The making of American domestic policy 243and in the concurrent attempts by the Republican leaders in Congress to cut
back on the Medicaid programme. The result was Clinton’s reluctant assent
to the Personal Responsibility and Work Opportunity Reconciliation Act of
1996, and the biggest upheaval in the working of the American federal sys-
tem for sixty years.
In 1935, as part of the New Deal programme of President Franklin Roo-
sevelt, Congress passed the Social Security Act. One part of the Act set up pro-
grammes for the disadvantaged which would be financed jointly by the federal
and state governments and administered by the states under conditions set by
the federal government. This programme, typical of the ‘cooperative federal-
ism’ initiated by Roosevelt, provided federal grants-in-aid for the states and
set tight conditions that the states had to meet to receive this federal money.
Under the Social Security Act one of these conditions was that those fami-
lies who met the eligibility requirements for assistance were automatically
entitled to benefit, and the states could not deny it to them. This became,
therefore, an open-ended commitment for the states, taking away from them
control over their own expenditures. A similar situation was created in 1965
when President Lyndon Johnson signed the Medicaid programme into law.
This legislation provided automatic entitlement to medical care for claim-
ants who met the eligibility requirements for welfare benefit, and it was fi-
nanced in the same way, a conditional grant-in-aid programme administered
by the states, with approximately half the cost coming from state funds. The
requirement of automatic entitlement, together with the rising costs of both
programmes, led Republican state governors to urge that the states be given
more control over these programmes, particularly Medicaid, which is ex-
tremely costly. Welfare reform was one of the aims set out in the Republican
‘Contract with America’ on which the election of 1994 was fought.
Although President Clinton had committed himself to some form of ‘wel-
fare-to-work’ reform, the proposals introduced into Congress by the Republi-
cans in 1995 went much further than he would have wished. He was opposed
to the Republican proposal to end automatic eligibility for Medicaid; he also
rejected plans to limit the entitlement to ‘food stamps’ by the poor, to deny
certain benefits to legal immigrants, and to give the states control over a
range of other welfare programmes for women and children. The president
vetoed two bills on welfare reform passed by Congress, one in December 1995
and the second in January 1996, but as the 1996 election campaign got under
way both parties were under pressure to show that they had made progress
in this area. In 1996 bills were again introduced into Congress providing for
reform in the welfare and Medicaid programmes. The link between welfare
and Medicaid was the key issue that would determine the fate of the reform
legislation. As long as the proposal to cut back on eligibility for Medicaid
benefits remained as part of the package the likelihood of a presidential veto
of any Bill that was passed by Congress remained high. In July 1996 the Re-
publican leadership in Congress decided to drop the Medicaid provisions,