History of the Idea of Welfare State and the Growth of the Welfare State

Russell S. Sobel, Ph.D.

Where We Stand Today• Federal Spending appx. $3.7 trillion• Govt. grown by almost 10% of GDP in last decade• Over 60% of federal spending is transfers

Where We Stand Today

Transfer payments now 1/5 of National Income

Where We Stand Today

• As recently as 1960 defense was ½ the budget

Are We At A Tipping Point?

• Individuals benefitting from government now exceed those paying for government

Share of families deriving income from government

Are We At A Tipping Point?

• Now about 50/50 with Tax vs. No Tax

Searching for the Origins of the Welfare State – A Trip Back in Time

• I will focus on what the economics literature has argued and found on this issue…..

When Did It Begin?

Did Universal Suffrage Cause It?

Did the Income Tax Cause It?

Did the Income Tax Cause It?

But is the adoption of the income tax a SYMPTOM or a CAUSE???

BUT…Spending Growth Prior to 1913 isNot As Flat As It Looks

Did Union Veterans Start It?

First “selective” transfer as CSA Veterans Didn’t Qualify

Did Union Veterans Start It?

Did the Supreme Court Cause It?

• Anderson & Hill trace the birth of the transfer society back to the 1877 Munn v. Illinois case that allowed the Illinois legislature to regulation grain elevator rates.

• Others argue 20th century ‘court packing’, war on drugs/terror, and other changes through time have led to a Supreme Court that has allowed government to go beyond the constitution (“constitutional erosion”)

Did it start prior to the Civil War?

Also changed:• Line-item Veto for President• Single issue bills only (with

funding source included)• 2/3 majority for spending bills• No open ended entitlements• Benefits received taxation

Did it start in 1789?

So Not As Easy As It Looks To Figure Out When It Happened…

When or Why?

• But even if we knew when, the big question is still WHY?

• Did we lose the “moral” argument, or did we simply lose the “numbers” in an economic and political sense and get “out voted”??

Thank You

• Extra Material that may be needed for Q&A stuff follows

Centralization (caused by Civil War?)