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CIO: Labor Democratizes America
Welfare State
  Origins in America
Public Assistance
Social Insurance
Social Security Act of 1935
Decommodification and the Social Wage
Types of Welfare States
Who gets what and why…
 Social Darwinist focus on
 biology discredited…simply
 no evidence.

 Marxist focus on immorality
 of exploitation challenged
 and/or rejected by most
 workers organizations

 Weber
    AFL & CIO organized, but
    not in the way Marx
    expected…
 Creation of an Activist State
Capitalism and Democracy
Market institutions and Political Institutions
exist side by side in American society

They offer different strategies for the
“mobilization of resources, the distribution of
rewards, and the steering of society” (Korpi 1989: 312)




Translation???
The CIO and Politics
In 1936 CIO puts $74 million
behind FDR (2007 dollars)

1943 CIO Political Action
Committee formed

   CIO committee created to register
   voters, educate them, and get them
   out to vote

   In some cities, extremely well
   organized
    • City broken down into
      districts…districts into
      wards…wards into blocks…each
      block had community steward in
      charge of mobilizing union vote
CIO Pushes Beyond Workplace…
  Need for Political Action and Expanded
  Government Protection
    “Every Worker a Voter”


  “Long ago we recognized the futility of a trade
  union movement concerned only with activity on
  the economic and industrial fronts. You just
  cannot draw a line between economic and political
  action.
    New York City CIO leader, Saul Mills, 1946
Two Dominant Strategies
 Economic Strategy
    Group mobility by organizing “Unions” within the
    labor market (AFL & CIO)


 Political Strategy: Working Class Organizations
 demand an “Activist State”

A) Government should protect citizens by intervening in
   the free market and regulating business

   •   Minimum wage laws, overtime rules, child labor laws,
       safety rules, fire codes, labor laws, etc.
An Activist State Regulates
Capitalism
Fair Labor Standards Act (1938)
  restricted child labor in industries engaged in interstate
  commerce and set minimum wage wages and maximum hours
  for all workers.

   • “Starting today, a new law will be in place across these United
     States- The FLSA. The Fair Labor Standards Act will regulate the
     wages, treatment, and hours of all workers across the country. No
     employee shall be paid less than 25 cents per hour and will be paid
     for working more than 44 hours per week. This is called overtime
     and will be effective immediately, but can be adjusted over time if
     needed. No more sending your kids to work in dangerous and
     unlawful work places because I have deemed this unconstitutional.”
     President Roosevelt

  Laissez Faire and Social Darwinist take on this?
An “Alternative Social Logic”
Political Strategy: Working Class Organizations
demand an “Activist State”

B) Government should use power to tax wealth and
income to re-distribute society’s surplus

  Regardless of what a person earns, they are entitled to
  certain things as a right of citizenship
   • What you earn in the labor market should not be the sole determinant
     of your quality of life


  Welfare States will be created
Welfare State Defined…
Government insurance, public assistance, education
and medical programs designed to maximize the
economic and social welfare of the society’s
population  (Marger p.383)



   Note: not just programs for poor…many programs effect
   most or all members of society

Posits a key role for the state in lives of citizenry

   Radical break with laissez fair conception of society…

   A point of major debate from 1930s through 2009
Welfare State by state by state…
By 1920s, a patchwork of programs around the nation
  Safety Net spotty…
   • Some have Unemployment Ins., Disability Ins., Aid for Mothers…


  Many firms & people aggravated…why?


An un-level playing field…

  Programs funded through taxes

  Firm in NY at a competitive disadvantage relative to a firm
  in Mississippi
1930s…Crisis
 Great Depression

 Large segments of society unable to provide for
 themselves…

   Nobody wants to buy their labor for a wage

   Without wages, people are in trouble…

 States and Charities unable to meet demand
   Tens of millions in need
A Glimpse of Need in
Philadelphia…

 “One woman went along the docks and picked up
 vegetables that fell from wagons. Sometimes fish
 vendors gave her fish at the end of the day. On
 two different occasions the family was without
 food for a day and a half. Another family did not
 have food for two days. Then the husband went
 out and gathered dandelions and the family ate
 them.”
   Social worker testifying to US Senate Committee
Charity or Government?
Is there a role for the federal government, or should we
depend on private organizations and the
states…positions emerge that remain until today?

President Hoover believes in a limited role for government:

   “You cannot extend the mastery of government over the daily lives of
   the people without at the same time making it the master of their souls
   and thoughts.”

“Trying to turn back this tide of distress through private
philanthropic contributions is about as useless as trying to put
out a forest fire with a garden house.”
   Observer of Depression America
FDR’s New Deal…Government
must play a role.
 “Modern society acting through it government
 owes the definite obligation to prevent starvation
 or dire waste of any of its fellow men and women
 who try to maintain themselves but cannot…Aid
 to jobless citizens must be extended by
 government, not as a matter of charity, but as a
 matter of social duty.”

   Franklin Delano Roosevelt
Economic Bill of Rights
It is our duty now to begin to lay the plans and determine the strategy for the
winning of a lasting peace and the establishment of an American standard of
living higher than ever before known. We cannot be content, no matter how high
that general standard of living may be, if some fraction of our people—whether it
be one-third or one-fifth or one-tenth—is ill-fed, ill-clothed, ill-housed, and
insecure.

This Republic had its beginning, and grew to its present strength, under the
protection of certain inalienable political rights—among them the right of free
speech, free press, free worship, trial by jury, freedom from unreasonable
searches and seizures. They were our rights to life and liberty.

As our nation has grown in size and stature, however—as our industrial economy
expanded—these political rights proved inadequate to assure us equality in the
pursuit of happiness.

We have come to a clear realization of the fact that true individual freedom
cannot exist without economic security and independence. “Necessitous men are
not free men.” People who are hungry and out of a job are the stuff of which
dictatorships are made.
Economic Bill of Rights
The right:
   of a useful and remunerative job in the industries or shops or farms or
   mines of the nation;
   to earn enough to provide adequate food and clothing and recreation;
   of every farmer to raise and sell his products at a return which will give
   him and his family a decent living;
   of every businessman, large and small, to trade in an atmosphere of
   freedom from unfair competition and domination by monopolies at
   home or abroad;
   of every family to a decent home;
   to adequate medical care and the opportunity to achieve and enjoy
     good health;
   to adequate protection from the economic fears of old age, sickness,
   accident, and unemployment;
   to a good education.
Economic Bill of Rights
Who proposed it? How do you think an advocate of
laissez faire capitalism would feel about the idea that
a good job, food, a home, education and other things
are a “right,” similar to the right to free speech or the
right to assemble. How would a social Darwinist
feel about this idea? Why?

What do you think? Should government actively
work to insure that these rights are realized, or are
such things best left to private actors in the market
economy?
Class Society
 FDR’s New Deal rejects laissez faire
 perspective and begins to construct modern
 Welfare State.

 “Citizens obtain welfare from three basic
 sources: markets, family and government”
 (Esping Anderson 2007)




 Translation???
Class Society
Market is chief source of well being
   In capitalist society labor (one’s ability to work) is a commodity that is
   sold for a wage (income)

   One can use income to buy food, shelter, clothing, child care, health
   care, etc.


Family is another source of well being
   Kin help each other by pooling money, transferring money, passing
   money on, and by providing services such as child care


Government can be another source of well being
   Role of government in insuring well being will vary, for instance
   government might provide universal access to child care as a right
Faced with the Great Depression…
FDR and Democratic Majorities in Congress increase the
Government’s Role in providing for people’s welfare

Social Security Act of 1935

Committed the Fed. Govt. to providing Social
Insurance & Public Assistance to certain
groups
   What’s the difference?
Targeted Public Assistance and Social
Insurance
  Public Assistance
    Means tested programs designed mainly for the poor             (Marger:
    213)

       • Targeted programs designed for certain populations
    Means tested? What does this mean?

  Means tested
       • income tested… “person or family has to earn below a certain
         amount to qualify” (Iceland 2003: 126)

  Social Insurance
    Programs that provide cash or benefits to all eligible
    citizens   (Marger: 213)



       • Universal programs
  Social Security Act of 1935
  Committed the Fed. Govt. to providing social insurance &
  public assistance to certain groups

  3 Programs…

1) Old Age Insurance (aka Social Security)
     provides income for senior citizens…some initial exceptions

  A form of social insurance that is a universal benefit…with
  some initial exceptions

  Southern Elites fight to exclude agricultural workers,
  domestic workers and others…Why would they do this?
  Social Security Act of 1935
1) Old Age Insurance (aka Social Security)
     provides income for senior citizens…some initial exceptions

  A universal benefit…with some initial exceptions

  Southern Elites fight to exclude agricultural workers,
  domestic workers and others…Why would they do this?

  Fear old age pension will make Blacks less subordinate
     80% of Blacks excluded from SS
Social Security Act of 1935
2) Aid to Dependent Children

  (Later AFDC…then TANF) what many commonly think
  of as “Welfare”)

  Means tested public assistance targeted at poor children
   • “under the age of sixteen who has been deprived of parental
     support or care by reason of the death, continued absence from
     the home, or physical or mental incapacity of a parent.”
     http://www.socialsecurity.gov/history/35activ.html




  In most cases will go to women with kids. Why not make
  the women work? Hint: It’s 1935…
Social Security Act of 1935
Unemployment Insurance (SI or PA?)

Public Assistance for those who meet criteria…but
funded as an insurance program
  “…reserves are accumulated during periods of employment to be paid
  out as benefits to workers during periods of unemployment…Those
  workers who have been employed and on whose behalf contributions
  have been paid into an unemployment insurance fund may draw
  benefits for a definite period of time relative to the length of their
  previous employment (usually 1 week of benefit to 4 weeks of
  employment). In normal times, the great majority of workers will be
  able to find other work before their right to benefits is
  exhausted.”http://www.ssa.gov/history/reports/ces/cesvol9unemploy.html
So FDR’s New Deal moves US toward
more Government Intervention
Market is chief source of well being
   In capitalist society labor (one’s ability to work) is a commodity that is
   sold for a wage (income)

   One can use income to buy food, shelter, clothing, child care, health
   care, etc.


Family is another source of well being
   Kin help each other by pooling money, transferring money, passing
   money on, and by providing services such as child care


Government can be another source of well being
   Role of government in insuring well being will vary, for instance
   government might provide universal access to child care as a right
How Does US Welfare State
Compare to Others
In all capitalist democracies, representatives of the
working class and the capitalist class have struggled
over the form that the welfare state would take…

Gosta Esping Anderson identifies 3 basic types…

  Liberal, Corporatist and Social Democratic… we’ll just
  discuss 2

  Liberal welfare state? Who can describe? Example?
Liberal Welfare State
Favors minimal government intervention under the
“assumption that the majority of people can obtain
adequate welfare from the market.

Government should nurture markets, not replace
them
  Provide tax credits to spur people to create more pre-
  schools…don’t provide government pre-school

Little spent on social services
  US expenditures on social services about 2% of Gross
  Domestic Product
Liberal Welfare States Tend to Favor
Targeted Public Assistance as Opposed to
Social Insurance
 US Policy has Emphasized Public Assistance
 program
    Means tested programs designed mainly for the poor
    213)
                                                                   (Marger:



       • Targeted programs designed for certain populations
    Means tested
       • income tested… “person or family has to earn below a certain
         amount to qualify” (Iceland 2003: 126)


 We have some Social Insurance programs (Social
 Security, Medicare, Unemployment)
    Programs that provide cash or benefits to all eligible
    citizens  (Marger: 213)


    Universal programs
Clusters of Welfare States
 In all capitalist democracies, representatives of the
 working class and the capitalist class have
 struggled over the form that the welfare state
 would take…

 Gosta Esping Anderson identifies 3 basic types…

   Liberal, Corporatist and Social Democratic… we’ll just
   discuss 2

   Social Democratic welfare state? Decommodification?
   Who can describe? Example?
Social Democratic Welfare States
High levels of government intervention in an attempt
to decommodify life


Decommodification

  refers to the degree to which individuals or families can
  uphold a socially acceptable standard of living independent
  of labor market participation.


To do this, you must provide an alternative to the
market wage…Called a Social wage?
Welfare States
Decommodification?
  refers to the degree to which individuals or families can
  uphold a socially acceptable standard of living independent
  of labor market participation


Social wage
  the share of a nation’s resources that is distributed according
  to social rather than strict market criteria.

   • Old people, New Parents, College Students, Unemployed enjoy
     decent standard of living although they don’t work

   • They survive because they receive $ from the government… a social
     wage
Social Democratic Welfare State
High levels of government intervention in an
attempt to decommodify life via a social wage


In some instances government should replace market
  Instead of buying health insurance in the market, you
  receive health care as a right of citizenship

A lot spent on social services
  Sweden and Denmark expenditures on social services
  about 20% of Gross Domestic Product
    • US was 2%
Caring for Our Young
 Compare and contrast Europe and the
 United States with regard to the provision of
 Family Leave.
Family Leave: Liberal vs. SD
Liberal Welfare State
  US Family Medical Leave Act (1993)
  12 weeks leave with no pay
   • NJ and CA now have pay


Social Democratic Welfare State
  Norway- 1 yr with 80% of full pay from govt.
  Sweden-1yr with full pay from govt.
 Sick Kids: Liberal vs. SD
Liberal Welfare State (US)
     FMLA with no pay
     Use sick days from employers
      • 56% of workers get paid sick days from employer
      • Avg. 15 days after 5 years
     44% just get docked pay


  Social Democratic Welfare State (Sweden)
     each parent is entitled to up to 60 day’s leave per
     child/per year at 80% to 90% of normal pay from govt.
Higher Ed: Liberal vs. SD
Liberal Welfare State (US)
  College must be purchased in the market

  Grants exist for those who qualify
   • Means tested Pell Grants


  Subsidized Loans are there for many


Social Democratic Welfare State (Sweden)
  College is free
  Living stipend provided
Outline
Welfare States
Paying for the American Welfare State: Taxes
Progressive, Regressive, Proportional
Social Security

Test on Tuesday
   MC/TF and essay
   Slides are all up…today’s will go up
   Fear of Bi-modal distribution….plesae prove me wrong
   Questions

Ministers will join on us on the 22nd
   Reflection questions will be posted and are due in class on Thursday
   the 22nd
   Class attendance on the 22nd will count as 4 point assignment
Caring for Our Young
 Compare and contrast France and the
 United States with regard to the provision of
 child care. Be sure to touch on how it is
 provided, cost, and quality.
Child Care: US
Government Provided Child Care programs are means tested
   Head Start

For most families, day care must be purchased in market
   Cost more than year in many public colleges

$4,000 to $10,000 a year per single child

   My cousin pays $1000 per kid per month

Child care workers receive low pay
   1998
    • $6.61 for day care
    • $ 8.32 pre-school
Child Care
United States                      You were asked to read an
                                   article abou Ecoles Maternales?
Government Provided Child Care
programs are means tested          France
   Head Start

For most families, day care must
be purchased in market place
   Cost more than year in many
   public colleges


Workers receive low pay
   1998
     • $6.61 for day care
     • $ 8.32 pre-school
Child Care
United States                      You were asked to read an
                                   article abou Ecoles
Government Provided Child Care     Maternales?
programs are means tested
   Head Start
                                   France
For most families, day care must
be purchased in market place       Government provides
   Cost more than year in many
   public colleges                 universal access for all
                                   kids 3 to 6 years old
                                      8:30 to 4:30
Workers receive low pay
   1998                            Staff has masters degree &
     • $6.61 for day care
     • $ 8.32 pre-school
                                   is paid on par with regular
                                   teachers
Welfare States Impacts Inequality
Design of the welfare state matters impacts on
question of “Who gets what and why?”

  If I didn’t have to pay for child care my life would
  be different

  If you didn’t have to pay for college, your life
  would be different

Design of the welfare state effects
poverty…Difference between Sweden & US?
Comparative Impact of Welfare
State,    p.261 Kerbo




                        Poverty Pre Poverty Post    Percent
                         Welfare      Welfare      Reduction
US                        26.7%       19.1%         -28.5%
Germany                     22          7.6          -65.5
Italy                      18.4         6.5          -64.7
England                    29.2         14.6          -50
Canada                     23.4         11.7          -50
Denmark                    26.9         7.5          -72.1
Belgium                    28.4         5.5          -80.6
Sweden                     34.1         6.7          -80.4
Children in Single Mother
Families: Percent Poor, 2003
 30        30

 25
      22
 20

 15                                Poor
                                   Extremely Poor
 10
                 6         5
 5
                     2         2
 0
      US        Finland   Sweden
Child Poverty, March 2005
Design of the Welfare State Effects
Level of Inequality
Wealth Distribution Compared              Sweden   25
(Gini Index: closer to 100 the >
inequality)

If people value greater equality,
they can use politics to achieve it

                                          US       40
    More of society’s resources are
    distributed by the political system
    as opposed to the economic
    system…
Design of the Welfare State and
Effort
Decommodification
   refers to the degree to which individuals or families can uphold a
   socially acceptable standard of living independent of labor market
   participation.

Social wage
   the share of a nation’s resources that is distributed according to social
   rather than strict market criteria.

Won’t people just choose not to work and free ride off of
society…interestingly, no evidence of this…Theories as to
why?
   Unemployment Rate 2000-2003
    • Sweden (SD)                5.3%
    • Norway (SD)                3.9%
    • US (L)                     5.1%
Liberal vs. Social Democratic
 Welfare States Effect on Economy
Welfare States
 Standard of Living
Welfare States Impacts Inequality
Design of the welfare state matters impacts on question
of “Who gets what and why?”

Consider the kids at CEM…how would their lives be
different if
  All parents received a social wage to insure that their kids
  were not poor
  High quality pre-school was made available to all citizens
  Schools were not funded by local property taxes, so they had
  access to the same education as kids in Swarthmore
  College tuition was free to all citizens

So the next question is, how are such things paid for?
So…How do you fund welfare states,
whether Liberal or Social Democratic?
 Taxes.
     Social Welfare Spending,
     (as pct. of gross national product)

40
35
30
25
20
15
10
5
0
      Sweden     Neth      Den       Fran   Germ   Italy   UK   US
Funding the Welfare State:
Household Tax Wedge, 2003
Trade offs and Choices: Is it worth the higher
taxes? Reasonable people will reasonably
disagree?
 Disposable Income of Avg. Production Worker (%
 of gross pay)
                 Single Person    Married w/ 2
                                     Kids
 Sweden              65.6%           65.5%

 US                  74.2%           81.7%
No right choice…
Reasonable people will reasonably disagree…

  Might form opinion based on personal values

  Might form opinion based on where you are in the class
  structure
   • Small business owner might see and experience things differently
     than a teacher or coal miner


Key Point: Welfare State has large impact on our
key questions… who gets what and why
Funding the New Deal and Beyond
Whether liberal or social democratic…Welfare
States require $…but where should the money come
from…only one possibility…

Taxes…

  “…taxes are what we pay for civilized society.” Oliver
  Wendell Holmes, US Supreme Court Justice (1902-1932)

  Big issue for many of you in this class…teachers, cops
  and other public workers
There is no such thing as a free
lunch…
First off, we need to recognize that taxes pay for more than
Welfare State…

Public assistance & Social Insurance- transfer payments of the sort
we’ve been talking about vis a vis the Welfare State
   Social Security, Aid to Dependent Mothers, Food Stamps, College
   Loans…

Public Goods- good that everyone in society derives a benefit from,
but which no private actor will provide
    Lighthouses, airports, highways, schools, military, teachers, cops,
    rangers, coast guard, DMV etc.

Interest on Debt
Federal Budget
Taxes of what sort…
Who should be taxed…& how much should they be
taxed…

Late 19th century, heavy reliance on tariffs and property
taxes…proved insufficient to fund government

Income Tax developed in 1913
  Bi-partisan support to begin taxing income to fund federal
  government
    • 16th Amendment
        “The Congress shall have power to lay and collect taxes on incomes,
         from whatever source derived, without apportionment among the several
         states, and without regard to any census or enumeration.”
An Income Tax…
But how should it work…taxes come in a
variety of forms…

Progressive, Regressive, Proportional…let’s
consider…

Can anyone tell me some of the differences?
What kind of tax…
Progressive Taxation
  as income rises, tax payments rise proportionately
   • Based on “ability to pay”

  “The only effective design for diminishing the income inequality
  inherent in capitalism is the progressive income tax.”
   • John Kenneth Galbraith, Economist

  Redistributes wealth downward
   • Tax Carnegie’s income to provide food stamps to Carnegie’s workers
   • Tax Trump’s income to provide college grants for the children of
     Trump’s workers
   • Tax Widener’s income to insure that cops and teachers have decent
     salaries
Progressive Taxation Illustrated
What kind of tax…
Regressive- as income rises, tax payments decline as
proportion of wealth or income

Example: Social Security...Pay 6.2% up to $102,000

   Make $102,000 and pay $6,324…rate of 6.2%

   Make $5 million but only pay on the first $102,000 you
   make $6,324 , so really only paying …rate of .12%

   I pay at a higher rate than Bill Gates
What kind of tax...
Proportional(Flat Tax)- people pay same percentage
rate

20% Income Tax
   20% flat tax of $10,000 means tax of $2000…$8,000 left to
   live on
   20% of $1,000,000 means tax of $200,000…$800,000 left to
   live on


Fair in that we all pay the same 20%, but some say
unfair because it hits some families much harder than
others
What kind of tax...
Proportional(Flat Tax)- people pay same percentage rate

Sometimes Flat tax ends up being regressive??? They’re fighting
about this in NJ right now…

Example: Sales Tax

    • $15,000, all of which is spent on living
         Pay 6% sales tax equal to $900, so 6% of their income is paid
          in tax

    • $500,000, spending $100,000 on living
         Pay 6% sales tax equal to $6,000, so 1.2% of their income is
          paid in tax
An Income Tax…
But how should it work…taxes come in a variety of
forms…

Progressive-high income people pay more

Regressive-low income people pay more

Proportional- everyone pays the same percentage
  Sometimes ends up being regressive
An Income Tax…Initial Choice?
When the income tax was first launched, bi-partisan
support for progressive tax structure

  Based on Ability to Pay

  1% of both individual and corporate incomes
   • People who make less than $3000 paid nothing
   • Almost everyone paid nothing


  Graduated Surtax of 6% for incomes over $20,000
   • 2% of Americans
                                                    (Wilson, p.46)
An income tax expands…
President Wilson, Democrat 1913-1921

  Dealing with war & social unrest
   • Russian Revolution, 1917


  “Redistributional taxation…became a major element of
  the Wilson administration’s program for steering between
  socialism and unmediated capitalism.”

  Modern corporation as “central engine of productivity”
   • Tax on corporate “excess profits”…profits above a “normal rate
     of return”
Reducing progressive rates?
When Republicans regain power (1921), there will
be move to reduce progressive aspects of income
tax…but…interestingly…

Move resisted by other Republicans like Republican
Secretary of Treasury Mellon

  “..helped persuade corporations and the wealthiest
  individuals to accept some progressive income
  taxation…This approach would..demonstrate their civic
  responsibility and defuse radical attacks against capital.”
  (1926, Wilson, p.6)
  Funding the New Deal…
1)INCOME TAX: progressive, but mass based

    Progressive
      13% on first $2000

      82%         on income over $200,000
  Funding the New Deal…
1)INCOME TAX: progressive, but mass based
    Progressive
      13% on first $2000
      82% on income over $200,000

    Mass Base...more people asked to pay
      3.9 million people paid income taxes in 1939
      42.6 million people paid income taxes in 1945
      •   60% of labor force                     (Wilson, p.92,104)




    By 1944/45…Income taxes will account for 40% of
    Federal Revenues
Income tax…Who pays what
today…
Still progressive…but   much less so…
Income tax…Who pays what
today…
David Cay Johnston
   NYT Reporter won Pulitzer Prize for tax reporting
   Perfectly Legal (2003)

2000: Richest 1% (>$313,000) earned 21% of income and
paid 37% of federal income taxes

2000:Calculate for all federal taxes (gas, beer and other
regressive taxes) Top 1% paid about 25%

So…1% got 21% of income..paid 25% of taxes…No longer
very Progressive
Funding the New Deal
How many of you understand the current
discussion about social security reform?

Anyone know what is happening?
Funding the New Deal
Pay as you go system of Insurance
  Current workers pay to fund current recipient
  •   “…with those taxes in there, no damn politician can ever scrap
      my social security program.” President Roosevelt(p.76 Wilson)




Payroll Tax for Social Insurance: Regressive

Example: Social Security...Pay 6.2% up to $102,000
  Make $102,000 and pay $6,324…rate of 6.2%

  Make $5 million & pay $6,324…rate of .12%
Old Age…US Welfare State
 1935, Social Security
    Federal Insurance Income
    Contribution Act (FICA)

    Supplemental Income to
    Retirees
     • Born after 1938…Full at 65
     • Born after 1960…Full at 67

    1972, Cost of Living
    Adjustment (COLA)
    provided

 On avg., 40% of pay is
 received by retiree
Social Security & Poverty
Benefits: Government
 How does Social Security work?
 “Pay as you go”
   Current generation taxed to pay current retirees
     • 6.2% payroll tax on earnings up to $102,000
     • Employer and Employee both pay




 Current Crisis:
   1950, 16 contributors for each recipient
   1999, 3 contributors for each recipient
   2020, 2 contributors for each recipient
Solutions?
Cut benefits or raise eligibility age
   Old take a hit
Raise Payroll Taxes
   All workers & employers take a hit
   Since regressive, low and middle income take biggest hit
Lift $102,000 cap & tax more earnings
   Top 25% of income bracket takes a hit
From the Grave…FDR trumps Bush
Change system to Personal Retirement Account
  Workers invest % of payment in stock market & bet that
  market investments grow
   • How fund current retirees as money is diverted?
   • What if retire when market is down? Many retirees are currently
     in a world of hurt…


Pay as you go system of Insurance
  Current workers pay to fund current recipient
   • “…with those taxes in there, no damn politician can ever
     scrap my social security program.” President Roosevelt   (p.76 Wilson)
Capitalism and Democracy
Market institutions and Political Institutions exist side by
side in American society

They offer different strategies for the “mobilization of
resources, the distribution of rewards, and the steering of
society” (Korpi 1989: 312)



Translation…People should sell their labor in the
marketplace and:

   Save their own money so they can survive when they’re too old to
   work (Market institutions)

   Are entitled to a government pension so they can live with dignity
   when they’re too old to work (Political institutions)
Next…Post War Class Relations

				
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