During the course of recent decades, the promoters of the concept of “welfare” in the USA have largely succeeded in convincing many citizens that they are being automatically entitled to a variety of social services by the mere fact of their existence. Again and again, we are being told that it is the responsibility of society as a whole, to make sure that all of its members enjoy an access to free Medicare, that they never have to struggle with trying to satisfy their basic social and physiological needs, and that their children are being given a chance to obtain a good education, at the expense of a state. On the other hand, the ultimate goal of a “welfare state” is to equally distribute resources between society’s members, due to considerations of “fairness” – when this happens, the continuous social, cultural and scientific progress in such state becomes impossible, simply because the notion of equality is synonymous to the notion of energetic death. In truly “fair” society, people will be totally deprived of a stimulus to indulge in socially-productive activities. After all, those unwilling to work would still be able to enjoy comfortable living – the government will “take care” of them by forcing employed taxpayers to simply “share the riches” with “underprivileged” social parasites. Employees make no contribution to the plan, and benefits received under the plan are unrelated to the amounts contributed. Payments to retirees are adjusted for inflation once every five years, but since inflation is suppressed in the economies the actual adjustments were relatively modest.
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The welfare system is a drain on the economy explained by the increased financial burden on the state budget. This system is designed to work under the conditions of the centrally planned economy but was by no means appropriate for capitalistic conditions, due to the high inflation, drastic increase in earnings, and the decline in national income and employment that is experienced in all transitional countries. By the beginning of the 2000s contributions started to decline due to the fall in industrial output, as well as a rising dependency ratio. Therefore the relations between the government budget and the old-age, disability and survivors' welfare, as well as other social assistance schemes and cash benefits, are unclear (Rector n.d.). All these schemes are financed from the same source and administered by the same authorities. The increase in the number of welfare survivors could be explained by demographic factors as well as by the fact that for some transitional countries the increase in unemployment caused the introduction of new legislation which lowered the retirement age. In some transitional countries the liberalized laws granted disability welfare; this again exaggerated the situation. Following Rector (2006), the system dependency ratio increased, and as a logical consequence of this, the financial pressure became an additional burden to the governments. This burden pushed them to consider new mechanisms and schemes that would make welfare finance more flexible and take away from the state responsibility for the ageing society. Most of the countries experienced high inflation, especially at the beginning of transition. Retaining the indexing mechanisms developed thus placed welfare systems under considerable strain. “Ten years ago, when the welfare reform legislation was signed into law, Senator Daniel Patrick Moynihan (D-NY) proclaimed the new law to be "the most brutal act of social policy since Reconstruction” (Rector n.d.). Consequently, some governments took the route of incomplete indexation, thus reducing the welfare expenditure GDP ratio by keeping the growth rate of average welfare well below the growth rate of nominal GDP. For instance, in the book: Prisons We Choose to Live Inside, Doris Lessing describes the situation when people are limited by social circumstances and troubles. Lessing portrays that welfare is funded by general taxation and all residents receive.
The main problem with welfare system is that it will not be able to support people in retirement years in 5 years from now. Critics admit that there is a significant relationship between welfare dependency and psychological distress among children. It is important to note that even under the centrally controlled living conditions, approximately 30 percent of all elective surgery is performed outside the governmental system. “The simple fact is that children are suffering because the U.S. welfare system has failed (Beach n.d.). Designed as a system to help children, it has ended up damaging and abusing the very children it was intended to save. The welfare system has failed because the ideas upon which it was founded are flawed” (Fagan and Rector n.d.). The welfare suggests that when consumers are forced to rely on out-of-pocket disbursements to pay in whole or in part for a variety of products and services, low-cost as well as luxury items, the demand for these items declines (Fromm 4). Given the difficulties of designing and implementing an effective mechanism for budgetary constraint in the social sector, it would appear judicious to allow households to supplement the funds provided by government and insurance. However, it is important to stress that rapidly worsening inequality is not a general phenomenon for transitional economies. At the present time two patterns of inequality have emerged: the pattern. In other words, there is a strong link between contributions today and future benefits. Another of his points is related to the main goal of a welfare system, which is the provision of income after retirement (Rector and Fagan n.d.). This goal should be separated from redistributional functions. In this context preference should be given to a system that provides a level of retirement benefits with fewer contributions. Therefore capital accumulation, growth and employment should be taken into account. The final criterion – the actuarial fairness principle – is mainly concerned with the realization of a maximum of equivalence between the present value and benefits for the individual. The short story “The Yellow Wallpaper" by Charlotte Perkins Gilman vividly portrays a need for welfare for women. The main character suffers from mental disorder but she has no chance to be treated by a professional doctor. Her husband, a physician, pays no attention to her illness and perceives it as “temporary nervous depression--a slight hysterical tendency” (Gilman). The financial collapse of a traditional unfunded social security system could be prevented by some changes in its basic parameters and restrict its cost rate within a reasonable level of payroll taxes. In order to achieve this it might be necessary to increase the retirement age as well as enhancing the administrative efficiency of the system. The pursuit of these objectives could be done through keeping the targeted benefits low, as well as the level of payroll tax. However, if payroll taxes become high, use of notional defined contribution plans may protect against labour market distortions and high evasion of taxes that are likely to ensue. “The available scientific evidence clearly refutes the liberal hypothesis that attempting to raise family income through more generous welfare payments will benefit children. For example, the average monthly value of welfare benefits (AFDC and food stamps combined) varies between states.” (Fagan and Rector n.d.). While these efforts at strengthening the welfare system were necessary, they did not confront the underlying structural problems created by the governments' commitment to pay future unfunded welfare. One of the key problems here is the elimination of the informal labor market. By reducing the size of the informal market, productivity will grow, which will lead to economic growth. Moreover, none of these methods would be able to provide an environment for long-term savings or would encourage the development of a financial market (Fromm 5).
To deal with these structural problems a more radical approach seemed necessary, and the most popular area for debate concerned the introduction of new privately funded savings schemes. In other words, the current system of welfare would be replaced by a defined contribution retirement income system. The main arguments in favor of such a change are: more adequate welfare incomes; lower costs; and a more economic system as a whole. In any case, the result of the welfare reform should be targeted not at the macro system as a whole, but should first of all provide a retirement income to the aged population; only secondly should it concern the impact of the welfare system on the economy. However, the shift from the traditional defined benefit welfare system to a defined contribution fully funded system has obvious implications for both the adequacy of welfare benefits (which is mainly related to the predictability of welfare benefits upon retirement as well as an assurance from the government that retirees will have a decent standard of living) and welfare financing (Rector and Fagan n.d.).
In view of these considerations, transitional governments have had to consider an alternative to the welfare system – a mandatory fully funded pillar. The general common feature of this new system is the creation of individual retirement accounts, where mandatory saving is accumulated and invested in financial assets. The main logic of this approach is the establishment of proper economic incentives, which will reduce distortions in capital accumulation and labor supply. The main principle here would be the enhancement of contributory compliance and the development of the financial market. The macroeconomic situation also plays a role, where there is space for savings, investment and growth. These aspects of reform would be particularly relevant to the transitional economies given their financial needs (Rector and Fagan n.d.). In this respect the system would be capable of providing an explicit link between benefits and contributions and therefore reduce labor supply distortions. In addition, the FF system would be able to prevent further distortions in the long run by the requirement of a lower contribution rate in order to cover a given replacement ratio, as in theory (and from past practice) the average yield of welfare funds is higher than the growth rate of the wage bill. However, it might not be true in some practical transitional cases where the transparency of the reforms, as well as the legal institutions, are weak, and the law cannot prevent the interference of the government in the private sphere. The argument regarding the welfare system as a high political risk, due to the legacy of the communist past and costly post-communist transition, where the population maintains mistrust of the public sector, is quite simplistic and does not reflect the present situation in the majority of the transitional countries (Rector and Fagan n.d.). Another problem is related to the question of the capability of the countries' financial and regulatory infrastructure to absorb the changes. Welfare reform and the establishment of private welfare funds require a number of preconditions in terms of financial sector development, for instance a relatively well-developed securities market. An important difficulty that any transitional government faces in the reform of its welfare scheme is the lack of properly developed financial markets (Beach n.d.). There is a direct relationship between welfare dependency and psychological distress among children. Welfare support lowers there IQ levels because children are used to rely on financial support and state support paying no attention to educational achievements and education in general. They enter the job market as low-skilled employees with low IQ levels and have to rely on welfare in adult life. For instance, American-American children perform poor results at schools than their white middle class peers because their families do not promote education as means of further living and investments in future.
The short story “Lottery” by Shirley Jackson demonstrates that people cannot change their traditions and values even I they are old fashioned and no longer work. The current US welfare system resembles the black box and its history portrayed by Shirley Jackson:
“Every year, after the lottery, Mr. Summers began talking again about a new box, but every year the subject was allowed to fade off without anything's being done. The black box grew shabbier each year: by now it was no longer completely black but splintered badly along one side to show the original wood color, and in some places faded or stained” (Jackson n.d.).
However, it appears that history had not taught anything the contemporary promoters of equality – just as it was the case with their ideological predecessors, they believe that there is nothing wrong with their desire to impose “fairness” upon citizens, despite these citizens’ actual will. How do they propose this could be achieved? A macroeconomic policy would be just one of the many conditions which would be required for successful economic development. Another important issue for facilitating relations between welfare reforms and the capital market is institutional infrastructure, which should be based on effective welfare reform (Beach n.d.). There are some institutional and technical conditions which need to be fulfilled in order to develop the capital market, namely: macroeconomic stability which will provide appropriate fiscal and monetary conditions; and a legal and institutional framework which will provide reassurance of transparency and permanence, employing widely the rule of law in transitional systems as well as practical implementation of the newly created legal infrastructure and wider understanding of the above principle (Beach n.d.).
The conceptual soundness of various “welfare” theories can only be seriously discussed, for as long as they are being concerned with racially and culturally homogeneous societies. For example, the only successful “welfare state” in the history of humankind was Nazi Germany. However, even there, it would never occur to policy-makers that certain categories of citizens are being automatically entitled to various social services due to these citizens’ “underprivileged” status. However, when “welfare state” is being established to serve the needs of multicultural society, it is only the matter of short time before the whole “enterprise” ends up in disaster (Crouch and Streeck 66). For example, it has traditionally been assumed by “welfar” theorists that people’s dependency on social services is not genetically predetermined. In their book Crouch and Streeck (86) state: “At least half of the children born into a disadvantaged home do not repeat the pattern of disadvantage in the next generation”. However, such authors’ suggestion only remained valid until the time when the policy of “multiculturalism” had attained an official status in Western societies.
The contemporary realities of “multicultural” living in such countries as Britain, U.S., France and Germany, leave no doubt as to the fact that the overwhelming majority of representatives of ethic minorities in these countries (with probable exception of Chinese) became fully “specialized” in relying upon governmental assistance, as the way to meet ends, regardless of whether they belong to first, second, third of fourth generation of “ethnically unique” immigrants. Why work if gullible White taxpayers, instilled with the complex of “historical guilt”, do not mind taking care of these people’s expenses? For example, while in U.S., all the average Mexican couple has to do, in order to qualify for thousands and thousands of dollars in monthly welfare payments, is to conceive 4-5 kids, without even being required to look after these kids’ upbringing (Beach n.d.).Thus, the conclusion of this paper can be formulated as follows: it is not only that the concept of “welfare state” had been deprived of any practical significance, but it had also lost the remains of its theoretical validity. If the attractions of fund-holding are not replaced, few doctors are likely to undertake additional obligations of this nature. In this case the job would tend to be done by social administrators, and we would effectively return to the position before fund-holding (Fromm 6). The existing welfare system contains incentives for families to split up and for female headed families with children to be created and the government will pick up the tab. When a single mother of multiple children can continue to sit home and raise a family then nothing makes her want to be a productive part of society. The example of such situation is Nadya Suleman. She gave birth to octuplets and has to rely on the state support raising her children.
In sum, welfare is both a burden for the state and panacea for millions of mothers and children in the USA. It is understood that there are a lot of good-natured but naïve people out there, who genuinely believe in the ideals of social egalitarianism – we do not deny their right to live in the world of fantasy. However, the problem starts when these people strive to impose their well-meaning but utterly meaningless ideas upon the rest of society as the only acceptable ones, because while doing it, they become ever-more aggressive and intolerant to the opinions of others. Still, welfare system is one of the most important social institutions in every state. Its development and up-to-date technologies have a great impact on living conditions of individuals and their well-being. The welfare is one of the main institutions around the world which helps the states to supply and provide a population with social services t all costs (van Kersbergen 43).
The United States is a single developed country without welfare. The advantage of welfare is that it allows states to treat debases and support people in need. The main problems identified by researchers are financial budgeting and increased role of technology at expense of human relations and communication. One of the side effects of the preoccupation of the people with the capabilities of high-tech medicine has been the neglect of the role that individuals can and must play in the maintenance of their own living conditions through wholesome personal behavior and life-styles. The potential contribution that expanded efforts at preventive medicine and living conditions can make to the nation's living conditions has also been neglected. Although there has been a marked decline in smoking and, to a lesser extent, the consumption of alcohol (largely among the better-educated, higher-income population), the nation has been plagued by increasing use of addictive drugs. Paying for social services creates more uncertainty and doubt for American citizens while the universal living conditions would ensure stable development and coverage of all social classes.
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