The Question Posed by U.S. Welfare Retrenchment — Where Is Institutional Trust Headed?

What Is Happening

The U.S. social safety net has entered a phase of historically unprecedented contraction. The "One Big Beautiful Bill Act," signed by President Trump in July 2025, cuts approximately $863 billion from Medicaid — the public health insurance program for low-income individuals — over ten years. The Supplemental Nutrition Assistance Program (SNAP, formerly known as food stamps) faces approximately $295 billion in reductions. Combined, these welfare cuts exceed one trillion dollars — an unprecedented scale for a single piece of legislation.

Federal funding is estimated to decline by approximately $95 billion in 2026 alone. Behind the numbers are the lives of real people. Analyses indicate that SNAP reductions will strip food assistance from millions. The impact on children is particularly severe: estimates by the Center on Budget and Policy Priorities (CBPP) suggest that approximately four million people will lose SNAP eligibility, of whom roughly one million are children.

The ripple effects on employment are equally grave. An estimated 1.22 million jobs are projected to be lost, equivalent to an approximately 0.8 percentage-point increase in the unemployment rate. The blow to state-level economies is also substantial, with estimates projecting a roughly $113 billion decline in state GDP in 2026. Cutting welfare expenditures is not merely an act of reducing spending. It carries the structural force to contract the very circulation of regional economies.

The Carnegie Endowment for International Peace has analyzed the political and social consequences of welfare retrenchment, identifying three key risks: the erosion of institutional trust, the intensification of political polarization, and the destabilization of communities. In rural areas in particular, welfare programs have also functioned as a source of employment. Healthcare facilities and social service operations are major employers in many regions, and their contraction threatens to accelerate both direct job losses and population outflow.

This issue extends well beyond the United States. The United Nations' World Social Report has documented the deepening decline of social trust across countries, underscoring that the relationship between welfare and trust is an international concern.

Background and Context

The movement toward welfare retrenchment in the United States did not begin overnight. Since the Personal Responsibility and Work Opportunity Reconciliation Act of 1996, enacted under the Clinton administration, the concept of "workfare" — conditioning welfare benefits on employment requirements — has served as the baseline orientation of policy. The current large-scale cuts are an extension of that trajectory.

What is decisively different, however, is the scale and speed. Whereas past reforms proceeded incrementally, the present approach seeks to cut over one trillion dollars through a single omnibus bill. A roughly 36 percent reduction in SNAP directly threatens households that depend on food assistance for their daily subsistence. Several factors underlie this shift.

One is fiscal pressure. With federal debt reaching historically high levels relative to GDP, political pressure to reduce expenditures has intensified. Welfare budgets constitute a large share of total spending and are thus easy targets for cuts. Another factor is the sharpening ideological conflict over welfare itself. The claim that "government redistribution undermines individual self-reliance" and the counter-claim that "the safety net is the core of the social contract" have collided head-on, with no compromise in sight.

In international perspective, the "retrenchment" of the welfare state has been a common trend among advanced economies since the 1990s. Yet the pace and depth vary enormously. The Nordic countries have updated their systems while maintaining redistributive functions. The United Kingdom experienced welfare contraction and growing social unrest under austerity policies. The current U.S. trajectory represents perhaps the most radical direction on this international spectrum.

The impact of these cuts, moreover, is far from uniform. Rural communities, racial and ethnic minorities, the elderly, and children — those in the most socially vulnerable positions — bear a disproportionate share of the burden. The figure of approximately 9.3 million children facing food insecurity suggests that the consequences of these cuts extend to the next generation. The risk that childhood malnutrition and lack of healthcare access will entrench long-term disparities in health and education is well documented in the research literature.

Medicaid is not merely a health insurance program. It provides broad support for the foundations of daily life — maternity and childcare assistance for low-income families, home-based care for people with disabilities, and nursing facility costs for the elderly. Its reduction will result not only in higher out-of-pocket medical expenses but also in the displacement of care responsibilities back onto families, the abandonment of preventive medicine leading to more severe illness, and the concentration of demand on emergency departments. Paradoxically, total healthcare expenditures may actually increase as a consequence.

Structural Analysis / Seeds of Social Vision

What, fundamentally, are welfare systems for? It is necessary to return to this basic question.

On the surface, welfare is "benefits for those in need." From the perspective of institutional design, however, welfare constitutes the very foundation of social trust. It is the promise that the state will guarantee the survival and dignity of its citizens. When that promise is honored, citizens trust institutions and find motivation to participate in society. The contraction of welfare severs this circuit of trust.

The "erosion of institutional trust" identified by the Carnegie Endowment for International Peace is not merely a matter of sentiment. Citizens who do not trust institutions are more likely to turn toward polarization and populism rather than legitimate political participation. The analysis that welfare retrenchment intensifies polarization rests on precisely this mechanism.

The figures — 1.22 million jobs lost and a $113 billion decline in state GDP — demonstrate that welfare expenditure is not simply a cost but an integral component of economic circulation. Money spent by welfare recipients in their communities becomes revenue for local shops and healthcare providers, sustaining the employment of those who work there. Severing that circulation causes the multiplier effect to operate in reverse, driving the contraction of entire regional economies.

The structural challenge can be analyzed across three layers.

First, the redefinition of welfare's purpose. Can welfare be repositioned from mere "relief" to "the foundational guarantee of social participation"? The idea of treating recipients not as "objects of assistance" but as "partners in institutional design" has precedents in the Nordic co-production model, among others.

Second, the structuring of fiscal discourse. As long as the framing of welfare as a "cost" remains dominant, pressure to cut will persist. What is needed are mechanisms to quantify and make visible the social returns on welfare expenditure — the narrowing of health disparities, reductions in crime rates, and increases in labor force participation.

Third, the redesign of the federal–state division of responsibilities. Reductions in federal funding shift the burden to state governments, but states with weaker fiscal capacity bear the greatest impact. The result is widening regional disparities. Under federalism, what forms of structural support are possible? This question resonates with Japan's local allocation tax system (地方交付税制度) and its decentralization reforms.

The contraction of welfare systems also places increased strain on the private nonprofit sector and religious organizations. Movements to have civil society compensate for the retreat of public services can be observed in many places, but the capacity of these organizations has limits. In areas lacking an organized support infrastructure, "zones of assistance vacuum" emerge under the banner of self-reliance. The balance among public assistance, mutual aid, and self-help can be unintentionally disrupted by institutional retreat.

Remaining Questions

The trillion-dollar-plus welfare reduction is at once a fiscal figure and an answer to the question: "Who does this society abandon?" Millions facing food insecurity, children confronting an uncertain future, an estimated 1.22 million lost jobs — these are neither natural disasters nor acts of force majeure. They are consequences intentionally produced through policy choices. How to design institutions, whom to protect, and what to prioritize — these are nothing less than a declaration of the values a society chooses to uphold.

Related Columns

• Japan's Welfare Take-Up Rate: 20%
• The "Depth" of Child Poverty
• The Accelerating Concentration of Global Wealth

References

SNAP and Medicaid Cuts in the One Big Beautiful Bill Act

Center on Budget and Policy Priorities (CBPP). CBPP

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The Impact of U.S. Welfare Retrenchment on Institutional Trust

Carnegie Endowment for International Peace. Carnegie Endowment

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World Social Report 2025 — Inequality in a Rapidly Changing World

United Nations Department of Economic and Social Affairs. United Nations

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