Goodbye to all that? The Very Uncertain Future of the American Welfare State

The American welfare state, at least in the form that we’ve known it since the New Deal, is under siege. Tax phobic voters, Tea Party governors, deficit “hawks” – all are trying to tear it down. All repeat the same mantra: “we” can no longer afford “out-of-control” entitlements spending. Worse, few Democrats seem willing to defend publically one of the signal achievements of 20^th century liberalism. Should we be preparing for life without the social safety net?

There are good reasons to think so. For one, changes in the ratio of labor to capital worldwide are creating a very strong headwind. The simultaneous opening up of the once closed or isolated economies of Brazil, Russia, India and China, and the development of new, information technologies that make it easier for capitalists to access labor worldwide, are creating enormous downward pressure on wages everywhere. And as wages fall, so do incentives for employers to offer the kinds of benefits, or to support the kind of expanded public benefit programs, that were once were deemed necessary to attract and keep workers, and to maintain social peace.

This is not only an American problem. It’s hard to find a Western capitalist nation that is not trying to rewrite the fundamental contract between society and the individual. There is, of course, resistance to retrenchment. Parisians have turned out in mass demonstrations to protest Nicolas Sarkozy’s cuts to public pensions. Londoners have greeted David Cameron efforts to slash state-support for higher education with massive street demonstrations. Nor have European employers aped American corporations decision to rely almost exclusively on cutting labor costs to maintain corporate profits during the most recent recession.

Still, conservative governments would not be so bold in their challenge to public provision everywhere where it not for the powerful economic and political winds at their backs: nearly everywhere, the political power of capital has grown mightily since the 1970s, and the power of labor, organized or not, has withered.

For several reasons having to do with the peculiarities of the political system itself, the American welfare state is especially at risk. For one, neither the ideology nor the institutions of social democracy took root in the United States to the same degree that they did on the European continent, in Scandinavia, or even in Great Britain and Canada. Unions have never been as politically important here as they are in other Western democracies. Nor has either of the two major political parties been willing to commit fully to the left’s policy agenda.

The ideological problem is longstanding, but it has become much worse since the 1970s: the curious but undeniable hold of neo-liberal ideas about individual choice and economic competition on the American imagination. Certainly, we need to step lightly when we trade in cultural explanations of political phenomena. But it’s hard to deny that the way that many Americans think about government helps the right by calling into question any political program that builds on notions of community, cooperation, and social equality. The well-documented American tendency to view government as “the problem,” to prefer individualistic solutions to social problems, to favor “opportunity” to “redistribution” – together, these ideas and prejudices make it that much easier for conservatives to demonize the very public programs upon which so many people depend.

The American institutional problem is also familiar: the extraordinarily complex, divided, and disorganized political system makes it difficult to adopt or implement social policies that actually challenge the status quo. There are so many veto points, so many levers that must be pulled, so many interest groups that must be bought off, that real redistributional reform is unlikely. Rather, the policies that do emerge from this legislative gauntlet are simultaneously oversold and underperforming: they rarely solve the problems they purport to address, and if they make any headway at all, it comes at such great cost that even the beneficiaries feel cheated. This institutional morass is uniquely hard on progressives, because they are typically the ones who actually want to use the government to do something positive. The right relishes inaction – at least on domestic policy.

These long-standing problems have only been compounded in recent decades by the steady decline of the organizations that supported the American left. From organized labor to the civil rights movement, the major drivers of social reform in the U.S. have all been profoundly weakened, if not eviscerated. Few people join or even identify with them.

Interestingly, the right draws the opposite conclusion from recent history. They see Barack Obama’s successful expansion of health care benefits to millions of uninsured Americans as well as the creation of a Medicare prescription drug benefit under George W. Bush as two signs that the welfare state is alive and far too well. But this indicates just how far the debate has shifted to the right. Just a few decades earlier, Democrats would have denounced both programs for what they are: moderate, Republican-style initiatives designed to reward entrenched interests corporate interests while warding off real change. Instead of forcing the insurance and pharmaceutical industries to pay their fair share of health care reform, both created captive, tax-subsidized markets to be further exploited by two of the most profitable industries in America.

It is possible that the success of the attack on the welfare state is “conjunctural” – that the economic crises that are wracking Western economies will recede; that right wing movements will exhaust and delegitimate themselves; and that the working and middle-classes will come to their senses when they feel the real pain of program cuts. Indeed, there are already signs of “buyers remorse” in Wisconsin, Ohio, and Florida where swing voters appear to be shocked that the conservatives that they elected in 2010 are actually doing the things that they threatened to do. The public may even recoil at the House Republican’s plan to privatize Medicare. One can imagine many second thoughts as a jobless economic recovery reminds the average American that there was a reason why their parents and grandparents voted Democratic.

But there is also much to suggest that long-term forces will continue to undermine political support for the welfare state. Indeed, for the last forty years, contrary to what the left imagined would happen, American conservatism has grown stronger despite its manifest policy failures when in office. Even as the average American has been watching his and her wage stagnate and even decline, even as the costs of health care and education have increased, people have blamed the government, not corporate America and certainly not the “free market.”

Where’s the party?

For American voters to resist this steady slide to the right, they will have to understand the Republican attack on public provision for what it is: an effort to redo the social compact so that individuals are on their own, and cannot use government to forge collective solutions to common problems. They will need to see the futility of scape goating the minority poor, and give up blaming public sector workers for the parlous state of the nation. In particular, they will need to admit that there’s a class war going on, and that they’re the targets. But who will help the average voter sort this out? Many progressives hoped that Barack Obama would rise to the occasion, that this gifted rhetorician would use the bully pulpit of the presidency to unmask the right. But he hasn’t.

Some on the left are puzzled by Obama’s failure to stand up for liberalism. How could such an eloquent campaigner fall silent at precisely this moment? But others think this misunderstands the man himself. Obama has, they point out, always been a pragmatist and a moderate. He has never shown much interest in explaining liberalism to the American people, and his move to the left during the primaries should be seen for what it was: a strategic move, designed to appeal to the Democratic Party’s mass base and nothing more. Look at Obama’s advisers, they say. It’s hard to imagine that Larry Summers et al, would rush to hold the banks accountable for the financial meltdown, or be eager to prosecute their friends on Wall Street.

Obama’s own political advisers offer a third explanation. They cannot, they have argued, influence the media framing of events as presidents once could. In the age of the 24-hour news cycle, non-stop cable punditry, and instant bloguery, presidents cannot shape the “narrative” in any significant way. Ronald Reagan may have been the last American president to wield that kind of influence over the public debate. The only thing a progressive president can do today is push Congress to adopt progressive policies. Those policies will shape public perceptions in a way that speeches no longer can.

While the president’s influence over the public debate is undoubtedly diminished, there is a real cost in giving up on trying to make the case for reform. Unless the public understands and supports progressive policies, Congress will feel little pressure to adopt them, and more pressure to eviscerate them from the interest groups that might be harmed; to eviscerate them as Congress has eviscerated many of Obama’s initiatives. Equally important, unless the public understands the larger issues at stake, they are likely to be misled by the negative ads and the conservative punditry that floods the airwaves and the Internet.

And if the president won’t make the case for reform, who will? Liberals cannot count on the Democratic Party to come to the defense of the welfare state. Certainly some individual Democrats have and will continue to, but the party as a whole is even less willing to defend the safety net than Obama. In part, it’s about money: the Democratic Party is now enormously dependent on corporate America for campaign cash. When the labor movement began its steady decline several decades ago, Democratic insiders like Terry McAuliffe argued that the party could make up for the inevitable shortfall in union financial support by turning to the same sorts of economic interests that had traditionally leaned Republican, in particular Wall Street. And it did. And it shows.

Electoral considerations are also pushing the Democrats to the center. As hard as it is for progressives to admit, most Americans don’t see themselves as liberals. Yes, it is exceedingly tricky to figure out what the majority’s ideological affiliations actually are – it’s not clear that they know themselves. But polls show that there are twice as many self-identified “conservatives” as “liberals” (something like 40% to 20%), with the rest of the population declaring itself “moderate”. Certainly, many of those moderates look suspiciously like liberals when we ask them whether they want to cut Social Security or Medicare. But when we ask the how to pay for government, they suddenly turn into conservatives: Slash waste! Don’t raise taxes! In all likelihood, none of this is deeply thought out. They want it all and are angry and confused.

But whether voters reject liberalism for good reasons, or just because they don’t understand it, the take away point is the same: the Democrats cannot build a sustainable majority coalition by promising a 21^st century version of the New Deal. Even if millions of voters want that but don’t yet know it, they few show signs of voting for it, particularly when the right hammers them about the tax increases that would be needed to finance a full slate of public benefits. No matter how many times political scientists point out that Americans are comparatively under taxed, most American voters don’t buy it. Even if they did, they’re likely to respond that they’re not getting value for the money they’re currently paying. The right has won that ideological battle. Democrats could refight it, but to do so, they would have to go straight at the same interests that they now rely on to finance their campaigns.

Complicating matters enormously, the ability of the Democratic Party to cobble together a majority coalition in Congress depends on the leanings of moderates who are not sure what they want. Yet, unless it wants to be doomed to minority status, or razor-thin legislative majorities (and thus vulnerable to permanent obstructionism by the Republican minority in the Senate), the Democrats have to win over these voters, voters who are easily scared off by what the party’s liberal base wants it to do. Think “Blue Dogs” and their opposition to Obama. In other words, even if it wanted to, the Democratic Party is an odd vehicle to carry a progressive agenda.

Blowback

We don’t want to take this electoral analysis too far. After all, the attack on the welfare state is neither an exclusively American phenomenon nor only a recent one. To the contrary, in the midst of the deepest economic crisis since the Great Depression, voters throughout the West are turning to rightwing governments to sort out the mess. So deeper, more general forces are at work.

One is what was once called “the contradictions of the welfare state,” i.e., the deeply structural, presumably irresolvable, conflict between guaranteeing social rights to health, education, work, and welfare and guaranteeing a private, profit-driven, market economy. The neo-Marxists who made this argument were optimistic that this tension would be resolved in favor of labor: workers would never give up hard-won entitlements; instead, they would make ever more radical demands, eventually forcing a democratic transition to socialism. In the 1970s, the Swedish Social Democrats’ plan to incrementally transfer ownership of the largest firms to worker- and citizen-controlled investment funds seemed a harbinger of things to come.

Sadly for the left, corporate capital and the rich were not on board. And they had political allies among the salaried middle classes, who did not see themselves as the primary beneficiary of an expanded welfare state (whether or not they were), who balked at the heightened tax burden that accompanied redistributional government spending, and who sometimes even resented the social leveling that social democracy promised. And as the proportion of industrial workers shrank, the political affiliations of the middle classes mattered more.

Understandably, because social democratic parties found it necessary to secure the political allegiance of the middle classes, they made sure that core social programs met their needs to. And to minimize capitalist opposition to reform, they sheltered corporate interests from confiscatory taxes. Both decisions, however rational, undermined the redistributional impact of social policy. That, in turn, made the entire social democratic project less appealing to the very workers who were supposed to be its beneficiaries because they ended up paying a very large share of the costs of the benefits they had won for society as a whole.

To make matters worse, as the middle classes became more secure, their commitment to the public provision of collective goods weakened further. After all, if capitalism really could deliver prosperity, why was the welfare state necessary, particularly if one had a decent education and a well-paying white-collar job in a growth industry? This was, of course, the other “contradiction” of the welfare state: social democracy in Europe and liberalism in the U.S. made the middle classes and even many workers just affluent enough to wonder whether they really needed to pay taxes for all those programs. So just as there were in-built forces pushing for the expansion of public provision, there were good reasons to expect a political backlash. And as social spending reached new heights in the 1970s, anti-tax movements, and not just in the U.S., were already on the rise.

Certainly, the expansionary forces dominated the welfare state for some time. Everywhere in the West, welfare states grew in size and scope. But it is important not to ignore the conjunctural factors that drove social spending higher and, equally important, the countervailing forces that threatened, from the outset, to limit it. In Great Britain, for example, the ideology of “shared sacrifice” in a nation under assault by the Nazi’s, and the flirtation by some of the British right with that enemy, helped create a political consensus for social protection. But only three decades later, Margaret Thatcher could bring the Conservatives roaring back with a full-throated attack on trade unions and the “nanny state” that those unions had helped to create. Obviously some countries proved more resistant than others to demagoguery and retrenchment. But in some of those cases, nationally specific factors – such as Norway’s fiscal bonanza from North Sea oil – mattered as much as the supposed genius of the social democratic model.

In the U.S., the precarious position of organized labor has proven particularly troublesome for American liberalism. Suffice it to say that many Americans, including people who otherwise considered themselves “progressives,” are ambivalent about unions. Yes, organized labor has supported reforms that help the poor. And unions have been at the forefront of nearly every progressive struggle since the mid-19^th century. But union members are a minority of the workforce, and that percentage is declining sharply. In fact, were it not for public –sector employees – a special and politically difficult case, as recent events in the Midwest make clear – labor unions would be all but moribund in the U.S. So it is not surprising that many Americans, including some union members, see organized labor as just another special interest, and efforts to protect the wages and pensions of union members look to the unorganized and to the middle classes like special pleading for a relatively privileged “labor aristocracy.”

Finally, capitalists, still very much in control of the economy, are well positioned to threaten any government that goes “too far” with disinvestment of one sort or another. Indeed, that threat is much easier to make in the 21^st century global economy because of the global integration of financial markets and the ease of transportation and communication. In retrospect, then, rather than the new normal, the thirty years of unparalleled labor peace and economic growth that the capitalist West enjoyed after the Second World War seems like a rather short, virtuous cycle within a longer, more typical epoch of insecurity, inequality, and class conflict.

Where are we heading?

It is fair to say that the American welfare state is today under greater pressure than it has been since its inception. Consider this: until quite recently, the accepted wisdom in Washington was that public attacks on core entitlement programs were political dead ends. Programs for the poor might be successfully challenged, but to attack Medicare and Social Security was to flirt with career suicide. Newt Gingrich’s proposal to slash Medicare in the 1990s while simultaneously proposing to cut taxes for the wealthy was one very important reason Bill Clinton was reelected in 1996. But that kind of proposal is commonplace today. And the right is demanding far more than cutbacks. It is trying to change the very political discourse about social policy and embed its own version of that discourse in the DNA of what remains of the welfare state. The very fact that Republican Rep. Paul Ryan’s proposal to replace Medicare with a voucher system that would only replace part of seniors’ health care costs is even taken seriously show just how much has changed.

Conservatives are challenging the three defining features of the liberal vision of social policy: that everyone has a right to help; that the state has both the means and the obligation to provide it; and that social policy should try wherever possible to create communities of interest rather than isolate and punish individuals for needing help. If the right successfully restructures the welfare state according to its cramped vision of public policy, people will be forced to make more “hard choices.” They will be told to save more even as their incomes stagnate; to allocate more of their meager incomes to health; to better plan for their own retirement and not to depend on employers or government for help; and to pay more attention to how they might want to educate their children, even sending them to private schools. And, in the new world of conservative social policy, they will be told to do these things on their own.

This is not to say that the state will no longer have a social policy. There will always be too many people who need help to ignore. it’s hard to imagine a capitalist society stripped of any and all old-age programs, or disability benefits, or aid to the blind And with incomes strained, too many working people will be hard pressed to meet all their income security needs on their own. But while the state is likely to always play a role in propping up incomes, financing health care, and promoting employment, if the right has its way, that role will change dramatically: it will be more market-oriented and decidedly more individualistic – neo-liberal if you will. There would be a small set of rather stingy, means-tested, safety-net programs, available only to the very neediest – the “least eligible” – and, for the rest of the population, tax incentives and subsidies to encourage and help them buy insurance of all sorts.

In the best of all possible worlds, restructuring the welfare state around of the idea of individual choice in a well-regulated insurance market could be made to work. It might even be a good thing to enable individuals to escape the grip of indifferent public bureaucracies and force them to take more responsibility for making decisions about how to face the risks and uncertainties of modern life. But we do not live in the best of all possible worlds. The operation of the American health insurance market makes quite clear that any number of normal business practices would lead to a large number of “irrationalities,” inefficiencies, and inequities, including robber-baron style profits for the insurers themselves and grossly inflated administrative costs. We also know that few people know enough, and have enough time and skill to learn enough, about the costs and benefits of various insurance products to make this a real “free” market. And the likelihood that that market would be well regulated, given the enormous political power of the insurers, is small.

Moreover, we cannot ignore the cultural implications of basing social provision on individual choice. If government policy does not express and encourage a sense of social solidarity, indeed if it encourages the opposite, can solidarity survive as a cultural norm? Put another way, if public provision is no longer seen as a social right, earned by virtue of membership in a political community and the contribution one makes there, whether as a citizen, or a parent, or a worker, or a caregiver, won’t it become a privilege (easily taken away) or, for those who cannot afford it, a form of charity to be doled out as those in power think best? This vision could turn especially toxic in the U.S., where racial, ethnic, and other divisions already discourage most forms of collective feeling and action.

What is to be done?

Even as the right masses for its grand assault on government, the American public does not seem quite ready to give up the social programs that they have come to take for granted. Public opinion polls show continued majority support for Medicare, Medicaid, and Social Security. Polls also indicate that Americans are unaware of just how unequal their society is, and, when presented with the facts, say they would prefer far more economic equality than exists today. The buyer’s remorse that many voters now express once they have seen what Tea Party-influenced Republican governors and legislators have in mind is also another sign that the welfare state can be defended.

But how exactly can the left help mount that defense? Obviously, progressives will want to defend the various programs under assault; there is much there worth defending, particularly social security’s preference for the poor. But simply defending the New Deal-Great Society way of doing public provision – that curious mix of poorly funded, means-tested benefit programs for the poor, and quasi-insurance programs for the elderly – is not a long-term political strategy. Even if the right fails to blow up the welfare state entirely, its clear that its attack on liberalism has already taken a toll on how people think about government. Americans no longer seem to support the idea of using government to help other people in need, only themselves.

The real political challenge then it to shape the debate over the social implications of market-based reforms. At bottom, this is an ideological struggle. And just as the right has done, the left needs to offer the American public a way of thinking about what’s at stake in public provision that makes sense, that resonates with the way the average American thinks about politics while offering the typical voter the possibility of choosing something that she or he thinks is fair.

This will be very hard. The same polls that show continued support for public benefits also show that many Americans are confused about how welfare state programs operate, and are exceedingly fuzzy about the principles that they embody. Worse, many of the people who directly benefit from specific programs aren’t aware of it. Or they don’t even understand that the programs they personally take advantage of – for example Medicare and student loans – are government programs. Perhaps they are confused. Or perhaps the stigma attached to being “dependent” on the welfare state in this individualistic political culture keeps many people from acknowledging that they are also clients of the state.

Finally, though they decry inequality, many people like even less the taxing and spending programs that are the principal means by which the state can make society more equal. They worry that government spending is riddled with fraud and waste, or only serves some “minority” community of which they are not part. Rather than “soak the rich,” Americans would prefer to play the lottery. In short, the right’s mantra of individual choice and personal responsibility resonates with the average American in ways that the left’s talk of solidarity does not. And the left is unlikely, at least in the short run, to change peoples’ minds.

This means several things. First, that the left’s case for social provision will have to respect the “earned” quality of the benefits on offer, and guard the link between individual contribution and program eligibility. Second, choice is going to be part of the new American safety net. Better that the left figure out a progressive version of this than decry the very fact of it.         Third, because most Americans don’t like government, the left should propose ways to do collective things without creating new of bureaucracies. Liberals have spent decades trying to disabuse people of the notion that government is the problem. But for whatever reason (and there are probably several), most Americans don’t like the idea of politicians and bureaucrats telling them what to do, and that’s what they think the government is, a collection of greedy politicians and overpaid, officious bureaucrats.

In sum, a new progressive social policy should be more decentralized, closer to the ground, more individualistic, less governmental. Some policy analysts have suggested that government provide everyone with a basic grant to be used as he or she wishes, to finance an education, for example, or to start a small business, or to go back to school. That’s one possible direction. For another, state and local communities could set up insurance cooperatives which would be large enough to pool risk, but small enough to be closer to the grass roots. None of these solutions is without problems. But the new health care law and other social policy initiatives have taken halting steps in these directions. We need to go further.

Perhaps most important, the left must force the Democratic Party to make a political issue out of economic inequality. People do resent just how much money some other people make, how bankers and CEO’s break the rules to enrich themselves and then go free. Right now that resentment is focused on public sector workers, but there’s no intrinsic reason why it couldn’t be turned to investment bankers or CEO’s or bond salesmen. The issue of economic inequality may not decide elections today, but it could in the future, particularly as Republicans continue to defend corporate America from environmental regulation and product safety rules, and to push for tax cuts for the very rich.

Unfortunately, before it can push economic inequality further up the policy agenda, the left will have to get the Democratic Party to take the issue of class more seriously. Party leaders are reluctant, partly because they don’t think the issue has any traction in elections, partly because the fat cats who finance the party don’t like to talk about money. But just as the right kept hammering on a small set of issues dear to it until the Republican leadership changed, or was forced to take notice, progressives must force Democrats to pay attention. How did the right change the Republican Party? They stopped caring about winning elections and focused on what small groups of ideologically committed people do best: agitate for ideas, draw lines in the sand, political guerilla warfare.

That’s not to say that progressives shouldn’t vote. They should. Or that progressives shouldn’t campaign for candidates that they support. They should do that too. But progressives need to be clear that this is not how progressive change happens in the American two-party system. Working for and within the Democratic Party will be heartbreaking unless and until that work is understood as part of a large strategy that doesn’t begin or end with getting Democrats elected, but instead ends with changing the Democratic Party. The good news is that there are already quite a few progressive organizations that are already working hard to make the Democratic party sit up and take notice; who challenge party leaders who care more about winning over white Southern conservatives than holding on to the party’s liberal base; who challenge party leaders who care more about fundraising on Wall Street than stoking the popular anger against miscreant bankers.

In the end, this is actually a terrain that the left knows well because it is an ideological struggle. It is about framing issues. Of course, in another kind of party system, the left would not have to do this, would not have to demand that its own party takes such a core issue seriously. But this is not that party system. In this one, the left has a stark choice: help the Democrats win elections but then watch as those Democrats abandon the issues they campaigned on, tacking so far toward the center that they accomplish too little to impress voters, or force the party to sort out what it does stand for, at the risk of losing elections in the short run. But that might be the only way of securing the political future of liberalism and even the Democratic Party itself.

Charles Noble is a Professor in the Department of Political Science at California State University, Long Beach. He is an expert on American politics and comparative public policy and has taught both in the United States and Canada. The author of numerous articles and books, including The Collapse of Liberalism; Welfare As We Knew It; and Liberalism At Work, he also contributes to the Blog on American Politics hosted by CÉRIUM at the University of Montréal, where he co-directs a course on American politics.