In every welfare state, the most expensive social programs are education, pensions, and healthcare. These three categories, plus national defense, will account for about 74% of total US government spending in 2015.* Most people think of ‘welfare’ as assistance for the poor, but the most expensive programs that assist the poor are programs that assist all Americans. The biggest welfare programs provide benefits that are targeted for education, pensions, and healthcare. Programs that are solely focused on reducing poverty like food stamps, housing assistance, and cash assistance are all relatively small and much less popular than the expensive social programs that benefit everyone. Unemployment insurance is somewhere in between. It benefits everyone in theory since everyone, including millionaires, get unemployment checks. And it is also an anti-poverty program because most of the money really does go to relatively needy families partly because high-income people are not unemployed as much as low-income people. Unemployment insurance is a lot smaller and less popular than the three big-dollar social programs, but it is more popular than welfare programs that exclusively help the poor.
Here is a brief timeline of changes in the big three social welfare programs in the US, focusing on healthcare because it has the most tortuous history, it is the biggest spending category, and it is the only category that is expected to continue growing much faster than GDP.
1800s: The US was one of the first nations to socialize education. Education became both an entitlement and required by mandate. Most Americans don’t think about the government takeover of education as being a form of socialism any more than they think of the military as being socialist, but both meet the quintessential definition of a socialist activity in which the government owns the means of production and directly hires the workers. Government production dominates education spending (and defense) in every country of the world today. Whereas education is a federal program in most countries, in the US, education was mostly socialized by local governments. For all of US history until about 2007, education was by far the single biggest social program in the US. My dissertation adviser, Joe Persky, told me that it was also the single largest welfare program (in the ‘anti-poverty’ meaning of welfare) since education spending has always been so enormous and because American kids disproportionately live in relatively poor households.
1935: Franklin D. Roosevelt socialized pensions by creating social security.
1954: Eisenhower created the employer-provided-insurance tax subsidy. This is the third most expensive government healthcare program after Medicare and Medicaid. Although most Americans don’t realize it exists, most economists (on both the left and the right) think it should be repealed because of their obsession with moral hazard. According to a lecture Timothy Jost gave at Bluffton, it led to a dramatic increase in employer-provided insurance.
1965: Lyndon B. Johnson created socialized universal health insurance for the elderly (Medicare) and the poor (Medicaid). Johnson gave universal, free healthcare to all Americans over age 65. He dramatically expanded the US healthcare entitlement beyond veterans who always had socialized healthcare beginning during the revolutionary war.
1972: Richard Nixon expands Medicare to cover the disabled.
1983: Ronald W. Reagan created the first truly universal healthcare system in the US: The Emergency Medical Treatment and Active Labor Act or EMTALA. It is the entitlement for all people in the US to get guaranteed hospital treatment through emergency rooms without regard to ability to pay or citizenship status. And once anyone is admitted, they cannot be discharged until their condition is stabilized regardless of the costs for treatment. Between EMTALA and Reagan’s efforts to expand Medicare and Social Security, Reagan is one of the main architects of the American welfare state.
1997: Clinton expanded Medicaid to cover many more children and pregnant moms. Children’s Health Insurance Program (CHIP) resulted in about half of all births being covered by Medicaid. It is the main legacy of Hillary Clinton’s failed efforts to pass universal health insurance.
2003: George W. Bush expands Medicare to add a drug benefit.
2010: Barack Obama passes the Affordable Care Act.
That is a brief overview that covers the social welfare programs that have had the biggest impact on the economy.
*This was an unofficial 8/17/2015 estimate of government spending and it might change slightly as new data comes in. It comes from an unofficial, third-party source because no official government agency aggregates data for state, local, and federal spending. I excluded interest payments from my calculation because interest is just a transactions cost that is used to pay for our government programs. The category which has historically produced the biggest budget overruns is national defense, so if you want to attribute interest costs to a particular program, national defense should get the biggest share.