UPDATE TEACHER'S EDITION

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP88B00443R000502210003-2
• Release Decision: RIFPUB
• Original Classification: K
• Document Page Count: 38
• Document Creation Date: December 22, 2016
• Document Release Date: December 22, 2010
• Sequence Number: 3
• Publication Date: December 13, 1985
• Content Type: OPEN SOURCE

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T E A C H E R S ' E D I T I O N
DECEMBER 13, 1985 ? VOL. 118, NO. 8 (ISSN 0745-7065)
('ocer of student Ndition:
.1 prom over 1'.5. Social Spending..
ABOUT THIS ISSUE
F ew national issues are more baffling to the average citizen than U.S. social
spending-the enormous federal outlay for programs ranging from Food
Stamps and job training to Social Security and Aid to Families with Dependent
Children. For the past five years, social spending-the fastest-growing sector of
the federal budget-has been the target of Administration cost-cutters and the
focus of heated national debate. This issue of UPDATE has been designed to help
your students understand that debate and the emotionalism that surrounds it.
UPDATE's coverage opens with profiles of four men and women and a child
whose well-being depends, in part, on federal social programs. A seven-page
Special Report follows, introducing your students to the five major areas of social
spending. A History feature-"How the Welfare State Began"-traces the
genesis of large-scale social spending in three nations: Germany, Great Britain,
and the United States. In exclusive interviews, two experts on social spendinga
liberal U.S. Congressman and an analyst for a conservative think tank-give
their views of the U.S. role in the social arena. Your students are then introduced
to 10 men and women who shape U.S. social policy. A look at Europe's welfare
states today rounds out the issue, which also contains the regular DataBank,
Wordpower, and Puzzle features, all tied to social spending.
The National Issues Forum, which sponsors "town meetings" around the
nation, has prepared teaching and study material on welfare spending which you
might want to use as an extension of this issue. For information, write: Domestic
Policy Association. 5335 Far Hills Avenue. Dayton, Ohio 45429. --The Editors
CONTENTS
"Five Who Benefit from U.S. Social Spending" (Sociol-
ogy): The human impact of social programs ............. 4
"What If You Held the Cost-Cutter's Knife" (Over-
view): A way to involve students 5
SPECIAL REPORT:
"The Battle to Control the Costs of Medical
Care" ........................................................... 6
"Worries About Social Security's Cloudy Fu-
ture" ............................................................ 8
"U.S.-State Partnership Aids Jobless Workers" . 9
"The War Against Poverty Enters a New Phase" 10
"Shifting Views on the U.S. Role in Education" .12
Sept. 20
ISSUE DATES FOR THIS YEAR
Sept. 6
"How the Welfare State Began" (History): From Bis-
marck to Roosevelt-and beyond .......................... 13
"Views of the U.S. Safety Net" (DataBank): Map,
charts, and graphs .............................................16
INTERVIEW/DEBATE on social spending:
"Spending Makes Us Strong": A liberal ............ 18
"We Need a Private Solution": A conservative ....19
"Ten Voices in the Debate over Social Spending"
(Shapers): Administrators, researchers, lobbyists .......20
"Europe's Welfare States: Alive, Kicking, and Cutting
Back" (World): Second thoughts abroad ................22
"A Social Spender's Lexicon" (Wordpower): ........23
"Puzzles": All tied to social spending ...................26
"Pre-Test" (page T-2); "Post-Test" (page T-7)
Apr. 4
Apr. 18
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-SCHOLASTIC UPDATE PRE-TEST
Payroll Tax Rates for Social Security Programs in Selected Countries (1981)
Country
Total Tax Rate
Employer Rate
Employee Rate
United States
17.60%
10.95%
6
65%
France
48.55
37.41
.
11.14
West Germany
34.75
18.12
16
63
Italy
55.02
47.57
.
7
45
Japan
22.85
12.80
.
10.05
Netherlands
54.86
29.23
25
63
Sweden
32.76
32.65
.
.11
Switzerland
17.60
8.45
9.15
United Kingdom
21.45
13.70
7.75
Source U.S
General Directions: On the line to the left
of each statement, write the letter of the
choice that best completes a statement or
answers a question.
A. TRUE (T), FALSE (F), OR ...?
Write T if the statement is true, F if it is
false, or N if there is not enough data in the
table to help you decide.
- 1. Among the countries shown, Dutch
workers pay the highest social security tax
rate.
- 2. Italian employers pay about 85% of
the tax money collected for their employ-
ees' social security benefits.
- 3. The French pay about twice as many
tax dollars as the Japanese for social se-
curity programs.
4. Swedish employees pay only 11 % of
their wages for social security.
- 5. Switzerland and the U.S. have the
most equally matched social security
benefits.
B. ODD ONE OUT!
Check (J any item(s) NOT included in
U.S. federal social spending programs.
- 1. Aid to disabled workers
-2. Retirement paychecks
-3. Aid for purchasing food
-4. Veterans' benefits
-5. Negative income tax.
-6. Aid for dependent children
-7. Medical payments for the needy
C. MATCH-UP!
Column A
a. James C. Miller f. COLA
b. U.S. Treasury g. Head Start
c. Food Stamps h. Block Grant
d. Social Security
Column B
- 1. automatic increase in payment,
based on rising consumer prices
- 2. begun under President Franklin
Roosevelt
- 3. reviews federal spending proposals,
to preserve Executive priorities
- 4. federal monies spent largely at state
discretion
D. FREE CHOICE
1. Approximately how many Americans
receive social security payments? (a) 1 out
of 3; (b) 1 out of 6; (c) 1 out of 9
- 2. Which was the first modern nation to
adopt a system of welfare laws? (a) Ger-
many; (b) U.S.; (c) Japan
3. Which U.S. President is credited with
launching a federal "War on Poverty"? (a)
Harry Truman; (b) Richard Nixon; (c) Lyn-
don Johnson
- 4. Which of the following projects under
President Franklin Roosevelt was NOT a
jobs-development program? (a) CCC; (b)
WPA; (c) OPA
E. OPINIONS, PLEASE!
Does the federal government spend too
much on social benefits? Write your opin-
ion as a 150-word "speech" on the reverse
side of this paper.
Scholastic Inc grants teacher-subscribers of Scholastic UPDATE permission to reproduce this page for use in their classrooms. c 1985 by Scholastic Inc. All Rights Reserved.
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SCHOLASTIC
Is,
THE UPROAR OVER U.S.
SOCIAL
SPENDING
Incorporating Senior Scholastic
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CLEARASIL CAN BREAK THE
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The
Uproar
Over U.S.
Social
Spending
December 13, 1985 ^ Vol. 118, No. 8
4 Five Who Benefit from U.S. Social Spending
Behind the dollars and cents of government spending are people, including
these citizens for whom U.S.-sponsored social services provide an edge.
5 What If You Held the Cost-Cutter's Knife?
Certain types of social programs are more vulnerable to the cost-cutter's knife
than others. Where would you reduce government spending?
Special Report: The Scope of Social Spending
6 The Battle to Control the Costs of Medical Care
The wonders of modern medicine cost money. But who should pay?
8 Worries About Social Security's Cloudy Future
Questions about the nation's largest-and most successful-social program.
9 U.S.-State Partnership Aids Jobless Workers
Unemployment insurance helps most jobless workers find their footing.
10 The War Against Poverty Enters a New Phase
Despite 20 years of battles, poverty remains. What went wrong?
12 Shifting Views on the U.S. Role in Education
The government proposes a dose of competition to improve U.S. schools.
13 How the Welfare State Began
Political as well as humanitarian goals motivated Germany, England, and the
U.S. to take responsibility for their citizens' well-being.
16 DataBank: Views of the U.S. Safety Net
Two pages of charts and graphs provide a snapshot of the "social safety net"
that the U.S. provides its citizens. Some problems show up, too.
Interview / Debate:
18 "Spending Makes Us Strong"
A liberal U.S. Congressman defends U.S. social programs.
19 "We Need a Private Solution"
A conservative policy analyst calls for restrictions on U.S. outlays.
20 Ten Voices in the Debate over Social Spending
Academics, policymakers, and administrators provide a sampling of the men
and women who shape and oversee U.S. social programs.
22 Europe's Welfare States: Alive ... and Cutting Back
The U.S. isn't the only nation having second thoughts about the extent of the
protection it affords its citizens. A look at Europe's problems tells why.
Medical care has made great strides in
recent years, as this arthritis sufferer's 23 A Social Spender's Lexicon
artificial joints demonstrate. But such A glossary that introduces and explains some of the terms used in this issue.
progress is costly. How much of the
price should the U.S. government bear? 26 Puzzle Page
A Crossword, Wordsearch, and Scrambler-all on the social spending debate.
NEXT TIME (Jan. 10): "Southern Africa-Region in Revolt." An in-depth
report oil the turmoil in South Africa and the system of apartheid that fuels it. Plus a
Special Report on the "frontline states"-South Africa's angry northern neighbors.
Maurice R. Robinson, founder of Scholastic Inc., 1895-1982
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Spruce Circle, a federally financed hous-
ing project for senior citizens in Princeton,
NJ. The setting resembles a park, with
many trees and buildings clustered around
the Princeton Senior Resource Center. The
center sponsors activities such as dances
and handicraft classes.
"I really don't know what we'd do if
we had to move," Selma says. One mar-
ried daughter lives in California. But
there, as new residents, they might not be
able to find such convenient housing.
"And what would we do for friends?"
Selma asks. "We would be shut-ins."
A more pressing concern is the cost of
getting sick on a fixed income. Ernst's last
check-up, plus tests, cost $75. Medicare
paid only $40 of that. "When you're sick
a lot, it really hurts," says Selma. "Doc-
tor bills are what frighten us most."
SELMA REISS speaks of her life with a
smile and a modest shrug. "You can't
depend on your children," she says.
"They are in the full speed of life, work-
ing hard to make ends meet. But we have
been fortunate so far."
Like millions of other retired Ameri-
cans, Selma and her husband Ernst aren't
forced to depend on their families. In-
stead, government aid helps them stay ac-
tive and independent by meeting their ba-
sic needs-a steady income, an affordable
place to live, and help with medical bills.
Selma, 75, and Ernst, 82, immigrated
from Eastern Europe in the mid-1950s.
Ernst, an ex-farmer, never earned a high
income. Together they receive $750 a
month in Social Security benefits. They
pay 30 percent of that-$271 a month-in
rent for a one-bedroom apartment in
MARGARET WILLIAMS is on familiar
terms with hardship. She gave birth to her
first child, a son, at 13. Later she dropped
out of school. "I was too young," Wil-
liams recalls. "I was listening to what
everybody else told me to do." Now, at
20, she's pregnant again, and the baby is
due January 6.
Metta Cahill, a nurse-midwife at the
Henry Austin Health Center in Trenton,
NJ, is monitoring Williams' pregnancy.
The center, largely funded by federal
grants, is the Trenton area's only low-cost
medical clinic. Patients pay as little as $7
a visit. "Poverty has a big medical effect
on poor women and their children," says
Cahill. "Problems like insufficient food
and inadequate housing present a special
risk during pregnancy."
Ordinarily, doctors would prescribe a
NICOLE CHRISTIE can't wait to get to
school these days. Her group meets in a
bright, cheery classroom. There she has
new friends to play with, songs to learn,
and a chair with her name on the back.
"She loves it," says her father, Richard.
"Everyone on the staff is a motherly type
who gives the kids individual attention."
Nicole, 21/2, attends the Little People's
College, a day-care center in Trenton, NJ,
that offers inexpensive child care-thanks
to government aid. "Most of the parents
couldn't work if they couldn't bring their
kids here," says Flora Batts, the center's
director. "Or they'd be forced to use sit-
ters who give only custodial care."
That was what Nicole's parents had to
do before they found the Little People's
College. Nicole's mother, Alice, works as
a tax auditor for the State of New Jersey.
better diet and more rest for a woman
whose baby was not developing properly.
"For many of these women, that's impos-
sible," says Cahill. To help, a government
grant is paying for a special high-risk
pregnancy clinic.
So far Williams' pregnancy is going
smoothly. She spends her days raising her
son, Lamont, and caring for her mother,
who now has cancer. They make do on
less than $700 a month in welfare assis-
tance. Lamont's father disappeared long
ago. Her new baby's father wants to help
out, but they have no plans to marry.
Still, Williams feels that her life is look-
ing up. Her sister, a nurse, has started to
help out. "Before, I didn't know anything
about life," she says. "After I have this
baby, I'm going to get my diploma and get
a part-time job." -David Gaddy
Richard is a self-employed electrician.
Until this fall, they left Nicole with a
relative. "The problem was, she's an old-
er woman and didn't get out," says Chris-
tie. "So Nicole was confined to the house
and wasn't around other kids."
The center, housed in a two-story brick
building next door to a factory yard, cares
for 66 children from ages two to five.
Federal social service grants-adminis-
tered by state and city agencies-subsidize
over one fourth of the center's $200,000
yearly budget. And government child nu-
trition programs help provide each child
with breakfast, lunch, and an afternoon
snack. "In the long run we're saving tax-
payers money," says Batts. "Our kids do
well in school, and they stay out of trou-
ble. But there's not enough day care to fill
the community's need."
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OVERVIEW
Protesters in San Francisco, CA-at least one from the senior citizens' group, the
Gray Panthers-demonstrate in defense of social spending. Wide support for "mid-
dle-class entitlements" has kept Social Security off limits to cost-cutters.
WHAT IF YOU HELD THE
COST-CUTTER'S KNIFE?
The size of the U.S. government's commitment to its citizens'
well-being has mushroomed over the past 35 years. And so have
questions over the nation's ability to support such a role.
W hat role should the U.S. govern-
ment play in delivering social
services-education, for example, or
health care and low-income housing'?
That question is at the heart of the
debate over U.S. social spending. For
that reason, it is at the heart of this
issue of UPDATE, which has been
designed to help you put together your
own answer.
The debate over U.S. involvement
in delivering everything from food aid
to job retraining has been raging for at
least 35 years. In 1950, nearly all
U.S. social spending was limited to
four areas: Social Security, Aid to
Families with Dependent Children
(AFDC), unemployment insurance,
and workers' compensation. The U.S.
spent $7.2 billion for these four pro-
grams in 1950 and another $746 mil-
lion for medical care, institutional
care, and vocational education.
During the 1960s, the U.S. involve-
ment in delivering social services
mushroomed. The government de-
clared a "War on Poverty." The U.S.
began spending heavily on public edu-
cation-formerly the preserve of local
and state governments-and on medi-
cal care for the elderly and the poor.
By 1980, total U.S. spending for all
social programs had topped $244 bil-
lion. The U.S. population had in-
creased by less than 50 percent in 30
years. But U.S. social spending had
increased almost 3,200 percent!
During that year's Presidential elec-
tion campaign, President Reagan
vowed to reduce the federal govern-
ment's role in the social arena. Yet he
never challenged the belief that the
U.S. had a role to play in helping its
neediest citizens. He spoke of main-
taining a "social safety net" of "es-
sential commitments" to the poor. the
elderly, and the disabled. He never
challenged the belief, intact since the
1930s, that the U.S. government has a
vital responsibility in these areas.
"He did not even suggest that the
termination of some Isociall programs
would be necessary," William Nis-
kanen, a former member of the Presi-
dent's Council of Economic Advisers,
said recently. Back in 1981, when he
first took office, the President "put
off limits [to cost-cutters) some of the
most important elements of the wel-
fare state," Niskanen said. These
items were largely "middle.-class cnti-
Clements"-programs such as Social
Security, veterans' benefits, and
Medicare, which go to people in all
income classes who qualify. So many
people depend on these programs, the
President didn't feel it was possible,
politically, to alter them.
It was easier to cut programs that
benefit the poor. So, among other
things, Congress made it more diffi-
cult for working families to qualify for
AFDC. For some -a mother of three
who earned $4 an hour at a job, for
example-this meant hardship. By be-
ing dropped from AFDC, that mother
of three lost about $2,000 a year in
benefits, says Jack Meyer. an econo-
mist at the American Enterprise Insti-
tute. "I can't believe this doesn't
cause real pain for someone like
that," Meyer told The Wall Street
Journal. "And I think it's unfair in a
world where we're hardly touching
middle-class benefits."
The Administration did manage to
slow the growth of some middle-class
entitlements, however. Cost-cutting
shaved about 6.4 percent from these
programs in 1985, for a savings of
$21 billion. The corresponding cut
from low-income programs amounted
to 8.3 percent, for a $6.4 billion sav-
ings. In all, non-defense programs
other than Social Security and Medi-
care-the two largest middle-class en-
titlements-dropped from 40 percent
of the 1981 U.S. budget to 30 percent
of the current year's budget. The de-
fense share of the budget rose from 23
percent in 1981 to 28 percent in 1986.
Is that an appropriate balance'? The
features in this issue of UPDATE, be-
ginning with a seven-page Special Re-
port on the details of social spending,
will help you make up your mind.
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THE SCOPE OF SOCIAL SPENDING
P art of the uproar over U.S. social spending is
no doubt due to confusion over its goals and
results. Some examples: In 1984, the Census Bu-
reau says, poverty took its greatest dive since
1968. But a Congressional study says that benefits
for poor children are at their lowest point in 10
years. Employment is up, says the White House.
But so are on-the-job accidents and illness, says
the Department of Labor. Health care is a thriving
industry, billing $360 billion a year-one third of
it to two U.S. programs, Medicare and Medicaid.
To help clear up the confusion, this Special
Report groups U.S. social spending into five cate-
gories: Health Care (pages 6-7); Social Security
(page 8); Aid to the Unemployed (page 9); Anti-
Poverty Programs (pages 10-11); and Education
(page 12). Each article details the programs' costs
and proposals to cut them. The five articles also go
beyond the cold statistics to show how impersonal
numbers actually touch people's lives.
The Battle to Control the
Costs of Medical Care
N o longer will older Americans be
denied the healing miracle of
modern medicine," U.S. President
Lyndon B. Johnson said on July 30,
1965. "No longer will illness crush
and destroy the savings they have so
carefully put away over a life-
time...." With these words, he
launched Medicare, a system of health
insurance provided through Social Se-
curity for people 65 and over.
No one expected the Medicare pro-
gram to be cheap. It cost $3.4 billion
during its first full year of operation.
Experts predicted that the yearly cost
would reach $8.8 billion by 1990-a
figure actually reached in the early
1970s. The government's share of the
Medicare bill, around $77 billion this
year, is now expected to top $100
billion by 1990.
But Medicare isn't the only health-
care program that the U.S. govern-
ment spends heavily on. The U.S.
also contributes to medical research
and education, public health projects,
and Medicaid-a health-care program
for the poor, partly funded by state
and local taxes. A look at the prob-
lems and promise of these programs
will show you just how tough it is to
control social spending.
The sharp rise in Medicare spend-
ing reflects the spectacular increase in
all public and private health-care
spending. In 1950, Americans spent
$12.7 billion on health care. That was
just 4.4 percent of the U.S. gross na-
tional product (GNP), the total value
of all goods and services produced in
a year. Now we are spending more
than $360 billion on health care-
around II percent of our GNP.
Despite the enormous growth of go-
vernment spending on Medicare, the
program has not freed older Ameri-
cans from the worry of medical bills.
Over the past five years, the bill-pay-
ing burden for most senior citizens has
actually increased. Medicare now
pays, on average, about 45 percent of
older people's medical expenses.
BACKWARD SLIDE
In Medicare's early years, the pro-
gram greatly reduced older Ameri-
cans' out-of-pocket payments for doc-
tor visits, medication, and hospital
stays. As a result, people 65 and over
spent, on average, about 5 percent of
their yearly incomes on medical care.
Now, however, the average medical
expenditure by an older person is 15
percent of annual income just what
it was before Medicare was created.
Does that mean that the Medicare
program is a failure? Not at all. Medi-
care and other government-sponsored
health programs have helped Ameri-
cans live longer. Medicare's total
costs are up partly because the number
of people 65 and older has in-
creased-from 8.9 percent of the pop-
ulation in 1965 to 11.6 percent in
1982. For this reason alone, experts
call the high cost of Medicare and
other health programs a measure of
the programs' success.
Surprisingly, the conquest of some
diseases has added to the cost of go-
vernment-backed health programs.
Many of the diseases that killed their
victims relatively quickly in the
past-pneumonia, tuberculosis, influ-
enza, meningitis, hepatitis-are now
rare or easily treated. So, most Ameri-
cans now die of chronic illnesses-
diseases that linger for a long time and
are costly to treat. Cancer and ail-
ments of the heart and circulatory sys-
tem are two such illnesses. In 1982,
they were responsible for seven out of
every 10 U.S. deaths. In most cases,
the final illnesses involved long peri-
ods of expensive medical care.
New medical breakthroughs have
-added to the costs, too. Many tests
and treatment programs that were not
available or extremely rare in 1965 are
now routinely prescribed. New diag-
nostic tools include computerized axi-
al tomography (CAT scan) and nucle-
ar magnetic resonance. Therapies that
have become routine include open
heart surgery, artificial artery replace-
ment, kidney dialysis, and long
courses of drug or radiation treatment
for cancer. And, understandably, most
doctors will do almost anything to
keep a patient alive.
This "no limit approach" to health
care has come under increasing attack.
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Critics, among them Colo-
rado governor Richard
Lamm, argue that we must
draw the line on certain ex-
pensive procedures. Speak-
ing to his state's Health
Lawyers Association,
Lamm said: "We're head-
ing for the day when they
can keep us alive with
transplants and high-tech-
nology medicine long past
when our quality of life is
gone." He added that elder-
ly people who are terminal-
ly ill "have a duty to die
and get out of the way."
Lamm's remarks shocked
a great many Americans.
Yet there is a growing
awareness that we must re-
duce medical costs before
they undermine Medicare.
NEW APPROACHES
Since 1980, the Reagan
Administration has sought
ways to reduce Medicare
costs. It introduced a sys-
tem of fixed hospital fees
for treating certain illness-
es, or diagnosis-related
groups (DRGs), in 1983. If
a hospital spends less than
the fixed DRG fee, it can
keep the difference. If it
spends more, it takes a loss.
The Administration also
introduced restrictions on
doctor's fees. After patients
whose doctor visits are cov-
ered by Medicare pay the
first $75 of a year's bills,
Medicare pays 80 percent
of all "reasonable
charges." The patients, or their pri-
vate insurers, pay the other 20 per-
cent, plus any part of the doctors' fees
that Medicare deems unreasonable.
President Reagan has proposed cut-
ting $4 billion from Medicare in 1986.
Experts say that if Congress accepts
the cut and medical costs continue to
soar, older Americans will face an
ever-rising medical expense burden.
President Johnson hoped Medicare
would bring older people into the
"mainstream of medical care." But
many people now fear that poorer se-
nior citizens, caught in a crunch be-
tween rising medical costs and falling
Medicare coverage, could be squeezed
out of the "mainstream."
Arthritis sufferer displays X-ray film of
the artificial joints that brought her re-
lief. Who should pay for such miracles?
That would be tragic, many feel.
Medicare has suffered waste and
abuse. Yet it has brought new life and
hope to millions of older Americans.
The case of Mrs. N. is one example.
ANOTHER CHANCE
After her husband died, this woman
plunged into volunteer work for a lo-
cal hospital, her church, and other or-
ganizations. However, she had a
worsening problem-arthritis, particu-
larly in her knee joints. Pain was con-
stant. On some days, she could hardly
move around her apartment.
Then a doctor told her
about artificial knee joint
transplants. After some
hesitation, she had her right
knee joint replaced by one
of steel and ceramic. To-
day, four years after the op-
eration, she is active and
happy, looking forward to
many productive years.
Without Medicare, she
feels, she could never have
afforded the operation when
she had it. Yet even with
Medicare, she doesn't think
she could afford the opera-
tion today. The operation's
cost has skyrocketed, as has
the share of the cost that
patients must bear.
Many of Medicare's sup-
porters feel that shifting the
program's costs to patients
may not be the best way to
strengthen it. Instead, they
argue, overall medical costs
ought to be reduced. To do
this, many common prac-
tices might need change.
Some changes are al-
ready taking place. Hospital
stays have been shortened.
More procedures are being
done outside hospitals, in
doctors' offices. For long-
term patients. there's a new
emphasis on home care. In
many communities, medi-
cal committees are review-
ing hospital and clinic re-
cords to identify and
eliminate wasteful or un-
necessary practices.
Under the guidance of
the American Medical Association,
some 150 groups are trying to hammer
out an overall plan-a "Health Policy
Agenda" for the nation. The groups
represent unions, businesses, govern-
ment units, scientists, insurance com-
panies, retired persons, and lawyers,
among others. Together, they are ex-
amining the way medical resources
are allocated and how doctors use new
technologies. They're also taking a
close look at long-term patient care,
insurance policies, new ways to deliv-
er health care, and the government's
role in funding it. Their goal is to find
the best ways to provide quality health
care, at the lowest possible cost, for
all who need it. -Michael Cusack
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Worries About Social
Security's Cloudy Future
O n August 14, 1985, the U.S. So-
cial Security program turned 50.
Celebration of the event, however,
was overshadowed by fears for the
program's future. Among them:
^ How safe is the system that pro-
vides benefits for 37 million Ameri-
cans-among them the elderly, the
disabled, and surviving spouses and
children of deceased wage earners?
^ Can the government use Social Se-
curity funds for other programs?
^ When today's high school students
reach retirement age, will there be
anything left for them?
These questions reflect real con-
cerns. Not all Social Security recipi-
ents depend totally on their benefits.
But a great many have no other source
of income, so every nickel counts.
Cost of Living Adjustments, or
COLAs, are supposed to keep social
security payments in line with price
increases. Many older Americans,
however, argue that inflation is usual-
ly a few steps ahead of each COLA.
A TEMPTING TARGET
Because the Social Security pro-
gram is so large and expensive-it
paid out $178 billion in 1984-it is a
tempting target for money-saving ef-
forts. Recently, several economists
and politicians argued that efforts to
cut U.S. spending must include cuts
in the Social Security program.
Several ways to cut the program's
costs have been suggested-including
a one-year freeze on COLAs. Last
April, the U.S. Senate voted to reduce
COLAs. Then, a few days later, most
Senators voted to restore the cuts.
The Senate's reversal points out
how politically sensitive the issue of
Social Security is. Retired people now
form a large-and growing-share of
the voting public. On Social Security
issues, they tend to vote as a bloc.
In 1984, President Reagan said that
he would not cut the program to re-
duce the government's need to borrow
money. "Social Security," he added,
"is totally funded by the payroll tax
levied on employer and employee.
It . . . has nothing to do with balanc-
ing a budget or lowering the deficit."
Yet, this past October 30, when
Congress was slow to permit further
government borrowing, the Adminis-
tration seemed to change its mind. It
declared that, if it couldn't borrow, it
might have to take money from the
Social Security trust fund to keep the
government running. To many people,
this threat was a sign that Social Secu-
rity may not be safe from pressures on
the federal budget.
Another factor also casts doubt on
the long-term strength of Social Secu-
rity. Each year, the number of people
receiving benefits from the program
rises faster than the number of people
paying into the program. In 1960, for
example, 67.1 million workers paid
Social Security taxes, and 14.3 mil-
lion people received payments. Now,
about 120 million workers pay into
the plan-an 80 percent increase. Yet
37 million people-a whopping in-
crease of 150 percent-collect Social
Security benefits.
Such figures lead some social scien-
tists to call today's Social Security
system unfair. They say it favors the
old over the young. Most retired peo-
ple are now getting more from the
system than they paid into it. But peo-
ple now under 30 may only break
even. And people under 15 may end
up losers-getting less than they paid.
CALL FOR CHANGE
James Dale Davidson of the Nation-
al Taxpayers Union, a private group,
calls the Social Security program "a
rip-off." He points out that a poor
person, with only a 50-50 chance of
living past 65, may pay thousands of
dollars into the program and never
collect a penny. Yet a rich person may
live 20 or more years past retirement
and collect thousands of dollars more
than he or she paid into the program.
Davidson advocates changing the
system. But opinion polls show that
about 90 percent of Americans like
the system as it is. They hope that
ways can be found to make the system
even better for future generations.
Fred Harris, former U.S. Senator
from Oklahoma, feels that the system
should be continued and improved.
He argues that Social Security and
similar programs help all of us by
stabilizing our economy and society.
Paraphrasing Pogo, a character in an
old comic strip, he said, "We have
met the beneficiary, and he is us!"
-Michael Cusack
Scenes like this one in a Florida Social Security office suggest that the program
benefits only old people. Yet more than 8 million surviving dependents of deceased
wage earners get Social Security payments. So do 4 million disabled workers.
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U.S.-State Partnership
Aids Jobless Workers
F or 10 years, Bill Smith assembled
mechanical parts at a factory near
Philadelphia, PA. Then the factory
laid off Smith and his co-workers.
Smith, 34, applied for more than 70
jobs without luck. "And that doesn't
even count the ones where you walk
in and they tell you, 'We ain't hir-
ing,' " he says.
Smith and his wife, Betty Ann,
barely squeaked by with his unem-
ployment insurance benefits and her
minimum-wage job. "My nine-year-
old keeps asking, 'Daddy, what are
you going to do when your unemploy-
ment runs out?' " he says. "It's been
terrifying for me."
Smith's fears are shared by millions
of Americans. When the paycheck
stops, family members don't stop get-
ting sick or needing clothes or food.
To soften the hardship, the U.S.
runs a $28.8 billion Unemployment
Insurance system. States devise their
own plans, which the U.S. govern-
ment oversees. Workers who lose
their jobs through no fault of their
own get 25 to 55 percent of their lost
wages for up to 26 weeks. Some states
extend the aid. Federal and state taxes
on employers pay for 86 percent of the
program-$25.3 billion in 1985. State
and federal budgets cover the rest.
MILLIONS JOBLESS
This past October, 7.9 million
Americans who wanted work couldn't
find it. Only one in four, or 2 million,
were getting unemployment benefits.
Many had used up their aid. Others-
many of them teenagers-had not
worked long enough to qualify for it.
Most jobless workers find unem-
ployment insurance an adequate safety
net. The average jobless person goes
without work for about 15 weeks.
Half of all jobless people find work in
seven weeks or less.
Other jobless workers have more
trouble, the U.S. Labor Department
has found. Forty percent of the work-
ers who lost their jobs between 1979
and 1984 because of plant closings did
not have jobs by November, 1984.
These "displaced" workers are the
victims of an economy that has shifted
A U.S.-state insurance program helps jobless workers like the ones above, lined up at
a state employment office. The $28.8 billion program partly replaces lost wages, for
up to 26 weeks, of workers who are jobless through no fault of their own.
away from jobs that produce goods,
such as steel, to jobs that provide ser-
vices, such as fast food. "There's a
real underclass growing in the U.S.,"
says Mike Wenger, spokesman for the
Center for Budget and Policy Priori-
ties, a private research group in Wash-
ington, DC. "Where these people are
going, I don't know."
EXTENDED BENEFITS
For states with extra-high unem-
ployment, an extended benefits pro-
gram provides up to 13 extra weeks of
aid. Its costs are shared by the states
and the federal government. In 198 1 ,
however, the U.S. Congress made it
hard for states to qualify for the exten-
sion. So, today, only jobless people in
Puerto Rico and Alaska receive extra
benefits.
"The program is on the books,"
says Ellen Vollinger, executive direc-
tor of the Full Employment Council, a
group that promotes measures to cre-
ate jobs. "But, for all practical pur-
poses, it's dead." She points out that
only 1.2 percent of all workers who
have been jobless for more than 26
weeks get extra benefits.
For three years from 1982 to this
past April--the U.S. funded an emer-
gency program to help workers who
ran out of other benefits. This Supple-
mental Benefits Program added up to
14 additional weeks of aid. After un-
employment dropped from 10.7 per-
cent in 1982 to 7.1 percent early this
year, the Administration ended the
program, saving $1.85 billion.
Critics say 7.1 percent unemploy-
ment is still too high. "Six years ago,
7 percent unemployment would have
been a national crisis," Congressman
Don J. Pease (D-OH) said recently.
"Many people have given up trying to
get most Americans hack to work."
Job retraining has helped many un-
employed people get on their feet.
The U.S. spent $223 million last year
to retrain displaced workers as part of'
the Job Training and Partnership Act.
This program helped 180,000 workers
last year. Many workers whose jobs
were lost to imports got help under the
1974 Trade Adjustment and Assis-
tance Act, which spent $26 million to
retrain and relocate workers in 1985.
U.S. President Reagan now thinks
these programs unnecessary because,
he says, the economy is creating
3,000 new jobs a month.
-Mauro Christopher
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Children dig into a hot breakfast of oatmeal at the Little People's College, a day-care center in Trenton, NJ. Federal social service
grants subsidize meals and pay day-care costs for one fourth of the center's children.
The War Against Poverty
Enters a New Phase
Poverty isn't a disease, but try tell-
ing that to Bernice Murray and
Sandy Benjamin. They're head nurses
at the Henry J. Austin Health Center
in New Jersey's capital, Trenton, a
city with a depressed economy and a
high jobless rate. The city-run health
center is the area's only source of
regular medical care for the needy.
Every day, Murray and Benjamin see
patients whose most troubling ail-
ments result from the facts of pover-
ty-want, distress, and ignorance.
"It's common for people we see to
have many problems, because they go
untreated until they can't wait any-
more," says Murray. The most com-
mon adult complaints: hypertension,
or high blood pressure, diabetes, ar-
thritis, obesity, and heart disease. Hy-
pertension, usually an older person's
ailment, is a rising problem among
young people. "It's a combination of
a bad diet and stress," Murray says.
Poverty poses even greater health
risks for infants. Many suffer from
what's called the "failure-to-thrive"
syndrome-the result of neglect and
poor nourishment. "We see this often
with the babies of low-income teenage
mothers," says Benjamin. If not
caught and corrected, developmental
problems may hinder such children
throughout their lives.
Community clinics such as the Aus-
tin Health Center, funded largely by
federal grants, are only a small part of
the U.S. effort to help the needy. In
1985, that effort cost U.S. taxpayers
some $86.3 billion, not including state
and local spending. Most of that mon-
ey paid for welfare programs that
helped more than 23 million low-in-
come Americans meet basic needs for
food, shelter, and health care.
Most Americans, polls show, back
the idea of helping those who can't
help themselves. But with government
spending rising faster than its income,
the question of government's ability-
and its obligation-to help out has
become a hot political issue. Many
people contend that anti-poverty pro-
grams cost too much and do little to
cure the problems of the poor. The
programs' backers, however, claim
that government isn't doing enough.
"We've been able to cushion the de-
privations of poverty," says Sheldon
Danziger, director of the Poverty Re-
search Institute at the University of
Wisconsin. "But we haven't been
able to get the poor into regular jobs."
HIGH POVERTY RATE
Experts on both sides agree on
some facts. Despite the recent eco-
nomic recovery and rising employ-
ment, poverty in the 1980s remains at
its highest level in 20 years. In 1984,
according to the Census Bureau, 33.7
million Americans-14.4 percent of
the population-were below the offi-
cial poverty line. The bureau called a
family of four poor that year if it had
cash income of less than $10,609.
More alarming, some say, is rising
poverty among children. Nearly one
in four Americans under 18 is poor-
up from one in seven in 1969. Poverty
is even higher among minorities. It
affects one in two black children, and
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two in five Hispanic children. And
more than half of all children in fam-
ilies headed by women are poor.
Experts fear the creation of a large
new "underclass" of young people
who lack the education and skills
needed to raise themselves out of pov-
erty. "If we continue to bring up chil-
dren who don't get a decent educa-
tion, who aren't very well fed, we're
going to have another generation of
the same problem," warns Gordon
Raley of the Child Welfare League.
It wasn't supposed to turn out this
way. Only two decades ago, in 1964,
President Lyndon Johnson called for a
"War on Poverty" to wipe out illiter-
acy and unemployment. For the first
time in our history, it is possible to
conquer poverty," he said. Buoyed by
rapid economic growth and rising so-
cial concern, most Americans agreed.
MAJOR PROGRAMS
Throughout the 1960s, Congress
expanded and created today's major
anti-poverty programs. Among them:
^ Aid to Families with Dependent
Children (AFDC), which provides
cash support to low-income families
with children. A joint federal-state
program run by the states, its 1985
budget was $16.4 billion, with an
$8.7 billion federal share.
^ Medicaid, which funds free or
low-cost medical care for the poor.
Also a joint federal-state program, its
1985 budget was $39.7 billion, in-
cluding a $22.6 billion federal share.
^ The Food Stamp program, which
helps low-income families buy food.
The program's 1985 budget: $12.3
billion, almost all federally paid.
^ Supplemental Security Income
(SSI), which gives cash support to the
elderly and disabled poor. Another
federal-state program, the U.S. share
of its 1985 budget was $8.9 billion.
^ Housing aid, which provides
rent subsidies for low-income families
and funds housing projects. Its 1985
budget: $11 billion.
These programs are known as
''means-tested entitlements." That is,
anyone whose income, or means, is
low enough to qualify for the program
is legally entitled to receive benefits.
Cash supports, however, vary widely
because individual states generally set
the benefit levels. Monthly AFDC
payments for a family of four range
from a low of $120 in Mississippi, to
a high of $800 in Alaska.
Congress also passed smaller pro-
grams to provide needed services.
Federal grants helped build the Austin
Health Center's modern brick build-
ing, for example, and pay for most of
its $3 million yearly budget. The cen-
ter finds many of its doctors through
the National Health Service, which
pays for doctors' training, then as-
signs them to needy areas.
For a decade, the nation seemed to
be winning the "War on Poverty."
As the number of families drawing
welfare benefits grew, the poverty rate
dropped-from 19 percent in 1964 to
less than 12 percent during most of the
1970s. Then the rate rose again in the
late 1970s, and welfare spending rose
with it. Many Americans began to
question whether government pro-
grams were the right way to solve
social problems.
CRITICS OF SPENDING
President Reagan, a long-time critic
of welfare spending, has agreed with
those who say anti-poverty programs
backfired. Such programs, critics ar-
gue, encourage the poor to become
dependent on aid. "Poverty went back
up because we changed the rules for
young poor people," says Charles
Murray, author of Losing Ground:
American Social Policy 1950-1980.
"We said poverty was not their fault,
and government aid allowed them to
The Agriculture Dept. bases food stamp
allotments on a "thrifty" food budget-
$268 a month for a family of four.
move in and out of the labor market
without a work record or skills."
Many poor people agree. A recent
Los Angeles Times survey found that
43 percent of the poor say welfare
benefits make them more dependent.
Sixty-four percent say poor young
women often have babies to get wel-
fare. And 60 percent say that welfare
rules encourage poor fathers to leave
so their families can get welfare.
Welfare's backers concede that the
system has had unwanted side effects.
But critics are off base, they say. A
major study of family income has
found "absolutely no evidence" that
welfare creates a "cycle of poverty,"
says Greg Duncan of Michigan's In-
stitute of Social Research. "Only 2
percent of the population are persis-
tently on welfare. Kids from families
on welfare are no more likely to be-
come dependent than other kids."
INFLATION'S TOLL
Some researchers say poverty is up
because government benefits lag be-
hind inflation. AFDC benefits, for in-
stance, have lost 37 percent of their
buying power since 1970. Others
blame cutbacks that, according to one
estimate, denied benefits to 4 million
people who had been receiving sup-
port from the major poverty programs.
Most experts now believe that the
only long-term solution to the problem
of poverty is to find new ways to get
the poor off welfare and into the work
force. Twenty-three states, including
California and New York, have adopt-
ed "workfare" plans. Such plans gen-
erally require welfare recipients with-
out young children to work for public
or private non-profit agencies or risk
losing their benefits. In just two years,
Massachusetts' program has helped
more than 18,000 welfare parents find
real jobs-saving state taxpayers $22
million a year in welfare payments.
The best such programs, experts
say, combine education or training
and an extended period of support.
"Republicans came to realize people
on welfare weren't shiftless but lacked
essential skills," says Art Agnos, a
state lawmaker who devised Califor-
nia's workfare plan. "And Democrats
learned it was no sin to ask people to
work. This is what the poverty pro-
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 SPECIAL REPORT
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Shifting Views on the
U.S. Role in Education
Federal money helps pay for classes in vocational education to give high school
students needed job skills. In 1985, the U.S. spent $940 million on vocational
education. U.S. Department of Education spending totaled $19.1 billion in 1985.
L ast month, William J. Bennett,
U.S. Secretary of Education, an-
nounced a plan that could affect the
education of 5 million students. The
plan would provide low-income fam-
ilies with federal money in the form of
vouchers. These families could
"spend" the vouchers for schooling-
public or private-outside their own
districts. Bennett feels his plan could
lead to a "healthy rivalry" among
schools that might improve them.
At present, the money Secretary
Bennett wants to offer as vouchers,
$3.7 billion, goes directly to schools.
It helps students in the nation's low-
income districts improve basic skills.
This program, Chapter I of the 1981
Education Act, is the Department of
Education's most costly one.
Giving a hand to students from
poorer families is one of the many
ways the U.S. gives education a
boost. Traditionally, education has
been a state and local job. The U.S.
government's share of education
spending is small-only 6.2 percent.
States cover 49 percent and local tax-
payers add 44.8 percent. "Educators
always want to see more federal dol-
lars, but this is ice cream on the
cake," says Chris People, spokesman
for the Education Commission of the
States. In 1985, U.S. education
spending topped $19.1 billion-a $4.3
billion increase over 1981.
SCALING BACK
President Reagan calls for scaling
back the federal role. "We created the
greatest public school system the
world has ever seen," he said recent-
ly. "I think it began to deteriorate
when the federal government started
interfering." For 1986, the President
asked the Congress to fund education
at $15.6 billion. Congress, however,
voted to spend more-$18 billion.
Among the President's proposals
are cuts in programs that help students
pay college costs. These programs,
which cost $8.7 billion in 1985, add
up to 45 percent of the Education De-
partment's budget. They include Pell
Grants and student loan programs,
among others.
The Guaranteed Student Loan
(GSL) program allows students to take
loans at interest rates lower than a
bank would charge. The U.S. govern-
ment pays the difference between the
bank's real interest charge and the
lower rate the students pay.
Early this year, the Administration
asked Congress to tighten eligibility
for the GSL program. By 1987, the
request would cut the number of stu-
dents getting loans by 35 percent,
from 3.6 million to 2.3 million. The
Administration calls GSL an entitle-
ment for the middle class. "The tax-
payer making $20,000 a year is subsi-
dizing the college costs of a family
making $80,000," says Sharon Mes-
senger, an expert in the U.S. Office of
Post-Secondary Education. "And the
costs of defaulters are enormous."
CATCHING DEFAULTERS
So far, Congress hasn't backed the
President's request. It plans to keep
1986 student aid funding at 1985 lev-
els. Last year, however, Congress act-
ed to reduce the number of students
who default, or fail to repay, their
loans. Starting in 1986, students who
fall behind on their payments will find
their debts subtracted from any federal
tax refunds they might he due.
Most other U.S. education money
aids elementary and secondary
schools. The government helps fund
classes for students who speak little or
no English-a program that costs $1.2
billion. Another $1.3 billion helps
fund education for the handicapped.
And $940 million goes to vocational
education to help build job skills.
Some experts say elementary and
secondary schools need more funding.
"The federal government put a teach-
er in space," says Nancy Kochuk,
public affairs officer at the National
Education Association, a teachers'
group. "That's a nice boost for the
teaching profession. But we need text-
books that are up-to-date, and enough
of them to go around."
Kochuk points to the Chapter I
program, which the Administration
wants to transform. A major study in
1984 placed Chapter I among the U.S.
Education Department's most effec-
tive programs. Yet, she says, 55 pe-
cent of the l I million students eligible
for this aid got none. "These kids,"
she says, "are falling through the
cracks." -Maura Christopher
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FROM BISMARCK TO ROOSEVELT:
HOW THE WELFARE STATE BEGAN
Idealism alone didn't convince governments to take responsibil-
ity for their citizens' welfare. The first social welfare programs
were created by politicians seeking to solve practical problems.
' n 1881, German chancellor Otto
von Bismarck stunned Europe with
a radical proposal. He asked the
Reichstag, the German parliament, to
create the world's first welfare state.
He wanted German workers to be
granted national health and accident
insurance, as well as retirement pen-
sions. At a time when no other go-
vernment provided these services,
Bismarck boldly affirmed that the
state should offer the poor "a helping
hand in distress. . . . Not as alms, but
as a right."
The Reichstag was astonished. Bis-
marck was one of the most conserva-
tive and ruthless politicians in Europe.
He had enacted laws ban-
ning socialist agitation and
socialist newspapers. And
now he was proposing what
he himself called a system
of "state socialism."
Bismarck's motives will
become clear if you look
back at the beginnings of
the welfare state in three
nations-Germany, Britain,
and the United States. In
each case, you will see that
idealism alone did not cre-
ate government social ser-
vices. In reality, the welfare
state was constructed by
shrewd practical politicians
who were responding to
concrete political pressures.
The pressures on Bis-
marck were obvious. The
rapid expansion of German
industry had created a large
class of urban workers. Im-
poverished, living in
gloomy slums, lacking ba-
sic social services, these la-
borers were voting for the
Socialist Party in ever-in-
creasing numbers.
At first, Bismarck tried
to suppress the Socialists, but the par-
ty continued to grow. So the chancel-
lor changed his tactics. Instead of
fighting the Socialists, he would steal
their thunder by offering a complete
social welfare program.
THE PRICE OF STABILITY
Bismarck cleverly realized that the
German worker would not overthrow
the government that offered him a so-
cial security system. "Whoever has a
pension assured to him for his old age
is much more contented and easier to
manage than the man who has no such
prospect," the chancellor pointed out.
He admitted that a welfare state
would be expensive but pointed out
that it might "avert a revolution."
And that, he said, "is a good invest-
ment for our money." By 1889, Bis-
marck's scheme was in full operation,
funded by contributions from employ-
ers, employees, and the government.
These welfare measures did not
stop the Socialists, who soon built the
largest political party in Germany. But
Bismarck was right on one point.
Now that German workers had their
pensions to protect, they became more
moderate in their demands. The So-
cialist Party gradually abandoned rev-
olutionary goals and turned to bread-
and-butter issues, such as better wages
and working conditions.
The welfare state paid one other
important dividend for Germany. In
1914, she entered World War I with
the healthiest soldiers in Europe.
Britain cared less well for her fight-
Otto von Bismarck's government in Germany was the first to
assume responsibility for its citizens' well-being.
ing men. In the Boer War
(1899-1902), the forces of
the British Empire had suf-
fered several humiliating
defeats fighting small
bands of South African
farmers.
In 1902, an English gen-
eral thought he could ex-
plain this poor perfor-
mance. He estimated that
60 percent of all army vol-
unteers were physically un-
fit for military service. The
cause? Poverty. Poor diet,
substandard housing, un-
safe working conditions,
and lack of medical care
were ruining the health of
British workers.
World War I was still 12
years in the future, but al-
ready many Englishmen re-
alized that they might
someday have to fight Ger-
many. In such a war, they
reasoned, Britain would not
have enough fit soldiers to
defend her vast empire-
unless she adopted a Ger-
man-style welfare state.
At the time, British so-
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cial services were pitifully inadequate.
For the destitute, there were work-
houses. As described in Charles Dick-
ens' novel, Oliver Twist, the work-
houses were like prisons. Inmates had
to wear uniforms and perform hard
labor. Visiting rights were restricted,
and family members were forced to
live in separate dormitories for men
and women.
Not all workhouses were as harsh
as those in Dickens' novels. Most
paupers were allowed to live in their
homes. Like U.S. welfare recipients
today, they received a small cash pay-
ment from local authorities. Still, for
the British worker, the system of poor
relief was stingy and humiliating.
Around 1900, sociologists Charles
Booth and B. Seebohm Rowntree
alerted the British public to the prob-
lem of poverty. They estimated that
about 30 percent of the population
was living below the "poverty line."
Such people didn't earn enough to
maintain a state of bare physical
health, even if they spent every penny
wisely and wasted nothing.
POVERTY'S CAUSES
Booth and Rowntree showed that
most poor people were poor through
no fault of their own. Many were des-
titute simply because they were elder-
ly and could no longer work.
So, in 1908, the British government
enacted a system of old age pensions.
Post offices paid out five shillings a
week (about $1.20) to every poor per-
son over age 70. In those days, when
a shilling bought much more than it
does today, that small payment often
meant the difference between indepen-
dence and the workhouse.
Meanwhile, other reforms were
coming in quick succession-free
school meals in 1906, medical inspec-
tions in 1907, and laws promoting the
welfare of children in 1908. Winston
Churchill, then head of Britain's
Board of Trade, set up special trade
boards in 1909 to enforce minimum
wages and decent working conditions
in sweatshops. In 1910, he opened the
first "labour exchanges"-govern-
ment employment bureaus.
The chief architect of the British
welfare state was David Lloyd
George. Although he genuinely sym-
pathized with the poor, Lloyd George
was also a crafty politician. He real-
ized that his own Liberal party was
losing votes to its left-wing rival, the
Labour party. Like Bismarck, Lloyd
George tried to win back working-
class voters by giving them a social
welfare program. Fifty-five years be-
fore U.S. President Lyndon Johnson
declared his own "war on poverty,"
Lloyd George vowed "to wage impla-
cable warfare against poverty and
squalidness. "
In 1911, after studying the German
welfare system, Lloyd George pro-
posed his own program of unemploy-
ment insurance and national health in-
surance. The plan was bitterly
opposed by Conservatives, aristocrats,
prosperous doctors, and many news-
papers. Wealthy ladies protested that
they would have to pay health insur-
ance premiums for their maids-about
six cents per maid each week.
WINNING AND LOSING
Lloyd George skillfully maneu-
vered his program through Parliament.
But, like Bismarck, he failed to win
over working-class voters, who gradu-
ally turned to the Labour party.
The United States, with a strong
tradition of economic individualism,
did not create a federal welfare system
until the Great Depression. The crisis
U.S. Pres. F.D. Roosevelt signs the So-
cial Security Act on August 14, 1935.
Behind him stands the first woman Cab-
inet member, U.S. Secretary of Labor
Frances Perkins, who crafted the plan.
David Lloyd George (1863-1945), chief
architect of Britain's welfare state, later
led his nation during World War I.
began in October, 1929, when the
stock market collapsed. By 1932, over
100,000 businesses had failed, and I 1
million people were unemployed.
Taking office in 1933, President
Franklin D. Roosevelt responded to
the emergency with a revolutionary
economic program-the New Deal.
One of the most serious problems
Roosevelt faced was overproduction
of food. Farmers could not sell their
produce to unemployed workers, and
food prices had collapsed.
To control farm production, the Ag-
ricultural Adjustment Administration
(AAA) was created in 1933. The
AAA paid farmers to plow under 10
million acres, and it purchased and
slaughtered 5 million pigs. At a time
when many Americans were going
hungry, this was a drastic remedy.
Yet it worked. Agricultural surpluses
were eliminated, farm prices began to
rise, and farmers once again could
earn a decent living.
INDUSTRIAL REFORM
To regulate industry, the New Deal-
ers created the National Recovery Ad-
ministration (NRA). Two million em-
ployers voluntarily accepted NRA
codes to ensure fair competition,
minimum wages, and shorter working
hours. State and local welfare agen-
cies, now close to bankruptcy, were
rescued by the new Federal Emergen-
cy Relief Administration (FERA).
One of the largest New Deal proj-
ects was the Tennessee Valley Au-
thority (TVA). The TVA built a net-
work of dams and power stations in
the Tennessee River basin, providing
cheap electricity, soil conservation,
and reforestation. In the Civilian Con-
servation Corps (CCC), 2 million
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young men were put to work develop-
ing reservoirs, parks, and forestland.
The Public Works Administration
(PWA) fought unemployment with
huge government construction proj-
ects, including Boulder Dam, New
York's Triborough Bridge, and the
aircraft carriers Yorktown and Enter-
prise. The Works Progress Adminis-
tration (WPA) spent $II billion to
provide jobs for 8.5 million people.
The WPA built or improved 651,087
miles of roads and streets, 124,031
for each of the 48 states.
Many newspapers and politicians
called the WPA a costly "boondog-
gle," paying people to do pointless
work. The British found it cheaper to
give the unemployed weekly handouts
rather than jobs. But many British la-
borers spent years "on the dole."
They lost their work skills and their
self-respect, and they nursed bitter re-
sentment toward employers and what
they felt was an uncaring government.
In contrast, most American workers
cial Security system-the largest so-
cial spending plan in U.S. history.
The Social Security Act of 1935 set up
a system of pensions for retired people
and benefits for widows and orphans.
It also began a federal-state system of
unemployment insurance.
Unlike British old-age pensions,
which were paid for entirely by the
government, U.S. Social Security
pensions were funded by a payroll tax
on employers and employees. Some
New Dealers felt this was wrong.
They believed that workers should not
have to pay a tax in exchange for
retirement benefits.
Roosevelt disagreed. If the voters
paid for their Social Security, he real-
ized, they would never tolerate any
cuts in benefits. "With those taxes in
there," FDR predicted, "no damn
politician can ever scrap my social
security program."
Young members of the Civilian Conservation Corps (CCC), a New Deal program
that gave 2 million jobless city youths work restoring the countryside.
bridges, 125,110 government build-
ings, 8,192 parks, and 853 airports.
Roosevelt realized that creative
people needed jobs as badly as con-
struction workers. So the WPA hired
nearly 5,000 artists, who gave free art
lessons and painted murals in post of-
fices. About 100 million Americans
heard free concerts by three dozen
WPA orchestras.
For 55 cents, anyone could see a
Shakespeare play staged by the WPA
Federal Theater Project. And the
WPA Writers Project paid about $90 a
month to 7,500 authors, who pro-
duced a classic series of travel guides
felt that the WPA was genuinely try-
ing to help them. Roosevelt had re-
membered "the forgotten man at the
bottom of the economic pyramid."
Since the 1930s, labor and manage-
ment have been much less hostile in
the U.S. than in strike-plagued Brit-
ain. In part, experts say, that's be-
cause the WPA preserved labor's con-
fidence in the U.S. economic system.
These job projects were dismantled
when the Depression ended, and many
other New Deal programs, such as the
NRA, were declared unconstitutional
by the U.S. Supreme Court. But Roo-
sevelt left a lasting legacy in the So-
SENIOR CITIZENS' POWER
Roosevelt was right. Since the first
Social Security checks went out in
1942, protests from the elderly have
defeated every attempt to trim pay-
ments. Unlike Bismarck and Lloyd
George, FDR succeeded in winning
votes with his social programs.
Backed by organized labor, urban po-
litical machines, liberal intellectuals,
Southern conservatives, and black and
ethnic voters, Roosevelt's Democrats
became the nation's majority party.
That "Roosevelt coalition" lasted for
nearly half a century-until the Rea-
gan landslides of 1980 and 1984.
Bismarck, Lloyd George, and Roo-
sevelt were very different men, but
they had one political principle in
common. They were all pragmatists.
Idealism, ideologies, and traditions
didn't interest them. They simply
wanted to find practical solutions to
practical problems. To them, the wel-
fare state seemed to be the most prac-
tical answer to the problem of pover-
ty-as well as a way to win votes.
For Roosevelt, the New Deal was
not an attempt to create a perfect soci-
ety. He called it, simply, "bold, per-
sistent experimentation." In an eco-
nomic emergency, FDR said, "It is
common sense to take a method and
try it. If it fails, admit it frankly and
try another. But, above all, try some-
thing." That something developed
into the elaborate system of social
programs that Americans enjoy-and
debate-today. -Jonathan Rose
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 MAJOR U.S. POVERTY PROGRAMS IN 1985
TNFRAG ,HA11?Lr~
Medicaid
Housing & Energy Aid
Food Stamps
i to "amiTies with
Dependent g Children (AFDC)
Supplemental Security Income
(elderly & disabled _ .n
Job Training & Employment
Children's Education
School Meals
Social Services Grants
Refunded Tax Credit
Family Services
Food Supplements
CA $1,087
$1,40
MT
$1,482
CO
$1,647
NM
$1,400
HI
$1,422
$L7
$1,416
SD
$1,
NE
$1,466
TX
$1,137
$13i
THE STATES' SHARE:
$11 141, $25.9 BILLION
OK
$1,654
WHO PAYS FOR HEALTH CARE
$1 f
IA
$1,431
MO
$1,593
LA*
$1
AFDC: $7.6 --\ Federal
Food Stamps: $0.8 Share:
Foster Care: $0.4
Medicaid: $17.1
(billions of dollars)
IL
$1,473
AR 1-7-P-4
$1,668
aMs AL
503 $1,566
(billions of dollars
$22.6
VIEWS OF THE U.S. SAFElY NET
OR
$1,601
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WA
$1.908
Benefits and Other
Consumer Direct Local
Payments 29%-- C- e Funds: 13%
sir w cra,n~ ,vw ar'- a nr _ R". r
U.S. SOCIAL SPENDING, STATE BY STATE
Budget outlays per state resident*
MI
Across the nation, U.S. social spending
per capita comes to $1,511 per citizen.
Federal
Funds: 29%
FL
$1,964
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$1,075'
,,NY
$1,795
u?~\
$1,760IJ ei
$1,533 DE
$1,514
VT $1,455 $1,713
Bud
$
' NC KEY
$1,319
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AA
683
RI
;1,886
T
M
DC
3,012
00
above
i00
99
Other
Military Retirement
Veterans' Benefits
Public Assistance
Federal Employee Retirement
Unemployment Compensation
Net Interest
Health
WHERE THE U.S. ENTITLEMENT DOLLAR GOES
Entitlement programs, accounting for about 60% of all U.S. spending, provide
benefits to all persons, businesses, and government units that qualify for them.
I I