enjoyed considerable popularity during the early 1980s. Led by Robert Barth, editorial page head of the Wall Street Journal, supply-siders were journalists, policymakers, and maverick economists who argued that demand-side policies and monetary policies were ineffective.29 They maintained that the incentive effects of reduced taxation would be so large that tax cuts would dramatically increase economic activity to the point where tax revenues would rise rather than fall. (Former President George H. W. Bush referred to this as voodoo economics in 1980.30) Specifically, supply-siders argued that tax cuts would lead to a large increase in labor supply and investment and therefore to a large expansion in economic output. The budget deficit would evaporate because taxes, increased savings, and higher economic output would offset the deficit. In the early 1980s, supply-siders seized power from the Keynesians and mainstream conservative economists, many of whom believed in the same things but wanted to move more slowly.31

Although some supporters preferred to think of supply-side economics as pure economics, the theory contained enough political implications to qualify as a political as well as an economic theory. Popularized by supporters such as Jack Kemp, Arthur Laffer, and Ronald Reagan, supply-side economics provided the rationale for the dramatic cuts in social programs executed under the Reagan administration.

Despite their popularity in the early years of the Reagan administration, the term supply-side economics fell out of favor when it became evident that massive tax cuts for the wealthy and corporations did not result in increased productivity. Instead, the wealthy spent their tax savings on luxury items, and corporations used tax savings to purchase other companies in a merger mania that took Wall Street by surprise. Some corporations took advantage of temporary tax savings to transfer their operations abroad, further reducing the supply of high-paying industrial jobs in the United States. For these and other reasons, the budget deficit grew from about $50 billion a year in the Carter term to $352 billion a year in 1992.32"

"Although the term supply-side economics fell out of favor by the late 1980s, its basic tenets, such as the belief that massive tax cuts for the rich would increase productivity (and the necessity of social welfare spending cuts), were adopted enthusiastically by the G.W. Bush administration in the form of the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA) and the Jobs and Growth Tax Relief Reconciliation Act of 2003 (JGTRRA). Citizens for Tax Justice estimated that more than $1 trillion has been lost to the U.S. Treasury as a result of the Bush tax cuts (later continued by the Obama administration).33 The result of these policies mirrored the effects of the earlier supply-side doctrine: huge federal and state budget shortfalls, corporate hoarding, greater economic inequality, and stagnant wages.34 The federal budget deficit rose to $1.4 trillion in 2009. It stayed above the $1 trillion mark until 2012, after which it fell to $583 billion in 2015.35

Conservative economists argue that large social welfare programs–including unemployment benefits and public service jobs—are detrimental to the society in two ways. First, government social programs erode the work ethic by supporting those not in the labor force. Second, because they are funded by taxes, public sector social welfare programs divert money that could otherwise be invested in the private sector. Conservative economists believe that economic growth helps everyone because overall prosperity creates more jobs, income, and goods, and these eventually filter down to the poor. For conservative economists, investment is the key to prosperity and the engine that drives the economic machine. Accordingly, many conservative economists favor tax breaks for the wealthy based on the premise that such breaks will result in more disposable after-tax income freed up for investment. In turn, high taxes are an impediment to economic progress because they channel money into “public” investments and away from “private” investments.

For conservatives, opportunity is based on one’s relationship to the marketplace and legitimate rewards can only occur only through that participation. In contrast to liberals who emphasize mutual self-interest, interdependence, and social equity, conservative economists argue that the highest form of social good is realized by the maximization of self-interest. In the conservative view (as epitomized by author Ayn Rand36), the best society is one in which everyone actively—and selfishly—pursues their own good. Through a leap of faith, the maximization of self-interest is somehow transformed into a mutual good.

Conservative economists maintain not only that high taxation and government regulation of business serve as disincentives to investment but also that individual claims on social insurance and public welfare grants discourage work. Together these factors lead to a decline in economic growth and an increase in the expectations of beneficiaries of welfare programs. The only way to correct the irrationality of governmental social programs is to eliminate them. Charles Murray has suggested that the entire federal assistance and income support structure for working-aged persons (Medicaid, the former Aid to Families with Dependent Children [AFDC], food stamps, etc.) be scrapped. This would leave working-aged persons no recourse except to actively engage in the job market or turn to family, friends, or privately funded services.37

Some conservative economists argue that economic insecurity is an important part of the entrepreneurial spirit. Unless people are compelled to work, they will choose leisure over work. Conversely, providing economic security for large numbers of people through welfare programs leads to diminished ambition and fosters an unhealthy dependence on the state. Social programs thereby harm rather than help the most vulnerable members of society. The belief in economic insecurity formed the basis for the 1996 welfare reform bill that included a maximum time limit on welfare benefits (see Chapter 11).

The public choice school gained traction among conservatives as faith ebbed in supply-side theories. This theory was not widely known outside academic circles until James Buchanan was awarded the Nobel Prize for economics in 1986. In effect, the public choice is predicted on the belief that public sector bureaucrats are self-interested utility-maximizers and that strong incentives exist for interest groups to make demands on government. The resulting concessions flow directly to the interest group as their costs are spread among all taxpayers. Initial concessions lead to demands for further concessions, which are likely to be forthcoming so long as interest groups are vociferous in their demands. Under such an incentive system, different interests are also encouraged to band together to make demands since there is no reason for one interest group to oppose the demands of others. As demands for goods and services increase, revenues tend to decrease. This happens because interest groups resist paying taxes directed specifically toward them and because no interest group has much incentive to support general taxes. The result of this scenario is predictable: Strong demands for government benefits accompanied by declining revenues lead to government borrowing, which in turn, results in large budget deficits.38 Adherents of public choice theory view social welfare as a series of endless concessions to disadvantaged groups that will eventually bankrupt the government. On the other hand, it would be logical also to apply public choice theory to defense industry interest groups who make similar demands on government while not paying a fair share of taxes."

"The Global Financial Crisis (GFC)

Alan Greenspan, the former head of the Federal Reserve, admitted that he “made a mistake” in trusting free markets to regulate themselves without governmental oversight. Greenspan further admitted that “I made a mistake in presuming that the self-interests of organizations, specifically banks and others, were . . . capable of protecting their own shareholders and their equity in the firms.”39 This was an amazing series of admissions from the man known as the “oracle” in economic matters. More importantly, he questioned the belief that unregulated free markets inevitably yield superior economic gain.

The initial event triggering the 2008 GFC was the collapse of the U.S. housing market and the realization that domestic and foreign banks, investment houses, and institutions were holding hundreds of billions of dollars of subprime mortgages (i.e., nonviable mortgages held by problematic borrowers) that were little more than toxic debt offering little hope for repayment. However, multiple factors converged to create the crisis, including the largely unregulated derivatives market and the reliance on various forms of dodgy financial instruments. Derivatives are used by banks and corporations to hedge risk or engage in speculation. They are financial instruments whose value depends on an underlying commodity, bond, equity, or currency. Investors purchase derivatives to bet on the future (or as a hedge against the potential adverse impacts of an investment), to mitigate a risk associated with an underlying security, to protect against interest rate or stock market changes, and so forth.

Derivatives are used in several financial areas. For example, credit derivatives can involve a contract between two parties that allows one of them to transfer their credit risk to the other. The party transferring the risk pays a fee to the party that assumes it. These derivatives are risky investments because they are basically bets made in large amounts, often in the billions. Like all forms of gambling, derivatives only work if the casino has the money to meet their obligation to bettors. If the casino lacks the cash to pay winners (i.e., it has a liquidity problem), the entire system collapses. The 2008 GFC was partly based on the failure of the derivatives market.

Various government bailouts—including $25 billion to the U.S. auto industry—helped ease the financial crisis. Much of the money to pay for the bailouts came from foreign investors who purchased U.S. Treasury bills.40 One unexpected outcome of the GFC and the collapse of Wall Street was that it temporarily chilled the debate on privatizing Social Security (see Chapter 10).

Democratic Socialism

Democratic socialism (as opposed to Soviet-style communism) is based on the belief that radical economic change is necessary and can be achieved within a democratic context. They question the fundamental precepts of capitalism and its ability to meet the needs of people. This view is at odds with both Keynesianism and conservative economics. Specifically, Keynesians basically believe in the market economy but want to make it more responsive to human needs by smoothing out the rough edges. Conservatives maintain that the economy should be left alone except for a few minor tweaks, such as regulating the money supply. Others argue that the market should be left totally alone. On balance, both Keynesians and economic conservatives believe that capitalism is compatible with the public good. Keynesians and economic conservatives have more in common with each other than Keynesians have with socialists.

Proponents of socialism argue that the fundamental nature of capitalism is anathema to advancing the public good. They contend that a system predicated on pursuing profit and individual self-interest can only lead to greater inequality. The creation of a just society requires a fundamental transformation of the economic system, and the pursuit of profit and self-interest must be replaced by the collective pursuit of the common good. Not surprisingly, they repudiate Keynes’s belief that economic problems can be fixed by technicalities instead of sweeping institutional change. In short, socialists criticize conservatives for the primary importance they place on markets and their belief in subordinating social welfare initiatives to market needs.

Left-wing theorists maintain that the failure of capitalism has led to political movements that have pressured institutions to respond with increased social welfare services. They believe that real social welfare must be structural and can only be accomplished by redistributing resources. In a just society where goods, resources, and opportunities are available to everyone, only the most basic forms of social welfare (health care, rehabilitation, counseling, etc.) would be necessary. In this worldview, poverty is directly linked to structural inequality: People need welfare because they are exploited and denied access to resources. In an unjust society, welfare functions as a substitute, albeit a puny one, for social justice.41"

"Some socialists argue that social welfare is an ingenious arrangement to have the public assume the costs associated with the social and economic dislocations inherent in capitalism. According to these theorists, social welfare expenditures “socialize” the costs of capitalist production by making public the costs of private enterprise. Thus, social welfare serves both the needs of people and the needs of capitalism. For other socialists, social welfare programs support an unjust economic system that continues to generate problems requiring yet more programs. These radicals argue that social welfare programs function like junk food for the impoverished: They provide just enough sustenance to discourage revolution but not enough to make a real difference in anyone’s life. Social welfare is simply viewed as a form of social control. Frances Fox Piven and the late Richard Cloward summarize the argument:

Relief arrangements are ancillary to economic arrangements. Their chief function is to regulate labor, and they do that in two general ways. First, when mass unemployment leads to outbreaks of turmoil, relief programs are ordinarily initiated or expanded to absorb or control enough of the unemployed to restore order; then, as turbulence subsides, the relief system contracts, expelling those who are needed to populate the labor markets.42

For radicals, real social welfare can occur only in a socialist economic system."

"The U.S. Political Continuum

Differing views on political economy produce differing conceptions of the public good. Competition among ideas about the public good and the welfare state has long been a knotty issue in the political economy of the United States. Since governmental policy is driven largely by an ideologically determined view of the public good, it will vary depending which political party is in power.

The major American ideologies, (neo)liberalism and (neo)conservatism, hold vastly different views of social welfare and the public good. Since conservatives believe that the public good is best served through marketplace participation, they prefer private sector approaches over governmental welfare programs. Conservatives believe that government should have a minimal role (via a safety net) in ensuring the social welfare of citizens. Traditional liberals, on the other hand, view government as the primary institution capable of bringing a measure of social justice to millions of Americans who cannot fully participate because of obstacles such as racism, poverty, and sexism. Traditional liberals view government social welfare programs as a key component in promoting the public good. One of the major differences between these orientations lies in their differing perceptions of how the public good is enhanced or hurt by welfare state programs.

The understanding of “the public good” is lodged in the political and ideological continuum that makes up the U.S. political economy. An appreciation of this requires an understanding of the interaction of schools of political thought and how they evolved. These ideological tenets also shape the platforms of the major political parties and can be divided into two categories: (1) liberalism and left-of-center movements and (2) traditional conservatives and the far right.

Liberalism and Left-of-Center Movements

Liberalism

Since Franklin Delano Roosevelt’s New Deal, liberal advocates have argued for advancing the public good by promoting an expanding economy coupled with the growth of universal, non-means–tested social welfare and health care programs. Traditional liberals used Keynesianism as the economic justification for expanding the welfare state, and as such, the general direction of policy from the 1930s to the early 1970s was for the federal government to assume greater amounts of responsibility for the public good.

American liberals established the welfare state with the passage of the Social Security Act of 1935. Harry Hopkins—a social worker, the head of the Federal Emergency Relief Administration, a confidant of President Roosevelt, a co-architect of the New Deal, and a consummate political operative—developed the calculus for American liberalism: “tax, tax; spend, spend; elect, elect.”43 This approach was elegant in its simplicity: The government taxes the wealthy, thereby securing the necessary revenues to fund social programs for workers and the poor. This approach dominated social policy for almost 50 years. In fact, it was so successful that by 1980 the social welfare accounted for 57 percent of all federal expenditures.44

By the mid-1960s, the welfare state had become a central fixture in America, and politicians sought to expand its benefits to more constituents. Focusing on the expansion of middle-class programs such as Federal Housing Administration (FHA) home mortgages, federally insured student loans, Medicare, and veterans’ pensions, liberal policymakers secured the political loyalty of the middle class. Even conservative politicians respected voter support for the welfare state, and not surprisingly, the largest growth in social welfare spending occurred under Republican president, Richard M. Nixon.

Despite such support, the promise of the U.S. welfare state to provide social protection similar to Western Europe never materialized. By the mid-1970s, the hope of traditional liberals to build a welfare state mirroring those of northern Europe had been replaced by an incremental approach that focused narrowly on consolidating and fine-tuning the programs of the Social Security Act. One reason for this failure was the ambivalence of many Americans toward centralized government. “The emphasis consistently has been on the local, the pluralistic, the voluntary, and the business-like over the national, the universal, the legally entitled, and the governmental,” observed policy analyst Marc Bendick.45

Liberalism lost ground for another reason. The Social Security Act of 1935—the hallmark of American liberalism—was primarily a self-financing social insurance program that rewarded working people. Public assistance programs that contained less political capital were therefore a better measure of public compassion, were rigorously means-tested, sparse in their benefits, and operated by the less than generous states. For example, although Social Security benefits were indexed to the cost of living in the mid-1970s, AFDC benefits deteriorated so badly that about half its value was lost between 1975 and 1992. At the same time that Social Security reforms reduced the elderly poverty rate by 50 percent, the plight of poor non-working families worsened."

"The Welfare Philosophers and the Neoconservative Think Tanks

Many early welfare thinkers envisioned a U.S. welfare state based on a European model.64 This vision was shared by virtually every social welfare scholar writing in the late 1960s and early 1970s.65 In turn, most social workers supported a liberal welfare philosophy grounded in a system of national social programs that would be deployed as more citizens demanded greater services and benefits. This framework was informed by European welfare states, especially the Scandinavian variant that spread health care, housing, income benefits, and employment opportunities equitably across the population.66 It also led Richard Titmuss to hope that the welfare state, as an instrument of government, would eventually lead to a “welfare world.”67

Despite the widespread acceptance of this liberal vision, an alternative vision arose that questioned the fundamental nature of welfare and social services. Throughout the 1970s and 1980s, conservatives (especially right-wing think tanks, or conservative policy institutes) busily made proposals for welfare reform. In fact, no conservative policy institute could prove its mettle until it produced a plan to clean up “the welfare mess.” The Hoover Institution at Stanford University helped shape the early conservative position on welfare. “There is no inherent reason that Americans should look to government for those goods and services that can be individually acquired,” argued Hoover’s Alvin Rabushka.68 Martin Anderson, a Hoover senior fellow and domestic policy adviser to the Reagan administration, elaborated the conservative position on welfare in terms of the need to (1) reaffirm the need-only philosophical approach to welfare and state it as explicit national policy; (2) increase efforts to eliminate fraud; (3) establish and enforce a fair, clear work requirement; (4) remove inappropriate beneficiaries from the welfare rolls; (5) enforce support of dependents by those who have the responsibility and are shirking it; (6) improve the efficiency and effectiveness of welfare administration; and (7) shift more responsibility from the federal government to state and local governments and private institutions.69 These recommendations formed the backbone of the 1996 PRWORA.

In turn, the Heritage Foundation featured Out of the Poverty Trap: A Conservative Strategy for Welfare Reform by Stuart Butler and Anna Kondratas.70 Following along the same lines, the Free Congress Research and Education Foundation proposed reforming welfare through “cultural conservatism”—that is, by reinforcing “traditional values such as delayed gratification, work and saving, commitment to family and to the next generation, education and training, self-improvement, and rejection of crime, drugs, and casual sex.”71

A handful of other works also served as beachheads for the conservative assault on the liberal welfare state. George Gilder’s Wealth and Poverty argued that beneficent welfare programs represented a “moral hazard” that insulated people against risks essential to capitalism and thus contributed to dependency.72 Martin Anderson concluded that income calculations should include the cash equivalent of in-kind benefits, such as food stamps, Medicaid, and housing vouchers, thus effectively lowering the poverty rate by 40 percent.73 Taken together, these ideas and recommendations provided a potent critique of welfare programs.

Perhaps the most enduring change engineered by the conservative movement is what Jacob Hacker calls the “Great Risk Shift.”74 Private ownership of property and the acceptance of personal responsibility have long been core American values, which partly explains why opposition to former President Bush’s “ownership society” had not materialized. In The Great Risk Shift, Hacker examines Bush’s ownership society and the Republican Party’s emphasis on personal responsibility as the code for shifting economic risk away from government and corporations and onto the back of the American family.

Hacker argues that private and public support mechanisms have fallen behind the pace of change in contemporary society. Almost half of marriages end in divorce. Over a third of employed Americans are frequently worried about losing their jobs. Structural changes in the nature of employment, primarily seen in a shift away from manufacturing to the lower-paying service sector, have left many without the skills needed for new jobs or the resources to retrain. The likelihood of family income dropping 50 percent has almost tripled since the 1970s; personal bankruptcies and home foreclosures have increased by a factor of five.75 Hacker maintains that during a 30-year period in which middle-class incomes have remained stagnant, the need for economic security has been neglected by public and private institutions.76

The risk shift is occurring in almost all sectors. Corporate retirement programs are transitioning from defined benefit plans (i.e., retirees are guaranteed a set retirement income) to defined contribution plans whereby retirement income depends upon the savvy of the employees’ investment managers. Whether these changes will help or hurt the individual depends on many factors, but it is clear that it is a shift in risk to the individual worker.

Despite Obamacare, the absence of real universal health care has underscored the importance of employer-provided health insurance. However, the increasing instability of employment often means that job transitions are accompanied by the failure to acquire health coverage. Conservatives have proposed Health Savings Accounts as a means of activating market forces to control health costs, but they reflect another risk shift from the corporation to the individual worker. The former Bush administration suggested the elimination of employer-provided health insurance in favor of tax deductions for health insurance premiums, yet another risk shift from corporations to the individual or family.77 An important implication of Hacker’s argument is that good social welfare policy analysis can no longer be restricted to a focus on income; it must also attend to the shifting dynamics of risk. As such, progressive social welfare policies must work to mitigate the degree of risk the individual family must bear."

"Conclusion

John Judis and Michael Lind argue that, “Ultimately American economic policy must meet a single test: Does it tend to raise or depress the incomes of most Americans? A policy that impoverishes the ordinary American is a failure, regardless of its alleged benefits for U.S. corporations or for humanity as a whole.”78 We would add: “What are the effects of an economic policy on the social health of the nation?” Researchers at Fordham University’s Institute for Innovation in Social Policy have argued that the nation’s quality of life has become unhinged from its economic growth. “We really have to begin to reassess this notion that the gross domestic product—the overall growth of the society—necessarily is going to produce improvements in the quality of life.”79 Constructing an Index for Social Health that encompassed governmental data from 1970 to 1993, researchers found that in six categories—children in poverty, child abuse, health insurance coverage, average weekly earnings adjusted for inflation, out-of-pocket health costs for senior citizens, and the gap between rich and poor—“social health” hit its lowest point in 1993. As current poverty data suggest, these indicators have worsened since 1993.

A corollary question is, “What’s the economy for, anyway?” In other words, do we exist to serve the economy or should the economy serve us? Economists often discuss the gross national product (GNP) or gross domestic product (GDP), productivity, and overall economic growth as if they were true indications of an economic quality of life. This approach avoids examining the beneficiaries of economic growth in the midst of growing income inequality. While discussions typically revolve around how to best grow the economy, too little of the economic discourse involves environmental sustainability or quality of life issues. John de Graaf has addressed these issues in Affluenza (the film and the book) as have other authors in various forms (see Spotlight Box 1.1)."

"Early Antecedents of Welfare Statism

Virtually all societies have developed some form of welfare-related activities. These governmental, societal, familial, or cultural institutions may address several human needs: (1) they help ameliorate the individual suffering of those judged worthy of help, (2) they promote the common good by distributing economic and other resources from a higher social group or class to a lower one, (3) they extend the rights of citizenship to groups outside of the societal mainstream, and (4) they promote social stability by managing lower social or economic class grievances. Different developed economies highlight different parts of these welfare functions.

Judeo-Christian Doctrine and Social Welfare

Social welfare functions are found in early history, and Walter Trattner notes that Hammurabi, the Babylonian ruler who died in 1750 BC, made the protection of women and children part of his famous code. The Greeks and Romans also developed welfare-related policies that included daily allowances for the handicapped, the public distribution of grain for the needy, and institutions for the custodial care of various vulnerable groups.1

From its early beginnings, Judaism contained strict laws for dealing with the poor and for giving tzedakah (Hebrew for charity). These laws helped in forming the basis of the modern welfare state in many ways. For instance, the Jewish law required farmers to leave a minimum of one-sixtieth of their field crops unharvested, which was left for the poor. To discourage dependence, the poor were encouraged to be competitive in gathering the peah (the standing allotment). Each was allowed to take as much as he or she could gather.

Jewish Rabbinic law also established one of the earliest means tests. Anyone who had 200 Zuz or above (established by the Rabbis as sufficient to purchase food for one year) was considered above the poverty line and ineligible for assistance. Like modern means tests, complex exemptions were employed in calculating the poverty level. For example, the residence, household utensils, religious articles, and certain of the wife’s property were exempt. The poor were not forced to give up the essential elements of their lifestyle to be eligible for assistance.

The process of Jewish charity was highly organized in biblical times, and it was common for each community to have two types of charity organizations: one for poor travelers and the other for poor residents. The organization of the charity was administered by a tax committee, and each family was assessed a tax, which was then distributed to the resident poor on Fridays. In addition, plates of prepared food were collected for the traveling poor. The law also prescribed what was to be given. If a person was hungry, he or she must be given food; if a person is without adequate clothing, he or she must be supplied with clothing."

"Jewish law was complicated in terms of charity, mirroring the ambivalence and contradictions of the modern welfare state. On the one hand, the poor who were entitled to alms but who worked hard and were self-supporting instead of burdening the public were worthy of high praise. Instead of needing others for help, people came to them for assistance. On the other hand, those who were old, sick, or otherwise incapable of eking out the barest of existence yet refused help were depriving themselves of essentials and therefore endangering their lives. These people were viewed as unworthy of pity. False pride was scorned upon.

It was forbidden in Jewish law to turn away a poor person empty-handed. Of the degrees of Jewish charity, the highest forms were assisting the poor with a gift or a loan, accepting them into a business partnership, or helping them find employment. In other words, the highest form of charity was helping the poor become self-sufficient. Conversely, the lowest kind of charity was giving it reluctantly, as in involuntary tithing. Charity was expected to be given with an open heart: “Whoever gives charity to a poor man ill-mannerdly and with downcast looks has lost all the merit of his action even though he should give him a thousand gold pieces.”2 The next level of charity was when the giver did not know who received the gift and the recipient did not know who gave it. The provision of anonymous charity to strangers also forms the backbone of the modern welfare state. Taxpayers pay taxes that provides assistance to strangers who cannot reciprocate, nor even recognize or acknowledge the individual whose tax money went to them.

Since most of the early Christians including Jesus, Paul, Peter, and other early founders of the Christian church were Jews, it is not surprising that Jewish charity customs were embedded in Christian doctrine. Beginning in the sixth century, monasteries became important sources of relief for the poor, and some religious orders specifically focused on aiding the needy. The funds to run charitable endeavors came from rents received on church lands, donations, endowments, collections, and tithing. Some of this money was used to help the needy by providing food, provisions, and medical services."

"The English Poor Laws

In some cases, the feudal system that dominated Europe throughout the Middle Ages helped the poor mitigate the hardship and distress of the period. Many, if not most, people in the medieval period were serfs who lived on a manor consisting of a castle, church, small village, and the surrounding farm land. Serfs worked as tenant farmers for the feudal lords. If the feudal lord was generous, the basic needs of the serfs such as employment, food, clothing, and aid in sickness were met. Conversely, life on the manor could be miserable if the lord of the manor was cruel and vindictive. Serfs were generally forbidden to leave the feudal estate without the permission of their lord.

Others in the medieval period lived in towns, which began as religious centers and later became commercial centers. People living in towns were “free men” compared to serfs. Social welfare needs were met by service, craft, or merchant guilds. Although the primary responsibility of guilds was to protect its members and meet the social and economic needs, it sometimes helped others, which might include feeding the needy or providing free lodging to travelers. In addition to the guilds, medieval hospitals (usually connected to monasteries) provided an important service by offering free medical care for weary travelers, the old, orphans, and the destitute. Many of the early hospitals, especially those in the burgeoning industrial cities, were later taken over by municipal authorities. The growth of industrial cities combined with the increased power of the state and the collapse of feudalism led to the creation of the English Poor Laws, the first modern codification of laws and responsibilities relating to the poor.

The English Poor Laws functioned as an early model for much of American social welfare. Early social welfare relief in England was considered a private and church matter. Individual benefactors took responsibility for building almshouses, hospitals, and even bridges and roads. Despite this, the major responsibility for meeting the needs of the poor rested with the church. Most European governments, including the English government, assumed little responsibility for the care of the poor. This situation would change with industrialization and its attendant social and economic problems.

Rapid industrialization and the growth of manufacturing led to the conversion of farmland into more profitable sheep pastures, a transformation that was necessary to feed England’s growing woolen mills. As newly released serfs followed economic opportunities, the urban migration of displaced and impoverished peasants led to untoward social consequences, including begging and vagrancy.

The Black Death (bubonic plague) of 1349 drastically reduced England’s population, leading King Edward III to create a Statute of Labourers that fixed maximum wages, placed travel restrictions on the unemployed, forced the jobless to work for any employer willing to hire them, and outlawed alms for the able-bodied.3 In 1531, the English Parliament outlawed begging for the able-bodied. Although repressive, the act also instructed local officials to seek out the worthy poor and assign them areas where they could beg.4

The passage of the Act for the Punishment of Sturdy Vagabonds and Beggars in 1536 (one of the series of Poor Laws) further mandated the English government to assume limited responsibility for the poor. Although this act increased the punishment for begging, it also ordered officials to obtain resources through voluntary church donations to care for the poor, the sick, the handicapped, and the aged. The statute required local officials to find work for the able-bodied and to arrange for the apprenticeship of poor children aged 5 to 14. In 1572, the English Parliament enacted yet another poor law, this time requiring local officials to implement a mandatory tax for the provision of economic relief to the poor.5

In 1601, the English government established the Elizabethan Poor Laws. These laws were meant to control the poor who were unable to obtain employment in the new industrial sector and who, because of that, might become disruptive. Taxes were levied to finance a law that by modern standards was harsh. The law continued the separation of the “deserving” from the “undeserving” poor. The worthy poor were the lame, the blind, orphaned children, and those unemployed through no fault of their own; the unworthy poor were vagrants, drunkards, and the slothful. The core of the Elizabethan Poor Laws would stand for 250 years.

The Elizabethan Poor Laws contained both positive and repressive features. For example, parents with means were legally responsible for supporting their children and grandchildren, and children were responsible for supporting their parents and grandparents. On the repressive side, the unworthy poor were sent to workhouses and forced to do menial work for the minimum necessities of life. Poor people who refused to work could be sent to jail, or in some cases, even executed. The English Poor Laws established the principle of “less eligibility,” the idea that any form of public assistance should be less than the lowest prevailing wage.

These laws institutionalized the responsibility of the English government to provide relief to the needy and provided the needy with a legal right to receive that assistance. To clarify the boundaries of government help, the law recognized three classes of dependents and proposed remedial measures: Needy children were given apprenticeships, the able-bodied were given work, and the worthy poor were provided either indoor (institutional) or outdoor (home) relief. The law also required local governments to assume responsibility for the needy.6 These Poor Laws formed the basis for statutes enacted in both colonial and postcolonial America.7"

"The Poor in Colonial America

Key aspects of the Elizabethan welfare system were adopted by the American colonies. Like its English corollary, the parish or colonial town was responsible for its residents. Until the 1700s when almshouses began to appear, cases of pauperism were handled on an individual basis in town meetings. When the number of poverty cases increased due to indentured servants and abandoned children, the English system of overseers—an official who administered poor relief—was introduced.

Most settlers in colonial America were poor, but unlike their European ancestors, they were not destitute and so abject pauperism was not widespread.8 According to Robert Morris, less than 1 percent of American colonists received help from outside sources.9

In small towns unable to support an almshouse, it was not uncommon for the town council to auction the poor off to neighboring farmers, apprentice out children, place the poor in private homes at public expense, or send them to privately operated almshouses. Settlers believed that children should be part of a family unit and the practice of indentured child servitude was widespread. By the end of the colonial period, the locus of responsibility for the poor began to shift from the town to the state or colony.10

While colonial settlers were often compassionate to indigent townspeople, they showed less compassion for strangers who were destitute. Some communities enacted laws of settlement as the numbers of poor increased. Residency requirements were enforced through policies of “warning out” or “passing on.” “Warning out” meant that newcomers were strongly encouraged to move on if they appeared indigent. “Passing on” was returning the transient poor to their former counties of residence. Some colonies established residency requirements to determine eligibility for public assistance. The able-bodied poor in colonial America were treated harshly and idleness was regarded as a vice whereby the able-bodied loafer was indentured, expelled from town, whipped, or jailed. By the late eighteenth century, the able-bodied unemployed were placed in workhouses or almshouses.11

The process for helping the poor changed radically by the early 1800s. The quasi-benevolence of the town council was replaced by a reliance on workhouses. In some areas, the use of outdoor relief was virtually abandoned in favor of institutional care. It was only in the mid-1800s that the federal government conceded even limited responsibility for the poor. Local government activities were based on a belief that poverty was a consequence of moral weakness, a theory linked to the Puritan values more prevalent in New England.12"

"Social Welfare in the Civil War Era

The federal government’s responsibility to provide relief has historically been a contentious issue. Dorothea Dix, a name synonymous with the humane care of the mentally ill, brought this issue to a head. While volunteering as a Sunday school teacher for an insane asylum in 1841, Dix underwent a spiritual and emotional awakening. Appalled by the conditions at the asylum, she committed herself to fighting for the humane care of the mentally ill.

The majority of mentally ill people in the 1840s were placed in public mental institutions, jails, or almshouses. Their treatment was often brutal and consisted of beatings, being chained, or being forced into cages or pens. Dix concluded that neither private philanthropy nor local action could remedy the problem—the solution laid in state and federal intervention.

After successfully lobbying for state action, Dix realized that the large expenditures necessary to reform mental health services demanded federal intervention. With the support of well-known clergy, prominent citizens, newspaper people, and public and private organizations, Congress passed a bill in 1854 that provided federal support for the mentally ill. Unfortunately, President Franklin Pierce vetoed the bill, claiming that, “If Congress has the power to make provisions for the indigent insane . . . it has the same power for the indigent who are not insane. . . . I cannot find any authority in the Constitution for making the Federal Government the great almoner of public charity throughout the United States.”13 Pierce’s veto was largely based on his belief in states’ rights. For the next 75 years, this veto would provide the rationale for the federal government’s refusal to provide social welfare services.14

The Civil War ushered in an important period of relief activities. Families who lost a breadwinner or whose breadwinner returned from the war permanently disabled could not be blamed for their misfortunes. In response, localities enacted laws that raised funds for the sick and needy, and in some instances, for the founding of homes for disabled soldiers.

Other health issues that emerged during the Civil War included the rampant disease and filth in army camps and hospitals and the shortage of trained medical personnel. To remedy this situation, a group of citizens (composed largely of women) organized the U.S. Sanitary Commission in 1861, the first important national public health group. Functioning as a quasi-governmental body, the commission was financed and directed by the private voluntary sector. Initially working in preventive health education, the commission eventually became involved in a variety of direct and indirect services for soldiers.15

Another institution that emerged from the Civil War was the Freedmen’s Bureau. By the close of the war, political leaders realized that the immediate emancipation of millions of slaves would create severe social problems. Former slaves with no occupational training, land, or jobs would require various kinds of assistance, which prompted Congress to establish the Bureau of Refugees, Freedmen, and Abandoned Lands in 1865. The Freedmen’s Bureau was responsible for directing a program of temporary relief for the duration of the war and one year afterward. After a bitter struggle, Congress extended the Freedmen’s Bureau for an additional six years.

Under General Oliver Howard, the bureau offered services designed to help African Americans make the transition from slavery to freedom. For example, it staffed an emergency relief center that distributed 22 million rations to needy Southerners. The bureau also functioned as an employment agency, a settlement agency, a health center that employed doctors and operated hospitals, an educational agency that promoted African American colleges and provided financial aid, and as a legal agency that maintained courts where civil and criminal cases involving African Americans were heard. The Freedmen’s Bureau was an important precedent for federal involvement in a variety of human services. In 1872, it was dissolved by Congress.16"