Public Policy and the Income Distribution

4. Government Programs and Social Outcomes: Comparison of the United States with Other Rich Nations

The United States has a long tradition of measuring income poverty and income inequality and weighing the effectiveness, successes, and failures of government policies aimed at poverty reduction. In our own way we have created a unique set of social policies that support widely held values and provide stories of both success and failure in reaching goals of poverty reduction and improved social outcomes for all Americans. But still our idiosyncrasies leave many questions to be answered. One can ask whether, in fact, Americans have “left no child behind.” And the answers depend very much on who one asks and where one looks for evidence. One can find claims that the 1996 Welfare Reform Act is a major “accounting” success story, with the AFDC and TANF (Aid to Families with Dependent Children and Temporary Assistance for Needy Families) caseloads falling from over 5 million units in 1994 and 4.5 million in 1996 to 2 million cases (and less than 5 million persons) by June 2003, less than one-third of the 6.9 million units that benefit from the Supplemental Security Income (SSI) program, which is up from 5.9 million recipients over this same period (U.S. Department of Health and Human Services 2003; Social Security Administration, Office of Policy 2003; Smeeding 2001). The question of whether and to what extent this dramatic change in caseloads has provided better outcomes for those who have entered or left each program is also widely debated. And even in areas where the case for policy success seems overwhelming, Chapter 4 Government Programs and Social Outcomes: Comparison of the United States with Other Rich Nations TIMOTHY M. SMEEDING such as the dramatic decline in poverty among the aged over the last half century, there is still room for serious policy debate over the remaining poor elders and their future prospects for better conditions under impending Social Security reform. For the most part, these examinations of domestic policy are inherently parochial, for they are based on the experiences of only one nation in isolation from the others. The estimation of crossnationally equivalent measures of poverty and the comparison of programs that support these groups of the poor provide a unique opportunity to compare the design and effectiveness of American social policy and antipoverty policy with other nations’ policies and experience. The Luxembourg Income Study (LIS) database, which undergirds this paper, contains the information needed to construct comparable poverty measures for more than thirty nations. It allows comparisons of the level and trend of poverty and inequality across several nations, along with considerable details on the programs and policies that in large part produce these outcomes. In this paper we use cross-national comparisons made possible by the LIS to examine the United States’ experiences in fighting poverty in the face of substantial and growing inequality, in a cross-national context . In so doing, we compare the effectiveness of United States antipoverty policies to those of similar nations elsewhere in the industrialized world. If lessons can be learned from cross-national comparisons, there is much that American voters and policymakers can learn about antipoverty policy. Every nation has its own idiosyncratic institutions and policies, reflecting its values, culture, institutions, and history , and wide differences in success and failure are evident from the comparisons that follow. Previous research has shown that the United States has one of the highest poverty rates of all the thirty rich countries participating in the LIS, whether poverty is measured using comparable absolute or relative standards for determining who is poor, and despite the fact that (with the exception of tiny Luxembourg itself), the United States is the richest of all nations on earth (Smeeding and Rainwater 2004; Smeeding, Rainwater, and Burtless 2001).1 All nations value low poverty, high levels of economic selfreliance , and equality of opportunity for younger persons, but they differ dramatically in the extent to which they reach these goals. 150 Public Policy and the Income Distribution Most nations are remarkably similar in their sources of social concern : births outside of wedlock and single-parent families, older women living alone, high unemployment, immigration pressures, low wages, and the sustainability of social expenditures in the face of rapid population aging. They also exhibit differences in the extent to which working-age adults mix economic self-reliance (earned incomes), family support, and government support to avoid poverty. This chapter is designed to examine...