Conservative advisor Bill Kristol penned a now-famous memo to Republicans about defeating the Clinton health care bill in 1993 that discusses the relationship between social policy and electoral politics. Kristol argued
its passage (Clinton's health care reform) in the short run will do nothing to hurt (and everything to help) Democratic electoral prospects in 1996. But the long-term political effects of a successful Clinton health care bill will be even worse – much worse. It will relegitimize middle-class dependence for “security” on government spending and regulation. It will revive the reputation of the party that spends and regulates, the Democrats, as the generous protector of middle-class interests. And it will at the same time strike a punishing blow against Republican claims to defend the middle class by restraining government.
There are a number of important questions that arise from the Kristol memo. How do electoral considerations influence a political party's strategy on social welfare policy? How can a political party in power target a socioeconomic class of voters with social benefits? How do party leaders balance short- and long-run considerations when designing social policy? And if Republicans believe that the Democratic Party benefits at the ballot box from increased social spending then why wouldn't the Republican Party try to distribute social benefits too? In this chapter, I introduce a partisan theory of the divided social welfare state in America. My theoretical argument examines the electoral and political motivations of both the Democratic and Republican parties in crafting social welfare policy.
In the following sections, I review the extant literature on the divided social system. In particular, I highlight recent studies from policy scholars on how the different characteristics of public versus private social welfare influence political changes to social policy over time. This line of literature foreshadows how Republicans and Democrats differentiate their approaches to the divided social system. Next, I provide a broad sketch of my party-centered theory of the divided social system. First, I consider why the major political parties would have different approaches to the divided social welfare state. I argue that the opposing electoral coalitions and member ideology of the Democratic and Republican parties create different incentives for favoring one type of spending versus another. Second, I examine how the two political parties distribute social benefits through the selection and substitution of policy tools across the divided social welfare state. I argue that Democrats in power increase government spending for public social programs and offset the costs through reductions in private subsidies, while Republican Party control results in an overall increase of federal subsidies for private social programs at the expense of traditional spending for public social welfare.
A Divided U.S. Social System
The fundamental dividing line between the Democratic Party and Republican Party is over the role of the federal government in the economy. As applied to social policy, the Democratic Party has continually expanded social welfare programs through increases in government spending while the Republican Party has limited social programs through spending cuts. This resilient relationship between political parties and changes to social spending has been found across time (McCarty et al. Reference McCarty, Poole and Rosenthal2006), across levels of government (Fellowes and Rowe Reference Fellowes and Rowe2004), and across countries (Blais et al. Reference Blais, Blake and Dion1993, Reference Blais, Blake and Dion1996, Huber and Stephens Reference Huber and Stephens2001).Footnote 1 While these relationships are certainly true, most empirical research does not take into account many of the assorted policy tools used to finance social policy such as tax expenditures, grants, and loans. These forms of off-budget spending have all grown more popular in recent decades and constitute an increasing percentage of total federal spending. Most importantly, many of these policy instruments are used to subsidize private sector organizations and businesses, especially those that provide and administer social programs. The inclusion of government subsidies for private welfare allows us to observe modern partisan conflict through the study of the politics of the divided American welfare state.
This study builds off a long line of work examining the role of the federal government in creating and perpetuating the divided American welfare state (see Gitterman Reference Gitterman2010, Hacker Reference Hacker2002, Howard Reference Howard1997, Reference Howard2007, Mettler Reference Mettler, Pierson and Skocpol2007, Morgan and Campbell Reference Morgan and Campbell2011, Titmuss Reference Titmuss1965). There are a number of recurring themes in the public policy literature on the divided social system that are relevant for the analysis in this book. First, the federal government is heavily involved in the financing, regulation, administration, and provision of both private and public social programs. As an example, Esping-Andersen (Reference Esping-Anderson1990) in The Three Worlds of Welfare Capitalism argues that international comparisons of social welfare need to account for the private sector and studies that only examine public social programs are incomplete and inadequate. He develops the concept of welfare-state regimes, which represents a social welfare state as being compromised by the state, the private market, and the family. In creating social welfare state regime types, Esping-Andersen categorizes the United States as a liberal welfare state (liberal in the classic sense). A liberal welfare state is exemplified by the dominance of private organizations in providing benefits and services and therefore limiting the federal government to a secondary role of providing means-tested benefits to the poor and dependents. A number of more recent studies such as Hacker (Reference Hacker2002), Howard (Reference Howard1997, Reference Howard2007), and Mettler (Reference Mettler, Pierson and Skocpol2007) show that the United States spends more on private social benefits than any other industrialized country in the world.
While the private welfare system is substantial in the United States, its size and scope are determined by the interaction between public and private programs. The seminal work on the American divided social system is Jacob Hacker's The Divided Welfare State (Reference Hacker2002). Hacker argues that the early development of a private health care system in the United States hindered future political efforts to create a universal, government-run public health insurance program. More recently, Morgan and Campbell (Reference Morgan and Campbell2011) show that the provision of private prescription drug benefits through Medicare Part D resulted in a lower demand among seniors for a publicly provided drug plan. Hacker (Reference Hacker2002) contends that the United States’ early adoption of a Social Security program allowed public retirement benefits the necessary time and space to develop, in part, due to the lack of an established private pension system. He goes on to show that future efforts at developing private retirement plans had to contend with both the elderly constituency built by public pensions and the bureaucracy (the Social Security Administration) charged with administering the program and protecting its policy turf. For example, President Reagan failed in his efforts to privatize Social Security, which resulted in the elderly becoming more politically active, and relatedly, the AARP growing in number and lobbying strength (Campbell Reference Campbell2003). These studies demonstrate that path dependency, policy feedback, and organized interests determine changes to the divided social system, and that a trade off exists between the government's promotion of private welfare benefits and public demand for government-administered social programs. In this book, I formally examine the role of political party power in moving federal money from one side of the divide to the other and expect that a party in the majority can alter the balance and path of the divided social system despite existing policy constraints.
Additionally, policy studies of the divided welfare state demonstrate how different the politics of private social welfare can be from the politics of public social policy. The major American public social programs were created during periods of unified party control, with large Democratic majorities, and a liberal public mood. An early and important work on private social welfare is The Hidden Welfare State (1997) by Christopher Howard. Howard (Reference Howard1997) shows that a number of new social tax expenditure programs for private welfare were created during periods of divided government, during an era of political party polarization and without the constraint of mass public opinion. Suzanne Mettler (Reference Mettler, Pierson and Skocpol2007) argues and demonstrates that the mass public is largely unaware of welfare benefits provided through social tax expenditure programs and that this interferes with the accountability between the public and policymakers. The result is that interest groups can protect and perpetuate social tax expenditures out of the eye of the public. Relatedly, Morgan and Campbell (Reference Morgan and Campbell2011) demonstrate the important role of interest groups and Congress in facilitating the creation and expansion of private social benefits. The implications from this line of work are that unified party control is not a condition necessary for the expansion of subsidies for private welfare, public opinion may be less of an influence on social tax expenditures than it is on public benefits, and different political actors are important for the formation of private as opposed to public social programs. In Chapter 5, I systematically examine the influence of political party control of the federal government, divided government, and political polarization on the growth of social tax expenditures for private programs.
The most important distinction between social tax expenditures for private programs and public social spending is who benefits. Scholars (Hacker Reference Hacker2002, Howard Reference Howard1997, Mettler Reference Mettler2011, Surrey Reference Surrey1974, Titmuss Reference Titmuss1965) have argued that tax expenditures for social programs benefit populations different from those helped by public social welfare. In particular, Howard finds that most tax expenditures are targeted to assist the provision of employment-based social benefits, and the employees who are most likely to be offered these benefits work in large corporations and earn high incomes. Howard (Reference Howard1997), Hacker (Reference Hacker2002), and Mettler (Reference Mettler2011) all argue that most tax expenditures for private social programs are designed to distribute more federal money up the income ladder to wealthier households and offer little to no benefit for poor families (except for the EITC). This form of welfare for the wealthy stands in stark contrast to the function of most public programs that either directly offer more assistance to the poor and unemployed or provide a large benefit-to-cost ratio to the working poor through program design (e.g., Social Security). In addition, this line of work highlights that not only do wealthier citizens benefit from social tax expenditures but so too do the private providers of social welfare goods (such as large banks, private HMOs, and private drug companies, to name a few). Businesses that offer employee social insurance benefit from tax-free compensation and providers receive annual government subsidies worth hundreds of billions for their investment and insurance products. In Chapter 6, I evaluate how changes to social tax expenditures correspond to changes in the level of income inequality. I expect that given the regressive distribution effects of tax expenditures, an increase in social tax expenditures will cause higher levels of inequality. In total, the public policy literature has improved our understanding of the politics of social policy by including in their analysis federal tax expenditures that finance private social benefits and services alongside traditional social spending. And although some of the more recent work (see Howard Reference Howard2007 and Morgan and Campbell Reference Morgan and Campbell2011) suggests a role for political parties in the creation of and changes to the divided social system, the exact motivations and mechanisms that Democrats and Republicans use to shape the divided social state are as of now unexamined.
A Theory of Political Parties and the Divided Social State
My theory of political parties and the divided social welfare state works at the nexus of research from American politics and public policy. Political parties have both the political motivations and the institutional capabilities to craft social policy as a means to distribute government benefits to their constituencies and move federal policy in the ideological direction of their members. My theoretical argument employs the following line of logic. First, the mass public, including a majority of self-identified Republicans, has continually called upon the federal government for higher levels of social spending. Therefore, a political party in power that is concerned about its electoral fortunes must respond to this public pressure with increased social spending or risk losing power. Second, a political party, operating under the constraints of public opinion, distributes government social benefits to its core constituencies and offsets this increase, in part, by taking away federal money from the opposing party's voters. This policy strategy looks different for Democrats and Republicans since each political party's electoral constituency is sorted out on one side of the divided welfare state or the other. The socioeconomic groups that rely on public social programs have traditionally aligned themselves with the Democratic Party while the socioeconomic groups that benefit from private social welfare are more likely to identify with the Republican Party. The Democratic Party when in power will increase public social spending at the expense of subsidies for private welfare as a means to target government benefits to their core voters and move policy in a liberal direction. Conversely, Republicans in the majority will raise the level of subsidies for private welfare while cutting public expenditures so as to distribute social benefits to their loyalists while moving federal policy in a conservative direction. While both parties are motivated by electoral and ideological goals, Democrats are more concerned with using social policy to distribute benefits to their constituencies and Republicans are primarily motivated to use social welfare as a mechanism to shift the ideological direction of the federal government. The implications of this theoretical argument are that which political party controls federal power determines, in part, who administers social services, who receives federal money for social benefits, and the balance between public and private power in the United States.
Why Political Parties Distribute Social Welfare Benefits
Why would both political parties, and not just the Democratic Party, distribute social welfare benefits to voters? Social programs such as health insurance, pensions, and education are widely popular with the American public (Ellis and Stimson Reference Ellis and Stimson2012, Page and Jacobs Reference Page and Jacobs2009). It is generally recognized that citizens who self-identify as liberals and those who align themselves with the Democratic Party are supportive of increased federal social spending, especially toward programs that assist more vulnerable populations such as the elderly and the poor (Jacoby Reference Jacoby2000, Lewis-Beck Reference Lewis-Beck, Jacoby, Norpoth and Weisberg2009). In addition, various studies demonstrate that citizens who classify egalitarianism as the most important American political value also favor more government spending on redistributive social programs (Feldman Reference Feldman1988, Jacoby Reference Jacoby2006). The New Deal and Great Society programs targeted electorally important groups such as unions, urbanites, minorities, farmers, and the working poor. These two periods of social welfare expansion helped create the modern Democratic Party's coalition of unions, women, minorities, liberals, the working class, and educated suburbanites. As a result, traditional theories of political party power and social policy claim that the Democratic Party has an electoral incentive to support and expand social welfare programs.
The Republican Party faces a different political challenge concerning social policy. While ardent conservatives do not favor higher social spending, there is a majority of self-declared conservatives and self-identified Republicans who do support a greater role for the federal government in the provision of social welfare (Page and Jacobs Reference Page and Jacobs2009, Ellis and Stimson Reference Ellis and Stimson2012). For example, Ellis and Stimson (Reference Ellis and Stimson2012) find that even though more of the electorate has identified as conservative over time, this ideological change has not been coupled with any measurable decline in public support for spending on social programs – a liberal position. A majority of the public during the period of their study consistently preferred more federal government spending on a variety of social programs. Most importantly for this study, the authors demonstrate that more than 50 percent of self-declared conservatives prefer higher levels of federal social spending for specific goals such as education or specific programs such as Social Security (Ellis and Stimson Reference Ellis and Stimson2012). In addition, Ellis and Stimson (Reference Ellis and Stimson2012) find that approximately 40 percent of the total American electorate represents a belief system they describe as symbolically conservative and operationally liberal. These are survey respondents who identify with the political label conservative yet consistently prefer more federal spending on social programs. They find that, over time, there are more than twice as many self-identified conservatives who take liberal positions on federal social spending than there are consistent conservatives who match their ideology with policy preferences for a smaller federal government. Page and Jacobs (Reference Page and Jacobs2009), similarly to the previous study, conducted a national survey and found that a plurality of American citizens fall under the category of conservative egalitarians. These are survey respondents who identify as ideological conservatives yet support federal government involvement in a large number of social programs. For example, Page and Jacobs (Reference Page and Jacobs2009) find that a clear majority of Republicans (80 percent and 60 percent, respectively) support the federal government's involvement in “spending whatever is necessary to ensure that all children have really good public schools” and that “Washington ought to see to it that everyone who wants to work can find a job.” The cumulative result of these studies is that many Republican voters, despite the public perception of favoring smaller government, demand more federal spending on popular social programs and goals.
There are a number of implications from these studies that are relevant to theorizing about political parties and the divided social system. First, a vast majority of the electorate at any one point in time over the last forty years has supported increased federal involvement and spending for the provision of social benefits and services. The overwhelming support for government spending on social programs, from Democrats to Republicans to political independents, means that there is no viable electoral strategy that would allow a political party to simply cut federal social spending without offering the public – in return – some government support for social programs. Second, a majority of citizens who identify as conservatives and a majority of Republicans prefer more federal spending on a range of social goals including health care, pensions, and assistance to the poor. Therefore, traditional theories of social policy claiming that the Republican Party has an electoral incentive to reduce federal social spending do not recognize the real constraints of public opinion on political party behavior. However, if we recognize that different policy instruments can be used to finance either the public or private social system, it becomes easier to see how Republicans could support federal subsidies for private social welfare while still claiming support for small government. The Republican Party's support of tax subsidies for private welfare, in particular, allows party members to thread the ideological needle of supporting less government spending in the abstract (a position favored by their supporters, who are consistent conservatives) while in reality subsidizing popular social goals demanded by the mass public (a position that appeals to conflicted conservatives and a majority of the electorate). In the following section, I describe the theory of distributive politics and how it maps onto the partisan politics of the divided welfare state.
The Distributive Politics of the Divided Social State
A political party in power has different options for distributing social welfare benefits to its electoral constituencies. First, a party can widely and indiscriminately distribute universal social benefits to the whole electorate. The political effect of this strategy would be to not only help the party's voters but also give benefits to independents and voters from the other party. These types of social spending programs are by their nature very expensive and hard to get through Congress unless the party in power has unified control of the federal government. Second, a political party in the majority could target swing voters with increased social benefits and services. A swing voter is usually a citizen who consistently votes but does not have a stable partisan identification. This political strategy of persuasion could be used if the party in power has a large number of members in swing districts or swing states. A third possibility is for a political party, in the majority, to direct social spending toward its core constituencies and pay for this spending increase through cuts to programs that benefit the opposing party's voters. A party that operates along these lines would be using social spending as a means to mobilize its supporters to get out and vote in the next election while taking away government benefits from voters who, in a polarized environment, are already lost to the opposing party. I contend that a political party in power will mobilize its core voters with social benefits while paying for this increased spending with reductions in subsidies for other types of social welfare.
Distributive politics is an institutional commitment by political parties to aid incumbents in delivering tangible and traceable benefits to their constituencies or congressional districts. According to the core voter model of distributive politics, a political party interested in vote maximization will distribute government goods and services to their major voting blocs (Cox and McCubbins Reference Cox and McCubbins1986). Cox and McCubbins (Reference Cox and McCubbins1986) define core voters in two ways: first, as voters who have strong preferences for one party over another, and second, as voters who can be directly identified and targeted with government benefits. The authors argue that a political party in power designs public policy, in part, as a means to mobilize latent partisans to vote. The most prized (and least costly) voter for a political party is one who already agrees with the party on policy issues and has an elastic probability of voting, which is conditional on targeted spending toward his or her group. A political party practicing distributive politics is either “rewarding loyalists” or “turnout buying,” depending on a voter's probability of voting (Nichter Reference Nichter2008). The core voter distributive politics model posits that a party in power makes payments to electoral groups to sustain their coalition over a long period of time. A political party in power will take the low-risk strategy of overinvesting in its core supporters as a way to maximize votes but also offering policies that reflect the ideology of the median member of the governing coalition. The transfer of social welfare benefits and services to core voters increases the likelihood of their turnout, sends signals to other constituencies about which groups they are politically aligned with, and deters primary challengers.
As an example, the budgetary process allows a political party, in the majority, to narrowly target direct spending for public projects or services back to its party supporters. Numerous studies demonstrate that the constituencies in districts of the majority party have been disproportionately favored in the distribution of all types of direct spending such as defense dollars (Carsey and Rundquist Reference Carsey and Rundquist1999), transportation funding (Lee Reference Lee2000), and federal grants (Levitt and Snyder Reference Levitt and Snyder1995). Levitt and Snyder (Reference Levitt and Snyder1995) conclude that political parties are better skilled at targeting specific types of voters and not as adept at directing money to individual member districts. They find “that Democratic control of both the House and Senate over most of the post-war period has allowed Democrats to fashion a portfolio of spending programs that disproportionately benefit their constituents. It appears that parties in the United States can, given enough time, target types of voters, but they cannot easily target individual districts” (p. 961). I argue here that a political party in the majority uses changes in social spending to target socioeconomic groups within its electoral coalition as opposed to targeting social benefits by district.
The Electoral Connection and the Divided Welfare State
The political and economic polarization of voters has allowed a political party to target core constituencies by moving federal money from one side of the divided social system to the other. The Democratic Party's socioeconomic electoral coalition relies more on public social benefits and the Republican Party's socioeconomic voting core benefits more from private social programs. I argue, here, that the Democratic Party favors the use of direct spending for public social programs, in part, because the public social welfare state disproportionately benefits the working class, racial minorities, ethnic minorities, and women. These same groups are central to the Democratic Party's electoral coalition and benefit twice over from public welfare: once, from their reliance on the insurance and services provided by public programs, and again, from the progressive redistributive effects. These policy features help explain why the Democratic Party has historically favored the addition and expansion of direct social spending for public programs (more on this argument in Chapter 3). Conversely, federal tax expenditures subsidize wealthier citizens in procuring social insurance, benefit financial institutions and private health care companies in offering their products, and lower the costs for large businesses that offer fringe benefits to their employees as a form of wages. For example, the reigning conservative view on investment income is that it should not be taxed (or taxed at very low levels), and therefore, the Republican Party has proposed a steady stream of tax deductions and exclusions for health savings accounts, retirement savings accounts, education savings accounts, and even unemployment savings accounts. These federal subsidies not only serve as a form of government assistance to banks and financial firms for their various investment products but reward wealthier households that have enough disposable income to save, and, therefore, purchase these accounts. Consequently and contrary to existing theories of social policy, both Democrats and Republicans can help their members by using social welfare spending to distribute government goods and services to important voting communities.
Democrats and Republicans have developed distinct and divergent socioeconomic core constituencies (McCarty, Poole and Rosenthal Reference McCarty, Poole and Rosenthal2006, Gelman Reference Gelman2008, Stonecash and Mariani Reference Stonecash2000, Gimpel and Schuknecht Reference Gimpel and Schuknecht2001, Stonecash et al. Reference Stonecash, Brewer and Mariani2003). Specifically, the working class and minorities have become more Democratic while wealthier whites have become more aligned with the Republican Party over time (Stonecash Reference Stonecash2000, McCarty et al. Reference McCarty, Poole and Rosenthal2006). The top income quartile was only marginally more likely to identify with the Republican Party in 1956, but in 2000, those in the top income quartile were more than two and half times as likely to vote for the Republican Party as the lowest income quartile (McCarty et al. Reference McCarty, Poole and Rosenthal2006). Stonecash (Reference Stonecash2000) finds a steady increase in support for the Democratic Party among the working class between 1952 and 1996. In this study, he showed that socioeconomic differences in voting started in the 1970s and have grown larger over time. The increase in class divisions between the two political parties is valid both inside and outside the South and whether you isolate white voters or examine all voters (Bartels Reference Bartels2008, Nadeau and Stanley Reference Nadeau and Stanley1993, Nadeau et al. Reference Nadeau, Niemi, Stanley and Godbout2004).Footnote 2 However, the link between class and Presidential vote can change depending upon the level of analysis. Gelman (Reference Gelman2008) finds a strong relationship between class and partisan voting in poorer states (that also are more conservative) yet little correlation between class and Presidential vote in richer and more Democratic states. In addition to these class cleavages, the Civil Rights legislation of the 1960s sparked an exodus of white Southern voters from the Democratic to the Republican Party. The Democratic Party became more likely than the Republican Party to support aid for racial minorities and, therefore, racial policy developed as an important characteristic dividing the two parties (Carmines and Stimson Reference Carmines and Stimson1989). The major implication of these studies is that as voters have sorted themselves out socioeconomically over time then it would follow that the two political parties use social policy as a means to move federal money either up or down the income ladder.
In addition to the partisan divergence of socioeconomic voters, economic interest groups have also selected into one of the two political party coalitions (Grossmann and Dominguez Reference Grossmann and Dominguez2009, Koger et al. Reference Koger, Masket and Noel2009, Heaney et al. Reference Heaney, Masket, Miller and Strolovitch2012). Grossmann and Dominguez (Reference Grossmann and Dominguez2009) find that during primary elections unions make up the majority of groups in the Democratic coalition while corporations are the dominant constituency for Republicans. These same patterns of support with unions overwhelmingly favoring Democrats and businesses and corporations supporting Republicans were found when they examined the mentions of interest groups between Democratic and Republican legislators from the Congressional Record. The union and business divide is not only found in electoral support but also through financial network analysis of the two political parties. The patterns of interest group support reinforce the class divisions found in the partisan identification and presidential voting of individual citizens. It is not just that working class citizens have become increasingly Democratic but that unions are uniformly Democratic, which provides even more political incentive for the Democratic Party to implement policies that redistribute federal money down the income ladder. Conversely, wealthier households and corporations have the same broad financial interests in distributing money to the rich.
There are a number of industries, which are represented by special interests, that benefit from social tax subsidies by having their services or products subsidized so that their customers do not pay the full cost of using private social welfare. In the following section, I examine campaign donation patterns across relevant industries that have a financial stake in federal social spending during the 2012 Presidential election. In a Presidential election won by a Democratic incumbent, we might expect that most groups would be strategic and risk adverse by donating heavily to the Democrats. Yet the data in Figure 2.1 show that even in a Presidential election won by an incumbent Democratic President more social welfare industries donated to the Republican Party. The skewed distribution of campaign donations toward the Republican Party is a function, in part, of their efforts to subsidize businesses and private organizations in their provision of social welfare. First, banks, private equity firms, and investment houses all benefit from the numerous social tax expenditures that subsidize citizens in purchasing private retirement accounts. These financial institutions sell 401k(s) and 403b(s) to self-employed individuals and businesses with employment-based retirement programs. Figure 2.1 shows that financial institutions disproportionately (on average a 75%/25% split) gave to Mitt Romney and the Republicans in 2012. Second, private hospitals, pharmaceutical companies, health insurance companies, and businesses that provide health services have financial incentives to support the addition and extension of tax expenditures for health care. In 2012, although the health care industries lean Republican, there is a more even split between Democratic and Republican donations. The passage and implementation of Obamacare are probably the most likely explanations for the split campaign donations. Next, real estate companies benefit from the tax expenditures that assist homeowners with their mortgage payments and associated taxes. Again, the real estate industry donated three times more to the Republican Party than to the Democratic Party in 2012. Overall, the patterns here provide some evidence that those industries that benefit from social tax expenditures reward the Republican Party with campaign donations at election time.
Figure 2.1. Industry PAC donations in the 2012 presidential election.
While both parties are concerned about the electoral ramifications of changing social policy, I expect Democrats to be more concerned over who benefits from social welfare spending rather than how they benefit. First, the major economic interest group within the Democratic Party has a vested interest in employment-based social benefits and services (Gottschalk Reference Gottschalk2000, Hacker Reference Hacker2002). Unions wanting to attract members, trying to counter the power of business owners, and frustrated with national failures to achieve universal health care and other benefits turned to encouraging policymakers to pass and grow subsidies for employment-based plans. So while more liberal Democrats may have strong preferences for government-run programs they have also had to balance the interests of American union members. Second, Democratic voters favor government spending on vulnerable populations but also have reported lower levels of trust in the federal government over time (e.g., Hetherington 2001). In addition, Democratic voters demonstrate more concern over which socioeconomic groups are assisted through spending and less concern over how government benefits are delivered (Faricy and Ellis Reference Faricy and Ellis2014). Finally, the Democratic Party is more of a network of special interest groups who make demands on the federal government for specific public goods, including social welfare (Grossmann and Hopkins Reference Grossmann and Hopkins2014). Therefore, in a hyperpolarized political environment and during periods of divided government the Democratic Party is more willing to compromise on the delivery mechanism of federal funds and less willing to negotiate about who receives social benefits. A countervailing factor is that the Democratic Party has issue ownership of public social programs. I expect that the Democrats’ priorities are primarily to protect and, when they can, expand the major public social programs and secondarily to add new benefits through public programs if they can or through private subsidies if they must.
In conclusion, although Republicans and Democrats are compelled by the constraints of mass public opinion to spend on social programs they can choose how to design social expenditures and by extension who benefits. The socioeconomic sorting across the divided social state allows each political party to target the types of voters that are at the core of its respective electoral coalitions by changing the balance of direct spending for public programs versus tax expenditures for private welfare. A political party in power by trading off types of social spending improves its members’ chances at reelection while taking away resources that benefit the minority party's constituency.
Member Preferences for Social Policy
While political party members construct public policy to distribute benefits for reelection, they are also concerned with making a personal contribution to changing the ideological direction of federal policy over the long run. There are a number of factors that motivate a policymaker to use social programs as a means to move the ideological direction of federal policy. First, party members in government have become more ideologically extreme over the years (McCarty et al. Reference McCarty, Poole and Rosenthal2000, Reference McCarty, Poole and Rosenthal2006). An implication of political polarization is that as ideologically extreme members replace moderate legislators then the long-run ideological direction of federal policy becomes more of an institutional goal for the two national parties. In addition, political party members find themselves representing more similar districts as polarization has intensified over the years. The realignment of the South and other demographic movements have resulted in electoral constituencies that are increasingly similar for members of the same party and different across the two political parties (Jacobson Reference Jacobson2005, Abramowitz and Saunders Reference Abramowitz and Saunders2006, Theriault Reference Theriault2008). There is evidence from studies on polarization that political parties are driving voters to ideological extreme positions, and that in turn ideological voters are increasingly self-selecting into one of the two parties (Carmines and Stimson Reference Carmines and Stimson1989, Zaller Reference Zaller1992, Abramowitz and Saunders Reference Abramowitz and Saunders1998, Layman and Carsey Reference Layman and Carsey2002). The homogenization of districts has also resulted in legislators increasingly being more concerned about losing their seats due to a primary opponent than to the opposing party in a general election (Brady et al. Reference Brady, Han and Pope2007, McGhee et al. Reference McGhee, Masket, Shor, Rogers and McCarty2014). The result of these trends is that legislators face less of a trade off between working on legislation for their district and working on ideological-driven bills. In essence, the legislative goals of members, their party leaders, and the districts have become more closely aligned so that working to protect and move forward an ideological agenda has become itself a type of “pork.”
Second, political party elites have polarized in ways that make it easier for party leaders to coordinate members around an ideological agenda. The theory of “conditional party government” ties together electoral and party member polarization in explaining partisan policymaking (Rohde Reference Rohde1991, Aldrich and Rohde Reference Aldrich and Rohde1998, Reference Aldrich and Rohde2000). Aldrich and Rohde argue that while a political party has both electoral and policy goals, party members are primarily concerned with reelection. Therefore, the uniformity of a political party's electoral constituency determines how willing individual members are to turn over power to political party leaders to enforce party line votes. In contrast, when members’ interests within a party do not line up, the individual members are more likely to retain power in order to meet the specific needs of their district. One of the characteristics of party polarization is that members’ constituencies are more socioeconomically and politically homogenous across congressional districts (Jacobson Reference Jacobson2001, Reference Jacobson2005). The authority given to party leaders from their membership provides the necessary carrots and sticks (such as campaign money and committee seats) that result in more party line votes and greater party polarization. As applied here, the core constituencies for both Democrats and Republicans have sorted themselves out so that parties do not need to make large economic trade offs when constructing economic and tax policy (Abramowitz and Saunders Reference Abramowitz and Saunders1998, 2000, Reference Abramowitz and Saunders2006, Jacobson Reference Jacobson2001, Reference Jacobson2005, Layman and Carsey Reference Layman and Carsey2002, Stonecash et al. Reference Stonecash, Brewer and Mariani2003, Brewer Reference Brewer2005).
So while party members have the incentives and capacities to pass ideological agendas, what does liberal versus conservative social policy look like? A policy's ideological bent is a function of who benefits, how it is delivered, and who administers the benefits or services. Direct spending for public social programs and tax expenditures for private welfare represent opposing political philosophies. Liberal policy makers promote the use of government activity and social spending to correct for market failures that undermine equality. Direct spending for public programs can be thought of as a liberal policy since the combined effects are to target vulnerable populations with social insurance, progressively redistribute federal money, and use federal government administration to ensure equal opportunity for citizens in gaining economic security. Conservative policy makers promote the idea that the private market is superior to any other system in creating an environment and incentive structure that fosters individual economic freedom. Therefore, social tax expenditures can be considered an example of conservative public policy since the combined effects are to subsidize businesses in their efforts to provide social goods and services, regressively distribute money to wealthier citizens (or job creators), and bypass public bureaucratic administration through off-budget spending. Specifically, the Democratic Party wants to move federal policy in a liberal direction at the expense of conservative benefits and Republicans desire to move federal policy in a conservative direction while reducing the impact of liberal programs.
Is there evidence that Republicans and Democrats demonstrate divergent preferences for public versus private forms of social welfare? Table 2.1 compares the positions of the two political parties across three social policy issues (pensions, health care, and education) using the 1980 party platforms. I used the 1980 election since it is often singled out as a bellwether for the rise of the conservative movement within the Republican Party. And since party platforms are not binding nor are they highly reported on by the media, they might better reflect the sincere preferences of party elites. As indicated by the policy positions in the platform, the Republican Party supports tax subsidies for each and every single social issue and also emphasizes the private market in discussing the provision of pensions and health care. In fact, the Republican preference for tax subsidies in 1980 was also included in other policy areas not in the table such as welfare, disability assistance, housing, and energy. Notice that the Republican platform does not directly attack Social Security and Medicare but instead offers up positive alternatives such as a private retirement initiative that uses tax exemptions and exclusions and in discussing health care they refer to patients as “health care customers” who can be assisted by tax and financial incentives. Democrats, in comparison, continually make arguments for the importance of public social programs in providing citizens economic security. In 1980, Democrats portrayed themselves as the creators and protectors of Social Security, calling the largest government social program “a covenant” with the elderly and declare their goal of bringing people “a government-run universal health care program.” In these sections, there is no shying away from the Democratic Party's full-throated support of a more active federal government as a way to bring about greater equality through increased spending.
Table 2.1. A Comparison of Political Party Platforms on Social Spending, 1980
| Social Issue | Republican Party | Democratic Party |
|---|---|---|
| Old Age Pensions | “We propose to assist families, and individuals of all ages, to meet the needs of the elderly, primarily through vigorous private initiative. Only new tax exemptions and incentives can make it possible for many families to afford to care for their older members at home.” | “The Democratic Party will oppose any effort to tamper with the Social Security system by cutting or taxing benefits as a violation of the contract the American government has made with its people. We hereby make a covenant with the elderly of America that as we have kept the Social Security trust fund sound and solvent in the past, we shall keep it sound and solvent in the years ahead.” |
| Health Care | “As consumers of health care, individual Americans and their families should be able to make their own choices about health care protection. We propose to assist them in so doing through tax and financial incentives.” | “The answer to runaway medical costs is not, as Republicans propose, to pour money into a wasteful and inefficient system. The answer is not to cut back on benefits for the elderly and eligibility for the poor. The answer is to enact a comprehensive, universal national health insurance plan.” |
| Education | “We are dismayed that the Carter Administration cruelly reneged on promises made during the 1976 campaign. Wielding the threat of his veto, Mr. Carter led the fight against Republican attempts to make tuition tax credits a reality.” | “We must begin to think of federal expenditures as capital investments, favoring those which are productive and which reduce future costs. In this context, education must be one of our highest priorities. Education is also the indispensable prerequisite for effective democracy. Federal aid to education has increased by 73 percent – the greatest income increase in such a short period in our history.” |
While both political parties are determined to change the ideological direction of federal policy, this is a more important goal for Republicans than it is for Democrats for the following reasons. First, the Republican Party has moved further to the ideological right than the Democratic Party has moved to the left (McCarty et al. Reference McCarty, Poole and Rosenthal2013). The simple fact is that the Republican Party's median member has become more conservative over time, pulling the party's legislative agenda to the far right of the ideological spectrum. As conservative members have replaced moderate members within the Republican Party, the implementation of a conservative agenda has become the main motivation for more and more members. Second, the Democratic Party owns the issues of Social Security and Medicare while Republicans own the issues of privatization and lowering taxes (Petrocik Reference Petrocik1996, Egan Reference Egan2013). The Republican Party only wins on social policy if public trust is shaken in the viability of the major public programs and voters seek out private solutions for economic security. Republican campaign tacticians such as Lee Atwater understand full well that the Republican Party is advantaged when people blame the federal government for society's problems and seek government solutions that rely on the private market. Lee Atwater remarked about the Republicans' strategy in the 1980 election,
we were able to make the establishment, insofar as it is bad, the government. In other words, big government was the enemy, not big business. If the people are thinking that the problem is that taxes are too high and government interferes too much then we are doing our jobs. But if they get to the point where they say the real problem is that rich people aren't paying taxes, that Republicans are protecting the realtors and so forth, then I think the Democrats are going to be in pretty good shape. Edsall and Edsall 1991.
Finally, the Republican Party is mainly a network of conservative interest groups not interested in policy compromise (Grossmann and Hopkins Reference Grossmann and Hopkins2014). Grossmann and Hopkins (Reference Grossmann and Hopkins2014) found that Republican voters prefer legislators who stick to their conservative principles to those who compromise to get policy passed. As long as legislative compromise on social welfare issues expands the scope of the federal government, then Republican voters have incentive to reject even small expansions of public programs. In turn, the main conservative interests that support the Republican Party, such as fiscal conservatives, Chamber of Commerce Republicans, and religious groups, can all be brought together to support subsidies for the private administration of social programs. Tax subsidies for private social welfare lower the level of federal revenues that can be used for future government spending, subsidize business interests, and in some cases provide federal money to religious groups in providing social assistance. The implication of this line of logic is that Republicans are primarily motivated to move social services to the private sector and, therefore, have a strong preference for private subsidies over public spending.
How Political Parties Distribute Social Welfare Benefits
How do the two political parties distribute benefits and services to their respective electoral constituencies in a way that adheres to their members’ dominant ideologies? In the following sections, I examine the role of policy tools in allowing political parties to select the delivery mechanism of social funding to particular groups in society. The study of policy tools or policy instrument choice is integral to understanding the politics of the divided social state. A public policy instrument is defined as ‘‘a method through which government seeks a policy objective’’ (Salamon Reference Salamon2002, p. 29).Footnote 3 As was previously discussed, the mass electorate has polarized in ways that make distributing benefits across the divided social system politically possible. First, partisan voters have polarized economically over the decades with more working-class citizens casting votes for the Democratic Party and wealthier voters aligning themselves with the Republican Party. Next, poorer and more vulnerable populations are served by the public system, and wealthier citizens are enrolled in the private system, resulting in different socioeconomic preferences for public versus private welfare. Therefore, the political-economic polarization of voters fits well with the socioeconomic bifurcation of the divided social welfare state. All total, Democrats distribute benefits to their constituencies through increasing direct spending for public social programs while Republicans target their supporters by raising tax expenditures for private welfare.
There are many different mechanisms the government uses to create public policy. Previous studies on the relationship between political parties and social policy focus exclusively on changes to one policy instrument: budgetary spending for public programs. Yet the last forty years has witnessed a tremendous growth in the diversity of policy instruments used by the federal government to provide social benefits and services. These tools include traditional spending, tax expenditures, grants, regulations, loan guarantees, government corporations, and loans (Hacker Reference Hacker2002, Howard Reference Howard1997, Kettl Reference Kettl1997, Salamon Reference Salamon2002). The selection of the right combination of policy tools is one of the most complex and important decisions made by political parties in strategic legislative planning. One study argues “what makes the use of different (policy) instruments so significant is that each instrument has its own distinctive procedures, its own network of organizational relationships, its own skill requirements – in short its own political economy” (Salamon Reference Salamon1989). So while political parties might agree on broad policy goals, such as providing income security to citizens or national defense, they often disagree over the means or policy instruments.
Although there are numerous policy instruments that are important for social policy, I choose to focus on just two, direct spending and tax expenditures, for the following reasons. First, direct spending and tax expenditures are the two largest categories of government spending for federal social programs that together summed to $2.87 trillion in 2010. In order to place this value in context, total U.S. budget expenditures in 2010 were listed at $3.7 trillion. Second, direct spending and tax expenditures represent opposing political economies. Direct spending is a tangible method of equalizing disparities caused by market economies both by using government administration to counter private businesses and by progressively redistributing federal income to poorer citizens. On the other hand, tax expenditures appeal to conservatives as a policy means to subsidize the private market to perform public services and regressively distribute income toward wealthier individuals.Footnote 4 Finally, direct spending and tax expenditures are passed and expanded using different policy processes in the legislature. Specifically, tax expenditures have to pass through fewer veto points in the legislative process, are not subject to annual review, and function as a form of entitlement spending. The important political and policy differences between direct spending and tax expenditures influence the opposing approaches to social policy of the Democratic and Republican parties.
There are numerous studies showing Democratic Party control of the federal government produces higher levels of traditional spending (e.g., Levitt and Synder Reference Levitt and Snyder1995). However, there are more recent studies that have found evidence of the Republican Party increasing government expenditures by using policy tools outside of the annual budget process. Bickers and Stein (Reference Bickers and Stein1996, Reference Bickers and Stein2000) demonstrate that in periods of Republican control of government, there are increases in contingent liabilities, a type of policy instrument that includes direct loans, guaranteed loans, and federal insurance programs. These types of spending programs underwrite risks for individuals and groups by guaranteeing that the federal treasury repays any loss. Most importantly, contingent liabilities benefit core Republican constituencies including small businesses, farmers, and entrepreneurial businesses. In addition, Faricy (Reference Faricy2011) found that Republican control over the U.S. Congress resulted in higher levels of social tax expenditures to direct social spending. When Republicans increase social tax expenditures at the expense of direct social spending, federal financial support for social welfare shifts from the middle and working classes to wealthier households (Ellis and Faricy 2011). Not only do political parties in government produce different patterns of policy tool usage but also recent survey experiments show that partisan voters reveal different preferences for traditional spending versus tax expenditures.
Republican and Democratic voters have opposing preferences for how social spending is delivered and who benefits. One recent study conducted a simple experiment that asked voters whether they supported different social programs. They described these programs either as tax deduction or as direct payments from the government. Additionally, they also either described each program as beneficial to the wealthy or did not include this information. The study finds that Republican and Democratic respondents differed in their level of support for social policy designed as a public spending program versus those framed as a tax expenditure program (Faricy and Ellis Reference Faricy and Ellis2014). First, Republican respondents were more likely to favor social tax expenditure programs as compared with those citizens who identified as Democrats.Footnote 5 Next, Democratic respondents were less supportive of social tax expenditure programs once they were informed the benefits disproportionately accrue to wealthier households. Interestingly, this additional information on the regressive distributive effects of social tax expenditures did not diminish Republican respondents’ support for tax subsidies. Therefore, Republican respondents favored social programs delivered through the tax code and were not bothered by more benefits going to the rich. Democratic respondents were less supportive of private subsidies and responded negatively to social programs that distribute money to the rich. These findings are similar to other studies that find ideological differences in support for tax expenditures and direct spending (Haselswerdt and Bartels Reference Haselswerdt and Bartels2013).
At the beginning of this chapter, I argued that Democrats and Republicans desire to use the power of the federal government to distribute social benefits to their loyal electorates in ways that reflect the membership's governing ideology. Here, I explained how the sorting by income across the divided social welfare state allows a party in power to select a delivery mechanism that targets federal funding. If this theoretical argument is correct, then there should be observable differences between Democrats and Republicans in their use of direct spending for public programs and tax expenditures for private benefits.
Conclusion
The most common narrative about American politics is that Democrats, when elected, will seek to expand social welfare while Republicans, in power, counteract government growth through reductions in social spending. My theoretical argument alters this idea by arguing that both Democrats and Republicans have incentives to use the federal government to expand social welfare, albeit through different delivery mechanisms that utilize different sectors of the economy, reward opposing partisan constituencies, and produce divergent income distribution effects. I argue that Democrats and Republicans use social policy, in general, and social spending, in particular, to distribute benefits to voters and to tilt the direction of overall federal policy in their preferred direction. The two political parties can accomplish these goals due to the sorting out of partisans across the divided social system and through the selection and trade off of public spending and tax subsidies. The result is that the party in power can determine which side of the divide receives increased federal funds (and which side loses), who receives more government support for social insurance (and who loses), and the balance of public versus private power in the delivery and administration of social benefits and services.
While my goal is to explain the electoral and policy motivations behind the observed relationship between party control and spending, there are limits to my argument. First, I am arguing that Democrats and Republicans have preferences for social spending types and trade one type of spending for another. I am not arguing that Democrats will only pursue public spending, and Republicans will only increase tax expenditures. In fact, there are numerous examples of the Democratic Party supporting expansions of the EITC, although Democratic support for social tax expenditure programs has been almost exclusively for the creation and expansion of refundable tax credits for the working poor (the one type of tax expenditure that does not regressively distribute federal money). Second, a fact of the policy process is that a party's preferences are not always mapped onto policy outcomes. This could be due to intraparty negotiations, interparty negotiations, divided government, policy path dependency, interest group influence, and the power of the budget committees. However, even with these constraints I expect to observe noticeable differences between Democrats and Republicans in their patterns of social spending. Next, my theoretical argument is meant to explain partisan behavior at the federal level over the last forty-two years of this study. While I believe that the theoretical argument presented here can travel across different countries and time periods, it is not tested on different levels of government or across a particularly long time period. Finally, my theoretical argument is about the motivations behind party behavior and my tests are of the relationship between party control and spending patterns.
In the next chapters, I test the different components of the theoretical argument laid out here. In Chapter 3, I empirically test the relationship between Democratic Party power and changes to public social spending. I first examine one of the counterhypotheses that the Democratic Party favors social spending in all its forms and has no preferences for public social spending. Next, I examine if Democratic Party control of the federal government results in higher levels of public social spending from 1970 to 2012. I expect to find, as have previous studies, that Democrats in power increase public social spending. Chapter 4 discusses the role of social tax expenditures in subsidizing the private social system and why the particular characteristics of both would appeal to the Republican Party. In Chapter 5, I test the relationship between Republican Party control of government and changes to social tax expenditures both as a stand-alone category and a ratio to total social spending. If my theoretical argument is correct, then Republican control of the government should result in higher levels of social tax expenditures and a higher proportion of tax expenditures to aggregate social spending. I also test other political factors (such as polarization and divided government) alongside Republican Party control to ensure that it is partisanship and not institutional factors that determines changes in social tax expenditures. In Chapter 6, I explore how changes in the modality of social spending influence corresponding changes in the level of income inequality. The totality of these empirical tests provides supporting evidence to my theoretical argument that changes to political party power do not change the total amount spent on social programs but rather how the federal government finances social welfare and who benefits.
