are State (The Battle over Public and Private Social Benefits in the Unit
THE DIVIDE D WELFAR E STAT E
At a time of fierce conflict ove r U.S. social policy, Americans ar e con-
sidering whether th e public sector should d o less and the private sector
wnload/the-divided-welfare-state-the-battle-over-public-and-private-soci
more. In this pioneering book, Jacob Hacker shows that this battle is as
old as the American welfare state itself - an d tha t unearthing its sources
and legacies i s crucial t o understandin g America' s strikingl y unusua l
social welfare system. Wha t i s truly distinctive abou t American social
provision, Hacker argues , is not th e level of U.S. spending, bu t tha t s o
many social welfare duties are handled by the private sector, rather tha n
by government. Alongside America's public social programs lies a sub-
merged network of employer-sponsored social benefits, which are heavily
subsidized and regulated by government, yet distributed much less evenly
than public protections . Examining th e twentieth-century development
of health insurance an d retirement pensions, Hacker unveils the politi-
cal root s an d effects o f America's hybrid system an d explains why th e
role of private benefits differs s o sharply across the health an d pension
areas. To do so , he develops a model of pat h dependence tha t demon -
strates how political choices of the past created interests and organiza-
tions dedicated t o preserving the private til t of U.S. social policy. With
sweeping history, topica l commentary, an d a wealt h o f statistical an d
cross-national evidence, The Divided Welfare State demonstrates tha t
private social benefits not only are a critical element of U.S. social policy,
but also have deeply influenced th e politics of public social programs -
to produce a social policy framework whos e full dimensions have yet to
be fully debated .
Jacob S. Hacker i s Peter Strauss Family Assistant Professor o f Political
Science a t Yale University. H e wa s previously a Junio r Fello w o f th e
Harvard Society of Fellows, a Fellow a t the New America Foundation ,
and a Research Fellow at the Brookings Institution. He is the autho r of
The Road to Nowhere: The Genesis of President Clinton's Plan for
Health Security, which co-won th e 199 7 Louis Brownlow Book Award
of the Nationa l Academy of Public Administration. This book is based
on his dissertation, which garnered prizes from th e American Political
Science Association , th e Associatio n o f Publi c Polic y Analysi s an d
Management, an d the National Academy of Social Insurance.
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are State (The Battle over Public and Private Social Benefits in the Unit
To Oona and Ava
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are State (The Battle over Public and Private Social Benefits in the Unit
THE DIVIDE D
WELFARE STAT E
wnload/the-divided-welfare-state-the-battle-over-public-and-private-soci
The Battle over Public and Private Social Benefits
in the United States
JACOB S. HACKER
Yale University
CAMBRIDG E
UNIVERSITY PRESS
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are State (The Battle over Public and Private Social Benefits in the Unit
CAMBRIDG E UNIVERSIT Y PRES S
Cambridge , Ne w York, Melbourne , Madrid , Cap e Town , Singapore ,
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permissio n o f Cambridg e Universit y Press .
First publishe d 200 2
Reprinte d 2003 , 2005 , 2007 , 200 8
A catalog record for this publication is available from the British Library
Library of Congress Cataloging in Publication data
Hacker , Jaco b S .
The divide d welfar e stat e : the battl e ove r publi c an d privat e socia l benefit s i n th e
Unite d State s / Jaco b S . Hacker .
p. cm .
Include s bibliographica l reference s an d index .
ISBN 0-521-81288- 7 - ISB N 0-521-01328- 3 (pbk. )
1. Unite d State s — Socia l policy . 2 . Privatizatio n — Unite d States . 3 . Welfare stat e —
Unite d States . I . Title .
HN59.2 . H3 3 200 2
361.6T0973-dc2 1
2002067734
ISBN 978-0-521-81288- 7 Hardbac k
ISBN 978-0-521-01328- 4 Paperbac k
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are State (The Battle over Public and Private Social Benefits in the Unit
Contents
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List of Tables page vii
List of Figures i x
Preface x i
Part I: Th e American Welfare Regim e
Introduction : American Exceptionalism Revisited 5
1 Th e Politics of Public an d Privat e Social Benefits 2 8
Part II: Th e Politics o f Public and Private Pension s
Introductio n 7 1
2 Connecte d a t Birth : Publi c an d Privat e Pension s Befor e 194 5 8 5
I2
3 Siblin g Rivalry : Publi c an d Privat e Pension s Afte r 194 5 4
Part IE: Th e Politics o f Public and Private Healt h Insurance
Introductio n 17 9
4 Seed s of Exceptionalism: Public an d Privat e Healt h
Insurance Before 194 5 I 9I
5 Th e Elusive Cure : Public an d Privat e Healt h Insuranc e
After 194 5 22 1
Part IV: Th e Formation an d Future of
the American Welfare Regim e
6 Th e Formatio n of th e American Welfare Regime 27 5
7 Th e Futur e of th e American Welfare Regime 31 3
Appendix 33 7
Notes 34 1
Index 43 5
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are State (The Battle over Public and Private Social Benefits in the Unit
Tables
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11.1 Welfare-State Types and After-Tax Public and Private
Social Spending, 1995 page 19
1.1 Th e Continuum of Social Policy Approaches 3 0
1.2 Shar e of Nonagricultural Private Workers Receiving
Health an d Pension Benefits, by Earnings, 1998 3 7
1.3 Distributio n of Selected Tax Expenditures, 200 0 3 8
1.4 Average Tax Subsidy for Healt h Insurance Received by
Families, by Income, 1998 3 9
I2.1 Public and Private Pensions in Selected Nations , 1993 76
2.1 Tim e of Adoption of Five Major Welfare Programs (U.S.
Rank Among 15 Developed Nations) 8 7
3.1 Social Security Benefit Increases Versus Price and Wage
Levels, 19 50-1974 14 1
3.2 Social Security Replacement Rates , 1940-204 0 14 3
3.3 Sources of Income Among Aged Units, 1990 15 5
3.4 Source s of Income Among Aged Units, by Quintile of
Income, 1990 15 6
3.5 Distributio n of Aggregate Income Among Aged Units, by
Source and Quintile of Income, 1990 15 6
3.6 Shar e of Workers Participating in 4oi(k ) Pension Plans,
1991 16 9
3.7 Individua l Retirement Account Participation, b y Earnings,
1992 16 9
I3.1 Healt h Spending and Coverage in Selected OECD
Countries, 1995 18 5
5.1 Basic Features of the British, Canadian, and U.S. Medical
Systems, 1960-199 0 25 2
7.1 Growt h of U.S. Private Social Expenditures Versus Growth
of Public Expenditures, 1950-199 4 31 7
A.i Publi c and Private Social Welfare Expenditures a s a
Percentage of GDP in Eleven Nations , 1995 33 8
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are State (The Battle over Public and Private Social Benefits in the Unit
Figures
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11.1 Public Social Welfare Expenditures a s a Percentage of
GDP in Eleven Nations , 1995 P#ge 14
11.2 After-Tax Public and Private Social Welfare Expenditures
as a Percentage of GDP in Eleven Nations , 1995 1 5
11.3 After-Tax Public Spending Versus After-Tax Private
Spending as a Percentage of GDP, 1995 1 7
11.4 Private and Public Social Welfare Expenditures
as a Percentage of GDP, 1950-199 4 2 0
1.1 Distinguishing Public and Private Social Benefits 3 1
1.2 Fou r Dimensions of Variation Among Approaches 3 5
1.3 Institutiona l Fragmentation an d the Private Share of
Social Spending 4 7
12.1 Occupationa l Pension and Old-Age Insurance Benefits
as a Share of Combined Benefits, 1950-199 6 7 8
12.2 Share of Americans Covered by Social Security and
Occupational Pensions, 1940-198 8 j ^
2.1 Shar e of Private Civilian Labor Force Covered by
Private Pensions, 1905-199 5 8 9
3.1 Pension Contributions an d Benefits a s a Share of Total
Compensation, 1948-199 6 15 4
3.2 Individua l Retirement Account and 40 1 (k) Plan Assets
as a Percentage of GDP, 1985-200 0 16 7
I3.1 Shar e of Americans Covered by Public and Private Health
Insurance and Pensions, 1940-199 5 18 6
4.1 Shar e of U.S. Population with Private Health Insurance,
1940-1995 21 4
5.1 Shar e of Americans Covered by Private Health Insurance
and Medicare/Medicaid, 1940-19 9 5 26 2
7.1 U.S . Federal Expenditures as a Percentage of GDP, 1962 -
2000 31 6
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