American Social Welfare Policy from a Financial Capability Perspective

Abstract

This introductory article to the special issue Wealth , Opportunity , and the New Social Contract : Integrating Financial Capability in American Social Welfare Policy argues for a paradigm shift in U.S. social welfare policy centered on the concept of financial capability. Drawing from Thomas Kuhn’s theory of scientific revolutions, the paper examines social welfare policy evolution in the U.S.—from the colonial era’s locally managed poor relief to the New Deal’s federally guaranteed safety net. The author contends that, despite periodic adjustments, the prevailing consumption-based paradigm—focused on meeting basic needs and preventing impoverishment—has failed to provide true economic opportunity or support the pursuit of the “American Dream”. The result is persistent poverty, rising wealth and racial inequality, and widespread dissatisfaction with current policies across the political spectrum. The article synthesizes evidence from the special issue to demonstrate how the promise of America—a society where all have the freedom to pursue their financial happiness—remains unfulfilled for many, particularly low-wealth and Black households. Instead of restricting social welfare to temporary relief, a more expansive framework is advanced that integrates policies that help people develop their financial capability: the combination of personal and governmental capabilities, including equitable access to financial institutions, income, and wealth-building resources. This framework shifts the focus from short-term survival to long-term asset accumulation, financial empowerment, and upward mobility. Five policy tools are proposed as a foundation for an integrated, future-focused social welfare system: Child Development Accounts, Guaranteed Income, Free College, Baby Bonds, and comprehensive financial education. These measures are designed to ensure that all Americans, regardless of background, can accumulate assets, weather economic shocks, and progress toward genuine financial growth throughout their lives. Ultimately, the article invites policymakers and scholars to imagine—and demand—a revolution in social welfare policy that aligns with the American ideal of the right to the pursuit of financial happiness, advocating for system-wide change rather than incremental tweaks that serve only to maintain the status quo. This perspective underlines the urgent need for a new social contract that addresses both individual and structural barriers to wealth, opportunity, and upward mobility.