There are two competing views of the world that can explain most of the political opinions in the United States. The statist view is that the government is responsible for directing the whole society towards the good so it has to enact and enforce rules to direct the society. The libertarian view, on the other hand, is that the individuals should be left free to live their lives and use their property to meet their own goals provided that they don’t commit aggression towards other people.
The statists define the good in an egalitarian fashion to mean the state of affairs that provide similar outcomes for all. They ignore the fact that outcomes are defined mostly by the inputs and efforts used to achieve them and that people have different abilities and resources so they cannot reach similar outcomes. For example, statists decry income variations as unfair and advocate policies and rules to redistribute income from people who made more to people who made less. Some of the statist policies to achieve what they see as fairer income distribution are the welfare state, progressive income tax, and affirmative action. In spite of over 100 years of progressive income taxes, over 50 years of the welfare state, and over 40 years of affirmative action no fundamental change happened. People who have more human capital such as education and skills make much more money than people who no or less human capital, people on welfare remain on welfare and rarely move out of government dole, and people who have stable families and belong to cultures that believe in hard work and driving for results achieve better education outcome. The main reason that statists fail to achieve any of their goals is that equality is not the natural state of the world, people have different skills, cultures and resources and that cause different outcomes and nothing can change that. You can place anyone in a high-quality university but unless that person developed the right skills he or she cannot graduate with the same grades and education as someone who did. You can use force to take money from a successful person and give it to someone who doesn’t have the work skills and doesn’t want to change and that person will remain on welfare forever.
The libertarians don’t believe that any outcomes should be forced on the society and that the individuals are free as long as they don’t commit aggression against anyone else. They don’t see inequality as a problem as long as it didn’t result from the use force. In that worldview, people are liable for the consequences of their actions and the role of the law and the courts is to stop anyone who uses force against someone’s person or property. People will get the reward the market allocates to them based on the value they provide and people who cannot contribute because of disability will be helped by family, friends, and charity.
The statist worldview depends on the arrogant assumption that government bureaucrats can manage people lives, care for their well being and provide for their children better than they can do for themselves. This world view ignores the fact that these bureaucrats are also people who have their own biases and prejudices and do what they do for their own benefit. The failures of statist solutions are numerous and well documented in the United States such as the new deal, the great society, and Obamacare but these failed programs never get canceled because they serve the needs of politicians to maintain a voter base of government dependent people.
The next time you hear a politician claim that he or she wants to help the people by creating a government-run solution know that he or she wants to help himself or herself get elected.
There is a solid case that all the federal government’s welfare programs are unconstitutional because they exceed the enumerated powers in the constitution. State and local governments don’t always have similar legal issues, so we will focus in this post on why the society can provide better welfare services outside of the government.
Government entered into welfare because some people confuse the society with the government. The society is the entity that include all the individuals of a city, state, or country. Government is one of the institutions of the society that has monopoly on the use of force within that society to provide law and order. The free market provides the system of exchange of services and products between people so each can meet his or her needs.
People engage in different activities and trade with other members of the society exchanging their services for income that enable them to buy their needs from the market and save for future needs. Some people may temporary or permanently become unable to get all their needs through their contributions to the free market and the society provides multiple ways to help these people.
Society provides help to people through family, friends and charities and people have relied on these institutions since the beginning of human society. For example, a college student may only be able to have a part-time job so he lives with his parents until he finishes his degree and be able to get a full-time job to support an independent life. A group of students who don’t have family in town may group together and rent a small apartment and share that space while they finish their studies. Another person may have a full-time job but because his skills can only earn him little income he has to live with other people of similar circumstance to afford a place to live until his skills grow enough to get him better income to support an independent life. Some people have more permanent issues such as disabilities that prevent them from having enough income so they have to rely on family or charities to get their basic needs.
Prior to 1900, charities were the main source of help for people outside of friends and family in the United States, but as part of the progressive era activists started to push for the local, state and federal government to offer welfare programs. Politicians champion welfare programs because they are good way to win people’s vote. Government welfare programs suffer from a number of structural problems that make them inefficient and wasteful:
- Government welfare programs don’t give incentive to people with temporary inability to cover their needs to improve their state. For example if a person has low skills and only earn low-income as a result he may share a crowded apartment with other people with similar circumstance, this will give him an incentive to work hard to learn more skills and raise his income so he can transition to his own place. Under the current system of government welfare this person may get a free or subsidized apartment from the government; this will not only make it unnecessary for him to work to improve his status but it may encourage him to stay in this low-income job so he can keep the government help.
- Government doesn’t have a way to know if people are in need so it rely on measures such as income to decide if someone is in need for help but these measures aren’t always right. For example, low-income doesn’t always mean that a person is poor. An early retiree who live on income from his investments may have officially very low-income which can make him eligible to a lot of government programs. A full-time student may have low-income from a part-time job qualifying him for government help even if his parents are rich and can support him while he finishes his studies.
- Government agencies that run welfare programs have no incentives to make the program more efficient. Usually the bureaucrats who run these programs care about protecting their jobs through making sure the program continue to serve as many people as possible. Economist Thomas Sowell tells a great story about when he spent a summer working in the labor department trying to measure the effectiveness of minimum wage, after spending a couple of months coming up with a method to do that he discovered that the department only cares about administering the program not measuring how effective is it. Private charities have incentive to help people who they serve overcome their problem and making their services more efficient because they compete for the donation money with other charities. Friends and family have incentive to make sure loved ones they help overcome their temporary issues and become independent.
- Government welfare programs have a lot of moral hazards involved. A person may collect unemployment because he got laid off while another person may get it because he keeps losing his job due to bad performance or carelessness. The government has no way to differentiate between the two.
- Government welfare programs take resources out of free market that could have been used by other institutions of society to better help people in need. When the government takes more money in taxes to finance these programs fewer people will have disposable income to give to charity or help their friends or family.
Different institutions of society could offer welfare to people who need it better than the government could ever do. It is better for government to get out of offering welfare and let the society take care of its own.