Well, actually since a large chunk of it consists of taxing one part of
the working class to help another part of the working class, it is at
least in part a form of self-help.
More seriously, the distinction between welfare and social insurance
traces its origins back to the Social Security Act, which enshrined a
two-tier system of social insurance (social security and unemployment
benefits) and welfare (the original ADC program). This split was
sharpened because the original Social Security only provided for the
worker, and it wasn't until four years later that a 1939 amendment moved
the start date up from 1942 to 1940 and added survivors. This change
made the distinction between social insurance and welfare clearer,
because henceforth, those families where a worker had vested in the
social security system got social insurance, while those without a
sufficient connection to the labor market got welfare. The policy
consequences of this distinction bedevil us to the present day.
Joel Blau
Jim Devine wrote:
"welfare system"?? who are they kidding? it's an insurance system.
On 10/23/06, Jayson Funke <[EMAIL PROTECTED]> wrote:
US welfare system faces accounting overhaul
By Krishna Guha in Washington
Published: October 22 2006
Financial Times
A radical new approach to government accounting that would require
the US administration to account for the cost of future social
security payments year by year as people build up entitlements will
be proposed on Monday.
The proposal by the federal accounting standards advisory board
(FASAB) – which would also require the government to account for
benefits accrued under Medicare and other social insurance programmes
in the same way – is unprecedented internationally. It would
radically change the presentation of US government finances, in
effect bringing forward the cost of rapidly increasing social
security and Medicare obligations and greatly increasing the reported
fiscal deficit.
George W. Bush's administration is firmly opposed to the proposal,
which officials believe wrongly implies that the government is
contractually obliged to make future payments based on current
benefit rules.
They fear this would make it more difficult to reform the big
entitlement programmes and increase pressure on future governments to
raise taxes to meet projected funding shortfalls.
The big increase in the reported fiscal deficit under the proposed
rule could have an immediate political effect, making it more
difficult to press for Bush tax cuts scheduled to expire in 2010 to
be made permanent.
The result is a split in the FASAB board, with six independent
members supporting the proposal and the three representing the
Treasury, the White House office of management and budget, and the
government accountability office opposing.
The FT has obtained a copy of the FASAB preliminary views paper which
will be released on Monday. In it, the independent board majority
argues that "for social insurance programmes an expense is incurred
and a liability arises when participants substantially meet
eligibility requirements during their working lives".
By contrast, the government representatives argue that the liability
arises only when the benefit amount is "due and payable" as under
current accounting rules. The majority independent directors want the
government to start providing for the future cost of social security
and other benefits when workers become fully insured after 10 years
in covered employment.
They say the current arrangement is "flawed" because it
"fails . . . to recognise the accruing cost of social insurance
programmes in each reporting period".
Adopting the proposed new rule would bring the government more into
line with the private sector, an approach that has considerable
support within a section of the Republican party and may in this
instance be of interest to Democrats too.However, it would break with
international public accounting practice, which essentially treats
social insurance offered by sovereign governments as a political
commitment to pay future benefits rather than a financial liability.
The Organisation for Economic Co-operation and Development has
written to the FASAB saying it is "very concerned" about the proposed
rule change.
The letter, signed by Barry Anderson, head of the OECD's budgeting
and public expenditures division, says that "classifying these
transactions the same as private sector liabilities is wrong" and
could confuse the public.
The proposal will now be put to public consultation, with hearings
scheduled for March. If the board votes to adopt it, the
administration could still veto the proposal, but this would be
unprecedented.
"We have never been prevented from adopting an accounting standard,"
a person familiar with the process said.
Copyright The Financial Times Limited 2006
--------------------------------
Jayson Funke
Graduate School of Geography
Clark University
950 Main Street
Worcester, MA 01610
