The Paradox of the Welfare State
Welfare states face an inescapable paradox: The level of production needed to sustain a welfare state cannot be sustained by a welfare state. This paradox is created by policies that encourage the redistribution and consumption of wealth while discouraging its creation. In the face of such perverse incentives, living standards must fall even though, for a time, they may be maintained through borrowing. The paradox is not unique to Greece or California, nor is it a function of who is in charge. It is, rather, inherent in the internal contradictions of the welfare state itself.
The term “welfare state” is defined here as a polity that assumes primary responsibility for the care of a good number of its citizens, providing such benefits as public housing, health care, education, minimum wage rates, unemployment insurance, and financial support for the poor, elderly, disabled, and politically favored institutions, businesses, and industries.
The material well-being of any society’s people rests on the quantity and quality of goods and services they produce. All goods and services consumed by the unproductive members of society must be taken from, or paid for by, the productive. Welfare state policies ensure that the ranks of the unproductive will grow and those of the productive population will shrink, and that the productivity of the dwindling number of producers will fall. As a result, the quantity and quality of goods and services available will drop and poverty will rise. The mechanics of this decline are both straightforward and predictable.
Welfare state policies discourage saving. When government helps pay for its citizens’ big-ticket items, citizens have little need to save for the future. Banks will therefore have less money to lend, leading to lower capital investment and lower economic growth. The taxes needed to pay for public benefits reduce the ability of, and incentives for, businesses to maintain and expand production facilities. To the extent that taxes are paid by consumers, or passed on to them through higher prices, they will have less money to save, further reducing private capital.
Loss of Productivity
Minimum wage laws, unemployment insurance, employer mandates, and regulations that make it difficult to fire workers all drive up the cost of employment, resulting in less of it. High corporate taxes will drive some businesses out of the country and others into bankruptcy, further adding to unemployment rolls. Demands for protectionist legislation will become more insistent as jobless rates rise. If these demands are met, even more jobs will be lost as foreign commerce collapses amid escalating trade wars.
As benefits and benefit recipients multiply, and as the number of taxpayers declines, the latter will be less and less able to bear the ever-growing burden. Many of the most productive and adaptable will move to countries that allow them to keep more of their earnings.
While productivity increases can help offset falling production due to a declining workforce, any such increase requires either capital investments or innovative process improvements. As previously explained, however, welfare states discourage capital formation by discouraging savings. Innovation is similarly discouraged by taxes that reduce or eliminate any profits that such innovation might generate.
Depleting the Ranks
As the population of unproductive citizens grows, either through job loss or through aging, government bureaucracies will also grow to meet this rising need. In addition, as more taxes are levied to pay for the bureaucracies and the programs they administer, government tax collection agencies must expand as well. This further depletes the ranks of the productive, channeling them away from producing wealth to merely redistributing it. Civil servants are typically paid more than their private-sector counterparts and are generally able to retire earlier and on more generous pensions than employees in the private sector, further adding to the burdens of productive workers. Moreover, the growing ranks of public employees form a powerful voting bloc strongly favoring increased government spending and more government control over the economy.
Institutions will grow up around the welfare state, increasing the number of people with a stake in its continuation and growth (and further decreasing the number of productive workers). For example, advocacy groups and law firms will form to help people obtain government benefits and to demand more of such benefits. Service providers, such as tax accountants, will spring up to help people deal with increasing bureaucratic complexity.
Special interest groups like AARP will funnel campaign funds and votes to pliable politicians. These private institutions will combine with government agencies in symbiotic, mutually reinforcing alliances. Elected officials can garner votes by acting as advocates for constituents forced to deal with unresponsive public agencies. Government departments, wishing to expand their “customer base,” will work to make government support easier to obtain and available to more people.
Job loss, unpleasant in a free-market economy, is softened by government-provided unemployment insurance in a welfare state. Some will find paid unemployment agreeable and will delay their return to work, perhaps indefinitely. As more parents become wards of the State, more and more children will come to see this as normal, and generations of families living on welfare will become commonplace.
Advocacy groups and government agencies charged with providing benefits will work to reduce the stigma associated with receiving public aid and to justify taking from those who work to give to those who do not. Poverty must, therefore, be portrayed not as a consequence of self-defeating actions or poor choices—and certainly not of government action—but as the result of bad luck or oppression. Conversely, wealth must come to be seen not as the outcome of hard work and perseverance, but good luck or greed and exploitation. The very concept of virtue must be questioned and stood on its head as the Tenth Commandment morphs from “Thou shalt not covet thy neighbor’s goods” to “Thou shalt not have goods thy neighbors covet.”
Feedback Loops
Imagine how dangerous the world would be for a person without the ability to feel pain (as happens with certain forms of leprosy). Such a person could hurt himself terribly by continuing to walk on a badly sprained ankle or putting his hand on a hot stove without knowing it. Government largess can create a sort of moral leprosy by weakening or even destroying feedback loops linking cause and effect. As the consequences of self-destructive actions (such as dropping out of school, having children out of wedlock, or drug and alcohol abuse) are increasingly borne by others, the incidence of such behavior will rise. At the same time, as the benefits of hard work, perseverance, and integrity fall, such virtues can be expected to fade.
The philosophy underlying the welfare state, “From each according to his ability, to each according to his need,” leads people to display minimum ability and maximum need. To the extent this philosophy is actually followed—more often, wealth flows from the politically weak to the politically strong—people will band together along ethnic, gender, religious, and other lines to compete to be seen as the most needy and therefore the most worthy of a larger share of an ever-shrinking pie. This downward spiral of competitive self-destruction may well create a permanent underclass that carefully avoids success and embraces failure—that is, which acts sensibly in the face of perverse incentives. This competition for tax dollars may create deep, irreparable fissures between recipient groups and between recipients and taxpayers.
As government grows it will increasingly be seen as the answer to any and all difficulties, and people will demand government solutions to increasingly minor inconveniences. Legislatures will respond by enacting ever-more-stringent regulations on individuals and industry, further reducing adaptability, independent and entrepreneurial thought, risk-taking, and productivity. Centralized, bureaucratic rule will erode people’s self-reliance, initiative, and sense of local community.
When government begins providing people with goods and services they can provide for themselves, it launches a self-reinforcing trend that will eventually become unsustainable. Once the practice of taking from one citizen to give to another becomes established, politicians will be unable to resist the urge to bribe voters with their own tax dollars. As legislators’ rewards for spending other people’s money grow, spending will grow.
The time it will take a country to spend itself into bankruptcy depends on its initial economic strength and the strength of its culture. But whether it takes one generation or ten, unless the trends reverse, bankruptcy must come. Time can be gained by borrowing or printing money, but other countries will eventually stop accepting the nation’s debt—whether it is in the form of government bonds or in the form of fiat currency.
In the case of the United States, the country is not yet bankrupt, but bankruptcy will soon be in sight if current policies are not changed. Social Security will go into the red this year and Medicare will shortly follow with even larger deficits. Current estimates of U.S. debt are on the order of $13–14 trillion, an amount equal to the country’s entire gross domestic product. As monumental as that number is, it pales in comparison to the present value of the unfunded liabilities of Social Security and Medicare, which total $107 trillion.
Of all the changes wrought by the welfare state, a degraded, dependent culture will have the deadliest impact and will be the hardest to reverse. Yet the culture must be changed. This can occur only if government-created incentives that encourage people to live at the expense of others are replaced by market-created incentives encouraging the production of goods and services that people want. Creative marketplace competition to produce more and better products must supplant political competition for an ever-dwindling pool of tax dollars extracted from an ever-dwindling pool of productive workers.
Comment by Gavin Veasey on 22 September 2010:
Sounds like what is going on in Japan.
Comment by Erik on 23 September 2010:
This article should be titled – A Brief History of the United States.
Comment by Rob Rice on 27 September 2010:
Japan? Gavin, how about the US? We’ve reached critical mass, the producers can no longer support the government + non-producers.
Comment by Tom Martin on 27 September 2010:
From Each according to their ability to each according to their need is a slave masters credo.
From each Slave’s ability to each master’s need.
Comment by Libertarian jerry on 27 September 2010:
Mr.Fulmer, I’ve read your essay and it is spot on. Over the last fifty years I’ve read hundreds of books,articles,essays and tracts about how our Constitutional Republic has degenerated into a mobocracy welfare/warfare state. How our Constitution has been either ignored or changed around so much that it is now meaningless. How we have 3 corrupt branches of government and have added a fourth branch-administrative that rules with an iron fist. The problem is that most Americans have sold their birthright of liberty and freedom for security. and that most of the people who live off the system could no easier be trained to be independent and self reliant than you could train a maggot to be a vegetarian. The problem is,that what are the people that still believe in our birthright of liberty going to do but just write essays.
Comment by Travis Bishop on 28 September 2010:
This is the very thing that will ultimately lead to a violent revolution and insurrection within our borders. As we sit here today, there are many self-made entrepreneurs and businessmen who are watching their life’s work go down the drain. They have begun a program of sponsorship. Sponsoring citizen Militia groups. These Militia’s are private armies comprised of Patriotic men and women who view the corrupt and broken system as nothing more than a monster to be destroyed. The government and bureaucracy would be well advised to grasp the factual concept of danger which lies within the action of stripping a People of their dignity and rubbing their noses in it. Sure, it’s all rhetoric and fun and games until the day comes when these armies mobilize and tyrants start to die. It is not too late. Stop the madness now before it is. Stop stripping America and Her people of their hard earned dignity and rightful property. I am begging you, stop it now. For it will be too late to talk about it once it starts. There will be a reckoning, and nothing will stop its momentum until America exists as The United States of America once more. Nobody has to die. There need not be a war. But, keep this madness up, and rest assured, there will be.
Comment by Barry Loberfeld on 1 October 2010:
FROM HERE:
What limits the limited welfare state? Not only has “liberalism” meant ever greater economic controls, but now it means the application of socialist ideology to social issues. This has always been a dubious dichotomy — Is a book a manufactured product or an expressed idea? — and one that didn’t exist among either the classical liberals or the Marxist regimes. Yet a surging number of voices tell us that “equality” demands, not only a redistribution of wealth, but also the banning of speech — not only an end to “economic violence,” but also the suppression of “verbal violence.” How this rhetoric translates into reality can be glimpsed by looking north. The legal perversity that pornography constitutes the criminal “exploitation” and “objectification” of women — a linguistic legerdemain whereby bourgeois feminists exculpate their own capitalist occupations as the “exploitation” and “objectification” of the proletariat, thus metamorphosing themselves from class oppressors into gender victims — was affirmed by the Canadian Supreme Court. This idea, in turn, evolved into that of “hate speech,” which was extended to “protect” other groups, such as homosexuals. So now when the Rev. Jerry Falwell airs his show in Canada, he must edit his preachings on homosexuality, which are not protected by freedom of religion or freedom of speech. Here is a “welfare state” that has gone well beyond taxing millionaires to house orphans.
It’s all really very easy to understand as the philosophic analogue to Mises’ economic analysis. The initial introduction of a socialist law into a liberal society forces the question: Do we accept or reject this violation of the liberal ethic? If we accept it, we set a precedent for the next proposed socialist law. We have made a very clear moral decision — collectivism trumps individualism. In contrast to the cynicism that leads to a deluge of special interest groups, this trend involves taking ideas seriously — i.e., recognizing the mutual exclusiveness of the capitalist and socialist paradigms, and thus the imperative to choose one. It acknowledges the hypocrisy — the incoherence — of bringing the socialist outlook to issue A but not issue B, to the “economic” issue but not the “social” issue.
A commitment to greater statism begets more such commitments, and if what we may call the Ronald Dworkin generation pooh-poohed the “silly proposition that true liberals must respect economic as well as intellectual liberty,” the Cass Sunstein generation repudiates as even sillier the proposition that liberals cannot impose on the free market of ideas the same doctrines and controls they impose on the free market in widgets. (The esteemed professor has insisted that speech, like commerce, must have its own “New Deal.” With Sunstein as thought control’s FDR, who will be its LBJ?)
Comment by David Ewing on 4 October 2010:
I am 73. I started working when I was 8 years old doing farm work. At 14 I moved up in the world and worked on well drilling rigs. During high school I worked 8 hours a day as an on the job trained butcher. It took me 9 years to get my Bachelor’s degree as I had to work off and on. With a wife, 5 kids and working full time I earned my Master’s degree. Back in the 80s when so many managers were laid of, I was unemployed for all most a year. We used up our savings, lost our house and car and had to file bankruptcy. I put food on the table by packing stuff for shipment at a local company and washing rental cars at the airport. DONT TELL ME IT CAN NOT BE DONE. GET UP OFF YOUR…AND GET WORK!
Comment by Richard W. Fulmer on 4 October 2010:
Mr. Bishop,
Those who cannot carry their arguments with reason may try to carry them by force. Fact and logic are on the side of individual freedom. But an appeal to force weakens freedom’s arguments, allowing its opponents to ignore them and concentrate on the threat. If freedom’s arguments are convincing, it will win at the ballot box. If freedom cannot win at the ballot box, it is unlikely to win with the cartridge box.
Comment by James Madison Fan on 4 October 2010:
Mr. Fulmer,
Mr. Fulmer,
In a limited defense of Mr. Bishop’s opinion I would offer that when people feel oppressed they tend to rebel.
Economic oppression is no more palatable than political tyranny and people are beginning to tire of both. People tend to be charitable to a point but when they can’t comfortably buy a home and raise a couple of kids because their boss is looking to earn a bonus by cutting their job and the government wants them to pay for a litany “entitlement” programs they aren’t entitled to use they tend to get cranky.
History teaches that when the plebeians grow weary of suffering for the mistakes and greed of the patricians things will change one way or the other. For 25 years or more people have been looking for salvation by changing their vote from one party to the other without success. Politicians have taken advantage of this quest for leadership with slogans such as the “Contract with America” as well as Obama’s “Hope and Change.”
In looking at the growing strength of groups like “Tea Party” and “Minute Men,” I’m not sure how much longer the average citizen can deal with having their political will thwarted by all three branches of government as well as the corporate elite. I think it is growing more likely that someone is going to say the modern equivalent of “let them eat cake” and the American Aristocracy will suffer the same fate as Ms. Antoinette.
Considering what we’ve been doing to essential liberties in this nation with laws that range from drug seizure laws to the Patriot Acts to Orwellian red light cameras, I’m not sure it would be a bad thing.
“The tree of liberty must be refreshed from time to time, with the blood of patriots and tyrants.” – T. Jefferson
Comment by Robert on 10 October 2010:
Sufficient evidence exists that the modern warfare/welfare state is doomed to disintegration from within. The 20th century versions of this leviathan only prove its fate. Eugene Richter, a member of the German Reichstag in the late 1800s, wrote a little dystopian novel entitled “Pictures of the Socialistic Future” which anticipates the totalitarianism of the 20s and 30s in Europe.
Richter uses the novel to portray the demise of free Germany under a fictional rise of socialism (he had first hand experience fighting the rise of socialism in the Reichstag). Mr. Schmidt, the protaganist of the story, relates his support of the new system and rationalizes the socialist state’s infringement on individual liberty in a way many may recognize. Like the frog in a pan of tepid water, Mr. Schmidt is cooked slowly by the incrementalism of the new order, oblivious to the end game. He loses his property, his wealth, his family and ultimately his reason for living to an encroaching, oppressive socialistic state.
The novel is short and to the point. The welfare/warfare state is incompetent to the task of governace. Planned, centralized economies are doomed to fail, since any plan to provide social and economic equality must immediately address the natural inequities of time preference and human action. Great little book to help envision the images and realities of modern socialism. Read it if you dare gaze upon the effects of our modern welfare states.
See here http://mises.org/books/socialisticfuture_richter.pdf for a copy of the book.
Comment by Andreas on 17 October 2010:
This is exactly what happens in Denmark and the other Scandinavian countries. I’m a Swede who grew up in Copenhagen, Denmark ever since I was 3 years old. I am now 24. In these years my dad, a hard working businessman for an international consulting firm has been paying the danish government 62% income tax! YES 62! This does not include the other taxes which I can report are steap as well!
Welfare failures in Denmark include a woman, who after taking maternity leave for over 2 years( amazing how she got away with that) got fired and claimed to the government “psychological trauma” for losing her job and now receives a tax-free check of 12.000 DKK (about 2 247.06 USD) every month for not having a job. The worst thing is that the check is more than she owned even before tax with a previous job!
Because of my dad’s hard work and not taking the easy way out, I can now enjoy having a BA in Poltical Science from a British university and because of the same work from my dad I’m now doing my Ma in the UK too. So thank you Dad for not being like many other people in Denmark.
Love you!
Pingback by Fear of Spreading European Debt Crisis Plagues Officials | The Freeman | Ideas On Liberty on 16 November 2010:
[...] Timely Classic “The Paradox of the Welfare State” by Richard W. [...]
Comment by Davi Orel on 16 November 2010:
Twice in one lifetime, that sucks. I thought I left it behind for good when I escaped communist Czechoslovakia, and here I am sinking into it deeper and deeper – in America of all the places!!!
Comment by ProgressiveLibertarian on 16 November 2010:
This critique, kind of Communism, sounds good on paper, but falls flat on its face when it meets reality.
1. In the last 30 years the U.S. has undergone massive wealth redistribution, but not at the hands of the Welfare State. Welfare programs have been cut to fund tax cuts for the highest income earners. Meanwhile tax policies, deregulation and deunionization have resulted in a massive wealth transfer from the lower and middle classes (the ones articles like these claim are the leeching welfare queens) to the top 10% (the ones articles like these falsely claim are producers of wealth. 80% of income growth in the last two decades gone solely to that top 10%.
2. Wealthy people save and horde a much larger percentage of their money than working and middle class people. If wealth is distributed more evenly among the lower classes, more of it will be spent, generating product/service demand, which in turn generates job demand. The effect is an over all increase in productivity in the economy.
Spending money you don’t have carelessly is certainly a problem, but so is misery. Neither extreme is good. We need spending, because: less spending = less demand = less jobs = even less money for spending = even less demand, etc. It’s called a deflationary job crisis for a reason…it’s a downward spiral, and it is not the remedy for the upward spiral of careless debt spending that predated it. In a global sense that is us and China. We overspend, China over-hordes, and as such our economic illnesses enable the other and drag the world economy down with us.
Money is meant to spent, to move around, to facilitate the exchange of actual goods and services. When it becomes too concentrated in any one place it can’t move, because there aren’t enough other people with enough wealth to trade with, if a single group hordes most it. Since the unregulated competitive market will tend to concentrate wealth as it weeds out the losers and rewards the winners there needs to be a counterbalance. Either you pass policy to limit the accumulation of wealth, or you create welfare programs and tax structures redistribute it back to the people after the market concentrates it. Otherwise this system begins to shut down.
Think of it as a pressure driven system. Air moves from high pressure to low pressure. Money moves from low demand to high demand. If you concentrate the wealth in too few hands you also concentrate demand in the same hands. If wealth and demand are concentrated together then trade will only happen within that group, and very little will trickle out of it.
3. Welfare spending helps offset what working and middle class people – who spend rather than horde most of their income – spend on things like health care, rent, mortgages, etc. This means they then have more money to spend on products like cars, TVs, phones, etc. which in turn generates the demand for the jobs needed to produce those goods or services. That means more people earning their own money and not depending on the government. That’s why welfare spending can increase productivity in the right conditions.
Now for some history:
4. The Great Depression happened before there was a welfare state. The country prospered for decades after with a welfare state, and began after welfare programs were cut in the 90s. Now some welfare defenders would argue that having or not having a welfare state is the reason here, I do not, I think other factors were much more important (more on that below). The history, however, simply does not show that the welfare state is the culprit in our economic problems, past or present.
5. So if the welfare state is neither the culprit nor the solution to our economic woes, perhaps we can think about what has driven these cycles. Here’s my take:
From founding until the 20th century our country does not worry much about deflationary jobs crisis, because new demand can be created by exploiting frontier land. The Homestead Act was probably the biggest stimulus package in our history. If you were jobless in the East you could take advantage of government stimulus earned through war in the form of cheap/free land out West, if you were willing to develop it (which helped build the country as a whole). In essence it was the modern version of the economic model of a traditional, expansionist empire, like say Rome. Most of which collapsed economically when they got so big that it was hard to find enough new conquests to support the existing system.
I do not think it is a coincidence, then, that our first major jobs crisis happened as the frontier days had come to their end. We had no easily exploitable means to fabricate new demand to spur new job growth and break the no demand no jobs deadlock – essentially a catch 22 where employers say “without demand I can’t give out more jobs” and consumers say “without a job I can’t generate any more demand.” The idea of Keynesianism, for all its faults, can be one tool to break this deadlock.
Without a new frontier to tap the U.S., during the Great Depression used government deficit spending to and government hiring to create – albeit artificially – both new jobs and new demand, helping to break that deadlock. The trick, of course, is how you pull out those supports, and not using their success in one instance to say you should always manage the whole economy this way regardless of what type of crisis you face. Ultimately spending on World War II amounted to the biggest of any of the fiscal stimulus measure, raising our debt to GDP ratio to 120% and spending that money on hiring American workers to build war equipment. Through war we fabricated the demand that was lacking; through deficit spending we created the jobs.
The post war boom, still, does not prove that all of that worked in the long-term. After World War II the U.S. was half of the world economy. Europe and Japan were in ruble; the rest of Asia, as well as Latin America had not yet industrialized. Lo and behold, Asia and Latin America are now industrialized and competing and Europe and Japan have been rebuilt. While we grew arrogant, outdated, under-productive and generally got too comfortable with our position on top, our competition roared on ahead.
We tried to use globalization to replace the old frontier and unlock new markets, but it out-sourced our jobs as well as our demand. We’ve waged wars through debt, but most of the spending went to corrupt contractors happy to swindle some government cash. We simply aren’t fighting the machine heavy wars of the past that would require thousands of factory workers to be hired. And we’ve tried the borrow and ignore strategy for too damn long. The amount of our debt which has been spent on welfare or fiscal stimulus is a mere pittance compared to that wasted on tax cuts for top earners (with no matching spending cuts), bloated defense budgets, or non-job-producing wars. Remember, Social Security (the biggest “entitlement program” is self funded, it does not get money from the treasury, in fact the treasury has borrowed from Social Security to fund the wasteful deficit spending of the past few years.
To sum up: welfare states can be run in a myriad of different ways, sometimes increasing productivity, sometimes decreasing it. Like all things, some good, some bad. Deincentivization of work is a problem, but so is the concentration of wealth in an unregulated market with no welfare programs. It is about balance. Our current problems are not about the innate contradiction of the welfare state, but our failure and unwillingness to adapt to increase competition, and blatantly pro-corporate government policies that rob consumer demand from the middle class and below. They are about our abuse of deficit spending (a tool best saved for narrowly defined and rare cases) on mostly frivolously things.
And while debt did get us into our troubles, in our current economic system we can’t avoid using debt to get out of them either. Think of it this way, taking out a loan to buy a margarita mixer = very bad idea in this economy. Taking out a loan to do some welfare spending on yourself that actually invests in your future, like say education or job training… Now that might be a better idea.
It’s true the producers can no longer produce enough to support the non-producers. It’s just that the producers are: The single-mom, working two jobs but feeding her kids on food stamps; the retired assembly line working living on Social Security; and the teacher working multiple part-time jobs who turns to Medicaid for his health care. The leechers are: the rich kids living off inherited wealth; the Wall St. banker who merely moves around the wealth of others, or often wealth that belongs to no one and is imaginary to begin with; and the corrupt contractors that get no bid contracts from their friends in Washington.
Comment by Sanchez on 16 November 2010:
Damn straight, ProgressiveLibertarian. Damn straight.
Comment by Libertarian jerry on 17 November 2010:
Progressive Libertarian, Your working on a failed premise. That is the premise that there is something static called “the wealth,” and that if I have more of this wealth than someone else then I stole that from someone else. This is the Zero Sum philosophy of Marxists. A rich kid who lives off of inherited wealth,as long as that wealth was earned in a hands off free market transaction,is not a leech. If I go out into the market and earn a billion dollars, that money 100% belongs to me not to some vague entity called “society.” You exist,I exist but the concept of a society is an abstraction. Yes,it is true,there is a lot of corruption in America today.But that corruption exists because of government collusion in the free market.The biggest corruption of all is your premise that someone has the “right” to live off of the production of someone else. Once you go down this collectivist path your so called “society”is doomed to collapse.O,and your class warfare take on American history is basically gibberish.
Pingback by Paradox of the Welfare State « threedonia.com on 17 November 2010:
[...] 2010 at 05:12:21 AM This was sent to me by an old friend of mine via Facebook from a website called Freeman Online. Welfare states face an inescapable paradox: The level of production needed to sustain a welfare [...]
Comment by Tom Langley on 17 November 2010:
Thanks Jerry for your defense of freedom. “Progressive Libertarian”.
Talk about an oxymoron.
Comment by Michael Powe on 17 November 2010:
1. “Welfare state policies discourage saving.” — Assumed, not proved. In fact, the low savings rate in America is driven primarily by the NEED TO PAY THE FREAKING BILLS. Doh!
2. “Banks will therefore have less money to lend,” — At the present time, banks are sitting on billions of dollars and refusing to lend, even to the most creditworthy of customers. Because current law allows them to choose between investment in markets or lending, they invest because the rate of return is higher. A part of the financial reform package which the Republicans strenuously opposed and defeated, would have re-imposed restrictions on banks to separate investment from lending.
3. “Minimum wage laws, unemployment insurance, employer mandates, and regulations that make it difficult to fire workers all drive up the cost of employment, resulting in less of it.” — Assumed, not proved. In fact, it is fairly straightforward research to see that job creation has been steady for the past 50 years. The problem is that wages have stagnated, resulting in a stagnating standard of living. Had the author some basic research capabilities, he would already have known this. Well, perhaps he did know it; and counted on his readers not knowing it.
4. “Some will find paid unemployment agreeable and will delay their return to work, perhaps indefinitely” — fact: there are strict limits to payouts of UE benefits, as a competent researcher could easily ascertain.
5. “The philosophy underlying the welfare state, ‘From each according to his ability, to each according to his need,’ leads people to display minimum ability and maximum need.” — Assumed, not proved
Acts 4:34-35 (King James Bible)
Neither was there any among them that lacked: for as many as were possessors of lands or houses sold them, and brought the prices of the things that were sold, And laid them down at the apostles’ feet: and distribution was made unto every man according as he had need.
Although the author implies that only money motivates him to work, it may just be that others have somewhat loftier ambitions than to “make a million bucks.”
6. “as more taxes are levied to pay for the bureaucracies and the programs they administer,” — fact: the tax burden for most Americans is lower as percentage of income that it was in 1970.
7. “Social Security will go into the red this year” — fact: SS is currently paying out more than it’s taking in because the bad economy has reduced the size of the pool paying into it. When the economy recovers, the fund will be back in the black.
“For too long, too many people dependent on Social Security have been cruelly frightened by individuals seeking political gain through demagoguery and outright falsehood, and this must stop. The future of Social Security is much too important to be used as a political football.” — Ronald Reagan
8. “government-created incentives that encourage people to live at the expense of others are replaced by market-created incentives” — There is no man more selfish or more dedicated to living “at the expense of others” than the capitalist. The very definition of capitalism is to obtain as much as possible while giving as little as possible in return.
“After I asked him what he meant, he replied that freedom consisted of the unimpeded right to get rich, to use his ability, no matter what the cost to others, to win advancement.” — Norman Thomas
“With the supermarket as our temple and the singing commercial as our litany, are we likely to fire the world with an irresistible vision of America’s exalted purpose and inspiring way of life?” — Adlai Stevenson
———-
Yet another paean to the “good old days,” when life was “nasty, mean, brutish and short” for the majority of citizens. Nearly fact-free, as the author concentrated on setting up prefabricated straw men and knocking them down with prefab arguments. All such articles, extolling the virtues of selfishness and greed, suffer from the same fatal flaw: they’re written by individuals who obtained full benefit of the society they condemn; and having plumped up heartily on the good meal, now set out to deny that same opportunity to all future citizens. Like the libertarian who gets his university degree via low-interest, gov’t-subsidized loans; and then dedicates himself to condemning and eliminating those loans, the author has no credibility. He committed numerous factual errors and logical solecisms. This is likely because he is uncritically repackaging and repeating what others told him.
Nowhere in this “critique” of the “welfare state,” was any mention made of the myriad ways in which gov’t policy redistributes wealth upward; so that since 1979, the income of the top 1% of earners has increased 214%, while during that same time period, the income of the middle 20% increased only 25%. Which of those two groups is actually benefiting from gov’t largesse? Who’s getting the “welfare” and who’s paying for it?
I’m downright sick of being told how f’ed up and lazy Americans are. We are in the midst of a huge economic crisis; a crisis not caused by lazy, immoral middle-class Americans, as Mr. Fulmer would have us believe. A crisis caused greedy, dishonest capitalists who were fully “incentivized” by Mr. Fulmer’s “take everything, including the light bulbs” philosophy to inflict massive financial fraud on nearly the entire citizenry. And I ask myself: What the Hell kind of American has nothing better to do with his time than to write articles sneering at fellow Americans who are in trouble? And I say: Why don’t you get off _your_ ass, Mr. High & Mighty Fulmer, and do something besides write high-carbohydrate articles implicitly congratulating yourself for being such a superior mensch? When you see a man struggling, help him with his load.
“So the last shall be first, and the first last: for many be called, but few chosen.”
Comment by Libertarian jerry on 17 November 2010:
Michael Powe, All your doing,with your comments,is shooting the messenger.
Comment by Trude Blomsoy on 17 November 2010:
Dear Mr. Fulmer,
Thank you for an excellent article.
It is interesting to see that the ones who do not, will not, or cannot understand are also the wordiest. No wonder one of them calls
himself “progressive libertarian”. Philosophical confusion reigns.
I hold with the ex Czech gentleman who fled his communist country,
as I fled the budding Norwegian welfare State where now people
suffer – gladly – from arrested development; the ability to judge
or question their Masters have been bred out of them as they have
become industrious white mice in their little maze run by rats.
Comment by Jorge Calvo on 17 November 2010:
Dear Mr. Fulmer,
Excellent presentation of the “Welfare State”. First, I would like to say that although the Welfare System in the U.S., is highly abused, I don’t think that it will be the main caused for our country going to bankruptcy. I believe that Government Pensions would be the Main Cause. Have you noticed how many of our Elected Officials and so called “Economic Pundits”, suggest reforming the Contributory Programs of Social Security and Medicare, yet, don’t make reference, as frequently, about the Government Pensions? WHY?
Finally, Welfare States have historically proven to have catastrophic results. Check the Enslavement of the Cuban people, who were sold a “Socialist Paradise”. The other important lesson is to know, that once they get in, you can’t get rid off them. The idea of people raising against it, used to happen, but not nowadys, unles the leaders are not too bright.
Comment by Richard W. Fulmer on 7 February 2011:
ProgressiveLibertarian and Michael Powe,
Mankind has known the cure for poverty for millennia: produce and save wealth (food, clothing, shelter, etc.). Where production and saving are rewarded, poverty will decrease. Where production and saving are discouraged, poverty will grow.