Economic influences on welfare system origins and contemporary economic impacts

ECONOMIC CIRCUMSTANCES THAT INITIATED the CREATION of the WELFARE SYSTEM and HOW the WELFARE SYSTEM HAS INFLUENCED TODAY'S ECONOMY

The objective of this work is the research the economic circumstances that initiated the creation of the welfare system and how the welfare system has influenced today's economy.

EXPECTED OUTCOMES of RESEARCH

The expected outcomes of the research in this study is to understand the reason that the welfare system was created and the impact that the welfare system has had upon the economy in the United States today.

The significance of this research is the knowledge that will be added to previous study in this subject area.

The methodology of this study is one of a qualitative nature and will be conducted through a review of relevant peer-reviewed literature in this subject area.

REVIEW of LITERATURE

The work of Berlet (2006) entitled: God, Calvin, and Social Welfare - Part Three: Roots of the Social Welfare Debate" states that: "The debates over social welfare and other domestic social policies in America today are shaped by three religious currents within Protestantism. These theological views are seldom discussed openly, yet they play a powerful role in determining federal and state public policies toward the impoverished, the ill and disabled, and those unable to find work at a living wage." (Berlet, 2006) Berlet states that the policies for social reform as set out by Liberals and Progressives are "legacies of ideas pioneered by the Quakers, the Unitarians, and other dissident religious reformers who rejected the notions of the early Calvinists and evangelicals." (Berlet, 2006) the history of welfare in the United States can be traced to the New Deal, which had its basis in "terms of the 'deserving' poor, since most people without jobs knew that it was not by their choice and were willing to contemplate the government taking over economic responsibilities if no one else could. Even the crown of the New Deal, the Social Security system (1938) was sold as a retirement plan that depended on one's own earning." (the Paternal State, the Liberal State, and the Welfare State, nd) it was however, revealed in 1960 that the contributions to social security were simply taxes for benefits that could not be "expanded or revoked at the political will of Congress." (Paternal State, the Liberal State, and the Welfare State, nd) in 1964, President Lyndon B. Johnson began what was known as a 'war on poverty' based upon liberal mottos including "not a handout, just a hand." (Paternal State, the Liberal State, and the Welfare State, nd) This school of thought believed that "with a little help, with the best modern sociological knowledge, the poor would quickly be up and off their own." (Paternal State, the Liberal State, and the Welfare State, nd) the creation of Medicaid and Medicare during Johnson's presidency was geared toward provision of medical care for the poor and elderly. This 'progressive' ideal resulted in a belief that "everyone was simply owed an income" with no differentiation between deserving and undeserving poor and no differentiation between virtue and vice. These ideas were "presented by the media as enlightened and compassionate ideas, anyone believing otherwise was consistently put on the defensive and portrayed as the most cruel, selfish and mean spirited persons imaginable." (Paternal State, the Liberal State, and the Welfare State, nd) There are several forms of government to be understood in relation to the welfare state, which are those as follows:

Paternalistic/Conservative/Traditionalistic Government: this form of government holds that law has the power to enforce virtues and punishment to address vice. Within this framework putting drug users in prison is for the purpose of protection society from these individuals;

Liberal/Libertarian Government: this theory of government holds that virtue receives natural rewards and vice receives natural punishments. Law is for the purpose of justice and for communicating additional punishment for things that are questionable as to whether they are indeed vices.

Social/Welfare/Liberal/Maternalistic Government: this form of government does not make morality judgments related to vice and virtue unless it is to blame society-at-large for creation of individual's vices and in that framework society is responsible to protect themselves from the consequences resulting form their actions. This school of thought holds that placing drug users in prison is for the betterment of the drug users. (Paternal State, the Liberal State, and the Welfare State, nd)

Say's Law is related which states that "life gets better as production, of things people actually want increases..." Or supply creates demand, which means, "that overproduction in a free economy is actually impossible." (Paternal State, the Liberal State, and the Welfare State, nd) the work entitled: "The Impact of the Welfare State on the American Economy" published by the Joint Economic Committee Study relates that while there is an existing agreement of a broad nature that economic well-being is enhanced through government functions, "the burdens of excessive government spending can reduce economic growth relative to what it would otherwise be." (Paternal State, the Liberal State, and the Welfare State, nd) This 1995 study is much like the ongoing debate in the United States today in that the debate is centered around budget policy and questions related to the spending practices and levels of the government become counterproductive. Gallaway and Vedder (1995) state findings from a research study that: "...the optimal level of government spending is approximately 17.6 of GDP and past this "the resources consume by government impose more costs on economy than benefits." (Paternal State, the Liberal State, and the Welfare State, nd) it is related additionally that when government "grows beyond the level that is optimal for the economy, it introduces inefficiencies that increase the cost of producing goods and services. The U.S. Department of Labor, Office of the Assistant Secretary for Administration and Management document entitled: "Overview of the Nixon-Ford Administration at the Department of Labor, 1969-1977 states that the primary goal of the Nixon and Ford administrations was the development of a "new working partnership termed 'New Federalism.' (U.S. Department of Labor, 1977) the theoretical base of New Federalism is "the unifying theme of revenue sharing which is a principle that reflects the belief that "decisions are better made when they are made by those directly concerned, that the Federal Government should supplement rather than supplant the capabilities and resources of local governments; and that local officials and citizens were willing and able to carry out their own responsibilities." (U.S. Department of Labor, 2007) New Federalism worked toward reinvesting the responsibility and decision making capacities to state and local governments through enabling the local governments with necessary resources to assume these responsibilities as well as being characterized by "substantial freedom and flexibility to tailor pogroms to local conditions and priorities." (U.S. Department of Labor, 1977) the primary purpose of New Federalism was to "remove the Federal presence as much as possible and to substitute in its place local decision making, flexibility, and accountability..." (U.S. Department of Labor, 1977) through block grants and revenue sharing instead of the "categorical programs." (U.S. Department of Labor, 1977) Within this framework, agencies of the government would be easier to access and "more responsive and effective in delivering their services. This goal was to be accomplished by decentralizing operations, strengthening the role of State and local governments and by improving agency program performance." (U.S. Department of Labor, 1977)

According to Professor Kamerman in the work entitled: The Fallout of Welfare Reform - Social Work Experts Predict Disaster with a Ray of Hope": "The welfare reform legislation signed into law in August constitutes the elimination of one particular program -- a.F.D.C. (Aid to Families with Dependent Children). From the perspective of poor children and their mothers, this can have very severe and punitive consequences. At the present time, there are about 14 million people receiving a.F.D.C., of whom more than 9 million are children. There are estimates that there will be one million additional poor children as a result of the eligibility changes and cuts in funding for welfare. The general public thinks that welfare is this enormously expensive program. The reality is that that cost of welfare is about 1 to 2% of federal social expenditures -- it's a very tiny portion of the budget. But it has this mystique, this symbolism, this stigma attached, that people think a fortune is being spent." The time was ripe for a major change in welfare. The problem is that it got distorted by conservatives in the 104th Congress who used it as an occasion to press forward their views of how people should behave. There is a fantasy that these changes are going to significantly reduce out-of-wedlock childbirth and teenage pregnancy. But very little attention is being paid to the consequences for children." (Columbia University Record, 1996) in the same publication, Professor Jackson states that: "Very little is known about how employment affects single mothers with low incomes, particularly black women, who are disproportionately represented among those receiving public assistance. Generally, when we look at minority mothers, we look primarily at the structural issues. We don't look at their psychological well-being. it's almost as though, psychologically, they're a blank. And we know very little about the differences among black women. Some cope better than others. We don't know who they are, why they cope better, what resources they have access to. If we can understand that, then we can understand the needs of those who cope less well. What I am finding so far is that almost all the mothers in my study, when asked whether they would prefer employment to public assistance, say they would rather have a job. However, having a job is very difficult for this group of mothers because it is difficult for them to find and keep jobs that support them and provide adequate benefits. And there's another consideration: When we say we're going to put these women to work, what is it going to mean in terms of the mothers' absence from the home? Even if there are financial benefits -- and it's not clear there will be -- the issue is, do these offset the mothers' absence from the home when the children are quite young? The mothers I've interviewed are very concerned about what's going to happen to their children. A number are already working two jobs, which still leave them in poverty. These are black women whom we rarely hear anything about. I don't think we know what the impact of the new welfare law will be for poor children over time." (Columbia University Record, 1996) Finally, Professor Garfinkel, an expert on contemporary urban issues states: "We want to distinguish between the long run and the short run. The structure that the welfare reform sets up is potential disaster. In addition to eliminating the guarantee of cash assistance to poor children and single mothers, it eliminates the federal matching of state expenditures. That's an important and underappreciated change that will play out in the long run. Under the old system, if a state government wanted to give a dollar of aid to poor people, it only cost them 50 cents because the Feds would pay half. We've eliminated that and created block grants. Now, if the states want to spend a dollar on poor people, it's going to cost them a dollar. The effect of that over time will diminish the amount that states are willing to spend. Any economist worth his or her salt will tell you that "If we have a big recession, the states are not going to be capable of handling it. That's why we federalized aid to the poor in the first place. Every state constitution requires a balanced budget. So when you go into a recession you have less money available at the state level, and one of the things you cut back on is welfare. The federal government does not have a required balanced budget, and, in fact, it makes sense from a macro-economic point-of-view, when you go into a recession, to run a deficit. That's what brings you out of the recession. And a welfare program is a natural stabilizer -- it's a counter-cyclical natural stabilizer for the macro-economy. We've just wiped that out with respect to welfare. In the long run, if that stands, it's a terrible step backwards. In the short run, it's not so bad. Welfare case loads have been going down because we have the best economy right now since the late 60s, early 70s. The way the new legislation reads, the block grants are based on the 1994 level of federal aid. Right now, in 1996, case loads are smaller in the majority of states than they were in 1994. So it turns out the majority of states will get more federal money in the next several years than they would have if the old law had stayed in place. but, if the economy turns bad -- which it always does in an economy that is cyclical -- states will be in trouble as more people are out of work and welfare case loads increase." (Columbia University Record, 1996) One of the major impacts that welfare assistance and reform has been noted to have had upon the U.S. economy is the problem related in the work of Hwa-Ok Park in the work entitled: "Grandmothers Raising Grandchildren: Family Well-Being and Economic Assistance" which states: "According to the U.S. Census Bureau, the number of children under 18 living in grandparent-headed house-holds has increased markedly, from 2.2 million (or 3.2% of children) in 1970 to approximately 4 million (or 5.5% of children) in 1997.4 Although the majority of grandparent-headed households also include at least one of the grandchild's parents, since 1990 the fastest-growing type of grandparent-headed household is one in which the grandparents and their grandchildren reside together without the grandchild's parents; these are generally called "skipped-generation" households. By 2000, approximately 2.4 million grandparents were responsible." (Park, 2005)in many cases the parents were "unwilling or unable" (Park, to raise the children whether it be due to drug abuse, imprisonment, abuse, neglect or abandonment, divorce, illness, and even death. Grandparent primary caregivers experience many challenges including social, physical, emotional, legal significant economic difficulties, which may result in poverty. In 1996 welfare reform replaced Aid to Families with Dependent Children (AFDC) with funding under Temporary Assistance for Needy Families (TANF) because grandparent caregivers are required to engage in work "no later than 24 months after receiving assistance subject to time limits for assistance." (Park, 2005) This has created a disparity in receiving benefits for care of dependent children by primary caregivers due to the unequal ability of grandparents to attain and engage in gainful employment due to issues of aging and a general decline in overall physical health. Park (2005) relates that the welfare reform legislation in 1996 "considerably altered the financing and structure of cash aid and other social welfare programs. programs. Although the federal government imposes some conditions, such as work requirements and time limits, states may now design their own welfare programs. As a result, the effects of the reform on grand-parent primary caregivers will ultimately depend on which state they live in and on any federal waivers that may be in effect.6 Before welfare reform, for instance, older grandparents were likely to be exempt from work requirements because of their age, but no such federal exemption currently exists." (2005) Accessing financial assistance by grandparents caring for their grandchildren in the absence of parents has eligibility criteria that must be carefully weighed in the various programs of assistance available. In the case that the grandparent receives AFDC and TANF child only grants the amount received does not consider the income and assets of grandparents however for those in need of financial assistance because they can no longer fulfill work responsibilities and child care-taking responsibilities, for those whose income or assets are too high, making ends meet is particularly challenging. Assistance is available under Title IV-E of the Social Security Act however, the grandparents have to surrender the children to the sate in order to receive the assistance while filling the role of foster parents to their grandchildren and many grandparents do not want the state involved and may not be able to reach criteria of foster parents and living arrangements. Kinship caregiver payments are able to be accessed in some cases and in others Subsidized guardianship programs are instituted in some states in permanent kinship caregiver options of children in state custody. Park addresses the question of: How effective was income assistance in closing the poverty gap among grandparent caregivers of grandchildren? The answer discovered in the study reported by Park (2005) is not very effective at all as "Among skipped-generation families, 51% of the single-grandmother families and 20% of married grandparents families had incomes below the poverty line prior to transfers. Park states that: "Targeted income support decreased the poverty gap around 40% among all skipped-generation grandmother caregivers' families and by half if we consider only families receiving targeted income assistance." (2005) Park states policy implications to include the fact that in view of the "high poverty rates especially among families headed by single grandmothers, even after the transfer of income assistance, policymakers should reconsider economic policies that currently place grandparents at a disadvantage. Grandparent caregivers often receive inconsistent and inequitable treatment based on their status as a relative. Economic hardship, as this study demonstrates, is widespread among grandparent caregivers, and affects their ability to financially support their grandchildren and maintain their own well-being. In addition to changes in financial assistance programs, policymakers therefore need to consider workplace policies and programs that will improve the grandmothers' abilities to care for their families." (Park, 2005) the work of Karier (2000/3) entitled: "Welfare College Students: Measuring the Impact of Welfare Reform" relates the fact that over the past several years there has been a coordinated effort among federal and state governments to "reorient welfare from income assistance to employment assistance.. With the passage of the Personal Responsibility and Work Opportunity Reconciliation Act of 1996, immediate employment became the primary goal of welfare programs across the nation. However, the rules and regulations that were developed to create incentives for immediate employment have created equivalent disincentives for pursuing higher education as a means to achieve economic independent." (Karier, 2000/3) for example, a barrier is presented under the terms of the new welfare laws for students desiring to go to college in that "students enrolled in college who do not meet the strict work requirements are not typically considered as engage in an approved work activity. Specifically, for parents who work and attend school, and the single parent who has to meet working requirements of 30 hours per week, it is particularly difficult to attend college full-time and then added to this the States place further burdens upon parents in the "combination of school, work, and parenting by denying child care assistance for welfare recipients during the time they are attending college." (Karier, 2000/3) Specific results of welfare reform are reported in the study of Karier to have been gained through a program that monitored a specific population of welfare recipients. Enrollment of welfare students experienced a drop from 435 in fall 1994 to 325 in fall 1997 "declining by an average 37 students a year." (Karier, 2000/3) Enrollment fell by 108 students from 1997 to 1998 showing that "the rate of decrease clearly accelerated after the implementation of welfare reform." (Karier, 2000/3 Introduction of welfare reform is seen clearly in Washington State, which "created disincentives for attending college and to be a major factor in the declining number of welfare students attending Eastern Washington University.