WRITTEN BY JENNIFER MARSHALL
Jennifer Marshall is Director of Domestic Policy Studies at The Heritage Foundation, overseeing research into education, marriage, family, religion and civil society. She is the author of Now and Not Yet: Making Sense of Single Life in the Twenty-First Century (2007).
American policy innovation has overcome persistent problems like welfare dependence and double-digit inflation. The U.S. constitutional order reflects the American entrepreneurial character; it presumes personal and community responsibility and individual initiative. States and localities have wide jurisdiction over most policy matters, allowing innovations to be adopted on a limited scale—in a city like New York or a state like Wisconsin—and proven before they are adopted nationwide, by other states and localities—or by other nations. Similarly, national policy innovations have developed in response to policy conditions that hamper the pursuit of the American dream. Examples of America’s policy trailblazing include:
- Welfare Reform
- 'Broken Windows' Policing
- PEPFAR: Compassionate, Effective International AIDS Relief
- President Reagan’s Revolutionary Economic Policy
- Retirement Security: Automatic Individual Retirement Accounts
Welfare reform is one of the most successful social policy reforms in American history. It transformed a system that rewarded idleness and encouraged permanent and inter-generational dependency on government into one that helps welfare recipients move toward self-sufficiency through work and stable family formation.
In 1996, President Bill Clinton signed The Personal Responsibility and Work Opportunity Reconciliation Act of 1996. The law replaced a part of the federal welfare system, the failed program Aid to Families with Dependent Children (AFDC), with a program that had a new philosophy: it was called Temporary Assistance to Needy Families (TANF).
During the 1980s the Reagan administration had urged Congress to establish work requirements for welfare recipients. While effective “workfare” policies were not enacted at the time, the terms of the debate were changed. The state of Wisconsin became the proving ground for these ideas in the early 1990s as Governor Tommy Thompson enacted a series of dramatically successful workfare-related reforms. As caseloads increased across the nation, Wisconsin’s rolls were cut in half during the decade prior to federal reform.
The 1996 federal law aimed to reduce welfare dependence and to increase employment; to reduce child poverty; to reduce unwed childbearing and to strengthen marriage. A decade later, one and a half million fewer children lived in poverty and black child poverty had reached its lowest level in US history. The rapid growth in the rate of unwed childbearing dramatically slowed. Welfare caseloads declined by 57 percent - after rising steadily since the launch of AFDC in 1965.
Welfare reform worked because it identified behavioral patterns, rather than material poverty, as the source of chronic dependence on government services. The typical American household defined as poor by the US government has more living space than the average European, air conditioning, a car, and a color television, among other amenities. On the other hand, the typical poor household with children logs only about 800 hours of work annually, which is equal to just 16 hours per week. Work requirements that aim to increase that rate to full-time, or 40 hours per week, could lift nearly three out of four children from poverty.
Child poverty is also associated with the absence of marriage and fathers. About two out of three poor children live in single-parent homes. Encouraging marriage and stable family formation would help reduce this rate: if poor single mothers married the fathers of their children, almost 75 percent could escape poverty.
America’s welfare reform has attracted attention in a number of countries around the world. For example, the Netherlands implemented policy in 2003 emphasizing welfare-to-work, with subsequent reductions in caseloads, and German communities have piloted welfare-to-work programs in recent years.
'Broken Windows' Policing
In 1990, a Time magazine cover article lamented "The Decline of New York." Drugs and crime were rampant, and city officials seemed unable to stop their spread. The article warned that the exodus of residents deeming the city unlivable might "become a flood if the fear of crime" continued to grow.
A decade later, the city had been transformed by a policing strategy that has become a model for other cities in the U.S. and elsewhere. Often referred to as “broken windows” policing, the strategy was implemented during the 1990s by New York City police commissioner William Bratton and Mayor Rudy Giuliani. A broken window left unrepaired communicates that no one cares, observed George L. Kelling and James Q. Wilson in a 1982 Atlantic Monthly article. Similarly, minor offenses unaddressed make major ones more likely.
“Obviously murder and graffiti are two vastly different crimes,” Mayor Giuliani said in 1998. “But they are part of the same continuum, and a climate that tolerates one is more likely to tolerate the other.” Disorder produces fear among citizens, undermining community controls and resulting in an environment conducive to crime," explain Kelling and Bratton.
In New York, Bratton reoriented policing strategy and administration to focus on communities. Resources and accountability were devolved to the city’s 76 local precinct commanders, who were charged with identifying and solving neighborhood problems to reduce crime. By cracking down on minor offenses like graffiti or vandalism, the plan focused on restoring order, rebuilding community, and preventing serious crime.
Increased order, as predicted, did lead to decreased crime—in fact, an unprecedented plunge. Robbery declined by 60 percent. Murder fell by more than 70 percent: in 1990, there were 2,262 murders in New York, compared to 629 in 1998. While the 1990s saw a reduction in crime nationwide, New York dramatically outpaced the rest of the United States. Property crimes declined 65 percent in New York City, compared to 26 percent across the U.S., while violent crime fell by twice the nationwide rate. In all, 'broken windows' policing helped prevent an estimated 60,000 violent crimes during the decade following its implementation, according to a study by the Manhattan Institute.
New York’s policing strategy is spreading. In 2002, Bratton was appointed chief of police in Los Angeles, where he implemented a similar strategy. Three years later, overall crime was down by 26 percent, and homicide by 25 percent. Meanwhile, locations like Hartlepool, England are applying the strategy.
PEPFAR: Compassionate, Effective International AIDS Relief
In 2003, President George W. Bush pledged $15 billion over five years to stop the spread of generalized AIDS epidemics in Africa and the Caribbean, “the largest commitment by any nation to combat a single disease in human history." The President's Emergency Plan for AIDS Relief (PEPFAR) has been widely praised for its achievements: as of 2008, PEPFAR is treating 1.73 million and providing care for more than 2.7 million orphans and vulnerable children. Ten million pregnant women have been tested and an estimated 157,000 infections of newborns have been prevented.
Ambitious targets are one key to PEPFAR’s successful track record. Two other critical factors are the law’s evidence-based prevention strategy and funding policies that keep the program focused on priority services.
Evidence from Uganda in the 1990s had shown remarkable drops in the rate of new HIV infections following advertising campaigns that encouraged abstinence for those who were not married and fidelity for those who were married. Between 1991 and 2001, HIV prevalence dropped 71 percent, and even more dramatically among those aged 15–24. Researchers from Cambridge University attributed the decline to the campaign to change sexual behavior by encouraging marital fidelity and abstinence.
PEPFAR required that a majority of funds go directly to programs in the target countries, rather than through multilateral programs. This direct aid ensured that assistance was provided efficiently and effectively in accord with the law’s strategic purposes. PEPFAR also required that funding be spent in proportion to its policy priorities, including 55 percent on medical treatment, and a third of the prevention funds on promoting abstinence and marital fidelity.
PEPFAR’s emphasis on abstinence and fidelity programs is now credited for its measurable impact on HIV prevalence, an important precedent for combating generalized AIDS epidemics.
In his final State of the Union Address, President George W. Bush urged Congress to expand PEPFAR. The 2008 reauthorization expanded the program to $50 billion over five years. New goals include providing treatment for at least 3 million, preventing 12 million new infections, and supporting care for 12 million, including 5 million orphans and vulnerable children.
“A tremendous possibility [is] within our grasp,” said President Bush in proposing PEPFAR. “Seldom has history offered a greater opportunity to do so much for so many.”
President Reagan’s Revolutionary Economic Policy
The Reagan administration’s tax and monetary policy had enormous effects around the globe. President Reagan changed the trajectory of the worldwide debate about taxes and his tax reforms impressed upon the world the importance of low taxes.
President Reagan significantly reduced taxes, cutting the top rate down from 70 percent to 28 percent. The reforms created incentives for individuals to save and for businesses to invest, and indexed income tax brackets to inflation.
Following the 1981 tax cuts and the 1986 tax reform, other countries had little choice but to lower tax rates to compete for capital and labor in the global marketplace. The years following the 1986 tax reform act saw a steady trend among countries large and small, developed and developing, to reduce tax rates to become more competitive. In fact, this global trend continues in much of the world, especially with respect to the corporate income tax rate, with the notable exception of the United States.
The United States also recast the central goal and practical conduct of domestic monetary policy worldwide. President Reagan supported the Federal Reserve in recognizing that inflation is ultimately a monetary phenomenon to be contained by a vigilant and independent central bank. By adopting a policy focusing on the growth of the money supply the Federal Reserve ended the upward spiral of U.S. inflation that threatened to become entrenched well above 10 percent annually, and began a decade-long process of disinflation.
While the mechanics of monetary policy have continued to evolve as financial markets and the economy itself changes, the essentials of the 1980s lessons remain constant. Consequently, despite soaring energy and food costs the United States has retained levels of inflation lower than what was thought possible even in fortuitous circumstances a decade ago. Learning from the U.S. experience, even countries that traditionally have suffered spasms of high inflation are able to maintain low and stable inflation rates and the expectation among investors and families that future inflation rates will remain low.
Retirement Security: Automatic Individual Retirement Accounts
A looming retirement security crisis facing the United States is prompting a bipartisan interest in strengthening pensions and increasing savings. The tax-financed US Social Security system will be unable to pay all of the benefits that it promises, and even if it could, benefits are not high enough to provide full retirement security. In addition, traditional pensions are being phased out as employers recognize that they will cost more than anticipated and replaced with low-cost, diversified retirement savings plans such as the employer-sponsored 401(k) accounts and individually managed Independent Retirement Accounts (IRAs). These accounts will provide workers who make regular contributions to them throughout their careers with significant retirement security.
However, two serious problems remained. First, those who need to save the most, lower-income workers, women, minority groups, and younger workers tended not to participate in these plans, mainly because they were unfamiliar with investing and feared losing their money through a bad investment choice. In response, researchers developed “automatic enrollment”, under which a worker participates and saves a certain proportion of income in a pre-selected investment vehicle. The worker has the full ability to refuse to join a savings plan and to change either the amount saved or the investment choice. Under automatic enrollment, participation by these four groups has gone from between 18 and 15 percent to well over 80 percent. Workers almost unanimously approve of automatic enrollment and over 65 percent say that they started saving earlier than they would have otherwise. The Clinton Administration issued an executive ruling confirming the legality of auto-enrollment, and the 2006 Pension Protection Act further clarified details of the process. Most large employers have already adopted automatic enrollment, and the number of other employers who are adopting it is growing every day. In addition, the federal government is close to adopting the procedure for its employees.
The second problem is that only about half of American workers work at a place that offers them an employer-sponsored retirement savings plan or pension. To make matters worse, only about 10 percent of these workers save for retirement on their own. In response, a bipartisan, cross-ideological consensus is building to establish “Automatic IRAs”, which feature direct payroll deposits of the workers’ own money into a low-cost, diversified IRA. Automatic IRAs have very low employer costs, and virtually no regulatory burden is placed on the employer. In surveys, over 80 percent of workers and employers agree that the Automatic IRA would help increase retirement savings. The Automatic IRA is expected to be considered in Congress during 2009, and is also under legislative consideration in a number of states. The UK is adopting automatic enrollment for its Personal Accounts retirement savings plan which debuts in 2012. Extensive US-UK consultations have taken place in the development process of both the UK Personal Accounts plan and the US Automatic IRA plan.