Welfare in America Through the Gilder and Krugman Lens

Embed Size (px)


I wrote this paper for on of my discussion courses. Welfare is a hotly debated issue within America, especially after the Depression. While the program seeks to provide financial aid to citizens below the poverty line, it has succeeded in dividing individuals above that threshold on the legitimacy of the program.

Text of Welfare in America Through the Gilder and Krugman Lens

Welfare in America Through the Gilder and Krugman LensBy Sharad Sharma12/7/2011

Welfare in America - Through the Gilder and Krugman LensWelfare is a hotly debated issue within America, especially after the Depression. While the program seeks to provide financial aid to citizens below the poverty line, it has succeeded in dividing individuals above that threshold on the legitimacy of the program. There are two clear and distinct opinions on the topic. One side believes that program seeks to redistribute wealth in order to provide equal opportunity to those citizens who are struggling to provide basic necessities for themselves, and the other side believes that it is the existence of this program that incentivizes these poor citizens to stay below the poverty line and continually reap the benefits, thereby causing this side to question the legitimacy of the program altogether. Welfare has been an increasingly relevant issue since the policy changes in the 1990s. These two sides are each arguably represented the left-wing party and the right-wing party, and this point is illustrated by Paul Krugman in The Conscience of a Liberal (2007). Krugman is undoubtedly supporting the argument represented by the left, and George Gilder is credited for the argument of the right which he illustrates in his book, Wealth and Poverty (1981). Although these books are written in different times, the viewpoints of Gilder and Krugman effectively illustrate the theories that are employed by right-wing and left-wing politicians, respectively. For a significant portion of the 20th century, welfare was and still is a highly controversial topic. The issue became important after the Depression when providing unemployment benefits to poor families was an important role of the government. Debates regarding the effectiveness of the program arose in the second half of the 20th century after Gilders book was released, and its arguable that his ideology sparked a new life into the debate. The issue became even more controversial; as a result, the Personal Responsibility and Work Opportunity Reconciliation Act (PRWORA) was passed in 1996. PRWORA added many restrictions to the welfare program. To track the changes in the welfare program, one must

TC 357 Prof. Prindle

Page 1

Welfare in America - Through the Gilder and Krugman Lensunderstand the program from its roots and follow the debates which have had an impact on the policy. Welfare was provided through federal funding and distributed through the states under the Aid to Dependent Children (ADC) program; ADC was born through the New Deal as part of the Social Security Act of 1935. As time passed, claims to the program rose significantly. As there was a limited amount of funds allocated to the program, it began to receive criticisms and in 1962, ADC was changed to Aid to Families with Dependent Children (AFDC) primarily due to belief that the rules of the program discouraged marriage. Further criticisms of the program pointed out that the program causes dependency and encourages childbirth. Some even believed that the welfare system was attracting immigrants to the United States. Ultimately, as mentioned above, the criticisms led to PRWORA (with bi-partisan support) and the end of AFDC. However, the welfare program did not cease to exist. AFDC was replaced by Temporary Assistance for Needy Families (TANF) which placed more restrictions upon the recipients of welfare. TANFs primary requirements effectively ended welfare as an entitlement program. Recipients were now required to begin working after two years of receiving benefits, and there was a lifetime limit of five years of benefits. The program also encouraged two-parent families and discouraged childbirth out of wedlock. Federal funds were still distributed through the states. Many states placed additional restrictions on recipients; some even funded private enterprises to support individuals seeking employment. It is important to note that many states allowed for exceptions to the time limit imposed by TANF because cutting funding to families that did not comply with the programs requirements would undeniably be disadvantageous for the children belonging to those families.

TC 357 Prof. Prindle

Page 2

Welfare in America - Through the Gilder and Krugman LensRationally, all of the criticisms make sense and these beliefs were held by many. Congress blamed dependency, out-of-wedlock births and intergenerational poverty as the root cause for the failure of AFDC. The statistical data that supported many arguments that were both anti- and pro-welfare may have been used selectively to serve bias of the individuals who pushed for the arguments (before and after the reform). Such being the case, individuals must seek to attain their own opinion on the matter. These issues did not go unnoticed in the media, especially following the reform in 1996. Supporters of welfare argue that the decrease in welfare claims and lower poverty and unemployment rates in the second half of the nineties are evidence of the programs success. Critics argue that - despite the decline in welfare claims - the rise of poverty and unemployment rates in the early 2000s (after the .com boom had slowed) directly credits the economy, not TANF, for the rise and fall of unemployment and poverty rates; thereby, TANF was effectively ineffective in aiding the poor. With such differing conclusions about welfare being broadcasted through the media, it is easy to get confused and pick a side on the issue solely based on hearsay. Both Gilder and Krugman would advise individuals against such action. In order to make a decision on the subject, one needs to be informed and understand both sides of the argument. Gilder and Krugman wrote their books in different times, but their opinions have influenced many and continue to do so even today. Whatever the reason for their differences might be, one must understand and evaluate their arguments as their arguments are essentially the essence of rightand left-wing politicians. Krugmans book can be seen as a criticism of the 20th century and also a criticism of Gilder. Krugman, like many liberals, fundamentally believes that active government policies are essential for the benefit of society. He believes that equality across society is necessary for it to

TC 357 Prof. Prindle

Page 3

Welfare in America - Through the Gilder and Krugman Lensfunction impartially and smoothly. From there he draws political collaboration is unfeasible for society without economic equality. Using the aforementioned premises, Krugman supports providing increased benefits to the poor; therein, he also supports the redistribution of wealth. Krugman doesnt rush to any of these conclusions. He argues and fights for the importance of each while using portions of American history during the 1900s to support his claims. According to Krugman after WWII, there was a period of economic prosperity during the 50s and 60s that allowed millions of Americans [to emerge] from urban slums and rural poverty to a life of comfort (Krugman, Pg. 3). The size of the wealthy and poor classes was relatively small as the primary characteristic of the economy was a strong middle class. Krugman claims that this was a period of economic commonality which meant that there was a great deal of economic equality within America during those times (Krugman, Pg. 4). In his eyes, this equality is of the utmost importance, and those who read Krugman will find that equality manifests as a fundamental principle for his arguments. He calls the two decades right after WWII the golden age of economic equality and claims that this economic equality helps preserve collaboration between political parties. This collaboration effectively promotes political bipartisanship. In essence, he interprets his observation of economic equality to be the cause for healthy political bipartisanship. This may very well be a spurious correlation as the country did recently emerge from a war, but Krugman corroborates his view. He holds that during periods of significant economic inequality political parties will attempt to favor the interests of the population that supports them. All else equal, this ought to be when differing views need representation most and thus, bipartisanship should increase within the political system. However parties cater to specific segments of the population in order to win elections, implying that disagreement within the population on certain issues

TC 357 Prof. Prindle

Page 4

Welfare in America - Through the Gilder and Krugman Lenscauses conflict between parties. Bipartisanship declines as votes are swayed by candidate or party positions on certain key issues, and the political system becomes a tool for the party in control to provide for their constituents. Krugman claims that the political rift of the 70s and 80s illustrates how economic inequality weakened bipartisanship in support of this argument. With that its rational to assume that economic equality and political bipartisanship will lead to the development of a strong middle class which will inevitably engender greater harmony within society. After establishing the need for equality and the importance of a strong middle class, Krugman focus shifts towards the role government should play. Krugman says it best, middle-class societies do not emerge automatically (Krugman, Pg. 18). He claims that active political action is crucial for society, and the reforms of the New Deal become his key defense. However, the reduction of the elite class after the Great Depression may not have been brought about by active political action; the Depression may have been to blame here. Whichever may be the cause of the reduction of the elite class, the economic conditions in America improved very slowly in relation to the first 100 years of the economy. The Depre