Molly Michelore, “Welfare State/Taxing State: Politics and Policy in Postwar America”

My dissertation studies the intersecting politics of “welfare” and taxation in the postwar United States in an attempt to better understand political change in the postwar period. I integrate the policy histories of federal public assistance programs and the income tax into a larger political narrative. In recent years, scholars interested in the development of the American welfare state have called attention to the racial and gendered dynamics of social policy formation. Most usefully, this literature has pointed to the ways in which social policy can reinforce existing, and in some cases create new, hierarchies of power. However, this dissertation looks at “welfare” and tax policy as more than mere instruments to preserve existing structures of racial, economic and sexual power. Rather, I argue that the politicization of both “welfare” and tax policy played a central role in the construction of a powerful, if amorphous, “middle-class consciousness” dedicated to the protection of middle-class prerogatives and the defense of taxpayer rights. Neither purely liberal, nor simply conservative, the political culture of “Middle America” has profoundly shaped contemporary American politics.

This new middle-class political culture grew directly out of the institutions and political commitments of the New Deal and postwar states. The phenomenal expansion of the taxing state during the Second World War rewrote the social contract between the governed and the government. By transforming the federal income tax from a “class” to a “mass” tax, the Revenue Act of 1942 not only subjected the majority of Americans to federal taxation for the first time but also established a new basis on which these citizens could make claims on the state. Simultaneously, economic growth, stimulated and managed by federal macroeconomic policies, made possible the creation of a “middle-class welfare state.” Because these “middle class entitlements” were granted either as a “right” or delivered through the private market, however, the national state’s role in protecting and creating middle-class economic and political power was largely hidden from view. Entitled as taxpayers to make claims on the state, Americans increasingly pursued their individual and group self-interests, and in doing so reoriented the political culture away from a commitment to society’s collective wellbeing, refocusing it instead on the protection of middle-class prerogatives and individual taxpayer rights.

The organization of the postwar state created conflicting political imperatives. State and local officials faced pressure from both constituents and from business interests to keep tax rates low while maintaining or expanding existing social services. Economic growth was able to manage these conflicts at the national level; at the state and local levels, however, these recurring distribution contests posed a threat to existing political regimes and economic development goals. The politically-constructed welfare “crises” of the forties and fifties – which blamed both high taxes and profligate spending on welfare “abuse” and “fraud” – represented an attempt by state and local politicians to reconcile the conflicting tax and spending demands of an increasingly powerful suburban, middle-class constituency. Drawing on and reinforcing sexual and racial stereotypes, state and local policymakers launched an attack on welfare that hardened the association between stigmatized dependency and the African American poor. The institutional structure of Aid to Dependent Children – which located political and financial responsibility in both national and subnational governments – thus played a critical role in the construction of the urban “underclass.” Perhaps more importantly, however, the state level welfare “crises” of the 1940s and 1950s helped to crystallize a coherent middle-class political culture. Welfare politics, by focusing attention on the financial burden borne by citizens as taxpayers, helped to create a common political culture and to establish shared political goals among a diverse middle-class constituency.

Seeking to avoid a zero-sum trade off between tax and service levels, attract or retain industrial development dollars and avoid constituent hostility, state and local officials created a “welfare crisis” that essentially equated all state activity with increasingly suspect “welfare” programs. In time, this contraction enabled a “populist” anti-statism that reconciled anti-government sentiment with the expansion of state programs and state spending. Although scholars have recently seized on “populism” to explain contemporary politics, and especially the rise of the conservative Right, this study suggests that liberalism’s defense of individual rights has been equally critical. In the postwar period, American liberals dedicated themselves to protecting and expanding the “rights” of American citizens. Taking seriously the promise of liberalism, Americans from all walks of life began to assert the political, civil and even social rights of citizenship, and to demand that the state act to protect these legitimate rights. At the same time, however, postwar liberals abandoned a politics grounded in the moral defense of social and economic justice and instead placed their faith in the potential of economic growth to smooth the roughest edges off of market-based inequality. The tension between the egalitarian promise of liberal democracy and market capitalism’s unequal distribution of resources and power resulted in a series of conflicting rights claims among various groups in the polity. By identifying the market, rather than the state, as the ultimate guarantor of prosperity, citizenship and even freedom, postwar liberalism had made room for an attenuated vision of rights in which the individual citizen was abstracted from a web of social relations. The politics of the welfare “crisis,” channeled by the institutional structures of the Social Security Act and shaped by the “growth imperative” and the “middle-class welfare state” enabled a politics that pitted the entrenched property rights of taxpayers against the suspect social rights claims of welfare recipients. The concurrent development of a stratified metropolitan landscape, segmented along both class and racial lines, created a political imperative for state, local and national politicians to engage in a divisive politics that pitted the needs of the poor against the rights of the nonpoor. Postwar liberalism likewise promised cost-free growth and denied the link between the creation of the middle class and the coincident construction of the urban underclass.