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Politics, Relief, and Reform: The Transformation of America's Social Welfare System during the New Deal

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  • John Joseph Wallis
  • Price Fishback
  • Shawn Kantor

Abstract

The American social welfare system was transformed during the 1930s. Prior to the New Deal public relief was administered almost exclusively by local governments. The administration of local public relief was widely thought to be corrupt. Beginning in 1933, federal, state, and local governments cooperatively built a larger social welfare system. While the majority of the funds for relief spending came from the federal government, the majority of administrative decisions were made at state and local levels. While New Dealers were often accused of playing politics with relief, social welfare system created by the New Deal (still largely in place today) is more often maligned for being bureaucratic than for being corrupt. We do not believe that New Dealers were motivated by altruistic motives when they shaped New Deal relief policies. Evidence suggests that politics was always the key issue. But we show how the interaction of political interests at the federal, state, and local levels of government created political incentives for the national relief administration to curb corruption by actors at the state and local level. This led to different patterns of relief spending when programs were controlled by national, rather than state and local officials. In the permanent social welfare system created by the Social Security Act, the national government pressed for the substitution of rules rather than discretion in the administration of relief. This, ultimately, significantly reduced the level of corruption in the administration of welfare programs.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 11080.

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Date of creation: Jan 2005
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Handle: RePEc:nbr:nberwo:11080

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  1. Wallis, John Joseph, 1989. "Employment in the Great Depression: New data and hypotheses," Explorations in Economic History, Elsevier, vol. 26(1), pages 45-72, January.
  2. Fleck, Robert K, 1999. "The Value of the Vote: A Model and Test of the Effects of Turnout on Distributive Policy," Economic Inquiry, Western Economic Association International, vol. 37(4), pages 609-23, October.
  3. Wallis, John, 2001. "The Political Economy of New Deal Spending, Yet Again: A Reply to Fleck," Explorations in Economic History, Elsevier, vol. 38(2), pages 305-314, April.
  4. Reading, Don C., 1973. "New Deal Activity and the States, 1933 to 1939," The Journal of Economic History, Cambridge University Press, vol. 33(04), pages 792-810, December.
  5. Marilyn Young & Michael Reksulak & William F. Shughart, 2001. "The Political Economy of the IRS," Economics and Politics, Wiley Blackwell, vol. 13(2), pages 201-220, 07.
  6. Price V. Fishback & Shawn Kantor & John Joseph Wallis, 2002. "Can the New Deal's Three R's Be Rehabilitated? A Program-by-Program, County-by-County Analysis," NBER Working Papers 8903, National Bureau of Economic Research, Inc.
  7. Wallis, John Joseph, 1987. "Employment, Politics, and Economic Recovery during the Great Depression," The Review of Economics and Statistics, MIT Press, vol. 69(3), pages 516-20, August.
  8. Wallis, John Joseph, 1991. "The Political Economy of New Deal Fiscal Federalism," Economic Inquiry, Western Economic Association International, vol. 29(3), pages 510-24, July.
  9. Fleck, Robert K., 2001. "Population, Land, Economic Conditions, and the Allocation of New Deal Spending," Explorations in Economic History, Elsevier, vol. 38(2), pages 296-304, April.
  10. Wright, Gavin, 1974. "The Political Economy of New Deal Spending: An Econometric Analysis," The Review of Economics and Statistics, MIT Press, vol. 56(1), pages 30-38, February.
  11. John J. Wallis & Wallace Oates, 1998. "The Impact of the New Deal on American Federalism," NBER Chapters, in: The Defining Moment: The Great Depression and the American Economy in the Twentieth Century, pages 155-180 National Bureau of Economic Research, Inc.
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Cited by:
  1. Jonathan Gruber & Daniel M. Hungerman, 2005. "Faith-Based Charity and Crowd Out during the Great Depression," NBER Working Papers 11332, National Bureau of Economic Research, Inc.

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