Working Paper: NBER ID: w11080
Authors: John Joseph Wallis; Price Fishback; Shawn Kantor
Abstract: The American social welfare system was transformed during the 1930s. Prior to the New Deal public relief was administered almost exclusively by local governments. The administration of local public relief was widely thought to be corrupt. Beginning in 1933, federal, state, and local governments cooperatively built a larger social welfare system. While the majority of the funds for relief spending came from the federal government, the majority of administrative decisions were made at state and local levels. While New Dealers were often accused of playing politics with relief, social welfare system created by the New Deal (still largely in place today) is more often maligned for being bureaucratic than for being corrupt. We do not believe that New Dealers were motivated by altruistic motives when they shaped New Deal relief policies. Evidence suggests that politics was always the key issue. But we show how the interaction of political interests at the federal, state, and local levels of government created political incentives for the national relief administration to curb corruption by actors at the state and local level. This led to different patterns of relief spending when programs were controlled by national, rather than state and local officials. In the permanent social welfare system created by the Social Security Act, the national government pressed for the substitution of rules rather than discretion in the administration of relief. This, ultimately, significantly reduced the level of corruption in the administration of welfare programs.
Keywords: New Deal; social welfare; corruption; politics; relief administration
JEL Codes: N0; N3; N4; H0; H1; H4; I3
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Centralization of administrative discretion under the New Deal (H77) | Reduction of political corruption in relief administration (D73) |
| Federal oversight under the New Deal (G28) | Limited political manipulation in relief administration (H84) |
| Discretionary power held by federal officials (H77) | Stricter standards and effective investigation of corruption (H57) |
| Roosevelt's political interests aligned with reducing corruption (D73) | Improved public support for his administration (H12) |
| Control over intrastate allocations by Roosevelt and Hopkins (H77) | Relief distribution aligned with economic needs rather than political interests (H84) |
| New Deal's structural reforms (D47) | Established a precedent for bureaucratic administration of welfare (I38) |