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Thought Leadership

Social Welfare

Social programs in the United States are institutions that are supported and managed by the U.S. government. The objective is to ensure economic security, universal access to the resources for self-development and the reduction of social suffering, such as poverty and illness.

The main reason for the creation of the U.S. welfare state has been modern American liberalism, which holds that positive rights, such as health care and education, are requirements for individual liberty. The Social Security Administration was created in 1935 and was the first major federal welfare state agency. As of today it is still the most prominent federal welfare state agency in America.


Welfare Programs

Currently total social welfare expenditure constitutes roughly 35% of GDP (Gross National Product), with public expenditure constituting 21 percent. There are publicly supported but privately provided welfare services constituting 10 percent of GDP and purely private services constituting 4 percent of GDP.

The main programs are mandatory and universal primary and secondary education, subsidized college education, unemployment and disability insurance, income subsidies for low wage workers, housing subsidies, food stamps, pensions and health insurance programs that cover public employees. The Social Security system is the largest and most prominent entitlement program.

All American citizens are enrolled in the Social Security system and thus access public Medicare health insurance once they reach the age of 65. Twenty percent receive health coverage through Medicaid and about 25% receive wage subsidies through the Earned Income Tax Credit (EITC). Current evidence indicates that the American welfare is successful in reducing poverty, inequality and mortality considerably. For example 40 percent of American seniors are above poverty line thanks to Public pension programs


The American Welfare State

The American welfare state was designed to address market shortcomings and do what private enterprises cannot do. Unlike welfare states built on social democracy foundations it was not designed to promote a redistribution of political power from capital to labor; nor was it designed to mediate class struggle.

Income redistribution, through programs such as the EITC, has been defended on the grounds that the market cannot provide goods and services universally. Interventions going beyond transfers are justified by the presence of imperfect information, imperfect competition, incomplete markets, externalities, and the presence of public goods. The welfare state, whether through charitable redistribution or regulation that favors smaller players, is motivated by reciprocal altruism.

The U.S. government generally refrains from intervention beyond the provision of transfers if markets can produce a given good or service efficiently. However, considerable debate remains on whether the U.S. government is intervening sufficiently to address market shortcomings. Some argue that an expansion of the welfare state is desirable because the market cannot or will not satisfactorily improve unjust economic and social inequality. Others argue that the welfare state has grown too large.

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