Welfare State 3.0: Social Policy After the Pandemic 9780367700393, 9780367700430, 9781003144342

Table of contents :
Cover
Half Title
Title Page
Copyright Page
Table of Contents
Prologue: Mary and her baby
Chapter 1 Crisis
Chapter 2 Forsaking African Americans
Chapter 3 Framing the welfare state
Chapter 4 Lyndon Johnson’s War on Poverty
Chapter 5 Convolution
Chapter 6 The problem from purgatory
Chapter 7 Policy paradigms
Chapter 8 Consolidate programs
Chapter 9 Harmonize applications
Chapter 10 Expand equity
Chapter 11 Conduct experiments
Chapter 12 Inflection
Acknowledgments
Index

Citation preview

Welfare State 3.0

Tis book identifes specifc changes to bring U.S. social policy in accord with the Information Age of the 21st century, in contrast to the policy infrastructure of industrial America. Welfare State 3.0: Social Policy After the Pandemic acknowledges the existing social infrastructure, considers viable options, and provides supporting data to suggest social policy reform by four strategies: consolidating programs, harmonizing applications, expanding equity, and conducting experiments. Te book favors discreet, poignant proposals of social programs. In 12 chapters, the text provides an analysis that honors past accomplishments, recognizes the infuence of established stakeholders, and concedes program inadequacies, while plotting specifc opportunities for policy improvement. In contrast to liberalism’s tendency toward idealism, the book adopts a realpolitik appreciation for social policy. Written by one of the most respected academics of U.S. social policy, this book will be required reading for all undergraduate and postgraduate students of social policy, social work, sociology, and U.S. politics more broadly. David Stoesz is founder and CEO, Up$tart, and a former Fulbright Distinguished Chair at the University of Birmingham and Carnegie Mellon University-Australia/Flinders University.

Welfare State 3.0 Social Policy After the Pandemic David Stoesz

First published 2021 by Routledge 2 Park Square, Milton Park, Abingdon, Oxon OX14 4RN and by Routledge 605 Tird Avenue, New York, NY 10158 Routledge is an imprint of the Taylor & Francis Group, an informa business © 2021 David Stoesz Te right of David Stoesz to be identifed as author of this work has been asserted by him in accordance with sections 77 and 78 of the Copyright, Designs and Patents Act 1988. All rights reserved. No part of this book may be reprinted or reproduced or utilised in any form or by any electronic, mechanical, or other means, now known or hereafter invented, including photocopying and recording, or in any information storage or retrieval system, without permission in writing from the publishers. Trademark notice: Product or corporate names may be trademarks or registered trademarks, and are used only for identifcation and explanation without intent to infringe. British Library Cataloguing-in-Publication Data A catalogue record for this book is available from the British Library Library of Congress Cataloging-in-Publication Data Names: Stoesz, David, author. Title: Welfare state 3.0: social policy after the pandemic / David Stoesz. Other titles: Welfare state three point zero Description: Abingdon, Oxon; New York, NY: Routledge, 2021. | Includes bibliographical references and index. Identifers: LCCN 2020055590 (print) | LCCN 2020055591 (ebook) | ISBN 9780367700393 (paperback) | ISBN 9780367700430 (hardback) | ISBN 9781003144342 (ebook) Subjects: LCSH: United States–Social policy. | Welfare state–United States. Classifcation: LCC HN65 .S74 2021 (print) | LCC HN65 (ebook) | DDC 306.0973–dc23 LC record available at https://lccn.loc.gov/2020055590 LC ebook record available at https://lccn.loc.gov/2020055591 ISBN: 978-0-367-70043-0 (hbk) ISBN: 978-0-367-70039-3 (pbk) ISBN: 978-1-003-14434-2 (ebk) Typeset in Adobe Caslon Pro by Deanta Global Publishing Services, Chennai, India

Contents Prologue: Mary and her baby 1 Crisis

vii 1

2 Forsaking African Americans

21

3 Framing the welfare state

44

4 Lyndon Johnson’s War on Poverty

62

5 Convolution

77

6 Te problem from purgatory

92

7 Policy paradigms

107

8 Consolidate programs

130

9 Harmonize applications

144

10 Expand equity

164

vi

CONTENTS

11 Conduct experiments

189

12 Infection

209

Acknowledgments Index

219 224

Prologue Mary and her baby Mary and her baby were on my caseload for three, maybe four, months. Te case was diverted to me when another caseworker in our unit quit, so her cases were divvied up among the rest of us until a replacement could be hired and trained, six weeks with luck. Ordinarily, I had 72 cases, so the addition of another dozen was not welcome. I fgured I could feather most of them, but Mary’s demanded immediate attention. Her previous caseworker noted she’d given birth; but, aside from that notation, a visual confrmation was necessary, or the state would automatically terminate the case at month’s end. At best, Mary could be delayed until the end of the week, when I could mail her the notifcation of a home visit and schedule a state car for the 30-mile trip to the city where my welfare families lived. Monday was a nightmare at the welfare department, the frst day after a weekend of mayhem. Te usual problems ran in patterns, with occasional surprises: a broken refrigerator (likely since the state supplied only second-hand appliances); a mother didn’t get her child support; “Tammy got pregnant”; another nonfunctioning refrigerator; stolen food stamps; an adolescent sent to live with an out-of-state relative; “Tyrone is in detention for joy-riding, but he didn’t steal the car”; a broken washing machine. My objective was to contain the chaos so home visits could be scheduled at the end of the week, the state requiring visual identifcation of each family member on welfare every six months. Not that all of the news from welfare mothers was bad; typically, a bit of good news fltered through. Among those, “I got a job!” was most frequent, even if the conversation often took an unexpected turn: “With full time work at the minimum wage, along with your child support, your case would be closed,” I’d explain. “You’re entitled to an Earned Income Disregard, so you could keep the frst $30 and one-third after that, provided total family income didn’t exceed the amount of the grant.” “Te what?” “Earned Income Disregard.” “But if my case is closed my kids will lose Medicaid?”

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“Yes, but maybe your boss made a mistake in the number of hours you’ll be working.” “Huh?” “If you worked fewer hours your earned income plus child support would still be less than the grant, so you and your kids would still receive Medicaid. Maybe your boss misunderstood how much you’d be working.” “Uh, yeah, maybe he did. Tanks.” Rarely, a welfare mother would (re)marry someone with sufcient income to support the family. But even then problems lurked. In the poor neighborhoods served by our unit, most men already had child support orders, often for kids on welfare, so it was likely that the new spouse was already hemorrhaging income for child support, with some orders probably in arrears. Anticipating the visit with Mary and her infant, I read her case record: childhood in a series of foster homes, two hospitalizations at the regional mental hospital (diagnosis: schizophrenia, depressive afect), then the pregnancy entitling her small family to cash assistance, Medicaid, and food stamps. For a single black woman not yet 20, her life trajectory was ominous. Mary’s apartment was in a dilapidated wooden structure in a run-down neighborhood. I trudged up the stairs and knocked on the door, although my presence had probably been noted by the black state car and my state-issued black schedule book: “the welfare.” I heard shufing from inside, the door cracked open, and I inquired, “Mary Early?” Without a word, she opened the door, a lithe fgure standing aside, revealing a bleak studio, furnished courtesy of the state: one mattress on the foor, a clothes bureau, a kitchen table and two chairs, and a used refrigerator for her baby’s formula. Mary’s afect was muted, and her one-word responses suggested medication. She showed me the birth certifcate; the baby seemed healthy, as I noticed the infant’s diaper clearing a clean streak across a flthy foor. And that was it, the visit lasting no longer than 15 minutes. I took notes for a later case dictation and departed for other home visits in more familiar parts of the town, somewhat relieved that Mary’s case would be transferred to the new worker in a few weeks. Or so I thought. Coincidentally, the state was embarking on a “fat grant” for welfare families: aside from earned income and child support, every household would be given a fxed amount graduated for family size. Two months before the new regime, each welfare mother was sent a letter explaining the change as well as the right to a “fair hearing,” a quasi-judicial procedure to review the

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amount of their fat grant. Te caseworkers braced for the deluge of welfare mothers uncertain about their status, learning by rote the agency response. With relief, the furry of indignant and fearful mothers soon ebbed. Te caseworkers, for their part, would be reassigned later to alpha groups as all future contacts were to be by phone, the new regime eliminating home visits. Ten, the call from the switchboard two days before the inception of fat grants: “Mary Early is here to see you. She’s in interview room 3.” I was bafed, wondering how Mary had transited the distance to the welfare ofce, yet realizing she was still on my caseload. Rehearsing the agency spiel, I opened the door to fnd a quite diferent Mary. Te smell of cheap wine sufused the room. Mary had her fat grant letter in hand, demanding, “How I suppose to raise my child on this?” I recited the agency explanation. She glared at me, “Tere ain’t but one thing in this world: a black woman and a white man!” She stalked out. I was so blown away I forgot to enquire about her baby. Several years later I got a teaching job at Howard University, a venerable African American educational institution, where I came to appreciate Mary’s metaphor: welfare was the new plantation, an institution of social and economic oppression of minorities of color by a dominant white society. And many years after Mary chastised me, I’d worked my way up the academic food chain, and was appointed to an endowed chair focusing on social welfare, which included a budget I could use for research. So I called my former employer, the state welfare department, to inquire about Mary Early. As expected, they refused to divulge any information citing client confdentiality. Subsequently, I hired a detective agency, suggesting the typical sources to be explored: the Department of Motor Vehicles, the state employment department, and vital records. To my surprise the detective assured me he had contacts within the welfare department as well. Since this sort of request was not unusual, he expected to have a report within the month. And he did. Mary had vanished. Tere was no trace of her or her infant, who, now an adult, may well have replicated Mary’s sad sojourn through foster care and public assistance, bearing children along the way. It is not difcult to conclude that Mary was a casualty not just of the state, in this instance foster care, the state mental hospital, and public assistance, in which I was complicit, but of social policy reforms in public welfare and mental health as well, in which we are all responsible. My stint as a welfare caseworker led to an academic career in social policy, writing about public welfare in particular and the welfare state in general. As a policy wonk (“know” spelled backward), I came to appreciate the value in data, as opposed to case studies, such as Mary and her baby, since

PROLOGUE

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they present information in the aggregate through standardized measures. Longitudinal data are especially useful, as shown in Figure I.1, which depicts

100

1979: 82

1996: 68

80 60 2018: 22

40 20 0

‘79

‘82

‘85

‘88

‘91

‘94

‘97

AFDC families

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‘03

‘06

‘09

‘12

‘15

‘18

TANF families

Figure I.1 Number of families receiving AFDC/TANF for every 100 families with children in poverty.1 Source: Center on Budget and Policy Priorities, http://www.cbpp .org, with permission.

adults and children receiving welfare grants over time, such as that provided to Mary and her infant, through the Aid to Families of Dependent Children (AFDC), which was converted in 1996 to Temporary Assistance for Needy Families (TANF). Tis graph shows the efect of the 1996 welfare reform, which sharply reduced the number of those eligible for TANF. Equally notable, there is no signifcant uptick in cases as a result of the Great Recession, commencing in 2008. With unemployment reaching 10  percent, the number of welfare cases would have been expected to increase noticeably. If the Great Recession produced negligible increase in family welfare, would the recession due to the coronavirus in 2020 be any diferent? In other words, in the absence of state support, would families like Mary’s be left to fend for themselves, once again? But something else happened with the conversion of AFDC to TANF: after 1996 states diverted income for “basic assistance” to supportive strategies that encouraged welfare recipients to work, including job preparation, childcare, pre-K for children, and child welfare. By 2018, program management and supportive services consumed 10 percent and 69 percent, respectively, of TANF funds, leaving only 21 percent of government welfare funds for basic assistance, i.e., money paid directly to welfare recipients for rent, utilities, clothes, etc. In other words, a secondary industry designed to beneft

PROLOGUE

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welfare mothers was carved out of their monthly welfare grant, essentially a slush fund for social service providers. But what would that have meant for Mary? Living in a relatively generous state, Connecticut, she would have seen her monthly grant erode in value signifcantly. By 2015, Connecticut’s maximum TANF grant was $597/month for a family of three, half the amount granted in 1981, 90 percent siphoned of for support services. By comparison, Mississippi’s TANF program was Dickensian, the monthly grant dropping from $250/month for a family of three in 1981 to $170/month in 2015, only 5 percent of TANF funding for Mississippi’s welfare families dedicated to basic assistance.2 Essentially, federal TANF funding had become a means for states to mount services for the alleged beneft of welfare families. Were they? Without research on program efcacy and efciency, we simply don’t know. But, one thing seems clear: TANF has spawned a secondary market in welfare support services, managed by human service professionals, by subtracting funds that previously went to welfare recipients—the “nanny state” with a vengeance! Te idea that family welfare is an optimal strategy for ameliorating poverty may seem counterintuitive, but it’s not especially original. Prior to the 1996 welfare reform, social scientists Kathryn Edin and Laura Lein interviewed welfare mothers in Chicago, Boston, Charleston, and San Antonio. In violation of federal welfare statutes, a sizable number failed to report income to their caseworkers, “two-ffths (39 percent) worked of the books or under a false identity to generate additional income, and 8 percent worked in the underground economy selling sex, drugs, or stolen goods.” Tey found only one mother surviving solely on her AFDC grant, but with severe consequences: “Since her child frequently went hungry, had only one change of clothes, and often missed school because he lacked adequate winter clothing, several of the woman’s neighbors (whom we interviewed) had reported her to child protective services for neglect.”3 If welfare is so grossly inadequate to support even a minimally adequate life, how do mothers manage expense shocks? Without an account with a credit union or bank, most resort to payday lenders, check cashers, and pawnshops, often vilifed as “predatory lenders.” An economist, Lisa Servon, worked for four months in a check casher, long enough to become familiar with consumers whom she later interviewed. Te “unbanked,” she learned, often need money urgently and fnd storefront lenders friendly, unlike formal banking institutions operating at inconvenient hours and subtracting high penalty fees for overdrafts. Despite the high fees for cashing checks, Servon found check casher consumers so appreciative that they actually tipped the staf.4 In retrospect, family welfare as AFDC was corrupt as it encouraged poor mothers to generate income beyond the welfare grant to care for their children, but its sequel, TANF, is also fundamentally fawed, diverting scarce revenues away

xii

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from low-income mothers to professionals—augmenting “rents,” in economic terms. Te thesis of this book is that poverty policy, a subfeld of social policy, is an artifact of industrial America, which should be reformatted congruent with the information age. In pursuit of that possibility, I observe that sovereign nations evolve social infrastructure in response to destabilizing events, such as the Great Depression; accordingly, the coronavirus presents a challenge to the welfare state that emerged during the industrial era, providing a catalyst for broad social policy reform through four strategies: consolidating programs, harmonizing applications, expanding equity, and conducting experiments. I divide the evolution of American social welfare into three stages: welfare state 1.0, which was introduced by the Social Security Act in 1935 and focused on social insurance, followed by welfare state 2.0, which expanded during the War on Poverty of the 1960s and emphasized public assistance. Te resulting infrastructure was a product of industrial America, and was much debated by the ideologies that animated political parties in the 20th century, with the Republicans embracing markets as a means for distributing resources and opportunities, and refexively opposing government interventions, and the Democrats insisting that government was not only the only corrective to untamed capital but also necessary for leveling an uneven playing feld. Tese opposing orientations reached a stalemate early in the 21st century, the loggerhead evident in strident polemics, a hollowing out of the political center, and a future of government budgets steeped in red ink. Te information age, I argue, ofers new possibilities for resolving this dilemma. What follows does not conform to the received wisdom professed by conservatives or liberals, and it will challenge the professional class that has emerged to manage social policy. Regardless, an open society provides the space to explore options; a democratic polity, the mechanism to try them out. As a professor, I cautioned my students that there were no panaceas in social policy, but there were better ideas. Just so, the future is redolent with opportunities to improve our social infrastructure. Certainly, citizens of advanced nations deserve more efcient, efective, and responsive ways to address social concerns, as was the case those many years ago with Mary and her baby.

NOTES 1 https://www.cbpp.org/research /family-income-support /chart-book-temporary -assistance-for-needy-families. By 2014, the percentage of children in the general population on TANF had declined to 4.0 percent and the number of adults to 0.4 percent. See “Welfare Indicators and Risk Factors: Sixteenth Report to Congress” (Washington, DC: Administration on Children and Families, n.d.), p. 15.

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https://aspe.hhs.gov/system/fles/pdf/257521/WelfareIndicators.pdf 2 Ashley Burnside and Liz Schott, “States Should Invest More of Teir TANF Dollars in Basic Assistance for Families” (Washington, DC: Center on Budget and Policy Priorities, 2020). https://www.cbpp.org/research/family-income-support/states-should-invest-more -of-their-tanf-dollars-in-basic-assistance 3 Kathryn Edin and Laura Lein, Making Ends Meet (New York: Russell Sage Foundation, 1997), pp. 42–45. 4 Lisa Servon, Te Unbanking of America (New York: Mariner, 2017).

1 Crisis Nations introduce major changes in social policy in response to crisis. Tus, 9/11 introduced the Department of Homeland Security, consolidating several existing agencies into the largest federal agency. Te Great Recession, the worst since the Great Depression, was addressed by an unprecedented infusion of fscal stimulus by the Treasury under the Bush II and Obama administrations. Similarly, the coronavirus promises to upend the status quo as developed nations struggle to sustain economic activity. Among the most conservative news outlets, Te Financial Times confessed that its pro-market orientation was passé, announcing the need for “radical reforms” over the complacency of the previous four decades: Government will have to accept a more active role in the economy. Tey must see public services as investments rather than liabilities, and look for ways to make labour markets less insecure. Redistribution will again be on the agenda; the privileges of the elderly and wealthy in question. Policies until recently considered eccentric, such as basic income and wealth taxes, will have to be in the mix.1 Tus, the pandemic could well portend major changes in the welfare state. Understandably, political victors of new social programs tend to invoke compassion as a motive, while the vanquished complain of irreparable harm to established institutional arrangements.2 In this respect, social policy is no diferent from policy undergirding defense or diplomacy; instability requires abrupt departures from the status quo, lest the status quo be consigned to the dustbin of history. Realpolitik demands innovation. Tus, Chancellor Otto von Bismarck, confronted by socialist challenges to a newly integrated Germany and an economic collapse impeding industrialization, instituted a National Health Plan for workers in 1883, followed by Accident Insurance in

2

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1884, Disability Insurance in 1889, and Unemployment Insurance in 1927, taking the wind out of the radicals’ sails by establishing the frst national welfare state.3 Ditto Australia. In 1909 the newly established Federation of territories pioneered old-age pensions, “invalid pensions” in 1910, and “maternity allowances” in 1912. But the Great Depression and World War II boosted the fedgling Australian welfare state, using Keynesian economics to fund a robust array of programs serving children, widows, the unemployed, and a national healthcare program. Drawing on English social philosophy, Australia would become a full-fedged welfare state by the century’s end.4 Similarly, the American welfare state originated with the Social Security Act of 1935, enacted six long years after the 1929 Wall Street crash. Te toll of the Great Depression included widespread bank failures, farmers and businesses plunged into bankruptcy, and an unemployment rate of 25 percent. Desperate people resorted to radical tactics, some joining the Industrial Workers of the World, the “wobblies,” which organized strikes and destroyed property in a campaign against capitalism. One historian chronicled, by the fall of 1932, the nation faced a serious threat. Disorder spread and talk of revolution was heard, many destitute and starving citizens had only contempt for the government and the system that was responsible for their plight but that did little to alleviate their distress.5 As Bismarck had done a half-century before, Franklin Delano Roosevelt’s New Deal defused a precarious polity by establishing the American welfare state. And the British replicated the pattern after the devastation of World War II, which destroyed much of London and Birmingham. In 1942 William Beveridge authored Social Insurance and Allied Services, arguing for the establishment of a National Health Service, government-fnanced and government-managed healthcare for the entire population. “Te Beveridge Report was received by the British population with unprecedented enthusiasm and became the blueprint for social legislation after the war.”6 Decades later, despite a series of Tory prime ministers averse to public monopolies, the NHS remains an impregnable fortress of the British welfare state. Social insurance, which I call Welfare State 1.0, has been central to these innovations, requiring employers and workers to contribute to a state pension scheme designed to provide an adequate income for employees who become unemployed, retire, or become disabled. For rapidly industrializing economies, social insurance assured family breadwinners minimal fnancial security once they left the labor market. In so doing, social insurance facilitated labor mobility insofar as younger workers would not be encumbered with the

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care of their fathers. By the same token, social insurance was patriarchal, presuming that men would enjoy the fruits of public policy, while women provided important domestic services and child raising but were not covered. No minor consideration, social insurance defused leftist radicals who champed at the abuses of capital, leaving industrializing nations largely under the control of businessmen, who readily distributed income, assets, and opportunities to their compatriots.7 To paraphrase Winston Churchill, social insurance may not have been perfect, but it has been far superior to the alternative: no security for workers and their families, at all. As depression and war have prompted previous innovations in social policy, will the novel coronavirus presage the next articulation of the welfare state?

THE STRUCTURE OF WELFARE STATES As the institutional manifestation of sovereign nations, welfare states vary, being products of history, economics, politics, and happenstance. Regardless, a welfare state is one in which “individuals belonging to a defned community (typically a national community) were entitled, through their status as citizens, to a range of social goods guaranteed by the central state designed to meet their basic needs (food, shelter, education, health, etc.).”8 Previous forms of social care included charity, often through religious institutions, or the local government, such as the “poor house” or “workhouse,” places deemed so loathsome that only the most indigent would resort to them. With the inception of the welfare state, the national government asserted a defning role.9 In doing so, nations modulated capitalism, establishing an alternative to fascism and communism; typically, welfare states consisted of social insurance for workers, welfare for the poor, public social services in the form of mental health, education, and childcare, and personal social services for the wayward.10 In 1990 Gosta Esping-Andersen introduced an important classifcation of “developed”—capitalist and technologically advanced nations—dividing welfare states into three clusters: “liberal” welfare states predicated on employment, which split social insurance for workers from public assistance for the poor, such as Canada, Australia, the U.K., and the U.S.; “corporatist” welfare states founded on social rights supporting traditional families, supported by the Church, such as France, Austria, Germany, and Italy; and “social democratic” welfare states where the emphasis is on universal benefts to the middle class, primarily the nations of Scandinavia.11 Tis clustering of welfare states omits important variations that are nation specifc. For example, Canada, Australia, and the U.S. have all been especially negligent to First Peoples/Nations; moreover, Australia established penal camps for illegal

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immigrants feeing persecution. Te scheme also omits important nations as well as groups of nations. Since 1990, the “four tigers” of Asia—Hong Kong, Singapore, Taiwan, and South Korea—have evolved social infrastructures quite diferent than those that emerged in the West. Equally important, former colonial nations of Southeast Asia and Sub-Saharan Africa have struggled economically, many losing ground developmentally since achieving independence. Te demise of the Soviet Union and Warsaw Pact is another change; conceived as a “workers’ paradise,” nations within the Soviet orbit degraded to the point of a joke: “We pretend to work; you pretend to pay us.” Other nations have managed resources for better or worse, afecting the wellbeing of citizens over time. Te fate of Argentina, a rich nation early in the 20th century, stands in contrast to China a century later. Blessed with natural resources, vast lands for cattle and sheep, and talented immigrants from Europe (without female partners, Italian men conceived a sensuous dance: tango!), an autocrat, Juan Peron, squandered opportunities, leaving Argentina among the developing nations of the world. Te advent of the Information Age has been accompanied by data permitting the evaluation of nations with respect to important components of development. Tis was frst done in the UN’s Human Development Index (HDI), based on three factors: income, longevity, and education. Later, gender, poverty, and political participation have been added, amplifying the HDI.12 Subsequently, researchers from Harvard University generated the Social Progress Index (SPI) comprising a dozen variables: basic human needs (nutrition and basic medical care, water and sanitation, shelter, and personal safety), foundations of wellbeing (access to knowledge, access to information and communication, health and wellness, and environmental quality), and opportunity (personal rights, personal freedom and choice, inclusiveness, and access to advanced education). Tese factors are converted to numerical values, permitting the ranking of nations, as shown in Figure 1.1, which depicts developed countries.13 Te nations ranked include several “liberal” welfare states: Canada, the U.K., and Australia, each ranking far better than the U.S., which is ranked at 28. No doubt Americans would object, citing the usual factors: the U.S. is far larger than many countries and it is a more heterogeneous population. But these objections fail in light of the size of Australia, for example, constituting an entire continent, or the diversity of Canada, which resembles that of the U.S. In a sense, the SPI is a report card on the adequacy of welfare states. Notably, the more “universal” welfare states of Scandinavia have risen to the top of the rankings, followed in mixed fashion by the “liberal” and “corporatist” nations, as presented by Esping-Andersen. At 28, the U.S. ranks well behind most of them. While many Americans like to think of their country

Crisis

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SPI Score, 2020

94 92 90 88 86 84 82

78

Norway Denmark Finland New Zealand Sweden Switzerland Canada Australia Iceland Netherlands Germany Ireland Japan Luxembourg Austria Belgium South Korea France Spain United Kingdom Portugal Slovenia Italy Estonia Czechia Cyprus Greece United States Singapore Malta Poland Lithuania Israel Chile Latvia

80

Figure 1.1 SPI score, 2020.

as “USA #1,” the data suggest otherwise; by factors other than economic prowess and military might, the U.S. keeps company with nations of lesser stature.14 This is due, in part, to depressed regions, such as Appalachia, Indian reservations, and the Mississippi Delta, but it also reflects the inadequacy of America’s social infrastructure, affecting a wide spectrum of the population How the U.S. would slip in international league tables from an incandescent beacon of prosperity and opportunity during most of the 20th century to a flickering light early in the 21st has much to do with America’s welfare state.

WELFARE STATE 0.0 The welfare state is a relatively modern invention, conceived during the 17th and 18th. centuries by the social contract philosophers. According to Kurt Andersen, Social contracts are unwritten but real, taken seriously but not literally. They consist of all the principles and norms governing how members of a society are expected to treat one another, the balance between economic rights and responsibilities, between how much freedom is permitted and how much fairness is required. All the formal rules specifying behavioral constraints and responsibilities, the statutes and

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bureaucratic codes, are distinct from the social contract but overlap with it, because lots of the specifc rules—tax rates, minimum wages, environmental regulations, the cost of education—are codifcations of the social contract.15 However, it would not be until the 20th century that industrialization generated sufcient surpluses to institutionalize a social contract through law, which established specifc programs. Tus, the welfare states of sovereign nations are constructed on legal platforms, however unstable these have been. Germany evolved social insurance for workers under the monarchy of Wilhelm I, struggled to maintain social commitments during the brief Weimar Republic, and then saw programs expand under National Socialism (Nazi) rule.16 After World War II, Germany was a forceful presence in European integration via the creation of the Eurozone as well as an early signatory to the European Social Charter, which harmonized social welfare benefts among member nations.17 Australia, still connected to Britain constitutionally, remained a Conservative redoubt until the 1970s, with the election of a Labor government which established Gough Whitlam as Prime Minister. An international oddity, the Australian Prime Minister has no formal job description, purely a product of politics. Eager to increase social protections, Whitlam endorsed national healthcare but was blocked by parliamentary maneuvering. A constitutional crisis was averted when the Queen’s appointed Governor General, without notifying Buckingham Palace, sacked Whitlam, leading to another round of elections,18 the imbroglio no doubt reminding many Aussies of the Queen of Hearts (“Of with his head!”) in Alice in Wonderland. Te welfare state in Britain has been constructed incrementally, piece by piece, as there is no formal British constitution. As a result, the parliamentary system in Britain is prone to rapid changes—as it has been in Australia—when governments are voted out of power, making the NHS all the more remarkable for its historical support by Tory as well as the Labor parties. Te American welfare state has been circumscribed by the Constitution, which defnes power sharing among three branches of the government as well as the authority of the federal government. Unlike the constitutions of many modern nations, except for an amorphous reference to “the general Welfare,” the U.S. Constitution is silent on the specifcs of social welfare; however, the Framers were keen to limit the authority of the national government, hence the Bill of Rights.19 A nod to the states, the Tenth Amendment is clear: “Te powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people.” In efect, the default was to rely on the states for social welfare, a challenge to the New Dealers, who perceived the federal government as essential to

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address the massive dislocations attendant with the Great Depression.20 Celebrated by Justice Brandeis as “laboratories of democracy,” states have served as important sources of innovation, 21 sometimes with perverse consequences as with voter suppression. Tus, federalism invited a host of problems with regard to achieving social objectives through social legislation, especially with respect to addressing racism. A classic example of the law of unintended consequences was the conservative Heritage Foundation scripting a right-wing health plan, which was adopted by the then Republican Governor of Massachusetts, Mitt Romney, in 2006. Featuring a state-managed insurance exchange, an individual mandate, and state subsidies for the poor, the Massachusetts plan worked well enough that it became the template for Obama’s Afordable Care Act (ACA) of 2010. As conservatives repudiated “Obamacare,” the Heritage Foundation and company quickly back-pedaled, castigating government involvement in healthcare. Equally consequential, after the Supreme Court ruled the Medicaid expansion under ACA was a state option, more than a dozen refused, most of all, the former Confederacy, continuing institutional neglect of poor African Americans, which is explored in Chapter 2. Despite some modifcation of the Tenth Amendment, permitting national social programs, especially Social Security and Unemployment Insurance in the 1930s, state dominance remains with respect to child welfare, mental health, public welfare, and corrections, often through awkward sharing of fnance and authority, which contributes to what is aptly derided as “the welfare mess.” Federalism in social policy thus invites obfuscation and noncompliance, as two analysts of an Oakland, California, economic development project admitted, quoting a federal education ofcial, Te federal system—with its dispersion of power and control—not only permits but encourages the evasion and dilution of federal reform, making it nearly impossible for the federal administrator to impose program priorities; those not diluted by Congressional intervention can be ignored during state and local implementation.22 In other words, having accepted federal funds, local and state ofcials fnd it relatively easy to evade accountability. Public policy following the Civil War presaged the American welfare state, specifcally a pension for Union veterans, 23 as well as Constitutional Amendments XIII (abolishing slavery), XIV (birthright citizenship), and XV (ensuring voting rights), designed to mainstream former slaves. Signifcantly, Amendment XVI (federal income taxation) provided a mechanism for generating the revenue necessary for the welfare state, which conservatives have decried ever since.24 At the state level, mothers’ pensions became popular,

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addressing the chronic poverty of families without breadwinners, although adhering to a dominant patriarchal norm of the period.25 Although fragmented, these eforts contributed to the momentum behind a nascent Progressive movement, catalyzing public support for government intercession in matters economic, social, and civil. Te heart of progressivism was faith in expertise. Beset with extensive urban squalor and corruption, migration to cities by the rural poor and European immigrants, and a burgeoning economy controlled by the Titans of Capital, progressives had any number of challenges. Often, they resorted to modern professions, relying on science to shape the government to public beneft. In the U.S., the trajectory of the professions was charted by C. Wright Mills, who attributed the rise of Ph.D.s to the popularization of science, which “was greatly accelerated by the urgent need for industrial and agricultural” research, propelled by the proliferation of land grant universities.26 Certainly, American higher education was due for an upgrade. When polymath and pragmatist William James enrolled in Harvard College in 1861, the institution instructed students in Latin and Greek, religion, and philosophy; science was housed in the Lawrence Scientifc School, afliated to, but independent of, Harvard. As late as 1868, Harvard boasted all of 529 students—all undergraduates—instructed by 23 teachers; the college had no formal admission standards, socializing young men in proper conduct, augmented by a heavy dose of hazing.27 Intellectual complacency of ante-bellum America would be upended with the embrace of research, adopting the German university model, famously at Johns Hopkins University in 1876 in Baltimore. Within a generation, professional societies emerged: the American Economic Association in 1885, the American Psychological Association in 1892, the American Sociological Association in 1905, and the American Political Science Association in 1906.28 Extending the Progressive promise of expertise for public beneft, the professions also provided a means to address rampant political corruption. Tus, the rise of the professions dove-tailed with the Pendleton Civil Service Act of 1883, basing federal hiring and promotion on merit. In short order, a professional credential became the ticket for secure employment, decent pay, and no small amount of authority. Employment prospects for professionals burgeoned during the Progressive Era with the deployment of agencies designed to protect the public: the Interstate Commerce Act of 1887, the Food and Drug Administration in 1906, the Public Health Service and the Children’s Bureau in 1912, and passage of the Sixteenth Amendment to the Constitution authorizing a federal progressive income tax, generating the revenues necessary for expanding federal authority, along with establishing the Federal Reserve, in 1913.

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Immigration, urbanization, and industrialization provided any number of opportunities for Progressive reformers, especially those credentialed by nascent professional organizations. Provoked by the disturbing photographs of Jacob Riis and accounts by muckraking journalists, such as Lincoln Stefens, Sinclair Lewis, and Ida B. Wells-Barnett, Progressives ofered expertise to address social squalor. Yet, professionalism was not uniformly endorsed, even by the experts. Te economist Torstein Veblen challenged the motives of newly empowered administrators. Te interests with which this discipline is approached are therefore not commonly the intellectual or cognitive interest simply. It is largely the practical interest of the exigencies of that relation of mastery in which the members of the class are placed. In point of derivation, the ofce of government is a predatory function, pertaining integrally to the archaic, leisure-class scheme of life. It is an exercise of control and coercion over the population from which the class draws its sustenance.29 But Veblen was swimming against a professional riptide, however unpredictable its ultimate manifestation. In a celebrated 1915 address to the National Conference on Charities and Corrections, a more established fgure, Abraham Flexner, provided the keynote address as a result of his having elevated medicine as a profession. Flexner pronounced that eforts to alleviate poverty by altruists working among the immigrant poor did not meet professional standards: professions involve essentially intellectual operations with large individual responsibility; they derive their raw material from science and learning; this material they put to a practical and defnite end; they possess an educationally communicable technique; they tend to selforganization; they are becoming increasingly altruistic in motivation.30 No doubt, the attendees were disappointed to learn that Flexner equated social service with newspaper journalism, and so redoubled eforts to organize professional organizations. Flexner’s role as a philosopher of applied social and medical science would lead him to establish the Institute for Applied Study at Princeton University. Any quibbles about what constituted professionalism would be overcome by the Great Depression, however. Suddenly, the incipient organizations that Progressives had established were elevated to the national stage to address economic devastation. President Franklin Delano Roosevelt’s initiatives, the Federal Emergency Relief Administration, the Civilian Conservation Corps,

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the Works Progress Administration, and the Tennessee Valley Authority, among others, had a primary objective of providing jobs to millions of unemployed men, but perforce required the services of thousands of bureaucrats. When these initiatives were consolidated into the American welfare state by the Social Security Act of 1935, professionalism became the norm in the state and federal government. Yet, profound errors in judgment would foreshadow the Progressive professional project. In 1924, a social worker was deposed in the Virginia case of a poor mother, Carrie Buck, who had a baby out of wedlock, probably due to rape by a relative. Carrie’s mother, a poor white woman from an unstable family, was labeled “feebleminded” by a Eugenics enthusiast, who advocated the sterilization of wayward women. Testifying about her examination of Carrie’s seven-month-old infant, the social worker stated, “Tere is a look about it that is not quite normal. But what it is, I can’t tell.” Tough the judge used the social worker’s testimony to authorize Carrie Buck’s sterilization in accord with state law, the case was challenged and eventually decided by the Supreme Court, where Justice Holmes wrote the majority opinion authorizing involuntary sterilization in 1927: “Tree generations of imbeciles are enough.”31 Subsequently, tens of thousands of poor women along with other “defectives” were forcibly sterilized. Te Tuskegee “syphilis experiment” would become a similar embarrassment to professionals. Begun by the U.S. Public Health Service in 1932 before the advent of antibiotics, 600 black sharecroppers were recruited to study the efects of long-term syphilis, the men in the “experimental” group receiving a placebo or mineral supplements, which intentionally had no medicinal efect, while “controls” went about their normal activities. Despite the advent of antibiotics to treat syphilis in 1947, the study continued, none of the subjects receiving medication. Providing essential coordination to the feld project was a public health nurse. In 1960, a researcher, Peter Buxton, questioned the ethics of continuing the experiment, but the Public Health Service refused to shut down the study or provide antibiotics to any of the subjects, insisting that their autopsies were necessary for medical science. It was not until 1972, after Buxton alerted a San Francisco journalist of the experiment that it was shuttered.32 In Buck v. Bell and the Tuskegee “syphilis experiment” professionals aligned with the state to oppress the poor. Yet, a burgeoning welfare state would employ tens of thousands of professionals, not only at inception but through the 20th century with the addition of program after program: Social Security Disability Insurance 1956, the creation of Supplemental Security Income in 1972, the welfare reform in 1996, the addition of the drug beneft to Medicare in 2003, and the passage of the Afordable Care Act in 2010. While interests varied with each of

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these additions, a common denominator validated the professional project by enlisting legions of economists, public administrators, accountants, psychologists, nurses, social workers, and lawyers, experts often aligned with trade associations having a stake in policy change.33 Often attributed to the Great Depression, the origins of the American welfare state are better understood in response to disasters—some small, others of an altogether larger magnitude. For example, the Freedmen’s Bureau, a federal initiative to assist slaves after the Civil War, established schools, hospitals, and labor exchanges from 1865 to 1872, when it was terminated in response to Southern opposition to Reconstruction. Altogether, from 1860 to 1930, Congress authorized 90 relief measures to address fres, foods, and other disasters, quite consistent with the Constitution. From this perspective, the Great Depression simply magnifed precedents already established, albeit on a much grander scale.34 Te American welfare state, created in 1935 through the Social Security Act, subsequently launched a byzantine array of silo programs administered by federal departments of Health and Human Services, Labor, Housing and Urban Development, the Veterans Administration, and the Treasury, often complemented by parallel state agencies, extending the professional project into virtually all aspects of family, civil, and community life, in the process subverting the helping capacity of low-income neighborhoods.35 Yet, the nation’s social programs proved remarkably durable. Having destroyed international competitors Germany and Japan during World War II, the U.S. enjoyed unrivaled command of global markets, the nation’s unprecedented growth making afordable major investments in Americans by way of a federal social infrastructure. Virtually the entire population benefted at some point; combining direct social benefts, such as Social Security and Medicare, with tax expenditures, such as the Earned Income Tax Credit and the mortgage interest deduction, “91.6 percent of all respondents confrmed that they had used at least one of these programs at some point in their lives.”36 Indeed, from these historical precedents, the federal government has amplifed its role, including the Treasury’s “quantitative easing” in response to the Great Recession and the coronavirus economic implosion, to say nothing of stimulus checks to taxpayers, attempts to stay economic collapse, or the long arm of Uncle Sam reaching into the pocketbooks of practically every American.37 Regardless, most Americans understand social welfare through the prism of the “safety net,” a metaphor as opposed to actual policy. A common conceptual distinction separates residual from institutional policy. Residualism holds that people should meet their needs from working, family and friends, and civic organizations, but the government only as a last resort—and temporarily—in that order. Self-sufciency is the objective of residualism, reliance on local supports, government aid reserved for emergencies, as in disaster

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aid through the Federal Emergency Management Agency. In contrast, institutionalism holds that a modern economy must make major investments in human capital in order to be competitive, with the national government assuring basic protections related to unemployment, disability, destitution, and illness—think Social Security and Medicare.38 In this formulation, the safety-net complements residualism, metaphorically “catching people who ‘fall through the cracks’,” the implication that people should be self-reliant, depending on government social services only as a last resort. Tis distinction has enormous ideological implications for American social welfare, with residualism being preferred by conservatives, while institutionalism has been bread-and-butter for liberals. Indeed, through most of the 20th century, institutionalism was regnant conspicuously, so in the New Deal of the 1930s and the Great Society of the 1960s. But conservatives soon mounted a counter-ofensive, celebrating mediating structures—family, church, neighborhood, and voluntary associations—as essential to protect individuals from exploitation by mega-structures, such as big government, big labor, professional associations, and big business.39 What is the correct balance between public and private, the state and local supports? When is dependence on residual supports inadequate, requiring institutional investments instead?

SOCIAL INSURANCE: WELFARE STATE 1.0 Tis question was confronted by Harry Hopkins, a New Dealer who had managed FDR’s public welfare efort in New York State. Faced with massive unemployment, which overwhelmed families and local civic associations, Hopkins elected to fund government relief eforts while denying federal assistance to private eforts. Indeed, federal policy against private services was not overturned until the 1960s, after which the government contracted with nonprofts, which would become a primary revenue source for them. In other words, what had been a zero-sum arrangement morphed into a crazy quilt funding arrangement, connecting the public and private sectors. But this was a side-show to the real objective of New Deal liberals: establishing social insurance as the bedrock of the nascent American welfare state. Te idea of importing a European model of social insurance was a non-starter from the beginning; frst, the U.S. already had extensive private pensions for upper-income workers; second, Congressmen from the South objected to including African Americans in a public pension. In navigating these obstacles, the New Dealers would sacrifce poor blacks at the altar of the Social Security Act. Tat Faustian bargain is explained in Chapter 2.

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What would seem like an oxymoron a century later, “welfare capitalism” was in vogue among the Captains of Industry during the Progressive Era. A rapidly industrializing economy brought with it labor disputes, pitting nascent unions against capitalists, which often boiled over as strikes. Seeking a more prudent strategy with labor, progressive businessmen, such as Nelson O. Nelson, a St. Louis plumbing supply magnate, Edward Filene, a Boston clothing entrepreneur, and Henry Dennison, a Harvard-educated paper company executive, founded the National Civic Federation to promote “industrial welfare work.” By 1914, over 2,500 companies subscribed to “welfare capitalism,” ofering workers various kinds of assistance, contingent on their employment, among them Proctor & Gamble, Eastman Kodak, General Electric, Sherwin Williams, United States Steel, and International Harvester.40 Like many progressive capitalists, Filene contributed to the American Association for Labor Law, which advocated a minimum wage and opposed child labor, along with welfare capitalism. As the Hoover administration struggled to address the Great Depression, Gerard Swope, President of General Electric, proposed a corporate welfare state with a national system of unemployment, retirement, life insurance, and disability programs and standards. A “federal supervisory body” would approve these programs and set overall accounting and reporting requirements. But administration of all programs would remain in the hands of industrial trade associations. Swope’s plan would apply to any business employing more than 50 workers; if industry balked, the federal government could enforce standards.41 Tus, the corporate sector actually preceded the government welfare state by ofering prized employees a range of benefts—healthcare insurance, pensions, and vacations—which were ratifed as tax expenditures after World War II and continue.42 Te government pension, Social Security, was framed in relation to corporate welfare. Taxes would be withheld from workers, initially 1 percent of wages, matched by employers, and deposited in a federal trust fund under the supervision of trustees. To assure Social Security did not compete with corporate welfare, the withholding tax initially applied to only the frst $3,000 in wages. Social Security was thus crafted as a poor man’s pension; more afuent workers and better paid union members would be covered by the provisions of corporate welfare, an agreement favored by the Chamber of Commerce as well as labor leaders. Not insignifcantly, the premise of corporate welfare, as it would be for the government pension, was the family breadwinner, almost exclusively men, refecting patriarchal norms of the period. Te advent of World War II changed the trajectory of welfare capitalism when wage and price controls were imposed to combat infation, anticipated to accompany

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the government debt necessary to prosecute the war. A clever end run to wage and price controls, corporations ofered benefts to workers as an augmentation to wages, the courts later ruling that benefts were not only exempt from wage and price controls but also qualifed for tax deductions, serving as the basis for company-based pension, disability, and health insurance. With corporate welfare largely supported by business and labor, the Social Security Act of 1935 introduced Social Security and Unemployment Insurance to the American welfare state, later adding Social Security Disability Insurance in 1956 and Medicare in 1965. As shown in Figure 1.2, these programs undergird the American welfare state, consuming billions of dollars annually. Major Social Insurance Program Expenditures, in $millions 1200000 1000000 800000 600000 400000 200000

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Figure 1.2 Major social insurance program expenditures, in $millions. Adapted from https://www.whitehouse.gov/wp-content/uploads/2020/02/hist_fy21.pdf

A few words are in order regarding social insurance, the bedrock of the American welfare state. First, Social Security benefts are calculated according to an employee’s work history over 35 years, with reduced benefts for those retiring at 62. For January 2020, the average Social Security beneft was $1,503 per month. While Social Security benefts are adjusted for infation, benefts are also taxable if a worker has other sources of income. Most Social Security recipients receive Part B of Medicare, $144.60/month, automatically subtracted from Social Security;43 21 percent of married couples and 45 percent of single recipients count on Social Security for at least 90 percent of their income.44 Assuming the average beneft, a Social Security recipient will receive annually $16,300, about 30 percent more than the federal poverty

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level,45 sufcient to live comfortably in a single-wide trailer in Appalachia. Poor man’s pension, indeed! Unemployment Insurance (UI) provides temporary benefts for workers who have lost a job for no fault of their own. While the federal government provides oversight, states are responsible for administering their own trust fund; as a result, benefts vary widely—in 2015, Hawaii’s beneft was $551/ month, while Mississippi’s was $235. Limited to 26 weeks, unless the federal Extended Benefts program is invoked, workers have a strong incentive to accept a job when available. Because of eligibility requirements, temporary and low-income workers tend not to receive unemployment benefts; overall, about half of the unemployed receive UI benefts.46 In response to high unemployment attributed to the coronavirus, the federal government augmented unemployment benefts with a $600/week until July 31, 2020, when additional benefts were terminated;47 subsequently, the Trump administration proposed extending benefts at $300/week if states ponied up one-fourth of the cost. Few did. Social Security Disability Insurance (SSDI) was added to the Social Security program in 1956 to cover workers who are disabled and unable to work. Te Social Security Administration (SSA) administers SSDI according to strict eligibility rules, including previous contributions to Social Security as well as earned income below $1,260/month.48 Te average SSDI check at the end of 2019 was $1,258/month.49 Because long-term disability is associated with poverty, SSA also administers Supplemental Security Income (SSI), assuring maximum benefts of $783/month for an individual or $1,175 for a couple, which some states supplement.50 In juxtaposition with the Americans with Disabilities Act, which encourages disabled Americans to engage in mainstream activities, such as work, SSDI erects barriers to employment.51 Finally, a major part of Medicare, Part A, hospital insurance, has covered in-patient care for the elderly since 1965. Hospitalization insurance is not a cash beneft to recipients but a health service reimbursed to primarily private providers. Medicare accompanies Social Security, so no additional payment is required; however, hospitalization insurance includes deductibles and co-pays, and is limited to about 100 days for each in-patient episode. As a result, there is a relationship between Medicare and a health assistance program for the poor: Medicaid. Given the high in-patient costs, many recipients of Medicare “spend down” personal assets, having reached the 100-day Medicare payment limit, becoming impoverished to become eligible for Medicaid, which pays nursing home care indefnitely. Anticipating long-term hospitalization, the elderly could purchase long-term health insurance, but few do. A better option is to assign assets to heirs, but this must be done at least fve years prior, thus requiring prognostication worthy of a cosmic-class astrologer.

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Te upshot of the major social insurance programs is that, while they may be ensconced in the pantheon of the American welfare state via the Social Security Act, they are abysmally inadequate given their benefts. As a result, social insurances are meager, temporary, and often associated with complementary public assistance programs, which are even more reedy. More of this will be considered in a subsequent chapter. Sufce it to say that social insurance, predicated on a male breadwinner of the industrial era, is deeply inadequate for a post-industrial economy in which women constitute a large portion of the labor force. However defcient, social insurances command wide respect, consuming not only large portions of the federal budget but ever larger portions with the retirement of 77 million Baby Boomers, leaving subsequent generations with justifable worry about their security with respect to income and health.

DENOUEMENT Te future of social insurance is tied to entitlement spending, of which Social Security and Medicare are major parts. Entitlement spending is driven by the number of people eligible for benefts, automatic allocations which are mandatory and cannot be controlled. Tink of the welfare state on autopilot. Discretionary spending, by contrast, is controlled by legislative budgeting, expenditures typically limited to annual appropriations, including at the federal level everything beyond entitlements: infrastructure, defense, diplomacy, education, and research and development. With the expansion of the American welfare state, entitlement spending has increased consuming a bit more than 60 percent of the federal budget, and more than 20 percent of GDP.52 Even entitlement spending can be reduced by changing the law, but this invites political retaliation, hence Social Security’s reputation as “the third rail” of public policy: you touch it, and you die! It’s not that social entitlements cannot be regulated—in 1983 major changes were introduced during the Reagan administration to sustain Social Security, and in 1996 the family welfare entitlement was converted to a discretionary program during the Clinton presidency—but these have been heavy lifts for politicians, who prefer lighter loads. A primary obstacle has been captured by policy analysts under an anodyne label: path dependence. Essentially, the public policy version of Newton’s First Law of Motion—an object at rest tends to stay at rest, while an object in motion tends to stay in motion—path dependence explains the durability of social programs, largely because of the millions of citizens who become reliant on benefts as well as the thousands of civil servants managing programs. For example, as of August 2020, 61.6 million Americans received Social Security;53 headquartered in Baltimore,

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SSA boasts almost 60,000 federal employees.54 Moreover, the integrity of Social Security and Medicare is diligently defended by AARP (previously, the American Association of Retired Persons), which boasted 38 million members in 2018.55 During his presidency, George W. Bush learned about AARP through direct experience: when his administration pledged to add a prescription drug beneft to Medicare as Part D, AARP was supportive, and the legislation passed; but AARP opposed his later attempt to partially privatize Social Security, which failed. Yet, the assumption that path dependence afects only the public sector would be wide of the mark, indeed. When Medicare and Medicaid were established in 1965, Congress elected to reimburse private providers, assuring a windfall to Wall Street fnanciers of healthcare. Since then, corporations have become dominant in several markets: nursing homes, hospital management, managed care, human service consulting, childcare, and even corrections. In 2018, for example, United Healthcare boasted $226 billion in revenues and employed 1.3 million workers, a leviathan greater than the entire budget and number of employees of many state departments of health and human services. States, for their part, have contracted with corporations, such as Molina and Tenet, to manage Medicaid and Children’s Health Insurance Programs, as well as Maximus, consulting on multiple programs. In anticipation of ACA, which passed in 2010, the healthcare industry and trade associations spent $383.7 million in 2009, acquiring 5,033 lobbyists to assure that health reform conformed to their interests, more than nine lobbyists for each member of Congress.56 But the real threat to social insurance is related to their funding mechanisms. With the exception of Unemployment Insurance, relatively minor in the scale of the welfare state due to management by states, American social insurance programs are funded by federal trust funds, protecting their integrity. Every year the Social Security and Medicare Boards of Trustees report the solvency of these programs in accord with a 75-year horizon. For 2019, the trustees projected diferent points when social insurances will have exhausted reserves requiring reduced benefts: Social Security in 2034, SSDI in 2052, and Medicare hospitalization in 2026.57 Yet, the viability of social insurances rests with contributions of workers paying Federal Insurance Contribution Act (FICA) withholding, a relatively robust amount given strikingly low unemployment in 2019. Enter Covid-19! Te pandemic afects social insurances in two important ways: frst, 22 million workers and their employers are not contributing to FICA, reducing revenue; second, increased disease places increasing demands on hospital care, especially among seniors.58 More ominous, President Trump proposed a “tax holiday,” allowing the suspension of FICA contributions, and ofering workers $2,200 over four months; subsequently, he promised to

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delete employee FICA contributions altogether, dealing a crippling blow to social insurance.59 Since its deployment in 1935, 1956, and 1965, social insurance has provided the foundation for the American welfare state, assuring working Americans protection against insecurity related to retirement, unemployment, disability, and illness. However essential these programs have been for a wide spectrum of Americans, social insurance has been neither generous nor comprehensive. In the worst circumstances the inadequacy of social insurances has introduced needy citizens—often to their surprise and dismay—to a parallel set of programs, public assistance, which are downright punitive in their eligibility and Dickensian in the size of benefts. In sum, social insurance undergirding Welfare State 1.0 may have been a radical departure from the stingy assistance provided by charities before the New Deal, but an industrial era format for social protection is jarringly mismatched for the Information Age.

NOTES 1 Quoted in Fareed Zakaria, Ten Lessons for a Post-Pandemic World (New York: WW Norton, 2020), p. 57. 2 Albert O. Hirschman understood the shifts between “private interest and public action” probably better than anyone. On the cusp of the Reagan presidency, he wrote, “Te welfare state may thus face a wave of hostile public opinion and as a result pass through a difcult phase, with the need for consolidation retrenchment” (1980, p. 115). Later, In Shifting Involvements (Princeton: Princeton University Press, 1982) he took a longer view, “Western societies appear to be condemned to long periods of privatization during which they live through an impoverished ‘atrophy of public meanings,’ followed by spasmodic outbursts of ‘publicness’ that are hardly likely to be constructive” (p. 132). 3 Lorraine Boissoneault, “Bismarck Tried to End Socialism’s Grip—By Ofering Government Healthcare,” Smithsonian Magazine, July 14, 2017; Franz-Xaver Kaufmann, European Foundations of the Welfare State (New York: Berghahn Books, 2012), p. 185. 4 Adam Jamrozik, Social Policy in the Post-Welfare State: Australian Society in a Changing World (Frenchs Forest: Pearson Australia, 1968), p. 79. 5 Walter Trattner, From Poor Law to Welfare State (New York: Free Press, 1994), p. 280. 6 Kaufman, p. 136. 7 Tomas Piketty, Capital in the Twenty-First Century (Cambridge, MA: Harvard University Press, 2014); Tomas Piketty, Ideology and Capital (Cambridge, MA: Harvard University Press, 2020). 8 Nick Ellison, “Beyond Universalism and Particularism,” in Te Welfare State Reader, 2nd ed., edited by Christopher Pierson and Francis Castles (Cambridge: Polity Press, 2006), p. 408. 9 Tony Judt, Ill Fares the Land (New York: Penguin, 2010), p. 74. 10 David Garland, Te Welfare State (New York: Oxford University Press, 2016). 11 Gosta Esping-Andersen, Te Tree Worlds of Welfare Capitalism (Princeton: Princeton University Press, 1990), pp. 26–27. Later, Esping-Andersen argued for a more dynamic understanding of social policy with respect to the challenges posed by the

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emergence of a post-industrial society, in Why We Need a New Welfare State (New York: Oxford University Press, 2002). http://hdr.undp.org/en/content/human-development-index-hdi https://www.socialprogress.org/assets/downloads/2020-global-index-results.pdf Nicholas Kristof, “We’re Number 28! and Dropping!,” New York Times, September 9, 2020. Kurt Andersen, Evil Geniuses (New York: Random House, 2020), pp. 152–153. https://en.wikipedia.org/wiki/Welfare_state https://www.europarl.europa.eu /RegData /etudes/STUD/2016/536488/IPOL _STU(2016)536488_EN.pdf https://www.theguardian.com/australia-news/2020/jul/14/what-we-know-so-far -about-the-palace-letters-and-the-dismissal-of-australian-prime-miister-ough -whitlams-dism Barbara Woodhouse, Te Ecology of Childhood (New York: New York University Press, 2020). Kenneth Davis, FDR, Te New Deal Years 1933–1937 (New York: Random House, 1979). David Osborne, Laboratories of Democracy (Cambridge, MA: Harvard Business Review Press, 1988). Jefrey Pressman and Aaron Wildavsky, Implementation (Berkeley: University of California Press, 1973), p, 161. Teda Skocpol, Protecting Soldiers and Mothers (Cambridge, MA: Harvard University Press, 1992). Isaac Martin, Rich People’s Movements (New York: Oxford University Press, 2013). Linda Gordon, Pitied but Not Entitled (Cambridge, MA: Harvard University Press, 1994). C. Wright Mills, Sociology and Pragmatism (New York: Oxford University Press, 1966), p. 70. Robert Richardson, William James: In the Maelstrom of American Modernism (New York: Houghton Mifin, 2006), pp. 41–47. Ibid., 71. Torstein Veblen, Te Teory of the Leisure Class (New York: Oxford University Press, 1899), p. 248. Abraham Flexner, “Is Social Work a Profession?,” in National Conference of Charities and Corrections, Proceedings of the National Conference of Charities and Corrections at the Forty-Second Annual Session Held in Baltimore, Maryland, May 12–15 (Chicago: Hildmann, 1915), p. 156. Edwin Black, War against the Weak (New York: Four Walls Eight Windows, 2003), pp. 108–132. https://www.history.com/news/the-infamous-40-year-tuskegee-study; James Jones, Bad Blood (New York: Free Press, 1981). Edward Berkowitz, Making Social Welfare Policy in America (Chicago: University of Chicago Press, 2020). Michele Dauber, Te Sympathetic State (Chicago: University of Chicago Press, 2013), p. 25. John McKnight, Te Careless Society (New York: Basic Books, 1995). Suzanne Metler, Te Submerged State (Chicago: University of Chicago Press, 2011), p. 37. Stephanie Kelton, Te Defcit Myth (New York: Public Afairs, 2020). Harold Wilensky and Charles LeBeaux, Industrial Society and Social Welfare (New York: Free Press, 1965). Peter Berger and Richard Neuhaus, To Empower People: Te Role of Mediating Structures in Public Policy (Washington, DC: American Enterprise Institute, 1977).

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40 Edward Berkowitz and Kim McQuaid, Creating the Welfare State (New York: Praeger, 1980), pp. 4–20. 41 Ibid., p. 83. 42 Jacob Hacker, Te Divided Welfare State (Cambridge: Cambridge University Press, 2002). 43 Emily Brandon, “How Much Will You Get from Social Security,” US News, January 21, 2020. https://money.usnews.com/money/retirement/social-security/articles/how-much -you-will-get-from-social-security 44 https://www.ssa.gov/news/press/factsheets/basicfact-alt.pdf 45 https://aspe.hhs.gov/2020-poverty-guidelines 46 Howard Karger and David Stoesz, American Social Welfare Policy, 8th ed. (New York: Pearson, 2018), pp. 210–212. 47 https://eligibility.com/unemployment/coronavirus-unemployment-faqs 48 https://www.ssa.gov/benefts/disability/qualify.html#anchor7 49 https://www.investopedia.com/ask /answers/082015/what-are-maximum-social -security-disability-benefts.asp 50 https://www.ssa.gov/OACT/COLA/SSI.html 51 Ari Ne’eman, “A ‘Safety Net’ that’s a Kafkaesque Mess,” New York Times, July 25, 2020. 52 https://en.wikipedia.org/wiki/Expenditures_in_the_United_States_federal_budget 53 https://www.ssa.gov/policy/docs/quickfacts/stat_snapshot/ 54 https://www.ssa.gov/org/ 55 https://en.wikipedia.org/wiki/AARP 56 David Stoesz, Te Dynamic Welfare State (New York: Oxford University Press, 2016), p. 137. 57 https://www.ssa.gov/oact/TRSUM/2019/index.html 58 Bob Carlson, “Te Pandemic Reduces Social Security’s Solvency,” Forbes, April 22, 2020. https://www.forbes.com/sites/bobcarlson/2020/04/22/the-pandemic-reduces -social-securitys-solvency/#67d4f0953df 59 Stephen Gandel, “President Trump’s Payroll Tax Holiday,” CBS News, September 2, 2020. https://www.cbsnews.com/news/trump-payroll-tax-deferral-takes-efect-voluntary-company-participation/

2

Forsaking African Americans

Historians hold that a great arc of social justice was constructed in 1935 with passage of the Social Security Act, which established the American welfare state. Rarely, if ever, mentioned is the fact that almost one-third of the labor force was excluded from participating in the new public pension program; these excluded Americans were primarily agricultural and domestic workers, and disproportionately persons of color, and they were not allowed to participate in the Social Security retirement until the 1950s. At frst glance this might seem to have been a misguided decision, but one rectifed relatively quickly, thus making this anomalous but not central to the evolutionary tale of the American welfare state. Nothing could be farther from the truth. As this chapter documents, the exclusion of agricultural and domestic workers, predominantly African Americans in the South and Latinos in the Southwest, has rippled through subsequent policy, undermining income and wealth accumulation for minorities of color.1,2 Although America’s social infrastructure would fail to replicate the universalism of the Scandinavian countries, it nonetheless aforded unprecedented securities for the unemployed, the elderly, the poor, the homeless, the ill, the disabled, and the victims of discrimination. Trough social insurance— Welfare State 1.0—the American welfare state not only expanded in the mid-20th century but also held fast when challenged by conservatives in the decades after 1980. Liberals championed their welfare state, however inadequate and inelegant, as essential for achieving a fair and equitable society. Conveniently elided, then, was the exclusion of agricultural and domestic workers from the original provisions of Social Security. For divergent reasons—racial politics and administrative efciency—more than 15 million American workers were denied a public pension and efectively consigned to working for any wage available until they were no longer able. Although the penury of low-skilled labor can be monetized, related efects on health and

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education mark this as a complement to the nation’s sad legacy of discrimination due to class, race, and ethnicity.

THE CONTEXT Slavery and Reconstruction provide the backstory to the exclusion of agricultural and domestic workers from Social Security. Monoculture accounted for the rise of King Cotton in the South prior to the Civil War, with the plantation functioning as a rural factory. Cultivation of cotton provided the exports that accelerated not only the industrialization of the North but international trade with Great Britain as well. “Te returns from cotton monopoly powered the modernization of the rest of the American economy, and by the time of the Civil War, the United States had become the second nation to undergo large-scale industrialization.”3 Te capital from cotton exports, produced with slave labor, became essential to and intertwined with the modernization of the American economy. In 1860, four million slaves were reported in the U.S., half of them in the South.4 Te degradation and brutality of slavery, poignantly reported by freedmen like Frederick Douglass,5 fueled an Abolitionist Movement, which before Appomattox convinced Congress to create the Freedmen’s Bureau to reestablish emancipated slaves as rural landowners in their own right, independent of the plantation system. Te brief tenure of the Freedmen’s Bureau, 1865 to 1872, foretold the demise of Reconstruction, the withdrawal of federal troops, and the resurgence of an aristocracy willing to deploy poor whites to reassert its antebellum prerogatives. Te 1873 massacre of 150 Republican freedmen in Colfax, Louisiana,6 and the murder of dozens of blacks by white rioters in Wilmington, North Carolina in 1898, symbolized the rise of Jim Crow.7 Episodic violence soon punctuated the systematic exclusion of Negroes from the polity through newly drafted state constitutions. By the century’s end, Jim Crow strode the breadth of the South, reducing Negroes to serfdom and dependence on agriculture controlled by owners of large farms or by overseers in the employ of Eastern companies. In the early decades of the 20th century, the vast majority of Negroes in the South were peons, making the most of their dependency on a seasonally unpredictable cash economy that was exploitive in the hands of employers that used illiteracy and subjugation to cheat them of earnings. In the Mississippi delta, Negro families moved from farms to villages after harvesting, and then back again for planting. Often, they lived on a plantation for no longer than three years before moving to another in search of more favorable working conditions. At best, Southern peasants aspired to abandon the meager income of sharecropping to become tenant farmers. Te portrait that emerges from the

FORSAKING AFRICAN AMERICANS

23

lives of rural Negroes of the period is feudal in comparison to the industrialization that was transforming other regions of America. Most feldwork in the South at that time was done by sharecroppers, who were completely dependent on landowners for shelter, implements, and credit; a fortunate few tenants owned the tools and livestock necessary to work the land but still rented housing on plantations. Te cotton year begins in March at planting time. To tenants the owner usually advances about ten dollars a month from this time on, for the fve or six months until the crop is made and the cotton ginned. Te cropper must cut old stalks, plow, plant, harrow, chop (with a hoe between the rows), pick cotton, and haul it into [Indianola, Mississippi] to be ginned. He then receives (even the dishonest planters allow) the money for the pressed seed ($32 per ton this year). Te tenant gets credit also for his half of the price of the cotton bale ($37.50 at present prices) to apply on what he owes the owner. As soon as his debt is paid of, he can keep the proceeds as the cotton is sold, bale by bale. In addition to the ffty dollars or so which may have been advanced for food, the owner may have paid for medical services. It is expected that a cropper will have enough left at the end of the season to carry him to the following March when he may expect another month’s “furnish.”8 Sharecropping and its tenant-farming cousin ofered a marginal living at best. When harvests were good, the landlord and laborer shared equally in profts, minus expenses incurred by the latter. Negroes were at the mercy of landowners, who often advanced credit at plantation stores and then subtracted expenses before a fnal settling for the season; a written accounting was usually deemed unnecessary due to farm workers’ illiteracy. Literate sharecroppers stoically bore the indignity of being cheated out of income having little recourse other than to move to another plantation. Wage theft was a norm during the early 1930s: Not more than twenty-fve or thirty per cent of the sharecroppers get an honest settlement at the end of their fve months of labor. For the year 1932, approximately seventeen or eighteen per cent of the tenants received some proft, averaging from $30 to $150. Te remainder either broke even or were left in debt to the landlord.9 Inherently exploitative, the plantation system perfected noblesse oblige among the Bourbon aristocracy. Te condescension of patrician planters is evident in William Alexander Percy’s memoir describing the Trail Lake plantation in Mississippi.

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Our plantation system seems to me to ofer as humane, just, selfrespecting, and cheerful a method of earning a living as human beings are likely to devise. I watch the limber-jointed, oily-black, well-fed, decently clothed peasants on Trail Lake and feel sorry for the telephone girls, the clerks in chain stores, the ofce help, the unskilled laborers everywhere—not only for their poor and fxed wage but for their slave routine, their joyless habits of work, and their insecurity.10,11 Adopting an enthusiasm from the Progressive Era, Percy likened sharecropping to “proft-sharing.”12 Well into the Great Depression, the South fared far worse than the rest of the country. While annual income averaged $604 nationally in 1937, it was $314 in the South. Tenant farmers accounted for 53 percent of farm families and reported even lower incomes. Sharecroppers earned as little as $38 a year, or $0.10 a day.13 Te iconic sharecropper shack, lacking running water, door akimbo, windows without screens, and walls without insulation, accounted for 1.5 million substandard dwellings in the South. Although Southern states accounted for onethird of American children aged 10–15, three-fourths of them were gainfully employed. Large landowners controlled agriculture in the South, forcing “more than half of the South’s farmers into the status of tenants, tilling land they do not own. Whites and Negroes have sufered alike. Of the 1,831,000 tenant families in the region, about 66 percent are white. Approximately half of the sharecroppers are white, living under economic conditions almost identical with those of Negro sharecroppers.”14 Owning draft animals and equipment, white tenant farmers enjoyed a marginal advantage over Negro sharecroppers, who had to rely on landowners for livestock and implements to work the land. Te circumstances of white sharecroppers remained precarious, nevertheless. With respect to modern conveniences and appliances, the rural South lagged far behind not only urban America but rural America as well, as shown in Table 2.1. Table 2.1 Percentages of Housing with Modern Conveniences, by Location and Type, 19401 Convenience

Urban

Rural

Rural South

Electric lighting Mechanical refrigeration Running water Flush toilet Private bath or shower Central heating

95.8 56.0 93.5 83.0 77.5 57.9

31.3 14.9 17.8 11.2 11.8 10.1

16.4 9.6 8.5 4.7 5.4 1.3

Adapted from Robert Gordon, Te Rise and Fall of American Growth: Te U.S. Standard of Living since the Civil War (Princeton: Princeton University Press, 2016), p. 120.

1

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25

Te absence of refrigeration, running water, and toilets was particularly debilitating for farm families in the South because it invited spoilage, contamination, and disease. “Te low-income belt of the South is a belt of sickness, misery, and unnecessary death,” reported the National Emergency Council in 1938,15 with the population susceptible to pneumonia, tuberculosis, and malaria. Morbidity and mortality were associated with poor diet; unable to buy and store fruits and vegetables, poor farmers lived on meals of fried pork, corn cakes, and molasses. Direct exposure to the excrement of mules, pigs, and dogs further compromised the health of farm workers and their children. Because of poverty and the temperate climate, many sharecroppers were often barefoot, making them susceptible to hookworm, which was endemic in the South. A parasite that infects mammals through feces in damp earth, hookworm saps strength in adults and causes permanent cognitive impairment in children; 40 percent of school children in the South were infected by a parasite that could have been eradicated if privies were built and children wore shoes. Te U.S. Government ofered little assistance to combat contagious disease infecting Negroes. Hookworm eradication began in 1909 with a $1 million grant from a private philanthropy, the Rockefeller Sanitary Commission.16 Not only was the federal government indiferent to treating Negroes for parasites, but it was actively engaged in iatrogenic experiments on blacks. Trough the notorious syphilis “experiment” conducted from 1932 to 1972 by the U.S. Public Health Service in Tuskegee, Alabama, public health ofcials observed the progression of disease among infected black men while withholding treatment.17 Tis failure on the part of the U.S. Public Health Service was underscored by the prevalence of syphilis in the Negro population at the time, reported at 35 percent in one Southern county.18 Beyond high levels of morbidity, the mortality of Negroes far exceeded that of whites. In 1935 life expectancy of white males was 61.0 years and for white females 65.0 years, while that of “blacks and others” was 51.3 years and 55.2 years, respectively.19 Longevity of minorities of color was almost a decade shorter than that of whites; for black sharecroppers life would have been even shorter.

THE EXCLUDED So organized, the rural South would prove a poor candidate for the introduction of a government pension program that was predicated on industrialization. Indeed, the Southern aristocracy railed against the intrusion of Washington into its prerogatives, as had Percy: “one day I read that the

26

FORSAKING AFRICAN AMERICANS

President of the United States [Franklin Delano Roosevelt] had excoriated bitterly and sorrowfully ‘the infamous sharecropper system,’” then waxing indignant: Tough rightly considered a bore and a pest in the best Trojan circles, Cassandra, no doubt, had her fun, but, at that, not nearly so much as the Knights of the Bleeding Heart who in politics and literature years from now will still be fnding it fetching and inexpensive to do some of their poignant public heart-bleeding over the poor downtrodden sharecroppers of the deep South.20 In addressing the plight of destitute workers, the evolving concept of social welfare included several provisions, although, notably, healthcare was not among them. Because of widespread joblessness, Unemployment Insurance was included to tide the unemployed for a fxed period until they could fnd work; Social Security provided a public pension for retirees; and public assistance addressed the circumstances of the poor who were elderly, disabled, and blind as well as dependent children. Two features would bedevil the Social Security Act as passed in 1935: First, Social Security would exclude a long list of workers, including agricultural and domestic workers; moreover, Unemployment Insurance and public assistance programs were managed by states, assuring them latitude in determining not only the eligibility for benefts but the amount of aid as well.21 As a result, disproportionately large numbers of African Americans and Latinos were either denied assistance or received minimal aid; presumably, poor whites were either too proud to seek relief or held in even lower esteem than Negroes.22 Te exclusion of agricultural and domestic workers would become an issue in the history of the Social Security Act with two explanations becoming central. Initially, historians attributed the exclusion of low-wage workers to Southern employers who demanded a docile labor force and pitted blacks against whites in competition for low-wage work. “Te primary motive, emanating particularly from Southern politicians, who monopolized crucial [Congressional] committee chairmanships, was to protect employers’ access to the primarily black but also Latino agricultural and domestic labor force in the South and Southwest.”23 Te control by ante-bellum plantation owners over black workers was thus extended, post-Reconstruction, through provisions of the Social Security Act, concessions that were maneuvered through Congressional seniority and control over legislation during the New Deal: “white Southerners, and especially plantation elites, fashioned a politics that was concerned simultaneously with advancing regional interests against [a national economic] dominant class and with protecting their distinctive

FORSAKING AFRICAN AMERICANS

27

racial civilization.”24 Accordingly, the dean of African American history John Hope Franklin observed: When the Social Security Board was established in 1935, provisions were made for old age assistance and unemployment benefts in a large number of categories. Since agricultural and domestic workers were excluded, however, a tremendous proportion of the Negro population failed to qualify for the benefts provided by the act. Even in the program of old age assistance, there was a tendency to grant lower sums, especially in the South to aged blacks than to aged whites.25 One historian calculated that “more than three-ffths of black workers, those employed in agricultural labor or domestic service, were excluded from coverage,”26 while another put the fgure at “two-thirds of employed blacks.”27 In this regard, the exclusion of agricultural and domestic workers refected a tradition of American social welfare: deference to embedded, popular preferences even when collective remedies might be available to support the most vulnerable.28 Denied a public pension, low-wage workers who became destitute were consigned to state operated public assistance—or welfare—that was, for all practical purposes, non-existent. Te systemic inadequacy of social programs complemented a pervasive poverty, which was only deepened by the Great Depression; in 1935, 59 percent of families had incomes of less than $1,250 for the year.29 Adding race to the equation, however, reinforced a caste system that was particular to the South. “Te political institution that paralleled sharecropping was segregation,” noted Nicholas Lemann, “[and] blacks in the South were denied social equality from Emancipation onward, and, beginning in the 1890s, they were denied the ordinarily legal rights of American citizens as well.”30 What benefts the minority poor might have received were paltry. Before 1935, many states had established mother’s pension programs; however, benefts in the South fell far below those of the North. In 1931, family benefts in Arkansas were $4.33 per month compared to $69.31 in Massachusetts.31 By 1939, benefts in Arkansas were $8.10 per month, while those in Massachusetts were $61.07.32 In the South, state-determined benefts were not only meager but also seasonal: during the Spring planting, Summer hoeing, and Fall harvesting, benefts were discontinued, the presumption being that work was available in the felds, easily enforced on powerless Negroes.33 A contrary argument was that labor in the pre-industrial South and Southwest was simply inadequately developed for Social Security to induct workers into a public pension program. Indeed, workers’ compensation laws, which had been established in 45 states between 1911 and 1920 and were

28

FORSAKING AFRICAN AMERICANS

supported by labor leaders, such as Samuel Gompers, had typically excluded farm and domestic workers from coverage.34 Accordingly, J. Douglas Brown, a member of the Committee on Economic Security (CES) that drafted the Social Security Act, would recall that agricultural and domestic workers were omitted initially, but that “the coverage of farm employees and domestic workers should begin as soon as administratively possible.”35 Once workers in manufacturing and commerce were included, agricultural and domestic workers would be enrolled, as would be the case with the amendments of 1950 and 1954.36 Tus, the nature of farm work was the primary justifcation for excluding agricultural and domestic workers. Arthur Altmeyer, an early Social Security administrator, recalled, we were smart enough politically to know there was no chance of covering farmers to begin with. Tey had been excluded traditionally from all forms of regulatory legislation, particularly workmen’s compensation even to this day. No, they’re the last stronghold of individualism, reactionism, independence—whatever you want to call it.37 Te presumption that industrialized workers would beneft from a government pension was a logical extension of “welfare capitalism” as it evolved during the Progressive Era. Gerard Swope, a proponent of welfare capitalism, advocated an array of benefts, including life and disability insurance as well as unemployment and retirement payments, but insisted that these be provided by “industrial trade associations,” not the federal government.38 Ultimately, the social insurance programs incorporated in the Social Security would complement private benefts provided by industry, not compete with arrangements that were favored by corporations and endorsed by collective bargaining agreements negotiated with unions. Initially, the CES, a panel of New Deal experts, advocated inclusion of all occupational groups to make provisions of the Social Security Act as broad as possible. Harry Hopkins, head of the Works Progress Administration, and Frances Perkins, Secretary of Labor, lobbied for including agricultural and domestic workers, acknowledging their marginal economic status. Indeed, the CES’s fnal report excluded only three occupational groups: white collar employees making over $250 per month, government employees, and railroad workers. Presented to Congress in January 1935, the House Ways and Means Committee convened hearings on the CES plan only to encounter unexpected resistance. Unbidden, Treasury Secretary Henry Morgenthau appeared, voicing concerns by the Chamber of Commerce to the efect that specifc occupational groups—agricultural, domestic, and casual workers—presented prohibitive problems in enrollment and should be dropped.39 Subsequently, the Senate Finance Committee concurred with the exclusion

FORSAKING AFRICAN AMERICANS

29

of workers deemed problematic with respect to collecting a withholding tax. Initially objecting to the exclusion of agricultural and domestic workers, Perkins would relent, fguring that these groups could be incorporated into Social Security at a later date.40 Te only witness speaking out in Congressional hearings against the exclusion of agricultural and domestic workers was Charles Houston, an NAACP ofcial, who preferred a universal, noncontributory welfare beneft.41 Regardless of rationale—race or efciency—the exclusion of agricultural and domestic workers from Social Security reinforced the semblance of a caste system of labor in the South and Southwest. Absent a government safety net, minority workers had to work at any wage available, until they dropped. Te Social Security Act thus deferred to regional ofcials who preferred a status quo Jim Crow to a modern welfare state, as did much of the nation. Of utmost concern to Southern ofcials was the prospect that federal programs would “change the racial situation” with regard to white employers and black workers. “A truly national labor system threatened to erode the ability of plantations to hold on to low-paid feld-workers.”42

THE ESTIMATE Te exclusion of agricultural and domestic workers from Social Security reinforced bias with respect to class, race, and ethnicity in social policy. Clearly, the nature of work in the rural South and Southwest presents a formidable obstacle to any accounting. A primary difculty is calculating a wage against which a withholding tax would be assessed. For employers who fled federal and state taxes this would not be especially difcult, but agricultural and domestic workers were part of a cash economy that was not only fuid but also capricious insofar as employers frequently cheated employees of earnings. With the “furnish” advanced at the beginning of the season and expenses for food, seeds, shelter, and doctor visits informally charged against earnings, sometimes with credit at usurious rates and with no written account, any estimate is likely to encounter error. Fortunately, some plantation owners maintained records that are suggestive of wages for agricultural and domestic workers. Te ambiguity of the problem is captured by Percy’s description of Trail Lake: Trail Lake has a net acreage of 3,343.12 acres of which 1,833.06 acres planted in cotton, 50.59 are given to pasture, 52.44 to gardens, and the rest to corn and hay. Te place is worked by 149 families of Negroes (589 individuals) and in 1936 yielded 1,542 bales of cotton. One hundred and twenty-four families work under [father’s] old contract, and

30

Forsaking African Americans

twenty-five, who own their stock and equipment, under a similar contract which differs from the other only in giving three-fourths instead of one-half of the yield to the tenant. The plantation paid in taxes of all kinds $20,459.99, a bit better than $6.00 per acre; in payrolls for plantation work $12,584.66—nearly $4.00 an acre. These payrolls went to the negroes on the place. The 124 families without stock of their own made a gross average income of $491.90 and a net average income of $437.64.43 Field workers labored about 150 days each year; considering Percy’s relatively humane stewardship, some of Trial Lake’s negroes likely supplemented their income during winter by migrating to nearby greenville, although he kept no records to that effect. Percy records that his employees received “free water and fuel, free garden plot and pasturage, a monthly credit for six months to cover food and clothing, a credit for doctor’s bills and medicine, and a house to live in” but attaches no figures in amount or interest.44 initially, social security included a withholding tax of 1 percent on the first $3,000 of income; so, had negroes at Trail Lake been covered, each head of household would have contributed $4.37 for 1936 in exchange for a minimum benefit of $20/month, or $240 annually upon retirement. Doubtless, this small amount would have been a substantial burden given their paltry earnings; however, as social insurance, social security was mandatory, its proponents contending that compulsory contributions would be repaid upon retirement in the wellbeing of aged workers as well as their dependents. of course, Trail Lake would have had to match the $4.37 worker’s contribution, or $541.88/year for its 124 resident families, 4.3 percent of payroll, doubtless an indignity to Percy, who relished the plantation’s bucolic ambiance. in sum, for a combined contribution of $8.74/year, Trail Lake’s working families could have received $240/year in benefits upon retirement. But doing so would have subverted Percy’s command of his plantation to say nothing of likely losing the services of his personal assistant, Ford.45 Trail Lake, then, provides a case study of fiscal consequences of excluding field workers and domestics from social security. How much did field workers and domestics forfeit from being denied participation in social security? retrospectively, the social security administration calculated the number of excluded workers, indicated in Table 2.2, showing the extreme differences between whites and non-whites in the percentages of each group excluded from participation. among white workers, 27 percent were left out; in stark contrast, 65 percent and 66 percent, respectively, of negroes and other minorities, were excluded from the public pension program established under the social security act of 1935. The

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31

Table 2.2 Te Excluded, by Occupational Categories and Race, 19331 Occupational Category

White

Agriculture 8,192,181 Domestic 3,268,725 Total excluded 11,460,906 Percent excluded 74 All workers 42,484,497 Excluded as 27 percentage of all workers

Negro

Other

1,987,839 1,576,205 3,564,044 23 5,503,535 65

291,978 197,521 489,499 3 741,888 66

Total 10,471,998 5,042,451 15,514,449 100 48,829,920

Adapted from Larry DeWitt, “Te Decision to Exclude Agricultural and Domestic Workers from the 1935 Social Security Act,” Social Security Bulletin 70, no. 4 (2010): 53.

1

consequences of denying coverage to two-thirds of all minority workers have been huge. Any calculation of the value of denied benefts encounters a fundamental change in Social Security as it was initially conceived as a pension program requiring vesting and the transition to advancing benefts, pay-as-you-go, predicated on contributions of current workers to payments to retirees. Te consequences are striking. Te frst benefciary under the initial vesting structure was a Cleveland streetcar motorman who, having worked one day for $5.00 and contributed $0.05 to Social Security, received a single beneft check for $0.17. Te frst benefciary of the subsequent advanced payment structure was a Ludlow, Vermont, legal secretary who received a monthly check of $22.54 beginning January 31, 1940.46 Te vesting period from 1937 through 1939 provided 441,745 benefciaries with a total of $25,652,000 in benefts, or $58.07 per year for that brief period. Subsequently, a monthly beneft would have been paid, the amount calculated according to a formula that advantaged low-wage workers over their higher earning compatriots. Te vast majority of agricultural and domestic workers would have been eligible for the minimum Social Security beneft of $20/month, had they been included.47 Assuming the excluded numbers in Table 2.2 and accounting for the diferences in payments as per vesting from 1937 to 1940 and averaging the period when excluded agricultural and domestic workers were included under amendments of 1950 and 1954, an estimate of the value of denied benefts is displayed in Table 2.3. Te total value of benefts for excluded agricultural and domestic workers totals $670.79 billion in 2020 dollars, not an insignifcant fgure.48 With amendments to the Social Security Act in 1950 and 1954, millions of previously excluded workers were inducted into the government pension

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Table 2.3 Estimate of Denied Benefts to Excluded Agricultural and Domestic Workers Factor

White

Negro

Other

Number of workers, 1933 Benefts in billions of dollars, 1937–1940 ($58.07/year) Benefts in billions of dollars, 1940–1952 ($240.00/year) Subtotal vesting and advanced benefts (in billions of dollars) 2020 dollars (billions)

11,460,906 1.997

3,564,044 0.621

489,499 0.085

33.01

10.26

1.04

35.01

10.88

1.12

499.03

155.80

15.96

program.49 Even though large numbers of agricultural and domestic workers were included under Social Security through the 1954 amendments, subsets of workers continued to be excluded and those were likely to be disproportionately minorities of color. For example, while cotton gin workers were included, turpentine workers and Mexican contract workers continue to be excluded. Migrant workers, in particular, were often unable to access benefts from governmental social welfare programs, their circumstances mirroring agricultural workers before the amendments of 1950 and 1954. A meeting of state welfare ofcials convened by the Social Security Administration reported that migrant families often lived in abandoned buildings, their children several years behind peers in school, and without healthcare.50,51 In addition, a home worker “who buys raw materials and makes and completes any article and sells the same to any person, even though it is made according to specifcations and requirements of some single purchaser, continues to be excluded from coverage as an employee.”52 In other words, workers who were not integrated into a modern labor force continued to be excluded, and these were often minorities of color. Although problems enrolling farm workers and domestics may have loomed large in the early years of Social Security, this is not a convincing explanation for their exclusion from a government pension. After all, these groups were folded into Social Security during the early 1950s when the South had not changed appreciably with regard to the nature of low-wage work. Indeed, the Social Security Bulletin reported in 1939 that several European nations— Great Britain, France, Germany, Sweden, and Austria—had encountered similar problems in enrolling agricultural employees yet had contrived creative ways to enhance the economic security of their farm workers.53 In other words, had not Treasury Secretary Morgenthau expressed objections by the U.S. Chamber of Commerce and its concerns for employer prerogatives, these excluded groups would have likely been enrolled in the initial cohort of covered workers.

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THE AFTERMATH Te millions of workers excluded from Social Security would haunt future social policy. Having struggled through the Depression, many laborers found themselves redundant due to the mechanization of agriculture. Whether in the form of the cotton picker machine replacing the Delta feld worker or the tractor powered by an internal combustion engine that became a fxture in American agriculture, millions of laborers were no longer necessary on farms that predominated in the South and Southwest. While sharecroppers were quickly dispossessed, tenant farmers, unable to access credit to purchase the equipment essential to plant and harvest crops, were similarly unnecessary. Denied Social Security benefts and fnding welfare assistance minimal, if available at all, millions of rural workers sought work elsewhere, the urgency of their search in large measure by government design. Harassed by Jim Crow, Negroes fed to cities of the North—Chicago, New York City, Detroit—the Black Diaspora populating black ghettoes, while whites often moved West, chronicled by John Steinbeck’s novel Te Grapes of Wrath, which won the National Book Award as well as a Pulitzer Prize.54 Te circumstances of black families migrating North would have been intimately familiar to a lad from an Irish family in New York City during the 1940s. Daniel Patrick Moynihan’s father had abandoned the family, leaving his mother to scrape together earnings from teaching at a women’s correctional institution, working as a nurse, and, occasionally, relying on public assistance. Te family’s frequent moves included slums, even Hell’s Kitchen, until the young Moynihan took advantage of the GI Bill and became a student of public policy. Receiving a master’s degree from the Fletcher School of Law and Diplomacy at Tufts University and a doctorate from the London School of Economics, Moynihan’s focus was on labor policy. Inserting himself in New York City politics, Moynihan sought a position in the new Johnson administration, where he hoped to expand job opportunities through the War on Poverty. As an assistant in the Labor Department, Moynihan sought to leverage social policy in order to preempt a burgeoning Civil Rights Movement that had become associated with urban riots. At the same time Moynihan wanted to position himself for a run for President of the City Council of New York.55 In March 1965, one hundred copies of Te Negro Family: A Case for National Action were printed, without authorship, and distributed surreptitiously within the Johnson administration. By the summer of 1965, the “Moynihan Report” was provoking debate within the administration as well as academic circles due to its focus on the disorganization of African American family life as a cause of persistent poverty. Illegitimacy, crime, and alcoholism subverted normal family life; conspicuously absent was a father fgure to discipline

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children, particularly boys. Absent discipline necessary to navigate a way out of poverty, poor black families produced irresponsible young men who had little education and limited job prospects and young women who became pregnant to sustain their families through welfare. Replicating family disorganization attributed to slavery, Moynihan worried about generational poverty distinguishing black families from the American mainstream.56 Te Moynihan Report generated a frestorm, infaming liberals, while animating conservatives who had long been skeptical about welfare. Liberal critics accused Moynihan of blaming African American mothers for their poverty; even though he cited contemporary data to substantiate his argument, liberals noted that Moynihan neglected to propose solutions. Conservatives found validation in Moynihan’s analysis, later confguring “behavioral poverty” subsidized by government welfare programs in perverse synergy. During the 1980s, conservative intellectuals would inveigh against government welfare, George Gilder stating the poor needed “the spur of their own poverty,”57 and Charles Murray advocating the termination of all government supports for welfare recipients of working age.58 Ultimately, Lawrence Mead would propose a “new paternalism” through which the government would deny benefts to poor women who refused to work and had children out of wedlock in order to integrate them into the mainstream.59 Tese would be harbingers of the welfare reform debate of the mid-1990s. Conspicuously absent in Moynihan’s monograph is any recognition of the role played by excluding almost one-third of low-wage workers from provisions of the Social Security Act during its early years: Social Security, Unemployment Compensation, and for all practical purposes public assistance.60 Te third part of the Moynihan Report, “Te Roots of the Problem,” included the matriarchal family that evolved from slavery, the emasculation of black males by Jim Crow, then skipped forward to the disorganized black family in urban ghettoes, which was attributed to high levels of black unemployment, especially among young men. A striking omission for a labor scholar, Moynihan failed to acknowledge how the government’s refusal to support low-wage workers contributed to economic desperation, evident in family disorganization. Ultimately, ignorance of the exclusion of agricultural and domestic workers from Social Security would place liberals on the defensive, struggling to refute conservative critics of welfare, who contended that imprudent behavior was the cause of minority poverty. Had he been better informed, Moynihan could have charted a more compassionate course for public policy, recognizing that low-income, minority households, having been excluded from social program supports, included workers who were left to fend for themselves in a Darwinian labor market. Eventually, the default in welfare reform would be a disciplinary regime that not only targeted wayward mothers but also absent fathers.

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Te irony of the Moynihan Report was that its author, elected to the U.S. Senate, would fnd himself disagreeing with a Democratic President about welfare reform during the 1990s. Himself a product of a low-income, disorganized home, Bill Clinton would become a Rhodes Scholar and, after losing the governorship of Arkansas in 1978, would regain it in 1982 and serve for a decade until his election as President in 1992. During Clinton’s governorship, Ronald Reagan had pioneered welfare reform, convincing Congress to pass the Family Support Act in 1988. While the outcomes of Reagan welfare reform would be disappointing for conservatives, the waivers granted to states induced them to experiment with alternatives to the Aid to Families with Dependent Children (AFDC), the family welfare entitlement. An ambitious politician, Clinton sought a welfare reform waiver from the Reagan administration, and subsequently established Arkansas WORKS, a mandatory welfare-to-work program. An evaluation of Arkansas WORKS revealed that it cost $118 per recipient, which was recovered by reduced expenditures for AFDC of $167.67 annually for each participant during the frst three years of the program. Notably, AFDC recipients benefted only $242.33 in increased earnings annually about $0.12 per hour, hardly enough to become self-sufcient.61 But the savings to the government, multiplied by the number of AFDC families, 20,000 in 1988,62 yields $3.5 million in savings, half of which would be credited to the State of Arkansas, a tidy sum for a small state. Compared to other state welfare-to-work programs, Arkansas WORKS performed better with respect to government beneft reductions as well as increased earnings, minimal as those would be, leading Governor Clinton to conclude that welfare reform was a winner. Presidential candidate Clinton would include in his platform “ending welfare as we know it.” In the debate leading to passage of the 1996 welfare reform law, President Clinton encountered an indignant Senator Moynihan, who objected to altering AFDC in line with a Republican plan, which included converting the entitlement to a discretionary program, devolving it to the states, and establishing a life-time cap on receipt of benefts. Clinton, however, realized the benefts of Arkansas WORKS and was on the cusp of a reelection campaign, so he signed the Personal Responsibility and Work Opportunity Reconciliation Act of 1996, efectively ending the family cash entitlement and securing reelection. By social policy standards, the consequences were profound: caseloads crashed. Between 1994 and 2002, caseloads plummeted, especially in the South: Alabama 64.2 percent, Florida 76.1 percent, Georgia 62.0 percent, Louisiana 72.7 percent, Mississippi 69.0 percent, North Carolina 62.5 percent, South Carolina 60.1 percent, and Virginia 59.8 percent.63 In many states, cash assistance dwindled, dropping from $117.00 per month in 1996 for a family of three in Mississippi to $101.00 in 1998, and in Alabama from $144.00 to $140.00.64

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If the War on Poverty marked a new front to assist the poor for many low-income families in the South, welfare reform represented a retreat, and a protracted retreat at that. Two decades after welfare reform 1.5 million American households, including 3 million children, were scrambling to get by on less than $2.00 per day.65 Signifcantly, Temporary Assistance for Needy Families (TANF), AFDC’s successor, declined dramatically, at inception providing benefts to 68 out of every 100 eligible families in 1996 to 27 eligible poor families in 2010.66 Much of the caseload collapse would be attributed to increasingly punitive eligibility requirements, sanctions that ejected entire families from assistance, and the belief among low-income families that welfare was not available for them, despite their technical eligibility. Any summary of poverty in the U.S. must acknowledge the interplay between social insurance, such as Social Security, and public assistance, such as TANF. For policy analysts, this distinction accounts for an awkwardness imposed by federalism; but for the poor, the distinction was moot. Te Social Security Act denied millions of poor households a public pension that was available to other workers, forcing them to rely on public assistance, or welfare, which was initially non-existent or minimal. When welfare uptake became too objectionable, politicians, Democrats and Republicans alike resorted to a work regime, paradoxically the very norm that the government had violated by excluding agricultural and domestic workers from Social Security. Denied a public pension, the minority poor would be efectively denied welfare, as well, ironically through the imposition of a work mandate and other eligibility requirements, making TANF elusive for the minority poor. Lacking access to TANF benefts, an increasing number of families cobbled together incomes by means that were illegal as regards federal welfare programs, including selling Supplemental Nutrition Assistance Program benefts, doubling up in Section 8 apartment units, and generating unreported income through scavenging for scrap metal, selling blood plasma, engaging in prostitution, and selling drugs, their 21st-century living conditions mirroring those of 20th-century farm workers, debased lives then and now. As before, their numbers are disproportionately minorities.67 Te sad tale of excluding agricultural and domestic workers from Social Security, which has been replicated in the denial of welfare benefts to the poor, would continue with the most recent addition to the American welfare state: the Afordable Care Act (ACA). Designed to universalize healthcare, the 2010 ACA included an expansion of Medicaid for the poor. In National Federation of Independent Business v. Sibelius, however, the Supreme Court ruled in 2012 that the Medicaid expansion would be optional; states could not be required to expand health care to the poor despite billions of dollars in federal funding to underwrite program expansion.68 By 2015, all of the states

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that had comprised the Confederacy, save Arkansas, had rejected the expansion of Medicaid, efectively denying access to healthcare to their disproportionately minority poor.69 Te efects of the denial of access to healthcare are signifcant. A 2006 analysis of regions of the U.S. revealed that African American adults in the Delta had higher rates of contagious disease, accidental injuries, cardiovascular disease, HIV, and cancer compared to other regions of the nation. Indeed, their health outcomes were similar to nations in sub-Saharan Africa.70

DENOUEMENT In retrospect, the exclusion of agricultural and domestic workers would compromise the Social Security Act and mar the New Deal. “Roosevelt’s program rested on the assumption that a just society could be secured by imposing a welfare state on a capitalist foundation,” observed William Leuchtenburg, on the eve of Lyndon Johnson’s Great Society, a social experiment that would prove problematic at best. “Without critically challenging the system of private proft, the New Deal reformers were employing the power of government not only to discipline business but to bolster unionization, pension the elderly, succor the crippled, give relief to the needy and extend a hand to the forgotten men.”71 In this case, about one-third of workers during the Depression had been, quite literally, forgotten. Te full impact of the failure to acknowledge the labor of agricultural and domestic workers in the South and Southwest contributed to the backwardness of the region. While the exclusion of these low-wage workers can be quantifed, the monetization of their loss of benefts does not address what this income might have purchased for them individually or contributed to these regions economically. While workers in other parts of America were enjoying the benefts of running water, fush toilets, electric refrigerators, automobile travel, plummeting disease and infant mortality rates, and increasing longevity, those in the South and Southwest continued to rely on hauling water from the pump, using the privy, an unhealthy diet due to absence of refrigeration, traveling by foot or wagon, high rates of disease, child deaths, and signifcantly shorter longevity. Life in the rural South and Southwest was Hobbesian compared to the industrialized regions of the nation. Denied a pension, the minority poor had to resort to minimal public assistance, which, once it became too burdensome for the government, would be conditioned on a work requirement, a blatant contradiction that escaped the scrutiny of prominent poverty analysts. For a withholding tax of as little as $5.00 a year, individual workers could have been provided an annual pension of $240, which would have aforded

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them a modicum of comfort, security, and dignity. In aggregate, the amount would have been comparable to a domestic Marshall Plan, jump-starting the economy of a poverty belt that spanned the South and Southwest. Te order of magnitude represented by these benefts—$670.79 billion in 2020 dollars between the inception of Social Security in 1935 and the amendments of the early 1950s—approximates for the South and Southwest what Congress appropriated as a stimulus to the entire nation to address the Great Recession, the 2009 American Recovery and Reinvestment Act projected to expend $787 billion over a decade.72 Historically, then, the exclusion of agricultural and domestic workers from Social Security is not just another event in an American tableau of second-class citizenship for minorities of color, although it is certainly that. Sandwiched between Jim Crow and the Civil Rights movement and extended through welfare reform of 1996 and health reform of 2010, this exclusion replicated diminished citizenship for African Americans and Hispanics through education, welfare, and healthcare, which continues. But the denial of a public beneft for minority workers also provides government data justifying reparations, as Ta-nehisi Coates contends, Te omnibus programs passed under the Social Security Act in 1935 were crafted in such a way as to protect the southern way of life. Old-age insurance (Social Security proper) and unemployment insurance excluded farmworkers and domestics—jobs heavily occupied by blacks. When President Roosevelt signed Social Security into law in 1935, 65 percent of African Americans nationally and between 70 and 80 percent in the South were ineligible. Te NAACP protested, calling the new American safety net “a sieve with holes just big enough for the majority of Negroes to fall through.”73 For skeptics, the case for reparations based on slavery, which was validated by reparations for Japanese interred during World War II, is problematic due to the absence of data. But that objection is belied by government data documenting the systematic denial of pensions to minority workers during the early years of Social Security. Subsequently, red-lining and other forms of discrimination compromised the prosperity of families of color, also providing data on which to make a moral claim. In 2017 Congressman John Conyers reintroduced H.R. 40, calling for a commission to consider reparations for African Americans due to slavery.74 Denial of Social Security to agricultural and domestic workers should be part of those deliberations. At a minimum, any family able to identify a forebear who had toiled without access to a public pension should be eligible for retrospective compensation. Insofar as social policy rests on an

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ethical foundation, that is the least that could be expected from a just society. Conyers died in 2019, leaving the promise of reparations to the next generation of civil rights leaders. Meanwhile, a degraded status quo erupted early in 2020 with two events: the coronavirus led to social distancing and business closings, resulting in high levels of unemployment, which disproportionately afected lower-wage workers, especially minorities of color. Suddenly, a poverty level, which had reached unprecedented lows, spiked upward. By 2019, “26.4 percent of Black children and 20.9 percent of Latinx children were living in poverty compared to just 8.3 percent of white children,” disparities that would worsen as a result of the economic collapse due to the pandemic.75 Te systemic racism implicit in poverty data was underscored with the murder of several minorities at the hands of police, generating protests nationwide, often orchestrated by Black Lives Matter. Recorded by witnesses on smart phones, police brutality prompted some public ofcials to transition police departments from a militarized posture to one of community service, but killings of minorities continued fomenting further civil discord. In the absence of leadership at the federal level, 50 mayors declared racism a public health crisis, citing lower longevity and higher morbidity for minorities of color as well as police violence.76 In retrospect, it is easy to imagine the major benefts that could have been produced had minorities of color not been excluded from the early years of Social Security. Social insurance—Welfare State 1.0—rightfully holds its place as the crown jewel of the American welfare state; however, its omissions continued a tragic legacy of racism compromising the wellbeing of African Americans and Latinos. As European nations successfully integrated agricultural and domestic workers into their social insurance schemes, American leaders deferred to Southern legislators, who insisted that only workers in industry could be enrolled. Conveniently, this meant that Southern employers could count on workers laboring at any wage ofered. Because of the lack of access to public assistance benefts—Welfare State 2.0—these minority workers had to work until they dropped, literally. Te height of hypocrisy, subsequent social policy mandated that the minority poor participate in the labor market, even as their forbears had been denied a public pension while they had, in fact, toiled in jobs that lacked not only adequate pay but dignity as well.

NOTES 1 Harold Wilensky and Charles Lebeaux, Industrial Society and Social Welfare (New York: Te Free Press, 1965); Kenneth Davis, FDR: Te New Deal Years 1933– 1937 (New York: Random House, 1979); Edward Berkowitz and Kim McQuaid, Creating the Welfare State: Te Political Economy of Twentieth-Century Reform (New York: Praeger, 1980); Michael Katz, In the Shadow of the Poorhouse: A Social History

40

2

3 4 5 6 7 8 9 10 11

12 13 14 15 16 17

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of Welfare in America (New York: Basic Books, 1986); Arthur Schlesinger, Jr., Te Cycles of American History (New York: Houghton Mifin, 1986): Michele Dauber, Te Sympathetic State: Disaster Relief and the Founding of the American Welfare State (Chicago: University of Chicago Press, 2013). Richard Gabryszewski of the Social Security Administration provided valuable documents and William Epstein of the University of Nevada-Las Vegas comments on an earlier draft. Pub. L. No. 74-271, 49 Stat. 620 (codifed as amended at 42 U.S.C. §§ 301–1397mm (2014). A welfare state “held that individuals belonging to a defned community (typically a national community) were entitled, through their status as citizens, to a range of social goods guaranteed by the central state designed to meet their basic needs (food, shelter, education, health, etc.).” See Nick Ellison, “Beyond Universalism and Particularism.” 4in Te Welfare State Reader, 2nd ed. Edited by Christopher Pierson and Francis Castles. Cambridge: Polity Press. 2006), p. 408; Te centrality of the national government in the welfare state was noted by Tony Judt, Ill Fares the Land. (New York: Penguin, 2010, 74). Edward Baptist, Te Half Has Never Been Told: Slavery and the Making of American Capitalism (New York: Basic Books, 2014). John Hope Franklin, From Slavery to Freedom: A History of Negro Americans, 5th ed. (New York: Knopf, 1980), p. 133. Frederick Douglass, “My Bondage and My Freedom,” in Autobiographies; Narrative of the Life of Frederick Douglass, an American Slave, edited by Henry Louis Gates, Jr. (New York: Literary Classics of the United States, 1994), pp. 103–452. LeeAnna Keith, Te Colfax Massacre: Te Untold Story of Black Power, White Terror, and the Death of Reconstruction (New York: Oxford University Press, 2008). David Blight, “An American Program,” New York Review of Books, November 19, 2020. John Dollard, Caste and Class in a Southern Town (New York: Anchor Books, 1937), pp. 109–10. Hortense Powdermaker, After Freedom: A Cultural Study in the Deep South (New York: Viking, 1939), pp. 86–87. William Alexander Percy, Lanterns on the Levee: Refections of a Planter’s Son (Baton Rouge: Louisiana State University Press, 1941), p. 280. In retrospect, Percy’s rationalization is repulsive, yet his conduct was a product of his era. When his nephew, Walker Percy, and his two siblings were left homeless due to the suicide of their parents, William Percy gave up a bon vivant lifestyle to adopt and care for them. A Harvard Law School graduate, World War I veteran, and published poet, William Percy was undoubtedly gay, a negative attribution in the South of that period. It is doubtful that Walker Percy would have become a noted fgure in American letters had his uncle not made such a personal sacrifce. Nor was William Percy deaf to the circumstances of Negroes. During the devastating food of 1927, which left the Delta under 10 feet of water, Percy served as coordinator of Red Cross relief. In that capacity, he advocated moving 7,500 Negroes of levee encampments and transporting them to higher ground at Vicksburg. His father, U.S. Senator LeRoy Percy, sabotaged his eforts, fearing that the Negroes would never return if evacuated and the plantations would be unable to fnd essential feld workers. Percy, p. 278. National Emergency Council, Report on Economic Conditions of the South (Washington, DC: National Emergency Council, 1938). Ibid., p. 46. National Emergency Council, p. 29. “Hookworm Infection,” Wikipedia, last modifed April 26, 2016, https://en.wikipedia .org/wiki/Hookworm_infection. James Jones, Bad Blood: Te Tuskegee Syphilis Experiment (New York: Free Press, 1981).

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18 Nicholas Lemann, Te Promised Land: Te Great Black Migration and How It Changed America (New York: Vintage, 1991), p. 29. 19 US Census Bureau. “20th Century Statistics.” Statistical Abstract of the United States: 1999. 119th ed. (Washington, DC: US Government Printing Ofce, 1999), p. 874. 20 Percy, pp. 280–82. 21 Ira Katznelson, Fear Itself: Te New Deal and the Origins of Our Times (New York: W.W. Norton, 2013), pp. 386–87. 22 “Intellectually and spiritually [poor whites] are inferior to the Negro, whom they hate. Suspecting secretly they are inferior to him, they must do something to him to prove to themselves their superiority. At their door must be laid the disgraceful riots and lynchings gloated over and exaggerated by Negrophiles the world over,” Percy lamented. “Te river folk do not like white tenants or ‘red-neck’ neighbors. When these shall have supplanted the Negro, ours will be a sadder country, and not a wiser one.” William Alexander Percy, Lanterns on the Levee, (1941), pp. 20, 21. 23 Linda Gordon, Pitied but Not Entitled: Single Mothers and the History of Welfare, 1890– 1935 (Cambridge, MA: Harvard University Press, 1994), p. 275. 24 Katznelson, p. 170. 25 Franklin, p. 396. 26 Jill Quadagno, Te Color of Welfare: How Racism Undermined the War on Poverty (New York: Oxford University Press, 1994), p. 157. 27 Katz, p. 244. 28 William Epstein, Democracy without Decency: Good Citizenship and the War on Poverty (University Park: Pennsylvania State University Press, 2010). 29 Richard Hofstadter, Te American Political Tradition and the Men Who Made It. 25th anniversary ed. (New York: Vintage, 1973), p. 441. 30 Lemann, p. 6. 31 Teda Skocpol, Protecting Soldiers and Mothers: Te Political Origins of Social Policy in the United States (Cambridge, MA: Harvard University Press, 1992), p. 472. 32 Frances Fox Piven and Richard A. Cloward, Regulating the Poor: Te Functions of Public Welfare (New York: Pantheon, 1971), p. 116. 33 Ibid., chapter 4. 34 Berkowitz and McQuaid, p. 36. 35 Douglas Brown, “Philosophical Basis of the National Old Age Insurance Program,” in Social Security and Private Pension Plans, edited by Dan McGill (Homewood: Richard Irwin, 1977), p. 12. 36 Larry DeWitt, “Te Development of Social Security in America,” Social Security Bulletin 70, no. 3 (2010b): 5. 37 Larry DeWitt, “Te Decision to Exclude Agricultural and Domestic Workers from the 1935 Social Security Act,” Social Security Bulletin 70, no. 4 (2010a): 49–68. 38 Berkowitz and McQuaid, p. 83. 39 Davis, pp. 459–61. 40 Edwin Witte, Te Development of the Social Security Act: A Memorandum on the History of the Committee on Economic Security and Drafting and Legislative (Madison: University of Wisconsin Press, 1963), pp. 152–53. 41 DeWitt, 2010a, pp. 8–11. 42 Katznelson, p. 385. 43 Percy, p. 279. 44 Ibid., pp. 281–82. 45 Poignantly illustrating the conceit of their relationship, Percy recounts his personal assistant: “‘Fode’ … started of as my caddy, young, stocky, strong, with a surly expression, and a smile like the best brand of sunshine. For no good reason he rose to be my chaufer; then house-boy; then general factotum; and now, without any contractual relation whatever, my retainer, which means to say I am retained for life

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46 47 48

49 50 51

52 53 54 55 56 57 58 59 60

61 62

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by him against all disasters great or small, for which he pays by being Ford.” William Alexander Percy, Lanterns on the Levee. (1941). p. 287. DeWitt, 2010b, p. 7. Wilbur Cohen and Robert Myers. “Social Security Amendments of 1950: A Summary and Legislative History,” Social Security Bulletin 13, no. 10 (October 1950): 4. Tese calculations are based on several assumptions, not least of which is a stable population through the period under investigation. In addition, some excluded workers may have received more than the minimum beneft of $20/month, which was based on previous earnings of $20.00–$25.00 per month, possible for tenant farmers as well as those who migrated of-season to towns to augment earnings. Moreover, a high mortality rate would have made dependents eligible for survivors’ benefts. Clarifcation on these factors awaits further research. James Marquis, “Old-Age and Survivors Insurance: Coverage under the 1954 Amendments,” Social Security Bulletin 18, no. 3 (January 1955): 3–10. Jules Berman, “Services for Migrant Agricultural Workers,” Social Security Bulletin 17, no. 11 (November 1954): 9–11. Perversely, undocumented workers have long subsidized Social Security, a program from which they are unlikely to draw benefts. A journalist reported that a few months after Woolworth marketed a wallet with a phony Social Security card in the 1970s, 33,000 payments were made into the account with a bogus number: Ted Conover, Coyotes: A Journey through the Secret World of America’s Illegal Aliens (New York: Vintage, 1987), p. 207. Annually, undocumented workers are paying $13 billion in withholding taxes but receiving only $1 billion in benefts, a subsidy of $12 billion, or $100 billion over the past decade: Roy Germano, “Unauthorized Immigrants Paid $100 Billion into Social Security Over Last Decade.” VICE News, August 4, 2014: https://news.vice.com/article/unauthorized-immigrants-paid-100-billion-into -social-security-over-last-decade Wilbur Cohen, Robert M. Ball, and Robert Myers, “Social Security Act Amendments of 1954: A Summary and Legislative History,” Social Security Bulletin 17, no. 9 (September 1954): pp. 4, 6. Tomas Blaisdell, “Old-Age Insurance for Agricultural Workers in Western Europe,” Social Security Bulletin 1, no. 6 (June 1938): 19–23. John Steinbeck, Te Grapes of Wrath (New York: Viking, 1939). James Patterson, Freedom Is not Enough: Te Moynihan Report and America’s Struggle over Black Family Life—from LBJ to Obama (New York: Basic Books, 2010). Daniel Patrick Moynihan, Te Negro Family: Te Case for National Action (Washington, DC: US Department of Labor, 1965). George Gilder, Wealth and Poverty (New York: Basic Books 1981), p. 118. Charles Murray, Losing Ground: American Social Policy, 1950–1980 (New York: Basic Books, 1984). Lawrence Mead, Beyond Entitlement: Te Social Obligations of Citizenship (New York: Free Press, 1986). Moynihan’s omission regarding the excluding agricultural and domestic workers from a public pension would be followed by major writers on poverty, including Nicholas Lemann, Te Promised Land (1991), William Julius Wilson, When Work Disappears: Te World of the New Urban Poor (New York: Knopf, 1996), and Jason DeParle, American Dream: Tree Women, Ten Kids, and a Nation’s Drive to End Welfare (New York: Viking, 2004). Judith Gueron and Edward Pauly, From Welfare to Work (New York: Russell Sage, 1991). US House of Representatives, Committee on Ways and Means, Green Book: Background Material and Data on the Programs within the Jurisdiction of the Committee on Ways and Means (Washington, DC: US Government Printing Ofce, 2004), pp. 108–6.

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63 Ibid., Table 7-7. 64 US Department of Health and Human Services, Administration of Children and Families (Washington, DC: Ofce of Family Assistance, 2014). “Caseload Data 1988 (AFDC Total).” Accessed April 18, 2016. http://www.acf.hhs.gov/programs/ofa/ resource/caseload-data-afdc-1988-total. 65 Kathryn Edin, and H. Luke Shaefer, $2.00 a Day: Living on Almost Nothing in America (New York: Houghton Mifin Harcourt, 2015). 66 Donilo Trisi, and LaDonna Pavetti, TANF: Weakening the Safety Net (Washington, DC: Center on Budget and Policy Priorities, 2012). 67 While the focus of this chapter is on federal social insurance benefts, the minority poor were also denied state benefts. Until the 1954 Brown v. Board of Education decision, Negroes in the South were denied educational opportunity due to segregation. After Brown, Southern legislators endorsed the establishment of a parallel system of private, white schools to evade the Supreme Court edict. In the late 1950s Virginia ofcials were more assertive, the state legislature passing a law endorsing “massive resistance,” which not only defed the Supreme Court but also closed public schools in the state, denying blacks an education. Decades later, the international league tables on education rank Mississippi, Alabama, Louisiana, and New Mexico with developing nations. In 2014 the high school non-completion rate of youth living in the Southern poverty belt—Mississippi, Georgia, South Carolina, Alabama, Florida, and New Mexico—exceeded that of other states. 68 In writing the majority opinion, Chief Justice Roberts contended that the traditional contract between the federal government and states underlying federalism had been violated by the federal requirement that states expand Medicaid as a result of their reliance on federal subsidies to the health assistance program, which the states would lose had they not complied with the Medicaid expansion: “Te threatened loss of over 10 percent of a State’s overall budget, in contrast, is economic dragooning that leaves the States with no real option but to acquiesce in the Medicaid expansion.” National Federation of Independent Business v. Sibelius, 567 U.S. June 28, 2012. 69 “22 States Are Not Expanding Medicaid: Here’s What Tat Means for Teir Residents,” last modifed June 4, 2015, https://www.whitehouse.gov/share/medicaid -map. 70 Christopher Murray, Sandeep C. Kulkarni, Catherine Michaud, Niels Tomijima, Maria Bulzacchelli, Terrell Iandiorio, and Majid Ezzati, “Eight Americas: Investigating Mortality Disparities across Races, Counties, and Race-Counties in the United States,” PLoS Medicine 3, no. 9 (2006): 1513–24. doi: 10.1371/journal .pmed.0030260. 71 William Leuchtenburg, Franklin D. Roosevelt and the New Deal, 1932–1940 (New York: Harper and Row, 1963). 72 “American Recovery and Reinvestment Act of 2009,” Wikipedia, last modifed April 22, 2016, https://en.wikipedia.org/wiki/American_Recovery_and_Reinvestment _Act_of_2009. 73 Ta-nihisi Coates, “Te Case for Reparations,” Te Atlantic (June 2014). 74 Donna Owens, “Veteran Congressman Still Pushing for Reparations in a Divided America,” NBC News (2017). https://www.nbcnews.com/news/nbcblk/rep-john -conyers-still-pushing-reparations-divided-america-n723151 75 Center for Law and Social Policy, 2019 Poverty Data Show Pre-Pandemic Cracks in Foundation; 2020 Updates Show Urgent Need for Congressional Action (Washington, DC: author, September 15, 2020). 76 Kim Bellware, “Calls to Declare Racism a Public Health Crisis Grow Louder Amid Pandemic, Police Brutality,” Washington Post, September 15, 2020.

3

Framing the welfare state

As welfare states evolve, networks of benefciaries, civil servants, and private contractors secure privileges that consolidate their status and often obstruct change. For the “liberal” welfare states in which social insurance—Welfare State 1.0—is paired with public assistance—Welfare State 2.0—this duality has been in place for decades. Since its inception, the American welfare state has been managed by a meritocracy, the minimal credential being an undergraduate degree, but with upper registers requiring advanced degrees in law, economics, statistics, public administration, and medicine. Signifcantly, political parties both defend and demand modifcations in accord with ideological preference: Republicans wary of social insurance while critical of public assistance; Democrats supportive of both. Equally consequential, both Welfare States 1.0 and 2.0 were established during the industrial era, raising existential questions about their relevance for the post-industrial Information Age, hence the case for Welfare State 3.0. Since welfare states are political constructs, public dissatisfaction with elites can destabilize social policy, evident in the populism driving the campaigns of Trump in the U.S. and Johnson in Britain.

CARTELS Te welfare states of developed nations have been operated by professionals for public beneft. Embedded in the civil service, professionals serve as the basis for the meritocracy, which not only has considerable infuence on social, economic, and political afairs, but also invites political reprisal as citizens, who, less anointed, often struggle with complex eligibility criteria as well as inadequate benefts. Once professions establish exclusive employment arrangements through public service, cartels emerge, assuring rents to

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members, but often at the expense of service quality and cost. Tus, rents and authority are often resented because they are borne by the public at large through taxes, which are compulsory, and access to benefts, which can be exasperating. A burgeoning welfare state would employ tens of thousands of professionals, not only at inception but through the 20th century with the addition of program after program: Social Security Disability Insurance 1956, the creation of Supplemental Security Income in 1972, welfare reform in 1996, the addition of the drug beneft to Medicare in 2003, and the passage of the Afordable Care Act in 2010. While interests varied with each of these additions, a common denominator validated the professional project by enlisting legions of economists, public administrators, accountants, and lawyers, experts often aligned with trade associations having a stake in policy change.1 Universities partnered with government, establishing professional schools that trained civil servants; when private agencies contracted with government to provide services, professional qualifcations were inserted into agreements, so academic credentials became the sine qua non for public service. Initially, American institutions of higher education had adopted the British Oxbridge (a confation of Oxford and Cambridge) model, educating students in religion, ancient languages, and philosophy, but the introduction of the German model, focusing on science and research, furthered the professional project. Subsequently, two quite diferent orientations evolved: the profession as philosophically imbued art, as had been the case with law and religion, versus the profession as research-based, applied science, as with engineering and medicine. But during the later decades of the 20th century, accelerating demands for professional experts required of an expanding welfare state papered over the issue. A hallmark of the 20th century, the training of professionals was promoted by professional societies at colleges and universities, all private entities, autonomous of government. Autonomy not only served to bufer a profession from government—or in the rare event, actually opposing the state as when the American Medical Association fought government “socialized medicine” in the form of Medicare—but also assured the space to prosper according to priorities of well-credentialed membership. Yet, autonomy would prove a promiscuous asset. While freedom from government interference allowed some professions to fourish, it permitted others to wither. As turf claiming defned expertise, professions sought to negate competition through licensure, an arduous state-by-state process since the federal government had no such authority. But the payof was huge: those successful achieved a legislated monopoly in their feld. “Professionalization,” concluded Louis Menand, “is a system of market control.”2 As organizations of experts emerging during the Progressive Era,

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professions are largely self-regulating: they set the standards for entrance and performance in their specialized areas, and they do so by the light of what is good for the profession rather than what market conditions or external forces, such as legislators or citizens’ groups, demand.3 Since professional activity was specialized, beyond the competence of the layperson, only other professionals could regulate activities of their members, including the certifcation of training programs through accreditation. Te net result was a multiplicity of closed systems—a veritable bureaucratic blizzard—constructed by professional societies, university training programs, accreditation, state licensure, and civil service requirements, which may have been undecipherable to the public but essential for upward mobility of young aspirants to the meritocracy. As an extension of progressivism and the expansion of the welfare state, the professional project was decidedly liberal. University training programs were populated by liberal professors, who understood their role of funneling young professionals to success either directly through positions in government, or indirectly through nonprofts organizations or private practices reliant on government reimbursement. Amplifed through journal publications, media contacts, and professional associations, experts demonstrated how their knowledge and skills benefted Americans, just as many jockeyed for positions in state and federal bureaucracies. Evidence of efcacy and efciency conveniently elided, the liberati—the literary left—was secure, protected by university tenure, civil service employment, and social entitlements, enjoying hegemony through much of the 20th century.4 Cartels, then, marked a fundamental feature of welfare states, originating with the professional education food-chain, which has been choreographed by independent professional associations and accreditation authorities, proceeding to government service protected by civil service, and ofering employment security, professions have risen in authority, morphing into a meritocracy that resembles a “fourth branch” of government.5 Although the basis for human service cartels—universities, professional associations, and accreditation authorities—are private in the U.S., their government service is broadly public. As a result of liberal bias, inculcated in higher education, and self-interest amplifed by collective bargaining agreements, human service cartels are ripe for political reprisal, originating from the right. Not so surprisingly, the impenetrability and lack of accountability of cartels has led conservatives to complain about a “deep state,” an arrangement of professional interests, aligned with government, acting against the interests of the public. With the expansion of the service economy, professions have become ubiquitous, and embedded in the welfare state. Although professionals may have the skills and freedom to practice independently, most conduct their work

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through organizations of varying infuence: private practices of independent or group providers, community-based nonproft organizations, government at the federal, state, and local levels, and human service corporations. Tese entities constitute, however haphazardly, the welfare state. Open societies of sovereign nations evolve quite diferent confgurations, but community-based organizations, private practitioners, government agencies, and human service corporations are evident in all of them. Te local advocate relishing the chance to enlist confederates in establishing a nonproft to serve a marginal, neglected population may be a heroine to the local community, but the initiative is apt to be perceived as a headache to the IRS ofcials managing tax exemptions or a prospective competitor to private practitioners and human service corporations. However jury-rigged the welfare state may be, professional cartels have been its common denominator.

MERITOCRACY Sufused in the structural interests comprising the welfare state, cartels predicated on professional credentials evolved from the Progressive Era promise of expertise for public beneft, but the unanticipated outgrowth was a fourishing, expensive, and exclusionary meritocracy. Indeed, the social class implications of the meritocracy with respect to struggling working-class and poor workers in all welfare states are profound. As Michael Sandel argues, the meritocracy has not only reaped the rewards of a globalized economy but controls the levers of national politics as well. Te non-college degreed comprise almost two-thirds of the population, their work in manual labor, the service sector, and clerical work controlled by their better educated peers. Te consequences, Sandel contends, “devalues the contributions of those without a diploma, fuels prejudice against less-educated members of society, efectively excludes most working people from elective government and provokes political backlash.”6 Te price of upward mobility for meritocrats is the resentment of the less educated. Coined by a progressive British politician and sociologist Michael Young, “meritocracy” signifed a new elite predicated on talent. Emerging after the decline of the industrial age, Young ofered a simple, if satirical, equation: I +E =M where I represents intelligence, E efort, and M merit.7 A quite real American meritocracy was described by another Brit ex pat, Richard Reeves, who noted that intelligence had been codifed by I.Q. tests and weaponized in higher education through ubiquitous entrance exams, such as the Scholastic Aptitude

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Test, while efort was gauged by undergraduate and graduate degrees graded according to the prestige of academic institutions. As college graduates engage in “assortative mating”—fnding partners of comparable merit—generational inequities become virtually hereditary, augmented by selective education beginning in pre-school and extending through college via legacy admissions.8 A new American elite, M, classifed as the upper-middle class and diferentiated from industrial era wealth, has emerged in relation to attaining professional degrees from prestigious institutions and assuming leadership of powerful organizations. Yet, the rise of the meritocracy perforce posed a disturbing question for Young, “Who will do the dirty work?” Widening economic inequality demanded a class of employees willing to manage the occupational debris, that “vast foating army” of the un- and under-employed of industrial work, the millions of fugitives from the Great Recession and coronavirus economic meltdown, all enlarged by the service workers of the “gig” labor market as well as those who opted out altogether by joining the informal economy. Notably, the low episodic earnings of the working and welfare poor contributed to stress and an assortment of mental problems, such as depression, substance abuse, and addiction, while subverting family stability and inviting domestic violence and child abuse. As Young concluded sardonically, “Without intelligence in their heads, the lower classes are never more menacing than a rabble, even if they are sometimes sullen, sometimes mercurial, not yet completely predictable.”9 Te implications of “rabble management” on the part of human service professionals are considered in Chapter 5. Te meritocracy would fnd a capacious home in a burgeoning welfare state, as Fareed Zakarias observed, All advanced countries are now run by a meritocracy. Schools admit applicants based on their test scores and companies hire and promote people based mostly on credentials of one sort or another. Most leaders in government, business, arts, and culture have a college education, and many have a postgraduate degree. In the U.S. two-thirds of Americans lacked a college degree, so their better educated compatriots enjoyed a signifcant power advantage: the vast majority of the population—often condescended as low-information voters—was managed by one-third with college degrees, or one-tenth with postgraduate degrees.10 Tat the well-credentialed experts gravitated to cities where they controlled major institutions, grated on rural Americans who lived by more modest means. Resentment toward liberal elites fourished. “Even as limousine liberals preached the gospel of social engineering, they seemed to behave like spoiled narcissists. Tey appeared preoccupied with style, self-promotion, and in

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their own way just as obsessed with piling up material stuf as the working class,” noted a critic. But liberal pieties clashed with working-class sensibilities. As welfare expanded according to liberal designs, blue-collar prosperity declined, prompting working-class families to dispatch mothers to the labor market to sustain family income. At that point the confict between white mothers working and minority welfare mothers subsidized to stay at home became a fashpoint. “Since traditional family arrangements were, among other things, a mark of respectability distinguishing ‘little man’ propriety, frugality, self-restraint, and sense of duty from profigacy and parasitism of the lower orders, the limousine liberal’s ‘bleeding heart’ was particularly galling.”11 Te demise of working-class prosperity from the later decades of the 20th century into the 21st, thus, spawned resentment toward government social programs, which, with the Tea Party and presidency of Donald Trump, boiled over into a populist revolt against meritocratic elites. Te clearest evidence of meritocracy is the rise of the upper-middle class in comparison with other social stations. Predicated on higher education, the upper-middle class has pulled away from the middle-middle class as well as the lower-middle class, as noted in Figure 3.1. As Tomas Piketty has observed, “lower- and middle-class students do not have access to the same resources or courses as children of the upper classes.”12 Te quite diferent trajectories of the middle classes over time have profound implications in two ways: First, has been the rise of the professional nouveau riche—the uppermiddle class—whose wealth, based on high salaries and long hours, is contrasted with coupon-clippers of the Gilded Age. “Today’s wealthy are less likely to have had their wealth handed to them by rich parents and more likely to have acquired it through growing and selling a business or by investing and saving a big chunk of their wages,” argued Reeves.13 As foundation presidents, university chancellors and provosts, partners in international law frms, physician specialists, hospital administrators, members of Congress, and Wall Street fnanciers, the professional elite manages powerful organizations that defne the culture, including the polity, economy, and fne arts. Professional wealth is transmitted generationally through private pre- and boarding schools, legacy admissions to prestigious colleges, and tax advantages to heirs exacerbating inequality: “a child born into a wealthy family is more than six times as likely to become a wealthy adult than a child born into a poor family,” Tomas Shapiro notes, “children from the highest-income families were eight times more likely than children from low-income families to obtain a bachelor’s degree by age twenty-four.”14 But Figure 3.1 also depicts the derogation of the middle-middle class. Once the bastion of blue-collar America, which ofered high wages through union membership sufcient to buy a home in the suburbs, set aside funds for retirement, and send their kids to college, the middle-middle class has

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collapsed to the point that it is now competing with the poor/near poor for jobs. Subsequent inequality blossomed: the poor (with income less than $32,500) fell from 16 percent of the population to 13 percent, while that of the lower-middle class (from $32,500 to $54,400) plunged from 31 percent to 16 percent, the middle class (from $54,500 to $108,500) dropped from 47 percent to 36 percent, but the upper-middle class ($108,500 to $380,500) soared from 6 percent to 33 percent, and the rich ($380,500 and above), from 0 percent to 2 percent, appeared for the frst time in signifcant numbers.15 Size of Income Classes by Year

60 50 40 30 20 10 0

Rich

1967

1981

Upper Middle

Middle Middle

2002 Lower Middle

2016 Poor/Near Poor

Figure 3.1 Size of income classes by year. Adapted from Stephen Rose, “Squeezing the Middle Class: Income Trajectories from 1967 to 2016” (Washington, DC. Brookings Institution, 2020), p. 7.

Since better paying union jobs were held largely by white men and the poor work at low-wage service jobs held by minority women, this generates gender and racial tension. And insofar as the poor/near poor often work to supplement meager public assistance benefts, the confict with the welfare state is not far below the surface. Joan Williams has underscored the cultural dynamics that inevitably subvert the welfare state: When you leave the two-thirds of Americans without college degrees out of your vision of the good life, they notice. And when elites commit to equality for many diferent groups but arrogantly dismiss “the dark rigidity of fundamentalist rural America,” this is a recipe for extreme alienation among working-class whites. Deriding “political correctness”

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becomes a way for less-privileged whites to express their fury at the snobbery of more-privileged whites.16 Well before an alienated white working class vaulted Donald Trump into the presidency, the former powerhouse industrial states of the upper Midwest—Illinois, Indiana, Michigan, Wisconsin, and Ohio—had already defected from the Democratic Party and elected Republican Governors. Te Democratic “blue wall” had collapsed.

LATE STAGE CAPITALISM In 1988, Nobel Laureate Milton Friedman and his wife, Rose, penned a prophetic essay, “Te Tide in the Afairs of Men,” observing three sweeping transformations in capitalism: the Adam Smith tide of the 19th century, with which we are all familiar; the Fabian tide of the 20th, ushering in the welfare state; and the Hayek tide of the 21st, expanding global markets.17 In citing Hayek, Friedman’s acknowledged an economist with contradictory inclinations, at once lauding national health and public education schemes, yet expressing skepticism about the state’s tendency to compromise freedom in the pursuit of domestic security, in Te Road to Serfdom. With the post– World War II economic infrastructure in place, markets extended globally into the far reaches of the planet; at the same time capital migrated to ever larger banks and fnancial institutions. By the end of the 20th century, the welfare states of developed nations were circumscribed in their ability to tax domestic revenue for fear of capital fight: too high taxes invited not only production to fee overseas but the accounts of the afuent as well. While ofshoring of production had been accounted for relatively diligently, it was not until 2016 that Te Panama Papers revealed the expanse of tax havens for the rich, representing about 8 percent of global assets, threefourths escaping taxation.18 Not long thereafter, the “paradise papers” were exposed, documenting extensive assets ofshored to evade taxation on the part of such eminences as the Queen of England, Russian oligarchs, and the cabinet of President Trump.19 Capital fight compromised the welfare states of even developed nations. “Now market power grows unchecked across the world,” noted an economic historian. “Te state grows in weight but weakens in capacity.”20 Banks proved pivotal in shifting capital, as an economic journalist observed, “banks simply put their business through markets in countries that have less draconian rules.”21 In response to hemorrhaging capital, sovereign nations adjusted their budgets, adopting “austerity” as the byword for “neoliberal” policies.22 Subsequent social policies of deregulation fostered capital fight, while

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restrained domestic spending, coupled with advancing privatization social welfare, were the consequence. In the U.S., Democratic Presidents hewed to the neoliberal playbook, a colossal irony. First, Bill Clinton oversaw the deregulation of fnancial markets, eviscerating the Glass-Steagall Act of 1933, which had separated banking from investing, while also signing the North American Free Trade Agreement, encouraging American companies to move production to Mexico and overseas. Less known, Eric Holder, Attorney General for Barack Obama, elected a policy of deferred prosecution for corporate malefactors. In 1999 as an assistant Attorney General, Holder had written a memo on methods to address malfeasance by corporate agents, concluding that wrongdoing should be considered in relation to internal penalties as well as restitution.23 Confronted with the Great Recession of 2008, Obama’s Department of Justice opted for expediency over justice, electing to fne banks and fnancial institutions rather than engage in a protracted prosecution of corporate leaders, which might prove unsuccessful. By allowing corporations to pay restitution, in lieu of prosecution, the Obama administration efectively monetized justice, permitting corporations to budget penalties in anticipation of wrongdoing. Tus, the immediate response by the Bush and Obama administrations to the Great Recession was to bail out banks and fnancial companies but elide prosecuting corporate ofcials. Pundits had a feld day: banks that had become “too big to fail” were headed by CEOs “too big to jail.” Te deference of the state toward capital resulted in an addition to the lexicon: late stage capitalism. Popularized by Occupy Wall Street and “we are the 99 percent,” adherents of late stage capitalism inveighed against metastatic markets that invaded all aspects of life, in the process crowding-out civic goods.24 Late stage capitalism thus became “a catchall phrase for the indignities and absurdities of our contemporary economy, with its yawning inequality and super-powered corporations and shrinking middle class.”25 In 2014, French economist Tomas Piketty became an international sensation with a door-stopping tome, Capital in the Twenty-First Century, documenting widening inequality, internationally.26 Reminiscent of the Gilded Age a century earlier, economic inequality afected the U.S. particularly: “in 2010, for example, the richest ten percent of all households owned seventy percent of all the country’s wealth (a good surrogate for ‘capital’), and the top one percent of all households owned thirty-fve percent of the wealth. By contrast, the bottom half of households owned just fve percent.”27 While late stage capitalism resonated with neo-Marxists and was quickly amplifed by postmodernists, the implications for the welfare state are poignantly specifc: the rise of oligopolies, cuts in supports for the working class and welfare poor, privatization of health and human services, the emergence of

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trade associations representing provider interests, compounded by a shriveled state unable to meet its fscal obligations without plunging deeper into debt. Unlike the virtuous cycle of the welfare state where the rich and corporations were taxed in order to redistribute benefts, services, and opportunities to the working class and poor, a vicious cycle had emerged where established interests contrived public policy in accord with their requirements, creating a Darwinian scramble for resources, the redistribution increasingly upward to favor the afuent. Te welfare state’s scafolding was being transformed from an industrial era edifce that approximated the public good to a commercial network of self-interest.

ECONOMIC INVOLUTION Early in the 21st century, the U.S. sufered two deep economic disruptions, reasserting the importance of the nation’s political economy.28 Commencing in 2008, the Great Recession burst a housing bubble infated by exotic fnancial instruments, prompting the federal government to shore up banks with an infusion of funds from the Treasury. Te Great Recession plundered working-class households, having seen their incomes stagnate since the 1970s, largely due to ofshoring manufacturing jobs. Although the North American Free Trade Agreement featured prominently in the deindustrialization of America, trade had expanded rapidly since the end of World War II, facilitated by international trade and lending organizations, such as the World Trade Organization and World Bank, respectively. Te arrival of the Information Age accelerated outsourcing and, with it, capital fight, leaving elected ofcials with less revenue to meet social program obligations. As Dani Rodrik observed, “hyperglobalization”—complementary to Piketty’s hypercapitalism 29—led to “domestic disintegration,” evident in the rise of ethnonationalism.30 Subsequently, domestic policies predicated on neoliberalism contained, then reversed welfare state expansion worldwide. In an efort to sustain competitiveness while honoring social entitlement commitments, national governments cut taxes, running up national debt with some defcits exceeding annual GDP.31 Inequality blossomed. Financially bereft as a result of ofshoring wellpaying jobs which were replaced by employment ofering signifcantly lower wages, the lower-middle class gradually found itself dwelling in the secondary labor market, blue-collar workers competing with the poor for jobs. At the same time, better jobs were requiring higher education and migrating to cities: “On one side, cities with little human capital and traditional economies started experiencing diminishing returns and stif competition from abroad,” noted one analyst. “On the other, cities rich in human capital and economies

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based on knowledge-intensive sectors started seeing returns and took full advantage of globalized markets.”32 Not surprisingly, the resentment of abandoned blue-collar voters toward elites became poignant, in 2016 vaulting Donald Trump into the White House. Ten, on the brink of recovery from the Great Recession, the novel coronavirus spread worldwide, posing to replicate the 1918 fu pandemic that killed millions. Nations quickly closed borders, instituted testing and tracking, and recommitted attending to the public’s health; however, nations varied considerably in their ability to hold the virus at bay. Te U.S., in particular, failed at containment, leaving the task to Governors, some more aggressive than others. Tragically, the politicization of wearing masks—Democrats deferring to public health experts admonishing citizens to wear masks countered by Republicans who perceived masks as proscribing individual liberty while negating economic growth—contributed to a spreading virus, evident in high rates of infection and death. By Fall 2020, 200,000 Americans had succumbed to the virus. As a result of the public health crises, the economy cratered, contracting 9.5 percent in the second quarter (32.9 percent annualized), businesses closed, unemployment claims skyrocketed.33 Nor was the damage limited to the U.S.: the second quarter loss to the European Union was higher, 12.1 percent, raising the specter of a worldwide depression.34 Te economic fallout of these events was extensive, the Great Recession having left minorities with signifcant home equity losses, and millennials confronted with a second setback, prompting reconsideration of marriage, home purchases, and having children. On the cusp of recovery from the Great Recession, the coronavirus plunged the economy into recession as many independent entrepreneurs, such as dentists, restauranteurs, and small shop owners, were suddenly without customers. As universities anticipated plunging enrollments, sports venues were canceled, and suspended preschools impeded mothers from working, a once vibrant economy was suddenly in free fall. Te social contract, already weakened by globalization, 35 fueled resentment toward those protected from insecurity, initially unions; however, suspicion could be directed at professional cartels as well. Indeed, the resentment of non-college educated workers toward professional elites has been ofered as an explanation for the rise of ethnonationalism internationally.36 In response to economic collapse due to the pandemic, governments resorted to Keynesian stimulus funding, paradoxically, a strategy embraced by Republicans as well as Democrats. Ultimately, the federal government would pump $16 trillion in liquidity to salvage the economy from the Great Recession.37 Federal funding to address the coronavirus was $4.2 trillion by May 2020, 38 which may well eclipse stimulus for the Great Recession. But federal stimulus funding has not been equitable. As Steven Pearlstein argues, the Treasury’s strategy is to “print money to buy as many bonds as necessary—to

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keep credit fowing to the business sector, no matter the risk.”39 Such vast and indiscriminate fow of money buoyed the economy, “magic money mocking the normal laws of economic gravity,” according to one economist.40 Te Fed’s placement of a foor under the economy advantages established economic institutions, bufering them against risk. “Remaking capitalism” in this manner, Zakarias noted, assured “no punishment for failure, no dangers of collapse, and no real mechanism for valuation of assets,” essentially “socialism for the rich and capitalism for the poor.”41 Scott Galloway put the Fed’s object in terms of moral philosophy, Protect the shareholder class, protect the executive class. Keep these frms on life support so their owners and managers don’t have to suffer. Pay for it with debt, a burden borne by middle-class taxpayers and, ultimately, by our children. However, history tells us, nearly every bailout, whether it’s Chrysler or Long-Term Capital Management, only creates moral hazard that results in a bigger failure and a more costly bailout.42 “Quantitative easing,” the Treasury’s term for injecting billions of dollars in the economy, had a noble pedigree promoted by John Maynard Keynes as a strategy for reviving an economy during recession, but the post-industrial American version became known as “modern monetary theory” (MMT). Stephanie Kelton, an economist and champion of MMT, aptly notes that the federal government enjoys a monopoly on issuing currency, unlike states, institutions, and families; hence the Treasury can print as much money as may be necessary. According to MMT enthusiasts, the glitch in unleashing federal fscal authority has been an unjustifed fear of expanding the defcit. “So, when the CBO [Congressional Budget Ofce] says that the federal government is on track to ‘spend more on interest payments than the entire discretionary budget, which includes defense and all domestic programs by 2046,’ many lawmakers begin to panic,” Kelton argued. To avoid cutting back on programs people value, Congress can simply authorize a larger budget to fund its other priorities. Tere’s no fxed amount of money. Tere is, however, only so much room in the economy to safely absorb higher spending. Tat’s the constraint Congress needs to worry about.43 Tus, MMT substituted worry about debt with preoccupation about infation. If the Treasury has efectively validated MMT through quantitative easing, what are the implications for the nation’s economic future, and therewith America’s welfare state? Several risks emerge: First, printing money for the

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purchase of corporate bonds favors publicly traded corporations embedded in Wall Street, as opposed to smaller businesses integral to Main Street. With the economy staggering, a “K” recovery has emerged, separating the have-yachts from the have-nots, fourishing digital corporations contrasted with desperate small retailers and unemployed workers, cast adrift. Approaching the 2020 election, the economic casualties of the coronavirus mount, including 4 million business closings along with 6.2–8.7 million workers whose jobs have disappeared.44 Second, increasing government debt entails interest payments, $378 billion on a debt of $18 trillion,45 which must be paid annually to assure “the full faith and credit” of the U.S. Such interest payments not only compete with other appropriations but could also contribute to an explosion of infation, should interest rates spike. Tird, ceding budget authority to Congress would eliminate the guardrails that have protected social insurances, especially Social Security and Medicare, leaving them more vulnerable to insolvency. Finally, while the objectives of MMT may align with progressive objectives for full employment and a Green New Deal, by the same token, conservatives in power could divert federal funding through tax refunds for the rich and fossil fuel corporations, exacerbating economic inequality and climate change. As MMT has coincided with Treasury monetary policy, more details are necessary for it to be a valid blueprint for the future. As conventional explanations of economic activity fail, unstable periods revive an interest in political economy, which posits reciprocity between the polity and markets as essential for prosperity. As Robert Reich explains, “Government doesn’t ‘intrude’ on ‘free markets.’ It creates the market.”46 But government’s capacity to craft capitalism through regulation, as was the case through much of the 20th century, faltered. Recently, critics have targeted “casino capitalism,” implying economic players place bets of comparable probability;47 yet, this fails to acknowledge the structural ways public policy rewards the afuent, via establishing think tanks promoting a neoliberal agenda, using the courts to favor business over workers, consumers, and communities, defenestrating regulations, defunding social programs, and opposing tax increases. According to Jef Madrick, public policy tilts toward the corporate sector, “the big oligarchical companies hav[ing] the lobbying and campaign-fnancing muscle to mold the rules in their own favor.”48 In this manner, 20th century Keynesianism has morphed into 21st century “economic involution,” shaping the polity and capital to advantage the afuent, assuring the wealthy and well-connected outsize rewards, leaving minimal, tentative benefts for workers via low hourly wages and the poor via degraded safety-net benefts. Just as tax cuts in recent decades have tilted the economy, favoring the afuent, so Supreme Court decisions, culminating in Citizens United, have shifted the polity to favor the plutocracy, diverting

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“dark money” to political campaigns, untraceable contributions perversely employing the IRS 501(c)(3) “social welfare” tax classifcation.49 Tus, the mid-20th century’s virtuous circle of political economy, however imperfect, has been eclipsed by a 21st-century sequel, a vicious circle of economic inequality, social division, and political instability. Economic involution rewards professionals as card-carrying members of the meritocracy, approximating the “one percent” and corporate CEOs. While professional remuneration may be less than that of the egregiously wealthy, they beneft in regular pay with benefts, especially compared to blue-collar workers and marginal workers who depend on social benefts. Borrowing the label of the Indian aristocracy, later appended to the Boston elite, Tomas Piketty charts the international rise of the “Brahmin left,” battened pay and security assured by professional education through meritocratic means.50 In the U.S., this has been chronicled as well.51 As the public expresses reservations about “professional cartels,” protected by educational qualifcations, licensing, and zoning, the relatively generous perks of the meritocracy have come under scrutiny.52

FLY-OVER COUNTRY A burgeoning meritocracy invites populist reprisal because positions are reserved for professionals who have credentials far beyond the general population and operate social programs at a distant remove from the public, factors with profound implications for the welfare state. Although modern developed nations are complex, requiring the knowledge and experience of leaders to sort through a wicked array of problems, their ease at establishing rents at the expense of the public breeds resentment. Tus, “fy-over country” has been invoked to describe those parts of nations largely ignored by meritocratic elites. Presumed to be expendable, fy-over country is both geographical and meritocratic. Te geographical manifestations of fy-over country are easily explained, requiring only a map. In the U.S., power is bi-coastal, lodged mostly along the Acela corridor connecting Washington, DC, with Boston with a subsidiary “left coast” running from California to Washington State. Brexit was largely fueled by indignation of working-class Brits for the afuence and infuence of London, “Te City.” Te European Union evolved its own version with leaders jetting back and forth from Paris, Berlin, London, and other national capitals to Brussels. When daily activities of citizens are compromised by distant authorities who seem witless about those of less stature, a rise in populism is predictable. But the occupational implications of fy-over country have been less conspicuous and, arguably, more ominous. With global economic expansion

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after World War II, developed nations evolved specialized institutions to aid elected ofcials with institutional management: think tanks. Even a robust democracy will elect representatives who are less informed than they could be to navigate the halls of power, in which event power is efectively ceded to bureaucrats. In this respect, populism represents citizen frustration with an unelected “fourth branch” of government. With regard to domestic policy, American think tanks run the spectrum from liberal to conservative, including the Center for American Progress (CAP), the Brookings Institution, the Urban Institute, New America, the American Enterprise Institute (AEI), the Heritage Foundation, and the Cato Institution, placed according to their ideological preferences.53 All think tanks are private, nonprofts so their funding is obscured by IRS provisions. Tink tank staf—often “fellows”—are highly pedigreed experts who write monographs on important issues, which bear the ideological imprint of their institute. Along with endowed chairs at Ivy League universities, such as Stanford, Berkeley, the University of Chicago, Princeton, Columbia, and, of course, Harvard, the aggregate brainpower is incomparable. Notably, think tank fellows and university chairs often cycle back and forth with changes of presidential administrations, Heritage, Cato, and AEI populating the upper reaches of Republican administrations, just as Brookings, CAP, and Urban serve as reservoirs for liberals awaiting the next Democratic presidency. Even around highly charged issues and periods of divisive polarization, think tank fellows from opposing ideologies will socialize, enjoying the intellectual skirmishing. Whether liberal or conservative, the elites orchestrating essential institutions are often out-of-step with the denizens of fy-over country. Impromptu uprisings, such as the Tea Party54 and QAnon from the right versus Black Lives Matter and antifa from the left, pose profound problems for the political establishments of the Republican and Democratic Parties, respectively, as they provide platforms for parvenues with political ambitions. Improbably for established political operatives, Donald Trump exploited a roiling populism in mounting a successful campaign for the presidency, while Boris Johnson replicated, more or less, the performance in Britain, giving rise to concern among intellectuals of “illiberal democracy” threatening post–World War II prosperity. Despite the diferences between extreme groups, they share an exasperation with the status quo, refected in a “blow it up” refrain,55 often expressed in demonstrations that occasionally incite violence. Populism in this sense represents an existential challenge to the welfare state in general, and its solidarity premise in particular—the right opposing taxes necessary for social programs, the left rejecting institutions of “rabble management.” Te Covid19 pandemic has thrown these threats to the welfare state into sharp relief. Foremost, the challenge to professional expertise, which has undergirded the

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welfare state, is evident in the denigration of epidemiologists at the Centers for Disease Control and Prevention as well as state agencies, otherwise benign experts with high credentials and long experience threatened with bodily harm. Moreover, the refusal of millions of Americans to wear masks to prevent spread of the virus exposes citizens to disease while prolonging economic recovery. Alarmingly, as the economy cratered President Trump foated a “tax holiday,” suspending the withholding tax dedicated to Social Security and Medicare for four months, suggesting he would terminate the tax if reelected. While this would require the approval of both chambers of Congress, the disregard of the “third rail” of social policy undermines social insurance, Welfare State 1.0. Insurgent populism, thus, shows the temporality of social institutions. However inadequate social insurance has been in the U.S., it served as the bedrock for the American welfare state, which liberals averred to expand until social protections were comparable to those of Scandinavia. Yet, liberal Democrats have struggled to maintain inadequate Social Security, Unemployment Insurance, and Medicare coverage, just as conservative Republicans, once deferential to federal social insurance programs, increase their assault. Tellingly, only one vote—by Republican Senator John McCain—saved the Afordable Care Act from being canceled, despite the Trump administration’s failure to ofer any alternative. If the social insurance programs of Welfare State 1.0 are vulnerable, public assistance of Welfare State 2.0 is even more so, raising the specter of a welfare state shipping suffcient water to founder completely.

NOTES 1 Edward Berkowitz, Making Social Welfare Policy in America (Chicago: University of Chicago Press, 2020). 2 Louis Menand, Te Metaphysical Club (New York: Farrar, Straus & Giroux, 2001), p. 415. 3 Louis Menand, Te Marketplace of Ideas (New York: W.W. Norton, 2010), p. 103. 4 “Liberati” is a confation of “literary left,” a preference for animating narrative over formal research in advocacy. David Stoesz, Quixote’s Ghost: Te Right, the Liberati, and the Future of Social Policy (New York: Oxford University Press, 2005). 5 George Will, “Te Fourth Branch of Government Is on Its Way to Displacing Congress,” Washington Post, September 11, 2020. 6 Michael Sandel, “Disdain for the Less Educated Is the Last Acceptable Prejudice,” New York Times, September 2, 2020. 7 Michael Young, Te Rise of the Meritocracy (Middlesex, Penguin, 1958), p. 94. 8 Richard Reeves, Dream Hoarders (Washington, DC: Brookings Institution, 2017). 9 Young, p. 190. 10 Fareed Zakaria, Ten Lessons for a Post-Pandemic World (New York: WW Norton, 2020), p. 90. 11 Steve Fraser, Te Limousine Liberal (New York: Basic Books, 2016), pp. 188–89.

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12 Tomas Piketty, Capital and Ideology (Cambridge, MA: Harvard University Press, 2020), p. 712. 13 Reeves, Dream Hoarders, p. 25. 14 Tomas Shapiro, Toxic Inequality (New York: Basic Books, 2017), p. 26. 15 Samuelson, Robert (2020, August 16), “Te Rise of the Upper Middle Class,” Washington Post, Augurs 16, 2020. https://www.washingtonpost.com/opinions/the-rise-of-the-upper-middle-class/2020/08/16/3aa1aea4-de60-11ea-b205 -f838e15a9a6_story.html 16 Joan Williams, White Working Class (Boston: Harvard Business Review Press, 2017), p. 4. 17 Milton and Rose Friedman, “Te Tide in the Afairs of Men,” in Tinking about America, edited by Annelise Anderson and Dennis Bark (Stanford: Hoover Institution, 1988). 18 Bastian Obermayer and Frederik Obermaier, Te Panama Papers (London: OneWorld, 2016), p. 185. 19 https://www.theguardian.com/news/2017/nov/08/key-revelations-from-the-paradise-papers 20 Edmund Fawcett, Liberalism (Princeton: Princeton University Press, 2014), p. 18. 21 John Plender, Capitalism (London: BiteBack Publishing, 2015), p. 70. 22 Colin Crouch, Te Strange Non-Death of Neoliberalism (Malden: Polity, 2011). 23 https://www.justice.gov/sites/default/fles/criminal-fraud/legacy/2010/04/11/charging-corps.PDF 24 Michael Sandel, What Money Can’t Buy (New York: Farrar, Straus and Giroux, 2012). 25 Annie Lowrey, “Why the Phrase ‘Late Capitalism’ Is Everywhere,” Te Atlantic, May 1, 2017. https://www.theatlantic.com/business/archive/2017/05/late-capitalism /524943/ 26 Tomas Piketty, Capital in the Twenty-First Century (Cambridge, MA: Harvard University Press, 2014). 27 John Cassidy, “Forces of Divergence,” New Yorker, March 31, 2014, p. 71. 28 Kurt Andersen, Evil Geniuses (New York: Random House, 2020). 29 Tomas Piketty, Capital and Ideology (Cambridge, MA: Harvard University Press, 2020), chapter 13. 30 Dani Rodrik, “Globalization’s Wrong Turn,” Foreign Afairs, July/August, 2019, p. 33. 31 David Stoesz, Te Investment State (New York: Oxford University Press, 2018). 32 Enrico Moretti, Te New Geography of Jobs (New York: Mariner Books, 2013), p. 106. 33 https://www.nytimes.com/live/2020/07/30/business/stock-market-today-coronavirus?action=click&module=Top%20Stories&pgtype=Homepage 34 https://www.nytimes.com/live/2020/07/31/business/stock-market-today-coronavirus?action=click&module=Top%20Stories&pgtype=Homepage%20%20A %20Potemkin%20village%20of%20metaphysics 35 Pankaj Mishra, Age of Anger (New York: Farrar, Straus & Giroux, 2017). 36 John Judis, Te Populist Explosion (New York: Columbia Global Reports, 2016). 37 Zachary Carter, Te Price of Peace (New York: Random House, 2020), p. 521. 38 https://www.usatoday.com/in-depth/news/2020/05/08/national-debt-how-much -could-coronavirus-cost-america/3051559001/ 39 Steven Pearlstein, “Te Fed Is Addicted to Propping Up the Markets, Even Without a Need,” Washington Post, June 17, 2020. 40 Sebastian Mallaby, “Te Age of Magic Money,” Foreign Afairs, July–August 2020, p. 69. 41 Fareed Zakarias, Ten Lessons for a Post-Pandemic World (New York: WW Norton, 2020), p. 159. 42 Scott Galloway, Post Corona (New York: Penguin, 2020), p. 166. 43 Stephanie Kelton, Te Defcit Myth (New York: Public Afairs, 2020), p. 88.

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44 https://www.washingtonpost.com/business/2020/08/25/permanent-economic-damage-piles-up-covid-crisis-is-looking-more-like-great-recession/?hpid=hp_business-1 _joblosses-10am%3Ahomepage%2Fstory-ans 45 https://www.thebalance.com/interest-on-the-national-debt-4119024 46 Robert Reich, Saving Capitalism (New York: Knopf, 2015), p. 5. 47 Steven Brill, Tailspin (New York: Knopf, 2018); Mazzucato, chapter 5. 48 Jef Madrick, “Why the Working Class Votes against Its Economic Interest,” New York Times, July 31, 2020. 49 Jane Mayer, Dark Money (New York: Random House, 2016). 50 Tomas Piketty, Capital and Ideology (Cambridge, MA: Harvard University Press, 2020), ch. 15; See also Chrystia Freeland, Plutocrats (New York: Penguin, 2012). 51 See Tomas Frank, Listen, Liberal (New York: Picador, 2016); Richard Reeves, Dream Hoarders (Washington, DC: Brookings Institution, 2017). 52 Banyamin Appelbaum, Te Economists’ Hour (New York: Little Brown, 2019), p. 329. 53 As conservative think tanks eclipsed those of liberal bent, scooping universities in “the marketplace of ideas,” a small literature has evolved in the biography of policy institutes. See, for example, James Smith, Te Idea Brokers (New York: Free Press, 1991); Andrew Rich, Tink Tanks, Public Policy, and the Politics of Expertise (New York: Cambridge University Press, 2004); Tomas Medvetz, Tink Tanks in America (Chicago: University of Chicago Press, 2012); Daniel Drezner, Te Ideas Industry (New York: Oxford University Press, 2017). 54 Teda Skocpol and Vanessa Williamson, Te Tea Party and the Remaking of Republican Conservatism (New York: Oxford University Press, 2012). 55 George Will, “Te Illusion ‘We the People’ Rule Democracy,” Albuquerque Journal, September 6, 2020, p. A12.

4

Lyndon Johnson’s War on Poverty

Although public assistance programs were introduced by states prior to the Social Security Act of 1935, which would include welfare for dependent children, the aged, the blind, and disabled, Lyndon Johnson’s War on Poverty of the 1960s introduced a new array of anti-poverty programs, amplifying Welfare State 2.0. Built on social insurance of Welfare State 1.0, the American welfare state thus continued a liberal trajectory in domestic policy. But Johnson’s aspiration to construct the Great Society foundered on civil disorder associated with the civil rights movement and opposition to military adventures in Southeast Asia. Moreover, neoconservative intellectuals, who had supported the New Deal, expressed profound skepticism about anti-poverty programs not contingent on work, laying the groundwork for a sustained campaign by the Right to oppose federal welfare programs.

PRECEDENTS TO FEDERAL WELFARE Federal involvement in social welfare actually predates the founding of the Republic, evident in marine hospitals established for seamen who might transmit communicable disease. Post–Civil War pensions to Union veterans were extensive, consuming upward of 40 percent of the federal budget; however, veterans of the Confederacy were excluded, further aggravating tensions between victor and vanquished.1 Families of veterans who lost the War Between the States petitioned state governors of the Confederacy for aid, which was granted, but not until after loud demonstrations on the part of widows.2 Te Freedmen’s Bureau (1865–1872) established schools, hospitals, and labor exchanges throughout the South as part of Reconstruction, generating animosity toward Negroes and catalyzing the rise of Jim Crow as well as the Ku Klux Klan.3 As the economy modernized, industrial carnage left

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many families bereft of male breadwinners, leading states to establish widows’ pension programs; by 1919, 39 states had programs supporting widows and their children.4 But state pensions for impoverished families adhered to contemporary norms, such as Jim Crow, insofar as only 3 percent of pensions went to Negro mothers.5 In advocating the inclusion of “mothers’ pensions” in the Social Security Act, Edith Abbott, a leading social worker, ofered lawmakers a maternal assurance that the program would only beneft “really nice children and the families are really nice families.”6 Hence, the 1935 Social Security Act incorporated four welfare programs for poor people who were aged (Old Age Assistance [OAA]), blind (Aid to the Blind), disabled (Aid to the Disabled [AD]), or dependent children (Aid to Dependent Children). As with Unemployment Insurance, states administered these public assistance programs as well as anted-up funding which the federal government would then match, providing a funding pool from which states would then allocate benefts. As noted in Chapter 1, Social Insurance was the focus of FDR and the New Dealers as male breadwinners were thought to be the key to stabilizing society during the Great Depression; however, insurance schemes presumed employment, so temporary work programs were instituted beginning in 1932, pending economic recovery. Until workers had contributed to a public pension (Social Security), they would have to rely on a state public assistance program; for workers who were disabled or retired, AD and OAA, respectively, ofered benefts of last resort. While social insurance ofered benefts to those who had contributed, public assistance was funded through general revenues and predicated on a means test, a limit on income and assets. Typically, assets were limited to $2,000, assuring that only the most indigent received benefts. Te result was a jury-rigged system based on state ability and/or willingness to provide for its poor. Just before passage of the Social Security Act, 34 states had established old age pensions—expressing somewhat less enthusiasm for poor retirees than widows with children—and benefts varied from $25/month in Massachusetts to zero in Mississippi, which had not adopted a program for the indigent aged.7 As noted in Chapter 2, state beneft levels difered from the adequate to the punitive. Racism left many minority families without benefts; in the South welfare recipients were suspended during the harvest, as recipients were expected to work.8 Social workers provided surveillance of mothers to ensure that they supervised children properly while not engaging in immoral behavior. Indeed, it was not until 1968 when the Supreme Court invalidated an Alabama “man-in-the-house” rule stripping welfare benefts from a mother who had sexual relations with a man.9 If the states were punitive toward the minority poor, the funding mechanism also corrected for any latent liberal efort to make benefts more generous. When welfare rolls increased to

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unacceptable levels, lawmakers simply refused to increase state allocations upon which federal funds were matched, thereby reducing their fscal exposure. Federalism, codifed by the Tenth Amendment to the Constitution, may not have been an especially generous means for dispensing public assistance by the states, but it served the purpose of keeping the poor in their place.

THE GREAT SOCIETY: WELFARE STATE 2.0 Trust into the presidency after the assassination of President Kennedy, Lyndon Johnson exchanged a reluctant acceptance of segregation for a broad policy agenda, not only advancing Civil Rights but also signing a raft of public assistance programs addressing the profound poverty of minority families. LBJ’s ambitions reprised FDR’s, leveraging crisis to advance social programs. Serving in the House of Representatives and Senate, Johnson had become a master tactician, moving into leadership. An ascendant Civil Rights movement punctuated by urban riots provided the catalyst for an ambitious legislative agenda, Johnson’s Great Society. Tree sets of laws articulated the Great Society: the Civil Rights Act of 1964, prohibiting discrimination based on race, religion, gender, and national origin, and the Voting Rights Act of 1965, assuring African Americans full access to the ballot; Medicare, a health insurance plan for seniors, an important addition to Welfare State 1.0; and a series of new public assistance programs targeted at the minority poor, hence the War on Poverty, amplifying Welfare State 2.0. Lyndon Johnson knew poverty intimately. Born into a hard-scrabble farm family in the hill country of west Texas, Johnson picked cotton at age nine for $2/day, graduating to managing a primitive road grader, a “fresno” as a gangly teenager. Te fresno had a metal grader pulled by four mules, the reins tied behind the operator’s back to keep his hands free to operate the wooden handles. An early riser, Johnson worked hard, poignantly aware that his patched clothes set him apart from more afuent peers. A friend later reported that Johnson simply hated poverty.10 And as President, he could do something about it. Drawing on the late-President Kennedy’s concern about poverty, Johnson commanded aides to develop specifc programs, then announced in his frst State of the Union address “war on poverty.” Eventually, Johnson’s anti-poverty initiatives would span multiple federal agencies, add public assistance programs in health care, nutrition, and education, as well as empower impoverished communities: the Department of Health, Education, and Welfare (now Health and Human Services) operated Medicaid and Head Start; the Department of Agriculture assigned to food stamps, while the Community

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Action Program, intended to coordinate anti-poverty eforts, was placed with an independent agency, the Ofce of Economic Opportunity, which also managed Job Corps, Volunteers in Service to America, and Legal Services. While liberals and leaders of the civil rights movement applauded, many intellectuals were aghast. Liberals who had supported the New Deal identifed several faws in the War on Poverty. Foremost, Medicaid, Head Start, and food stamps were detached from the labor force, eligibility determined by the means test as was the case with welfare programs established by the Social Security Act. Daniel Patrick Moynihan, the Labor Department analyst we met in Chapter 2, was especially indignant about the Ofce of Economic Opportunity (OEO), which bypassed state government and mayors, connecting impoverished neighborhoods directly with the federal government. Even more troubling, OEO’s Community Action Programs, essentially a coordinating council of anti-poverty eforts, required that one-third of board composition be reserved for the poor themselves under a “maximum feasible participation” provision. Moynihan blanched at the prospect of the minority poor managing anti-poverty programs, penning a rebuttal, Maximum Feasible Misunderstanding.11 As Richard Nixon’s domestic policy advisor, Moynihan would win the skirmish, scuttling OEO, but lose the war as an entire generation of minority leaders used CAP as a vehicle to transition into city and state-elected ofce. Little noticed, Legal Services advocates challenged restrictive state welfare policies with class action suits, opening eligibility to those previously denied benefts. Building on their empowerment, a National Welfare Rights Organization mobilized the poor to fght for more equitable policies and more adequate benefts. Conservatives vehemently objected, inveighing against liberal intellectuals supporting the War on Poverty as “poverty pimps.” Lyndon Johnson’s Great Society became collateral damage to efects intended and otherwise. Te anti-poverty programs, however well-intended and funded compared to the eforts begun in 1935, ofered too little for minorities energized by the civil rights movement. Urban unrest of the early 1960s exploded after the assassination of Martin Luther King, Jr., in 1968, leading to confagrations in Los Angeles, Chicago, Washington, DC, and elsewhere. Te escalation of the military incursion in South Vietnam angered youth, especially men subject to the draft, leading to the takeover of presidents’ ofces at major universities at Berkeley, Chicago, and Columbia. Militarized radicals, including the Weather Underground and Black Panthers, fought the police and bombed banks. Te destabilization of the country led Johnson to announce he would not run for re-election, but this was insufcient to quell the violence. Te 1968 Democratic convention in Chicago devolved into a riot.

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WELFARE Yet, major additions to Welfare State 2.0 endured, food stamps, Medicaid, and Head Start immune to forces that sabotaged the Great Society. Tese, along with Aid to Families with Dependent Children (Temporary Assistance for Needy Families [TANF] after 1996) and Supplemental Security Income (the merger of Old Age Assistance, Aid to the Blind, and Aid to the Disabled after 1974), represented the foundation of “welfare” in America. Signifcantly, with the exception of TANF after 1996, each of these programs was an entitlement, so government expenditures followed the number of eligible applicants, increasing automatically with need, as opposed to a predetermined budget. As depicted in Figurer 4.1, public assistance expenditures are, with the exception of Medicaid, fat. Tis follows a dictum of policy wonks: “poverty programs are poor programs,” in two essential ways. Compared to social insurance, benefts are inferior, Social Security pays better than Supplemental Security Income and Medicare provides better coverage than Medicaid. Tis can be attributed to the Tenth Amendment compounded by Jim Crow afecting the Social Security Act, allowing states to determine eligibility for public assistance programs as well as manage them. As a result, public assistance, or “welfare” as it is more commonly known, represents second-class benefts for second-class citizens.

Major Public Assistance Program Expenditures, in $millions 500000 450000 400000 350000 300000 250000 200000 150000 100000 50000 0

1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 2025 Medicaid

Nutrition

Supp Sec Income

AFDC/TANF

Figure 4.1 Major public assistance program expenditures, in $millions. Adapted from https://www.whitehouse.gov/wp-content/uploads/2020/02/hist_fy21.pdf

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But, the nation’s experience with welfare has been more complicated than public ambivalence about the poor. Obviously, Medicaid, despite being a meanstested program, mirrors expenditures for social insurance, evident in Hospital Insurance, the major component of Medicare, in Figure 4.1. Tis refects the awkward marriage of Medicare, health insurance for seniors, with Medicaid, health assistance for the poor. Medicare presumes acute illness from which the patient recovers, hence limits on coverage to about 100 days of hospitalization, while Medicaid covers care beyond 100 days, usually in a nursing home. As a result, Medicaid expenditures favor the elderly by a wide margin over, say, children. According to the Centers for Medicare and Medicaid Services, in 2014, Medicaid spent $19,098 per senior, fve times that of children, $3,749 per child; overall seniors consumed 30 percent of the Medicaid budget,12 a fgure that will increase with the gradual decline of 77 million Baby Boomers. But over time interest groups have emerged to support public assistance programs. Medicaid benefts have become essential to healthcare providers, including medical personnel, hospitals, pharmacies, and insurers, each with robust trade associations. Tus, Medicaid may be an inferior health assistance program for the poor, but healthcare interests have been keen to maximize revenues fowing from it. Te next most prominent public assistance program, “nutrition” is comprised of what was known as food stamps, relabeled the Supplemental Nutrition Assistance Program (SNAP), along with the Women, Infants and Children Nutrition Assistance Program (WIC), and the School Lunch Program. In this instance, the poor receive a boost from powerful interests: farmers, industrial agriculture, and supermarkets. Originally a way to distribute surplus agricultural commodities, government nutrition programs now support agriculture by providing targeted subsidies for the poor to purchase food produced on farms, hence the location of SNAP within the Department of Agriculture. To this point, foreign and non-consumables are excluded, including French wine and American cigarettes. Finally, SSI, assistance to those deemed unable to work because they are blind, old, or disabled received strong support from the Association of Retarded Citizens (now the Arc). Physical and cognitive impairments tend to cross conventional lines of stratifcation regarding income, race, and ethnicity, so Down syndrome, to cite an example, is evenly spread through the population, afecting families of poor African Americans as well as afuent members of Congress. Tus, bills afecting SSI are certain to feature powerful testimony from benefciaries, including relatives of those with Down syndrome.

WELFARE REFORM Process of elimination leaves cash benefts to poor families as the last major public assistance program to consider, once AFDC, now TANF. Tis

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transition is predictable insofar as poor, disproportionately minority families lack the support of an infuential interest group. Te details of TANF are considered in Chapter 5, along with other reconfgurations of the American welfare state, but this change refected the increasing ambitions by the Right to “reform welfare.” Forays against other public assistance programs for naught due to the infuence of powerful interests, conservatives focused on AFDC. Simmering controversy about AFDC erupted in 1961 in a small city, Newburgh, New York, when the city manager instituted a 13-point plan to restrict welfare, including a residency requirement, a work mandate, substituting vouchers for cash payments, and denial of benefts for children born once the family had received assistance. Te “battle of Newburgh” was won by the State’s welfare board, which, citing the grant-in-aid agreement with the federal government, ordered the city to comply with federal regulations.13 But, in defeat, Newburgh ignited interest by conservatives to tackle a New Deal program that appeared vulnerable, AFDC. As a Governor, Ronald Reagan supported the California Welfare Reform Act, geared to reduce fraud, impose a work mandate, and track down absent fathers. Inveighing against “welfare queens,” Reagan brought his animosity to welfare mothers to Washington, DC, where his administration introduced the Family Support Act (FSA) of 1988. Te hallmark of FSA was encouraging employment of welfare mothers; however, a furry of exemptions insisted by congressional Democrats rendered the reform inefective. Meanwhile, conservative intellectuals released a broadside against unconditional welfare, arguing that benefts should be contingent on compliance with conventional norms: delaying pregnancy until marriage, graduating from high school, and getting a job. As a critique of existing welfare, “behavioral poverty” proved a powerful indictment, contrasting traditional norms with the amoral conduct of poor minority mothers. Taking advantage of an obscure section of the Social Security Act, Section 1115 permitting states to ofer alternative assistance schemes so long as they were not more expensive than the current federal/state status quo, states were ofered waivers to operate their own versions of AFDC, providing outcomes were documented by feld experiments. Among the Democrats taking advantage of this option was the Governor of Arkansas, Bill Clinton, who would later vow the “end welfare as we know it,” but welfare waivers proved popular, signaling an opportunity for governors to avoid walking in lockstep with Washington. Indeed, by the time President Clinton signed the 1996 Personal Responsibility and Work Opportunity Reconciliation Act (PRWORA), most states had already been granted waivers, which the 1996 welfare reform law honored, so AFDC was already relegated to the dustbin of history for all practical purposes.14

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Notwithstanding the ostensible policy benefts that conservatives promised through PRWORA, the TANF caseload collapse continued during the Great Recession when fnancial needs of poor families skyrocketed, raising profound questions about the adequacy of family assistance. But conservatives were not to be disabused of enthusiasm for replicating the 1996 welfare reform template on other public assistance programs. Of these, Medicaid loomed large. Tus, early in 2020, the Trump administration issued invitations to states to apply for Medicaid waivers, which would restrain costs by imposing a block grant, adhering to the 1996 welfare reform strategy.15 But the Trump Medicaid venture was bound to end diferently. As AARP and health interests reacted, the half-life of the Trump proposal was limited to months, even if a few Republican governors expressed initial enthusiasm for the notion. Medicaid already accounts for 17 percent of state budgets, vying with education for public funding,16 so dumping more fscal demands on states would seem ill advised, especially as state and local government struggles to respond to the coronavirus with little federal assistance. Impending costs for nursing home care alone would strain state budgets, so Trump’s Medicaid block grant scheme invited unhappy visions: a granny in her chair being wheeled to the curb for her family to pick her up and assume care after the nursing home where she had lived ran out of state Medicaid funding!

THE POVERTY TRAP If social insurance ofered through the “liberal” welfare states promised a minimal public pension, public assistance functioned to trap the poor in penury. Te mechanism for structurally impoverishing the poor has been the means test, the requirement that applicants have not only minimal income but negligible assets as well. Te purpose of the means test has been to differentiate the “worthy poor” from the “unworthy poor,” the latter presumed to have sufcient resources for self-support and therefore no need for public aid. Tis distinction, for example, separates Social Security, which has no means test from Supplemental Security Income, which, at inception, limited benefts to those with resources less than $2,000.17 States operating public assistance programs retain the authority to regulate the means test, some being relatively forgiving, as in allowing applicants to retain a house and car, while others are more restrictive, tapping resources, such as life insurance, burial plots, and savings accounts. Signifcantly, once income and assets exceed the means test, benefts for public assistance recipients are terminated. Tus, the means test may come as a shock to unemployed blue-collar workers, who, having exhausted

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Unemployment benefts, resort to the local welfare ofce to apply for SNAP only to be confronted by a requirement they sell the late model car, deplete savings for their kids’ college, and sell life insurance to meet the typical means test requirement of resources. For welfare recipients who have received TANF, SNAP, SSI, and Medicaid. for any period of time, the means test is an all too familiar impediment to upward mobility, so, if at all possible, they hide resources from surveillance of welfare authorities even if this constitutes fraud, a felony under current statutes. Te means test functions to increase the shufing of welfare recipients to and from low-wage jobs of the secondary labor market. It may come as a surprise to many Americans, but most of their compatriots receiving welfare actually work; the annual report to Congress on public assistance programs recently reported, more than one-half of families who receive TANF or SNAP benefts are in the labor force.18 Yet, participating in the low-wage labor force represents a Faustian bargain for welfare recipients: accrue too much in resources and important benefts, such as Medicaid for the children, are deleted. Typically, low-wage workers cycle on and of welfare depending on the availability of work and the adequacy of wages, all the while keeping a keen eye on the means test limit for public assistance. If public assistance was intended to provide a minimal foor of aid for the poor and promote their upward mobility, the asset limit of the means test would be scrapped, thus encouraging low-income households to build resources. Tus, an important complement to Clinton’s 1996 welfare reform, which required welfare recipients to work, was a three-fold increase in the Earned Income Tax Credit, a tax refund, which contains no asset restriction; refunds are based simply on earned income and number of dependents. Tis will be considered more fully in Chapter 5; however, even then, income from public assistance and low-wage work has been inadequate for most families to become economically self-sufcient. Essentially, the means test traps the poor in poverty instead of accelerating their upward mobility, hence compounding obstructions that have long impeded the prosperity of low-wage workers, especially women and minorities of color. Further compounding the lot of the poor, the interaction of minimal public assistance and episodic, low-wage work has spawned an industry in fnancial services to the poor. As two researchers explained, “Applying for public benefts today is often clunky and slow. It can require standing in lines, flling out extensive forms, parsing complicated eligibility criteria that vary for each type of public beneft, and answering burdensome follow-up questions.”19 Waiting weeks for the arrival of welfare benefts, many low-income families facing a car repair, healthcare emergency, or utility shut-of, resort to a subprime lender ofering immediate cash, even if the interest is high. Indeed, a survey of payday loan consumers revealed desperation so acute that

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37 percent would take out a loan under any conditions ofered.20 Tus, high fees and interest of subprime loans complement inadequate welfare and wages for the working poor. Pawnshops have been ubiquitous in minority neighborhoods, ofering residents quick cash for valuable items, redeemed upon payment that represents extreme interest rates. Te lack of access to traditional fnancial services— banks and credit unions—coupled with punitive charges for overdrafts, have found the minority poor a niche market for “alternative fnancial services” (AFS), the anodyne label afxed by the Treasury but opposed by religious leaders citing Old Testament injunctions against usury and liberals, labeling purveyors of extraordinary interest rates as “predatory lenders.” Tus, the later decades of the 20th century witnessed a veritable explosion of new fnancial services: check cashers, buy-here-pay-here auto lots, payday lenders, auto title lenders, and rent-to-own appliance stores. Curiously, none of these are frequented by anti-poverty advocates, who view them as worsening the lot of the poor. But, coincidental with state lotteries, the market in alternative fnancial services fourished, driven by demand for services on the part of the working poor and welfare recipients struggling for purchase in a Darwinian labor market. Without access to mainstream fnancial services, AFS has become the default bank for the working and welfare poor. Former football star and payday pitchman, Willie Green stated, Check-cashing stores and pawnshops and payday lending stores, those are the poor man’s institutions. You go to any poor black person, and I guarantee you, they’ve borrowed money from a payday person, a title loan person, or a pawnshop. Tat’s what you do if you don’t have the luxury of going into a bank and borrowing money.21 But the disproportionately minority poor pay dearly for AFS, allege critics, noting that the Annual Percentage Rate for a fee of $15 for a $100 payday loan is 391 percent. To this, Tomas Sowell observed that payday loans are short-term; thus three-digit interest rates were not a relevant metric, analogous “to the price of salmon as $15,000 a ton or say a hotel room rents for $36,000 a year, when no consumer buys a ton of salmon. And few people stay in a hotel room all year.”22 Countering the liberal diatribe on AFS, Lisa Servon, a fnance professor, worked at a check casher in New York City for four months and interviewed customers later. She found that consumers appreciated extended business hours into evenings and weekends, the bi-lingual and friendly staf, and staf willingness to postpone fees, to the extent customers often tipped staf.23 Later, Servon observed that “the decoupling of the terms ‘middle class’ and

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‘economic stability’ is closely connected. To the retraction of the public and private safety net.”24 Evicted from a McMansion due to job loss, the middleclass family moving into a double-wide trailer is immediately confronted with the plight of the working and welfare poor, including inaccessible welfare benefts and high cost AFS. But the real moral hazard is being ensnared in the poverty trap from which escape is difcult, indeed.

MOBILITY Individuals vary considerably from the general population, fourishing or forfeiting opportunities over time. Researchers from the Brookings Institution tracked successful negotiation of critical life events in relation to social class. Six life stages were included in their analysis: (1) Family formation at birth: normal birth weight to a mother with at least a high school diploma; (2) Early childhood: pre-reading and math skills with appropriate pre-school behavior; (3) Middle childhood: reading and math skills with social-emotional skills; (4) Adolescence: graduation from high school with a GPA at least 2.5 and no criminal conduct or pregnancy; (5) Transition to adulthood: living independently with earnings at least 250 percent of poverty or receipt of a college degree; and (6) Adulthood: reaches middle class with earnings at least 300 percent of poverty. While these events in sequence represent a pathway to the middle class, they also present barriers, singly and multiply (Figure 4.2). 80

Accomplishment of Life Stages, Percent

70 60 50 40 30 20 10 0

Early childhood Middle childhood White

Adolescence Black

Young adulthood

Adulthood

Hispanic

Figure 4.2 Accomplishment of life stages, %. Adapted from Isabell Sawhill, Scott Winship, and Kerry Grannis, “Pathways to the Middle Class” (Washington, DC: Brookings Institution, 2012), p. 6.

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As depicted in Figure 4.1, whites enjoy relatively steady success through all life stages, beginning at 68 percent in early childhood and ending at 68 percent in adulthood. Blacks, however, have a strikingly diferent experience, beginning at 56 percent in early childhood, dropping to 34 percent in adulthood. For Hispanics, life progression resembles a roller-coaster, beginning at 61 percent in early childhood, rising to 66 percent in middle childhood, dropping to 43 percent in adolescence, then rising to 47 percent in early adulthood and 52 percent in adulthood.25 Clearly, whites enjoy continual advantages over Hispanics and even more so over blacks. Common sense may conclude these barriers to the middle class are cumulative: the under-weight minority infant faring poorly in school, later engaging in crime or pregnancy, then earning poverty level wages or dependent on welfare, gradually inducted into the underclass. However, the researchers found that 24 percent of children having failed to navigate all life stages successfully still rose into the middle class, 26 a testament to will and/or luck. Changes in mobility—or in the American experience, declining mobility for the lower-middle class and middle-middle class—have enormous implications for the welfare state. Recall Figure 3.2, which depicts the poor and near-poor treading water between 1967 and 2016, compared to the collapse of the lower-middle class and decline of the middle-middle class, especially relative to the rise of the upper-middle class. Needless to say, those losing ground economically will resent those with whom they have to compete as well as those having skated past. Keith Payne sketches the consequences in social psychological terms: As the minority at the top pull further and further away from the mass of working-class people at the bottom, we can expect their political opinions to change. Tey will mistake their self-interests for genuine principles, and they will look with disdain on people who disagree with them. If they view their political opponents as incompetent, irrational or immoral, then they won’t be motivated to compromise.27 Beset with declining fortunes, the working class will tend to seek scapegoats for their reversals, targeting minorities, imaging them the benefciaries of outsize and unjustifed welfare benefts, or, even worse, having eclipsed white blue-collar stifs in infuence, epitomized by Barack Obama. “Means-tested programs inadvertently set the ‘have-a-littles’ against the ‘have-nots,’” noted one of the few observers investigating the consequences for the working class.28 It goes without saying that the “have-yachts” rarely feature in discussions of welfare policy. Te increasing complexity of the public assistance programs comprising Welfare State 2.0 has profound implications, not least of which obliges states

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to maintain satellite departments, which house welfare bureaucrats to process applications for diferent public assistance benefts. But the greater burden falls on the minority poor: low-income applicants “with lower income, less education, and few language skills” necessary to navigate the welfare bureaucracy.29 As a result of retractions of public aid, the ranks of the poorest Americans swelled. “In early 2011, 1.5 million households with roughly 3 million children were surviving on cash income of no more than $2 per person, per day in any given month,” concluded two analysts.30 Absent necessary assistance, the poor scavenged for bottles and cans for cash, sold plasma, and doubled-up in housing, in the process risking losing custody of their children to neglect, the victims of “deliberate political choices at both the federal and state levels.”31 Tus, aggravating poverty in the name of welfare reform had become a leitmotif of social policy, the unintended consequence of “the ‘iron triangle’ of liberal philanthropy, expertise, and government policy in the hope that a more receptive [presidential] administration would return.”32 Tus, America’s dual welfare state—Welfare State 1.0 assuring social insurance for workers along with Welfare State 2.0 ofering public assistance for the poor—borders on the schizophrenic, colliding with a working class not only having been left behind economically but being expected to pay taxes to sustain the edifce as well. Compounding political resentment have been bureaucrats managing social benefts, civil servants whose positions require at least an undergraduate degree, a credential out of reach for much of the working class. In the attempt to salvage economic and social status, bluecollar workers often resort to public assistance only to be confronted with an impenetrable welfare bureaucracy, populated by thousands of civil servants, who enjoy a secure government job reserved for the meritocracy. Finally, to the working class, the multiplicity of silo programs makes the welfare state indecipherable, defying any logic that may have justifed its initial deployment: efciency, compassion, efectiveness. Aside from state control, public assistance has been problematic since inception. First, benefts are not adjusted for infation, actually dependent on state willingness to increase benefts, upon which federal funding is contingent. Second, benefts are scattered across multiple “silo” programs, leaving applicants struggling to complete complex applications with diferent deadlines, a special problem for those eligible for multiple benefts. Tird, the duration of benefts varies, so applicants have to recertify at diferent times. Fourth, even though governments have introduced electronic access and completion to public assistance benefts, states vary with regard to the efciency and accuracy of such applications, a glaring issue with respect to low-income households lacking Internet access. Tese artifacts of Welfare State 2.0 efectively deter low-income families from obtaining benefts to which they are eligible.

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Tus, public assistance exacerbates the very poverty it was intended to mitigate; in the words of two scholars, “the state shapes inequality.”33 To the well-credentialed liberal, the skeptical response of the working class toward anti-poverty programs smacks of racism and bigotry toward the minority poor. If only working-class whites seized the opportunities before them and joined the service economy, they would be on the right side of economic history! Teir failure to attain more education through a college degree represents squandered social capital, thwarting their upward mobility. Moreover, their vilifcation of the minority poor attests to their cramped morality. What liberal professionals fail to see is the welfare state they operate has been a catalyst of working-class resentment, indeed a plausible explanation for the explosion of conservative populism. In retrospect, the anti-poverty programs launched in the 1960s were morally defensible and fscally plausible, but a half-century later would encounter stif headwinds from a working class that had found the American Dream ever farther out of reach. Tat, of course, has been the enduring experience of the minority poor, who had struggled for decades with the inadequate benefts and punitive procedures of Welfare State 2.0. Tus, the War on Poverty became a victim of time and politics, gradually eroding support for the American welfare state. Yet, during the latter decades of the 20th century an ascendant, but waning, liberalism reconfgured social programs, further compounding the welfare state.

NOTES 1 Teda Skocpol, Protecting Soldiers and Mothers (Cambridge, MA: Harvard University Press, 1992). 2 Jill Lepore, Tese Truths (New York: W.W. Norton, 2018), pp. 302–03. 3 John Hope Franklin, From Slavery to Freedom (New York: Knopf, 1980). 4 William Trattner, From Poor Law to Welfare State (New York: Free Press, 1999), p. 225. 5 Skocpol, p. 471. 6 Quoted in Linda Gordon, Pitied but Not Entitled (Cambridge, MA: Harvard University Press, 1994), p. 105. 7 Edward Berkowitz and Larry DeWitt, Te Other Welfare (Ithaca: Cornell University Press, 2017), p. 3. 8 Frances Fox Piven and Richard Cloward, Regulating the Poor (New York: Vintage, 1971). 9 Adam Cohen, “Te Enemy of Poor Americans,” Te Atlantic, February 26, 2020. 10 Robert Caro, Te Passage of Power (New York: Knopf, 2012), pp. 3–4, 542. 11 Daniel Patrick Moynihan, Maximum Feasible Misunderstanding (New York: MacMillan, 1970). 12 https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and -Reports/NationalHealthExpendData/NHE-Fact-Sheet 13 Walter Trattner, From Poor Law to Welfare State (New York: Free Press, 1999), p. 310.

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14 David Stoesz, A Poverty of Imagination (Madison: University of Wisconsin Press, 2000). 15 https://www.commonwealthfund.org/blog/2020/what-does-new-block-grant-guidance-mean-medicaid-program 16 https://www.forbes.com/sites/adammillsap/2020/01/23/medicaid-spending-is-taking-over-state-budgets/#7b9bc0b7dfd0 17 Edward Berkowitz and Larry DeWitt, Te Other Welfare (Ithaca: Cornell University Press, 2017), p. 7. 18 https://aspe.hhs.gov/system/fles/pdf/257521/WelfareIndicators.pdf, original emphasis. 19 Jonathan Morduch and Rachel Schneider, Te Financial Diaries (Princeton: Princeton University Press, 2017), p. 166. 20 Pew Charitable Trust, How Borrowers Choose and Repay Payday Loans (Washington, DC: author, 2013), pp. 41, 21. 21 Gary Rivlin, Broke, USA (New York: Harpers Business, 2010), p. 256. 22 Tomas Sowell, “Payday Loans,” National Review Online, November 2, 2011. 23 Lisa Servon, “Te Real Reason the Poor Go without Bank Accounts,” Bloomberg Citylab, September 11, 2013: https://www.bloomberg.com/news/articles/2013-09-11/ the-real-reason-the-poor-go-without-bank-accounts. 24 Lisa Servon, Te Unbanked in America (New York: Mariner, 2017), p. 50. 25 Ibid., p. 6. 26 Ibid., p. 10. 27 Keith Payne, Te Broken Ladder (New York: Viking, 2017), pp. 109–10. 28 Joan Williams, White Working Class (Cambridge, MA: Harvard Business School Press, 2017), p. 21. 29 Herd and Moynihan, p. 30. 30 Kathryn Edin and H. Luke Shaefer, $2.00 a Day (New York: Houghton Mifin Harcourt, 2015), p. xvii. 31 Christopher Jencks, “Why the Very Poor Have Become Poorer,” New York Review of Books, June 9, 2016, p. 15. 32 Alice O’Connor, Poverty Knowledge (Princeton: Princeton University Press, 2001), p. 277. 33 Pamela Herd and Donald Moynihan, Administrative Burden (New York: Russell Sage Foundation, 2018), p. 33.

5 Convolution In the years following the Great Society, the American welfare state was expanded and transformed, often in unexpected ways. Perhaps the greatest surprise was Richard Nixon’s proposal for a Negative Income Tax. Although the idea foundered on the shoals of conservative opposition to the prospect of increasing the number of poor Americans dependent on government and liberal concerns about low benefts, two important policies emerged. First, in 1974 public assistance to the blind, disabled, and aged was merged into Supplemental Security Income and assigned to the Social Security Administration. Second, in 1975 a tax refund for low-wage workers with children was created, the Earned Income Tax Credit administered by the Treasury. Bending to a conservative insurgency, in 1996 Bill Clinton cashiered the family cash entitlement to a discretionary program, devolved to the states in a block grant. In a bid to attract the support of seniors, George W. Bush successfully added a prescription drug beneft, Part D, to Medicare in 2003. And the high point of Barack Obama’s presidency was passage of the 2010 Afordable Care Act, an incongruous assemblage of provisions, in efect piloted in Massachusetts in 2006. Tese changes modifed the welfare state, and other programs also emerged, some of them quite signifcant, such as Pell grants (1976) and the Americans with Disabilities Act (1990). How the public would perceive this agglomeration of programs was given short shrift, even as it was expected to pay the tab.

NIXON’S RADICAL PROPOSAL Having lost the 1960 presidential race to John Kennedy and then the 1962 California gubernatorial race to Edmund “Pat” Brown, Richard Nixon was a washed-up politician, except for the stature he retained in the

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Republican Party. With a canny sense for middle-American respectability, Nixon mobilized a “great silent majority” indignant about the counter-culture revolution of “sex, drugs, and rock ‘n roll,” unpatriotic opposition to the war in Vietnam, and ghetto riots plaguing big cities. Running on a platform of ending the war in Southeast Asia, law and order, and welfare reform, Nixon handily defeated George McGovern. Victorious, Nixon moved swiftly on his welfare reform promise, hiring Daniel Patrick Moynihan as his Domestic Policy Advisor to navigate his Family Assistance Program (FAP) through Congress. In background and training Nixon and Moynihan made an odd couple but were well-matched in their desire to radically transform cash assistance. Rarely in the annals of American social policy has a failed initiative proven so productive. Raised by a single mother in New York City’s Hell’s Kitchen and trained as a social scientist, Moynihan had a better appreciation for poverty than most of his peers, and his ambitions matched Nixon’s. As noted in Chapter 2, Moynihan had authored the controversial report, Te Negro Family: Te Case for National Action, positing that welfare crowded out or substituted for the wages of black men, gradually destroying the African American family. Nixon, for his part, wanted a bold plan to reduce poverty, restore family integrity, and encourage work among poor, minority families. Based on their joint skepticism of welfare and opposition to anti-poverty programs, Moynihan convinced Nixon to support a negative income tax, which would replace most of public welfare. Symbolically introduced as H.R. 1, Nixon’s Family Assistance Plan (FAP) was radical indeed. “Te program would provide direct federal payment to all needy families with children,” observed one analyst, “and, for the frst time, poor families headed by full-time male workers,” in other words the working poor. At a cost of $12 billion, FAP would provide an eligible family of four $1,600 in federal payments, augmented by $750 in food stamps, or $2,350, two-thirds of the 1969 poverty level. FAP was projected to increase welfare payments in ten states, accounting for 20 percent of welfare recipients, and raise almost two million welfare families out of poverty.1 FAP was revolutionary for its time and still is, judging from the reaction to Andrew Yang’s 2020 presidential campaign proposal to provide all American families with monthly stipends. But FAP’s momentum quickly dissipated due to vociferous objections from liberals and conservatives. Te former claimed the beneft amounts were grossly inadequate, while conservatives feared FAP’s unconditional payments might lead to larger caseloads, which had increased by 40 percent since 1955. 2 Conceding to congressional stalemate, Nixon withdrew H.R. 1, killing FAP.

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Yet the failed Moynihan/Nixon welfare reform gambit led to two important, lasting changes. Te frst, Supplemental Security Income (SSI), merged Old Age Assistance, Aid to the Disabled, and Aid to the Blind into one nationwide program managed by the Social Security Administration, introducing a basic, nationwide beneft level. Te federal base beneft could, at state discretion, be augmented, but SSI was efectively federalized. Nonetheless, SSI remained a public assistance program, benefts contingent on applicants meeting the means test with respect to income and assets. By afxing SSI to Social Security, its architects had hoped to remove the stigma attached to welfare receipt. “SSI would be like Social Security. It would be run by the same agency, and it would operate at the national level. [SSI] benefciaries would be treated with the same dignity as Social Security benefciaries.”3 Second, the Treasury was injected directly into public welfare. Previously, the most important relationship between the Treasury and social policy, writ large, had been granting tax exemptions to socially validated activities, through 501(c)(3) status. Te tax exemption to nonproft organizations has been jealously guarded since, without it, all income would be taxable. But the Treasury also has a long, indirect relationship with social policy by virtue of favorable tax treatment the Internal Revenue Service grants to activities deemed of social value. According to one analyst’s characterization, “tax expenditures are incentives rather than commands,”4 encouraging tax payers to own homes, thereby granting a deduction for mortgage interest, employers to provide benefts to workers, thereby granting deductions for pensions and health insurance, corporations to produce innovative products, thereby granting deductions for research and development. Historically, most tax benefts accrued to middle- and upper-income groups;5 but, the Earned Income Tax Credit (EITC) was the frst successful efort to rejigger the tax system so the poor could also beneft, absent the stigma of welfare. Enacted in 1975, the EITC is an income supplement available to most low-income families with children. One historian succinctly captures its signifcance, “for the frst time in American history using the tax system as a mechanism to provide resources to the needy” and correctly predicted it was “a measure that would be expanded greatly in the future.”6 Tax credits such as EITC are “of budget” and do not require authorization through the fraught and uncertain budget appropriations process, and thus garner support across the political spectrum. Gradually, the EITC was complemented by other credits with welfare in mind, such as the Child Tax Credit, the Adoption Assistance Tax Credit and Work Opportunity Tax Credit. Enjoying the support of Democrats and Republicans, tax credits as a means to support lowincome families expanded, as noted in Figure 5.1.

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Tax Refunds in $millions

70000 60000 50000 40000 30000 20000 10000 0

1980

1985

1990

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2000 EITC

2005

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2015

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CTC

Figure 5.1 Major tax expenditures targeting the poor.

Tax credits as income supports for poor families have eclipsed direct cash family welfare. When the Child Tax Credit was adopted in 1997, EITC benefts exceeded $40 million, and were claimed by roughly 15 million tax flers, exceeding federal appropriations for Temporary Assistance for Needy Families (TANF).

CLINTON’S BAIT AND SWITCH Te austerity imposed by stagfation coupled with conservative containment of governmental expenditures constrained liberal ambitions in social policy, while introducing neoliberalism as a preoccupation of subsequent Democratic Presidents. For example, tax expenditures targeted at the poor addressed the problem of advancing a domestic agenda restrained by neoliberalism. A Rhodes Scholar, Clinton was undoubtedly aware of Arthur Schlesinger, Jr.’s prophecy that progressive intervals in public policy occurred at 30-year intervals, the New Deal of the 1930s followed by the Great Society of the 1960s.7 As Schlesinger later reprised his chronology: Young people who grew up in the Progressive era–like FDR, Eleanor Roosevelt, Harry Truman—when they came to power, carried forward the Progressive ideals they had imbibed in their youth. Young people who grew up under FDR—like John Kennedy, Lyndon Johnson, Hubert Humphrey, Robert Kennedy—when they came to power, tackled the New Deal’s unfnished business. As the Kennedys and Johnson

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were in efect Roosevelt’s children, so Bill Clinton and Albert Gore Jr., who arrived at their political consciousness in the 1960s, are Kennedy’s children.8 Te chronology placed Clinton in the White House during the 1990s when Schlesinger’s timetable suggested he would complete the last major omission of the American welfare state: a national healthcare program. Accordingly, Clinton ofered First Lady Hillary Clinton leadership of the administration’s health reform initiative, the Health Security Act (HSA), but after extensive deliberations and considerable acrimony, the plan was shelved as being unworkable, unpalatable, and elitist. Disabused of Schlesinger’s presumption, Clinton sought redemption with welfare reform, boldly promising to “end welfare as we know it.” As Arkansas Governor, Clinton had secured a welfare waiver from the Reagan administration for a demonstration, Arkansas WORKS, which was evaluated by a nationally recognized research frm. Results showed that Arkansas WORKS increased the earnings of welfare recipients and saved sufcient state funds to cover the demonstration costs, allowing Clinton to claim a savvy understanding of welfare reform; however, a closer examination found that recipients’ increased earnings were so meager that most were still eligible for Medicaid and food stamps. State savings were also not substantial, but Arkansas was small and poor, so the $3 million or so the state did beneft was a “win” for Governor Clinton.9 After the embarrassing failure of HSA, Clinton needed a national policy win, especially after the 1994 midterm elections when Republicans under the insurgent leadership of Newt Gingrich assumed control of the House of Representatives. Eyeing expanding power further, Gingrich proposed a “Contract with America,” a marquee feature of which was a radical overhaul of welfare. Intended to back Clinton into a corner just as he was running for reelection, Gingrich proposed to devolve AFDC into a block grant to the states with a capped budget, a work mandate for recipients and other features from the right’s behavioral poverty playbook, completely repudiating Nixon’s FAP. Clinton’s welfare reform working group and liberals were aghast, encouraging him to follow a more moderate path, to “make work pay” by increasing the minimum wage, funding work training and education, while increasing the EITC. Tese actions could be construed as living up to Clinton’s pledge to end welfare, while improving the economic situation of the poor and ofering pathways to upward mobility. For a time, it appeared Clinton would hold frm, listen to the liberal outcry, and heed his advisors’ advice; twice he vetoed Republican proposals. However, with the election closing in, realpolitik trumped all; Clinton caved to Gingrich, and signed the Personal Responsibility and Work Opportunity Reconciliation Act (PRWORA).

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PRWORA devolved cash welfare to the states as a discretionary program, therewith ending a welfare entitlement originating with the New Deal,10 and included time limits, a work mandate, and full family sanctions for noncompliance with program requirements, and denied benefts to children born while the family was on the new program, TANF. Tough referred to as welfare reform, PRWORA was really welfare repeal. Rather than produce the next iteration of progressive policies and reforms, Clinton was outmaneuvered by Gingrich, abandoned New Deal principles, and signed a regressive, punitive “welfare reform” bill. Te war about welfare reform was lost but once reelected Clinton did win a few battles of policy import, securing increases in the EITC and creating the Children’s Health Insurance Program (CHIP). But the focus of social policy during the mid-1990s was welfare reform, the result of which, PRWORA, caused Republicans to rejoice! Clinton may have fnessed the situation by increasing the EITC as a partial substitute for cash assistance and radically expanded the presence of the Treasury in anti-poverty policy, but Republicans had good reason to be gleeful. Tey had cashiered the largest cash assistance entitlement, replacing it with a fscally strangled block grant, along conservative precepts, demonstrating in real time and according to realpolitik their template for reforming other welfare reforms in the future.

GEORGE W. BUSH’S BIG GOVERNMENT CONSERVATISM Following a campaign against Al Gore, decided by a single Supreme Court vote, George W. Bush was eager to consolidate his legitimacy as President. Initially, he aligned with liberal Senator Ted Kennedy to enact education reform, No Child Left Behind (NCLB). Amending the War on Poverty’s Elementary and Secondary Education Act, which funded schools in poor, minority neighborhoods, NCLB increased federal funding to $55.7 billion on the condition that states comply with a variety of provisions to improve the nation’s lackluster educational performance.11 Tis improved the credibility of Bush’s administration but is a footnote in educational policy since states and localities still controlled policy and funding for elementary and secondary education. A much bigger prize and reputational cachet could be had if Bush could enhance Medicare. Despite the Reagan administration’s 1983 eforts to rein in Medicare outlays, expenditures had risen steadily. Te primary cause of ballooning expenditures was policy choices made at the program’s inception in 1965. Consistent with the strong American preference for and faith in “the market” to deliver better results than government, Medicare and Medicaid

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were set up to reimburse private providers for services to enrollees, rather than as public healthcare systems providing services directly. Te Medicare Modernization Act (MMA) of 2003 ft nicely into the commercialization of healthcare that the federal government had been encouraging and subsidizing for decades, by adding two features. First, seniors could assign their Part A (hospital insurance) and Part B (supplemental medical insurance) coverage to managed care plans, under a new component, Part C. Second, efective 2006, a prescription beneft, Part D, would be created. Tese were the most signifcant Medicare changes in nearly four decades, although the policy context was markedly diferent. During the War on Poverty, the provenance of Medicare and Medicaid, the calculus was fairly simple; the Johnson administration primarily had to appease only two external actors, the American Medical Association (AMA) and the American Hospital Association (AHA).12 By 2003, the Bush administration was confronted not only by the AMA and AHA but also by trade associations such as the Pharmaceutical Research and Manufacturers Association (PhARMA), to say nothing of the American Association of Retired Persons (AARP) which claimed to be the largest membership association in the world. Already ensconced in the pharmaceutical industry, Wall Street understood the gargantuan business opportunity these changes presented, and eagerly took part. Among these new healthcare providers were managed care companies, enrolling citizens who agreed to receive all services through the managed care plan, forfeiting their unrestricted choice of provider, a hallmark of traditional Medicare. Managed care plans, in turn, received a monthly premium from the federal government, for each enrollee, whether services were provided or not. Over time managed care plans, direct descendants of the Health Maintenance Act of 1973, enticed Medicare recipients by ofering more services than regular Medicare, such as vision and dental, and Medicare Advantage Plans have become big business. To illustrate, UnitedHealth Group, parent company of United Healthcare has achieved massive scale in managed care, and ranks 7th on the 2020 Fortune 500 list; Humana, which focuses on administering Medicare Advantage Plans ranks 52nd. Te shift to for-proft healthcare was not greeted enthusiastically by everyone, however; the editor-in-chief of the prestigious New England Journal of Medicine cautioning about the rise of the “medical industrial complex.”13 Others wondered if the commercialization of healthcare represented market intrusion into an area that should continue to be governed by nonproft norms. Having secured the support of AARP for the Part D prescription drug beneft, the Bush administration launched its initiative. Immediately, the pharmaceutical industry (aka Big Pharma) hired lobbyists, formatted an ad campaign, and drafted policy options. In 2002, Big Pharma spent $82.5 million to shape Part D; in 2003, $81.5 million. Te money was well-spent. Te

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fnal bill prohibited the federal government from negotiating to obtain drugs at lower cost, a ban which persists even today. Tis proscription provided a windfall for Big Pharma: [Big PhARMA] got millions of new paying customers, courtesy of Medicare, but Medicare was required to pay whatever the industry demonstrated was the average price it was charging everyone else— which, if the drug had a patent and, therefore, had monopoly status, was literally whatever the manufacturer decided to charge. Medicare and Medicaid [by 2010] were demanding a lion’s share of federal and state budgets. Yet because the health care interests had plowed enough of their profts into what had become the largest arsenal of any American industry, none of the controls that prevail in every other country on prices for products that people usually have little choice but to buy ever made it out of a congressional committee.14 Te MMA of 2003 also included the designation of Pharmacy Beneft Managers (PBMs), which would distribute medication, ofering subsidies to low-income seniors on Medicare and/or Medicaid. Dozens of PBMs were launched, each marketing a plan to seniors, sowing confusion among Medicare benefciaries. Despite the disarray, promoters of Part D correctly assessed that the number of PBMs would fall as they consolidated, the pattern of mergers having become common in the nation’s healthcare industry. Notwithstanding the huge sums spent on lobbyists and campaign contributions conservatives balked at the price tag of the prescription drug beneft, initially pegged at $400 billion over 10 years; a lower estimate was put forth to comply with congressional spending limits. Even so, the bill’s passage required a late-night session held open far beyond the conventional time limit in order to obtain the necessary votes. Res ipse loquitur. MMA changed the welfare state signifcantly by amplifying a market strategy in an already corporately dominated but publicly funded health system. Two healthcare analysts explained it this way: [MMA] responded to strong mass demand for a new drug beneft— thus putting Republicans on the side of a signifcant expansion in a federal entitlement program—yet also increased the role of private insurers in delivering program benefts and requiring seniors to purchase this new beneft from a market of competing prescription plans.15 Te whetted appetites of private, for-proft insurers and providers, aggressively advanced by their trade associations and armies of lobbyists, would

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prove insatiable, as the Obama administration would discover when revisiting healthcare reform.

THE AFFORDABLE CARE ACT Among Washington, DC think tanks competing in the marketplace of ideas, the Heritage Foundation was already punching above its weight when it conceived of a business-friendly health reform for the Republican Governor of Massachusetts, Mitt Romney. Te Heritage template included a website where employees and employers could review insurance plans, a mandate that individuals have health insurance, and state subsidies for low-income workers, all intended to decrease the number of uninsured. Arguably the most liberal of states, the Massachusetts legislature was heavily Democratic, a party ordinarily skeptical of market solutions to social problems, but, Romney prevailed, and in 2006 Massachusetts undertook a novel approach: using market-oriented health reform to achieve universal coverage. Upon his election in 2008 and once the macroeconomic carnage of the Great Recession had been staunched, President Obama sought to pick-up healthcare reform where the Clintons had left of 15 years prior. Aware that the HSA fasco had been confgured in the backroom by experts, Obama elected a public strategy, assigning the task to Congress, which boasted Democratic majorities in both chambers. Having honed their lobbying skills from MMA, healthcare insurers, providers, and trade associations were wellprepared to shape the fnal bill to their preferences. Indicative of the high stakes, the year before passage of the Afordable Care Act (ACA), lobbying for healthcare totaled $383.7 million, the year of the Act’s passage, $516.6 million; in 2010, healthcare lobbyists numbered 4,544, more than eight for each member of Congress.16 While the fght was joined in Washington, DC, the Massachusetts pilot rolled on, enrolling ever larger numbers of the uninsured at modest state expense. Regardless, Congressional Republicans were united, vociferous, and unyielding in their opposition to the ACA even though Te proposal Obama and the Democrats in Congress put together in 2009 was not something Republicans should have been resisting … for Obama was pushing a more conservative version of health care reform than what Richard Nixon had proposed in 1972, or what Governor Mitt Romney had implemented in Massachusetts in 2006. Tey called it a government takeover of healthcare when, in fact, it was a classic Republican/business lobbyists’ solution that was exactly the opposite.17

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Still smarting from the Clinton HSA debacle, liberals split into two factions. Preferring the Canadian model, the left insisted on a single-payer plan through which the federal government would pay for all healthcare, assuring accountability as well as cost control. Centrists, on the other hand, recognized that health insurance was already embedded in the private sector due to employer benefts often codifed in collective bargaining agreements, so they advocated permitting families to retain private insurance along with a public option, allowing citizens to buy into Medicare if they wished. Obama sided with the Centrists and was willing to support a public option but the proposal was thwarted, in part, by the Democratic Chair of the Senate Finance Committee, Max Baucus who, from 2003 to 2010 was the leading recipient of campaign funds from the healthcare industry.18 Ultimately, the healthcare industry prevailed, leaving healthcare reform largely in the hands of commercial providers. Te ACA imported many provisions from the Massachusetts plan, including an insurance mandate, an insurance marketplace accessed through a website, and subsidies for low-income purchasers. Importantly, it also prohibited the exclusion of people with pre-existing conditions and discrimination against women, while requiring that children be included in a parent’s plan until the age of 26, if they wished. Not surprisingly, Big Pharma weighed in too, and the “non-interference clause” introduced in MMA prohibiting negotiating to obtain lower drug prices was also a provision of the ACA. Te ACA might have evolved along pathways common to public policies— attracting benefciaries, funding providers, and placating stakeholders, but this was not to be. Republicans remained adamantly opposed to “Obamacare” even using a Tenth Amendment objection and pursuing their arguments to the Supreme Court. Tey especially objected to the Medicaid expansion feature of the ACA, which, not compulsory de jure, had such a high matching rate, that it could be viewed as a de facto obligation to the states to comply. In 2012, the Supreme Court ruled that the Medicaid expansion was at the option of states. Subsequently, reminiscent of the discriminatory legacy of public assistance programs, more than a dozen states rejected the Medicaid expansion, among them, with the exception of Arkansas, all of the states in the former Confederacy. Te individual mandate has also been struck down, but the ACA remains in the crosshairs of the right wing. During the Trump administration, there were more than a dozen unsuccessful attempts to repeal the ACA despite Republicans having no alternative in the legislative queue. At the end of 2020 rational, cost-efective healthcare reform remained a gaping hole in the American welfare state. Instead, the U.S. boasts one health insurance program (Medicare), 52 state and territorial health assistance programs (Medicaid), an odd number of state Children’s Health Insurance Programs, the Veterans Administration, and hundreds of private health

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insurers. America is the only industrialized nation without universal healthcare and, despite spending more on healthcare than any other industrialized, democratic, capitalist nation in 2018 (17 percent of GDP), Americans have the worst outcomes: the lowest life expectancy among developed countries, the highest suicide rate, the highest chronic disease burden, the highest rate of obesity, and the highest rate of avoidable deaths.19 Poignantly, the performance of the U.S. in containing Covid-19 has become an international embarrassment.

AN ASSESSMENT Eight decades after its deployment, the American welfare state is less leviathan and more sprawl, consisting of an array of uncoordinated, costly, inefcient, silo programs of uneven quality, managed by legions of bureaucrats and contractors, but fnanced by citizens. Navigating the thicket of administrative complexity can be maddeningly time-consuming and frustrating for applicants who must often visit multiple ofces and repeatedly supply redundant information in order to access benefts if, indeed, they are able to do so.20 Much to the dismay of those who had championed social justice, navigated hostile legislative processes, and anticipated creation of additional progressive policies, after the War on Poverty the welfare state had developed in ways unanticipated, resulting in convolution. America’s convoluted welfare state is also expensive to administer, although just how costly is not easy to calculate. In 1998, the Government Accountability Ofce (GAO) assessed the administrative cost of 11 of some 80 public assistance programs at the time, most jointly managed by states and federal governments. Of the 11 programs surveyed, administrative costs totaled $12.4 billion per year, more than the total benefts paid out by any single program. Programs exceeding $1 billion in administrative costs included Medicaid at $3.8 billion, SSI at $2.3 billion, food stamps (now SNAP) at $1.9 billion, and TANF at $1.0 billion.21 Tis GAO analysis not only excluded many public assistance programs, but the underlying data are now more than 25 years old. In the absence of further program consolidation after the creation of SSI and the increased use of contracted services, there is every likelihood that program administration costs are much higher today. Yet, despite administrative costs, with the exception of TANF, the social entitlements of the welfare state cruised along, essentially on autopilot, eluding not only the governance capacity of Congress, but the patience of taxpayers and Americans dependent on social benefts, as well. Two scholars of public administration coined the term “administrative burden” to depict the consequence for consumers: “Ultimately, administrative burdens are the

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fne print of the social contract between citizens and their government. Tey are the nuts and bolts of policy design. Te presence of administrative burdens makes the diference whether government is experienced as accessible or opaque, simple or bewildering, respectful or antagonistic.”22 In public assistance programs, citizens’ administrative burdens can have devastating efects on the most disadvantaged. Programs are supposed to help the poor but can exacerbate inequality. Applicants “who may need services the most—those with lower income, less education, and few language skills—may therefore be most negatively afected.”23 Indeed, as Cass Sunstein observed, “Most programs designed to beneft poor people have participation rates of between 30 and 60 percent.”24 Te red tape and lack of coordination in public assistance programs interferes with citizens’ ability to access benefts, worsening the lot of the welfare and working poor, and almost certainly increasing administrative costs. Oddly, there has been little opinion research on welfare state programs, the assumptions being that social insurance, funded by a payroll tax, returns benefts already earned, while welfare programs are in the best interests of the poor as judged by liberals. Yet, surveys can disabuse proponents of their pretensions. On the eve of welfare reform, for example, the trade association of polling organizations conducted a survey of perceptions of welfare reform options. Te sample was sufciently large that responses of welfare recipients could be separated from those of the general public as well as whites and blacks. Majorities of all respondents, regardless of race or welfare status, agreed with a number of negative statements about welfare. Among all respondents, 73 percent agreed that people stayed on too long and didn’t try hard enough to get of, and at least three-ffths concurred with statements of similar ilk, about such things as cheating and teenage childbearing.25 Perhaps tellingly, these response patterns did not align with liberal positions on welfare reform but did comport with illiberal welfare reform changes being debated at that time. Te American welfare state is also not held in high regard compared to other developed nations, such as Canada, the U.K., Germany, Italy, Sweden, and Norway. “Most of the time the United States comes in last,” admitted Christopher Howard.26 “Americans want government to do more for the poor but not spend more on welfare.”27 Further complicating Americans’ opinions of their welfare state are uncertainties about benefts through the tax code. Direct payments via social insurance and public assistance are complicated enough; tax credits are even more obtuse, even though the EITC and CTC are now signifcant economic supports for low-income families. One experiment found that, with more information about the disparate outcomes of important tax benefts, people evinced less support for the mortgage interest deduction and the pension tax credit and increased support for the EITC.

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Signifcantly, conservatives supported the EITC because it rewarded work, making it “a more palatable means of aiding the poor than public assistance.”28

THE AFTERMATH Already complicated because of profound diferences between social insurance and public assistance, the American welfare state became more byzantine with adoption of more programs and regearing others. Te resulting convolution might be described as dystopian benevolence, insofar as costs surged higher, access to benefts became more problematic, and skepticism entered the political mainstream. Already, social philosophers had suspected the liberal momentum of the 20th century was expiring, raising ominous doubts about the future of the welfare state. Alan Wolfe’s pessimism spanned the Atlantic. Across all of Europe and North America, the social democratic century has come to an end. Solidarity, social citizenship, the gift relationship, and the diference principle—all of them representing formulations of the idea that all who live in a society are obligated to ensure the welfare of everyone else—are terms being bandied about in academic circles, but they no longer make much of an impression in real politics.29 Tony Judt concurred, “Te social democratic ‘moment’ was the product of a very particular combination of circumstances unlikely to repeat themselves.”30 And Michael Sandel described how the nature of the philosophical environment in which the welfare state exists had changed. Since the 1980s, debates about the welfare state have been less about solidarity than about the extent to which the disadvantaged are responsible for their own misfortune. Some assert more demanding notions of personal responsibility, others more restrictive ones. Expansive conceptions of personal responsibility are a clue that meritocratic assumptions are in play. Te more thoroughgoing our responsibility for our fate, the more we merit praise or blame for the way our lives turn out. Skeptics from both ends of the ideological spectrum increasingly registered reservations. Fred Siegel of the conservative Manhattan Institute questioned the motives of do-gooders, In the liberalism that emerged out of the political caldron of the 1960s, professionals such as lawyers and social workers mobilized to protect

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victimized groups from a supposedly virulent majority. But too often professionals have a vested interest in infating their own worth at the expense of those they look to instruct.31 A veteran of social programs nationally and internationally, William Epstein was comparably acerbic: if the American people are largely responsible for social policy, then they are also responsible for the problems that beset the nation, notably enormous economic and social inequality. Even worse, if the masses rule policy choice, then the persistence of material and social deprivation that lies easily with the economic capacities of the nation to address suggests that Americans are by and large short-sighted, selfcentered, and mean-spirited—morally hyphenated more than ethnically hyphenated.32 But diminishing allegiance to the welfare state cannot be attributed only to growing complexity, increasing costs, and lack of access, alone. Had the welfare state been institutionally benign, these defects might not have caused so many to turn away. Some opined the waning support was a consequence of increased and well-publicized situations in which clients, most often children in care of the state, were grievously harmed or killed. Often no civil or criminal penalties are levied against the caseworkers. Tese situations made clear that a welfare state originally intended to be benevolent could also be malevolent, one whose professional agents damaged the vulnerable. Tat criticism could not be easily dismissed or handled as an unintended efect of the shape, size, or structure of the welfare state. Rather, evidence of harm would further subvert support for an already tenuous social institution.

NOTES 1 Original emphasis, M. Kenneth Bowler, Te Nixon Guaranteed Income Proposal (Cambridge, MA: Ballinger Publishing Company, 1974), pp. 25–26. 2 Ibid., p. 14. 3 Edward Berkowitz and Larry DeWitt, Te Other Welfare (Ithaca: Cornell University Press, 2017), p. 6. 4 Christopher Howard, Te Hidden Welfare State (Princeton: Princeton University Press, 1997), p. 11. 5 Suzanne Mettler, Te Submerged State (Chicago: University of Chicago Press, 2011), p. 5. 6 Walter Trattner, From Poor Law to Welfare State (New York: Free Press, 1999), p. 350. 7 Arthur Schlesinger, Jr., Te Cycles of American History (Boston: Houghton Mifin, 1986), p. 47.

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8 Arthur Schlesinger, Jr., “It’s My Vital Center,” Slate, January 10, 1997. Schlesinger died in 2007, but this essay clearly repudiates his earlier anticipation that Clinton would replicate the accomplishments of FDR and LBJ as a champion of progressivism. 9 David Stoesz, A Poverty of Imagination (Madison: University of Wisconsin Press, 2000). 10 Easily forgotten, perhaps, an earlier policy failure was the termination of Catastrophic Health Insurance in 1989. Passed in 1988, this social insurance program was funded by a tax on wealthy Medicare recipients, who revolted, ending the program a year later. 11 https://en.wikipedia.org/wiki/No_Child_Left_Behind_Act 12 Paul Starr, Te Transformation of American Medicine (New York: Basic Books, 1982). 13 Arnold Relman, “Te New Medical Industrial Complex,” New England Journal of Medicine 303, no. 17 (1980): 1–5. 14 Stephen Brill, Tailspin: Te People and Forces behind America’s Fifty-Year Fall – and Tose Fighting to Reverse It (New York: Knopf, 2018), pp. 107–108. 15 Kimberly Morgan and Andrea Campbell, Te Delegated Welfare State (New York: Oxford University Press, 2011), p. 6. 16 David Stoesz, Te Dynamic Welfare State (New York: Oxford University Press, 2016), chapter 6. 17 Brill, Tailspin, 169–71. 18 Brill, Tailspin, 108. 19 https://www.commonwealthfund.org/publications/issue-briefs/2020/jan/us-health -care-global-perspective-2019 20 Andrew Sherrill and Tim Hall, Means-Tested Programs: Determining Financial Eligibility Is Cumbersome and Can Be Simplifed (Washington, DC: U.S. General Accounting Ofce, 2001), p. 21. 21 https://www.gao.gov/assets/240/232997.pdf 22 Pamela Herd and Donald Moynihan, Administrative Burden (New York: Russell Sage Foundation, 2018), p. 2. 23 Ibid., p. 3. 24 Cass Sunstein, “Wading through the Sludge,” New York Review of Books, April 4, 2019. 25 Steve Farkas and Jean Johnson, Te Values We Live By (New York: Public Agenda, 1996), p. 40. 26 Christopher Howard, Te Welfare State Nobody Knows (Princeton: Princeton University Press, 2007), p. 114. 27 Ibid., p. 143. 28 Suzanne Mettler, Te Submerged State (Chicago: University of Chicago Press, 2011), p. 65. 29 Alan Wolfe, “Paths of Dependence,” Te New Republic, October 24, 2002, p. 41. 30 Tony Judt, Ill Fares the Land (New York: Penguin, 2010), p. 52. 31 Fred Siegel, Te Revolt against the Masses (New York: Encounter Books, 2013), p. 103. 32 William Epstein, Te Masses Are the Ruling Classes (New York: Oxford University Press, 2017), p. xii.

6

The problem from purgatory

Well before the advent of the welfare state, progressives struggled with whether to give the poor material assistance or moral guidance. At the turn of the 20th century, altruists established Charity Organization Societies to assist the poor, coining the phrase “not alms but a friend,” which refected the refusal of “friendly visitors” to provide more than moral uplift to the immigrant poor for fear of inducing dependency.1 For its part, local government consigned the indigent to workhouses, an efective deterrent to begging, where paupers stuck out a hand or tin cup hoping for a few coins, cash being the most useful material resource.2 Notably, however, many states, led by Illinois in 1911, established Mothers’ Aid/Pension programs providing cash aid to single, typically widowed women and their children; 39 states had such programs by 1920. Eligibility, benefts, and funding varied widely, and non-white women, most of them clustered in Ohio and Pennsylvania, accounted for only 4 percent of recipients.3 Outside government, Progressive reformers such as Jane Addams pushed successfully for housing, sanitation, child labor, and juvenile justice.4 Other private initiatives were destructive of immigrant families, as when Charles Loring Brace’s Children’s Aid Society removed hundreds of poor children from their parents and shipped them by train to the Midwest where they were adopted by farm families.5 At times, local government proved quite savvy, as with public health, Josephine Baker establishing child hygiene clinics to address infectious disease among school children, initially supported by wealthy women but later funded by the City of New York.6 Such innovations served as prototypes for the entry of the federal government along with states to establish the welfare state, yet the issue of providing cash or in-kind benefts remained. In the U.S., both social insurance and public assistance programs refect this duality. Seniors, for example, receive cash through Social Security, but Medicare is ofered through a fee for service

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or managed care arrangement, where healthcare providers or managed care plans are directly reimbursed by government. Similarly, the poor receive cash through Supplemental Security Income or Temporary Assistance for Needy Families, but Medicaid mirrors Medicare in that providers and plans are paid directly by government. Tus, healthcare, like Section 8 housing vouchers, is an in-kind beneft. Supplemental Nutrition Assistance (SNAP) is a hybrid. Recipients are issued debit cards, reloaded monthly with cash benefts, but these can only be used to purchase approved food items. Of course, citizens could instead be provided with cash to purchase healthcare, food, and housing without the circumscribed choices imposed by in-kind benefts which serve to target beneft consumption in ways dictated by policy.

THE NANNY STATE Te apex of in-kind benefts has been government providing a commodity directly, adhering to a public utility model. Aside from the Veteran’s Administration, no institution better refected public ownership and management of an essential service than public education. Te Morrill Act of 1862 established land-grant universities to educate leaders in American agriculture, which proliferated nationwide and introduced state government as the primary actor in higher education, a role which has persisted. An early adopter of universal elementary and secondary education subsequently, American public education was hailed as providing a literate and numerate workforce necessary for industrialization; European nations later following suit. Attempting to improve equity in public education, LBJ’s War on Poverty included the Elementary and Secondary Education Act (ESEA), targeting millions of dollars of federal funds for schools in low-income neighborhoods. But the U.S. gradually lost its command of public education, resulting in the publication of A Nation at Risk in 1983, an indictment of public education, which included this clarion call: “If an unfriendly foreign power had attempted to impose on America the mediocre educational performance that exists today, we might well have viewed it as an act of war.” 7 Te administration of George W. Bush used the report to justify revising ESEA through the No Child Left Behind Act of 2001, including more funding for poor schools, standardized testing, and support for a novel innovation, charter schools. By the beginning of the second millennium, experiments to reverse the decline in public education proliferated, many demonstrations among the most adversely afected, poor minorities. Wendy Kopp established Teach for America (TFA), attracting graduates from frst-tier universities to volunteer in poor rural and urban schools.8 Subsequently, two TFA veterans established the Knowledge is Power Program (KIPP), a model of charter schools

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that expanded nationwide.9 At the same time, Geofrey Canada deployed the Harlem Children’s Zone covering a 99-block area of Harlem, creating a “conveyor belt” of innovative instruction, from “baby college” to a charter elementary school, and a charter high school.10 Others followed suit, although some, such as the for-proft Edison Project, would fold. Research on TFA and KIPP showed superior performance among children from disadvantaged communities, an explicit challenge to public education. Te response of the public education status quo was divided. Some educators admitted substandard instruction and deployed themed magnet schools under the authority of the superintendent of schools; others established charter schools in poor neighborhoods, attracting the ire of teacher organizations, which complained that pay and seniority were being sacrifced. As charter schools in low-income communities proliferated, odd bedfellows emerged: minority parents, defecting from public schools, expressing gratitude to white conservative politicians, breaking up what they deemed a public monopoly. Indeed, the demand for admission to charter schools was so high that lotteries were staged to select students, poignantly portrayed in a popular documentary Waiting for Superman. Teacher organizations remained adamant that charter schools subverted public education, diverting essential revenues, attracting instructional staf, and drawing of the support of minority parents most active in the community. Indeed, the charter school movement’s impact on educators was evident in a leading scholar’s pirouette Diane Ravitch, once an advocate for charter schools, later becoming a critic.11 But the public education monopoly was not an anomaly. During the 1950s, using urban renewal as pretext, cities razed low-income neighborhoods, diverting poor, minority families into public housing complexes, which, in concentrating poverty, resulted in rising crime, spiraling drug and alcohol abuse, and rampant gang activity. In 1966 Dorothy Gautreaux fled suit against the Chicago Public Housing Authority (CHA) alleging the diversion of African American families to public housing was discrimination prohibited by the Civil Rights Act. Long after Gautreaux had died, the suit was settled in 2019 with CHA agreeing to a plan for mixed-income housing as well as instituting a voucher program allowing residents to move to the suburbs.12 In 1974 the Housing and Community Development Act had permitted public housing authorities to subsidize scattered-site housing for low-income families under Section 8, beginning the break-up of the public housing monopoly for the poor.13 Public education and public housing demonstrated wide dissatisfaction with the public utility model of service provision. Since afuent families “voted with their pocketbooks” defecting from public sector services, most of the debate focused on the poor dependent on public programs. Accordingly, the fourishing of in-kind benefts introduced with the War on Poverty fueled

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a debate about optimal methods to help low-income families. On one side were libertarians insisting that low-income families be treated with the same dignity as their upper-income compatriots, ofered cash to purchase any goods they deemed necessary. As behavioral economist Cass Sunstein put it, people should be entitled to choose as they like, even if they end up choosing poorly. In a free society, people must be allowed to make their own mistakes, and to the extent possible, learn from them, rather than facing correction and punishment from bureaucratic meddlers.14 As conservatives challenged the welfare state for infantilizing the poor by insisting that benefts be in-kind, the “nanny state” came into focus. On the other side were liberals who insisted that in-kind benefts were superior, adding to Medicare and Medicaid other anti-poverty programs: food stamps, Head Start, and Job Corps. Instead of in-kind benefts, the poor might have been ofered cash, but liberals perceived many of the poor as too ill-informed to make prudent choices, so they should rely on professional assistance through in-kind benefts; moreover, to provide cash would be a waste of resources, especially as the impoverished may be inclined to squander benefts on drugs, alcohol, or lottery tickets. Te professional corrective for asocial behavior was ripe for parody, as with “Ofcer Krupke” from West Side Story. Ridicule notwithstanding, the cause for in-kind benefts endures, as Janet Currie advocated for child welfare: “in-kind programs are more efective than cash at improving the welfare of poor children in specifc domains.”15 Is this true, or is it yet another example of defending a professional rent? Assuming the poor lack the judgment to optimize expenditures, organizations assigned human service professionals to help them. Doubtless, the illiterate poor struggle to complete job applications, the innumerate poor are unable to make basic math computations in deciding on purchases, and the cognitively impaired poor will have difculty in navigating many of life’s challenges; however, the presumption of ineptitude not only diminishes lowincome Americans but also institutes in-kind benefts that are often stigmatizing. Tus, Daniel Hatcher alleged that “human service agencies created to look outward toward helping those in need are simultaneously turning inward toward their own self-preservation and agency fnances.”16 But no scholar has done more to debunk liberals from their pieties than William Epstein. With regard to therapeutic interventions for the poor, Epstein challenged social work interventions “increasingly reserved for lower-income working people and the inhabitants of the putative underclass.”17 Nor were the anti-poverty programs spared. “Te programs of the War on Poverty, notably including the personal social services that it devised, did not succeed on their own terms,

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let alone to reduce poverty.” As for the real benefciaries? “Staf members and the semi-professions of social welfare remain the principal benefciaries of the institutionalized spoils system of personal social services.”18 As enthusiasm for anti-poverty programs waned, another issue emerged: in-kind benefts were expensive. In contrast, cutting checks was infnitely less costly than establishing organizations, hiring staf to deliver benefts and monitoring usage. Te prospect of converting food stamps (now SNAP) to cash in the early 1990s was illustrative. As a voucher, food stamps were technically restricted to food purchases; but many low-income families, confronting bills due at the end of the month, surreptitiously “sold” their benefts for cash, often at a 50 percent discount. In order to better understand this behavior, which was illegal, the Food and Nutrition Service conducted studies in four sites to determine the consequence of giving families a check instead of food stamp coupons. Te fndings suggested that food consumption decreased a little, some nutrition value was lost, but no food shortages were reported, and more was spent on shelter, transportation, education, and healthcare.19 Although families diverted some funding previously assigned to food to other expenses, the research neglected to compare the cashing-out pilots with the losses many families experienced when they sold food stamps at a sizable discount. Nor did the studies consider the consequence of converting the entire food stamp infrastructure to cash benefts and diverting that value to increased benefts, which could well have resulted in better nutrition as well as less fnancial stress for families. But the food stamp cash-out study was an anomaly; understandably, perhaps, the professionally stafed helping organizations of the nanny state were too embedded to consider their liquidation.

THE BULLY STATE While the nanny state might be dismissed as good intentions poorly applied, a darker side emerges in the bully state, state-sponsored interventions that damage citizens. Tis possibility contradicts the professional narrative that infuses the nanny state, but it is no less evident. Profound errors in judgment foreshadowed the Progressive professional project, as with the Buck v. Bell and Tuskegee “syphilis experiment,” considered in Chapter 1. Tese episodes were not discreet, idiosyncratic events but organized eforts involving several institutions and multiple actors spanning decades, during which they inficted serious damage to thousands of Americans. While professional credentials and organizational sophistication may have improved in the decades since, the harm produced under the authority of the welfare state continues, much of it obscured by expert politesse. Indeed, the collusion of cartels with the meritocracy makes for the systematic denial of opportunity and forfeiture

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of prosperity inficted on the minority poor. In efect, the benign factotum envisioned by Max Weber as the ideal bureaucrat has been transformed into the well-pedigreed expert putatively helping the disadvantaged and promoting social welfare. Although harming citizens in the name of welfare is contrary to the professional narrative, evidence is mounting that cartels, quite beyond ofering inferior services at higher cost, are damaging clients. Anne Case and Angus Deaton, for example, recount how the medical and pharmaceutical cartels have been implicated in “deaths of despair,” increasing mortality due to alcoholism, drug overdose, and suicide. With regard to opioid addiction, iatrogenesis—physician induced illness—has become literally epidemic, doctor prescriptions of FDA-approved medication accounting for almost half of all opioid deaths in 2017.20 But deaths of despair are only the most recent incarnation of professional misconduct; others had already defected from the professional project. Among the frst was E. Fuller Torrey, a psychiatrist with a mentally ill sister, contributing to his critical analysis, Te Death of Psychiatry.21 Mistreatment of the mentally ill plumbed the depths of professional ineptitude as when, after World War II, mental health experts advocated replacing archaic and deteriorating state mental hospitals with community mental health centers. Aided by the advent of psychotropic medication and federal funding, the promise of more humane care convinced state ofcials to discharge patients en masse, facilitated by court decisions focusing on patients’ rights. Te resultant calamity would fnd patients refusing to take medication due to adverse side efects, the federal government reneging on its funding of community mental health centers, and states relying on court decisions to minimize care. Eventually, the largest institutions providing care for the seriously mentally ill would be jails: the Los Angeles County Jail, Chicago’s Cook County Jail, and New York’s Rikers Island. Unsuited for mental health care, jail staf often resorted to solitary confnement, further harming impaired inmates. Unsupervised, mentally ill inmates gouged out their eyeballs, slashed their genitals, and opened abdominal cavities.22 A half-century later, the nation’s experiment in community mental health care continues at the expense of the mentally ill. Meanwhile, Michael Lipsky provided one of the frst critiques in an analysis of store-front bureaucracies: welfare departments, courts, and schools. Citing wide discretionary authority under conditions of scarce resources, human service professionals rationed services, often surreptitiously through “bureaucratic disentitlement.”23 Rather than adapt public policy to the circumstances of citizens, agency staf found creative ways to deny benefts to those likely eligible. Deceptive tactics, such as insisting applicants provide additional documents and return for interviews, requiring hours waiting

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for the next available appointment, referring consumers to distant agencies, insisting that English be used in all communication, and simply being rude, efectively reduced citizen demand for services as prospective consumers gave up. Welfare ofces were among the worst ofenders because they served the minority poor. When welfare reform was a hot topic during the early 1990s, a former welfare recipient complained, “there is no accountability in the social service feld. None demanded, none supplied.”24 But, the conversion of family welfare to a discretionary program managed by states in 1996 ofered almost unlimited opportunities to jigger public assistance to the disadvantage of the poor. Under the new welfare law, a worker from a California department was recorded responding to a complaint from a recipient: Quit trying to take our money. You are not special; you are a piece of shit. Tat’s what the Department of Social Services Health and Welfare Agency thinks of you. So get of your fat, lazy ass, you bitch, because we’re sick of you. And guess what? You have already lost your case. We just want to let you know what we think of you. We think you’re garbage. Everybody thinks you’re garbage. Go somewhere else and leach, you bitch.25 One welfare recipient refected on the psychological cost of interacting with agency staf: I’ve felt the poorest with the people who were supposed to be helping me. I get that their jobs suck and they’re over-worked, but I go out of my way to not be another asshole customer. I have my paperwork and a list of questions ready to go. I have all my references, my pay stubs, medical bills, everything. Sometimes I don’t have a document, but then it’s on my list of questions, to fnd out what I can use as a substitute. But often, none of that matters, because I am poor and asking for benefts that I am qualifed for and entitled to as a citizen, and in some people’s eyes that makes me less human.26 Accordingly, state welfare staf discouraged the eligible poor from receiving benefts. One analysis of welfare-to-work programs found that the “preferred institutional outcome [was] having applicants drop out of the welfare system” by subtle, but no less, efective means. “Te work-frst welfare intake structure is meant partly to punish or shame those who pass through it partly to teach a lesson and issue a challenge for ‘improved’ behavior, and partly to weed out those who are not strong enough to withstand its demands.”27 A study of a suburban welfare ofce concluded that the “upside” of welfare reform was a

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product of workers denying benefts, which reduced the caseload.28 Another analyst concluded that race was a critical factor in welfare receipt: “nonwhite applicants in welfare ofces face more unprofessional behavior from caseworkers than whites: withholding crucial information, refusing to provide applications, and other forms of outright rudeness. States with higher African American populations have tougher rules, more stringent work requirements, and higher sanction rates.”29 Public education often mirrored public welfare as a disservice to the minority poor. Te “school-to-prison pipeline” popularized by Marian Wright Edelman, founder of the Children’s Defense Fund, funneled low-income minority children from public education to juvenile detention—occasionally diverted to foster care—increasing the likelihood they would become adult ofenders: “Like the victims of a crippling or wasting disease, once drawn into the prison pipeline, massive numbers of young people lose their opportunity to live happy, productive lives, not because of festering microbes but because of years spent behind bars.”30 Abetted by the 1994 Gun Free Schools Act, “zero tolerance policies” (ZTP) targeted miscreant students who were often prescribed mood-altering medications but when noncompliant referred to juvenile authorities. Often foster care served as a way station, child welfare professionals maligning poor parents for neglecting their children. With a semantic nod to deinstitutionalization, child welfare analysts coined “disproportionality” to account for the relatively high number of black and Hispanic students interdicted by professional teachers, social workers, and guidance counselors, ironically admitting racism in institutional procedures. Since black children are 1.6 times more likely to be in foster care than other children, the entire child welfare system has come under scrutiny. “Once a report is made, allegations involving Black children are more likely to proceed to investigation than those involving White children,” observed critics. “Once accepted for investigation, allegations involving Black children are signifcantly more likely to be substantiated than those involving White children.”31 A Texas study of African American families found that, controlling for poverty, they were 77 percent more likely to have their children removed, despite having lower at-risk scores.32 Foster care, in turn, often serves as a waystation to juvenile justice, after which many minority youth are inducted into adult corrections, contributing to the rise of “the new Jim Crow,” public institutions of social control replicating ante-bellum slavery.33 Te capricious use of foster care complementing ZTP resulted in a new epithet directed at human service professionals: Jane Crow. As disproportionality sanitized the racist outcomes of children’s service professionals, the rise of Black Lives Matter underscored how child welfare served to control minority families. “Te reckless destruction of American families in pursuit of the goal of protecting children is as serious a problem as the failure to

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protect children,” contended a law professor, “We need to understand that destroying the parent-child relationship is among the highest forms of state violence.”34 Elevated consciousness of the punitive nature of children’s services led parents abused by child welfare agencies to demonstrate in 2020 in New York against the city’s Administration for Children’s Services (ACS), chanting, “No justice, no peace; ACS is the police.” A related organization, the Movement for Family Power, asserted parental rights in opposition to child protective services and the destruction of minority families by overzealous professionals, intent on placing minority children in foster care.35 Te fipside of overzealous child welfare interventions has been professional ineptitude in protecting abused children. In 1989, as a result of LaShawn A. v. Gray, the District of Columbia’s Child and Family Service Agency (CFSA) was required to upgrade child welfare staf, electing to hire only Masters of Social Work. But children known to CFSA continued to perish, nine in 2008 alone, the year marking the deaths of four children at the hand of their mother, an active case. In 2013, the District would agree to a $2.6 million settlement for failing to protect the children.36 In Los Angeles, 2013 marked the death of Gabriel Fernandez, whose abuse, known to child protective workers and supervisors, resulted in trials of his mother and her partner for homicide as well as four social workers of the Department of Child and Family Services (DCFS) for felony neglect. While the mother and partner received life and death sentences, respectively, the case against the social workers was dismissed, not only inciting demonstrations against DCFS but also divulging more deaths of cases active with the agency.37 A discerning public would have noted that the debacles associated with mental health, public welfare, and children’s services were overseen by wellcredentialed, state-sanctioned professionals. In each instance, reforms that emerged from the Progressive Era were elaborated, professionalized, and funded by government in order to advance a social project writ large, but in each instance the results were not just underwhelming but often inficted considerable damage on entire cohorts of Americans. Yet, the state monopolies erected during the 20th century protected professionals from accountability. Instead of advancing the wellbeing of clients, professionals were often complicit in ofering substandard service, neglecting to provide social care, and deferring to authorities demanding rationing of benefts. Because the clientele tended to be low-income, minorities of color, and lacking knowledge and skills to navigate complex beneft systems, benefts were often forfeited, leaving eligible American without assistance to which they were entitled. Rather than advocate for their charges in an environment demanding conformity, professionals often elected the most punitive, restrictive option available, furthering the disadvantage of the minority poor. Insofar as their failures came

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to public attention, the responses from beleaguered professionals were consistent: appeals for more funding and more authority. New Mexico, among the poorest states, provides a case study of the non-provision of social benefts. Te state agency responsible for distributing public assistance benefts to low-income residents, the Human Services Department (HSD), has been under federal court supervision since 1998 for failure to process applications for Medicaid and SNAP. Intransigence of HSD led the Judge in Hatten-Gonzalez v. Earnest to appoint a “special master” to oversee compliance. In 2018 the special master reported that, as of April 6, 2017, 36,622 SNAP and 63,141 Medicaid applications were still in limbo, not only denying poor residents essential healthcare and nutrition, but denying the state millions of dollars in federal funding. Among the errors attributed to state employees were failure to return phone calls, providing erroneous information, falsifying applications, and arbitrary denial of benefts.38 Two years after the special master appointment the state continues to bicker about HSD’s compliance failure instead of rectifying massive errors. While progressives tend to focus on market failure in advocating more assertive regulatory authority by the state, the failure of New Mexico to process applications for social benefts represents a classic case of state failure. By 2020, no personnel have been held accountable and dismissed for state failure to assure benefts entitled to the poor in New Mexico.

PROFESSIONAL RENTS In microcosm each human service profession has enjoyed the latitude to expand or degrade its public remit. Although they represented closed systems, the professions were neither homogenous nor invariable; having secured rents through licensure, professions enjoyed the freedom to prosper, or decline. Te classic professions—law, the military, and the clergy—predate the Enlightenment, while the modern professions based on science, have evolved any number of specializations, evident in medicine, engineering, and psychology. A useful distinction separates the full-status professions, such as law and medicine, which operate independently on a fee-for-service basis, from the semi-professions, such as teaching, social work, public health, and nursing, whose practitioners work for a salary in large organizations.39 While the label “semi-profession” implies subordination, in fact, this need not be the case. Nursing, for example, once clearly subordinate to physicians, has followed Flexner’s admonition with a vengeance, requiring a research thesis for the master’s degree as well as original research for the doctorate. In contrast with the M.D., a practice degree, the result has been paradoxical: in only a

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few decades, Dr. Nurse, often a female with a research Ph.D., is arguably more knowledgeable than Dr. Physician, commonly a male M.D. Within the semi-professions central to the welfare state—nursing, public health, teaching, and social work—disciplines have fared quite diferently. Adhering to science, nursing and public health have enjoyed wide public respect. Teaching and social work, on the other hand, perceiving their work as more an art than a science, have fagged in public regard. In contrast with nursing and public health, a student studying teaching or social work can earn a “terminal degree,” meaning they have acquired the necessary knowledge and skills to operate independently, by having displayed their aptitude in the feld in an internship under the supervision of a mentor, but without having conducted research that would contribute to the knowledge base of their profession. Te risk of semi-professional status has been derogation of ethical commitment to public service in favor of complying with organizational mandates. While all professions claim public service as a primary concern, necessary to secure the legislated professional monopoly, the independent professions are more able to prioritize ethical conduct, while the semi-professions are tempted to subordinate ethics to organizational requirements. A fundamental problem with professions has been evaluating the caliber of their work. With the post-Enlightenment professions, accountability has been determined by outcome research, which serves to justify the state-sanctioned professional monopoly. In the absence of empirically determined efectiveness, however, the professions are vulnerable to the accusation that they have erected organizational edifces to justify rents, i.e. unearned income by virtue of excluding competitors.40 Tere is no better example of defending a professional rent than the attempt of California educator organizations to ban Teach for America from operating in the state. TFA had recruited graduating students from premier colleges, over 700 assigned to struggling schools in California. Several studies by reputable policy analysis organizations found that TFA volunteers performed better in math instruction and were comparable in reading, compared to teachers with traditional degrees.41 Yet, California teacher organizations objected, contending that TFA subverted the salary structure and benefts enjoyed by conventional educators,42 but the ban failed. Te behavior of teacher unions in obstructing education reform has also been chronicled in Newark.43 In public service, defending professional perks became conspicuous when teachers and social workers reverted to toady mode when push came to shove, especially when their salaries, benefts, and work conditions were supported by collective bargaining agreements. Tose teachers and social workers who perceived an unacceptable disconnect between organizational requirements

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and professional ethics tended to defect from the public sector, leaving for greener pastures, i.e. more responsive clients in private schools or private practice, respectively. Regardless of the ethical problems associated with government service, probably the majority of semi-professionals begin their careers in the public sector. While some will depart at the frst opportunity, the colleagues left behind will tend to be less enterprising and less up to date with regard to knowledge; gradually the bureaucracy takes its toll, requiring the sacrifce of independence for an adequate salary and a stable job.

AN ACCOUNTING What are the implications for the welfare state of problematic performance a la the nanny state, the bully state, and professional rents? Figure 6.1 tracks major industrial nations with respect to total welfare expenditures as a percent of GDP, including public and private spending, such as healthcare and pensions provided by employers as well as government contracts with nonprofts and other charitable activity. Likely a surprise to many liberals, total spending in the U.S., in the middle of the pack in 1995 rose to be second to France by 2015, altogether 30 percent of GDP. Once all social welfare activity is included, the American welfare state appears almost generous to a fault. Note that the countries included in Figure 6.1 include the four labeled in Chapter 1 as “liberal” (the U.S., U.K., Australia, and Canada), two “corporate” (Germany and France), and two “social democratic” (Finland and Sweden). Regardless of classifcation, Figure 6.1 shows that welfare states of developed nations average 25 percent of GDP on social welfare expenditures. Now, recall Table 1.1 in Chapter 1, ranking nations with regard to the Social Progress Index. All the nations in Figure 6.1 rank well above the U.S. in Social Progress, despite America’s higher spending, second only to France. What accounts for America faring so poorly with regard to social welfare spending? Note that all the nations in Figure 6.1 assure universal healthcare, paid family leave, and adequate benefts for the unemployed, except the U.S. Te unique platform for the American welfare state—recall Welfare State 0.0 and American federalism codifed in the Tenth Amendment—and its dual evolution coupling social insurance with public assistance account for much of this disparity. But not all, since Australia, Canada, and the U.K. also have dual structures and score signifcantly higher on social progress. Clearly, other factors compound the ability of the U.S. to approximate other nations, such as Jim Crow racism that continues in the benign form of the nanny state and its more aggressive counterpart, the bully state. Add rents engineered by professional cartels and the American welfare state is signifcantly encumbered and compromised in addressing the needs of citizens.

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Total Welfare as %GDP

35 30 25 20 15 10 5 0

1995

2005

2015

Australia

Canada

United Kingdom

United States

Finland

Sweden

France

Germany

Figure 6.1 Total welfare as %GDP. https://stats.oecd.org/Index.aspx?datasetcode =SOCX_AGG

Te contradiction of relatively low social progress vis-à-vis relatively high welfare spending has enormous implications for American political parties and the ideologies driving social policy. Ideologies are shorthand for value diferences, simplifying, for better or worse multiplicities of preferences. Now that ideology is more clearly bifurcated according to political parties in the U.S., it is safe to observe that conservative Republicans prefer private solutions to social problems as well as smaller government while liberal Democrats opt for public solutions engineered by larger government, while being leery of private initiatives. Accordingly, conservatives, such as William Voegeli, fear the extortive demands on taxpayers by liberal designs to increase welfare spending,44 while liberals, such as Jacob Hacker, express alarm at retreats from government employment, health, and retirement benefts engineered by the right.45 How to regear the American welfare state to bring it in line with other developed nations represents “a problem from purgatory,” that miserable station between hell and heaven, or, administratively speaking, between protracted agony for some and bliss for others, and with respect to social benefts, the diference between desperation for many and afuence for a few. Crises and the choices made at societal infection points determine welfare states, evident in the Great Depression inaugurating the American welfare

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state of the 1930s (Welfare State 1.0) followed by its expansion during the Great Society of the 1960s (Welfare State 2.0). In both instances, the interaction of social and political instability was seized upon by political leaders who maneuvered major changes in America’s social infrastructure. With the Covid-19 pandemic, a public health crisis producing economic collapse across developed nations emerges coincidental with the proliferation of digital technology, raising the possibility of transforming social infrastructure and producing a Welfare State 3.0 suited to the needs of the 21st century.

NOTES 1 Roy Lubove, Te Professional Altruist (Cambridge, MA: Harvard University Press, 1965). 2 Michael Katz, In the Shadow of the Poorhouse (New York: Basic Books, 1986). 3 Carolyn Moehling, Mothers’ Pensions and Female Headship (New Haven: Yale University, May 2002). 4 Michael McGerr, Te Rise and Fall of the Progressive Movement in America: 1870–1920 (New York: Te Free Press, 2003), pp. 106–113. 5 Charles Loring Brace, Te Dangerous Classes of New York (New York: Wynkoop & Hallenbeck, 1972). 6 Josephine Baker, Fighting for Life (New York: New York Review of Books, 1939). 7 https://www2.ed.gov/pubs/NatAtRisk/risk.html 8 Wendy Kopp, One Day, All Children (New York: Public Afairs, 2003). 9 Jay Mathews, Work Hard, Be Nice (Chapel Hill: Algonquin Books, 2009). 10 Paul Tough, Whatever It Takes (New York: Houghton Mifin, 2008). 11 Diane Ravitch, Reign of Error (New York: Vintage, 2014). 12 https://www.washingtontimes.com/news/2019/jan/23/a-ffty-year-chicago-housing -discrimination-case-s/ 13 https://en.wikipedia.org/wiki/Section_8_%28housing%29 14 Cass Sunstein, “It’s for Your Own Good!” New York Review of Books, March 7, 2013, p. 10. 15 Janet Currie, Te Invisible Safety Net (Princeton: Princeton University Press, 2006), p. 3. 16 Daniel Hatcher, Te Poverty Industry (New York: New York University Press, 2016), p. 19. 17 William Epstein, Psychotherapy as Religion (Las Vegas: University of Nevada Press, 2006), p. 169. 18 William Epstein, Democracy without Decency (University Park: Pennsylvania State University Press, 2010), p. 216. 19 https://fns-prod.azureedge.net/sites/default/fles/CashOutFoodUse_Summary.pdf 20 Anne Case and Angus Deaton, Deaths of Despair (Princeton: Princeton University Press, 2020), p. 140. 21 E. Fuller Torrey, Te Death of Psychiatry (New York: Chilton/Haynes, 1974). 22 E. Fuller Torrey, M. Zdanowicz, A. Kennard, A. Lamb, D. Eslinger, M. Biasotti, and D. Fuller, Te Treatment of Persons with Mental Illness in Prisons and Jails: A State Survey (Bethesda: Treatment Advocacy Center, 2014). 23 Michael Lipsky, Street-Level Bureaucracy (New York: Russell Sage Foundation, 1980). 24 Teresa Funicello, Te Tyranny of Kindness (New York: Atlantic Monthly Press, 1993), p. 252. Original emphasis.

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25 Inhuman services, Harpers, June 1997, p. 16. 26 Linda Tirado, Hand to Mouth: Te Truth about Being Poor in a Wealthy World (London: Virago, 2014), pp. 53–54. 27 Frank Ridzi, Selling Welfare Reform (New York: New York University Press, 2009), pp. 36–37. 28 Teresa Lawinski, Living on the Edge in Suburbia (Nashville: Vanderbilt University Press, 2010), p. 67. 29 Virginia Eubanks, Automating Inequality: How High-Tech Tools Profle, Police, and Punish the Poor (New York: St. Martin’s Press, 2017), p. 79. 30 Marian Wright Edelman, “Te Cradle to Prison Pipeline: An American Health Crisis,” Preventing Chronic Disease 4, no. 3 (2007): 1–2. 31 Alan Dettlaf, et al., “It Is Not a Broken System, It Is a System Tat Needs to Be Broken: Te upEND Movement to Abolish the Child Welfare System,” Journal of Public Child Welfare, September 2020. https://www.tandfonline.com/doi/full/10 .1080/15548732.2020.1814542?f bclid=IwAR0JF7U8Sr7eNX8 _rdh9KzTBVro TIQOECQW2a3ECc7BQicZv-O5vdY_JKLs 32 https://imprintnews.org/child-welfare-2/fulton-city-philadelphia-both-sides-miss -most-important-point/49025?utm_medium=email&utm_source=govdelivery 33 Michelle Alexander, Te New Jim Crow (New York: New Press, 2010). 34 Larissa MacFarquhar, “When Should a Child Be Taken from His Parents? New Yorker, August 7, 2017. 35 M. Fitzgerald, “Rising Voices for ‘Family Power’ Seek to Abolish the Child Welfare System,” Te Imprint, July 8, 2020. 36 M. Weil, “D.C. to Pay 42.6 Million in Deaths of 4 Children Slain by Banita Jacks,” Te Washington Post, May 31, 2013. 37 L. Bergman and B. Knappenberger, Te Trials of Gabriel Fernandez. Luminant, 2020. 38 http://nmpovertylaw.org/wp-content/uploads/2018/02/Doc.-810_Report_Special -Master_2018_01_31.pdf 39 Amitai Etzioni, Te Semi-Professions and Teir Organizations (New York: Free Press, 1969). 40 Mariana Mazzucato, Te Value of Everything (New York: Penguin, 2018). 41 https://www.mathematica.org/our-publications-and-findings/projects/teach-for -america 42 https://www.sacbee.com/news/politics-government/capitol-alert/article239799863 .html 43 Dale Russelkof, Te Prize (New York: Houghton Mifin Harcourt, 2015). 44 William Voegeli, Never Enough (New York: Encounter Books, 2010). 45 Jacob Hacker, Te Great Risk Shift (New York: Oxford University Press, 2006).

7 Policy paradigms Major expansions of welfare states occur in response to destabilizing events. Tus, the Great Depression introduced the New Deal of the 1930s, the labor wars fought between the Wobblies and army veterans after World War I, Patton’s dispersion of the veterans’ “bonus army” in 1932, and widespread destitution due to unemployment rising to 25 percent nationally, underscoring the urgency to reclaim social control. Similarly, the War on Poverty of the mid-1960s attempted to address vicious opposition to the civil rights movement by racists in the South, the rise of black separatism personifed by Malcolm X, and the explicit threat of the Black Panthers. Such crises threaten the economy, placing a premium on efective national leadership, evident in Franklin Delano Roosevelt and Lyndon Baines Johnson. Rather than enjoying carte blanche authority, history instructs that their policies were circumscribed by precedent and constitutional strictures as well as compromises negotiated with Congress and validated by the courts. Te national pandemic accompanied by economic collapse could well prompt a subsequent restructuring of the American welfare state.

PARADIGMS OF SOCIAL POLICY In 1962 Tomas Kuhn’s Te Structure of Scientifc Revolutions appeared, upsetting the received wisdom about the evolution of science. Rather than a linear progression of explanations of how the natural world works, Kuhn showed that science emerged as the product of fundamental disagreements among scientists, superior explanations giving rise to paradigms that eclipsed previous explanations. As a successful explanation, paradigms are more than theories ascribed by formulas, but identify entire institutions, consume professional careers, and are embellished by prestigious prizes, all ensconced as

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“normal, puzzle-solving” activity. Yet, no paradigm is completely successful, so anomalies accumulate that cannot be ignored, leading mavericks to propose an alternative explanation of the phenomenon under examination.1 If the sequence—normal science, anomaly accumulation, alternative paradigm—explains physical science, how much more applicable to social science, to say nothing of its application to social policy? Accordingly, paradigms of social policy have emerged, embedded in wellfunded organizations, articulated by highly credentialed experts over the span of their careers, and promoted through publications and media outlets. Te social insurance paradigm of Welfare State 1.0, for example, is defended by the National Academy of Social Insurance, 2 AARP, and the Social Security Administration; the public assistance paradigm of Welfare State 2.0 is supported by the Children’s Defense Fund, the Center for Law and Social Policy, and the Center on Budget and Policy Priorities. Stafed by highly pedigreed experts who often transition to and from Congressional committees, these organizations may not be well known to the public, but they anchor the paradigm in the realpolitik of the nation. Beyond defending the programs under their remit, they prefer incremental expansion—normal, “puzzle solving” policy—but rarely venture into more radical territory of fundamental policy change. By way of illustration, Peter Hall, a Harvard policy scholar, has identifed “instrumental changes” in beneft levels and “parametric changes” in beneft rules, which may lead to “paradigmatic changes” in programming, although the latter occur rarely.3 Tus, Social Security, introduced in 1935, has been changed to increase the withholding tax while raising the cap on taxable income to assure the provision of future benefts. Critics have alleged that this arrangement is doubly regressive insofar as the withholding tax is set at a fat rate while the cap avoids taxing the wealthy. Since the inception of Medicare in 1965, the withholding tax has been used to fund Part A hospital insurance (HI); but “all income” is taxed for HI, to fnance Part B (Supplemental Medical Insurance), thus eliding the cap on taxable income for Social Security.4 Progressive solutions to social insurance regressivity would be to make the withholding tax progressive, such as instituting a 3 percent levy on minimum wage workers, 6 percent for median wage workers, and 9 percent for upper-income workers, and removing the cap on taxable income. A partial step in this direction came under the ACA which imposed an additional Medicare surtax of 0.9 percent on the amount of single persons’ incomes exceeding $88,000 ($176,000 for married couples); this additional tax is paid 100 percent by the employee. Further changes of this type would undoubtedly face political headwinds because they would represent a signifcant paradigmatic shift in social insurance. Yet, the fact that benefciaries with high taxable incomes already pay a Medicare surtax suggests

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that proposals to make social insurance taxation completely progressive could conceivably gain traction. During the 2020 presidential primaries, Andrew Yang advocated a Universal Basic Income (UBI), not unlike Nixon’s Family Assistance Plan, although the idea was quickly dismissed. A UBI could be constructed by merging Supplemental Security Income, Temporary Assistance for Needy Families, and smaller welfare programs, but doing so would wreak havoc with unions representing federal and state employees operating public assistance programs while also deleting the behavioral requirements upon which welfare is contingent, likely outraging conservatives who prefer that welfare be stigmatic, to say nothing of scrambling the welfare advocacy groups cited above. Yet, a fundamental restructuring based on UBI or FAP principles may not be out of reach. FAP was defeated not because of widespread objection to the new structure it proposed, but largely because liberals thought its beneft levels were too low, and conservatives complained about possible unintended behavioral consequences. Moreover, many European countries have had UBI-like programs for decades and because such programs are less complicated to administer than the bifurcated American system of social insurance and public assistance, they tend to have lower overhead costs. Nonetheless, in addition to the ingrained preference for the status quo, there remain many political and ideological obstacles on the road to signifcant structural changes to the American welfare state. An oft overlooked but critically important obstacle is path dependence.

PATH DEPENDENCE For the policy scholars “path dependence” refers to the presumption of incremental change; political and economic considerations favor the status quo and dissuade actors from pursuing more substantial changes. Under even optimal circumstances, steering the welfare state in a diferent direction requires patience, diligence, and time.5 But, the middle decades of the 20th century made path dependence a serviceable default option for policy scholars on both sides of the Atlantic. Te American welfare state during the latter decades of the 20th century was inferior to Scandinavian and other European nations’ systems of social provision, but kept plodding along in generally, if incrementally, liberal fashion because of path dependent thinking on the part of welfare state proponents. Despite its faws, the welfare state was strongly anchored in liberal principles so that, even during this generally quiescent period, even Republican presidents like Richard Nixon conceded to liberal designs in social policy.6

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Just as liberal institutions held back more progressive possibilities in social policy, so conservatives began an assault on the welfare state. Commencing with the Reagan presidency, a multipronged efort to contain, then reverse liberal ambitions in public afairs began. In the early 1970s, Lewis Powell, a Virginia lawyer, began a memo, castigating business leaders for ignoring the explicit threat to capitalism posed by the left, personifed by Ralph Nader, Abbie Hofman, and Jane Fonda. Later distributed by the Chamber of Commerce, Powell advocated challenging the left on a broad front, enlisting corporate CEOs, politicians, and philanthropists. In relatively short order in institutional terms, conservatives unleashed unprecedented sums to build an infrastructure of think tanks, fund political action committees, and amplify the work of charitable foundations.7 In doing so, the right established a conservative intellectual infrastructure, which, admittedly small compared to liberal universities and policy institutes, was considerably more savvy and assertive. For example, the American Enterprise Institute acquired the services of Peter Berger and Richard John Neuhaus to prepare a theory of American malaise. To Empower People attributed individual alienation to the rise of megastructures (Big Government, Big Labor, Professional Associations, and Big Corporations) at the expense of “mediating structures” that afrmed individuals (the Family, Church, Neighborhood, and Civic Associations).8 Nonpartisan on its face, the Berger and Neuhaus was hardly agnostic insofar as three of the four megastructures—Big Government, Big Labor, and Professional Associations—have been instrumental in the ascendance of liberalism during the 20th century. Post-Powell memo, instead of sniping at liberals, good sport among conservative pundits, the right was now playing a long game. Liberal intellectuals remained aloof, secure in their wisdom that the path dependence of programs introduced during the New Deal and War on Poverty enjoyed wide public support and produced policy tomes that defed digestion by decision makers in Congress. To punctuate the marketing strategy of conservative think tanks, new-comer Heritage Foundation began producing Backgrounder, designed to be read during the cab ride from Reagan airport to Capitol Hill. But perhaps the most adroit maneuver by the right was hijacking the 501(c)(3) IRS status intended for nonproft charitable activity to ideological purposes, which permitted conservative activists to obscure the source of private contributions. By the beginning of the 21st century, the right was out-gunning liberals in “the marketplace of ideas,” observed British journalists.9 Retreat from welfare state commitments was not limited to the U.S. tax cuts and looming debt prompted developed nations to rein in public spending, as Anton Hemerijck, a European scholar, observed, creating an era of fscal austerity.

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Massive increases in fscal defcits and public debt, required to preempt a more severe global meltdown, have since forced policymakers to consider deep cuts in welfare services, including health, education, and social transfers to the poor, the unemployed, and pensioners, in order to shore up public fnance solvency and economic stability.10 Austerity, a central tenet of neoliberalism, contained welfare states, despite an alternative, ordoliberalism, a German concept: “According to this view, states must provide adequate social safety nets and support extra-economic institutions to allow labor to adjust skills to match market needs, ensure that cartels do not develop, and limit unproductive speculation through taxation and other policy instruments.”11 But, Americans were still in the thrall of neo-classical economics, assuming markets were self-correcting; left to their own devices an economy in the doldrums would recover, providing, once again, revenues necessary to sustain the welfare state. Eventually, the right’s incursions into social policy challenged the path dependence thesis of liberal scholars and their determinism to keep faith in the progressive cause: if the continuity of social programs could be explained by historical precedent conditioned by economic constraints, what did this mean for the future of the welfare state, especially if citizen skepticism was refected in electing anti-government conservatives to public ofce? Te gradual defection of Americans from their welfare state has been captured by Jacob Hacker, the rare scholar willing to translate academese into everyday discourse. On the eve of the Great Recession, Hacker published a prescient account of the liberal project losing traction. Te backstory was the structure of the welfare state: “Te architects of the Social Security Act contrasted insurance for working Americans with relief from those who were already destitute. Relief was reactive, demeaning, inevitably stingy. Insurance was proactive, uplifting, generous. Relief was backward looking; insurance was forward looking.”12 Yet, since the 1970s the protection of insurance from pension plans and healthcare had declined, shifting fnancial responsibility from employers to families. Te paradox was that during subsequent decades the drop in post-tax median family income accelerated, 27.7 percent during the 1970s, 28 percent in the 1980s, and 37.5 percent during the 1990s.13 Over the same period of time, as one analyst summarized: middle-class wages have been nearly frozen for the past 40 years, and discretionary income has declined if escalating out-of-pocket health care costs and insurance premiums are counted. [Moreover] the economy of the last 40 years has shed more than a third of its manufacturing jobs [and] it has replaced them with lower-paying jobs in the service sector—fast food chains, retail stores, hotels, customer service centers.

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Most who hold those jobs work at minimum wage, or at rates that use the minimum wage as a benchmark.14 Is it then surprising that a large swath of lower- and middle-class Americans experiencing dwindling private pension and health insurance protections, stagnant wages, job losses, and static if not declining incomes, began revoking their allegiance to the welfare state? Te most public-facing action illustrative of citizens’ defection has been their election of conservative Republicans and neoliberal Democrats to Congress, and in 2016 the election of Donald Trump to the Presidency. Whether oblivious to the diminishing support for the welfare state, too obstinate to believe the trend would last, or too smugly confdent in the righteousness of their cause and the moral superiority of their policy designs, most liberals soldiered on with path dependence, as did Hacker, advocating “a new framework of social insurance that revitalizes the best elements of the present system while replacing those parts that work efectively with stronger alternatives geared toward today’s economy and society.”15 Unfortunately, the safety-net of public assistance was neglected altogether, ignoring the fact that the middle class was losing ground economically, as was the lower-middle class, which was approximating the working poor in terms of income. Indeed, Tomas Piketty uses the word “collapse” to describe what happened to lowermiddle income Americans during this period. In this fraught environment, the Democratic administrations of Bill Clinton and Barack Obama had to make concessions to Congressional conservatives, earning an epithet from the left as “neoliberals,” but social entitlements remained intact, except for family welfare, of course, which had been devolved to the states as a discretionary program. Belatedly, progressives introduced a more assertive think tank, the Center for American Progress, but it was largely a defensive response to an ascendent conservatism. As if understanding path dependence as well as any liberal academic, Grover Norquist, founder of Americans for Tax Reform, advocated reducing taxes in order to drain revenue for liberal social programs, pledging to “get [government] down to the size where we can drown it in the bathtub.”16 Te liberal welfare state survived these assaults, but it was less robust. It had lost the support of many Americans, and faced an array of new, well-funded and skillful ideological opponents in think tanks and in government, as increasingly conservative presidents flled their administrations with like-minded cabinet secretaries, appointees, and high-ranking civil servants.

REACTIONARY RHETORIC As liberals redoubled allegiance to the welfare state, an agnostic economist was plumbing the depths of conservatism. Albert O. Hirschman was European

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in sensibility and South American by experience but had little patience with the superiority of liberalism:17 “progressives have remained mired in earnestness,” he quipped. “Most of them have been long on moral indignation and short on irony.”18 While his colleagues were immersed in the sophisticated equations of neo-classical economics, Hirschman delved into history, isolating the themes conservatives employed to counter liberal hegemony in social policy, hence his concern about “reactionary rhetoric.” Appreciating the value of social programs, Hirschman’s focus was on the right’s attack on the welfare state, promulgated by conservative intellectuals. Hirschman posited three conservative theses. Te “perversity thesis” held that public policy had negative, if unintended, consequences; thus, attempts to sustain the poor, ensure workers from injury, and regulate business were ultimately perverse. “Attempt to reach liberty will make society sink into slavery, the quest for democracy will produce oligarchy and tyranny, and social welfare programs will create more, than less, poverty. Everything backfres,” he wrote.19 In essence, social welfare invited moral hazard, public assistance benefts induced the poor to disengage from work, public pensions invited workers to retire early, and unemployment benefts delayed reentry to the labor market. Te right’s “futility thesis” held that deep social structures were responsible for distributing resources and opportunities; therefore social welfare was essentially cosmetic. Accordingly, eforts at redistribution were superfcial. Conservatives earned debating points arguing that “many of the newer social welfare programs served primarily to provide jobs to a large group of administrators, social workers, and sundry professionals who were pictured as power-hungry bureaucrats wholly dedicated to expanding their bureaus and perquisites.”20 Under such circumstances, conservatives argued it was better to leave opportunity to traditional institutions, such as the family and the economy. Te conservative “jeopardy thesis” held that the welfare state ultimately abridged freedom, even as it endeavored to expand opportunity. Tis harkened to Isaiah Berlin’s distinction between types of liberty: “negative liberty” conforming to the classical liberal understanding as freedom from interference from others, including the state; “positive liberty” meaning the intrusion of the state under the guise of assistance, which is often compulsory. Berlin’s biographer summarized the diference: Negative liberty was the core of a properly liberal political creed: leaving individuals alone to do what they want, provided that their actions did not interfere with the liberty of others. Positive liberty was the core of all emancipatory theories of politics, from socialist or communist: for all such doctrines wish to use political power to free human beings to realize some hidden, blocked, or repressed potential.21

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As Hayek had argued in Te Road to Serfdom: “Freedom is critically threatened when the government is given exclusive power to provide certain services— power which, in order to achieve its purpose, it must use for the discretionary coercion of individuals.”22 Tus, the unrelenting expansion of the welfare state compromised individual liberty. For example, compulsory participation in Social Security, which enjoys a de facto monopoly on public pensions, subverted the right of individuals to ensure for their own retirement. Combined, these arguments provided the right with powerful leverage against proponents of the welfare state, who Hirschman contended must craft a “progressive rhetoric” if they are to reverse the ascendance of conservatives in public policy. Accordingly, Hirschman thought “chances are that a good deal of the repertoire of progressive or liberal rhetoric can be generated from the various reactionary theses … by turning them around, standing them on their head, or similar tricks.”23 Regardless of the terms employed, the rhetoric justifying social programs is essential to building public support. Congressional 2020 election results imply that liberals have not yet crafted a rhetorical narrative convincing enough to rebuild widespread public support for the American welfare state. It remains to be seen if there is more enthusiasm for narrative construction among the liberal academy, think tanks denizens, and others under the Biden administration. It would be prudent to seize this opportunity to develop a new welfare state narrative suited to the 21st century because, as Piketty reminds us: No one will ever possess the absolute truth [but] the struggle of ideologies and the quest for justice entails the expression of clearly defned positions, [and] multiple trajectories are always possible Te existing system is a consequence of sociopolitical processes shaped primarily by the balance of political-ideological capital and the mobilization capacities of the various partisans in contention and it will continue to evolve in the same way. Te key point is this: the very sharp rise in wealth inequality in the U.S. in the period 1980-2020, combined with mediocre growth, has created the conditions for a challenge to the conservative ideological turn of the 1980s.24

THE CYCLE OF WELFARE STATE DECLINE Rhetoric aside, the dual paradigms of the American welfare state, insurance vs. assistance, have also been complicit in its decline. To a large degree this is because of our persistent differentiation between the “worthy poor” and the “unworthy poor,” a distinction that predates the New Deal. Firmly rooted in Calvinist values, this distinction has had unfortunate

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consequences for citizens and for the nation. In general, the “unworthy poor” are consigned to means-tested public assistance programs, further handicapped by having to repeatedly and often redundantly justify their claim to benefits. The nation’s solidarity and its pocketbook suffer because of the excessive administrative cost of managing 52 separate state public assistance programs (i.e., TANF), along with numerous other silo programs in areas ranging from child welfare to housing, juvenile justice to child support enforcement and more. Multiple state agencies administering a multitude of social programs create a thicket of time-consuming application processes for citizens potentially eligible for multiple benefits, sowing confusion and exasperation. Moreover, the determination of conservatives to withhold necessary tax revenues to “starve the beast” of government social programs serves to strangle the welfare state, a poignant issue in view of 77 million retiring Baby Boomers. Given these factors, path dependence may be the redoubt of academic scholars, but it is a dead-end street, failing to adequately appreciate or portray the perilous situation of the American welfare state. Importantly, it also does not recognize that the coronavirus pandemic and the health and economic damage it has wrought may be one of those “inf lection points,” where institutional change, not just more incremental tinkering, may be achievable. To bring forth cogent proposals for systematic change and restore citizens’ support for a new welfare state, however, requires a solid understanding of how and why that support diminished, and why the welfare state itself has also been in decline. Five factors account for much of the decline in support and deterioration in the welfare state itself. Te frst is rising economic inequality: the shares of income and wealth held by the upper strata have increased to levels not seen since the Gilded Age of a century ago.25 Te top 1 percent of households now captures about a ffth of total (U.S.) income and the top one-tenth of 1 percent captures about a tenth. Compared to the 1950–1970 period, this roughly doubles the share owned by the top 1 percent and triples the share owned by the top one-tenth of one percent. Today, income inequality in the U.S. exceeds that in India, Morocco, Indonesia, Iran, Ukraine, and Vietnam.26 Although inequality is often understood economically due to robust data, it is evident in other domains as well, including health, housing, education, and employment. While the poor struggle to fnd minimal healthcare, the afuent enjoy ready access to cosmetic surgery; while low-income families have trouble locating afordable rental units, to say nothing of homes to purchase, the rich relax in McMansions; while poor students apply to college, incurring crippling debt in the process, their afuent peers indulge in legacy admissions to Ivy League institutions,

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graduating debt free; while low-wage workers cobble together multiple jobs to keep their economically fragile families afoat, CEOs bask in salaries and golden parachutes. It is not uncommon to question if poor people “deserve” the meager public assistance benefts they are provided, but it is rare to hear mainstream America question whether hedge fund managers, CEOs, corporate raiders, and others of their ilk “deserve” their lavish, extravagant perquisites and salaries which can be in the tens of millions, if not billions, of dollars per year. 27 Clearly, the liberal promise to create a more just and equitable society has not yet been kept, and the promise itself began to fade from view starting in the 1980s. Te second failure of liberalism has been attributed directly to an increasingly regressive tax code, which not only apportions tax credits and refunds upwardly but also deprives the Treasury of revenue necessary to fund more equitable social programs. Tus, the apogee of liberalism, the 1970s during the Nixon administration, witnessed progressive taxation that had been gradually reduced, especially during the administrations of Reagan, Bush II, and Trump. Aside from increasing regressivity in taxation, the rich enjoy two additional advantages: First, loopholes in the tax code ofer many and sizable tax credits not available to other Americans, such as equity swaps, carried interest, and complex deferred compensation arrangements.28 Second, the rich have perfected sheltering capital overseas in low- or zero-tax havens. Critics allege, “among the superrich, dodging taxes is a competitive sport. An estimated eight percent of the world’s household fnancial wealth is hidden in tax havens.”29 Closer to home, the U.S. has lost “close to $70 billion a year due to the shifting of corporate profts to tax havens, an amount nearly equal to all of America’s spending on food stamps [SNAP].”30 Absent tax revenues, the welfare state is unable to meet its legislated mandates. Te third handicap has been amplifcation of government bureaucracies. Already notorious for “red tape,” bureaucracies have burgeoned as programs are added under the auspice of diferent federal agencies—the Departments of Health and Human Services, Labor, Education, Housing and Urban Development, and the Treasury—with corresponding state agencies. On average, 10 cents of every federal dollar allocated to government social programs is consumed by so-called administrative costs. Beginning in the 1980s, government began to seek cost and program efciencies by increased outsourcing to the private sector but often discovered that contracted/privatized services are more expensive, not less, because these contracts include “indirect costs” for administrative overhead which often exceed the administrative cost of direct publicly provided services. Accountability can also be compromised when publicly fnanced services are contracted out. Many instances of child damage or death, for example, have occurred among youngsters placed and/or

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cared for by private agencies, often for-proft frms. Te most egregious example of such harm is the treatment of separated infants and children at the Southern border, many of whom were housed in facilities operated by large, for-proft corporations, licensed, paid, and allegedly supervised by states. As bureaucracy expands, directly and/or through the use of contracted service providers, so do the difculties and complexities faced by citizens in need of help. Tey confront multiple agencies in diferent locations, with conficting application forms with diferent due dates, review periods, and documentation requirements creating a veritable maze which deters people in need from obtaining benefts for which they are eligible. Te fourth problem is that, while child welfare examples are most obvious, citizen harm caused by social program staf occurs, to one degree or another, across all programs, regardless of provider auspice. Minorities of color are well-acquainted with dismissive public welfare staf, but the punitiveness in juvenile justice has more consequential and lasting efects. As a result of the failed community mental health movement, homelessness is epidemic among the mentally ill. Most recently, the opioid epidemic has implicated major pharmaceutical companies and thousands of physicians for prescribing addictive medications, not only contributing to deaths due to overdose and suicide but also driving an increase in foster care placements.31 In all situations where consumers are harmed by individual providers, or agency personnel, culpability attaches to individual ofenders, but also to public agencies’ professional, supervisory, and managerial personnel, and to contracted service providers. However, experts organized into professional cartels and/or protected by unions or contract provisions have proven largely immune from public accountability, let alone criminal prosecution, for the damage they do to the most vulnerable. Finally, the inability of the welfare state to adequately address citizens’ needs in real-time leaves low-income Americans resorting to alternative providers. Tis is most evident in the rise of Alternative Financial Services (AFS), subprime lenders operating as check-cashers, buy-here-pay-here auto lots, payday lenders, auto title lenders, and rent-to-buy appliance stores. Once limited to pawnshops, AFS are now afliated with major banks and boast millions of customers. Addressing a niche market of low-income households, AFS ofer fnancial products at high interest, refecting the high risk of customers, but on terms which thwart the upward mobility of consumers. Tus, the inadequate benefts of the welfare state have spawned a new industry of AFS, which arguably negates opportunity, but whose services are valued by customers for their accessible locations, convenient service days and hours, friendly employees, and the absence of bureaucratic rigidity, red tape, hassle, and condescension.32

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Each of these faws and problems could be corrected by readily identifable policy changes but even discrete reforms would likely be met with vociferous opposition and practical impediments. For instance, increasing tax progressivity may generate more revenue for social programs, but damage to citizens might also increase if more teachers, social workers, and counselors continue to deliver harmful interventions. Similarly, inequality may generate interest in expanding opportunities through higher education, but opportunity is more chimeral than real when unmanageable tuition for low-income students leaves them with crushing debt. Even worse, the interaction of these factors confounds eforts to address them, in policy terms the vortex of a “perfect storm.” Yet, as Hirschman, ever the optimist, had observed, declining progress through the welfare state can also presage a path to renewal.

THE CYCLE OF SOCIAL POLICY RENEWAL In proposing a new framework for 21st century social policy, it is important to recognize that our current welfare state remains anchored in the bygone era of industrial America. Fundamentally, social benefts presumed a male breadwinner, whom government would support in the event of disability, unemployment, or retirement, and today social insurance continues to be predicated on labor market participation. Inferior public assistance was delivered through the states for the poor who could not work, hence welfare for low-income mothers, the disabled, and aged. Subsequently, though whites are the majority, the welfare poor are disproportionately women, children, and minorities of color. Despite this dualism, benefts across the board are inadequate. Many social insurance benefciaries also qualify for public assistance (SSI), and many public assistance (TANF) recipients feel compelled to work “under the table” because of beneft inadequacy. Worse, the means test on income and assets creates a “poverty trap” that consigns the welfare poor to long-term poverty. As should be obvious, with the Information Age already several decades old, the nearly constant proliferation of enhancements to computing and digital technology, advances in artifcial intelligence and machine learning, and other innovations, the current infrastructure of social insurance and public assistance is as archaic as it is inadequate. Te U.S. is not alone in facing a moment in time, an infection point, where foundational principles, structural arrangements, social policies, and programs need to be revisited; these issues have also become evident on the Continent. Protracted austerity in Europe Hemerijck observed post–Great Recession has resulted in a “frozen welfare state,” social policy anchored

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to an arrested political economy. Echoing his collaborator Gosta EspingAndersen, 33 Hemerijck calls for a “fundamental rethinking, re-examination, and reappraisal” of the welfare state, congruent with current circumstances.34 Tus, any future-focused model of social provision must eclipse its industrial era predecessor as well as neoliberal constraint imposed by austerity. Positive glimmers of transitional movement can already be seen in demonstration projects, the use of randomized controlled trials (RCTs) and quasi-experimental designs to empirically determine which programs work and which do not, other private sector innovations, and even changes in certain government policies. Accordingly, a philosophical rationale for Welfare State 3.0 can be organized around fve principles: capability, productivity, evidence, democratization, and inclusion. As was true in the 1930s and 1960s iterations of welfare states 1.0 and 2.0, today’s window of opportunity to create a more efective and efcient welfare state is induced by a crisis, in this instance a global coronavirus pandemic that has destabilized the nation’s political economy. As the third decade of the 21st century gets underway, conditions augur well for the evolution of a post-industrial welfare state congruent with the Information Age. However, its realization is contingent on leadership, the ability and willingness to seize the moment, and skillfully construct a new philosophical, ideological, and sociopolitical framework in which a 21st century welfare state—Welfare State 3.0—can take root, and from which consonant programs can be developed to meet citizens’ immediate needs, promote their pursuit of life, liberty, and happiness, rectify past injustices and, fnally, create a more just society.

Capability Recent debate about the future of the welfare state has centered around liberal advocacy of equality as an organizing concept versus conservative insistence on opportunity. Equality in all aspects of life—economic, education, employment, housing, and health—has proven as illusory as it is impractical, primarily because it omits efort, or what David Schmidtz refers to as desert. Moreover, equality has been predicated on economic factors, such as income and assets, which are decreasingly relevant for many Americans opting for a post-consumption lifestyle. Opportunity, on the other hand, has also been illusory, conspicuously so for low-income, minority populations. For the right, opportunity has been a crutch to refute equality while refusing to put in place more and frm steps in the ladder of upward mobility, making opportunity a hollow promise. For these reasons, capability is a principle more

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consonant with the Information Age, allowing people to adjust their lifestyles as they wish. Research on happiness and wellbeing have expanded our understanding of equipping and empowering citizens to achieve the “good life” for themselves their families and their communities should be the fundamental objective of any client-centered welfare state.35

Productivity As a result of post–World War II expansion, the industrial era welfare state established a series of entitlements, both social insurance and public assistance, many operated in conjunction with state and local governments. In some instances, social entitlements were predicated on work; in some, work was irrelevant, and in others, work was impeded by eligibility requirements. On the other side of the public–private divide was a robust system of employer-provided benefts, including healthcare and pensions, which were often superior to public sector benefts. Instead of dissuading Americans from being productive, social entitlement should be replaced by employment entitlement, a more culturally congruent approach. Lest this ofend liberal sensibilities, work should be redefned in more modern and expansive fashion—as a socially productive activity, whether or not a paycheck attaches to it. Under this defnition, necessary and valuable activities, such as child and elder care, volunteer activity, and continuing education, would fnally be aforded the recognition and respect they deserve. An expanded defnition is congruent with 21st-century realities and allows us to acknowledge the social value of new forms of “work,” such as employment in the gig economy, or as “when needed” contract employees, or as the so often mislabeled independent contractors. European nations have pursued an active labor policy, coined “fexicurity” to assure security of the workforce while ofering employers fexibility in meeting production needs; it is time for the U.S. to also emphasize productivity as a defning principle of social welfare.

Evidence Te array of social programs has been predicated on an intuitive understanding of fairness, compassion, and justice. While the adequacy of any society can be judged according to these values, the specifc programs deployed toward those ends can and should be evaluated to assess their efectiveness and efciency in meeting predetermined outcomes and service objectives, and their ability to do so in timely fashion and at- or under-budget. Social services

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based on good intentions but damaging to citizens—or producing no positive efect—should be weeded out in favor of those producing constructive outcomes, freeing up funds to support promising new initiatives. In this way, interventions based on authority can be replaced by interventions based on formal demonstrations of evidence that they achieve the desired, specifed outcomes for consumers. Accompanying this transition, just as consumers of private sector services are constantly being asked to evaluate service quality—think Amazon deliveries—consumers of nonproft, for-proft, and governmental social services should also routinely provide feedback about their satisfaction with services, and be ofered options to be served by diferent providers.

Democratization American social policy is increasingly defned by the afuent who command leadership of major institutions. Te emergence of elites may be inevitable in any society, but democracy is designed to minimize their control by representative government. Alas, the widening economic inequality, compounded by election fnancing evident in Citizens United, has produced an American plutocracy, rule by the afuent at the expense of citizens, and rule by the unelected few over the many. Te revolving door through which corporate executives and high-ranking government ofcials routinely exchange places results in regulatory capture, if not state capture, whereby accountability of both institutions is thwarted. Quite beyond amplifying democracy in government, experiments with alternative forms of commerce should be encouraged. America has a long, proud, and successful tradition of mutual aid in the form of cooperatives, such as farm co-ops and credit unions. Tese and perhaps new 21st century variants, such as “social entrepreneurship” and B corporations, should be promoted by federal and state tax codes, local ordinances, and short-term fnancing if need be, to induce them to locate in underserved communities where, for example, many residents are unbanked and must rely on AFS. Such actions would also revitalize our long and once vibrant tradition of self-help organizations, while bringing commerce in line with the expectations and needs of localities. Hence, democratizing the polity and commerce is of utmost import.

Inclusion During the industrial era, excesses in commerce resulted in increased regulatory activity on the part of government, whether in the form of breaking

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up monopolies or penalizing polluters. With the emergence of the professions and the service economy, less heavy-handed, top-down alternatives have evolved, such as the Joint Commission on Accreditation of Healthcare Organizations, the Council on Accreditation of Child Welfare and Social Service Organizations, and the Council on Higher Education Accreditation, agencies that oversee members through self-regulation. As America has become more diverse, these agencies have also become more inclusive, establishing policies designed to increase representation of women and minorities of color. Even the “white shoe” Federal Reserve has established a Center for Financial Inclusion. With the advent of sophisticated management information systems, accountable self-regulation becomes feasible, providing more efective and efcient monitoring of organizational performance and outcomes achievement. With carefully constructed data management and reporting systems and clear, measurable outcome defnitions, self-regulation is to be preferred with regular reporting to government, ideally with results available to the public. Tis approach, along with stif fnes for noncompliant organizations and criminal prosecution of executive malefactors, should be sufcient to protect the integrity of the monitoring process. Tus, inclusion can replace regulation. Organizing social welfare in accord with capability, productivity, evidence, democracy, and inclusion is a departure from industrial era principles which are woefully inadequate and simply outdated as the foundation for the welfare state in the Information Age. Widespread policy manifestations of these new principles as well as the bedeviling details are yet to be elaborated, but many are already evident in the U.S. or are evolving in other countries. National welfare schemes vary, but all have enormous implications for social solidarity and, indeed, for the future. Tus, the pressing question is: Can the U.S. aford to maintain an industrial era social infrastructure when a welfare state congruent with the Information Age can be crafted? Te desperation, alienation, and despair of increasing numbers of Americans who are poorly served by extant programs—“strangers in their own land”36 —underscores the urgency of the moment.

AN INFLECTION POINT Since 1980, income inequality had widened appreciably. Static wages over the past four decades have left families with virtually identical incomes, in infation adjusted terms, 37 even before the pummeling of household fnances by the coronavirus pandemic. What wage gains did occur mostly fowed to the highest tier of workers; however, taxes and transfers altered afuence for many, as shown in Figures 7.1 and 7.2.

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Percent 125 100 75 50 25 0 –25

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Figure 7.1 Before tax and transfer cumulative growth in average income by income group, 1979–2016. Source: https://www.cbo.gov/publication/55413 Percent 125 100 75 50 25 0 –25

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Figure 7.2 After tax and transfer cumulative growth in average income by income group, 1979–2016. Source: Ibid.

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From 1980 to 2015, the average before tax and transfer income growth of the top quintile doubled, compared to a roughly 25 percent for lower quintiles. Note that the lowest quintile kept track with middle quintiles. Yet, after tax and transfer income tells a quite diferent story, as shown in Figure 7.2. After taxes and transfers, the top quintile enjoyed roughly the same amount of income; despite nominally progressive taxes, the top quintile never lost its afuence compared to the rest of the population. However, post taxes and transfers, the lower quintiles diverged from those in the middle signifcantly, growing over 75 percent compared to that of middle quintiles, which grew less than 50 percent. Tis is an inversion of what might be expected in a society based on “deserts,” in which income growth for the middle quintiles would ordinarily eclipse that of the lowest. Tus, the hollowing out of the middle class would coincide with a populist revolt of blue-collar workers against elites as well as benefciaries of the welfare state. Yet, despite the Tea Party and Trump election, income inequality would persist. Te Federal Reserve reported that “despite an initial bounce-back in income growth between 2013 and 2016 to the robust pre-crisis rates, the United States has yet to return to the general pattern of sustained increases in income of the early 1990s.” In 2018, for example, the “average hourly wage has just about the same purchasing power it did in 1978, following a long slide in the 1980s and early 1990s and bumpy, inconsistent growth since then,” reported the Pew Research Center. “In fact, in real terms average hourly earnings peaked more than 45 years ago: Te $4.03-an-hour rate recorded in January 1973 had the same purchasing power that $23.68 would [in 2018].”38 In short, even before the novel coronavirus pandemic decimated the incomes and fnances of Americans, most had not yet recovered from the Great Recession. Rather, most were treading water, wagewise, having made virtually no real progress in decades, taking infation into account. What wage gains did occur fowed mostly to the highest tier of workers. Tus, Americans became resigned to the American Dream being out of reach for all but the afuent. Since 1970, the top 1 percent of income earners garnered 10 percent of all income, exceeding 20 percent in 2019, while the bottom half of all earners saw their share fall from 22 percent to 15 percent during the same period.39 Income remained highly skewed in favor of the rich. In 2016, the bottom 20 percent of families, reported median income of $17,200 a year, depending on the number of members likely below the federal poverty level, while that of the wealthiest 10 percent was $267,600. Between 2016, income of the bottom 20 percent increased 3 percent, compared to a 6 percent increase for the top 10 percent. Te incomes of families in between rose between 3 and 4 percent, as depicted in Figure 7.3.

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% Median Income, $thousands 300 250 200 150 100 50 0

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20-39.9

40-59.9 2016

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80-89.9

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Figure 7.3 Percent median income in $thousands. Source: https://www.federalreserve .gov/publications/fles/scf20.pdf

Similarly, median net worth favored the afuent. While the top 10 percent own 70 percent of America’s wealth, the bottom half own just 1.5 percent.40 In 2016, the wealth of the bottom 25 percent was $26,900, while that of the top 10 percent was $229,700. Between 2016 and 2019, the net worth of the bottom 25 percent of households increased 11 percent, while the top 10 percent benefted from a 3 percent increase. Despite the three-fold increase of the poorest quartile of families compared to the richest 10 percent, their afuence was decidedly less. Since much of the afuence of the poorest households consists of home equity, which is not easily converted to cash, many lack savings to address emergencies. An earlier Fed survey found that 61 percent of households could not access $400 to cover an emergency.41 Beyond these crude indicators of prosperity, or lack thereof, lower-income households lacked basic resources for which social programs might compensate. For example, families headed by an earner without a high school diploma lost income between 2016 and 2019. Moreover, fewer than 40 percent of families from the bottom half of the income distribution participated in a pension plan, suggesting total reliance on Social Security upon retirement. Finally, upward mobility through higher education was compromised by a 10 percent increase in student debt between 2016 and 2019, rising to $22,000 on average.42 If the circumstances of households likely to rely on social programs of the welfare state were suboptimal in 2019, the bottom fell out from under millions of families with the advent of the coronavirus the following year. Te poverty rate jumped from 9.3 percent to 11.1 percent in only four months, among African Americans from 18.2 percent to 22.8 percent, and for Americans

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without a college degree from 17.0 percent to 21.5 percent.43 At the same time, the Fed pumped trillions of dollars to support the economy, the vast majority being sucked up by Wall Street and major corporations. Aside from token assistance in the form of $1,200 relief checks sent to individuals making less than $75,000, small businesses, the self-employed, and temp workers were essentially left out to dry. Alarmed about increasing political polarization fomented by a desperate President on the verge of losing reelection, street violence pitting ethnonationalist Proud Boys, against the minority rights advocates Black Lives Matter, and a teetering economy, liberal pundits realized the status quo ante was inadequate to address the coronavirus crisis. Among the frst was Fareed Zakarias: We could settle into a world of slow growth, increasing natural dangers and rising inequality—and continue with business as usual. Or we could choose to act forcefully, using the vast capacity of government to make massive new investments to equip people with the skills and security they need in an age of bewildering change. We could build a 21st-century infrastructure, putting to work many of those most threatened by new technologies.44 Yet, how Covid-19 could regear social policy was less clear. To observe that social policy has been given short shrift at a critical time would be an understatement. Well into the pandemic, the venerable political analyst Tomas Edsall refected on a survey of academic views of the election, only a month hence. Respondents to Edsall’s open queries were professors from frst-tier universities, bastions of liberalism, who prognosticated on the 2020 election. Quite aside from astute points about the political implications of Donald Trump remaining in, or being evicted from the White House, and the implications for the Democratic Party, omissions by respondents were revelatory. Te pandemic received not even cursory reference, perhaps because the cloistered Ivy League has been largely immune from the raging virus. Moreover, the claims of Americans not subscribing to liberal orthodoxy tended to be confated with bigotry, misogyny, and nationalism. Finally, the efect of social programs—fragmented, ofering inadequate benefts, yet managed by well-credentialed and -paid professionals—was ignored altogether.45 Smug in their command of the received wisdom of the virtues of extant social policy, the liberal left failed to acknowledge the precarity of Americans at the downward trajectory of the “K” recession as it grinds along in real time. Te intellectual condescension is revealed when opinion pollsters complain about “low-information” voters. Indeed, the derogation of independent voters was revealed by Joseph O’Neill, a political operative:

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as “persuadables—the low-information, temperamentally apolitical, ideologically squishy voters who are responsible for the fuctuations in presidential approval polls”46 —as if the high-information, temperamentally political, and ideologically fxed pollsters had been able to accurately predict the outcome of either the 2016 presidential election or its 2020 sequel! Evidently, the motives and rationality of unaligned voters are suspect when the agendas of political parties fail to resonate, rather than vice-versa. Missing from the political analysis is an appreciation for how social programs, for better or worse, connect voters to the polity. When social programs work efectively, voters endorse candidates who are supportive; but when social programs are perceived as inadequate, or worse, as serving those who are not contributing, voters opt for anti-government candidates, fguring they may be better of on their own. So, the bankruptcy of path dependence of suboptimal programs justifed by austerity has been exposed by the havoc unleashed by the pandemic, evidence that it’s time to reconfgure the nation’s social infrastructure—in other words a new paradigm, Welfare State 3.0.

NOTES 1 Tomas Kuhn, Te Structure of Scientifc Revolutions (Chicago: University of Chicago Press, 1962). Note that Piketty excludes government transfer payments in his calculations: Gary Burtless, Has Rising Inequality Brought Us Back to the 1920s (Washington, DC: Brookings Institution, May 20, 2014). 2 Full disclosure, I am a member of the National Academy of Social Insurance. 3 Bruno Palier, “Beyond Retrenchment,” in Christopher Pierson and Francis Castles, eds., Te Welfare State Reader (Malden, MA: Polity Press, 2006), p. 369. 4 Committee on Ways and Means, Overview of Entitlement Programs (Washington, DC: U.S. GPO, 2004), pp. 2–3. 5 Steward Wood, “Labour Market Regimes under Treat? Sources of Continuity in Germany, Britain, and Sweden,” in Paul Pierson, ed., Te New Politics of the Welfare State (New York: Oxford University Press, 2001), pp. 370–376. 6 William Voegeli, Never Enough (New York: Encounter Books, 2012). 7 Kurt Andersen, Evil Geniuses (New York: Random House, 2020), pp. 59–66. 8 Peter Berger and Richard John Neuhaus, To Empower People (Washington, DC: American Enterprise Institute, 1977). 9 John Micklethwait and Adrian Wooldridge, Te Fourth Revolution (New York: Penguin, 2014). 10 Anton Hemerijck, Changing Welfare States (New York: Oxford University Press, 2013), p. 20. 11 Mark Blyth, Austerity (New York: Oxford University Press, 2013), p. 56. 12 Jacob Hacker, Te Great Risk Shift (New York: Oxford University Press, 2006), p. 42. 13 Ibid., computed from f. 39. 14 Steven Brill, Tailspin, p. 4, 320. 15 Ibid., p. 182. 16 Ed Kilgore, “Starve the Beast,” Blueprint, June 30, 2003. 17 Jeremy Adelman, Worldly Philosopher: Te Odyssey. Of Albert O. Hirschman (Princeton: Princeton University Press, 2013).

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18 Albert O. Hirschman, Te Rhetoric of Reaction (Cambridge, MA: Harvard University Press, 1991), p. 165. 19 Ibid., p. 12. 20 Ibid., pp. 62–63. 21 Michael Ignatief, Isaiah Berlin: A Life (New York: Henry Holt and Company, 1998), p. 226. 22 Quoted in Te Rhetoric of Reaction, p, 114. 23 Ibid., p. 149. 24 Tomas Piketty, Capital and Ideology (Cambridge, MA: Harvard University Press, 2020), pp. 570, 1036–1037. 25 Tomas Piketty, Capital in the Twenty-First Century (Cambridge, MA: Harvard University Press, 2014). 26 Daniel Markovits, Te Meritocracy Trap: How America’s Foundational Myth Feeds Inequality, Dismantles the Middle Class, and Devours the Elite (New York: Penguin Press, 2018), p. 12. 27 Ibid., pp. 18, 169. 28 Americans for Tax Fairness, Fact Sheet: Taxing Wealthy Americans. https://americans fortaxfairness.org/Files/12-ATF-Taxing-Wealthy-Americans-fact-sheet.pdf 29 Joseph Stiglitz, Todd Tucker, and Gabriel Zucman, “Te Starving State,” Foreign Afairs, January/February 2020, p. 32. 30 Gabriel Zucman, “How Corporations and the Wealthy Avoid Taxes (and How to Stop Tem),” New York Times, November 10, 2017. https://gabriel-zucman.eu/how -corporations-avoid-taxes/ 31 Anne Case and Angus Deaton, Deaths of Despair (Princeton: Princeton University Press, 2020). 32 David Stoesz, Te Dynamic Welfare State. 33 Gosta Esping-Andersen, Why We Need a New Welfare State (New York: Oxford University Press, 2002). 34 Hemerijck, p. 47. 35 For an overview and discussion on these points, see Tim Jackson, Prosperity Without Growth: Foundations for the Economy of Tomorrow (London: Routledge, 2017), pp. 47–65. 36 Arlie Russell Hochschild, Strangers in Teir Own Land: Anger and Mourning on the American Right (New York: Te New Press, 2016). 37 Drew DeSilver, For Most U.S. Workers, Real Wages Have Barely Budged in Decades (Pew Research Center, August 7, 2018). https://pewresearch.org/fact-tank/2018/08/07 /for-most-workers-wages-have-barely-budged -for-decades/ 38 https://www.pewresearch.org/fact-tank /2018/08/07/for-most-us-workers-real -wages-have-barely-budged-for-decades/ 49 Fareed Zakarias, Ten Lessons for a Post-Pandemic World (New York: WW Norton, 2020), p. 160. 40 Zakarias, p. 160. 41 https://www.cnbc.com/2019/05/23/millions-of-americans-are-only-400-away-from -fnancial-hardship.html 42 Ibid. 43 John Cassidy, “Te Great Coronavirus Divide: Wall Street Profts Surge as Poverty Rises,” New Yorker, October 16, 2020. https://www.newyorker.com/news/our-columnists/the-great-coronavirus-divide-wall-street-profits-surge-as-poverty-rises ?utm_source=nl&utm_brand=tny&utm_mailing=TNY_Cassidy_10162020&utm _campaign=aud-dev&utm_medium=email&bxid=5be9d58b3f92a40469e3e415 &user_id=32039339&hasha=a5a06f75798abf b68f3453d7fae6659d&hashb=510 915a11516595ce7c3126b0983e21253c7c819&hashc=99ec045ed1718c54e298b60 1372886672561b959475c83f519bcb64d64e1d74b&esrc=subscribe-page&utm_term =TNY_Cassidy

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44 Fareed Zakaria, “Te Pandemic Upended the Present, But It’s Given us a Chance to Remake the Future,” Washington Post, October 6, 2020. https://www.washingtonpost .com/opinions/2020/10/06/fareed-zakaria-lessons-post-pandemic-world/?arc404 =true 45 https://www.nytimes.com/2020/10/07/opinion/trump-biden-2020-election.html ?action=click&module=Opinion&pgtype=Homepage 46 Joseph O’Neill, “Brand New Dems?” New York Review of Books, May 28, 2020, p. 44.

8 Consolidate programs An audible sigh of relief could be heard from liberals at the outcome of the 2020 presidential election, the prospect of another four years of corrupt, erratic, and retrograde government vanquished. Many had lamented the 2016 election, the Electoral College denying the frst woman presidency, to say nothing of the thousands of federal appointments reserved for meritocrats from liberal think tanks and advocacy organizations, each understanding the resume-building value of an assignment in a Democratic administration. Yet, a nagging question endured: How could such an ignorant and narcissistic President Trump consistently enjoyed approval by at least 40 percent of voters, representing over 70 million votes? Te left easily dismissed Trump’s popularity to xenophobia, misogyny, and racism; to ethnonationalist impulses, others could have added fat-earthers, anti-vaxxers/taxers, NRA addicts, and creationists. Yet, many of these Trump supporters would have received benefts from social insurance, public assistance, and tax refunds, the very programs that had evolved with the ascendance of liberalism during the previous eight decades. Evidently, the rise of the Tea Party and subsequent support for the Trump administration questioned these benefts, representing defection from, if not outright repudiation of, the welfare state.

THE WELFARE STATE ON AUTOPILOT Victorious, industrious meritocrats composed a raft of policy prescriptions in anticipation of their return to power under a Biden administration. Under the auspices of the Brookings Institution, the Urban Institute, the Center for Law and Social Policy, New America, the Economic Policy Institute, the Institute for Women’s Policy Studies, the Children’s Defense Fund, and the like, these provide a plausible, if fuzzy, template for future social policy while

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refecting the proliferation of experts. Essentially, ambitious and earnest meritocrats, having earned their credentials at frst-tier universities and mentored by appointees in previous administrations, look forward to trial-by-fre testifying at Congressional hearings and threading their proposal through an arduous legislative process; yet, apart from immersion in the upper reaches of higher education, they tend to have little direct exposure with the problems about which they seek to pontifcate. Tus, “normal puzzle-solving” policy, or path dependence in wonk-speak, is the default, presuming that future options are defned by past achievements. Lest this formula for infuence sound too sterile, a Native American or African proverb can be ofered as a token of sincerity. Tird Way, a center-left think tank is illustrative.1 Acknowledging the widening chasm in inequality, Tird Way has proposed a New Contract on Work, consisting of (1) increasing the minimum wage and indexing it for infation, (2) raising the Earned Income Tax Credit, (3) instituting a cap on healthcare expenses adjusted for income, (4) beginning automatic enrollment in a healthcare plan, (5) putting in place a cap on childcare expenses adjusted for income, (6) expanding the Child Tax Credit, (7) increasing employer contribution to worker pensions beyond Social Security, (8) raising equity capital for business owned by women and minorities, (9) quadrupling the amount of SBA lending, (10) assuring permanent access to unemployment benefts for entrepreneurs, (11) adding a minimum beneft package for gig workers “including health care, retirement, paid leave, and disability insurance,” (12) altering non-compete agreements to improve workers employment options, (13) ofering support for ex-inmates to obtain work, (14) amplifying internships, (15) including more training vouchers and income support for the unemployed, (16) increasing Pell grants to inmates and Dreamers, (17) enhancing “high quality” training programs for workers in line with employer needs, (18) adding an Emergency Payroll Subsidy for employers to retain workers during a recession, and (19) modernizing unemployment insurance to facilitate workers obtaining benefts.2 Of this veritable laundry list of ways to enhance work, many progressives would nod in support; after all, virtually all of these proposals augment existing programs, which, having become law, have automatic validity. Replicated by other think tanks seeking an advantage in the “market place of ideas,” with respect to healthcare, childcare, social services, income support, juvenile services, child welfare, long-term nursing care, pre-K through secondary education, higher education, fnancing retirement—indeed, every facet of the American welfare state!—the default pattern further expands an already fractured social infrastructure, increasing costs, but to a cynic, representing a meritocrat full employment program. Rarely, if ever, does a proposal focus on simplifying the welfare state by consolidating existing programs.

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Te expanding trajectory of the welfare state has been questioned by economists as far back as the 1960s. In 1965, Mancur Olson suggested that interests are keen to extract a beneft for a specifc constituent as opposed to mass mobilization, which is far more difcult. Te subsequent evolution of a multiplicity of “silo” programs of the American welfare state validates Olson’s thesis. In 1966, William Baumol observed that human services are less efcient than manufacturing over time, since personal relations are labor-intensive and cannot be efectively routinized. Tus, “Baumol’s disease” consigns social care to inefciencies, unlike other sectors of the economy, which can be industrialized. Consequently, social entitlements are bound to consume more of GDP, especially as the senior population increases and demands more social care.3 In the absence of an intervening factor, these observations portend further fragmentation and expansion of the welfare state, attendant with accelerating costs. But the multiplication of social programs invites blowback by raising questions for non-meritocratic Americans who not only pay the taxes to sustain a jury-rigged social infrastructure but also have to navigate its complexity to obtain needed benefts. Beset with an increasingly convoluted, inefcient, and remote welfare state, many Americans have registered their objection by electing anti-government conservatives to elected ofce. Puzzled, liberal intellectuals wonder how lower-income Americans would “vote against their interests,” often attributing blue-collar skepticism of social programs to “low-information voters” failing to acknowledge the dripping condescension of those terms. Assuming the welfare state is on autopilot, liberals anxious to reestablish control over domestic policy are intent on expanding their policy remits. As the venerable Tomas Edsall observed, “Biden will take ofce under immediate pressure to address internal Democratic battles over a broad range of topics, including, to name just a few, mass incarceration, immigration reform, denial of asylum seekers’ rights, constraints on evictions, the politics of utility shutofs, defunding law enforcement and the logistics of mandatory vaccination,” each of which invites further elaboration of extant programs.4

ENTER THE INFORMATION AGE A paradox of cosmic proportion is that, although the Information Age has revolutionized commerce and communication, it has yet to make signifcant inroads into the welfare state. Scholars frequently argue that institutional evolution can be likened to waves. With regard to technology, Alvin Tofer chronicled three waves: the age of agriculture, the era of mass manufacturing, and the Information Age.5 Later, Steve Case, founder of America On Line, split the Information Age into three eras: 1985–1999, building the Internet;

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2000–2015, the app economy and mobile revolution; 2016 and beyond, the Internet of everything.6 Clearly, the expansion of Internet corporations, such as Amazon, Google, Alibaba, Netfix, and others, demonstrates the superior efciencies of Internet commerce and communications, even as brick-andmortar retailers and print news are driven into bankruptcy. Information technology would establish a beach head on the welfare state as a result of the coronavirus. While higher education had firted with digital tech for several years, introducing Banner for course management and Massive Open Online Courses at a few universities, the pandemic accelerated this manifold. Social distancing necessitated by the fear of contagion suddenly found schools at all levels confronted with closing or resorting to Zoom as an alternative to in-person instruction. Within a fortnight, Clayton Christensen’s prophesy of the potential for “disruptive innovation” had come to pass as classrooms nationwide appeared as tiny, digital cameos at the bottom of a teacher’s computer screen.7 While this might have been viewed as a temporary adjustment at the elementary and secondary level, the impact for higher education was disruptive, indeed. American colleges and universities had become accustomed to providing a residential experience for many students, often with amenities including multiple varsity sports as well as student unions, dining halls, and health centers. With courses ofered online and students sheltering-in-place, these amenities went unused, and students clamored for reductions in tuition, the parents of some threatening suit. Almost instantly, university trustees, presidents, and provosts were forced to reappraise the higher education business model not just for the short-term but possibly well into the future. Perforce, a competitive healthcare market placed a premium on efciencies available through digital technology. Initially, digitized x-rays were sent overseas for interpretation at lower cost, but the advent of Artifcial Intelligence pushed prices down further. Government insurance exchanges, notoriously botched with the roll-out of the Afordable Care Act in 2010, were upgraded, providing employers and families with real time comparisons of diferent health insurance plans. And, just as Zoom had allowed teachers to continue instruction while avoiding possible contagion, even more diligent healthcare providers used streaming technology to examine patients, consult with colleagues, and conduct conferences. Remote education has been complemented by remote healthcare.

CONSOLIDATED HEALTHCARE American healthcare is noteworthy for being the most fragmented, highest cost, and least productive of developed nations, factors poignantly relevant

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for a world contending with a global pandemic. Te U.S. has one national health insurance program (4-part Medicare), one national health utility (the Veterans Administration), 52 state health assistance programs (Medicaid) (some of which also have separate Child Health Insurance Programs), an independent federal regulatory agency (the Food and Drug Administration), and two federal research agencies (the Centers for Disease Control and Prevention) and the National Institutes of Health (boasting 21 institutes). Refecting the dual structure of social programs, the Center for Medicare and Medicaid (CMS) coordinates Medicare and the various Medicaid programs. Te Afordable Care Act provided incentives for employers and workers to select among hundreds of health insurance plans for enrollment, premiums subsidized by the federal government. For all this, 10 percent of Americans still lack health coverage. As one critic observed, “Americans are bafed by their healthcare; uncertain of the benefts they’re entitled to, the providers that will accept their insurance, the amount of copays, and the accuracy of the billings they receive.”8 Tis hodge-podge consumes 18 percent of GDP; the non-system spends an estimated $500 billion on billing plus $240 billion on waste.9 Te Commonwealth Fund compared healthcare along fve indicators for 11 developed nations in 2013: the U.S. ranked last on three of the indicators but spent far more than any of the nations ranked.10 A revealing 2006 study of U.S. counties with respect to age, race, and gender found striking disparities with regard to morbidity and mortality. Te life expectancy gap between urban black males and Asian females was 20.7 years, refecting the lack of access to healthcare among the minority poor as well as variations in risky behavior.11 Aside from providing care to patients, physicians expend considerable time optimizing their practices, many ofering concierge care for a price, guaranteeing prompt and personal access. Hospitals, for their part, are “run like hotels, aiming to fll their beds and leave little spare capacity.”12 If the healthcare marketplace functions at all, it does so to the advantage of providers who have established cartels, afording them sizable rents. For all its celebrated research and technology, American health care “redistributes income upwards to hospitals, physicians, device makers, and pharmaceutical companies while delivering among the worst health outcomes for any rich country,” pronounced Anne Case and Angus Deaton. In scathing words, they portrayed “the healthcare industry [a]s a cancer at the heart of the economy, one that has widely metastasized, bringing down wages, destroying good jobs and making it harder and harder for state and federal governments to aford what their constituents need.”13 Te nation’s healthcare could be upgraded by transitioning CMS to a Center for American Healthcare (CAH), which would have the authority to optimize research, medical practice, and administration. Following the

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model of the Federal Reserve, the CAH would be an independent agency, governed by a nonpartisan board representing stakeholders as well as the public. Board members would require Senate confrmation; their terms staggered to assure continuity while minimizing regulatory capture. Annually, the CAH would publish a Report on American Healthcare, overviewing progress in meeting predetermined objectives, including a survey of citizen perceptions of various components: primary care, pharmaceuticals, eldercare, pediatrics, medical devices, cost and access, and consumer satisfaction. Just as the nation’s economy could not aford to be left to the whims and caprice of bankers a century ago, so today’s healthcare cannot be allowed to underperform for the public while it favors practitioners and CEOs.

CONSOLIDATE INCOME SUPPORT Te “K” recession attributed to Covid-19 aptly depicts the upward vector for the afuent coupled with the degraded prospects of Americans facing unemployment and, as stimulus supports dry up, reliance on welfare. Many of these destitute citizens will be alarmed at encountering the means test, restricting their eligibility for SNAP, Medicaid, and other benefts on disposing of assets and savings exceeding about $2,000. For many, a late model car would make them ineligible for benefts, unless they sold the vehicle and spent down the sale value until they were under the asset limit. Upon receiving welfare, any attempt to improve their circumstances signifcantly would be sabotaged by the “poverty trap” with benefts abruptly terminated once the asset limit was exceeded. Ironically, many of these families surviving on low wages without benefts would recognize the contradiction of tax refunds insofar as the Earned Income Tax Credit (EITC) and Child Tax Credit (CTC) were based on income alone. Yet, in the midst of worsening poverty, the federal government has been responsible for administering some 80 anti-poverty programs, many in collaboration with state governments. A useful portrait of federal welfare benefts is prepared by the Department of Health and Human Services for Congress, most recently using data for 2015. Ofcial poverty was 12.7 percent in 2016; for 2015, 2.4 percent received benefts from more than one program—Supplemental Nutrition Assistance Program (SNAP), Supplemental Security Income (SSI), and Temporary Assistance for Needy Families (TANF). Te vast majority of recipients use benefts for less than one year: 53.7 percent for SNAP and 79.6 percent for TANF, compared to 37.8 percent of SSI benefciaries receiving aid for longer than 20 months.14 Pre-coronavirus, federal welfare spending for the most prominent programs was small and short-term. Te paradox of welfare has been that many recipients are actively engaged in the labor market, as shown in Figure 8.1.

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TANF

SNAP

SSI

100% 80%

36.5%

45.4%

61.3% 7.1%

60% 10.1% 40% 20% 0%

16.1%

19.0%

8.1% 40.3%

25.5% 3,220,000 Persons

47,940,000 Persons

3.7%

27.0% 8,330,000 Persons

No one in LF At least one looking, no one working At least one PT, no one FT At least one working FT

Figure 8.1 Percentage of recipients in families with labor force participants, by program, 2015.

Not only the majority of SNAP and TANF recipient households but almost 40 percent of SSI benefciaries too were working, striking since so many are old or disabled. But this dynamic is not surprising insofar as most low-wage work is episodic and lacks benefts, so the working poor often rely intermittently or continually on public assistance, particularly SNAP, Medicaid, and SSI. For the working poor, refundable tax credits have become essential for making ends meet as well. But, a tax refund, such as the EITC and CTC, is also problematic since it is received as a one-time check from the IRS. Although the EITC can be designated as a wage supplement, most families use the refund as a de facto savings account to cover the cost of overdue bills or replace an expensive good, such as an appliance. Income support for the welfare and working poor, then, is suboptimal: the means test of welfare programs prevents savings, while tax refunds are quickly spent upon receipt of the IRS check. Aside from avoiding the means test, a secondary virtue of tax refunds is that they arrive anonymously in the form of an IRS check, avoiding the stigma long afxed to welfare benefts. A reasonable reform for aid to the poor would be to transfer all fnancial assistance to the Treasury, incorporating SSI, TANF, and other income

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assistance with existing tax refunds. A Division of Income Support (DIS) could afx welfare cash assistance to extant tax refunds, adding benefts to employees’ wages. Employers already have a connection to the federal government by virtue of having to compute and divert revenue through the withholding tax, so it would be relatively easy for the Treasury to reverse the fow by adding to a worker’s wages. Current welfare recipients who are not working would receive a monthly check through the IRS, eliminating the stigma of a welfare check. Moreover, reassigning much of welfare to the Treasury would enhance government efciency by eliminating thousands of positions in the welfare bureaucracy, jobs that are often associated with reducing access to benefts. Tus, the winners in such a transfer would be states; no longer having to employ thousands of welfare department employees, state revenues could be spent on other projects.

CONSOLIDATE UNEMPLOYMENT BENEFITS As Chapter 2 chronicled the racist backstory of family welfare, so too are structured benefts to the unemployed. In constructing the New Deal and subsequent labor legislation, Southern members of Congress insisted on state control of benefts to workers so that employers could be assured of dependable, law-wage work, especially in the cotton felds. A poignant problem with war preparation and the industrialization of some Southern cities, agricultural interests were fearful about the prospect of losing feld workers. As an Arkansas member of Congress complained at the time, “What little labor we have in the South available for farm work has stopped working and are drawing allotment checks, unemployment compensation or other Federal benefts.”15 Retaining control of Congressional committees necessary to pass labor reforms, Southerners insisted the agricultural and domestic workers not be covered for purposes of labor law, just as they had with regard to Social Security. Tus, the iconic labor legislation of the New Deal era, the Wagner Act, safely assigned the United States Employment Service (USES) to the states, stipulating that labor law “shall not include any individual employed as an agricultural laborer, or in the domestic service of any family or person in the home.”16 Once again, the “black codes” of Jim Crow intruded into social policy, contributing to the bifurcation of the welfare state, social insurance favoring workers of the industrial sector while conforming unemployment insurance and public assistance benefts to Southern insistence on low wages for feld work and domestic service. As the states set eligibility while also managing benefts, unemployment benefts oscillated with recessions, ramping up services during high unemployment, decreasing capacity during economic recovery. Regardless, the

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structure of unemployment signifcantly attenuated benefts to workers. Federal benefts for unemployment insurance are limited to 26 weeks, with states permitted to set shorter spells, unless the Emergency Unemployment Compensation program is activated to extend the beneft period. Typically, benefts cover half of previous earnings, although low-wage workers tend to receive less if they fail to meet the minimum earnings requirements or work part-time. All told, unemployment benefts covered about 36 percent of workers until the Great Recession, when 49 percent of unemployed workers received benefts.17 While unemployment ofces served displaced workers over the decades, inadequate benefts and fragmented infrastructure were overwhelmed by the coronavirus in 2020. Suddenly, the economy cratered, businesses closed diverting millions of workers to USES ofces, which were overrun. In a desperate attempt to right a foundering economy, $600/week in additional unemployment benefts was authorized for four months; however, Congress balked at continuing the unprecedented initiative. Te Trump administration ofered a $400/week extension, providing states covered onefourth of the amount, but few had the surplus resources necessary to accept the ofer. Te relationship between unemployment benefts, a la fscal policy, and monetary policy, a la interest rates, has been a key component of the nation’s economic policy. Trough most of the 20th century, liberal economists followed an approach advanced by John Maynard Keynes favoring increased benefts to the unemployed in order to recover from recession, while conservative economists, fearing infation due to too much government stimulus, focused on tight money through monetary policy, advocated by Milton Friedman. Tese diferences were simplifed in the form of the Phillips curve, showing a trade-of between unemployment and wage infation. Stagfation of the 1970s when infation rose along with unemployment shattered faith in the Phillips curve, but, for lack of an alternative, economists retreated to the comfort of their puzzle-solving paradigms. In response to the Great Recession and economic collapse due to the coronavirus, the Fed pumped trillions of dollars into the economy; following Keynesian economics, however, interest rates remained low, perhaps due to wage stagnation, which had been evident since the 1970s. Tis evident anomaly resulted in a paradox. Insofar as increasing government spending in the absence of tax increases, radically increased the defcit, former “defcit hawks” found themselves confronted with Republican presidents, including Reagan, Bush I and II, and Trump, disregarding skyrocketing debt. On the other side of the political aisle, Modern Monetary Policy (MMT) evolved from the left, also disregarding defcit spending, but contending this was a strategy to achieve full employment. If, as advocates of MMT contended, the federal government

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held a monopoly on currency, then it could easily run defcits in order to achieve maximum productivity, the only guardrail being infation.18 As with healthcare and income support, the nation’s unemployment nonsystem should be revamped in accord with the Information Age. Just as digital technology has given rise to a new cohort of gig workers, the selfemployed Uber and Lyft drivers as well as temp workers hired by Amazon, forming a precariat ineligible for conventional unemployment benefts, so the Information Age also provides the technology to upgrade services for those marginal to the labor market. Te frst order of business would be to create a federal USES, providing benefts promptly and adjusted locally, as by ZIP code. Te European concept of “fexicurity” ofers a way for employers to have fexibility to acquire, upgrade, and remove workers in relation to production, while assuring employees job security, benefts, and retraining—a win-win compared to the status quo. Signifcantly, fexicurity also adjusts employment with regard to workers’ preferences for education as well as family life, introducing a win-win-win in social policy terms.19

THE CONSOLIDATION PROCESS As we saw with the creation of SSI in Chapter 5, consolidation of programs is not novel, nor is it confned to the American experience. In the U.S., the confation of Old Age Assistance, Aid to the Disabled, and Aid to the Blind into Supplemental Security Income (SSI) in the mid-1970s represented the only instance of program consolidation, a product of the advocacy of the disabled, program administrators, and bipartisan sympathy. In that episode, advocates hoped to integrate SSI into Social Security, as Disability Insurance had been in 1956; however, that objective was only partially realized. As SSI’s biographer concluded, “it started and remained a means-tested welfare program.”20 More recently and on the other side of the Atlantic, the British integrated six welfare programs into the Universal Credit. Enacted in 2012, the Universal Credit addressed income support for low-income, working aged Brits; by 2019, 2.5 million Brits were receiving monthly checks, 65 percent of them out of work.21 Tese precedents demonstrate the plausibility of consolidating other fragmented programs by adopting Information Technology. As the coronavirus strains existing programs, structural reform of the welfare state becomes not only possible but essential. Arguably, the largest program consolidation in American history was executed by the Department of Defense through the Base Realignment and Closure (BRAC) process. As a result of the Korean War and the Cold War, hundreds of military installations were scattered across the country primarily

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for strategic purposes; however, local communities soon found these bases an important asset for economic development. But, the Department of Defense (DoD) determined to close bases or reassign their functions through BRAC, despite opposition from members of Congress representing districts slated to lose an installation. But the 1990 BRAC was designed for the beneft of the entire country, not just individual jurisdictions; hence a nine-member commission was empaneled to make recommendations, which were forwarded to the President, who had to agree to the entire list. From 1988 to 1995, 300 military bases were closed, with another dozen on the chopping-block, saving the Pentagon $7 billion annually.22 Te economic fall-out from BRAC left some communities bereft, but others prospered, such as San Diego’s conversion of the Naval Training Station to Liberty Station, a vibrant neighborhood of condominiums, shops, and restaurants.23 Operating under the unitary command of the Pentagon, BRAC avoids the pitfall of federalism that has fragmented the American welfare state; but, by the same token, it provides a blueprint for consolidation. With Congressional authorization, a nine-member commission could be designated with the remit to consolidate programs on a rolling basis, each functional area—healthcare, income support, unemployment, for purpose of illustration—requiring the sign-of of the entire commission, the result automatically put in force by a predetermined date. During this process, states, cities, and local governments would be invited to testify. Also, alternative scenarios could be explored and encouraged. A precedent for renewal of social programming exists through Chapter 1115 of the 1935 Social Security Act, which authorized states to mount alternatives to the Aid to Families of Dependent Children, thus presaging the 1996 welfare reform.

WELFARE STATE 3.0 Te paradox of American welfare state has been expending 30 percent of GDP yet ofering such fragmented and substandard coverage that the U.S. ranks 28th compared to other developed nations. Indeed, a cynic would conclude that the more the country spends on social programming, the worse the outcome! Even scholars from the center-right Niskanen Center have admitted that “the liberal democratic capitalist” welfare states “are the richest, healthiest, best educated, and freest societies that have ever existed. Tis is a legacy to be proud of and to build upon.”24 Yet, aside from advocating a “free market welfare state,” the notion of fundamental reform tends to get bogged down in the liberal “big government” versus conservative “free market” dispute.25 Steve Teles coined “kludgeocracy” to describe the perverse consequences with regard to the welfare state.

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Te complexity and incoherence of our government often make it diffcult for us to understand just what government is doing, and among the practices it most frequently hides from view is the growing tendency of public policy to redistribute resources upward to the wealthy and the organized at the expense of the poorer and less organized.26 While the wealthy have long enjoyed oversized economic and social advantages through public policy, the welfare state was intended to reverse that, diverting resources, benefts, and opportunities to the working class and the poor. Increasingly, however, the real benefciaries of the welfare state have been meritocrats in public service and professionals who have erected cartels. Tose reaping the benefts of the welfare state are no longer the residents of lower social stations but a professional, upper-middle class. Under these circumstances, is it any wonder that the working and welfare poor might support candidates for public ofce, who oppose bigger government? Te problem is not more government or less government, but smarter government, which can be attained by bringing the welfare state in line with the Information Age. A smarter government would contend with the emergence of hundreds of “silo” programs, leveraged with the good intentions of progressives concerned about the welfare of fellow citizens, but creating a bureaucratic maze. A smarter government would also acknowledge how federalism has been distorted to appease Southern interests for decades, efectively institutionalizing Jim Crow, evident in state controlled public assistance programs. A smarter government would also replace “redistributive” mechanisms of social policy with “investment mechanisms,” accelerating the upward mobility with lower-income Americans. As Anton Hemerijck has observed, “most European welfare states had to be transformed from passive beneft systems into activating, capacity building, social investment states.”27 More specifcally, “rather than stressing the promotion of (income) redistribution as a basis for social justice, the normative claim behind social investment rests more on concrete needs and capabilities for social participation and inclusion.”28 Tus, restructuring the welfare state is more than a dispute between more or less government versus more or less capitalism, but incorporates philosophical concepts, such as “capability” and “desert.” Nor can a welfare state redesigned in accord with the Information Age be produced by mindless continuation and replication of “path dependence” in social programs, efectively expanding the kludgeocracy. Indeed, the frst step in modernizing the welfare state requires consolidating the current disarray of programs under coherent, functional agencies. Te coronavirus pandemic represents an invitation to consolidate the welfare state, beginning with healthcare, and proceeding into other felds of activity. But, as subsequent chapters demonstrate, restructuring is insufcient;

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simplifying access, experimentation, and building wealth are also necessary. Te political hazard of failing to construct Welfare State 3.0 is already evident in ethnopopulism, which can be interpreted as resentment on the part of the working class toward a social infrastructure that has been constructed by meritocrats, largely for their beneft, a byzantine array of programs, with arcane eligibility requirements, which voters without college credentials then have to pay for. Tis fate, of course, is the opposite of the solidarity premise of the welfare state. However, so long as the current jury-rigged, non-system endures, the public is apt to be at least skeptical about, if not opposed to government social programs.

NOTES 1 Endorsed by a conservative-centrist opinion writer: https://www.washingtonpost .com/opinions/2020/10/19/heres-biden-economic-agenda-that-might-draw-gop -support/ 2 https://www.thirdway.org/report/its-time-for-a-new-contract-on-work 3 John Micklethwait and Adrian Wooldridge, Te Fourth Revolution (New York: Penguin, 2014), pp. 109–112. 4 https://www.nytimes.com/2020/10/21/opinion/biden-2020-democratic-party.html ?action=click&module=Opinion&pgtype=Homepage 5 Alvin Tofer, Te Tird Wave (New York: Bantam, 1980). 6 Steve Case, Te Tird Wave (New York: Simon & Schuster, 2016), p. xvi. 7 Clayton Christensen, Te Innovator’s Dilemma (Cambridge, MA: Harvard Business School, 1997); Clayton Christensen and Michael Raynor, Te Innovator’s Solution (Cambridge, MA: Harvard Business School, 2003). 8 David Oshinsky, “Health Care: Te Best and the Rest,” New York Review of Books, October 22, 2020, p. 28. 9 Ibid., p. 29. 10 Commonwealth Fund, 2014. 11 https://journals.plos.org/plosmedicine/article?id=10.1371/journal.pmed.0030260 12 Fareed Zakaria, Ten Lessons for a Post=Pandemic World (New York: WW Norton, 2020), p. 66. 13 Anne Case and Angus Deaton, Deaths of Despair (Princeton: Princeton University Press, 2020), p. 19. 14 https://aspe.hhs.gov/system /f iles/pdf /259196/ WELFAREINDICATORS17 THREPORT.pdf, p. 3. 15 Quoted in Ira Katznelson, Fear Itself (New York: Liveright, 2013), p. 385. 16 Ibid., p. 395. 17 Howard Karger and David Stoesz, American Social Welfare Policy, 8th edition (New York: Pearson, 2018), pp. 210–212. 18 Signifcantly, employment has been the focus of much of MMT. Stephanie Kelton, Te Defcit Myth (New York: Public Afairs, 2020). 19 Anton Hemerijck, Changing Welfare States (New York: Oxford University Press, 2013), pp. 383–384. 20 Edward Berkowitz, Te Other Welfare (Ithaca, NY: Cornell University Press, 2013), p. 7. 21 https://en.wikipedia.org/wiki/Universal_Credit 22 https://www.rand.org/blog/2017/03/making-brac-politically-palatable.html 23 Ibid.

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24 https://www.niskanencenter.org/wp-content/uploads/2020/09/FGFG-Part-I-synthesis_fnal.pdf 25 https://www.nytimes.com/2020/10/22/opinion/democrats-republicans-big-government.html?action=click&module=Opinion&pgtype=Homepage 26 Steven Teles, “Kludgeocracy in America,” National Afairs, Fall 2013. 27 Anton Hemerijck, “Two or Tree Waves of Welfare State Transformation?” in Nathalie Morel, Bruno Palier, and Joakim Palme, eds., Towards a Social Welfare Investment Welfare State (Briston: Policy Press, 2012), p. 46. 28 Anton Hemerijck, ed., Te Uses of Social Investment (New York: Oxford University Press, 2017), p. 12.

9 Harmonize applications Tat government benefts through social insurance or public assistance would worsen economic inequality is counterintuitive given the purpose of the welfare state is to redistribute income through progressive taxes.1 An extension of the Progressive movement, subsequently adopted by liberal Democrats, the American welfare state evolved to provide a basic pension for those once in the labor market as well as adequate aid for the non-working poor. As we’ve seen, Welfare State 1.0 provides benefts that have been discriminatory and now cover only a portion of a retiree’s economic needs; health insurance for seniors is similarly laden with copays and deductibles. Even Unemployment Insurance (UI) has been declining as a protection for those out of work. For 2018, of unemployed workers who had jobs during the previous year, 77 percent had not applied for UI, 60 percent simply assuming they were not eligible.2 Public assistance benefts of Welfare State 2.0 are even more inadequate in amount and selective in distribution. Instead of providing a basic foor of income and services, public assistance has been meager and fragmented, often trapping the poor in poverty. Te means test on income and assets confronts low-income applicants with a Faustian bargain: either go without assistance or submit to having no more than $2,000 or so in assets. Ironically, most public assistance recipients do work, but at jobs paying so little and without benefts that they rely on public assistance episodically or, in many instances, continually. For families reliant on public assistance long-term, eligibility requirements efectively consign them to indefnite penury. Tus, if many working-class households in desperate straits opt not to apply for welfare benefts, certainly as many of the welfare poor are left homeless once they are ejected from benefts due to obtuse and punitive eligibility requirements. Such are the systemic inadequacies of the American welfare state.

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THE SOCIAL BENEFIT LABYRINTH Social benefts, which expanded with the growth of the American welfare state, evolved under diferent agency auspices as advocates successfully lobbied for their constituents, which varied with administrative authority. Social Security and Medicare fell under the Department of Health and Human Services, with Unemployment Insurance under the Department of Labor in consort with parallel state agencies. Myriad public assistance programs, such as the Supplemental Nutrition Assistance Program, Temporary Assistance for Needy Families, and Medicaid, were collaborations between federal and state agencies. Te Treasury administered the Earned Income Tax Credit and Child Tax Credit. Te result was a byzantine network of social programs, which was not only difcult for lawmakers to comprehend but also perplexing, if not outright exasperating, for citizens attempting to access benefts. Woe to the citizen seeking aid from multiple programs! Te array of public benefts for low-income households has been simply bewildering, a haphazard network of uncoordinated programs with diferent eligibility rules operating under the auspices of diferent agencies. Te resulting non-system not only under-serves individuals and families qualifed for benefts, but also deprives states and cities of federal revenues. Te Center on Budget and Policy Priorities (CBPP) has identifed 17 programs that could be linked in order to improve access to benefts: • • • • • • • • • • • • • • • •

Supplemental Nutrition Assistance Program National School Lunch Program Special Supplemental Nutrition Program for Women, Infants, and Children Medicaid Medicare Savings Program Low-income Subsidy Temporary Assistance for Needy Families (TANF) Supplemental Security Income (SSI) Unemployment Insurance (UI) Earned Income Tax Credit (EITC) Child Tax Credit (CTC) Pell grants and other fnancial aid Child Care and Development Fund Housing Assistance Low-income Home Energy Assistance Program Lifeline

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For purposes of qualifying for benefts, some programs are linked, but most are not. For example, 33 states and the District of Columbia use SSI to determine eligibility for Medicaid. On the other hand, UI, EITC, and CTC are not linked to any other income support program. Te CBPP authors observe reasonably enough, “Program administrators or policymakers who oversee multiple programs play a critical role in establishing and strengthening crossenrollment between programs to simplify program operations and ensure that low-income people receive the full package of benefts for which they qualify.”3 Yet, program managers exacerbate the poverty of low-income citizens when they do not assure prompt and accurate determinations, let alone synchronize applications for benefts across programs.4 As prospective benefciaries throw up their hands in frustration and give up, they forfeit thousands of dollars in benefts. Wading through the bureaucratic “sludge” ultimately results in low take-up rates. “Most programs designed to beneft poor people have participation rates of between 30 and 60 percent,” noted Cass Sunstein.5 Indeed, experience provides several instances when decision makers fail to optimize eligibility in order to enhance the wellbeing of low-income households, instead erecting obstacles to eligibility as a way to reduce beneft takeup, in efect rationing benefts. In this respect, the Medicaid expansion of the Afordable Care Act serves as a cautionary tale: despite signifcant federal subsidies, by 2018, lawmakers in 19 states had refused to expand Medicaid, leaving millions of poor Americans without health coverage.6 If state legislators cannot be counted on to act in the interest of low-income citizens, neither can social administrators. New Mexico represents a textbook case of bureaucratic obstacles to social benefts. As a result of a 1998 lawsuit accusing the state of obstructing access to food stamps, a federal court appointed a Special Master to recommend upgrades in processing benefts;7 yet, by 2016, nine employees of the state’s Income Support Division alleged that managers were requiring staf to alter applications in order to clear a backlog of thousands of applications, in the process delaying and denying benefts.8 In a January 31, 2018, report the Special Master reported failure to comply with a Consent Decree on multiple factors, not least of which was a backlog of 99,763 “applications, recertifcation, and interim reports.”9 Over three decades spanning fve governors, Democrat and Republican, poor New Mexicans were unable to obtain healthcare and nutrition assistance assured to them by the federal government. Federal interest in streamlining benefts has been limited, despite the enormous efciencies that might be gained. A 2017 Government Accountability Ofce (GAO) report identifed six programs for low-income Americans— the EITC, Medicaid, the Housing Choice Voucher Program, SNAP, SSI, and TANF—operating under diferent agencies, requiring diferent

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eligibility requirements, representing $540 billion in outlays for 2015. Te GAO reported, Legal, administrative, and fnancial constraints pose challenges to eforts to streamline varying eligibility rules for federal low-income programs, according to GAO’s current and previous work. A key challenge is that the programs are authorized by diferent federal statutes enacted at diferent times in response to difering circumstances.10 By the same token, separate applications pose a special burden for low-income applicants, those most likely to apply for multiple benefts. Public assistance is ordinarily dispensed through a local welfare ofce, which has not encouraged beneft receipt; typically, applicants must wait, sometimes for hours, and then return with additional documents to complete an application, graphically depicted in Frederick Wiseman’s 1975 documentary Welfare. Te simple act of waiting communicates that the state believes that individuals’ time is of little value. Such spaces may also be characterized by few amenities, the use of security, and partitions between claimants and caseworkers, further reiterating the limited standing of the claimant.11 Te use of metal detectors manned by security ofcers is especially symbolic insofar as welfare ofces do not dispense cash; even expedited SNAP benefts are through electronic beneft cards. But welfare administrators know that desperate clients can become volatile as a result of the waiting, depersonalization, and requirement to return with additional documents, so a show-offorce serves as a preemptive social control mechanism. Welfare applicants understand their subjugated status: “welfare claimants are acutely aware of the disempowering efects of such processes and their relatively lack of autonomy in the interaction, resulting in a sense of frustration, powerlessness, and degradation.”12 An additional problem with social benefts has been the due dates for recertifcation, which can be as frequent as three months or as long as a year. Challenged by multiple applications with diferent reapplication dates, many of the poor simply throw up their hands, forfeiting benefts for which they are eligible. Application and recertifcation for public assistance serves as a critical factor in accessing social benefts but can also be a hazard. When states link benefts, such as using information to assess eligibility for TANF, SNAP, and Medicaid, adverse determinations for TANF can negatively afect access to SNAP and Medicaid. As poor families are dissuaded from applying

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for TANF, a consequence of punitive provisions, such as rigid interpretations of the work mandate in the 1996 welfare reform law, they forfeit other public assistance benefts. Work mandates with other programs, such as SNAP and Medicaid, are also likely to depress eligibility. When a homeless Milwaukee parent, James Howlett, was confronted with Wisconsin’s work mandate for SNAP benefts, 30 hours per week for parents of school age children, he feared that his sole asset, a repair-prone car, would make his family ineligible. “Why are there diferent qualifcations for diferent benefts?” he asked. “I fail to understand it.”13 But purging low-income families from welfare has persisted with President Trump signing an executive order directing federal agencies to institute work requirements for benefts, including SNAP,14 while urging states to require employment as a condition for Medicaid.15 Requiring employment among Medicaid recipients would seem to just be mean-spirited and make little sense; in 2015, to illustrate, 70 percent of enrollees would have been exempted from work, because they were children (45.8 percent), aged 65 or older (10.8 percent), or disabled (13.2 percent). Another 12 percent worked full- or part-time.16 One strategy to address beneft fragmentation in the U.S. has focused on the supply side, evident in the formation of SSI in the mid-1970s. More recently, Great Britain introduced the Universal Credit in 2013, consolidating six means-tested programs.17 While SSI was forged during expansion of the American welfare state and implementation was relatively benign, the British Universal Credit was inaugurated during a period of austerity and has been subject to scathing criticism.18 But the supply-side approach to social benefts is most associated with reducing access—efectively rationing benefts—particularly with welfare reform, which dramatically cut TANF rolls. Harmonizing applications, in contrast, focuses on the demand side, leaving programs intact but facilitating access. Such a strategy avoids disrupting established constituent groups, minimizing confict. Te lack of coordination among various agencies results in suboptimal outcomes regarding self-sufciency, a primary objective of many public assistance programs. Typically, local welfare departments managing TANF do not help benefciaries access EITC benefts despite work mandates, not only leaving welfare-to-work participants without additional income but also encouraging them to resort to commercial tax preparers, promoting Refund Anticipation Loans at high fees and interest rates, thus subtracting from income.19 According to the federal Department of Health and Human Services, in 2016, the take-up rate for TANF was 27.6 percent, SNAP 88.1 percent, and SSI 59.2 percent.20 Low take-up rates mean not only that low-income Americans do not receive benefts to which they are eligible but also that communities also lose tens of millions of dollars in revenue.21 Annually, states and municipalities leave the equivalent of million dollar bills on the sidewalk, unclaimed.

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Low take-up rates have real consequences for low-income households. Inadequate public benefts and low-wage work combine with unpredictable employment and periodic expense shocks to exacerbate fnancial volatility in working-class households, leaving many outside the fnancial services mainstream and resorting to sub-prime vendors to make ends meet.22 While payday loans, auto-title loans, and check cashers have become staples in many poor communities as consumers avoid mainstream fnancial services, subprime vendors strip wealth from low-income consumers.23 Such “alternative fnancial services” are especially pernicious when, in the absence of mainstream fnancial institutions, they become the bankers of low-income communities, efectively leeching capital from poor neighborhoods.

ACCESS TO HIGHER EDUCATION While welfare departments have been notorious for suppressing benefts for the minority poor, fnancial aid to low-income college students also thwarts upward mobility. Tis is ironic insofar as a college credential has become synonymous with a step up on the ladder of occupational success by obtaining an Associates or Baccalaureate degree.24 But the income of a student’s family plays a huge role in graduating from college: of students from the top quartile of family income, 60 percent graduate, but of those from the bottom quartile, only 14 percent will receive a diploma.25 Young adults who are poor and wish to improve their position in the labor market are eligible for Pell grants but access has been through a complicated, ten-page form administered by the Department of Education. “To get fnancial aid for college, students have to fll out the Free Application for Federal Student Aid (FAFSA). It’s long and complicated; many students give up and fail to apply for college at all,” observed Cass Sunstein. “Simplifcation of FAFSA dramatically increases the likelihood that low-income students will apply for aid and eventually enroll in college.”26 Understandably, the arduous process of completing FAFSA reduces access to federal student aid, as researchers concluded in a 2009 study: FAFSA is four times longer than the simplest tax return (i.e., IRS Form 1040EZ) and longer than IRS Form 1040. Even the lowest-income individuals, who have already established their eligibility for other federal means-tested programs, must complete this long application to receive aid for which they are almost certainly eligible.27 Because FAFSA determines a family’s income in relation to a student’s application, it is not uncommon for graduate students and younger faculty to apply

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for their college-age children. Needless to say, a young professor should have the facility to complete FAFSA; however, a research professor recalled his experience in applying for Pell grants for his college-bound kids: “As a father of four with children in college I can tell you that FAFSA was designed by people who wanted to deter people from qualifying for educational assistance. It’s the most evil, senseless thing I’ve ever tried to do.”28 For prospective college students who are the frst in their family to attend college, FAFSA has become a rite of passage, often discouraging an application to college. When tax preparers assisted low-income families with completion of FAFSA and provided information on higher education options, however, applications for higher education increased 40 percent, enrollment 29 percent, and receipt of fnancial aid 33 percent.29 Yet, FAFSA’s complexity impedes access to student aid. In 2014 low-income students forfeited $2.7 billion in aid because they did not complete FAFSA.30 Although the Internal Revenue Service (IRS) has promised to “populate” FAFSA with student and parents’ tax data, through a Data Retrieval Tool (DRT), the process was interrupted in 2017, after hackers stole $130 million from the DRT;31 for 2018/2019, information on applying tax information to FAFSA was not visible to students and parents on the IRS website, further impeding access to student aid.32 Completion of FAFSA is necessary to access Pell grants, introduced in the 1970s, which have provided essential, if problematic assistance for lowincome students, accounting for their increased enrollment in community colleges as well as four-year colleges and universities. Although low-income students still lag behind their high-income classmates in enrollment, their position has improved signifcantly since the inception of Pell grants, as noted in Figure 9.1. American college students represent an increasingly diverse population of racial and ethnic groups. Variation in college engagement for minorities of color tends to track wage diferences along race and ethnicity, with Asians earning more than whites; however, wages of Hispanics have exceeded those of blacks.33 So, race and ethnicity have a profound efect on how diferent groups fare in college. Figure 9.2 depicts the experience of major race and ethnic groups with regard to higher education, in descending order, Asians, whites, Hispanics, and blacks. Te college degree earnings bonus also varies with race/ethnicity, as shown in Figure 9.3. In this fgure, “frst generation” means frst in family to graduate; “college persistence” refers to youth who had at least one parent with a college degree; and “downwardly mobile” means youth with at least one parent with a college degree but did not graduate from college. Notably, whites with a parent with a college degree, who also graduated from college, enjoyed an earnings bonus of about 50 percent over their black

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90 80 70 60 50 40 30 20 10 0 1975

1980

1985

1990 High

1995

2000

Middle

2005

2010

2015

Low

Figure 9.1 Attendance at two- and four-year colleges by income. Source: https://nces .ed.gov/pubs2017/2017094.pdf, p. 415 120 100 80 60 40 20 0

Asian

White Graduated

Black Still enrolled

Hispanic Not enrolled

Figure 9.2 Six-year outcomes, by race and ethnicity. Source: https://www .insidehighered.com/news/2017/04/26/college-completion-rates-vary-race-and -ethnicity-report-fnds

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152 $120,000 $100,000 $80,000 $60,000 $40,000 $20,000 $0

White

Black College Persistence Downwardly Mobile

Hispanic

Other

First Generation No College

Figure 9.3 Median income by race/ethnicity group, 2016. Source: https://www .stlouisfed.org/on-the-economy/2019/february/college-education-persists-less -blacks-hispanics?utm_source=hfslist&utm_medium=email&utm_campaign =HFSAlert

and Hispanic peers. Te earnings of black and Hispanic youth who did not attend college, less than $40,000, would be inadequate to raise a family, let alone purchase a home in most regions of the U.S. Yet, the earnings of whites not graduating from college, a bit more than $40,000, also make achieving the American Dream ify. Tus, the long-term beneft of a successful college experience transcends race and ethnicity. Further complicating the portrait of college students, since 1984 women have exceeded men as full-time students, accounting for 56 percent of college students.34 Yet, women continue to earn less than men: the wages of Hispanic women 82.3 percent of Hispanic men, black women 87.3 percent of black men, and white women 77.0 percent of white men.35 Ironically, although women are enrolling in college in numbers exceeding men, women of color remain more dependent on social benefts, refecting their marginal relationship to the labor market. Te interaction of poverty and minority status thus poses problems for many students. Black students, for example, borrow about $2,000 more than whites, even at public institutions. Similarly, Hispanic students are more likely to get loans while attending private institutions.36 Students of color are also more likely to attend for-proft colleges and universities, with African American students more than twice as likely to enroll at commercial institutions.37 In search of quick credentials in order to upgrade their position in the labor market, poor minority students often take out loans that become

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difcult to repay when they discover, often belatedly, that their for-proft credential does not produce a better job, and they are unable to discharge debt through bankruptcy. Tus, for many minority students, college attendance does not necessarily correlate with a better job and higher income, but a heavier debt burden, instead.

FINANCIAL AID A college or university’s fnancial aid ofce often determines the fate of lowincome students, from enrollment, to progressing through a course of study, to graduation. Despite institutions of higher education being increasingly reliant on student tuition for economic viability, the fnancial aid ofce is among the least infuential on any campus. Te business model of higher education, initially relying on governmental support, gradually became more dependent on student tuition, the increases of which skyrocketed, driven by the power of trustees and college/university presidents. Prior to World War II and the GI Bill, American universities were highly stratifed since only upper-income families could aford college. Ironically, after decades of federal subsidies to higher education, college is even more unequal, as Scott Galloway suggested, “Ivy League undergraduate programs are not colleges, but hedge funds that educate the children of their investors.”38 Tus, students from upper-income families with college graduate parents, often pursuing admission to private institutions, navigated the new arrangement relatively easily; however, it posed obstacles for those from families for whom college was a novelty, lower-income students seeking admission to public institutions. Financing a college degree would be wickedly complicated as institutions of higher education adopted varied practices; with no incentives to standardize tuition, fees, and awards, prospective students were at the mercy of colleges and universities, confronted with a “black box” with regard to how to cover the costs of attendance. Tis model of higher education would prove difcult for low-income, frst in family to attend college students, in several respects. Foremost, it presumed having 2–4 years to dedicate to higher education, in other words the opportunity costs of delaying work for a signifcant period, which may represent a large portion of household income. Second, until the recent advent of online programs, students were expected to attend institutions at fxed locations, an arrangement that, while copasetic for young, afuent, and mobile undergrads, required commuting for adult learners attending to work and family obligations. Finally, the cost of college, including tuition, fees (adding housing for residential students), books, as well as healthcare and recreation, ratcheted upward, requiring low-income students to seek grants and, when

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these were insufcient, take out loans. Coming from poor families, many low-income students would have been eligible for social benefts and/or tax refunds, but these were embedded in “silo” programs, requiring applications separate from FAFSA. Te college fnancial aid ofce may assist students access Pell grants, but often students and their families are on their own. Unfortunately, research consistently demonstrates that there is a huge gap between college students’ eligibility for various social benefts and their participation in those programs. Te most striking example concerns SNAP, formerly food stamps. In 2016, among all potentially eligible college students with at least one other risk factor for food insecurity, only 43 percent were receiving benefts. Te most common food insecurity risk factor was having low income. All together it was estimated that almost two million potentially SNAP-eligible, at-risk students were not receiving SNAP in 2016. By the end of the 20th century, low-income students and the colleges they attended faced a common dilemma: securing additional funds to support their educational endeavors. While private universities could count on endowments to defray rising costs, public institutions resorted to tuition increases. Although escalating tuition at public universities has slowed, it continues to exceed infation. From 1978 to 2020, college tuition has increased 1,400 percent, four times that of healthcare at 294 percent.39 Since 2000, the costs of community college increased 28 percent and public universities 54 percent.40 For the 2015–2016 academic year, tuition, fees, plus room and board at fouryear public institutions totaled $2,077;41 over 70 percent of students attending public institutions, and over 80 percent attending private institutions received fnancial aid.42 As state funding for higher education withered and students struggled to pay tuition, federal grants to low-income students became critical for budgeting higher education, yet between the 2011–2012 and 2016–2017 academic years the number of eligible Pell grant applicants fell from 61.1 percent to 56.3 percent and from 13.4 million to 10.6 million, respectively. Moreover, the value of federal grants diminished; in 2016, Pell grants covered only 60 percent of tuition and fees.43 Te drop in Pell grant supports has been punishing for struggling families, the net price of college consuming 84 percent of the income of the bottom quartile of households.44 But it has also impinged on administrators of colleges and universities, who have contended with declining state and local support, down 11 percent from 2005– 2006 to 2015–2016.45 In light of the declining value of Pell grants, young adults borrow to pay for tuition but become saddled with increasing educational loan debt, which grew 15 percent from 2013 to 2016, from $29,800 to $34,200.46 For younger workers, student loan debt depresses future planning: “people graduating

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student loan debt are less likely to own homes, attend graduate school, or save for retirement; they’re also more likely to delay marriage and parenthood.”47 Tus, declining value of Pell grants combined with increasing tuition results in rising student debt, which attenuates the nation’s social capital. Despite the economic quandary of higher education, low-income students already eligible for Pell grants might have accessed social benefts and tax refunds for fnancial support. Yet, fnancial aid for low-income students remains unpredictable and fragmented. Although “27 percent of full-time students work at least 20 hours per week,”48 many likely eligible for the EITC, they must apply for that tax refund separately from FAFSA and SNAP. Nor were external sources of income support reliable. About one-fourth of eligible households do not receive the EITC.49 Te take-up rate for SNAP varies from 41 percent to 83 percent, depending on subgroup.50 Because Pell grants, the EITC, and SNAP are the provenance of “silo” federal agencies, eligibility is established through diferent applications and rules, leaving low-income students struggling to complete applications—not only does this dissuade many from receiving all the social benefts for which they are eligible, but the application paper chase also detracts from their studies. Linking applications and providing assistance could increase take-up, thus benefting lowincome students and the institutions they attend. Integrating applications for social benefts would increase student income on average $3,297 per student annually.51 As institutions at the forefront of the knowledge economy, colleges and universities might have put their considerable research capacity to good purpose in evaluating the educational and economic aspects of their mission, particularly as regards low-income students, but they have demonstrated a studied disinterest in doing so. Te “university is congenitally uninterested in applying its formidable analytic powers to its own educational mission,” an educational analyst concluded. “Tat’s because it would rather not produce defnitive evidence of the educational failures that invariably occur in organizations that sublimated their teaching obligations to research back in the nineteenth century.”52 Coupled with the analytic failure, traditional institutions of higher education have failed to be accessible to low-income students of color, track them to graduation, and assure placement in sustainable employment. Te intransigence of institutions of higher education refects the conservative preferences of leaders for the status quo, despite their otherwise liberal verbalizations. An economist and former university president, James Koch, argued that colleges and universities “refect ‘rent-seeking’ behavior: attempts by individuals and groups to insulate themselves from the discipline of the marketplace so that they can earn higher wages or returns than they would in a freely operating non-monopolized market.”53 At public universities, trustees

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could correct for tuition gouging and lack of transparency regarding other college costs, but they tend to be rubber-stamps for institution presidents and chancellors. Worse, the higher education business model has “a relatively infexible cost structure,” notes Scott Galloway. “Tenure and union contracts render the largest cost (faculty and administrator salaries) near-immovable objects.”54 Having secured a cartel, academics and managers have enjoyed carte blanche in operating colleges and universities, including increasing already bloated salaries and building posh student amenities, while maintaining a studious indiference to the implication of rising tuition to students from low-income and working-class families. Te result, paradoxically, has been increasing stratifcation, as Koch concludes: “It is difcult to construct an argument that the increasing economic stratifcation one observes in the student bodies of many American public colleges is consistent with either an opportunity-focused society, or with the rapidly changing demographics of the United States.”55 Or more cynically, as expressed by Scott Galloway, “higher education in the U.S. has morphed from the lubricant of upward mobility to the enforcer of our caste system.”56 Instead of pioneering new ways to accelerate the upward mobility of low-income students, colleges and universities treat Pell grant recipients as expendable; while their tuition is gratefully accepted, the educational casualty represented by one poor student failing to graduate will be replaced by another low-income applicant. According to one professor and critic of higher education, “Te priority, for many college presidents, is getting freshmen in the door and tuition dollars in the bank.”57 Te business model of higher education favored legacy applicants and those able to pay full tuition, out-of-state and foreign applicants being especially prized. As low-income students represent a comparative economic liability to colleges and universities, they are less likely to be admitted. As a result, admissions ofcers prefer low-achieving high-income applicants over highachieving low-income applicants. Tis observation led educational reporter Paul Tough to suggest an “iron law of college admissions: Te colleges with high average SAT scores—which are also the highest ranked colleges and the ones with the lowest acceptance rate and the largest endowments—admit very few low-income students and very few students of color.”58 Poor students with excellent academic skills, thus, are apt to experience instruction at elite institutions as alien, more compatible with their more afuent classmates. Not surprisingly, many drop out, opting for a local community college closer to home, with all the familiarity that that represents. Educational data report this as a matter of individual discretion, rather than evidence of stratifcation in higher education. In response to higher education being beyond the reach of struggling families, liberals resorted to a bromide: replicating the secondary school model of

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free education by moving it forward to higher education. Consider Senator Elizabeth Warren’s plan: at a one-time cost of $640 billion, Warren would erase up to $50,000 in tuition debt for students from families earning up to $100,000, for families earning between $100,000 and $250,000 the cancellation rate would be one-third, but zero for households earning more than $250,000.59 According to Jared Bernstein, former economic advisor to Vice-president Biden, Warren’s progressive approach “would reach more than 42 million Americans, or 95 percent of those owing student debt. Te $50,000 is enough to achieve complete debt cancellation for more than threequarters of student debtors.”60 No doubt, families of tuition-debt-stricken students would welcome cancellation as an economic windfall, but would it really beneft low-income students already trailing their more afuent peers? As a retroactive policy, debt cancellation leaves intact the very procedures and actors (university trustees, presidents, and faculty) who have been responsible for the tuition crisis. Without reform of higher education, Warren’s bailout, like any moral hazard, provides ample incentives for irresponsible leaders to maintain a fscally unsustainable status quo, in other words to continue driving up tuition, expecting students to meet costs through grants and loans. Although Warren claimed her debt forgiveness plan was progressive, Adam Looney of the Brookings Institution crunched the numbers, concluding that most of the beneft would fow to the very upper-income families more likely to be able to aford college in the frst place: 65 percent of debt forgiveness would be claimed by the top two quintiles of income earners, compared to 14 percent for the lowest two quintiles. Similarly, 65 percent of tuition debt would be canceled for whites, compared to 17 percent for African Americans and 8 percent for Hispanics.61 Te expectation that a majority of non-college educated taxpayers would pay for debt forgiveness was problematic politically as well. If the college graduation bonus averages $1 million and 84.7 percent of student loan borrowers are currently in payments, then why should a majority of a non-college graduating public cover the costs of vacating tuition loan debt?62 Pete Buttigieg pointed out the contradictions in Warren’s plan: “Americans who have a college degree earn more than Americans who don’t. I have a hard time getting my head around the idea of a majority who earn less because they didn’t go to college subsidizing a minority who earn more because they did.” Finally, with regard to a $100 billion increase in Pell grants over a decade, Sara Goldrick-Rab, who has studied the plight of low-income students, preferred expanding social benefts, such as the Supplemental Nutrition Assistance Program, instead. Tus, harmonizing fnancial aid with public assistance programs like SNAP seems a more productive approach.

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THE PANDEMIC PLUNDERS HIGHER EDUCATION In addition to spiking tuition, stagnant enrollment, and competition from for-proft institutions, the conventional higher education business model was suddenly trashed by the coronavirus. Within a year, institutions of higher education had lost $120 billion, an unprecedented collapse in revenue, prompting colleges to drop majors, discontinue adjuncts, and even dismiss tenured faculty. But this is unlikely to address the fscal clif that colleges have suddenly encountered. Scott Galloway, again: “We’re going to see hundreds of universities begin a death march.”63 Having adjusted to decreasing state support, public universities were suddenly without a major revenue source, varsity sports, making circumstances even more dire.64 Perforce, the instructional default was remote learning through online classes, although this posed problems for low-income students without requisite computers or rural students without access to necessary broadband. Suddenly, Information Technology, at the margin in academic operations through Banner and Blackboard software as well as Massive Open Online Courses (MOOCs), had become mainstream. Yet, linking applications for FAFSA with other benefts and tax refunds for low-income students and their families remained of the table. Te tale of access to higher education in America is ironic precisely because it is one of the institutions at the forefront of the knowledge economy. Blessed with talented faculty, well-endowed institutions, and eager students, the nation’s colleges and universities were once launching pads for generations of America’s leaders. Instead of expanding opportunity to poor, minority students, however, institutions of higher education have shamelessly increased tuition so that undergraduate credentials are beyond the grasp of many working-class families, let alone the working poor. Despite technological capability that is the envy of other nations, America’s colleges and universities have assiduously disavowed their public remit, not only for nonprofts provided tax right-ofs for pledges of public beneft but also for state institutions mimicking their elite, private counterparts. Institutions of higher education could easily have made their business model public, especially as regards tuition, fees, scholarships, and grants; but it has been in their interests to obfuscate fnances, leaving students and their families clueless about the cost of a college degree. Moreover, colleges and institutions have the knowledge and technology to build a pathway of upward mobility for low-income students, but they have been content to leave that to foundations concerned about economic equality. Perhaps, the greatest irony is that the nation’s colleges and universities are predominantly liberal, both as regards the preferences of administrators, faculty, and students; yet, they have become perpetrators of economic inequality!

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As an institutional microcosm of problems faced by low-income Americans confronted with meager, erratic income, an inhospitable welfare bureaucracy, and indecipherable applications, however, higher education is just another barrier to upward mobility. Now that the coronavirus has upended the higher education business model, university presidents, trustees, and provosts have quickly embraced Information Technology, without which they would have abruptly closed shop. Perhaps the coronavirus pandemic will convince them to also expand their horizons in another direction to embrace changes such as harmonizing fnancial aid with other social benefts, thus facilitating the enrollment, retention, and graduation of poor, minority students.

ACCESS AMERICA Lessons from higher education’s track record translate directly to innovations that would improve access to social benefts. Just as insurance exchanges established by the state and federal governments under the Afordable Care Act display diferent plans, allowing comparison shopping, consumer choice, and enrollment, government can create a single, easy-to-use, portal where citizens could learn about various benefts: Access America. Basically, citizens could input general information, which Access America would then process and direct them to programs for which they might be eligible. When fully developed, the impact of Access America would be increased geometrically by integrating applications for social benefts and tax refunds. Te selfdirected nature of Access America and the simplifcation brought about by harmonizing applications would not only expedite beneft receipt but also diminish the public’s resentment toward indiferent, impersonal bureaucracies and their minions. In conjunction with program consolidation proposed in Chapter 8, administrative overhead would be reduced. Access America would be the visible, usable result of a complete overhaul of the assumptions undergirding programs. Six rules would guide this redo: favoring social insurance over means tested programs, eliminating the means test, using a choice architecture that reduces cognitive stress, synchronizing application due dates, introducing positive language to reduce stigma, and using autoenrollment and presumptive eligibility to increase take-up.65 Social citizenship can be facilitated by developing a simple application form establishing eligibility and recertifcation across programs as well as “auto-enroll[ing] those who have demonstrated eligibility from one program into another with equivalent eligibility requirements.”66 Te objective of Access America would not be to provide benefts to citizens who do not meet eligibility requirements but to expedite benefts to

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those who do. As we’ve seen in Chapter 4, while the intent of public assistance may have been to assure a beneft foor to the deserving poor, too often the result has been the creation of an underclass by constructing a poverty trap for the minority poor. Tis is not only counterproductive as regards public policy, but it is also strikingly hypocritical insofar as the meritocrats managing welfare programs would refexively reject such treatment if inficted upon themselves, the middle class quite accustomed to their entitlement to opportunities and benefts. Indeed, the hallmark of middle-class prosperity has been the very linkages that generate household prosperity. As Esther Dufo has admonished, Stop berating people for not being responsible and start to think of ways instead of providing the poor with the luxury that we all have, which is that a lot of decisions are taken for us. If we do nothing, we are on the right track. For most of the poor, if they do nothing, they are on the wrong track.67 To cite one example, when middle-income mortgage holders miss a payment, they likely receive a friendly reminder of nonpayment; when a low-income beneft applicant fails to submit a recertifcation by the due date, benefts for the household are summarily terminated. Similarly, a Beneft Passport could be produced digitally, and mailed if necessary, informing Americans of social benefts and tax refunds that they have used in the past and, depending on the information available through government data, those they might consider applying for in the future. With Access America and the Beneft Passport, residents would be provided with a website, an email address, and a phone number to get answers to their questions, a user-friendly response being the objective. While Access America and Beneft Passport are likely to increase beneft take-up, application of Information Technology is likely to reduce administrative costs, possibly to no net increase in public expense. One of the paradoxes of America has been that services, benefts, and opportunities have been apportioned not according to equality but in relation to wealth and connections; in other words, private fnancial services for the wealthy parallel the public benefts of the welfare state. With respect to health, pension, and education benefts, the afuent have advisors who make judicious decisions with regard to income, taxes, and the law to advantage their clients. Te working class and the poor, on the other hand, are left to fend for themselves; often confounded by applications and indiferent bureaucrats, many low-income Americans simply give up. As has been the case with low-income students pursuing higher education, the consequence is incalculable loss of human capital, a forfeiture any nation can ill aford.

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But the greater paradox is this: the tangle of applications that ensnares the welfare poor, often trapping them in poverty, has been justifed by public suspicion that they are the “unworthy poor.” But can the same attribution be made to low-income youth trying to better themselves by pursuing higher education credentials? Given the advantages of Information Technology, separate applications for multiple social benefts according to diferent cycles is an artifact of the Industrial Era, which placed a premium on routinization of repetitious tasks, regardless of the resultant depersonalization, disregard of context, and negative outcomes. Tat mindlessness is as antiquated as the typewriter, the rotary phone, and the fling cabinet. A nation that can allow consumers to order customized products online, everything from blue jeans to cars, should certainly deploy that same technology on behalf of lowincome and minority citizens. We have the power, and we have the duty to facilitate their access to social benefts and tax refunds and credits to help stabilize erratic income, smooth over expense shocks, and ofer a predictable path of upward mobility. Te coronavirus may be just the catalyst necessary to harmonize applications, as an essential component of Welfare State 3.0.

NOTES 1 Pamela Herd and Donald Moynihan, Administrative Burden (New York: Russell Sage Foundation, 2018), p. 31. 2 Stephanie Kelton, Te Defcit Myth (New York: Public Afairs, 2020), p. 246, 3 Sonal Ambegaokar, Zoe Neuberger, and Dorothy Rosenbaum, Opportunities to Streamline Enrollment Across Public Beneft Programs (Washington, DC: Center on Budget and Policy Priorities, 2017). https://www.cbpp.org/research/poverty-and inequality/opportunities-to-streamline-enrollment-across-public-beneft 4 Sendhil Mullainathan and Eldar Shafr, Scarcity (New York: Penguin, 2013). 5 Cass Sunstein, “Wading through the Sludge,” New York EReview of Books, April 4, 2019. 6 https://www.kff.org/medicaid/report/medicaid-and-chip-eligibility-enrollment -renewal-and-cost-sharing-policies-as-of-january-2018-fndings-from-a-50-state -survey/?utm_campaign=KFF-2018-March-Medicaid-50-State-Survey-Eligibility -Enrollment&utm_source=hs_email&utm_medium=email&utm_content=2& _hsenc=p2ANqtz-_On_aTaztavl1yaRG432Ir4sNqR 5OOKJ6RiWacws00i2022 FtaV5Jrjf-IkUNJoOb3q6CcMytBnesnYAuCp_Iqm6owlw 7 Andrew Oxford, “New Mexico Still Failing at Beneft Assistance,” Te New Mexican, February 18, 2018. 8 Joey Peters, “Judge Picks Texas Administrator as HSD ‘Special Master,’” New Mexico Political Report, November 17, 2016. 9 Lawrence Parker, “Document 810,” United States District Court, Santa Fe, NM, January 31, 2018, p. 7. 10 Government Accountability Ofce, Federal Low-Income Programs: Eligibility and Benefts Difer for Selected Programs Due to Complex and Varied Rules (Washington, DC: Author, 2017). 11 Herd and Moynihan, p. 27. 12 Ibid., p. 27.

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13 Robert Samuels, “Wisconsin Is the GOP Model for ‘Welfare Reform.’ But as Work Requirements Grow, so Does One Family’s Desperation,” Washington Post, April 22, 2018. 14 Tami Luhby, “Trump Signs Executive Order Pushing Work Requirements for the Poor,” CNN Money, April 10, 2018. 15 https://thehill.com/policy/healthcare/368823-fve-things-to-know-about-medicaid -work-requirements 16 Amanda Lee and Beth Jarosz, “Majority of People Covered by Medicaid and Similar Programs are Children, Older Adults, or Disabled,” PRB, June 29, 2017. https:// www.prb.org/majority-of-people-covered-by-medicaid-and-similar-programs/ 17 Andrew Hood and Laura Oakley, A Survey of the GB Beneft System (London: Institute for Fiscal Studies, 2014). 18 Rob Merrick, “Tousands of People on Universal Credit Will Not Receive a Payment at Christmas,” Te Independent, November 18, 2017. 19 David Stoesz, A Poverty of Imagination (Madison, WI: University of Wisconsin Press, 2000). 20 U.S. Department of Health and Human Services, Welfare and Risk Factors: Sixteenth Report (Washington, DC: Author, 2017). 21 Lack of synchronization thus exacerbates economic inequality diminishes revenues for distressed communities. See Tomas Piketty, Capital in the 21st Century (Cambridge, MA: Harvard College, 2013) and Enrico Moretti, Te New Geography of Jobs (New York: Mariner, 2013), respectively. 22 Kathryn Edin and H. Luke Shaefer, $2.00 a Day (New York: First Mariner, 2015). 23 Gray Rivlin, Broke USA (New York: Harpers, 2010); Jonathan Morduch and Rachel Schneider, Te Financial Diaries (Princeton: Princeton University Press, 2017); Lisa Servon, Te Unbanking of America (New York: First Mariner, 2018). 24 Richard Reeves, Dream Hoarders (Washington DC: Brookings Institution, 2017). 25 https://jscholarship.library.jhu.edu/bitstream/handle/1774.2/63021/familyincom eandcollegegapmastheadfnal.pdf?sequence=1&isAllowed=y 26 Sunstein, “Wading Trough the Sludge,” p. 34. 27 Eric Bettinger, Bridget Long, Philip Oreopoulos, and Lisa Sanbonmatsu, Te Role of Simplifcation and Information on College Admissions (Cambridge, MA: National Bureau of Economic Research, 2009), p. 5. 28 Interview with Bruce Tyer, April 3, 2019. 29 Bettinger, Long, Oreopoulos, and Sanbonmatsu, pp. 16–19. 30 http://www.educationnews.org/education-policy-and-politics/fafsa-study-shows-2-7 -billion-in-unclaimed-pell-grants/ 31 Farran Powell, “IRS Plans to Suspend Financial Aid Tool for Months,” US News and World Report, March 15, 2017. 32 https://www.weberassociatesinc.com /blog/2018/01/15/irs-data-retrieval-tool -changes-20182019/ 33 https://www.epi.org/blog/10-years-after-the-start-of-the-great-recession-black-and -asian-households-have-yet-to-recover-lost-income/ 34 https://www.theatlantic.com/education/archive/2017/08/why-men-are-the-new -college-minority/536103/ 35 https://www.epi.org/blog/10-years-after-the-start-of-the-great-recession-black-and -asian-households-have-yet-to-recover-lost-income/ 36 https://www.demos.org/publication/debt-divide-racial-and-class-bias-behind-new -normal-student-borrowing 37 https://nces.ed.gov/pubs2010/2010015/tables/table_24_3.asp 38 Scott Galloway, Post Corona (New York: Penguin, 2020), p. 131. 39 Ibid., p. 126. 40 Sara Goldrick-Rab, Paying the Price: College Costs, Financial Aid, and the Betrayal of the American Dream (Chicago: University of Chicago Press, 2016), p. 2.

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41 https://trends.collegeboard.org/sites/default/fles/2017-trends-in-college-pricing_0 .pdf 42 https://nces.ed.gov/pubs2019/2019474.pdf 43 https://www.cbpp.org/research/federal-budget/pell-grants-a-key-tool-for-expanding-college-access-and-economic-opportunity 44 Goldrick-Rab, pp. 4–5. 45 https://trends.collegeboard.org/sites/default/fles/2017-trends-in-college-pricing_0 .pdf 46 https://www.federalreserve.gov/publications/fles/scf17.pdf 47 Jonathan Zimmerman, “What Is College Worth?” New York Review of Books, July 2, 2020, p. 36. 48 Galloway, p. 148. 49 https://www.povertyactionlab.org/evaluation/improving-take-tax-benefts-united -states 50 https://www.povertyactionlab.org/evaluation/snap-take-evaluation 51 Conversation with Sarah Crawford of Single Stop. 52 Carey, Te End of College, p. 225. 53 James Koch, Te Impoverishment of the American College Student (Washington, DC: Brookings Institution, 2019), pp. 71–72. 54 Galloway, p. 139. 55 Koch, 138, original emphasis. 56 Galloway, p. 180. 57 David Kirp, Te College Dropout Scandal (New York: Oxford University Press, 2019), p. 5. 58 Paul Tough, Te Years Tat Matter Most (New York: Houghton Mifin Harcourt, 2019), p. 164. 59 https://medium.com/@teamwarren/im-calling-for-something-truly-transformational-universal-free-public-college-and-cancellation-of-a246cd0f910f ?subsource =GS-67803607336-elizabeth%20warren-p-335492650015&gclid=CjwKCAjwzPX lBRAjEiwAj_XTEQ9ZV6hpD6C0DB2h-vzF4TetMpxlgOOYNg0_GT-DSaegmJ D5Hcw1KxoCL1sQAvD_BwE&refcode=WFP2019-LB-GS-CT&refcode2=GS -67803607336-elizabeth%20warren-p-335492650015 60 https://www.washingtonpost.com/outlook/2019/04/22/there-she-goes-again-sen -elizabeth-warren-introduces-new-proposal-signifcantly-lower-student-debt/?utm _term=.28fe51f524b4&wpisrc=nl_everything&wpmm=1 61 Adam Looney, How Progressive Is Elizabeth Warren’s Loan Forgiveness Proposal? (Washington, DC: Brookings Institution, 2019). https://www.brookings.edu/blog /up-front/2019/04/24/how-progressive-is-senator-elizabeth-warrens-loan-forgiveness-proposal/?utm_campaign=Brookings%20Brief&utm_source=hs_email&utm _medium=email&utm_content=72104257 62 https://w w w.washingtonpost.com /opinions/elizabeth-warren-has-the-wrong -answer-to-americas-student-debt-problem/2019/04/23/a67f78e8-65e1-11e9-a1b6 -b29b90efa879_story.html?utm_term=.870c7198ed56 63 Galloway, p. 141. 64 https://www.nytimes.com/2020/10/26/us/colleges-coronavirus-budget-cuts.html ?action=click&module=Top%20Stories&pgtype=Homepage 65 Herd and Moynihan, p. 259. 66 Ibid., p. 261. 67 Cited in Cass Sunstein, Simpler (New York: Simon and Schuster, 2013), p. 48.

10 Expand equity Te American welfare state, intended to provide benefts, services, and opportunities to those left behind due to the caprices of capital, technology conditioned prosperity, and simple bad luck, is approaching its centennial, but with little fanfare. It had a long run through the 20th century, but the 21st century has brought changes which our industrial era welfare state is ill-prepared to address. Lower standards of living for the working class have resulted in defection from political parties that promoted social programs but failed to deliver on promises to bring about a more inclusive, just society. Women entering the labor market encountered inadequate pay and working conditions all too familiar to minorities of color. Meanwhile, the welfare poor continued to patch together jobs to support their families but were often reliant on public assistance to supplement their incomes when employers failed to ofer adequate wages and benefts. Tat this has transpired since the 1970s is deeply troubling insofar as more than a generation has had to deal with defated aspirations, and fewer opportunities for economic upward mobility, particularly for their children. If the promise of the welfare state was to promote social solidarity, by 2020 the outcome appeared to be deep political polarization, instead. Americans seeking assistance from an array of programs that had multiplied in response to demands of advocates of diferent vulnerable groups found themselves confronted with byzantine bureaucracies and indecipherable applications, seemingly designed to the requirements of civil servants instead of a needy public. Te safety-net metaphor, having served as a liberal trope for decades, seemed suddenly inapt. As invoked by liberals, the safety net simply needed patching up to keep people from falling through; citizens seeking aid for multiple problems, however, saw a disconnected series of tattered slings, each requiring careful navigation but with no assurance of success. Conservatives, ever nostalgic for an era of laissez faire capitalism and its

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illusion of self-sufciency, mocked the safety net as a hammock. Well into the 21st century, the prospect of merely patching the safety net was likely to further complicate an already convoluted set of programs, leaving even sympathetic lawmakers exasperated. Nonetheless, with institutional support and cadres of dedicated analysts, the social insurances and public assistance programs of the welfare state have continued on autopilot, adhering to a suboptimal strategy: path dependence. Honed during decades of neoliberalism, path dependent “reforms” were incremental in nature, more familiar, and certainly much easier to accomplish than undertaking what was really needed: reconceptualizing and then reconfguring the welfare state. Increasingly, the economic platform which was supposed to complement the welfare state was speeding along on its own trajectory, leaving ordinary citizens, indeed, the vast majority of the population, in the dust. Financialization of the economy provided over-sized rewards for MBAs from Ivy League universities, abetted by laws authorizing unfriendly company take-overs. Regulators ignored the proliferation of risky, exotic fnancial instruments and contributed mightily to the Great Recession. At the same time globalization and ofshoring of manufacturing jobs that once provided blue-collar workers with middle-class wages and stable, comfortable lifestyles wreaked havoc among whole communities, efectively hollowing out the middle class, and creating fear, uncertainty, and anxiety among many. Meanwhile, the very wealthy were perfecting techniques to shelter their income and assets from taxation through of-shore accounts.1 A bipartisan subversion of the American Dream, both Republican and Democratic administrations were complicit in what would become a frestorm of public indignation, the rise of the Tea Party foreshadowing the election of Donald Trump. Liberal intellectuals looked with dismay at the wreckage, initially oblivious as to how so many dependent on such carefully crafted social benefts and tax refunds would be so ignorant and ungrateful, with some fnally considering a reckoning. Among those was Harvard’s Robert Putnam, who documented accelerating economic inequality: Over the four decades between 1974 and 2014, infation-adjusted annual market income fell $320 for households at the 10th percentile (the bottom tenth), rose $388 for those at the 20th percentile (the bottom ffth), rose $5,232 for those at the national median, rose $75,053 for households in the top 5 percent, rose $929,108 for those in the top 1 percent and rose $4,846,718 for those in the top 0.1 percent.2 Te initial response to the coronavirus pandemic would further exacerbate income disparities as the Fed’s support of Wall Street contributed to a “K” recession, battening the salaries and stock options of CEOs, leaving low-wage

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workers to cope with expired unemployment benefts, food insecurity, and evictions. Countless small business owners on Main Street were forced into bankruptcy. It seems inevitable that, in attempting to address inequality, liberal Democrats will ofer reasonable, though wholly predictable, policy responses to address the plight of working-class Americans: increasing the minimum wage, assuring afordable childcare, shoring up unemployment benefts, and facilitating union organizing.3 Tese are laudable but fail to address disparities in wealth, a primary driver of economic inequality across generations. Moreover, increasing inequality, accelerated by the economic fallout from the pandemic, has not been evenly distributed geographically. Two factors loom large: the geographic shift in good jobs to cities and the disadvantage in opportunities faced by younger generations. In both instances, Welfare State 3.0 can create a fairer playing feld, not by adding to existing programs but by establishing new opportunity structures for Americans left behind.

MID-AMERICA BEREFT Accompanying the decline of family farming, much of rural America is bereft, evident in husks of once-thriving towns, abandoned businesses, and closed schools. As self-sufcient farms, agricultural co-ops, and civic organizations are shuttered, dollar stores, Walmarts, and payday lenders take their place, ofering low-wage, precarious work. Declining employment opportunities contribute to population exodus, especially on the part of the mobile young, leaving seniors to manage an exhausted physical and social infrastructure. While there are exceptions to rural decline, such as petroleum and gas extraction in North Dakota and the Permian Basin spanning Texas and New Mexico, broad swaths of rural America have been depleted, leaving those citizens left behind susceptible to alcoholism and drug abuse. A colossal paradox: as drug addiction and suicide claim the lives of rural Americans, ambulance service is curtailed due to waning numbers of Emergency Medical Technicians,4 while hospitals, where the injured would be taken, continue to be shuttered.5 Te corollary has been thriving cities, especially metropolitan regions blessed by good universities, state-of-the-art healthcare, and rich oferings in the arts. Te paradox is that urban amenities in education, healthcare, and high culture are subsidized by the tax code, providing afuent donors incentives to contribute to their community’s nonproft organizations. Such investments in the fne arts, such as the symphony, opera, and ballet (known by fund-raisers as the “SOBs”), become signature institutions of the good life, attracting young, afuent, and talented Americans to city life as well

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as young, afuent, and talented foreigners to our shores. City life is hardly idyllic, as the homicide rates of Chicago and Baltimore attest. However, cities which have emerged from the doldrums of the rustbelt to thrive in the Information Age, such as Pittsburgh, have done so largely as a result of the benefcence of philanthropy and charitable foundations. If this divergence of circumstance, between urban and rural, seems benign, recent elections show the profound consequences of an increasingly polarized polity, as voters in the heartland support Republican candidates while those in cities vote reliably Democratic. Te consolidation of political parties in rural vs. urban areas becomes immutable as a result of the Constitution, which apportions members of the House of Representatives according to population, thus favoring cities, while the Senate is comprised of two Senators for each state, thus favoring the countryside. “Te urban-rural divide is now gaping,” observed Michael Tomasky, as “our two tribes attempt to vote each other into submission.”6 Te irony of contemporary politics is that rural Americans have been abandoned by both political parties: Republicans who have favored tax cuts for the wealthy who are overwhelmingly denizens of cities, and Democrats who, in failing to craft a viable policy for rural America, have forfeited a major part of the polity to Republicans. As a result, rural America has continued to crumble, as have the current fortunes and future opportunities of its residents. Te 2020 election underscored the urban–rural divide, as researchers from the Brookings Institution reported, “Biden captured virtually all of the counties with the biggest economies in the country, including fipping the few that Clinton did not win in 2016. By contrast, Trump won thousands of counties in small-town and rural communities with correspondingly tiny economies.”7 If life in rural America was tenuous for millions of families, it had been at least stable; but this changed with the Great Recession. Te aftermath of the economic collapse beginning in 2008 not only provided a government bailout for Wall Street fnanciers but also left millions of homeowners in foreclosure or with “underwater” mortgages. Te indignation of working-class Americans would propel the Tea Party, bolstering a right-wing insurgency within the Republican Party, and limiting the liberal impulses of the Obama presidency to his frst two years in ofce. Subsequently, a glacial recovery to the Great Recession experienced by low- and middle-income Americans, contributed to the election of Donald Trump. Trump’s white working-class base fumed at decades of deindustrialization, the implosion of manufacturing jobs, which had promised union workers $40/hour wages, double that available in retail. Since 1997, America had lost fve million manufacturing jobs, primarily in what became known as the Rust Belt.8 Well into the 21st century, the fabled Democratic “blue-wall” was disintegrating as union workers defected to the Republican Party. An analysis of

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Trump voters after 2016 revealed deep antipathy toward conventional politics, including the Democratic Party, once identifed with the working class, as voiced by a rural Michigan voter: You know, one of the things I really don’t get about the Democratic Party or the news media is the lack of respect they give to people who work hard all of their lives to get themselves out of the hole, it’s as though they want to punish us for the very things we hold dear: hard work, no dependence on the government, no debt, and so on.9 As a result of the ravages that deindustrialization inficted on families and communities, blue-collar skepticism toward established parties deepened and solidifed. On the cusp of the 2020 election one union ofcial contrasted the collapse of good-paying manufacturing jobs with lower-wage jobs in the service economy, noting that most of the latter required a college degree: “Not all of us go to college. Not all of us want to pursue that kind of career.”10 For their part, well-credentialed policy pundits overlooked the fact that two-thirds of Americans did not have a college degree. In the midst of high unemployment, a pandemic, and economic uncertainty, upward mobility was contingent on graduating from college, although earning a degree was increasingly out of reach due to spiraling tuition. Tus, many Americans looked askance at proposals to reduce or eliminate student loan debt held by the fortunate third with college degrees, if necessary, by presidential Executive Order. Only 26 percent of respondents in a recent poll thought loan forgiveness should be a top priority for President Biden’s frst 100 days in ofce. Many economists concur, saying broad-based student loan forgiveness ofered less bang for the taxpayer buck to get the economy accelerating again.11 Adam Looney of the Brookings Institution was unequivocal: “It is not a great form of stimulus, it’s poorly targeted.”12 One bank president was more explicit, favoring support for households without a college degree: “Te unfortunate part of the economic impact of COVID is that it’s impacting a sector of the workforce that statistically has less savings, less reserves, lives on a paycheck to paycheck basis,” he said. Stimulus should be very focused on the restaurants, hotels, front-line workers that are being most heavily impacted.13 Some non-college educated adults might well have wondered why loan forgiveness for farm equipment and machinery, small business loans, and plumbing, electrical, and other tools required by tradesmen were omitted from the discussion. Popular autobiographies have validated the alienation of rural Americans. Nancy Isenberg skewered Southern politicians for their transient identifcation with working-class voters.

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Instead of thoroughgoing democracy, Americans have settled for democratic stagecraft: high-sounding rhetoric, magnifed, and political leaders dressing down at barbecues or heading out to hunt game. Tey are seen wearing blue jeans, camoufage, cowboy boots, and Bubba caps, all in an efort to come across as ordinary people. But presidents and other national politicians are anything but ordinary people after they are elected. Disguising that fact is the real camoufage that distorts the actual class nature of state power.14 J.D. Vance shared the resentment he and his mother felt toward neighbors on welfare in Appalachia. We began to view much of our fellow working class with mistrust. Most of us were struggling to get by, but we made do, worked hard, and hoped for a better life. But a large minority was content to live of the dole. Every two weeks I’d get a small paycheck and notice the line where federal and state income taxes were deducted from my wages. At least as often, our drug-addict neighbor would buy T-bone steaks, which I was too poor to buy for myself but was forced by Uncle Sam to buy for someone else. Tis was my mind-set when I was seventeen, and although I’m far less angry today than I was then, it was my frst indication that the policies of Mamaw’s “party of the working man”—the Democrats—weren’t all they were cracked up to be.15 And Sarah Smarsh refects on growing up in Kansas. I rarely saw the place I called home described or tended to in political discourse, the news media, or popular culture as anything but a stereotype or something that happened a hundred years ago … Te countryside is no more our heart than are its cities, and rural people aren’t more noble and dignifed for their dirty work in felds. But to devalue, in our social investments, the people who tend crops and livestock or to refer to their place as “fyover country,” is to forget not just a country’s foundation but is connection to the earth, to cycles of life scarcely witnessed and ill understood in concrete landscapes.16 Te neglect of Americans living and working in the cotton country in the South, in coal country, Appalachia, or wheat and cattle country, Midwest, is manifested in declining opportunity that has corroded entire regions. Rural America has succumbed to a vortex of adverse social vectors leading to population declines in relation to job loss and ratcheting up the age of those left behind, who rely on fxed incomes.17 Crucial has been signifcant

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declines in business activity in rural counties, leaving vast swaths of nonurban america hollowed out.18 as tomasky observed, declines in business activity in middle-america have accelerated as the nation recovered from recent recessions. While 32 percent of new business growth after the recession of the early 1990s occurred in counties of less than 100,000 people, the percent of increased business activity for such counties after the Great Recession was zero.19 at the crux of rural decline have been lost employment opportunities; recovery from the Great Recession found cities thriving, while small towns and unincorporated rural hamlets continued to lose jobs, as shown in Figure 10.1. % Employment Growth 10 8 6 4 2 0 –2

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–4 –6

Figure 10.1 percent employment growth. adapted from Clara Hendrickson, Mark Muro, and William Galston, Strategies for Left-Behind Places (Washington, dC: Brookings institution, 2018), p. 9. https://www.brookings.edu/wp-content/uploads ​ ​ ​ ​ ​ ​ /2018/11/2018.11_Report_Countering-geography-of-discontent_Hendrickson ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ -Muro-Galston.pdf ​ ​

The implications of increasing mortality among working-age men due to “diseases of despair,” loss of business activity, and a diminishing labor force were profound, creating a vicious, self-perpetuating cycle of lost human capital. nowhere has the decline of rural america been more elided than in labor analysis. Thus, Enrico Moretti explored the transition of a workforce predicated on manufacturing to one focusing on knowledge and services, sectors flourishing in cities with a workforce prepared by good universities.

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Today there are three Americas: At one extreme are the brain hubs— cities with a well-educated labor force and a strong innovation sector. Tey are growing, adding good jobs and attracting even more skilled workers. At the other extreme are cities once dominated by traditional manufacturing, which are declining rapidly, losing jobs and residents. In the middle are a number of cities that could go either way.20 Rural employment, however, failed to even register in Moretti’s geography of jobs, in efect representing a fourth America, another casualty of fyover country thinking! What small town, rural Americans lack in population, they make up for in representation: two Senators for each state. Te shift from Democratic populism that once fourished in Kansas and Wisconsin, to Republican populism has accompanied the abnegation of political elites to address the plight of mid-America. As Brookings Institution researchers concluded, the “losers” have seen the ballot box as their last chance to reverse their declining fortunes. In the United States, their political voices are amplifed by systems of representation that favor rural residents, triggering political resentment among urbanites that mirrors economic and cultural resentment in the countryside. In this way, the populist politics produced by economic change, and the polarization that results, constitute an externality few economists anticipated but can no longer aford to ignore.21 Free trade collapsed employment opportunities in rural America; broadband neglected nonmetro regions; the knowledge industry skirted small towns; and capital abandoned hamlets and rural consumers. “Geography has come roaring back as a determinant of economic fortune, as a few elite cities have surged ahead of the rest of the country in their wealth and income,” noted Phillip Longman, In 1980, the per capita income of Washington, D.C., was 29 percent above the average for Americans as a whole; by 2013 it had risen to 68 percent above. In the San Francisco Bay area, the rise was from 50 percent above to 88 percent. Meanwhile, per capita income in New York City soared from 80 percent above the national average in 1980 to 172 percent above in 2013.22 While metro regions thrived, small town, rural America withered, but the implosion of fyover country occurred before the economic travails attributed to the coronavirus pandemic!

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ONE AMERICA Since the introduction of the Tennessee Valley Authority during the New Deal, the U.S. has considered various strategies to revive economic backwaters, such as “enterprise zones” and “empowerment zones.” But tax credits and other economic incentives for companies willing to establish operations in poor communities disregard the human capital already in residence—people not only attached to their neighborhood but also invested in its improvement. Tus, recognizing and making better use of existing human capital, not just relying on importing new talent, is key to revitalization. Financial capital may be necessary for renewal, but it is insufcient without human capital. Productive work is basic to any society, even more so for America with its embedded work ethic.23 During the latter decades of the 20th century, social capital evolved as an essential complement to physical capital, necessary for building and sustaining strong communities. As Oren Cass contended in arguing for a production basis for economics, as opposed to current policies predicated on consumption, social capital bridges paid labor with more constitutive aspects of community. Work is both a nexus of community and a prerequisite for it. Work relationships represent a crucial source of social capital, establishing a base from which people can engage in the broader community whether it’s playing on a softball team, organizing a fund-raising drive, or hosting a feld trip for the local preschool.24 Fundamentally, Americans perceive work as distinct from welfare, so it is essential to create a rural recovery strategy that promises not a hand-out but a hand-up, as well as supporting vital community institutions. Joan Williams aptly observed, “Changing working class attitudes will require a mind shift for progressives whose instinct has been to highlight the benefts of government help for the poor. Again, that strategy only hurts the poor—and everyone else—in the long run.”25 One America would replicate the Earned Income Tax Credit by establishing a Refundable Volunteer Tax Credit, providing a federal refund for volunteers designated by mayors or county commissioners as providing essential community services. Eligible activities would be determined by local ofcials but should include public safety, such as members of volunteer fre departments and neighborhood watch; educators, including after-school activity supervisors and librarians; extracurricular volunteers, such as coaches and marching band instructors; and the various construction trades to rehab dilapidated structures and remove abandoned buildings. One America’s staf would comply with employment practices of local government, be integrated

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with existing governmental structures, and be paid in accordance with a locality’s median wage, payments made to volunteers by Treasury checks, as with other tax refunds. Both political parties have been culpable in abandoning the American heartland: Republican enthusiasm for globalization and free trade, later endorsed by Democrats, ofshored millions of manufacturing jobs. And the Democratic Party’s shift away from blue-collar workers in favor of professionals proved a critical factor in the 2016 electoral loss to a Republican candidate quite willing to sacrifce the working class on his altar of greed and corruption. Te problem for both parties is that the neglect of manufacturing workers, rural families, and those without college degrees invites electoral retaliation. Until social policy addresses these forgotten Americans, instability will be a constant feature of the polity.

A LOST GENERATION Inequality is not just geographical but also generational. Parents might hope that their children will fare better than themselves, but that aspiration more closely approximates wishful thinking today. Young adults are faring far worse than previous generations. As Longman notes, [Tey] had a lower real income in 1979 than twentysomethings did in 1969. And as fftysomethings now, they not only make less money than they did when they were fortysomething, they are also far worse of as a whole than were the fftysomethings of 2005. Tis generalization applies to white members of this cohort and even more so to those who are African American or Hispanic.26 Losing ground with regard to economic opportunity, young workers not only forfeit income necessary for fnishing college or trade school, beginning families, starting a small business or purchasing homes, but are less able to accrue savings essential for smoothing income shocks and providing for retirement. In academese, inequality guru Tomas Piketty observed, “the intergenerational correlation of education and earned income, which measures the reproduction of the skill hierarchy over time, shows no trend toward greater mobility over the long run, and in recent years mobility may even have decreased.”27 Research from Harvard’s Opportunity Insights mirrors Tomas Piketty’s international work. Te Opportunity Insights team—Raj Chetty, John Friedman, and Nathaniel Hendren—tracked the children’s earnings to those of their parents. Te trend is consistently downward over time, as shown in Figure 10.2. To illustrate, 90 percent of children born during World

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War II earned more than their parents, compared to just 50 percent who earned more among those born in the early 1980s. %Children Earning More than Parents 100 80 60 40 20 0

1940

1950

1960

1970

1980

Figure 10.2 Percent children earning more than parents. Adapted from https:// opportunityinsights.org/national_trends/

Although disparities between whites and Asian Americans and between whites and Hispanics have been narrowing, African American and Native American gaps remain wide. Moreover, minority women have made substantial gains in attaining equity, and minority children raised in more afuent neighborhoods fare better than those who remain in poor communities.28 Te coronavirus is certain to exacerbate these disparities as millennials, having navigated the Great Recession, wrestle with lost employment and educational opportunities for an entire year. International comparisons are also illuminating. Of American children born to parents in the bottom quintile of the income distribution, only 7.5 percent will rise to the top quintile, compared to 9.0 percent of children in the U.K., 11.7 percent of children in Denmark, and 13.5 percent of children in Canada. Researchers concluded that chances of achieving the “American Dream” are almost two times higher for Canadian children rather than American kids.29 But again, these studies focus on income, ignoring wealth disparities which loom large and have intergenerational efects. Indeed, wealth inequality in America is worse than income inequality, and both the gaps and the trends are stark. In 2006, the top 1 percent controlled 30.0 percent of the nation’s wealth; by 2020, they controlled more than 31.1 percent. Tose in the 50–90th percentile accounted for a relatively modest share of national wealth in 2006, 32.7 percent, but their share had dropped to 29.7 percent by 2020. Te wealth commanded by the bottom 50 percent was negligible, declining from 2.2 percent in 2006 to 1.9 percent in 2020.30 Tese wide disparities are also evident in average family net worth by income percentile. As depicted in Figure 10.3, between 1990 and 2015, the average wealth among families in

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the top 10 percent more than quadrupled, from roughly $1 million to about $4.5 million. Te top 80–90 percent showed a slight uptick in average net worth over time; for everyone else there was no improvement. $5M $4M $3M $2M $1M $0

1990

1995

2000

2005

2010

2015

Top 10%

Top 10–20%

Fourth 20%

Middle 20%

Second 20%

Boom 20%

Figure 10.3 Family average net worth, by income percentile. Source: usafacts.org

Tese disparities in net worth have real-world consequences for families because liquid assets can address income shocks and emergencies requiring quick access to cash. Prior to the pandemic, the bottom quarter of Americans held about $25,000 in assets, and most of this was in home equity, not easily liquidated. With the exception of the top 10 percent and, more spectacularly, the top 1 percent, America has become increasingly poor, with respect to wealth and income. Te Great Recession of 2008 alone erased the savings of many workingclass families; between 2005 and 2009 the median wealth of white families fell 16 percent but plummeted 53 percent for African Americans and 66 percent for Hispanics.31 Moreover, a series of tax cuts, beginning in the Reagan administration and continuing under the administrations of Presidents George W. Bush and Donald Trump, have gilded the asset portfolios of the afuent, ofering largely symbolic benefts to the bottom half of taxpayers. Promising minimal income benefts to most American households over the coming decade, the 2017 Tax Cuts and Jobs Act vastly increased the wealth controlled by afuent families.32 As with income, wealth also varies with race and ethnicity. Among lowerincome groups, whites lost signifcant wealth following the Great Recession, their net worth plummeting from $42,700 in 2007 to $22,900 in 2016. In 2016, however, the net worth of Hispanics was $7,900 and for blacks $5,000, the approximate value of a used car.33 While African American families have

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typically earned half of that of whites, black wealth has been one-ffth that of whites.34 From 1984 to 2013, the wealth gap between whites and African Americans increased markedly from $84,400 to $245,000.35 Zero and negative wealth signifcantly disadvantage ethnic and racial minorities in relation to whites, and these disadvantages persist across generations. Children of afuent white families have a fnancial foundation on which to draw, which is not available to those of the minority poor, where “each generation starts essentially from scratch.”36 Te wealthy can transfer much of their estates to their children, often taxfree, while lower-income households have meager incomes and negligible wealth. Over time, those at the top and bottom of the wealth distribution tend to stay in place, but for many at the bottom, the vaunted American Dream is but a fantasy. One-third (35 percent) of children who grow up in the bottom income quintile are still there as adults and about two-thirds (64.9 percent) remain stuck in the bottom two quintiles. Only a little more than one in 20 (6.4 percent) migrate to the top quintile as adults.37 Economists refer to lack of intergenerational mobility as “sticky” insofar as children tend to adhere to the wealth profle of their parents. Unless policies are instituted to correct for the stickiness of wealth, children are apt to replicate the experience of their parents, whether wealthy or poor. Tis “stickiness” is captured in Table 10.1. Table 10.1 Intergenerational Wealth Mobility, Ages 45–64, in Percent1 Parents’ Wealth Quintile Children’s Wealth Quintile

Highest >$412k Quintile 4 $195k–$411k Middle $89k–$195k Quintile 2 $24k–$89k Lowest