The Economy and Social Welfare
Economics is usually defined as "the study of how societies use scarce re- sources to produce valuable commodities and distribute them among dif- ferent people."1 Such a broad definition should include social welfare. Yet most people continue to think of social welfare as a separate part of the modern economy. There is the market economy, the private sector, where profit guides decisions about people's investments and work, and then some- where off to the side there is social welfare for children, the elderly, the sick, and the disabled—those who cannot cope in this demanding environment. This formulation is misleading. Seeking to divide the indivisible, it perpet- uates the idea that social welfare constitutes a charitable but not wholly essential addition to a perfectly functioning economy.
In reality, the role of social welfare in the modern U.S. economy includes three distinct tasks that go to the heart of our economic life. Without each one individually, and certainly without all of them together, the U.S. econ- omy could not operate.
As indicated in chapter 2, the first task of social welfare is to reduce economic insecurity. Social Security for the elderly performs this function, as do unemployment benefits for the unemployed, and TANF (popularly called welfare) for poor mothers and their children. By giving their recipients a little more money to spend, these programs supplement the total amount of con- sumer spending in the economy and cushion the effects of poverty.