Great Society

From Wikipedia, the free encyclopedia

https://en.wikipedia.org/wiki/Great_Society 

Pens used by President Lyndon B. Johnson to sign Great Society legislation

The Great Society was a set of domestic programs in the United States launched by Democratic President Lyndon B. Johnson in 1964–65. The term was coined during a 1964 commencement address by President Lyndon B. Johnson at Ohio University and came to represent his domestic agenda. The main goal was the total elimination of poverty and racial injustice.

New major spending programs that addressed education, medical care, urban problems, rural poverty, and transportation were launched during this period. The program and its initiatives were subsequently promoted by him and fellow Democrats in Congress in the 1960s and years following. The Great Society in scope and sweep resembled the New Deal domestic agenda of Franklin D. Roosevelt.

Some Great Society proposals were stalled initiatives from John F. Kennedy's New Frontier. Johnson's success depended on his skills of persuasion, coupled with the Democratic landslide victory in the 1964 elections that brought in many new liberals to Congress, making the House of Representatives in 1965 the most liberal House since 1938. In the 88th Congress it was estimated that there were 56 liberals and 44 conservatives in the Senate, and 224 liberals and 211 conservatives in the House. In the 89th Congress it was estimated that there were 59 liberals and 41 conservatives in the Senate, and 267 liberals and 198 conservatives in the House.

Anti-war Democrats complained that spending on the Vietnam War choked off the Great Society. While some of the programs have been eliminated or had their funding reduced, many of them, including Medicare, Medicaid, the Older Americans Act and federal education funding, continue to the present. The Great Society's programs expanded under the administrations of Republican Presidents Richard Nixon and Gerald Ford.

Economic and social conditions

Unlike the old New Deal, which was a response to a severe financial and economic calamity, the Great Society initiatives came during a period of rapid economic growth. Kennedy proposed an across-the-board tax cut lowering the top marginal income tax rate in the United States by 20%, from 91% to 71%, which was enacted in February 1964, three months after Kennedy's assassination, under Johnson. The tax cut also significantly reduced marginal rates in the lower brackets as well as for corporations. The gross national product rose 10% in the first year of the tax cut, and economic growth averaged a rate of 4.5% from 1961 to 1968.

GNP increased by 7% in 1964, 8% in 1965, and 9% in 1966. The unemployment rate fell below 5%, and by 1966 the number of families with incomes of $7,000 a year or more had reached 55%, compared with 22% in 1950. In 1968, when John Kenneth Galbraith published a new edition of The Affluent Society, the average income of the American family stood at $8,000, double what it had been a decade earlier.

Johnson's speeches in Ohio and Michigan

Johnson's first public reference to the "Great Society" took place during a speech to students on May 7, 1964, at Ohio University in Athens, Ohio:

And with your courage and with your compassion and your desire, we will build a Great Society. It is a society where no child will go unfed, and no youngster will go unschooled.

He later formally presented his specific goals for the Great Society in another speech at the University of Michigan in Ann Arbor, Michigan, on May 22, 1964.

We are going to assemble the best thought and broadest knowledge from all over the world to find these answers. I intend to establish working groups to prepare a series of conferences and meetings—on the cities, on natural beauty, on the quality of education, and on other emerging challenges. From these studies, we will begin to set our course toward the Great Society.

Presidential task forces

Almost immediately after the Ann Arbor speech, 14 separate task forces began studying nearly all major aspects of United States society under the guidance of presidential assistants Bill Moyers and Richard N. Goodwin. In his use of task forces to provide expert advice on policy, Johnson was following Kennedy's example, but unlike Kennedy, Johnson directed his task forces to work in secret. His intent was to prevent his program from being derailed by public criticism of proposals that had not yet been reviewed. The average task force had five to seven members and generally was composed of governmental experts and academics.

After the task force reports were submitted to the White House, Moyers began a second round of review. The recommendations were circulated among the agencies concerned, and strategies were developed for getting the proposed legislation through Congress. On January 4, 1965, Johnson announced much of his proposed program in his State of the Union Address.

The election of 1964

With the exception of the Civil Rights Act of 1964, the Great Society agenda was not a widely discussed issue during the 1964 presidential election campaign. Johnson won the election with 61% of the vote, and he carried all but six states. Democrats gained enough seats to control more than two-thirds of each chamber in the Eighty-ninth Congress, with a 68–32 margin in the Senate and a 295–140 margin in the House of Representatives.

Johnson won a large majority of the Jewish vote, a liberal constituency that gave strong support to the Great Society.

The two sessions of the Eighty-Ninth Congress

The political realignment allowed House leaders to alter rules that had allowed Southern Democrats to kill New Frontier and civil rights legislation in committee, which aided efforts to pass Great Society legislation. In 1965, the first session of the Eighty-Ninth Congress created the core of the Great Society. It began by enacting long-stalled legislation such as Medicare and federal aid to education and then moved into other areas, including high-speed mass transit, rental supplements, truth in packaging, environmental safety legislation, new provisions for mental health facilities, the Teacher Corps, manpower training, the Head Start program, aid to urban mass transit, a demonstration cities program, a housing act that included rental subsidies, and an act for higher education. The Johnson Administration submitted 87 bills to Congress, and Johnson signed 84, or 96%, arguably the most successful legislative agenda in US congressional history.

The major policy areas

Privacy

The Naked Society is a 1964 book on privacy by Vance Packard. The book argues that changes in technology are encroaching on privacy and could create a society in the future with radically different privacy standards. Packard criticized advertisers' unfettered use of private information to create marketing schemes. He compared a recent Great Society initiative by then-president Lyndon B. Johnson, the National Data Bank, to the use of information by advertisers and argued for increased data privacy measures to ensure that information did not find its way into the wrong hands. The essay led Congress to create the Special Subcommittee on the Invasion of Privacy and inspired privacy advocates such as Neil Gallagher and Sam Ervin to fight what they perceived as Johnson's flagrant disregard for consumer privacy. Ervin criticized Johnson's domestic agenda as invasive and saw the unfiltered database of consumers' information as a sign of presidential abuse of power. Ervin warned that "The computer never forgets". Jerry M. Rosenberg dedicated a chapter of his 1969 book The Death of Privacy to the National Data Bank.

Civil rights

President Johnson signs the Voting Rights Act of 1965

Historian Alan Brinkley has suggested that the most important domestic achievement of the Great Society may have been its success in translating some of the demands of the civil rights movement into law. Four civil rights acts were passed, including three laws in the first two years of Johnson's presidency. The Civil Rights Act of 1964 forbade job discrimination and the segregation of public accommodations.

The Voting Rights Act of 1965 assured minority registration and voting. It suspended use of literacy or other voter-qualification tests that had sometimes served to keep African-Americans off voting lists and provided for federal court lawsuits to stop discriminatory poll taxes. It also reinforced the Civil Rights Act of 1964 by authorizing the appointment of federal voting examiners in areas that did not meet voter-participation requirements. The Immigration and Nationality Services Act of 1965 abolished the national-origin quotas in immigration law. The Civil Rights Act of 1968 banned housing discrimination and extended constitutional protections to Native Americans on reservations.

Johnson recognized the benefits and costs of passing civil rights legislation. His support for the 1964 Civil Rights Act was despite his personal opinions on racial matters, as Johnson regularly articulated thoughts and disparaging language against racial minorities, including against African-Americans and Asians. Scholar and biographer Robert Caro suggested that Johnson used racially charged language to appease legislators in an effort to pass civil rights laws, including adapting how he said the word 'negro' based upon where the legislator's district was located.

The "War On Poverty"

The August 1964 signing of the Poverty Bill

The most ambitious and controversial part of the Great Society was its initiative to end poverty. The Kennedy Administration had been contemplating a federal effort against poverty. Johnson, who, as a teacher, had observed extreme poverty in Texas among Mexican-Americans, launched an "unconditional war on poverty" in the first months of his presidency with the goal of eliminating hunger, illiteracy, and unemployment from American life. The centerpiece of the War on Poverty was the Economic Opportunity Act of 1964, which created an Office of Economic Opportunity (OEO) to oversee a variety of community-based antipoverty programs.

Federal funds were provided for special education schemes in slum areas, including help in paying for books and transport, while financial aid was also provided for slum clearances and rebuilding city areas. In addition, the Appalachian Regional Development Act of 1965 created jobs in one of the most impoverished regions of the country. The Economic Opportunity Act of 1964 provided various methods through which young people from poor homes could receive job training and higher education.

The OEO reflected a fragile consensus among policymakers that the best way to deal with poverty was not simply to raise the incomes of the poor but to help them better themselves through education, job training, and community development. Central to its mission was the idea of "community action", the participation of the poor in framing and administering the programs designed to help them.

Programs

The War on Poverty began with a $1 billion appropriation in 1964 and spent another $2 billion in the following two years. It gave rise to dozens of programs, among them the Job Corps, whose purpose was to help disadvantaged youth develop marketable skills; the Neighborhood Youth Corps, established to give poor urban youths work experience and to encourage them to stay in school; Volunteers in Service to America (VISTA), a domestic version of the Peace Corps, which placed concerned citizens with community-based agencies to work towards empowerment of the poor; the Model Cities Program for urban redevelopment; Upward Bound, which assisted poor high school students entering college; legal services for the poor; and the Food Stamp Act of 1964 (which expanded the federal food stamp program).

Programs included the Community Action Program, which initiated local Community Action Agencies charged with helping the poor become self-sufficient; and Project Head Start, which offered preschool education for poor children. In addition, funding was provided for the establishment of community health centers to expand access to health care, while major amendments were made to Social Security in 1965 and 1967 which significantly increased benefits, expanded coverage, and established new programs to combat poverty and raise living standards. In addition, average AFDC payments were 35% higher in 1968 than in 1960, but remained insufficient and uneven.

Education

The most important educational component of the Great Society was the Elementary and Secondary Education Act of 1965, designed by Commissioner of Education Francis Keppel. It was signed into law on April 11, 1965, less than three months after it was introduced. It ended a long-standing political taboo by providing significant federal aid to public education, initially allocating more than $1 billion to help schools purchase materials and start special education programs to schools with a high concentration of low-income children. During its first year of operation, the Act authorized a $1.1 billion program of grants to states, for allocations to school districts with large numbers of children of low-income families, funds to use community facilities for education within the entire community, funds to improve educational research and to strengthen state departments of education, and grants for the purchase of books and library materials. The Act also established Head Start, which had originally been started by the Office of Economic Opportunity as an eight-week summer program, as a permanent program.

The Higher Education Facilities Act of 1963, which was signed into law by Johnson a month after becoming president, authorized several times more college aid within a five-year period than had been appropriated under the Land Grant College in a century. It provided better college libraries, ten to twenty new graduate centers, several new technical institutes, classrooms for several hundred thousand students, and twenty-five to thirty new community colleges a year.

This major piece of legislation was followed by the Higher Education Act of 1965, which increased federal money given to universities, created scholarships and low-interest loans for students, and established a national Teacher Corps to provide teachers to poverty-stricken areas of the United States. The Act also began a transition from federally funded institutional assistance to individual student aid.

In 1964, basic improvements in the National Defense Education Act were achieved, and total funds available to educational institutions were increased. The yearly limit on loans to graduate and professional students was raised from $1,000 to $2,500, and the aggregate limit was raised from $5,000 to $10,000. The program was extended to include geography, history, reading, English, and civics, and guidance and counseling programs were extended to elementary and public junior high schools.

The Bilingual Education Act of 1968 offered federal aid to local school districts in assisting them to address the needs of children with limited English-speaking ability until it expired in 2002.

The Great Society programs also provided support for postgraduate clinical training for both nurses and physicians committed to work with disadvantaged patients in rural and urban health clinics.

Health

Medicare

President Johnson signs the Social Security Act of 1965.

The Social Security Act of 1965 authorized Medicare and provided federal funding for many of the medical costs of older Americans. The legislation overcame the bitter resistance, particularly from the American Medical Association, to the idea of publicly funded health care or "socialized medicine" by making its benefits available to everyone over sixty-five, regardless of need, and by linking payments to the existing private insurance system.

Medicaid

In 1966 welfare recipients of all ages received medical care through the Medicaid program. Medicaid was created on July 30, 1965 under Title XIX of the Social Security Act of 1965. Each state administers its own Medicaid program while the federal Centers for Medicare and Medicaid Services (CMS) monitors the state-run programs and establishes requirements for service delivery, quality, funding, and eligibility standards.

Welfare

A number of improvements were made to the Social Security program in terms of both coverage and adequacy of benefits. The Tax Adjustment Act of 1966 included a provision for special payments under the social security program to certain uninsured individuals aged 72 and over. The Social Security Amendments of 1965 included a 7% increase in cash benefits, a liberalization of the definition of disability, a liberalization of the amount a person can earn and still get full benefits (the so-called retirement test), payment of benefits to eligible children aged 18–21 who are attending school, payment of benefits to widows at age 60 on an actuarially reduced basis, coverage of self-employed physicians, coverage of tips as wages, liberalization of insured-status requirements for persons already aged 72 or over, an increase to $6,600 the amount of earnings counted for contribution and benefit purposes (the contribution and benefit base), and an increase in the contribution rate schedule.

The Social Security Amendments of 1967 included a 13% increase in old-age, survivors, and disability insurance benefits, with a minimum monthly benefit of $55 for a person retiring at or after age-65 (or receiving disability benefits), an increase from $35 to $40 in the special age-72 payments, an increase from $1,500 to $1,680 in the amount a person may earn in a year and still get full benefits for that year, monthly cash benefits for disabled widows and disabled dependent widowers at age 50 at reduced rates, a liberalization of the eligibility requirements for benefits for dependents and Survivors of women workers, and an alternative insured-status test for workers disabled before age 31.

Additionally, new guidelines for determining eligibility for disability insurance benefits, additional non-contributory wage credits for servicemen, broadened coverage of clergy and members of religious orders who have not taken a vow of poverty, and an increase in the contribution and benefit base from $6,600 to $7,800, beginning in 1968. In addition, the Social Security Amendments of 1967 provided the first major amendments of Medicare. These social security amendments extended the coverage of the program to include certain services previously excluded, simplified reimbursement procedures under both the hospital and medical insurance plans, and facilitated the administrative procedures concerning general enrollment periods.

The Food Stamp Act of 1964 made the program permanent, while the Social Security Amendments of 1967 specified that at least 6% of monies for maternal and child health should be spent on family planning. By 1967, the federal government began requiring state health departments to make contraceptives available to all adults who were poor. Meal programs for low-income senior citizens began in 1965, with the federal government providing funding for "congregate meals" and "home-delivered meals." The Child Nutrition Act, passed in 1966, made improvements to nutritional assistance to children such as in the introduction of the School Breakfast Program.

The arts and cultural institutions

Johnson promoted the arts in terms of social betterment, not artistic creativity. He typically emphasized qualitative and quantitative goals, especially the power of the arts to improve the quality of life of ordinary Americans and to reduce the inequalities between the haves and the have-nots. Karen Patricia Heath observes that, "Johnson personally was not much interested in the acquisition of knowledge, cultural or otherwise, for its own sake, nor did he have time for art appreciation or meeting with artists."

National Endowments for the arts and the humanities

In September 1965, Johnson signed the National Foundation on the Arts and Humanities Act into law, creating both the National Endowment for the Arts and National Endowment for the Humanities as separate, independent agencies. Lobbying for federally funded arts and humanities support began during the Kennedy Administration. In 1963 three scholarly and educational organizations—the American Council of Learned Societies (ACLS), the Council of Graduate Schools in America, and the United Chapters of Phi Beta Kappa—joined together to establish the National Commission on the Humanities. In June 1964, the commission released a report that suggested that the emphasis placed on science endangered the study of the humanities from elementary schools through postgraduate programs. In order to correct the balance, it recommended "the establishment by the President and the Congress of the United States of a National Humanities Foundation."

In August 1964, Representative William S. Moorhead of Pennsylvania proposed legislation to implement the commission's recommendations. Support from the White House followed in September, when Johnson lent his endorsement during a speech at Brown University. In March 1965, the White House proposed the establishment of a National Foundation on the Arts and Humanities and requested $20 million in start-up funds. The commission's report had generated other proposals, but the White House's approach eclipsed them. The administration's plan, which called for the creation of two separate agencies each advised by a governing body, was the version that the Congress approved. Richard Nixon dramatically expanded funding for NEH and NEA.

Public broadcasting

After the First National Conference on Long-Range Financing of Educational Television Stations in December 1964 called for a study of the role of noncommercial education television in society, the Carnegie Corporation agreed to finance the work of a 15-member national commission. Its landmark report, Public Television: A Program for Action, published on January 26, 1967, popularized the phrase "public television" and assisted the legislative campaign for federal aid. The Public Broadcasting Act of 1967, enacted less than 10 months later, chartered the Corporation for Public Broadcasting as a private, non-profit corporation.

The law initiated federal aid through the CPB for the operation, as opposed to the funding of capital facilities, of public broadcasting. The CPB initially collaborated with the pre-existing National Educational Television system, but in 1969 decided to start the Public Broadcasting Service (PBS). A public radio study commissioned by the CPB and the Ford Foundation and conducted from 1968 to 1969 led to the establishment of National Public Radio, a public radio system under the terms of the amended Public Broadcasting Act.

Cultural centers

Two long-planned national cultural and arts facilities received federal funding that would allow for their completion through Great Society legislation. A National Cultural Center, suggested during the Franklin Roosevelt Administration and created by a bipartisan law signed by Dwight Eisenhower, was transformed into the John F. Kennedy Center for the Performing Arts, a living memorial to the assassinated president. Fundraising for the original cultural center had been poor prior to legislation creating the Kennedy Center, which passed two months after the president's death and provided $23 million for construction. The Kennedy Center opened in 1971.

In the late 1930s the U.S. Congress mandated a Smithsonian Institution art museum for the National Mall, and a design by Eliel Saarinen was unveiled in 1939, but plans were shelved during World War II. A 1966 act of the U.S. Congress established the Hirshhorn Museum and Sculpture Garden as part of the Smithsonian Institution with a focus on modern art, in contrast to the existing National Art Gallery. The museum was primarily federally funded, although New York financier Joseph Hirshhorn later contributed $1 million toward building construction, which began in 1969. The Hirshhorn opened in 1974.

Transportation

Transportation initiatives started during President Johnson's term in office included the consolidation of transportation agencies into a cabinet-level position under the Department of Transportation. The department was authorized by Congress on October 15, 1966 and began operations on April 1, 1967. Congress passed a variety of legislation to support improvements in transportation including The Urban Mass Transportation Act of 1964 which provided $375 million for large-scale urban public or private rail projects in the form of matching funds to cities and states and created the Urban Mass Transit Administration (now the Federal Transit Administration), High Speed Ground Transportation Act of 1965 which resulted in the creation of high-speed rail between New York and Washington, and the National Traffic and Motor Vehicle Safety Act of 1966—a bill largely taken credit for by Ralph Nader, whose book Unsafe at Any Speed he claims helped inspire the legislation.

Consumer protection

In 1964, Johnson named Assistant Secretary of Labor Esther Peterson to be the first presidential assistant for consumer affairs.

The Cigarette Labeling and Advertising Act of 1965 required packages to carry warning labels. The Motor Vehicle Safety Act of 1966 set standards through creation of the National Highway Traffic Safety Administration. The Fair Packaging and Labeling Act requires products identify manufacturer, address, clearly mark quantity and servings. The statute also authorized the HEW and the FTC to establish and define voluntary standard sizes. The original would have mandated uniform standards of size and weight for comparison shopping, but the final law only outlawed exaggerated size claims.

The Child Safety Act of 1966 prohibited any chemical so dangerous that no warning can make it safe. The Flammable Fabrics Act of 1967 set standards for children's sleepwear, but not baby blankets.

The Wholesome Meat Act of 1967 required inspection of meat which must meet federal standards. The Truth-in-Lending Act of 1968 required lenders and credit providers to disclose the full cost of finance charges in both dollars and annual percentage rates, on installment loan and sales. The Wholesome Poultry Products Act of 1968 required inspection of poultry which must meet federal standards. The Land Sales Disclosure Act of 1968 provided safeguards against fraudulent practices in the sale of land. The Radiation Safety Act of 1968 provided standards and recalls for defective electronic products.

The environment

Joseph A. Califano, Jr. has suggested that the Great Society's main contribution to the environment was an extension of protections beyond those aimed at the conservation of untouched resources. In a message he transmitted to Congress, President Johnson said:

The air we breathe, our water, our soil and wildlife, are being blighted by poisons and chemicals which are the by-products of technology and industry. The society that receives the rewards of technology, must, as a cooperating whole, take responsibility for [their] control. To deal with these new problems will require a new conservation. We must not only protect the countryside and save it from destruction, we must restore what has been destroyed and salvage the beauty and charm of our cities. Our conservation must be not just the classic conservation of protection [against] development, but a creative conservation of restoration and innovation.

— Special Message to the Congress on Conservation and Restoration of Natural Beauty; February 8, 1965

At the behest of Secretary of the Interior Stewart Udall, the Great Society included several new environmental laws to protect air and water. Environmental legislation enacted included:

• Water Quality Act of 1965
• Clean Air Act of 1963
• Wilderness Act of 1964
• Endangered Species Preservation Act of 1966
• National Trails System Act of 1968
• Wild and Scenic Rivers Act of 1968
• Land and Water Conservation Fund Act of 1965
• Solid Waste Disposal Act of 1965
• Motor Vehicle Air Pollution Control Act of 1965
• National Historic Preservation Act of 1966
• Aircraft Noise Abatement Act of 1968
• National Environmental Policy Act of 1969

Housing

In 1964, the quality of the housing program was improved by requiring minimum standards of code enforcement, providing assistance to dislocated families and small businesses and authorizing below market interest loans for rehabilitating housing in urban renewal areas. The Housing and Urban Development Act of 1965 included important elements such as rent subsidies for low-income families, rehabilitation grants to enable low-income homeowners in urban renewal areas to improve their homes instead of relocating elsewhere, and improved and extended benefits for relocation payments. The Demonstration Cities Act of 1966 established a new program for comprehensive neighborhood renewal, with an emphasis on strategic investments in housing renovation, urban services, neighborhood facilities, and job creation activities.

Rural development

A number of measures were introduced to improve socio-economic conditions in rural areas. Under Title III of the 1964 Economic Opportunity Act, Special Programs to Combat Rural Poverty, the Office for Economic Opportunity was authorized to act as a lender of last resort for rural families who needed money to help them permanently increase their earning capacity. Loans could be made to purchase land, improve the operation of family farms, allow participation in cooperative ventures, and finance non-agricultural business enterprises, while local cooperatives which served low-income rural families could apply for another category of loans for similar purposes.

Title III also made loans and grants available to local groups to improve housing, education, and child care services for migrant farm workers, while Titles I and II also included potentially important programs for rural development. Title I established the Job Corps which enrolled school dropouts in community service projects: 40% of the corpsmen were to work in a Youth Conservation Corps to carry out resource conservation, beautification, and development projects in the National Forests and countryside. Arguably more important for rural areas were the Community Action Programs authorized by Title II. Federal money was allocated to States according to their needs for job training, housing, health, and welfare assistance, and the States were then to distribute their shares of the Community Action grants on the basis of proposals from local public or non-profit private groups.

The Public Works and Economic Development Act of 1965 reorganized the Areas Redevelopment Administration (ARA) into the Economic Development Administration (EDA), and authorized $3.3 billion over 5 years while specifying seven criteria for eligibility. The list included low median family income, but the 6% or higher unemployment applied to the greatest number of areas, while the Act also mentioned outmigration from rural areas as a criterion. In an attempt to go beyond what one writer described as "ARA's failed scattershot approach" of providing aid to individual counties and inspired by the European model of regional development, the EDA encouraged counties to form Economic Development Districts (EDDs) as it was recognized that individual distressed counties (called RAs or Redevelopment Areas) lacked sufficient resources for their own development.

EDDs encompassed from 5 to 15 counties and both planned and implemented development with EDA funding and technical assistance, and each EDD had a "growth center" (another concept borrowed from Europe) called a redevelopment center if it was located in an RA or development center if in another county. With the exception of the growth centers, EDD counties were ineligible for assistance unless they were RAs, but they were all expected to benefit from "coordinated districtwide development planning."

Labor

The Amendments made to the 1931 Davis-Bacon Act in 1964 extended the prevailing wage provisions to cover fringe benefits, while several increases were made to the federal minimum wage. The Service Contract Act of 1965 provided for minimum wages and fringe benefits as well as other conditions of work for contractors under certain types of service contracts. A comprehensive minimum rate hike was also signed into law that extended the coverage of the Fair Labor Standards Act to about 9.1 million additional workers.

Conservative opposition

In the 1966 midterm elections, the Republicans made major gains in part through a challenge to the "War on Poverty." Large-scale civic unrest in the inner-city was escalating (reaching a climax in 1968), strengthened demand for Law and order. Urban white ethnics who had been an important part of the New Deal Coalition felt abandoned by the Democratic Party's concentration on racial minorities. Republican candidates ignored more popular programs, such as Medicare or the Elementary and Secondary Education Act, and focused their attacks on less popular programs. Furthermore, Republicans made an effort to avoid the stigma of negativism and elitism that had dogged them since the days the New Deal, and instead proposed well-crafted alternatives—such as their "Opportunity Crusade." The result was a major gain of 47 House seats for the GOP in the 1966 United States House of Representatives elections that put the conservative coalition of Republicans and Southern Democrats back in business.

Despite conservatives who attacked Johnson's Great Society making major gains in Congress in the 1966 midterm elections, and with anger and frustration mounting over the Vietnam War, Johnson was still able to secure the passage of additional programs during his last two years in office. Laws were passed to extend the Food Stamp Program, to expand consumer protection, to improve safety standards, to train health professionals, to assist handicapped Americans, and to further urban programs.

In 1968, a new Fair Housing Act was passed, which banned racial discrimination in housing and subsidized the construction or rehabilitation of low-income housing units. That same year, a new program for federally funded job retraining for the hardcore unemployed in fifty cities was introduced, together with the strongest federal gun control bill (relating to the transportation of guns across state lines) in American history up until that point.

By the end of the Johnson Administration, 226 out of 252 major legislative requests (over a four-year period) had been met, federal aid to the poor had risen from $9.9 billion in 1960 to $30 billion by 1968, one million Americans had been retrained under previously non-existent federal programs, and two million children had participated in the Head Start program.

Legacy

Interpretations of the War on Poverty remain controversial. The Office of Economic Opportunity was dismantled by the Nixon and Ford administrations, largely by transferring poverty programs to other government departments. Funding for many of these programs was further cut in President Ronald Reagan's Gramm-Latta Budget in 1981.

Alan Brinkley has suggested that "the gap between the expansive intentions of the War on Poverty and its relatively modest achievements fueled later conservative arguments that government is not an appropriate vehicle for solving social problems." One of Johnson's aides, Joseph A. Califano, Jr., has countered that "from 1963 when Lyndon Johnson took office until 1970 as the impact of his Great Society programs were felt, the portion of Americans living below the poverty line dropped from 22.2 percent to 12.6 percent, the most dramatic decline over such a brief period in this century."

In the long run, statistical analysis shows that the Official Poverty Rate fell from 19.5 percent in 1963 to 12.3 percent in 2017. However, using a broader definition that includes cash income, taxes, and major in-kind transfers and inflation rates, the "Full-income Poverty Rate" based on President Johnson's standards fell from 19.5 percent to 2.3 percent over that period.

The percentage of African Americans below the poverty line dropped from 55 percent in 1960 to 27 percent in 1968. From 1964 to 1967, federal expenditures on education rose from $4 billion to $12 billion, while spending on health rose from $5 billion to $16 billion. By that time, the federal government was spending $4,000 per annum on each poor family of four, four times as much as in 1961.

 

Cost–benefit analysis

From Wikipedia, the free encyclopedia

https://en.wikipedia.org/wiki/Cost%E2%80%93benefit_analysis 

Cost–benefit analysis (CBA), sometimes also called benefit–cost analysis, is a systematic approach to estimating the strengths and weaknesses of alternatives used to determine options which provide the best approach to achieving benefits while preserving savings (for example, in transactions, activities, and functional business requirements). A CBA may be used to compare completed or potential courses of actions, or to estimate (or evaluate) the value against the cost of a decision, project, or policy. It is commonly used in commercial transactions, business or policy decisions (particularly public policy), and project investments. For example, the U.S. Securities and Exchange Commission has to conduct cost-benefit analysis before instituting regulations or de-regulations.

CBA has two main applications:

1. To determine if an investment (or decision) is sound, ascertaining if – and by how much – its benefits outweigh its costs.
2. To provide a basis for comparing investments (or decisions), comparing the total expected cost of each option with its total expected benefits.

CBA is related to cost-effectiveness analysis. Benefits and costs in CBA are expressed in monetary terms and are adjusted for the time value of money; all flows of benefits and costs over time are expressed on a common basis in terms of their net present value, regardless of whether they are incurred at different times. Other related techniques include cost–utility analysis, risk–benefit analysis, economic impact analysis, fiscal impact analysis, and social return on investment (SROI) analysis.

Cost–benefit analysis is often used by organizations to appraise the desirability of a given policy. It is an analysis of the expected balance of benefits and costs, including an account of any alternatives and the status quo. CBA helps predict whether the benefits of a policy outweigh its costs (and by how much), relative to other alternatives. This allows the ranking of alternative policies in terms of a cost–benefit ratio. Generally, accurate cost–benefit analysis identifies choices which increase welfare from a utilitarian perspective. Assuming an accurate CBA, changing the status quo by implementing the alternative with the lowest cost–benefit ratio can improve Pareto efficiency. Although CBA can offer an informed estimate of the best alternative, a perfect appraisal of all present and future costs and benefits is difficult; perfection, in economic efficiency and social welfare, is not guaranteed.

The value of a cost–benefit analysis depends on the accuracy of the individual cost and benefit estimates. Comparative studies indicate that such estimates are often flawed, preventing improvements in Pareto and Kaldor–Hicks efficiency. Interest groups may attempt to include (or exclude) significant costs in an analysis to influence its outcome.

History

French engineer and economist Jules Dupuit, credited with the creation of cost–benefit analysis

The concept of CBA dates back to an 1848 article by Jules Dupuit, and was formalized in subsequent works by Alfred Marshall. Jules Dupuit pioneered this approach by first calculating "the social profitability of a project like the construction of a road or bridge" In an attempt to answer this, Dupuit began to look at the utility users would gain from the project. He determined that the best method of measuring utility is by learning one's willingness to pay for something. By taking the sum of each user's willingness to pay, Dupuit illustrated that the social benefit of the thing (bridge or road or canal) could be measured. Some users may be willing to pay nearly nothing, others much more, but the sum of these would shed light on the benefit of it. It should be reiterated that Dupuit was not suggesting that the government perfectly price-discriminate and charge each user exactly what they would pay. Rather, their willingness to pay provided a theoretical foundation on the societal worth or benefit of a project. The cost of the project proved much simpler to calculate. Simply taking the sum of the materials and labor, in addition to the maintenance afterward, would give one the cost. Now, the costs and benefits of the project could be accurately analyzed, and an informed decision could be made.

The Corps of Engineers initiated the use of CBA in the US, after the Federal Navigation Act of 1936 mandated cost–benefit analysis for proposed federal-waterway infrastructure. The Flood Control Act of 1939 was instrumental in establishing CBA as federal policy, requiring that "the benefits to whomever they accrue [be] in excess of the estimated costs."

Public policy

CBA's application to broader public policy began with the work of Otto Eckstein, who laid out a welfare economics foundation for CBA and its application to water-resource development in 1958. It was applied in the US to water quality, recreational travel, and land conservation during the 1960s, and the concept of option value was developed to represent the non-tangible value of resources such as national parks.

CBA was expanded to address the intangible and tangible benefits of public policies relating to mental illness, substance abuse, college education, and chemical waste. In the US, the National Environmental Policy Act of 1969 required CBA for regulatory programs; since then, other governments have enacted similar rules. Government guidebooks for the application of CBA to public policies include the Canadian guide for regulatory analysis, the Australian guide for regulation and finance, and the US guides for health-care and emergency-management programs.

Transportation investment

CBA for transport investment began in the UK with the M1 motorway project and was later used for many projects, including the London Underground's Victoria line. The New Approach to Appraisal (NATA) was later introduced by the Department for Transport, Environment and the Regions. This presented balanced cost–benefit results and detailed environmental impact assessments. NATA was first applied to national road schemes in the 1998 Roads Review, and was subsequently rolled out to all transport modes. Maintained and developed by the Department for Transport, it was a cornerstone of UK transport appraisal in 2011.

The European Union's Developing Harmonised European Approaches for Transport Costing and Project Assessment (HEATCO) project, part of the EU's Sixth Framework Programme, reviewed transport appraisal guidance of EU member states and found significant national differences. HEATCO aimed to develop guidelines to harmonise transport appraisal practice across the EU.

Transport Canada promoted CBA for major transport investments with the 1994 publication of its guidebook. US federal and state transport departments commonly apply CBA with a variety of software tools, including HERS, BCA.Net, StatBenCost, Cal-BC, and TREDIS. Guides are available from the Federal Highway Administration, Federal Aviation Administration, Minnesota Department of Transportation, California Department of Transportation (Caltrans), and the Transportation Research Board's Transportation Economics Committee.

Accuracy

In health economics, CBA may be an inadequate measure because willingness-to-pay methods of determining the value of human life can be influenced by income level. Variants, such as cost–utility analysis, QALY and DALY to analyze the effects of health policies, may be more suitable.

For some environmental effects, cost–benefit analysis can be replaced by cost-effectiveness analysis. This is especially true when one type of physical outcome is sought, such as a reduction in energy use by an increase in energy efficiency. Using cost-effectiveness analysis is less laborious and time-consuming, since it does not involve the monetization of outcomes (which can be difficult in some cases).

It has been argued that if modern cost–benefit analyses had been applied to decisions such as whether to mandate the removal of lead from gasoline, block the construction of two proposed dams just above and below the Grand Canyon on the Colorado River, and regulate workers' exposure to vinyl chloride, the measures would not have been implemented (although all are considered highly successful). The US Clean Air Act has been cited in retrospective studies as a case in which benefits exceeded costs, but knowledge of the benefits (attributable largely to the benefits of reducing particulate pollution) was not available until many years later.

Process

A generic cost–benefit analysis has the following steps:

1. Define the goals and objectives of the action.
2. List alternative actions.
3. List stakeholders.
4. Select measurement(s) and measure all cost and benefit elements.
5. Predict outcome of costs and benefits over the relevant time period.
6. Convert all costs and benefits into a common currency.
7. Apply discount rate.
8. Calculate the net present value of actions under consideration.
9. Perform sensitivity analysis.
10. Adopt the recommended course of action.

Evaluation

CBA attempts to measure the positive or negative consequences of a project. A similar approach is used in the environmental analysis of total economic value. Both costs and benefits can be diverse. Costs tend to be most thoroughly represented in cost–benefit analyses due to relatively-abundant market data. The net benefits of a project may incorporate cost savings, public willingness to pay (implying that the public has no legal right to the benefits of the policy), or willingness to accept compensation (implying that the public has a right to the benefits of the policy) for the policy's welfare change. The guiding principle of evaluating benefits is to list all parties affected by an intervention and add the positive or negative value (usually monetary) that they ascribe to its effect on their welfare.

The actual compensation an individual would require to have their welfare unchanged by a policy is inexact at best. Surveys (stated preferences) or market behavior (revealed preferences) are often used to estimate compensation associated with a policy. Stated preferences are a direct way of assessing willingness to pay for an environmental feature, for example. Survey respondents often misreport their true preferences, however, and market behavior does not provide information about important non-market welfare impacts. Revealed preference is an indirect approach to individual willingness to pay. People make market choices of items with different environmental characteristics, for example, revealing the value placed on environmental factors.

The value of human life is controversial when assessing road-safety measures or life-saving medicines. Controversy can sometimes be avoided by using the related technique of cost–utility analysis, in which benefits are expressed in non-monetary units such as quality-adjusted life years. Road safety can be measured in cost per life saved, without assigning a financial value to the life. However, non-monetary metrics have limited usefulness for evaluating policies with substantially different outcomes. Other benefits may also accrue from a policy, and metrics such as cost per life saved may lead to a substantially different ranking of alternatives than CBA.

Another metric is valuing the environment, which in the 21st century is typically assessed by valuing ecosystem services to humans (such as air and water quality and pollution). Monetary values may also be assigned to other intangible effects such as business reputation, market penetration, or long-term enterprise strategy alignment.

Time and discounting

CBA generally attempts to put all relevant costs and benefits on a common temporal footing, using time value of money calculations. This is often done by converting the future expected streams of costs (${\displaystyle C}$) and benefits (${\displaystyle B}$) into a present value amount with a discount rate (${\displaystyle r}$) and the net present value defined as:

$${\displaystyle {\text{NPV}}=\sum _{t=0}^{\infty }{B_{t}-C_{t} \over {(1+r)^{t}}}}$$

The selection of a discount rate for this calculation is subjective. A smaller rate values the current generation and future generations equally. Larger rates (a market rate of return, for example) reflects human present bias or hyperbolic discounting: valuing money which they will receive in the near future more than money they will receive in the distant future. Empirical studies suggest that people discount future benefits in a way similar to these calculations. The choice makes a large difference in assessing interventions with long-term effects. An example is the equity premium puzzle, which suggests that long-term returns on equities may be higher than they should be after controlling for risk and uncertainty. If so, market rates of return should not be used to determine the discount rate because they would undervalue the distant future.

Methods for choosing a discount rate

For publicly traded companies, it is possible to find a project's discount rate by using an equilibrium asset pricing model to find the required return on equity for the company and then assuming that the risk profile of a given project is similar to that the company faces. Commonly used models include the capital asset pricing model (CAPM):

$${\displaystyle r=r_{f}+\beta \left[\mathbb {E} (r_{M})-r_{f}\right]}$$

and the Fama-French model:

$${\displaystyle r=\underbrace {r_{f}} _{\text{Risk-Free Rate}}+\beta _{M}\underbrace {\left[\mathbb {E} (r_{M})-r_{f}\right]} _{\text{Market Risk}}+\beta _{SMB}\underbrace {\left[\mathbb {E} (r_{S})-\mathbb {E} (r_{B})\right]} _{\text{Size Factor}}+\beta _{HML}\underbrace {\left[\mathbb {E} (r_{H})-\mathbb {E} (r_{L})\right]} _{\text{Value Factor}}}$$

where the ${\displaystyle \beta _{i}}$ terms correspond to the factor loadings. A generalization of these methods can be found in arbitrage pricing theory, which allows for an arbitrary number of risk premiums in the calculation of the required return.

Risk and uncertainty

Risk associated with project outcomes is usually handled with probability theory. Although it can be factored into the discount rate (to have uncertainty increasing over time), it is usually considered separately. Particular consideration is often given to agent risk aversion: preferring a situation with less uncertainty to one with greater uncertainty, even if the latter has a higher expected return.

Uncertainty in CBA parameters can be evaluated with a sensitivity analysis, which indicates how results respond to parameter changes. A more formal risk analysis may also be undertaken with the Monte Carlo method. However, even a low parameter of uncertainty does not guarantee the success of a project.

Principle of maximum entropy

Suppose that we have sources of uncertainty in a CBA that are best treated with the Monte Carlo method, and the distributions describing uncertainty are all continuous. How do we go about choosing the appropriate distribution to represent the sources of uncertainty? One popular method is to make use of the principle of maximum entropy, which states that the distribution with the best representation of current knowledge is the one with the largest entropy - defined for continuous distributions as:

$${\displaystyle H(X)=\mathbb {E} \left[-\log f(X)\right]=-\int _{\mathcal {S}}f(x)\log f(x)dx}$$

where ${\displaystyle {\mathcal {S}}}$ is the support set of a probability density function ${\displaystyle f(x)}$. Suppose that we impose a series of constraints that must be satisfied:

1. ${\displaystyle f(x)\geq 0}$, with equality outside of ${\displaystyle {\mathcal {S}}}$
2. ${\displaystyle \int _{\mathcal {S}}f(x)dx=1}$
3. ${\displaystyle \int _{\mathcal {S}}r_{i}(x)f(x)dx=\alpha _{i},\quad i=1,...,m}$

where the last equality is a series of moment conditions. Maximizing the entropy with these constraints leads to the functional:

$${\displaystyle J=\max _{f}\;\int _{\mathcal {S}}\left(-f\log f+\lambda _{0}f+\sum _{i=1}^{m}\lambda _{i}r_{i}f\right)dx}$$

where the ${\displaystyle \lambda _{i}}$ are Lagrange multipliers. Maximizing this functional leads to the form of a maximum entropy distribution:

$${\displaystyle f(x)=\exp \left[\lambda _{0}-1+\sum _{i=1}^{m}\lambda _{i}r_{i}(x)\right]}$$

There is a direct correspondence between the form of a maximum entropy distribution and the exponential family. Examples of commonly used continuous maximum entropy distributions in simulations include:

• Uniform distribution
  • No constraints are imposed over the support set ${\displaystyle {\mathcal {S}}\in [a,b]}$
  • It is assumed that we have maximum ignorance about the uncertainty
• Exponential distribution
  • Specified mean ${\displaystyle \mathbb {E} (X)}$ over the support set ${\displaystyle {\mathcal {S}}\in [0,\infty )}$
• Gamma distribution
  • Specified mean ${\displaystyle \mathbb {E} (X)}$ and log mean ${\displaystyle \mathbb {E} (\log X)}$ over the support set ${\displaystyle {\mathcal {S}}\in [0,\infty )}$
  • The exponential distribution is a special case
• Normal distribution
  • Specified mean ${\displaystyle \mathbb {E} (X)}$ and variance ${\displaystyle {\text{Var}}(X)}$ over the support set ${\displaystyle {\mathcal {S}}\in (-\infty ,\infty )}$
  • If we have a specified mean and variance on the log scale, then the lognormal distribution is the maximum entropy distribution

CBA under US administrations

The increased use of CBA in the US regulatory process is often associated with President Ronald Reagan's administration. Although CBA in US policy-making dates back several decades, Reagan's Executive Order 12291 mandated its use in the regulatory process. After campaigning on a deregulation platform, he issued the 1981 EO authorizing the Office of Information and Regulatory Affairs (OIRA) to review agency regulations and requiring federal agencies to produce regulatory impact analyses when the estimated annual impact exceeded $100 million. During the 1980s, academic and institutional critiques of CBA emerged. The three main criticisms were:

1. That CBA could be used for political goals. Debates on the merits of cost and benefit comparisons can be used to sidestep political or philosophical goals, rules and regulations.
2. That CBA is inherently anti-regulatory, and therefore a biased tool. The monetization of policy impacts is an inappropriate tool for assessing mortality risks and distributional impacts.
3. That the length of time necessary to complete CBA can create significant delays, which can impede policy regulation.

These criticisms continued under the Clinton administration during the 1990s. Clinton furthered the anti-regulatory environment with his Executive Order 12866. The order changed some of Reagan's language, requiring benefits to justify (rather than exceeding) costs and adding "reduction of discrimination or bias" as a benefit to be analyzed. Criticisms of CBA (including uncertainty valuations, discounting future values, and the calculation of risk) were used to argue that it should play no part in the regulatory process. The use of CBA in the regulatory process continued under the Obama administration, along with the debate about its practical and objective value. Some analysts oppose the use of CBA in policy-making, and those in favor of it support improvements in analysis and calculations.

Distributional issues

CBA has been criticized in some disciplines as it relies on the Kaldor-Hicks criterion which does not take into account distributional issues. This means, that positive net-benefits are decisive, independent of who benefits and who loses when a certain policy or project is put into place. Phaneuf and Requate (2016: p. 649) phrased it as follows "CBA today relies on the Kaldor-Hicks criteria to make statements about efficiency without addressing issues of income distribution. This has allowed economists to stay silent on issues of equity, while focussing on the more familiar task of measuring costs and benefits".

The main criticism stems from the diminishing marginal utility of income. Without using weights in the CBA, it is not the case that everyone “matters” the same but rather that people who value money less (who are by assumption people with more money) receive a higher weight. One reason for this is that for high income people, one monetary unit is worth less relative to low income people, so they are more willing to give up one unit in order to make a change that is favourable for them. This means that there is no symmetry in agents. A second reason is that any welfare change, no matter positive or negative, affects people with a lower income stronger than people with a higher income.

Taken together, this means that not using weights is a decision in itself – richer people receive de facto a bigger weight. As to compensate for this difference in valuation and in order to take into account distributional issues, it is possible to use different methods. The two most common ones are taxation, e.g. through a progressive tax, and the addition of weights into the CBA itself. There are a number of different approaches for calculating these weights. Often, a Bergson-Samuelson social welfare function is used and weights are calculated according to the willingness-to-pay of people.