The setting

The US, like many other nations, is reconsidering and repositioning many of its social programmes. The significant change in the income maintenance, or welfare, programme that is discussed in this chapter occurs in the context of efforts to promote the privatisation of public activities (pensions, schools, prisons, social services), and to reduce the federal government's role in social welfare relative to the individual states of the US. These two trends can be observed in recent welfare policy changes. Concurrently, widening inequalities have reawakened concerns that the American poverty line approach inadequately measures what is needed to maintain an above-poverty standard of living.

Administrative trends

Privatisation and reduction in government involvement

The trend towards privatisation and the disputes that ensued are evidenced in recent proposals to change the Social Security system that provides pensions to older Americans. The underlying assumption of privatisation advocates is that, 25 years from now, the system will not be able to cover its outlays due to the increased number of retirees from the ‘baby boomer’ generation. Their proposal is to privatise the system through investment of the Social Security taxes in stock markets. This move is presumed to offer the likelihood of a much larger return on the investment than does the safer investment in government bonds. One version would give the wage earner complete decisionmaking control of the investment. An alternative is to create an independent commission to make investment decisions in these private markets.

The outcome of this push to privatise is uncertain. The assumption of future Social Security deficits is questioned by:

• • conflicting sets of calculations;

• • the recommendation of alternative ways of increasing the size of the fund;

• • cooling support for private markets, due to the recent decline in stock markets.

A parallel road to greater privatisation is to increase individual savings for retirement by decreasing income taxes, thereby freeing funds for personal investment. Invested funds and resulting profits would not be taxed. The individual funds would be taxed only when the money is withdrawn for retirement purposes.

Until recently, the public retirement savings system appeared likely to be considerably privatised. The Enron scandal (where employees lost retirement benefits that they invested in their company's stock) is, however, slowing that push, at least for a time.