Responding to Taking Welfare and Hating It

Will Wilkinson has a post at the Economist Democracy in America blog – Taking welfare and hating it – responding to the big New York Times story about people’s conflicts with the welfare state, a story that we covered here.  It’s worth reading it all, but here’s part of it blockquoted.  Wilkinson:

Mostly I find a faithful depiction of a common and interesting conflict within many Americans between their de facto dependence on government transfers and their closely-held ideals of independence and self-reliance.

To understand all this, I think it’s important to acknowledge that our so-called “social insurance” programmes, such as Social Security and Medicare, produce a sense of dependency by design…But, like it or not, many Americans do find this dependency humiliating…

Defenders of the massive New Deal-Great Society entitlements are inclined to see hypocrisy or thick-headedness in those who oppose in principle programmes on which they in fact depend. A more generous way to understand this phenomenon is to acknowledge that the New Deal-Great Society social insurance institutions have proved successful in engendering economic dependence and, thereby, self-reinforcing political support, but they have failed to engender a corresponding shift in America’s culture of self-reliance…

One argument for transforming Social Security and Medicare into Singapore-style forced savings programmes is that a system which relies primarily on intra-personal transfers better suits America’s ingrained ethos of individual responsibility and would thus help resolve the cognitive and emotional dissonance created by the status-quo system.

This discussion would benefit from splitting the welfare state into two relevant parts.  The first is old-age support.  Social Security and Medicare are incredibly popular with the broader public, and indeed that support is a major part of the political map.  They are also popular because they have been very successful in eliminating old-age poverty.  Indeed the huge reduction on old-age poverty is one of the major achievements of 20th century liberalism.

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The people in the New York Times story don’t seem terribly conflicted about these programs.  And that’s by design.  As my man Franklin Roosevelt said, “We put those payroll contributions there so as to give the contributors a legal, moral, and political right to collect their pensions and their unemployment benefits. With those taxes in there, no damn politician can ever scrap my social security program.”  Smart guy.  I don’t see how “Singapore-style” transfers of these programs, whatever their other strengths or weaknesses, would benefit the ethos of Americans.

The second is more interesting, and that is the welfare state surrounding wage and income support.  Here is where you see a lot of cognitive dissonance when it comes to getting benefits.  People in the story are conflicted about food stamps and the earned-income tax credit.  Summarizing an interview with a family head struggling to get by, “Instead, he said he would rather give up the earned-income credit the family now receives and start paying for school lunches for his children.”  I’d really like to see polling on this, but it certainly seems like an issue among the working class, even the working poor.

Wilkinson attacks the New Deal for generating this kind of dissonance, but the New Deal had a very different type of approach to income and wealth support of workers.  There it was about mass unionization following the 1935 Wagner Act, a stronger minimum-wage and other ways to boost the pre-transfer portion of the distribution of income, bolstered by generous public goods (especially driven by the GI Bill).

The post-New Deal approach is the one we see in the story, one of tax-related subsidies and various vouchers targeted to those at the bottom of the income distribution.  Instead of giving workers more bargaining power upfront, we supplement their income after the fact.

There’s a reason why this new approach causes dissonance.  As we brought up in the liberal critique of left-neoliberalism, when the conceptual project of the welfare state is to compensate the losers of society rather than broadly empower citizens, these kinds of pity-charity state governance techniques forces those worse off to engage in additional acts of “shameful revelations.” These revelations make the liberal state something that doesn’t create the conditions for your freedom but instead shames and embarrasses you.

Which is to say the anti-American ethos dissonance strikes me as being most relevant in spaces with market-targeted, decentralized, means-tested, price-mechanism-driven welfare and redistribution policies.  The kind of reforms “liberal”tarians and left neoliberals support the most.  But if that’s the problem, then what is the solution?  Especially in an age with stagnating incomes and declining share of labor?