The Shift in U.S. Welfare Policy and its Impact on Economic Well-Being

Can a paradigm shift explain changes in welfare policy under Ronald Reagan and what are the impacts of the altered policy on peoples' economic well-being?

Hausarbeit, 2018

21 Seiten, Note: 1.0



Table of Content:

1. Introduction

2. Theoretical Approach

3. Method & Data

4. Analysis

5. Discussion

6. Conclusion


1. Introduction

“My friends, some years ago, the Federal Government declared war on poverty, and poverty won.“1 With this quote, Ronald Reagan alludes to his predecessor, Lyndon Johnson, who contributed greatly to the expansion of the U.S. welfare state. During the period of the Johnson Administration (1963-69), it became commonly accepted that a part of the population needed particular assistance to be able to participate in general prosperity. The welfare states’ purpose to promote and ensure the economic well-being of its citizens became an overarching goal. The development of various welfare programs in combination with increased expenditures in social policy were being considered as inevitable features of societies for achieving this goal (Plotnick 1992: 29). It was assumed that the welfare state would constantly expand. However, since the 1970s, the welfare state faced mounting challenges (Pierson 1996: 143). Moreover, the election of Ronald Reagan as new President of the U.S.A. marks a turning point in the history of the U.S. welfare. Reagan challenged the established welfare state consensus, arguing that the nation’s economic well-being would be promoted more effectively by retrenching and reorganizing the social welfare state (ibid.). Under the Reagan Administration (1981-89) welfare policy was altered and brought into focus by new viewpoints on its purpose, encompassing a political call for more self-responsibility and less state regulation. A possible explanation for the changes could be the development of a new policy paradigm aiming to replace the existing one due to certain, mainly economical, reasons, also referred to as paradigm shift. Such a paradigm shift in the policy of a welfare state could alter the economic well-being of its citizen as it incorporates a change of self-perception of the state that it is no longer primary responsible for deliberately modifying the natural course of market forces through the provision of social services and financial assistance (Seeleib-Kaiser 2014: 268). Consequently, the question arising for my research is the following: Can a paradigm shift explain changes in U.S. welfare policy under Reagan and did the altered policy have an impact on the economic well-being of its citizens?

In order to answer these questions, this paper is divided into five sections. The first section presents Peter Hall’s approach of social learning, which serves as theoretical framework for this paper and indicates that a paradigm shift occurs through three different stages. Secondly, the method and data used in this paper will be discussed. The analysis, forming the fourth section, first establishes that indeed a paradigm shift happened by descriptively analyzing that the shift towards a new welfare consensus is detectable in all levels of social learning. Through the second part of the analysis, which evaluates the impact of the paradigm shift on the citizens’ economic well-being, it becomes obvious that no improvement happened during the Reagan presidency. Within the fifth sections the results will be summarized and discussed. The last section briefly considers the legacy Reagan bequeathed and points out the limitations of this paper.

2. Theoretical Approach

Since the 1980s, approaches focusing on the learning process of political actors have gained considerable importance to explain policy outcomes and adjustments in light of crisis-causing problems and the failure of past political solutions (Schmidt/Radaelli 2004: 189). One of the most influential concepts is that of “social learning” by Peter Hall (1989, 1993). Hall developed a complex model of policy change to explain the paradigm shift in economic policy in Great Britain in the 1970s. Thus, the concept does not constitute an overarching analytical framework (Bandelow 2003: 6). However, his work is deemed as defining contribution and a central approach to the field of policy analysis and serves as the underlying concept of this paper (ibid.).

The concept is shaped by Heclo’s notion of “political learning”, which assumes that selected policies cannot be explained solely as reactions to current problems but also reflect experiences made with earlier strategies (Heclo 1974: 305). Correspondingly, Hall defines “social learning as a deliberate attempt to adjust the goals or techniques of policy in response to past experience and new information, [where] learning is indicated when policy changes as the result of such a process” (Hall 1993: 278). It is assumed that the process of policy making takes different forms and changes occur through three different stages of social learning (tripartite order change), which can lead to a paradigm shift (Pemberton 2000: 775). A first order change incorporates modifications or amendments in the arrangement and settings of policy instruments, while a second order change occurs when certain instruments used to attain a given set of goals are changed by the choice of new policy instruments. These order changes can be described as common and routinized processes of decision making, where policy is adjusted to contemporary situations (Hall 1993: 279-280). The model’s focus lays on the third order change, which is perceived as the highest stage of the three-level hierarchy. This change incorporates simultaneous changes in all three policy components: the instrument settings, the instruments themselves as well as the hierarchy of goals behind policy. It involves radical transformations of policy instruments or its overarching objectives (Pemberton 2000: 775). The term policy paradigm can be defined as a framework of ideas and standards that “specifies the policy goals, the kind of instruments that can be used to attain them, [and] the nature of problems they are meant to be addressing” (Hall 1993: 279). This framework, in which policy makers work and communicate is influential exactly because much of it is taken for granted.

In the first and second order learning, considered as instrumental learning, Hall (1986; 1993) attributes the greatest importance to individual actors. Experts, politicians and civil servants are the main actors as part of policy communities and institutions, who start the learning process due to different causes (Haiden: 2008: 23). Since the values and causal concepts underlying policies are variable, these forms of learning are based on cognitive processes within political elites on a frequent basis and do not imply systemic shocks. In contrast, the third and most comprehensive form of learning (social learning), the paradigmatic change in a policy field with all its values, norms and causal connections, requires external pressures and broader social forces to change a path-dependent form of established policies over a longer period (Biegelbauer 2007: 237). Correspondingly, policy learning in Hall’s approach provides a multidimensional explanation of political changes, where political learning is not only used to explain changes in the choices of arrangement of policy instruments, but fundamental policy transformations (Bandelow 2003: 8).

The stages of political learning are cumulative, which means that third-order changes imply the other forms of learning, whereby first and second order changes do not automatically lead to third order changes (Hall 1993: 280). The multi-phase model of policy learning takes its starting point in a situation, where a policy paradigm is stable and completely institutionalized (Feindt 2010: 298). The emergence of a paradigm shift becomes more likely when existing paradigms are no longer suitable to depict real situations. The implementation of a new paradigm follows different processes (Bandelow 2003: 7). In the first phase the policy paradigm can be threatened by anomalous developments due to a political, economic or social crisis revealing explanatory deficits of existing paradigms (Hall 1993: 280). When policy aims are repeatedly missed and irregularities accumulate, policy makers will test alternative settings of instruments or novel instruments in the second phase (Feindt 2010: 299). If the paradigm is still incapable of dealing with emerged anomalies after adjusting instruments and introducing new ones, the authority of the present paradigm is undermined (Hall 1993: 280). The fourth phase is characterized by the implementation of a new paradigm based on political decision-making. Finally, the development of political instruments in line with the new paradigm enable its consolidation (ibid.).

Regarding the changes that occurred within Reagan’s presidency, Hall’s concept seems to provide an appropriate framework. In the 1970s, different economic pressures fostered the perception that the welfare state is in a crisis (Gough 1979, Offe 1984). The election of Reagan as the new President, known for his dismissive attitude towards former extensive welfare state expansions, strengthened presumptions that the welfare state might be dismantled (Green-Pedersen 2002: 19). This assumption has not been borne out. However, it was subject of change. More importantly, a re-definition of the contours of the welfare state did establish, which gives rise to the following hypothesis:

H1: The changes in welfare policy under Reagan can be explained in terms of a tripartite order change, reflecting a paradigm shift.

It is assumed that an ideological shift from a relatively protective welfare state shaped by the principle of collective responsibility to a welfare state mainly emphasizing individual responsibility occurred and that this transformation is also reflected in the government’s policy measures. According to Reagan, the welfare system generated its own need of existence by creating dependencies and violating the self-sufficiency of recipients, although the free-market would receive everyone according to his exerted effort (Hamilton 1990: 51).

Policy changes concerning the size and nature of (non-)monetary income support programs, the tax system and the development of human resources through job training programs and public education, can significantly alter the economic well-being of citizens (Plotnick 1992: 30). Policies deriving from the principle of self-responsibility probably induce major reductions of welfare programs, its funding and diminished state-control over a balanced redistribution. Thus, following this reasoning set forth, a second hypothesis arises:

H2: If such a paradigm shift occurred, it had a negative impact on the economic well-being of American citizens.

3. Method & Data

The methodology serving to verify the hypotheses can be classified as single case study. However, two types of the selected methodology are used to pay tribute to the difference of the hypotheses. The first part of the analysis employs a descriptive single case study as it deals primarily with the description of a phenomenon (Caramani 2011: 43). This part of the analysis reflects a “most-likely case” design. Most-likely cases are cases in which the framework conditions of a case correspond to a certain approach and therefore, make the outcome predicted by a concept very likely to occur (Blatter 2018: 283). Accordingly, the first hypothesis is examined by applying the conception of a tripartite order change to the U.S. welfare policy changes. As first and second order changes reflect routinized political processes adjusting policies to altered circumstances (Hall 1993: 279-280), the focus is on changes on the legislative level. Budgetary adjustments are categorized as first order changes, while content-related alterations evoked by these acts are associated with second order changes. The Omnibus Budget Reconciliation Act (OBRA) and the Economic Recovery Tax Act of 1981 are selected as first and second order changes. These acts did not exclusively concern welfare policy, but their budgetary and administrative changes had direct impacts on welfare programs and its recipients. Additionally, tax policy plays a crucial role, as it clearly reflects the way policy makers influence income distribution and with that indirectly economic well-being (Pierson/Hacker 2010: 182). The focus is on Reagan’s first term, as especially these years were characterized by substantial changes and laid the foundation for Reagan’s pursued goals. The ideological realignment from a relatively protective welfare state to a welfare state emphasizing self-responsibility is deemed as third order change.

The second part of the analysis uses a “causal single case study” (Gerring 2016: 397) as it assumes that the paradigm shift emerging during Reagan’s presidency had a negative impact on the economic well-being. This impact is evaluated due to changes in poverty and inequality, as they are the broadest and most frequently used indicators of economic well-being (Plotnick 1992: 39). The assessment is based on data provided by the U.S. Bureau of Census. Poverty is derived through various poverty lines. If income is below a certain poverty line its member is evaluated as poor (ibid.). Inequality refers to income inequality and is displayed by the ratio of total income received by the comparison of aggregate shares of household income by each fifth of the income distribution and the Gini-Coefficient. The Gini-Index is the most widely used and regarded measure of inequality (Lindsey 2009: 57).

4. Analysis

This section aims to verify the hypotheses. First, the challenges the U.S.A. faced are presented, since the emergence of a new paradigm is preceded by abnormal developments that call into question the existing paradigm. Subsequently, the ideological transformation (3rd order change) is stated, before going into detail regarding changes on the legislative level (1st and 2nd order). This chronology results from the fact that first and second order changes had already been influenced by ideological realignments of welfare policy. This section ends with the analysis of the paradigm shifts’ impact on the economic well-being of U.S. citizens.

The 1970s became a frustrating decade for the U.S.A.. Politically, the Watergate scandal undermined the confidence in political leadership and the war in Vietnam damaged the military’s reputation (Schild 1998: 606). At the same time, demographical trends pressured the welfare state (Clayton 1998: 95). Economically, various globalization processes, such as advanced capitalism, brought intensified competition pressure (Green-Pedersen 2002: 22). Other anomalies were rising rates of inflation, recession and large budget spending deficits leading to a reinforced atmosphere of fiscal austerity (Pierson, 1996: 170). Furthermore, the oil crisis of 1973 as an external blow, led to a feeling of economic vulnerability (Schild 1998: 606). The combination of these anomalous events challenged the prevailing paradigm and entailed growing calls for welfare state limitations with conservative politicians at the center of the efforts (Pierson 1996: 145). The perception that the redistributive logic of the welfare state and the logic of capitalism are not compatible became more popular (Clayton, 1998: 67). Many draw the conclusion that the welfare state reached its limit as different social programs generated significant inefficiencies and further financing would require high levels of taxation and budgetary spending (Moran, 1988: 397). When political paradigms become the subject of open political disputes, the result depends on a party’s ability to mobilize sufficient electoral support in the political arena (Hall 1993: 287). In the 1980s, the U.S.A. experienced a significant rightward shift due to Republicans capturing the presidency and the Senate until 1986 (Pierson 1996: 164).

Third order change: A new welfare state consensus

Reagan played a major role in promoting a new conservative welfare state consensus. However, the successful consolidation of a new paradigm requires a legitimate justification to be supported by broader societal forces (Hall 1993: 291). Once in office, Reagan criticized the undesirable developments in the welfare system and justified his intention to change it by arguing that the U.S.A. could no longer afford social policy in its scope and emphasized that Great Society measures had been counterproductive for the poor (Schild 1998: 607). These arguments included two features. First, he stressed the bad economic situation and pointed to the fact, that changes in welfare system displayed an inherent necessity due to its excessive costs. Secondly, he defamed and delegitimized the institutionalized paradigm by blaming failures of past politics for the current situation. His major objectives were to reduce expenditure in the social sector and to replace ‘wasteful’ and ‘inefficient’ federal grants for social services (Krieger 1987: 187). Furthermore, he promised to review every welfare program initiated in the last 20 years (Schild 1998: 607).

The changes pursued by the government also included a new self-conception of itself. Reagan did not consider the government to be a superordinate body that created equal opportunities for all but as a bureaucracy that interfered too much into people’s lives by crushing personal initiative through welfare payments (Schild 1998: 606-608). In his inaugural address, Reagan claimed that “government is not the solution to [the] problem; government is the problem”2. This rose from a renewed link between welfare and poverty, as the way to prosperity and out of poverty could not be designed by government (Stoesz/Karger 1993: 619). George Gilder (1980), wrote that contemporary welfare programs made it difficult for the poor to improve their fate on their own initiative. This view was encouraged by Murray’s analysis (1984) revealing that welfare programs worsened poverty by corrupting the self-help morality of beneficiaries, encouraging unemployment and creating dependency (Walsh 1989: 336). In Reagan’s words, “it’s common knowledge that [the] welfare system has itself become a poverty trap – a creator and reinforcer of dependency.”3

Reagan’s aim was to strictly limit state regulations that hamper the free development of welfare recipients and instead promote personal responsibility and strengthened work ethics (Crafton 2014: 40). Welfare payments should not be seen as a right for recipients that are able to work. For those beneficiaries’ provisions are only temporary as they are required to fulfill the obligation to provide for themselves (ibid.). In a free-market, “people would live on a level commensurate with their exertion” (Hamilton 1990: 51). Moreover, the reduction of financial support, is rather an incentive to spring into action than a punishment. Accordingly, making changes to social laws were no longer reckless, but the first step towards self-sufficiency. This anti-welfare-ideology manifested itself in an altered perception of welfare recipients and a changed view on poverty. The poor were no longer regarded as victims of the economic system (Schild 1998: 608). During this period, data from public polls indicate that a growing percentage of Americans believed that slackness and lack of motivation to work were the main causes of poverty (Montero 1999: 175). Blaming the poor for their life situation is nothing new, but within the Reagan years stigmatization intensified drastically (Walsh 1989: 338). The understanding has been disseminated that dependency on welfare programs is a bigger concern than poverty (O’Connor, 1998: 55). Besides emphasizing dependency over poverty, the government allowed the term welfare to be further labeled by race and gender (O’Connor, 2009: 244). Although welfare has always been associated with these terms, the administration’s welfare-state-rhetoric involved severe generalizations and moralistic accusations. Additionally, the promotion of negative stereotypes incorporated the distinction between those in need of protection, the undeserving poor, and the deserving poor, including “welfare queens” and “freeloaders” (Crafton 2014: 28-40). The “truly needy” considered as deserving assistance, are, inter alia, the elderly or disabled, so to speak groups who should not be expected to work (Palmer/Sawhill 1984: 25).


1 Reagan, Ronald: „Address Before a Joint Session of Congress on the State of the Union“, January 25, 1988.Online by Gerhard Peters and John T. Woolley, The American Presidency Project.

2 Reagan, Ronald: „Inaugural Address “, January 20, 1981.Online by Gerhard Peters and John T. Woolley, The American Presidency Project, see

3 Ronald Reagan:"Radio Address to the Nation on Welfare Reform", August 1, 1987.Online by Gerhard Peters and John T. Woolley, The American Presidency Project.

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The Shift in U.S. Welfare Policy and its Impact on Economic Well-Being
Can a paradigm shift explain changes in welfare policy under Ronald Reagan and what are the impacts of the altered policy on peoples' economic well-being?
Universität zu Köln  (Cologne Center for Comparative Politics)
Political Economy of the USA
ISBN (eBook)
ISBN (Buch)
USA, Ronald Reagan, Welfare Policy, Welfare State, Political Economy, Paradigm Shift
Arbeit zitieren
Anonym, 2018, The Shift in U.S. Welfare Policy and its Impact on Economic Well-Being, München, GRIN Verlag,


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