The Divided Welfare State: The Battle over Public and Private Social Benefits in the United States

462 Pages·2002·28.086 MB·English

by  Jacob S. Hacker

THE DIVIDED WELFARE STATE
At a time of fierce conflict over U.S. social policy, Americans are con-
sidering whether the public sector should do less and the private sector
more. In this pioneering book, Jacob Hacker shows that this battle is as
old as the American welfare state itself - and that unearthing its sources
and legacies is crucial to understanding America's strikingly unusual
social welfare system. What is truly distinctive about American social
provision, Hacker argues, is not the level of U.S. spending, but that so
many social welfare duties are handled by the private sector, rather than
by government. Alongside America's public social programs lies a sub-
merged network of employer-sponsored social benefits, which are heavily
subsidized and regulated by government, yet distributed much less evenly
than public protections. Examining the twentieth-century development
of health insurance and retirement pensions, Hacker unveils the politi-
cal roots and effects of America's hybrid system and explains why the
role of private benefits differs so sharply across the health and pension
areas. To do so, he develops a model of path dependence that demon-
strates how political choices of the past created interests and organiza-
tions dedicated to preserving the private tilt of U.S. social policy. With
sweeping history, topical commentary, and a wealth of statistical and
cross-national evidence, The Divided Welfare State demonstrates that
private social benefits not only are a critical element of U.S. social policy,
but also have deeply influenced the politics of public social programs -
to produce a social policy framework whose full dimensions have yet to
be fully debated.
Jacob S. Hacker is Peter Strauss Family Assistant Professor of Political
Science at Yale University. He was previously a Junior Fellow of the
Harvard Society of Fellows, a Fellow at the New America Foundation,
and a Research Fellow at the Brookings Institution. He is the author of
The Road to Nowhere: The Genesis of President Clinton's Plan for
Health Security, which co-won the 1997 Louis Brownlow Book Award
of the National Academy of Public Administration. This book is based
on his dissertation, which garnered prizes from the American Political
Science Association, the Association of Public Policy Analysis and
Management, and the National Academy of Social Insurance.
To Oona and Ava
THE DIVIDED
WELFARE STATE
The Battle over Public and Private Social Benefits
in the United States
JACOB S. HACKER
Yale University
CAMBRIDGE
UNIVERSITY PRESS
CAMBRIDGE UNIVERSITY PRESS
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Cambridge University Press
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© Jacob S. Hacker 2002
This publication is in copyright. Subject to statutory exception
and to the provisions of relevant collective licensing agreements,
no reproduction of any part may take place without the written
permission of Cambridge University Press.
First published 2002
Reprinted 2003, 2005, 2007, 2008
A catalog record for this publication is available from the British Library
Library of Congress Cataloging in Publication data
Hacker, Jacob S.
The divided welfare state : the battle over public and private social benefits in the
United States / Jacob S. Hacker.
p. cm.
Includes bibliographical references and index.
ISBN 0-521-81288-7 - ISBN 0-521-01328-3 (pbk.)
1. United States — Social policy. 2. Privatization — United States. 3. Welfare state —
United States. I. Title.
HN59.2. H33 2002
361.6T0973-dc21
2002067734
ISBN 978-0-521-81288-7 Hardback
ISBN 978-0-521-01328-4 Paperback
Transferred to digital printing 2010
Cambridge University Press has no responsibility for the persistence or
accuracy of URLs for external or third-party internet websites referred to in
this publication, and does not guarantee that any content on such websites is,
or will remain, accurate or appropriate. Information regarding prices, travel
timetables and other factual information given in this work are correct at
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the accuracy of such information thereafter.
Contents
List of Tables page vii
List of Figures ix
Preface xi
Part I: The American Welfare Regime
Introduction: American Exceptionalism Revisited 5
1 The Politics of Public and Private Social Benefits 28
Part II: The Politics of Public and Private Pensions
Introduction 71
2 Connected at Birth: Public and Private Pensions Before 1945 8 5
3 Sibling Rivalry: Public and Private Pensions After 1945 I24
Part IE: The Politics of Public and Private Health Insurance
Introduction 179
4 Seeds of Exceptionalism: Public and Private Health
Insurance Before 1945 I9I
5 The Elusive Cure: Public and Private Health Insurance
After 1945 221
Part IV: The Formation and Future of
the American Welfare Regime
6 The Formation of the American Welfare Regime 275
7 The Future of the American Welfare Regime 313
Appendix 337
Notes 341
Index 435

Tables
11.1 Welfare-State Types and After-Tax Public and Private
Social Spending, 1995 page 19
1.1 The Continuum of Social Policy Approaches 30
1.2 Share of Nonagricultural Private Workers Receiving
Health and Pension Benefits, by Earnings, 1998 37
1.3 Distribution of Selected Tax Expenditures, 2000 38
1.4 Average Tax Subsidy for Health Insurance Received by
Families, by Income, 1998 39
I2.1 Public and Private Pensions in Selected Nations, 1993 76
2.1 Time of Adoption of Five Major Welfare Programs (U.S.
Rank Among 15 Developed Nations) 87
3.1 Social Security Benefit Increases Versus Price and Wage
Levels, 19 50-1974 141
3.2 Social Security Replacement Rates, 1940-2040 143
3.3 Sources of Income Among Aged Units, 1990 155
3.4 Sources of Income Among Aged Units, by Quintile of
Income, 1990 156
3.5 Distribution of Aggregate Income Among Aged Units, by
Source and Quintile of Income, 1990 156
3.6 Share of Workers Participating in 4oi(k) Pension Plans,
1991 169
3.7 Individual Retirement Account Participation, by Earnings,
1992 169
I3.1 Health Spending and Coverage in Selected OECD
Countries, 1995 185
5.1 Basic Features of the British, Canadian, and U.S. Medical
Systems, 1960-1990 252
7.1 Growth of U.S. Private Social Expenditures Versus Growth
of Public Expenditures, 1950-1994 317
A.i Public and Private Social Welfare Expenditures as a
Percentage of GDP in Eleven Nations, 1995 338

Figures
11.1 Public Social Welfare Expenditures as a Percentage of
GDP in Eleven Nations, 1995 P#ge 14
11.2 After-Tax Public and Private Social Welfare Expenditures
as a Percentage of GDP in Eleven Nations, 1995 15
11.3 After-Tax Public Spending Versus After-Tax Private
Spending as a Percentage of GDP, 1995 17
11.4 Private and Public Social Welfare Expenditures
as a Percentage of GDP, 1950-1994 20
1.1 Distinguishing Public and Private Social Benefits 31
1.2 Four Dimensions of Variation Among Approaches 35
1.3 Institutional Fragmentation and the Private Share of
Social Spending 47
12.1 Occupational Pension and Old-Age Insurance Benefits
as a Share of Combined Benefits, 1950-1996 78
12.2 Share of Americans Covered by Social Security and
Occupational Pensions, 1940-1988 j ^
2.1 Share of Private Civilian Labor Force Covered by
Private Pensions, 1905-1995 89
3.1 Pension Contributions and Benefits as a Share of Total
Compensation, 1948-1996 154
3.2 Individual Retirement Account and 401 (k) Plan Assets
as a Percentage of GDP, 1985-2000 167
I3.1 Share of Americans Covered by Public and Private Health
Insurance and Pensions, 1940-1995 186
4.1 Share of U.S. Population with Private Health Insurance,
1940-1995 214
5.1 Share of Americans Covered by Private Health Insurance
and Medicare/Medicaid, 1940-199 5 262
7.1 U.S. Federal Expenditures as a Percentage of GDP, 1962-
2000 316