Deregulating Social Welfare

The similarities between 1929 and 2010 in the United States are striking. America in the 1920s was almost giddy in its prosperity. A "housing boom" enabled millions of U.S. citizens for the first time to own their own home. Americans began to depend on automobiles, electricity, radio, and mass advertising to meet household needs. Corporations offered workers more generous fringe benefits and stock-sharing opportunities (Marx, 2004). However, the overall prosperity of the United States in the 1920s--ike that in the 1980s and 1990s--overshadowed the legitimate need for prudent government oversight and regulation of market activity--particularly the banking sector--to sustain overall societal well-being. In early 1929, the need for government regulation of the banking industry seemed, to most, an unnecessary intrusion into the working of the market. Similarly, in 1979, presidential candidate Ronald Reagan continually asked Americans not to rely on government to solve their problems; to Reagan, "government is the problem." Reagan's promise of government deregulation helped him to a landslide victory in 1980. Subsequent administrations have echoed Reagan's call for deregulation. If government was the problem in the U.S. economic system, according to this logic, it could also be a problem in its social welfare system. The administrations of Reagan, Bush, Clinton, and Bush, therefore, placed greater policy emphasis on private solutions to social problems. That is, each encouraged private sector approaches to social welfare through charitable giving, volunteerism, and social entrepreneurship. Reagan advised the public to rely on private donors and cut social programs; George H. W. Bush "stayed the course" of his predecessor, Reagan, while promoting his "Thousand Points of Light" volunteerism; Clinton established AmeriCorps as he ended "welfare as we know it"; and George W. Bush championed faith-based initiatives while attempting to privatize social security (Jansson, 2005; Zinn, 2005). In short, the social welfare policy of each administration stressed philanthropy--voluntary action by private individuals for the public good. Yet social welfare, like Wall Street, has been deregulated at a risk. In 1929, the sudden and severe downturn of the American economy left many people in shock and denial. Between 1929 and 1933, consumer spending decreased 18 percent, manufacturing output fell 54 percent, and construction spending plummeted 78 percent. Eighty percent of the automobile industry's production capacity came to a halt. Unemployment rates hit double digits (Marx, 2004; Patterson, 2000). Sound familiar? Yes, it does, because the United States in 2010 is suffering from similar economic shock waves, the result once again of the collapse of a deregulated financial sector. The primary source of the current problem is not conventional depository banks, which are regulated by the FDIC, but a relatively unregulated financial sector dealing in new financial instruments like mortgage-backed securities (Krugman, 2008). However, the Clinton administration did ease conventional banking regulations (Scherer & Calabresi, 2009); the administration of George W. Bush did also. In fact, Time magazine claimed, "from the start, the 'ownership society's' No. 1 fan [George W. Bush] embraced deregulation and allowed federal oversight agencies to ease off banks and mortgage brokers" (Gibbs, 2009, p. 24). What has received less attention is the negative outcome produced by the deregulation of social welfare! The delegation of federal responsibility for social welfare to the private sector in the form of private charitable giving and volunteerism has resulted in a well-documented "charitable divide" (Hall, 2008). …