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New book puts American welfare state in perspective

March 1, 2010 By Stacy Forster

A new book called “Wealth and Welfare States: Is America a Laggard or a Leader?” explores the role of the welfare state in the overall wealth and well-being of nations and, in particular, looks at the American welfare state in comparison with other developed nations in Europe and elsewhere.

While it is widely believed that the welfare state undermines productivity and economic growth, and that the United States has an unusually small welfare state, and that it is (and always has been) a welfare state laggard, “Wealth and Welfare States” co-authors Irwin Garfinkel, Lee Rainwater and Timothy Smeeding, director of the Institute for Research on Poverty and distinguished professor of economics and public affairs at the La Follette School of Public Affairs at the University of Wisconsin–Madison, disagree.

In their new book published this month by Oxford University Press, they explain that it is only in terms of cash transfers that the U.S. becomes a laggard. A wider vision of the welfare state suggests that the U.S. has been a leader, but now lags in education and other key areas.

“Wealth and Welfare States” shows that all rich nations, including the United States, have large welfare states because the socialized programs that make up the welfare state — public education, health insurance and social insurance — enhance the productivity of capitalism. For most of the 19th and 20th centuries, the U.S. was a leader in public education, the most productive part of the welfare state.

“In ‘Wealth and Welfare States,’ the authors argue that generous investments in education and other social welfare programs provided a foundation for America’s economic growth,” says Maria Cancian, professor of public affairs and social work and a former director of the Institute for Research on Poverty. “The book not only turns conventional wisdom about the minimalist American welfare state on its head, but also reframes the current debates about how to return the country to a period of broad-based prosperity.”

Though few would argue that public education is not part of the welfare state, most previous cross-national analyses of welfare states have omitted education, the book shows. Including education has profound consequences, undergirding the case for the productivity of welfare state programs as well as the explanation for why all rich nations have large welfare states and identifying U.S. welfare state leadership. The authors argue that from 1968-2006, the United States swung right politically and lost its lead in education and opportunity, failed to adopt universal health insurance and experienced the most rapid explosion of health care costs and economic inequality in the rich world.

The American welfare state faces large challenges, the book concludes. Restoring its historical lead in education is the most important one, but requires investing large sums in education, beginning with universal preschool, and in complementary programs that aid children’s development. The American health insurance system is by far the most costly in the rich world, yet fails to insure one-sixth of its population; produces below average results; crowds out useful investments in children and is the least equitably financed. Achieving universal coverage will increase costs. Only complete government financing is likely to restrain long-term costs, the authors say. And a more progressive cash welfare state that assured parents who work that their children would not be poor is also called for.

“Wealth and Welfare States” is co-authored by Garfinkel, Mitchell I. Ginsberg Professor of Contemporary Urban Problems at the Columbia University School of Social Work and co-director of the Columbia Population Research Center; Rainwater, professor emeritus of sociology at Harvard University and a founder and research director emeritus of the Luxembourg Income Study; and Smeeding, who is also founder and director emeritus of the Luxembourg Income Study.