fiscal federalism quiz #3

What evidence does Skocpol use to argue that America in the late 19th century was less a “laggard welfare state” than a peculiar one? How does she argue the US was not so far behind?

• the size and generosity of Civil War pensions

• women’s groups that gave rise to a “maternalistic” welfare state

• points out that the federal agencies administering veterans’ benefits were quite large and professional 

Skocpol and Civil War Pensions

• the number of people receiving Civil War pension benefits exceeded those of Britain in 1913

• enrollment exploded after the 1879 Arrears Act, and again after the 1890 Dependent Pension Act

• were an extremely successful case of federal social policy expansion

• signaled the potential for an “honorable, cross-class, cross-racial, social policy to flourish in America”

• party competition and patronage politics drove the expansion of the system

Skocpol and the “Maternalist Welfare State”

• demands for political representation expressed through discourse about making world safe for good “motherhood”

• pushed for mothers’ pensions, child welfare programs, public health reforms

• quite successful in passing state-level laws to reduce women’s working hours since women were considered to be “wards of the state”

• 39 states pass “Mothers’ Aid” pension programs by 1920

David Brian Robertson attributes the failure of the progressives to enact national social welfare policies between the 1880s and 1930 to what forces?

• American federalism has created a constitutionally fragmented political authority; no unified federal authority to implement cohesive policy; instead, thousands of local governments and 50 different states would have to come together to coordinate programs

• Congress also fragmented into several committees working with government bureaucracies and private businesses to achieve narrow policy goals

• craft unionism: skilled workers in specific trades skeptical of broad welfare that might reduce their bargaining power

• interstate competition: states competed for business by keeping labor costs low with low wages, weak safety laws, no mandatory insurance

• universal white male suffrage: parties forced to appeal to broad electorate, producing patronage politics

• racial and gender divisions inhibit the formation of alliances

Where and on what issues does Robertson say Progressives had success?

• succeeded mainly at state and local levels where federalism allowed reforms by giving states autonomy

• progressives champion innovative state legislation and push for its horizontal and vertical diffusion

• professionalized government services like data collection, budget formation, reporting; also more use of statistics

• create new administrative units for specific social problems such as the US Children’s Health Bureau (1912), the Department of Labor (1913)

• women: created reforms through maternalist terms that framed the state as protecting motherhood and children

How does David Brian Robertson characterize the similarities and differences in perspectives on labor market policies of John R Commons and William Beveridge?

• both are economists/lawyers who become dominant figures in the social welfare policies of their countries, particularly applied to labor market problems

• both characterized by pragmatists who adapted recommendations to respective political systems

• believed labor markets were unstable and required reform (rejecting laissez-faire economics)

To what, does David Brian Robertson ultimately attribute the major differences in Beveridge’s and Commons’ reform strategies?

• Commons: national wealth, individualistic political culture, fragmented government steered him away from more unified system

• Beveridge: being British enabled him to push for more comprehensive, centralized, income-maintenance system

What does David Brian Robertson say about the role of “experience rating” in the American system of unemployment insurance?

• Commons pushed for differential taxation and experience rating

• experience rating: adjusts policyholder’s premium based on actual past loss experience compared to expected losses of average business in same industry

• dangerous firms made to pay more, encouraging employers to work with employees to lower accident levels and leave space for this to be done experimentally across firms and industries

Arrears Act of 1879

• enabled Civil War veterans to receive benefits from the date of their discharge (or death, for dependents) rather than from date application was approved

• i.e., veterans and their dependents received “back benefits”15 years after the war

• new claims rise more than five times, from 1600 to 10000 a month

Dependent Pension Act of 1890

• expands the Civil War pension system 25 years post-war

• granted pensions to Union Army veterans who were unable to perform manual labor (regardless of whether disability was service-related)

• only eligibility requirement was having served 90+ days w/ honorable discharge

• also provided pensions for widows, minor children, and dependent parents

• Republicans link a “treasury overflowing with tariff revenues” to an explicit effort to solidify their base 

social security/old age insurance

• is federally financed and administered

• centralization makes it more inclusive since eligibility requirements and benefit levels are uniform

• logic of long-term insurance leads to expansion since you want to increase the number of taxpayers paying into the system

• initially excluded agricultural and domestic workers due to perceived administrative difficulty of collecting payroll taxes from these jobs types plus political pandering to Southern Democrats (they were later brought in in 1954 over Southern opposition)

• contributory financing creates sense of “I paid for my benefits” so it is theoretically politically untouchable

aid to families with dependent children

• established through Title IV of the SS Act of 1935 that builds on progressive era maternity pensions

• is state run and cofinanced through federal 50/50 matching grants

• states are not required to participate, federal govt can veto but is excluded from operational control, requires state-level budget decisions for financing, states set eligibility and benefit levels

• requires annual appropriations

how does ADC become so exclusive

• “suitable home” and long “state residency” requirements for benefits

• no payments to women living with unmarried partners

• Notification of Law Enforcement Officers (NLEO) to identify absent fathers, bringing criminal justice system into the operation of Welfare—>applying for aid could trigger a criminal investigation

• poor working familes and poor men aren’t eligible (they have no children)

unemployment insurance

• federal govt. charges employers a federal unemployment tax, with employers getting tax credit (offsets) if they pay into the state’s unemployment insurance program; threat of taxation used to push states into creating programs themselves

• also cofinanced by the federal government

• states are free to choose their own plans and decide benefit levels, eligibility, duration, how much employers pay, etc. and most choose Wisconsin Plan

• initially, none included agricultural or domestic workers but as Blacks move into more “regular” employment it naturally becomes more inclusive

• preserves fiscal competition as states compete to attract business, and pushes UI benefits downward

patronage democracy

• elected officials and party organizations distribute jobs, favors, and public benefits directly to individuals or local groups in exchange for political loyalty

• public benefits became political currency, not necessarily something politicians implemented for the good of their constituencies

• legislators prefer to delegate tasks to private organizations, use indirect incentives like federal matching grants or tax offsets (rather than directly enforcing mandates or administering programs), and fragment administration amongst the states

• drove the expansion of civil war pensions since politicians sought to reward the veterans and their dependents that formed a sizeable portion of the Republican Party’s base

Rube Goldberg Welfare State

• Rube Goldberg machine=intentionally complex machine designed to complete a simple task in an overly complicated way; essentially does nothing

• American welfare state is overly complex and convoluted due to reliance on indirect incentives, delegated authority, and diffusion of accountability

  • state and local private provision of services

  • federal matching grants

• is a tangled web of hybridized forms of welfare provision: overlapping federal, state, local regulations; indirect government involvement, large bureaucracies

maternalist welfare state

• many welfare programs excluded poor working families and poor men without children

• form of early social welfare provision that targeted women (especially mothers) and justified benefits in terms of motherhood and protection of the family unit

• involved morally charged eligibility requirements

settlement houses

• community centers in impoverished urban areas

• provided social services and education to immigrants and the urban poor

• some set up English language programs, pushed people to send children to school

• gave personal hygiene lessons

• successfully organized local social assistance to help immigrant families build “suitable homes” that fit “American standards”

Federal Child Labor Act of 1916

• pushed for by reformers who initially failed to create a National Child Labor Committee to push for adoption of uniform model code

• prohibited interstate sale of goods from establishments that employed children under 14 (under 16 for mines)

• SCOTUS struck it down in Hammer vs. Dagenhart on grounds that commerce clause did not apply and production regulation reserved by 10th amendment

Hammer vs. Dagenhart 1918

• struck down the Federal Child Labor Act of 1918 on the grounds that Congress does not have the power to regulate production as it is not commerce (commerce clause implications)

• also argued that regulation of production was reserved by the 10th Amendment to the states

“pure and simple unionism”

• labor philosophy popularized by Samuel Gompers and the American Federation of Labor (AFL)

• narrow focus on immediate material gains through direct confrontation with employers: collective bargaining and strikes, avoided broad political agendas

• pure because it sticks narrowly to workplace issues and simple because it avoids ideological politics

• skilled workers in craft unions were quite successful at raising wages and regulating working conditions

• rejects UI on grounds that it weakens unionization by reducing impetus to enter union and need to strike/contribute to strike funds

labor market policies

• government policies designed to shape and regulate functioning of labor markets (i.e., those affecting employment, wages, working conditions, job security, etc.)

• Progressive: state workers comp., state child labor laws, state minimum wave and maximum hours for women

• New Deal: unemployment insurance, SSR/OAI, Wagner Act, FLSA

• Post WWII: federal minimum wage expansions, job training programs, etc.

why turn to private provision and matching grants?

• because of state underdevelopment, reformers borrowed organizational capacity from existing private institutions—>allowed them to build welfare programs without needing to create an entirely new apparatus

• patronage jobs and government contracts enabled legislators to “take care fo their own”; private delivery keeps accountability diffuse so that legislators aren’t blamed for program failures

• reformers had to adapt to fragmented US federalism, interstate competition, so direct provision was often impossible

Wisconsin Plan

• developed by John R. Commons

• proposed a state-run UI system with compulsory employer contributions on their payrolls and experience rating (firms with history of unemployment paid more)

• makes UI self-financing and used the tax code to reshape employer behavior

• incredibly influential as experience rating is now built into the current unemployment insurance system

Ohio Plan

• called for a flat tax paid by all employers and employees to fund a universal unemployment insurance system

• standardized set of unemployment benefits

• emphasized risk pooling, solidarity across employers, and universal coverage within the state over experience rating

• because it was statewide and pooled, benefits were more predictable and less tied to health of individual firms

• main focus on stabilizing worker income

John R Commons

• American pragmatist who believes institution create “working rules” (i.e., norms and customs) to solve problems

• these rules are always adjusted through experimentation to meet new problems

• wanted carefully crafted laws and regulations to induce voluntary solutions to social problems

• sees American capitalism as successful in raising standards of living

• to reduce workplace accidents, pushes for system of differential taxation and experience ratin

• believed the govt should set the rules of the labor market but that the actual solutions to labor problems should come from employers, workers, and unions themselves

William Beveridge

• British economist focused on unemployment and poverty reduction

• sees unemployment as a “problem of industry,” not an individual failing; the structure and organization of industry itself (e.g., economic cycles, technology changes, etc.) causes and perpetuates joblessness

• believed that because the causes are national, the solution must also be national (centralized social insurance)

• Britain gets universal healthcare after WWII based on 1942 Beveridge report, funded by individual payroll contributions (contributory financing)

What practices does Clemens identify with the America’s ‘Rube Goldberg State.’ How do they differ from our idea of ‘normal states,’ or from ‘normal’ Weberian bureaucracies?

• federal government “delegates authority” to non-governmental actors; state and local over rely on the private provision of public services (heavy use of public-private contracts)

• indirect policy tools like federal matching grants used to encourage subnational levels of government to pursue national goals

• accountability is diffused across many actors, making it hard to identify who is actually accountable for successes or failures—>multiple levels involved, tasks delegated to NGOs, funding comes from one source that differs from implementation

• contrast from Weberian bureaucracies that pursue policy goals by implementing uniform rules through a unified chain of command

Why does Clemens’ classification of the American Welfare State as a “Rube Goldberg State” matter?

• citizens misrecognize public services as private ones

• citizen’s don’t understand who is responsible for the outcomes of what services

• nobody understands who should be held accountable for what

• willingness to pay taxes for services becomes fragile

What do Skocpol and Ikenberry say about the origins and influence of ‘welfare capitalism’ on New Deal legislation? Where do they locate the main forces that shaped the New Deal?

• argue welfare capitalists weren’t very involved in shaping New Deal policy; when they are, they want more uniform and nationally implemented policies to level the playing field between “good” and “bad” employers

• emphasize pre-existing state institutions and policy fights within FDR’s council on economic security

How do Skocpol and Ikenberry explain why America got state- run, federally-assisted programs for unemployment insurance and public assistance, but a fully national program for Social Security?

• FDR and a few other members of his brain trust opted for federal tax offset plans for unemployment insurance and workers compensation

• for social security, there was much more consensus on a national plan and they didn’t believe in any existing state systems that needed to be reformed 

• social security was built around contributory financing to essentially trick people into thinking they are paying for their future benefits through payroll contributions (contributory financing)

Lieberman says that each of the major national welfare programs put in place during the New Deal –Old Age Insurance, Unemployment Insurance, and Public Assistance—initially discriminated against Black Americans. But he then argues that over time these programs developed along different trajectories. What is his argument? How is the argument similar to and different from that of Skocpol and Ikenberry’s?

• OAI: aka social security; nationally administered and funded, initially excluding predominately Black agricultural and domestic workers (on the grounds of administrative feasibility” but eventually evolves into a universal program through efforts to increase tax base

• UI: state-run and co-financed; initially excludes agricultural and domestic workers but becomes slightly more universal as Blacks move into new occupations but still state run

• ADC: state-run and co-financed (federal matching grants); initially excludes Southern Black women and children (because of state eligibility requirements) and evolves into a stigmatized welfare program

• evolved this way because tracking agricultural and domestic income is difficult and politically, without the support of Southern Democrats the New Deal Coalition crumbles

• believes that contributory financing would have made for more powerful and inclusionary programs; because everyone pays in and is entitled to receive benefits, making these programs more resistant to racial stereotyping

Committee on Economic Security

• established by FDR during the New Deal to create a comprehensive social security program

• responsible for the old-age pension program, the unemployment insurance system, and the national healthcare program

• brought together people from Wisconsin progressive tradition

The “Welfare Capitalists”

• a system where private companies provide social welfare benefits to employees to improve productivity and labor relations

• employee stock options, health and pension plans, employee representation plans

• provided welfare in exchange for worker loyalty, reduced union membership, and control over works’ personal behavior (benefits were often conditional)

• basic idea is that a more stable and healthy workforce will boost productivity

Townsend Plan

• proposed during the Depression to rescue elderly Americans

• promised every senior $200 a month (equivalent to $4000 per month today)

• would have been funded by a 2% sales tax

• never enacted but its popularity pushed FDR to adopt federal old-age insurance

“Share Our Wealth” Program

• proposed by Senator Huey P. Long of Louisiana

• radical wealth redistribution program intended to end poverty and limit extreme inequality

• proposed limiting a person’s maximum fortune to $5 million and guaranteeing every family a minimum annual income, a homestead, free education, and other social benefits

• benefits would have been funded by heavy taxes on wealthy

Arthur J. Altenmeyer

• Wisconsin labor economist, New Dealer, and long-time administrator of Social Security

• part of President’s Committee on Economic Security

• first Commissioner of Social Security after 1946 reorganization

• strong proponent of contributory social insurance, meaning workers pay into the system and benefits are “earned”

contributory/payroll tax financing

• programs that use contributory financing rely on payroll taxes either from individuals, employers, or both

• those who pay into the system receive benefits

• for individuals, idea of forced savings for future; see it with social security

• more politically durable since recipients develop sense of ownership, like they deserve the benefits they will receive

• for employers, they pay taxes into a state fund on behalf of employees with experience rating

general revenue financing 

• programs are financed out of a pool of government money using general tax revenues (income tax, corporate tax, sales tax, etc.)

• paid for through all taxpayers, regardless of whether they actually receive benefits

• vulnerable to budget cuts and political whims since are granted based on annual appropriations

• used for means-tested or redistributive programs

What does Schulyer say about the distribution of public revenues and expenditures between levels of government in America before 1940?

• local governments were the most important level of government from both taxation and spending POV (made up 50% of total government tax revenues)

• local governments collected bulk of public revenues through property taxes (the single largest source at 50% of total)

• state made up 38% of govt. tax revenue, and federal 12%

• states relied on property and some consumption taxess

• most spending occurred at the local level (was double that of federal in 1902)

What does Schulyer say happens to the relationship between a) local and state spending, b) federal and state and local spending after 1940?

• WWII is a critical juncture

• by 1948, income tax becomes the single largest source of public revenue (77% in 1948—>66% in 1966)

• local governments drop to 13% of public revenue and local governments collect least amount (they are the biggest losers)

• states begin to collect more taxes than local government primarily through consumption (sales and excise) taxes

• New Deal expands intergovernmental grants and transfers (built into AFDC, UI, and workers compensation design and grows as programs expand)

• initially, all intergovernmental transfers go to state governments, who then distribute to cities and towns

• local property taxes insufficient to fund expanding services so state governments increasingly supervised, regulated, and partially financed local functions

What does Schulyer say is driving the growth of state and local revenues after 1940?

• is driven almost entirely by expansin of federal fiscal capacity and new intergovernmental grant system

• New Deal and WWII expands social security, UI, public assistance, etc. all of which require state and local participation

• states need to expand their own budgets (through intergovernmental transfers) to administer programs

• federal grants-in-aid to states for postwar highway development, education grants, and Great Society programs increased

• grants to local governments primarily for education (school operation and construction in federally affected areas like military bases) and housing+community development

In his article “The Sales Tax that Wasn’t, An Actual History and Alternative History,” Zelanak argues that it is perfectly plausible to think that the New Deal could have been financed by a combination of a federal sales tax and a more ‘elite’ income tax, instead of just a ‘mass’ (and progressive) income tax. How does he think the introduction of a federal sales tax, and the use of less elite income tax to finance the American Welfare State would have affected our tax politics once the age ‘easy finance’ came to an end in the mid-1970s?

• believes a sales tax could have led to the creation of a national value added tax (VAT) and a more elite income tax (one paid by a much smaller percentage of the population)

• likely that postwar tax cuts would have been less favorable to the rich

• we wouldn’t rely on tax expenditures to make policy: because income taxes are a mass tax, it is much easier to make exemptions, loopholes, etc.

• housing mortgage deductions and employer-provided health insurance would be less important since it would be seen as a sop to the rich

• post age of “easy finance,” people would likely argue over sales tax more

Lundeen Plan

• called for general revenue financing of unemployment insurance

Suitable Home

• many states implemented “suitable home” requirements for ADC benefits

• targeted Black and unmarried mothers who seemed to be engaging in sexual activity outside of marriage

• could be denied coverage if a child was born out of wedlock or the children had different fathers 

income tax exemptions

• earned income tax credits for households with low enough income

• employer and employee contributions to employee health and pension plans

• mortgage interest deduction

• for corporations, many get investment credits, capital gains rates, etc.

Henry Morgenthau

• sees “mass income tax” as preferrable to sales tax

• opposed to universal coverage

“victory tax”

• FDR administration supported a victory tax to fend off a sales tax

• lowers income tax exemptions to $500 per person and $1000 per couple

• results in 69% of Americans paying income tax

1964 Economic Opportunity Act

• creates Office of Economic Opportunity

• kickstarted programs like Head Start and Job Corps

• focused on creating opportunities for education, training, etc. 

family assistance plan

• proposed by Nixon but ultimately defeated because right thinks costs too much, left doesn’t like work provisions

• would have implemented a negative income tax (those below a certain income would receive payment from the government)

• was designed to replace AFDC by standardizing and nationalizing cash payments to poor

Community Action Agencies

• contract out new public services to private NGO providers

• most Great Society grants are directed through CAAs

• all come with antidiscrimination requirements

ACIR Advisory Commission on Intergovernmental Relations (1959-1996)

index of relative wealth