Just give welfare to everyone
If you were designing a welfare state from scratch, how would you do it? What would be your first organizing principle?
A lot of Americans left, right, and center would say it's good to spend money on the people who need the help. As a basic budgetary matter, welfare state money spent on people who already have money is wasteful. Targeting keeps the costs of programs down. As a broader matter of principle or fairness, it's best to avoid giving money to people who don't need assistance.
But while targeting sounds rational in the abstract, it may be self-defeating in practice.
"By discriminating in favor of the poor, the targeted model creates a zero-sum conflict of interests between the poor and the better-off workers and the middle classes who must pay for the benefits of the poor without receiving any benefits," sociologists Walter Korpi and Joakim Palme argued in The Paradox of Redistribution and Strategies of Equality. "...The greater the degree of low-income targeting, the smaller the redistributive budget."
Poverty can socially mark people in their community and in the public discourse: as lazy, as lacking virtue, as unworthy. But government aid programs that target people in poverty can socially mark them in the same way, precisely because other people who aren't getting the benefits see the people in poverty getting them. As early as 1976, Ronald Reagan was telling stories of young black men buying steaks with food stamps, and women gaming the welfare system. More recently, in 2013, conservative media got ahold of a single anecdote of a man buying lobster with food stamps and beat it into the ground. These sorts of urban legends then feed attempts at both the federal and state level to either cut food stamp spending, or hem in its recipients with drug testing and other humiliating restrictions. Work requirements for government aid are also extremely popular.
There's even international evidence for this: Studies of two programs that gave direct cash transfers to poor people in Kenya and Malawi found, not surprisingly, that the recipients of the money did better. But the people in the same communities who didn't get any aid showed decreased life satisfaction and spikes in emotional distress.
In America, race and racism intensifies the effect. Poverty and the programs targeted at the impoverished do not just mark people in general as lesser; they're largely used to mark black Americans specifically, despite the fact that the majority of welfare recipients are white. Poverty and economic deprivation are among the main vehicles by which racial injustice is created. White resentment of black Americans was one of the central forces of opposition to traditional welfare (Aid to Families with Dependent Children) and even ObamaCare (which is also heavily targeted at the poorest Americans).
Giving people aid through government programs is never just an "economic" act. It's always a social act, too, as well as a political one — and thus an act with social and political consequences. The social and political effects of targeting benefits create resentments that can fracture the political alliances needed to preserve welfare state programs. Targeting winds up defeating itself, because the targeted programs lose support, gain enemies, and become easy political targets for cuts. The welfare state winds up more stingy and redistributing less.
Because the politically powerless get these targeted benefits, people start to resent them. So politicians cut the programs. Then the programs don't work very well. "Programs for the poor are poor programs," as an old adage goes.
The answer to the problem is to actively pursue "universalism" — avoid programs that target poorer Americans or that have eligibility cutoffs for people with too much income ("means testing" is the technical term) and instead deliberately distribute government aid across as broad a swath of the population as possible.
A universal basic income — which would give the same monthly cash benefit to every man, woman, and child in the country — is the extreme version of this idea. But universalism is an approach, not a policy, and can be pursued to varying degrees. For instance, one could imagine a program that gives the same monthly cash benefit to every family with a child, per child, regardless of income. You could extend that framework to the rest of the welfare state as well, with similar programs for every student, every retired person, every disabled person, and every person caring for a disabled or sick person. Single-payer systems are an example of universalism in health care.
The closest America has come to universal programs are things like Social Security and Medicare, which go to everyone over a certain age. And while resentments of the poor in general and African Americans in particular have certainly been used to prevent their expansion (Social Security excluded 65 percent of the black workforce and only 27 percent of the white workforce when it was implemented in 1935, and the gaps weren't closed for almost two decades) there's little evidence from American history that they can fracture universal programs once they're in place. Social Security and Medicare, much to the chagrin of many reformers, are pretty much untouchable in U.S. politics. Meanwhile, politicians have cut AFDC and other targeted income supports in the last few decades, sometimes severely.
That's the theory, anyway. The data backing this theory is not airtight, though. When economist Lane Kenworthy looked across several major western nations, from 1985 to 2005, he found a strong relationship between how big a country's welfare state budget was and how much it reduced inequality. He also found that in 1985, there was a strong relationship between how much a country relied on universal programs and how much it reduced inequality. But by 2005, that relationship had disappeared. How much a country relied on universalism didn't seem to have much effect on how much its programs reduced inequality.
That said, Kenworthy was working with a small data set. His results largely depended on changes in Denmark and the United States. Denmark has moved from universalism to a more targeted system without becoming any noticeably less generous or redistributive. It still spends gobs on its welfare state, and boasts very low levels of poverty and inequality. The United States, meanwhile, cut its targeted programs (think welfare reform) while leaving broad programs like Social Security and Medicare in place. The nature of its welfare state programs became more universal on net, while staying extremely stingy.
This led Kenworthy to propose an updated theory: By installing universal systems first, Denmark changed its social character. It created the social and political solidarity that allowed it to target programs more effectively later on.
Achieving that solidarity would likely be much harder in the U.S., given our history of slavery and Jim Crow and white supremacy, not to mention our comfort with inequality. But the story of how this happened doesn't change the effectiveness of universalism as an important strategy toward equality.