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Econ 101: Let's Be Honest about Entitlements

     Recent data on the number of people receiving assistance from the federal government has created some stir and discussion as to whether welfare reform in the U.S. has been successful. Federal Reserve Chairman Ben Bernanke has warned that a failure to address exploding entitlement costs will cause economic harm.


     Rather than look at the technical aspects of welfare and other entitlement programs, including Social Security, Medicare, and Medicaid, it is useful to begin with a discussion of the role of government in creating a social safety net and how attitudes towards receiving government aid affect the system.


     In 1850 Frederic Bastiat, a French politician and political economist, wrote a book entitled “The Law” wherein he attempted to define justice in government. He began with the assumption that we all have a natural right to self-defense. Then he argued that government was the organization of this natural right.


     This was not new. In the 17th century John Locke, in his “Second Treatise on Civil Government,” justified the police powers of the state along similar lines. From these assumptions comes the point that the role of government is to protect life, liberty and property, and a just government limits itself to this role. An unjust government does just the opposite – that is, it takes from some people and gives to others. This is what Bastiat called legalized plunder.


     Most of the entitlements provided by the federal government do this very thing. Social Security clearly takes from those who are working and gives to those who are retired. If any of us tried to do this individually it would be recognized as theft.


     But as Bastiat pointed out, when the government does this it will not be recognized for what it is. It would be interesting to speak the truth about Social Security, Medicaid, Medicare, and similar programs. We would just admit it is stealing and perhaps say we approve of it anyway. There may be various reasons that we might approve of it, but at least the discussion would be honest.


     Instead, we attempt to gloss over the fact that these programs are theft by the government. If you think they are financed by voluntary contributions, try not paying your FICA tax for a year or so and see if you get a visit from an employee of the federal government.


     Herbert Spencer, writing about the same time as Bastiat, only in England, wrote about the “poor laws” or the English welfare program. Spencer wrote that the problem with government welfare was not that the poor would become reliant on it, but rather that the rich would begin to believe they did not have a responsibility to take care of the poor.


     We see this when Ebenezer Scrooge refuses to give a contribution for the poor in “A Christmas Carol.” Scrooge asks, “Are there no poor houses?” In other words, Scrooge is asking why he should contribute when the government is supposed to care for these people. This is, in Marvin Olasky’s words, “The Tragedy of American Compassion,” a book well worth the read.


     Prior to the 1960s there was a general reluctance to take advantage of the welfare state among the impoverished. In the movie “Cinderella Man,” boxer James Braddock is down on his luck and has to get in the welfare line. When he hits the big payday, he returns to the welfare office and pays back what he had received.


     Once the Great Society took hold, with its emphasis that you are “entitled” to government programs, a scene such as this would be unheard of. This is why the 1960s were crucial years for the expansion of the programs of the New Deal. Once the social barrier against taking full advantage of the system broke down, the welfare state was inevitable.


     It is time that we truly examine the proper role of the government and the individual in taking care of those who are less fortunate or for other reasons are at the bottom of the socio-economic ladder. We must admit these programs are legalized theft and then decide if we wish to continue or expand them anyway.


     We should have a frank discussion of the responsibility of those who have a comfortable life to take care of those who do not. This would be far more successful in dealing with entitlements than attempts at changing the technical aspects of these programs to circumvent the incentives that exist to take advantage of the system. My belief is that, as Bastiat put it 150 years ago, the solution to the problems of society lie in individual liberty and true philanthropy.


Dr. Gary L. Wolfram is the George Munson Professor of political economy at Hillsdale College in Hillsdale, Mich. He also serves as an adviser to the Business & Media Institute.