Wreckage of the American Social Safety Net
I’ve been pondering the wreckage of the American social safety net and the fault lines of the American economy so glaringly and painfully evident now to all of us. Public health does not work; we cannot do timely and accurate testing or contact tracing. Unemployment Insurance (UI) has collapsed under the weight of over 33 million new applicants. We are back to the bread lines of the 30’s with families waiting in line in their cars for food handouts at local schools and food banks. The banks and SBA have been terrifically efficient at re-financing the large employers hurt by the closure of the economy, and horrendously ineffective at helping the small retail businesses, local services and neighborhood restaurants, the mom and pop stores, barber shops and hair salons who have borne the brunt of the economic lockdown. We cannot manufacture or distribute enough masks and PPE to keep our first responders and health care workers safe, or enough ventilators to save lives in the most impacted communities. This is not to even mention that the President failed to heed the warnings of his intelligence services for January, February and half of March and to lead and rally the nation’s preparedness against the thoroughly predictable and foreseeable pandemic.
The first bricks of the social safety net were built into our society from at least the 1600’s beginning with the adoption of the Elizabethan poor laws in many local jurisdictions. This was the foundation of local and state general relief programs. It also included over the years isolation facilities for the poor, the unwed mother, the debtor, the mentally ill and fragile. Local General Relief programs and public hospitals, where they still exist, are its vestiges.
Bismarck, the conservative Chancellor of Germany, began to build a modern social democracy towards the end of the 19th century as a bulwark against both Marxism from the left and Herbert Spenser’s Social Darwinism from the right (survival of the fittest concepts embodied in laissez faire capitalism). He pioneered national social welfare policies to help the newly industrialized workforce, including universal health coverage through employers. https://en.wikipedia.org/wiki/State_Socialism_(Germany) States throughout Europe followed; some use the German mandatory private social insurance model; others use the Canadian single payer of private hospitals and doctors; the British use a true public system of public hospitals and publicly employed doctors paid by the government. All have universal health coverage. I think no one would ever mistake Otto von Bismarck for a socialist.
In the USA during the Progressive era of the early twentieth century, Presidents Teddy Roosevelt and Woodrow Wilson helped implement many reforms to the abuses of the industrial age, the cartels, the trusts and the robber barons of the Gilded Age. https://en.wikipedia.org/wiki/Progressivism_in_the_United_States These included Worker’s Compensation, anti-trust, the federal income tax, women’s suffrage, restraints on child labor, food and drug safety, public health, lower tariffs, regulation of the professions, the Federal Reserve and banking reforms, the closing of saloons, and the regulation of railroads. Roosevelt started the century long effort to develop universal coverage in the USA, for which he was descried as socialist by the newly forming AMA.
During the Great Depression, President Franklin Roosevelt’s New Deal took form and created many more early elements of the modern American safety net -- passing the 40 hour work week, Social Security, the minimum wage, Unemployment Insurance, Public Assistance (welfare for the aged, disabled and single parent families), the rights of workers to organize unions, assistance for farmers, public housing, and regulations of the banking sector and the Wall St. stock markets, whose collapse kicked off the decade long Great Depression and destroyed the savings and livelihoods of so many Americans. https://www.history.com/topics/great-depression/new-deal The New Deal was the antidote of reforms to capitalist excess and the antithesis to those sectors of society supporting Communism and Fascism, which rose in Europe and had many adherents in the USA as well. FDR was derided as a socialist by his enemies from the right. President Truman resumed the efforts to develop American universal health coverage — an effort labeled as socialist by the AMA and AHA.
Under President Lyndon Johnson during the era of the Great Society, Congress passed the Civil Rights Acts, Medicare and Medicaid, Head Start and federal assistance to low income students, urban renewal, and the Immigration and Naturalization Act. https://www.history.com/topics/1960s/great-society He too was attacked as a socialist. Under President Nixon, the EPA, the Clean Air Act and the Clean Water Act were established. https://www.nixonfoundation.org/richard-nixons-top-domestic-and-foreign-policy-achievements Food Stamps, now SNAP, was initiated as a pilot under FDR, reintroduced as a pilot under Presidents Kennedy and Johnson, and expanded under Presidents Nixon and Ford and Carter to become an effective entitlement program to feed the nation’s lowest income and most vulnerable citizens. https://www.snaptohealth.org/snap/the-history-of-snap SSI (Supplemental Security Income) is a federal program providing monthly cash assistance to the low income aged and disabled; it too was established under President Nixon as a supplement to Social Security and an income floor for the poorest and most vulnerable. https://www.cbpp.org/research/introduction-to-the-supplemental-security-income-ssi-program The Earned Income Tax Credit was established under President Ford to help low income working families and children and has since been expanded, generally in a bi-partisan fashion. https://www.epi.org/publication/ib370-earned-income-tax-credit-and-the-child-tax-credit-history-purpose-goals-and-effectiveness EITC was a compromise between the visions of Senator George McGovern and Ambassador Kenneth Galbraith for a Guaranteed National Income for every American and President Nixon’s FAP (Family Assistance Program), which was built on Professor Milton Freidman’s ideas for a Negative Income Tax to assist all low income Americans. It was the one public social program for the poor to win President Reagan’s unvarnished praise. The Section 8 rental housing assistance program, first established under FDR, was expanded greatly during the 70s to help low-income families, seniors and individuals secure affordable housing so that lower income families would pay no more than 30% of their incomes for rent; it used federal funds to subsidize the costs of private housing. https://en.wikipedia.org/wiki/Section_8_(housing) Over the years, its funding levels failed to keep pace with rising rents and increasing unaffordability of housing (particularly severe in California, New York and Boston).
During this era, Senator Kennedy sought universal health coverage using a Canadian style single payer system, under which private hospitals and doctors were reimbursed by the government — a precursor of Medicare for All. President Nixon sought universal coverage using a mixture of expanded public coverage and mandatory private employment-based coverage — very akin to ObamaCare, the Affordable Care Act. No compromise was reached. President Clinton in the early ‘90s reprised an effort closely modeled on President Nixon’s, but with a stronger regulatory overlay to moderate spiraling health costs; it was derailed by Senate Republican opposition.
The reactionary counter-revolution took form and full flight during the 1980’s under President Reagan who cut the top marginal income rates for high-income earners from 70% to the mid 30’s. https://en.wikipedia.org/wiki/Reagan_tax_cuts Low income families were demeaned as “welfare queens”, and public programs were enshrouded in bureaucratic red tape that often provided an impenetrable barrier to those whom the programs were meant to serve. At the state and local levels, tax cutters such as Howard Jarvis and Paul Gann in California cut and capped the growth in local property taxes, then the prime source of funding for local public education, public health, police and fire, cut and capped state and local spending and repealed inheritance taxes. https://www.nytimes.com/2016/10/17/us/the-california-ballot-measure-that-inspired-a-tax-revolt.html They were widely emulated in states and localities across the nation. Tax cutting at the federal level was repeated under Presidents George W. Bush, who cut federal capital gains and inheritance taxes sharply https://www.cbpp.org/research/federal-tax/the-legacy-of-the-2001-and-2003-bush-tax-cuts, and yet again under Donald Trump who cut corporate income tax rates and higher earner taxes dramatically. https://www.investopedia.com/taxes/trumps-tax-reform-plan-explained The result of all that tax cutting has been an explosion in income inequality, a massive growth in the national debt, and a hollowing out of federal “discretionary spending”, programs such as CDC (Centers for Disease Control), NIH (National Institutes of Health), public health, pandemic preparedness. For this, we as Americans are all responsible, and we are all now paying a huge price, as the USA has become the epicenter of Covid 19 deaths and infections with too little public health infrastructure to test, track and quarantine. Our much prized employment based health insurance coverage has imploded as we are heading towards 20% of working Americans unemployed and conceivably higher.
Long time federal welfare programs, such as Aid to Families with Dependent Children (AFDC), were gutted and block granted to states as TANF (Temporary Assistance to Needy Families) under the leadership of President Clinton, Speaker Gingrich and Majority Leader Lott. Many states simply diverted funds intended to financially help low income families to other more politically popular purposes, such as cutting taxes. https://www.cbpp.org/research/family-income-support/lessons-from-tanf-block-granting-a-safety-net-program-has In 1995 AFDC helped 2 million Californians with cash grants; in the January 2020 Governor’s proposed 2020-21 budget, CalWorks (TANF in California) was slotted to help 350,000 Californians with cash grants.
Important federal banking rules, such as Glass-Steagall, were repealed. Glass-Steagall was a FDR era law that restricted risky investment practices for commercial banks (where you may have your checking and savings accounts). It was part of the FDR era banking reforms to spare bank depositors from loss of their checking and savings during financial meltdowns. It had separated the commercial banking businesses from investment banks (stocks and bonds) and from insurance companies (life, auto, disability etc.). Increasingly lax federal regulatory oversight of the practices of savings and loans, investment banks, commercial banks and shadow banks led to recurrent financial crises throughout the 80s, 90s and 2000s (think the crashes of ‘82, ‘87 and 2000), culminating in the Great Recession of 2008 when too many of modest means lost their homes in a financial meltdown generated by poorly understood banking malpractices of the large stand out investment banks. Now once again many Americans of modest means face evictions from rental housing due to the indecipherable and inscrutable delays of the UI (Unemployment Insurance) and SBA (Small Business Administration) in promptly acting and issuing UI checks, SBA loans and grants. More and more Americans are living in cars, and others in street encampments adding to the national embarrassment of rampant street homelessness in the “strongest economy” in the world. The Dodd Frank legislation correcting the banking abuses responsible for the Great Recession has fortunately put our financial institutions on a sounder footing headed into the health and economic maelstroms of today.
The Affordable Care Act has covered about 6 million Californians and 30 million Americans. At a time when we need and ought to expand on and improve affordability and accessibility of health coverage for essential gig workers and the newly unemployed through Obamacare, President Trump and many of his like minded Republican Governors are yet again asking his appointees on the US Supreme Court to invalidate it. https://www.politico.com/news/2020/03/02/supreme-court-obamacare-case-118643 There remain about 15 states, primarily with Southern Republican Governors and solid Republican legislative majorities, who still adamantly refuse to accept the 90% federal Medicaid match being offered for Medicaid expansion to cover their uninsured low wage adult workers. https://www.kff.org/medicaid/issue-brief/the-coverage-gap-uninsured-poor-adults-in-states-that-do-not-expand-medicaid California Governor Newsom has already implemented increased premium affordability for Obamacare plans, and Presidential candidates, such as Buttigieg and Biden, have proposed and outlined the federal funding that is needed to increase premium affordability and to lower out of pocket copays and deductibles for Americans of moderate and middle class incomes, who now face historic job losses, loss of health coverage, and unemployment and must rely on Medicaid or subsidized coverage through the state and federal Exchanges. This is the least costly means for our nation to achieve universal health coverage.
Our nation’s public schools are mostly closed, and the digital divide/chasm facing poor students who lack computers, internet access and parental digital know-how while trying to cope with on-line and remote learning is imperiling their academic futures and the economic future of the nation. https://edsource.org/2020/more-california-students-are-online-but-digital-divide-runs-deep-with-distance-learning/630456
The CARES Act and the Families First Act appropriated trillions of dollars in short term stop gap programs and funding streams to address the melt down of our health and economy. Most of the spending and expansions expire after a few months, or when the Covid Emergency is over, or at the end of the calendar year; in other words quite soon. The task of rebuilding the tattered social safety net lies ahead — universal and affordable health coverage, a strong, quick and responsive public health system, stockpiles of necessary medical supplies and equipment, a good supply chain and reliable distribution network, universal sick leave, universal child care, affordable housing and comprehensive unemployment insurance. So please make sure you ask for a mail in ballot (where and if available) and vote in November.
Our President has abdicated leadership and turned over the management of the pandemic and economic reopening to the nation’s Governors. The leaders of the nation’s most economically successful states and prosperous cities are being attacked and vilified for profligate spending by the nation’s President. California, for example, had saved up a $20 billion plus Rainy Day fund heading into this economic Armageddon; by contrast President Trump had added $1 trillion annually to the federal debt to pay for his tax cuts to the nation’s wealthiest individuals and most profitable corporations. Californians contribute billions more in federal taxes towards the endeavors of the federal government than its residents receive in return benefits, as do New York, Connecticut, New Jersey and Massachusetts.
President Trump rages on about the news media, the Democrats, the Chinese, the nation’s Governors, blue states, the deep state, and all manner of real and imagined enemies while small businesses are forced to close; others are forced into bankruptcy; people cannot pay their rents or mortgages, their utility bills or put food on their tables, and the nation’s front line of health care, first responders, and other essential workers put their lives on the line every day for all of us without adequate protection (masks, shields and PPE). President Trump, meanwhile, encourages armed individuals carrying assault weapons, brandishing their swastikas and Confederate battle regalia. He is morphing under our astonished gaze to a modern day Nero or Caligula with incoherent televised babbles of self-aggrandizement and monuments self made of sand to his fragile ego.
Prepared by: Lucien Wulsin
Dated: 5/8/20