Jamee K. Moudud (The Jerome Levy Economics Institute) Ajit Zacharias (The Jerome Levy Economics Institute)
Abstract
This paper addresses two broad questions. The first one relates to the economic rationale for the existence of the welfare state. To address this question, we review the marginalist arguments and then counterpose a historical and institutional analysis of the rise of the U.S. welfare state. The second question concerns the macroeconomic impacts of welfare spending. We examine the standard neoclassical macroeconomic arguments for and against welfare cutbacks and then propose an alternative growth framework, rooted in the classical and Harrodian traditions, to evaluate social policy. We argue that the alternative framework provides both demand-side and supply-side mechanisms whereby social spending can be supported without harmful long-run macroeconomic effects. Our analysis suggests that, in general, because growth and crises are endogenous, there may be no tension between social policy and economic performance. Specifically, the recent cutbacks in the U.S. are hard to justify on purely economic grounds.
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Paper provided by EconWPA in its series Macroeconomics with number
0004037.
Length: 58 pages Date of creation: 12 Oct 2000 Date of revision: Handle: RePEc:wpa:wuwpma:0004037
Note: Type of Document - Adobe Acrobat PDF; prepared on IBM PC; to print on PostScript; pages: 58; figures: included Contact details of provider: Web page: http://129.3.20.41
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References listed on IDEAS Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
Haliassos, Michael & Tobin, James, 1990.
"The macroeconomics of government finance,"
Handbook of Monetary Economics,
in: B. M. Friedman & F. H. Hahn (ed.), Handbook of Monetary Economics, edition 1, volume 2, chapter 17, pages 889-959
Elsevier.
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