From Welfare State to Opportunity and Responsibility (OAR), Inc.
Mark Rom
The Personal Responsibility and Work Opportunity Act (PRWOA) is widely seen as having ‘ended welfare as we know it.’ But did it begin anything? Not exactly; instead, it was one large step on the broader transformation in American social policy. This transformation might be called ‘From Welfare State to Opportunity and Responsibility (OAR), Inc.’
Market Economy and Welfare State
Who should receive what kind of help from the public, why, when, and how? These fundamental questions about social arrangements have always been the subject of intense political and philosophical debate. Diverse and subtle answers have been given, but two core models – the “Market Economy” and the “Welfare State” -- have animated the U.S. experience.
For much of our nation’s history – and still today – the Market Economy model has been the dominant model of how our society should operate. Advocates of the Market Economy contend that (virtually) no one is entitled to (virtually) any benefits from the public (that is, the government). This belief has two central elements. The first element is that free markets provide the optimal creation and distribution of resources. Individuals, operating freely in buying and selling labor and goods, get more of what they want, in the amounts they deserve, than through any other system of production and allocation. Individuals have the incentives to produce in order to obtain their material goals and they have the motivation to buy and sell wisely to maximize their material happiness. The second, corollary, element is that governments inevitably produce inferior economic results when they interfere with these natural economic processes. When the government tries to help the poor by providing them resources (for example, income, food, medical care), this is seen as having the perverse effect of making poverty more desirable. According to this logic, if a person can get something for doing nothing, then nothing is exactly what persons will do. To the extent that governments can only offer resources to the poor by taking them away from the productive, redistribution is also seen as having the effect of reducing incentives to produce: why would individuals want to work hard if the government takes away the fruits of their labor? From the perspective of the Market Economy, the best government is the one that does not interrupt natural economic processes by taking resources away from those who work hard and giving these resources to those who do not.
The Welfare State answers the questions of “who should receive what kind of help, why, when and how?” much differently. The Welfare State’s proponents assume that all citizens are entitled to receive at least minimally adequate social benefits (such as income, food, medical care, and education, among many other benefits) from the public, that is, the national government. This assumption is based on several elements. First, citizens have inalienable rights. These rights include life, liberty, and the pursuit of happiness, to be sure, but they also include an entitlement to the resources necessary to make these rights real. From this perspective, life, liberty and happiness can only be obtained by a person who is clothed, fed, housed, healthy and educated. Second, it is the duty of the government to provide for the security of the public. Just as security means protection against external military threats, it also means protection against the internal threats of poverty, ignorance, and disease. The government provides this security by ensuring that citizens have the goods necessary to avoid these threats. Indeed, the security provided by the Welfare State is viewed as essential if individuals are to become economically and socially productive citizens. Third, as citizens have equal worth on account of their humanity, the government should distribute resources equitably to citizens across the country. The Welfare State thus emphasizes the distribution of resources by the national government. Those who advocate the Welfare State believe it the duty of the national government to provide all citizens the resources they need to maintain a decent standard of living, and that by doing so the government creates a more harmonious and productive nation.
Both Market Economy and Welfare State have compelling strengths, but also substantial limitations. As a practical matter, most Americans are wary of the government and of welfare, but they do want to help those who need help. Most Americans also believe in capitalism, but they see for themselves that it does not benefit everyone, and that many among us remain poor, sick, and otherwise needy. What most Americans want is a way to assist those who need help in ways that produce independence.
While the debate between advocates of the Market Economy and proponents of the Welfare State has dominated American political discourse for much of the twentieth century, an alternative is emerging that attempts to blend and reconcile Market and State in their roles of creating, allocating and ensuring prosperity for all citizens. This alternative might be called “Opportunity and Responsibility, Inc.” or, for short, OAR, Inc.
OAR, Inc.
OAR, Inc. provides an alternative to Market and State because it recognizes that both models have distinct advantages and imperfections, that neither can be relied upon in entirety to resolve social issues, and that both market and state must be used to resolve these issues. In the view of OAR, Inc., the Market is better than the State at creating affluence; the State is better than the Market at protecting individuals. The State may not be efficient, but it can be fair; the Market may not be equitable, but it can be productive. Instead of choosing among Market and State as ways to organize society, OAR, Inc. attempts to use the best features of each, and to dislodge the worst elements of both. OAR, Inc. seeks to enhance the economic prospects of citizens by making governmental agencies act more like market firms and by using market firms in ways that produce public benefits. OAR, Inc. attempts to use governmental powers to enhance the ability of individuals (especially poor ones) to participate fully, and to compete effectively, in the economy so that they can be secure in their prosperity. OAR, Inc. emphasizes both that the government plays a key role in protecting the weak, but that the government must also insist that individuals become stronger and more self reliant.
OAR, Inc. differs from the Welfare State by seeking less to ease misery than to transform lives by promoting responsibility, both for the recipients of governmental assistance and for program administrators. To do this, OAR, Inc. seeks to instill a new culture, a new set of expectations for providers and recipients. This new culture will emphasize different values, especially those that value work, responsibility, accountability, and independence. These values should be reflected in behavior, so that citizens and administrators alike act in ways that support the values of OAR, Inc. To ensure that behavior has changed, the focus shifts from process (i.e. following rules) to results (i.e. accomplishing goals). These results should include, among other items, lower costs to the government and greater self-sufficiency for citizens.
Proponents of OAR, Inc. typically do not believe that the centralized governmental bureaucracies are the organizations most capable of accomplishing these goals, although these advocates do not automatically conclude that private sector firms are more qualified at doing so than governmental agencies. Whether the organization delivering services is public or private is less important to the proponents of OAR, Inc. than how the organization performs to promote the public interest.
OAR, Inc. differs from the Market because its proponents do not trust that the natural workings of the economy will benefit all citizens. Its advocates believe that the State must take an active role in working with citizens – at least those citizens who need assistance -- if they are to become, first, economically sufficient and, later, economically self-sufficient. Its defenders contend that governmental intervention does not inevitably fail to improve the situation (or, even, to make problems worse); the State, if designed properly, can be reinvigorated so as to improve its performance in assisting citizens.
OAR, Inc. did not spring up as a fully developed and coherent theoretical model and political program. It had diverse and often conflicting sources. Several sources appear most important. A first came from the generally disappointing economic performance of the American economy from the 1970s through the mid-1990s. During most of these years the economy grew much slower on average than it did in the decades immediately following World War II. Many observers attributed the slow economic growth to the growth of the Welfare State and also suggested that slow economic growth made it difficult to sustain the benefits promised by the Welfare State: welfare was thus the cause of economic difficulties and the victim of these difficulties. When the economy did grow at a satisfactory rate, it had the unsatisfactory consequence of producing greater income inequality (as during the “Reagan Boom” of the 1980s).
A second, related impetus for OAR, Inc. came from the growing fiscal strains of American government. These strains came, in part, from slower economic growth; they also stemmed from larger governmental social welfare obligations. Perhaps more importantly, the fiscal strain on government was caused by tax cutting and revenue restricting policies adopted by the national government and many state governments (Pierson, 1994: 152-53). With (relatively) fewer resources, governments became increasingly preoccupied with delivering services at lower costs.
These situations led increasingly to arguments that the Welfare State was not economically or politically sustainable: it was too costly to support; its impacts on the economy were too deleterious; it was too unpopular. Others focused their criticisms more directly on the social effects of the Welfare State. The most important critiques were that the Welfare State offered rights but did not require responsibilities. As a result, the Welfare State was seen as inducing its recipients into a wide variety of bad behaviors, especially dependence on the government (rather than economically productive work) and illegitimacy; that is, bearing children outside of marriage. The brunt of these arguments was that welfare was producing neither security, prosperity, nor opportunity for those who received it. Welfare recipients were increasingly seen as “locked in” to a cycle of self-defeating behavior.
Most controversies about the Welfare State during the 1980s and 1990s involved how the poor should be treated. Apprehension about those in poverty hardly contained all the questions about the Welfare State, however. The two other big issues related to the elderly, often seen as the biggest beneficiaries of the Welfare State by virtue of the Social Security and Medicare programs, which provide income and health insurance for the elderly and their dependents; and healthcare, the most rapidly growing elements of the Welfare State through the Medicare and Medicaid programs (the latter providing health insurance to the disabled as well as to poor families and the poor elderly).
Virtually all observers agreed that the economic, political and social critiques put pressure on political actors to “do something” about the Welfare State, though they did not themselves provide entirely plausible alternatives concerning what should be done. The status quo had few defenders (indeed, the most controversial welfare program, Aid to Families with Dependent Children, or AFDC, had essentially no defenders), yet liberals were committed to the concept that the government must in some fashion protect the poor. Calls to eliminate public assistance programs altogether (such as Murray, 1984) received much notoriety, but were not seen by most as morally or politically acceptable. While large majorities of the public in the 1990s believed that welfare was seriously flawed, only a miniscule proportion believed that welfare should be scrapped (Morin, 1996: 37).
The view that resonated most with the public, and with the politicians elected by it, was for a “new paternalism” that made governmental assistance conditional upon appropriate behavior by the recipients of the assistance (Mead, 1986; Mead, 1997). The public believed that “Americans attach a simple moral corollary to helping the needy. ‘We will support your efforts to regroup and re-enter the mainstream but, in exchange, we expect you to give something back to the community’” (Morin, 1996: 37). At the same time, there was a growing interest among politicians and policy analysts (if not the general public) in ways to make the larger social programs (e.g. Social Security, Medicare, and Medicaid) provide larger benefits at reduced costs.
Two developments outside the social arena had important implications for the origination of OAR, Inc. The first had to do with the “new public management,” (NPM) often referred to as the “reinventing government” movement (Osborne and Gaebler, 1992). Many observers of traditional public management had become disenchanted with the centralized, command-and-control practices stereotypically employed by governmental agencies. The alternative that was proposed looked to business firms as the appropriate organization model; the proponents of reinventing government hoped to transform governmental agencies into organizations that more closely resembled business firms (or, when possible, to use business firms actually to deliver governmental services). The new public management calls for improved government performance through, among other techniques, streamlining, deregulating, decentralizing, and privatizing as well as through calling for entrepreneurialism within agencies and between the government and the private sector. The reinventing movement focuses less on process and more on results. The NPM has had a substantial impact on the national government (the Clinton administration, for example, embraced many of these goals through its National Performance Review) and also, it appears, on state governments (Barrilleaux, 1999: 108-110).
The second development involved the resurgence of state governments – especially state governors and bureaucracies – as political actors. Through the height of the Welfare State, political power in the United States had flowed away from state and local governments and toward the national government. This flow began to reverse direction in the 1970s, in part as national politicians (especially Presidents Nixon and Reagan) sought to devolve policy authority; later the Supreme Court also became more involved in returning powers to the states (Weber and Brace, 1999: 7-9). Just as importantly, many states elected governors who were talented, ambitious, innovative and determined to exert influence over the policies that affected those living their states (Demetrius, 1999). These governors were influential in seeking additional freedom from the national government to experiment with welfare reform and in using this freedom to experiment. As Georgia Governor Zell Miller put it: “I want more flexibility, I want to run these programs without federal strings” (Pear, 1995).
Together, these economic, social and political conditions led to the emergence of OAR, Inc. The Welfare State, by cushioning citizens from economic pressures, was seen as slowing down economic growth. Conservative politicians, concerned about the growth of the Welfare State (and its impact on the economy), tried to cut welfare spending either directly or by reducing the ability of the government to collect revenues. Still, the public and many politicians were reluctant for the government to simply abandon the poor. The NPM movement called for government agencies to rethink and reform the ways they did business, and to look to business for the models on how to behave. The states became more assertive in their desire, and more confident in their ability, to manage policy problems. OAR, Inc. was the answer that simultaneously responded to all these conditions.
OAR, Inc. is a less developed theoretical concept and a less examined empirical fact than either the Market Economy or the Welfare State. OAR, Inc. does seem to represent three bold experiments in social welfare policy. First, authority over welfare programs is being shifted from the national government to state governments. Second, design and implementation of these programs is being shared between governments and the private and non-profit sectors. Third, the relationship between the state and its citizens is being recreated: rather than providing benefits to passive and dependent recipients, social welfare programs increasingly require that clients actively seek to empower themselves. These experiments jointly seek to transform our nation’s efforts to relieve social problems from Welfare State and Market Economy to OAR, Inc.
We face several challenges in moving from Welfare State to OAR, Inc. These challenges involve both the relationships between governments and citizens as well as between governments and non-governmental organizations.
A first challenge is to preserve the rights of the clients (i.e., citizens) while providing them the assistance they need to become economically self-sufficient. Some observers have been concerned that private sector firms, especially when motivated by profit-making goals and priorities, may be less inclined to provide equal access to services for all eligible beneficiaries, or will be tempted to provide inferior services to cut costs.
A second challenge is to obtain real competition among organizations seeking to deliver welfare services so that governments can realize the presumed benefits of OAR, Inc. It is not clear that all areas of social welfare will have enough organizations (governments, for-profit firms, non-profit firms) willing and able to submit quality bids. An additional challenge is to specify program results in detail sufficient to hold organizations delivering these services accountable; this challenge is especially important for relatively inexperienced state and local governments. A final challenge is to monitor performance in social service programs, whether provided directly by the government or through a contract. Weaknesses in monitoring performance make it difficult to ensure that all intended beneficiaries have access to services and to determine whether private providers achieve desired program goals and avoid unintended negative consequences.
OAR, Inc. and Social Welfare Reform
The ideas behind OAR, Inc. are touching virtually every aspect of social welfare policy in the United States. Proposals to change Social Security, the quintessential Welfare State program, into one that places greater responsibilities on individuals (through some form of privatized savings accounts), are gaining greater respectability. Some programs, such as Medicare and Medicaid, already contain substantial elements of OAR, Inc., in which individuals are free to choose from among private doctors for their medical care. Food stamps, child welfare, public housing, public education…all are engaging in one way or another with OAR, Inc.
But the greatest transformation involves the shift from the Aid to Families with Dependent Children (AFDC) program to the Temporary Assistance for Needy Families (TANF) program. Though AFDC always had a strong element of state control, PRWOA ended the individual entitlement to income support and provided the states great leeway to experiment with alternative program forms. Some states are experimenting with a vengeance. In Wisconsin, TANF has been largely delegated to the counties, and the counties themselves have to bid against private (for-profit and non-profit) providers. Many states are experimenting with “individual development accounts” (IDA) that enable low-income families to build assets while remaining in the program, and recipients are often required to take classes to enhance their ability to accumulate assets. The entire thrust of the program has moved away to providing assistance checks to placing ‘clients’ in private sector jobs.
Will OAR, Inc. prove itself superior to the Welfare State and the Market Economy? Will policies that shift responsibility away from the central government towards more local governments, away from purely public delivery towards public-private partnerships, away from providing benefits to dependents to enhancing capabilities of individuals, ultimately bring better services to those who need them most at less cost and in ways that enhance self-sufficiency? The answers are not yet known. The superiority of OAR, Inc., is based more on theory, ideology, and hope than on proven results. Research findings are, in general, mixed. Moreover, there are almost certainly limits to what OAR, Inc. can deliver.
The American Welfare State was originally conceived as necessary to remedy some of the misery associated with, if not caused by, the Market Economy. Gradually, the Welfare State was seen as essential to the very success of the Market Economy, because Welfare provided fiscal stimulus in times of recession (to help end the downturn) while at the same time it prevented (destitute) workers from rebelling against the Market. Only later did the Welfare State come to be seen as the enemy of the Market Economy (and vice versa). OAR, Inc. may yet play a harmonizing purpose for both models of society. By bringing Market forces into social welfare provision, OAR, Inc. may help make welfare work more effectively to assist the poor while muting political opposition to attempts to do so. By bringing the State into market activities, OAR, Inc. perhaps can show how markets can be used to assist not just the most competitive, but all citizens.
References
Barrilleaux, Charles. 1999. “Statehouse Bureaucracy: Institutional Consistency in a Changing Environment.” American State and Local Politics: Directions for the 21st Century. Ronald E. Weber and Paul Brace. Editors. New York: Chatham House Publishers. 97-113.
Demetrius, Nelson C. 1999. “Governors: Their Heritage and Future.” American State and Local Politics: Directions for the 21st Century. Ronald E. Weber and Paul Brace. Editors. New York: Chatham House Publishers. 38-70.
Mead, Lawrence M. 1997. The New Paternalism: Supervisory Approaches to Poverty. Washington, DC: The Brookings Institution.
Mead, Lawrence M. 1992. The New Politics of Poverty. New York: Basic Books.
Morin, Richard. 1996. “Fed Up with Welfare,” The Washington Post. National Weekly Edition. April 29-May 5. p. 37.
Pear, Robert. 1995. “Governors Helping to Set National Agenda Like Never Before.” New York Times. January 30.
Pierson, Paul. 1994. Dismantling the Welfare State? Reagan, Thatcher, and the Politics of Retrenchment. Cambridge: Cambridge University Press.
Weber, Ronald E. and Paul Brace. 1999. “States and Localities Transformed.” American State and Local Politics: Directions for the 21st Century. Ronald E. Weber and Paul Brace. Editors. New York: Chatham House Publishers. pp. 1-20.
| Index | Policy Currents Home Page |