Rethinking the Welfare State

Government by Voucher

Ronald J. Daniels, Michael J. Trebilcock

• Publisher: Routledge
• Year: 2013
• ISBN:
  9781134305094
• Edition: 1
• Topic: Politics & International Relations
• Subtopic: Politics
• Index: Politics & International Relations

Rethinking the Welfare State offers a comprehensive and comparative analysis of social welfare policy in an international context, with a particular emphasis on the US and Canada.The authors investigate the claim that a decentralized delivery of government supported goods and services enables policy objectives to be achieved in a more innovative and efficient way, but at a lower cost. Secondly they examine the effectiveness of the voucher system as a solution to problematic welfare concerns. While this system has shown much promise in improving welfare, there have been problems for institutions unable to attract enough voucher-assisted consumers to ensure their survival.In this context, the authors examine major social programmes such as food stamps, primary and secondary education, post-secondary education, labour market training, childcare, healthcare, legal aid, low-income housing, long-term care and pensions.

1 Introduction

This book is in part a thought experiment. In it we seek to consider the prospects for government by voucher. We ask: What would the state look like if, instead of delivering public goods and services itself, the government were to rely on voucher-financed delivery of these goods and services by private actors? In this world, vouchers would not be confined to one or two discrete policy areas, but rather would be the predominant instrument of public policy. With the exception of a few areas like national defense or policing, governments would discharge their responsibilities by creating or, at least, supervising markets in which citizen beneficiaries would use publicly financed vouchers to determine their consumption of a range of different goods and services supplied by private actors.

Such a scenario is not as far fetched or fanciful as it seems. Many industrialized democracies have, in fact, adopted voucher-based programs in discrete policy areas, including: education, health care, social services, housing, pensions, and legal aid. In some cases, these voucher-based programs are relatively narrow experiments which have only operated for a short period of time. In other cases, however, vouchers have a well-established pedigree, and have operated successfully for decades. Although we know of no single government anywhere that has as yet adopted the voucher across the broad spectrum of services provided by the modern welfare state, we can identify a rich vein of experience with the voucher from a number of different jurisdictions that enables us to imagine what the state might look like if all of these programs and experiments were, in fact, concentrated in a hypothetical “government by voucher.”

Many commentators, we acknowledge, will be inclined to denigrate or dismiss this.enterprise of thinking about “government by voucher.” The fact is that there are few ideas in modern public policy that seem to elicit as much criticism, acrimony and passion as vouchers. Why is this soft It is indeed perplexing that a policy instrument would engender so much visceral antagonism. As we define it, the voucher is a tied demand-side subsidy, and the fact that we are talking about the conferral of subsidies should assuage concerns that the voucher is antithetical to time-honored goals of the social welfare state. After all, by creating and distributing vouchers, the state is responding to some legitimate set of interests and values through targeted financial assistance.

We would argue that there is nothing inherent in the voucher instrument that is irreconcilable with the goals of the modern social welfare state. Indeed, quite the opposite. It is, as we will discuss, open to governments to use vouchers any way they want. The voucher can be the means by which a government expands or contracts the contours of the welfare state. The voucher is equally consistent with a universal welfare state as with a residual one. The voucher can be generously or poorly endowed. The voucher can be used as a substitute or a complement to existing governmental programs. In other words, a decision by government to invoke the voucher instrument to achieve public goals in a specified policy area does not in itself reveal much about the underlying character of the policies being pursued by the sponsoring government.

That is not to say that reliance on vouchers is bereft of any normative content whatsoever. In deciding to pursue the realization of public goals through vouchers, governments will certainly be sensitive to the relative strengths and weaknesses of the voucher instrument as against other instruments of public policy, for instance, public delivery of public services. As against alternative instruments, the case for the voucher is straightforward: once governments have decided to intervene in a given policy area (for a host of different rationales, including equity, efficiency, and distributional goals), by conferring explicit, targeted subsides on individual citizens, decisions regarding the consumption and production of public goods and services will be made more efficiently. This results from the fact that vouchers place resources directly into the hands of citizens, where they, rather than a governmental agent, will determine the precise goods and services that will be consumed from among a number of competing suppliers, thereby increasing the likelihood that citizen preferences in the consumption of publicly supported goods and services will be more effectively vindicated. Specifically, the voucher concept introduces the prospect of economic exit and hence failure on the supply-side (e.g. bankruptcy) for institutions that are unable to attract and retain sufficient voucher-assisted consumers to ensure their survival and thus face a discipline that is markedly absent from many current government programs that depend exclusively or primarily on political voice to ensure accountability.¹

However, the case for vouchers is not based solely on efficiency rationales. Because vouchers enable (and, indeed, promote) citizen choice in the consumption of publicly funded goods and services they increase the scope for individual autonomy. In Julian Le Grand’s terms, vouchers convert citizen beneficiaries of the welfare state from pawns, the least powerful piece on the chess board, to queens, the most powerful.² Thus, vouchers demonstrate considerable promise in terms of their ability to realize public goals. Indeed, given this potential, the adoption of voucher programs may be able to mute, or even obviate, the great efficiency equity trade-off of which Arthur Okun wrote so eloquently in his celebrated essay by that title.³

Despite these claims, many commentators remain highly skeptical of the voucher’s virtues, and are unwilling to see the voucher as following, rather than shaping, government’s underlying goals. For them, the voucher is deeply hostile to a compassionate welfare state. Vouchers are regarded as implying the unalloyed triumph of individualism over community, of markets over governments, of private greed over public obligation, and of consumerism over citizenship. Vouchers, on this view, do not promise more efficient, more dynamic, or more accountable public services, but only fewer public services, of a lower quality, and overseen by smaller and more mean-spirited governments.⁴

The depth of the antipathy to the voucher instrument cannot be exaggerated. In many cases, the mere identification of a new program initiative with the voucher, particularly where the voucher is designed to substitute for existing programs that involve direct government provision of goods and services, is sufficient to provoke considerable public consternation. In fact, in many cases, the intensity of public opposition to proposed voucher programs has forced sponsoring governments to abandon the idea altogether. And, in those cases where vouchers have been adopted, sponsoring governments have often done so only after overcoming stiff, sometimes excoriating, political opposition and, even then, find that they are often constrained in establishing programs large enough to reap the benefits of competition. We can illustrate these points by reference to a number of different voucher initiatives.

Vouchers and politics

Primary and secondary school vouchers

Without doubt, the most intense and protracted debate over vouchers has been in relation to elementary and secondary school choice experiments in the United States. Over the years, governments from Colorado to Florida have drafted and, in several cases, enacted legislation implementing choice programs, and, in the course of so doing, have confronted virulent opposition. For instance, in 1993, a coalition against Proposition 17 in California, which would have introduced education vouchers, waged a US$6 million television advertising war against the proposed state legislation, leading to its eventual defeat. Despite widespread support for greater school choice and general recognition of the failures of the public education system, particularly in inner-city areas, polls revealed antipathy among suburbanites towards the voucher concept on the grounds that it would “import to the suburbs the problems of ghetto and barrio education.”⁵

While various stakeholder groups, like the National Education Association, a major teachers’ labour union, have been active in lobbying against voucher initiatives,⁶ the legislature is not the only forum for their activities. Courts, too, have been an important site for opposition to vouchers, where opponents have alleged that proposed voucher programs violate the Constitution’s non-establishment clause because public funds will ultimately be directed towards sectarian institutions. Vouchers have also been challenged on the basis of their inconsistency with state constitutional requirements. A Wall Street Journal editorial wryly frames an emerging pattern: “As surely as night follows day, education reformers can expect that any expansion of school choice will be followed by a lawsuit.”⁷

Primary and secondary school vouchers have fared no better in our home province, Ontario. In 2001, when the Conservative government of Premier Michael Harris introduced a budget that proposed partial subsidization of private school education at both the primary and secondary level through an “Equity in Education Tax Credit” (essentially a flat-rate voucher), the public response was swift and determined.⁸ A broad cross-section of journalists, politicians, policy-makers and union leaders contended that the “Harris Agenda” was tantamount to the destruction of public education.⁹ The claim was made that the government’s initiative would “erase a I 00 year history of support for public schooling.”¹⁰ Further, the program was characterized as sectarian, elitist, segregationist and socially corrosive. The Chief Commissioner of the province’s Human Rights Commission went so far as to warn that the voucher program would “ghettoize the education of our children.”¹¹ Interestingly, in defending the measure, the government studiously refused to characterize the program as a voucher for fear of further heightening public hostility.¹² Although the measure was adopted, one year later, the Conservative government was defeated and the incoming Liberal government abolished the program retroactively.

Post-secondary vouchers

The university reform programs recently introduced in Australia (1996) and Britain (2003-4) are also indicative of the daunting political challenges surrounding vouchers. In both cases, incumbent governments were seeking to address problems of deteriorating program and facility quality that had long affiicted publicly financed universities.¹³ They did so by relaxing longstanding restrictions on tuition pricing, while simultaneously adopting a voucher-based system of conditional grants and income contingent loans.¹⁴ As we will discuss later in the book, there are strong efficiency and equity arguments that favour students paying higher fees for their university educations, particularly in light of the significant private benefits that are derived from these opportunities. The critical issue is how to ensure that students from financially disadvantaged families, who are traditionally under-represented in universities, are not deterred from applying to, and enrolling in, university as a result of higher tuition fees. Vouchers in the form of means-tested grants and income contingent loans are certainly a plausible way of responding to this concern. Nevertheless, in both countries, tuition de-regulation, coupled with vouchers, provoked considerable public outrage.

In Australia, the reforms unleashed a hailstorm of student protest, described by the press as “scenes of rage.”¹⁵ Students alleged that the reforms were designed to limit access to university education to only the most advantaged members of society. The reforms were viewed as part of a slippery slope towards privatization. In response, some student leaders urged “militant action” as it was “the only way we are going to be able to achieve our aims … boycotting upfront fees next year, shutting down the administration and not allowing them to process results or to process applications.”¹⁶ In fact, students did storm university offices, occupied senior administrative offices, and engaged in walk-outs to protest the reforms. Further, the National Tertiary Education Union council funded an intensive campaign against the sitting government, which included “a national strike, the targeting of certain marginal seats, protests, endorsements and polling.”¹⁷

The situation was not much different in Britain when the Blair government introduced its university reform program. As in Australia, the reforms led opponents to charge that British higher education was becoming elitist because higher education would be priced out of reach of financially needy students.¹⁸ Not only was there criticism and protests from students, but, significantly, there was vehement opposition from within the ranks of Blair’s Labour Party. Indeed, so intense was the internal opposition to the reform package that there was speculation (prior to the vote in the House of Commons) that the government may well be defeated over the measure. Although the bill passed on the first reading, it did so only narrowly – by 5 votes as against the government’s usual margin of 16 votes, inflicting significant damage on the Prime Minister’s reputation and on the cohesiveness of the Labour Party.¹⁹

Housing vouchers

In the United States, the Clinton administration faced similar challenges with the voucher when it sought to place greater reliance on housing vouchers, as opposed to government owned housing, in meeting the needs of the urban poor. Section 8 housing vouchers we...

Table of contents

• Cover
• Title
• Copyright
• Contents
• Preface
• 1 Introduction
• 2 The case for vouchers
• 3 Food stamps
• 4 Low-income housing
• 5 Legal aid
• 6 Health care
• 7 Early childhood education
• 8 Primary and secondary education
• 9 Post-secondary education
• 10 Labour market training
• 11 Conclusion
• Notes
• Index