Questions Posed by U.S. Welfare Retrenchment — Where Is Institutional Trust Heading?
Trillion-dollar welfare cuts are advancing in the U.S. Examining the social impact of massive Medicaid and SNAP reductions and welfare redesign.
TL;DR
- The One Big Beautiful Bill Act cuts over $1 trillion from welfare, including approximately $863 billion from Medicaid and $187 billion from SNAP
- Projected impacts include 1.22 million job losses and $113 billion in state GDP decline, revealing welfare spending as integral to economic circulation
- Welfare retrenchment risks severing institutional trust circuits, accelerating political polarization and community destabilization
What Is Happening
Trump's 2025 welfare cuts totaling over $1 trillion affect millions through Medicaid and SNAP reductions.
The United States' social security system has entered a phase of historically unprecedented retrenchment. The "One Big Beautiful Bill Act" signed by President Trump in July 2025 cuts approximately $863 billion from Medicaid (public health insurance for low-income individuals) over 10 years. SNAP (Supplemental Nutrition Assistance Program, formerly food stamps) also faces cuts of approximately $187 billion. Combined welfare cuts exceed $1 trillion. This represents an unprecedented scale of reduction for a single piece of legislation.
For 2026 alone, an estimated $95 billion in federal funding is projected to decrease. Behind these numbers lie the concrete lives of real people. Analysis suggests that millions will lose food assistance due to SNAP cuts. The impact on children is also severe, with CBPP estimates indicating that approximately 4 million people will lose SNAP eligibility, including about 2 million children.
The ripple effect on employment is also severe. Approximately 1.22 million job losses are predicted, equivalent to about a 0.8 percentage point increase in unemployment. The blow to state-level economies is significant, with state GDP projected to decline by approximately $113 billion in 2026. Welfare spending cuts do not merely "reduce expenditures." They possess the dynamics to contract the circulation of regional economies themselves.
The Carnegie Endowment for International Peace analyzed the political and social impacts of welfare retrenchment, identifying risks including erosion of institutional trust, intensification of political polarization, and community destabilization. Particularly in rural areas, welfare programs have functioned as employment opportunities. The operation of medical facilities and social services represents major regional employment sources, and their contraction could accelerate direct job losses and regional population outflow.
This issue extends beyond the United States alone. The UN's World Social Report also documents the serious deterioration of social trust across nations, making the relationship between welfare and trust an international challenge.
Background and Context
Historical context and political dynamics leading to unprecedented scale of social safety net retrenchment.
The movement toward welfare retrenchment in the United States did not begin suddenly. Since the "Personal Responsibility and Work Opportunity Reconciliation Act" enacted under the Clinton administration in 1996, the concept of "workfare" — imposing work requirements for welfare receipt — has become the policy baseline. The current massive cuts represent an extension of this trajectory.
However, the scale and speed are decisively different. While past reforms were gradual, this approach cuts over $1 trillion through comprehensive legislation. The approximately 36% SNAP reduction directly impacts households that depend on daily food assistance. Several factors form the background.
One is fiscal pressure. With federal debt reaching historically high levels relative to GDP, political pressure for spending cuts has intensified. Welfare budgets constitute a large proportion of total spending, making them easy targets for reduction. Another factor is the sharpening of ideological opposition to welfare. The argument that "government redistribution undermines individual self-reliance" and the claim that "safety nets are at the heart of the social contract" are in head-on collision without finding compromise.
Internationally, the "contraction" of the welfare state has been a common trend among advanced nations since the 1990s. However, there are significant differences in pace and depth. Nordic countries have maintained redistributive functions while updating their systems, while Britain experienced welfare contraction and increased social unrest through austerity policies. America's current choice is swinging toward the most radical direction in this international spectrum.
But the impact of cuts is not uniform. There is a structure where disproportionate damage concentrates on socially vulnerable populations such as rural residents, minorities, the elderly, and children. The figure of approximately 9.3 million children facing food insecurity suggests that the impact of cuts extends to the next generation. The risk that childhood malnutrition and lack of medical access will perpetuate long-term health and educational disparities is pointed out by numerous studies.
Medicaid is not merely health insurance. It is a system that broadly supports the foundation of life, including childbirth and childcare support for low-income households, home care for people with disabilities, and nursing home costs for the elderly. Its reduction brings not only increased medical cost burden, but also situations where caregiving is pushed back onto families, abandonment of preventive medicine leading to severe conditions, and concentrated demand on emergency rooms. Paradoxically, this could result in overall medical cost inflation.
We need to return to the fundamental question: What purpose do welfare systems serve in the first place?
Superficially, welfare is "benefits for people in need." However, from a system design perspective, welfare is the trust foundation of society itself. It is the promise that the state will guarantee citizens' survival and dignity. When this promise is fulfilled, citizens trust institutions and have motivation to participate in society. Welfare retrenchment disconnects this circuit of trust.
The "erosion of institutional trust" pointed out by the Carnegie Endowment for International Peace is not merely an emotional issue. Citizens who distrust institutions tend to turn toward polarization and populism rather than legitimate political participation. The analysis that welfare retrenchment intensifies polarization is based on this mechanism.
The figures of approximately 1.22 million job losses and approximately $113 billion in state GDP decline show that welfare spending is not merely cost but part of economic circulation. Money consumed locally by welfare recipients becomes revenue for local shops and medical facilities, supporting employment for people working there. If this circulation is severed, multiplier effects reverse and entire regional economies head toward contraction.
Structural problems can be considered in three layers.
First, redefinition of welfare's purpose. Can we shift welfare's positioning from mere "relief" to "guarantee of foundation for social participation"? The idea of positioning recipients not as "targets of support" but as "partners in system design" has precedents in Nordic co-production models.
Second, structuring fiscal arguments. As long as framing that views welfare as "cost" remains dominant, pressure for cuts will not disappear. Mechanisms are needed to quantitatively visualize the social returns of welfare spending — reduction of health disparities, decreased crime rates, improved labor participation rates.
Third, redesigning the division of roles between federal and state governments. Federal funding cuts transfer burden to state governments, but fiscally weaker states suffer greater damage. This results in expanded regional disparities. Under federalism, what kind of "bottom support" mechanisms are possible? This question connects with Japan's local allocation tax system and decentralization reforms.
Welfare system contraction also increases load on private nonprofit sectors and religious organizations. Movements where civil society attempts to substitute for retreating public services are seen in various locations, but their response capacity has limits. In regions without organizational support infrastructure, support vacuum areas emerge under the name of "self-help." The balance of public assistance, mutual aid, and self-help can unintentionally collapse due to institutional retreat.
Remaining Questions
Unresolved issues about long-term consequences and institutional trust in American welfare systems.
Welfare cuts exceeding $1 trillion are simultaneously fiscal figures and responses to the question "Who will this society abandon?" Food insecurity faced by millions, children's uncertain futures, approximately 1.22 million lost jobs. These are not natural disasters or force majeure. They are consequences intentionally created as results of policy choices. How to design systems, whom to protect, what to prioritize. This is nothing other than an expression of what values society chooses.
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References
SNAP and Medicaid Cuts in the One Big Beautiful Bill Act — Center on Budget and Policy Priorities (CBPP). CBPP
The Impact of U.S. Welfare Retrenchment on Institutional Trust — Carnegie Endowment for International Peace. Carnegie Endowment
World Social Report 2025 — Inequality in a Rapidly Changing World — United Nations Department of Economic and Social Affairs. United Nations
