Brad notes the distinction between social insurance and 'welfare' in the colloquial sense. This is well-taken, but there is a fair amount of mobility out of 'poverty' into 'the middle class' and back again. Howard Chernick and Andy Reschovsky did a paper on this for EPI some years ago. A lot of people who make use of AFDC/TANF are there for brief spells, which means that otherwise they are in the 'middle class' social insurance system.
There has been a core of long-term AFDC/TANF recipients who are looking into the abyss these days, as their time clocks run down. Many have already been sanctioned out of the program. So there are some big problems in store for a minority of people -- a few million families with children.
Another example of the permeable membrane between social insurance and welfare is the SSI program, which has become a resort for middle class families who need support for elderly relatives. You 'get poor' and eligible for this program with some modest financial planning. 2/3rds of Medicaid is in fact for the elderly, some of whom has always been poor, many not.
As to trends, the run-up in health-related spending since 1980 has been huge. It accounts for part of the debt no less than the military buildup. The latter ended around 1986, while Medicaid/Medicare kept growing like Topsy. In the 90s, the expansion of the EITC (and last year, the Child Tax Credit) is also a significant source of aid to low-income families.
Brad's distinction alludes to developments in AFDC/TANF. TANF spending and coverage is a bit of a puzzle right now. The caseload has dropped precipitously, but part of this is due to the boom of the 90s. Lots of people leave TANF for the same reason lots used to leave AFDC -- they went to work. Meanwhile, part of the apparent caseload drop is illusory. Caseload figures refer to the "cash caseload." States are able to shuffle people out of TANF proper and into other programs where they can get cash assistance, and there are those formerly on the cash caseload who now get work-tested benefits, both in and out of TANF. There are more people getting public benefits then is evident from the caseload figures.
Finally, a brake on spending growth in TANF has been the caseload drop, partly because of the economy, partly because of movement into other programs. In an important respect, the flat spending profile in TANF is misleading since there are others getting benefits from other spending, and others still who don't qualify because of the economy.
Some competent people have estimated that spending on work-tested benefits for the poor has increased by a factor of eight over the past decade.
The real question for TANF is what happens as unemployment rises, the time limits kick in, and the work requirements on state govs start to bite. Then we will really see what welfare reform is made of.
It's really too soon to predict the demise of the 'welfare state.' The means-tested program of interest -- TANF -- is in limbo, and the 'middle class' social insurance programs have been doing reasonably well since 1950.
Final bit of data -- this a.m. in the Post there's a story about the Repugs advising Congressional candidates to forego use of the word "privatization" with regard to Social Security. The Dems have won this debate. The President will be left to eat his words over the next two years.
So all the way round the welfare state is still intact, I would say, with some important unresolved issues pertaining to TANF. We should look back to the welfare rights movement, when agitation caused fiscal crises in state governments, leading to Federalization and advancement of key anti-poverty entitlements. An advantage this time around is that the people in question aren't welfare recipients any more. "Welfare" is dead and gone. These are the working poor. Very different political story there.
Re: nathan's point below, in fact there is plenty of income transfer in the EU systems. One need only consult the LIS studies that measure this, taxes and benefits both. The key difference is that the EU systems make less use of the separate, ghettoized category known as "the poor."
It's true that the very wealthy in the EU probably get away with paying less tax than in the U.S. We might regret this but in the final analysis what counts is broad measures of well-being, not the extent to which the rich get stuck. In this area the EU looks better. The left seems to understand this everywhere but in the U.S., where we are obsessed with the rich and make them pay a bit more in tax while our public squalor persists.
mbs
One area where I disagree with Max is that I think the degree of tax progressivity is crucial to evaluation the overall value of government spending, since the goal is to have taxes of the wealthy paying for the benefits for those with less income. Most spending in Europe is high taxes on the middle class paying for benefits for that same middle class, with little income transfer. Because of that high tax system, it is easier to jstify a bit more spending on the poor, but I have not seen good studies on whether than increased spending comes more from the middle class or from the rich. Most studies like the ones you cite completely ignore the issue of who is paying for the spending, which seems like the crucial issue in assessing the welfare state balance sheets.
-- Nathan Newman