Introduction

What has become known as the ‘Great Recession’ began in the US when the crisis that hit investment banking and other key financial institutions through 2008 developed into a wider economic crisis leading to a massive increase in unemployment. For policymakers, this posed a choice of whether to expand social policy programmes in order to protect people suffering in the economic downturn or to turn to radical welfare state retrenchment to remedy the accelerating problems of deficit and debt (Vis et al, 2011). In the US, the historical evidence as to the likely impact of economic crisis on social policy was contradictory. The economic slowdown and stagflation of the late 1970s did help fuel the conservative resurgence, even if the policy change that subsequently resulted was limited in scope (Pierson, 1994). On the other hand, the Depression of the 1930s had led to a period of sustained social policy expansion, as the New Deal era saw the establishment of the first modern federal welfare state programmes like Social Security (Beland, 2005).

The political dynamics at the end of 2008 suggested that existing welfare state structures would be reinforced and some social policy programmes expanded. The presidential and congressional elections that took place in November 2008, just as the full extent of the crisis was emerging, resulted in the Democratic Party taking unified control of the federal governing institutions. Yet expectations that this would lead to a new ‘New Deal’ were quickly challenged (Skocpol and Jacobs, 2011), as conservative opponents, maintaining their political cohesion in spite of the defeats in the 2008 elections, decried the policy direction of the Obama administration and Democratic Congress while insisting that the growing budget deficit was the greatest long-term threat to the country's future and that dramatic spending cuts – rather than tax increases – were required to balance the books.

When Barack Obama won the presidential election, he promised major changes to reduce the economic insecurity many Americans faced. But three years after the financial meltdown, unemployment remained high amid what was widely described as a ‘slow recovery’ as evidence emerged of how the downturn had reinforced the long-term socioeconomic stagnation of the ‘middle class’ (Peck, 2011).