Why Should We Not Want Welfare?

Most people would probably ask what is wrong with welfare. We've had it a long time ever since the 30's. Why not? It helps people.

Actually, in the long run, if you look closer, welfare does not help people. It actually hurts them.

First, welfare is an incentive not to work. This incentive increases every time the government increases the recipients' checks. This is just common sense: like if your grandmother gave you $5,000 this month and then increased the check to you next month to $5,500, you probably wouldn't want to work very much, and eventually not at all if the increases kept coming. The point is, the incentive to work fluctuates negatively as welfare increases. The incentives just keep piling up not to work as is evident by the truth that what many middle-class people earn today is less than what some people who have welfare receive. The result is that work is discouraged and relying on others is encouraged.

Flickr image by Internet Archive Book Images.

Since work is discouraged, productivity also falls. This argument is made clear by Richard Fulmer in his article in The Freeman: "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." 

It is ironic that in a country such as the United States, that we should continue to support the idea of welfare when unemployment is such a hot topic and is at the top of the list of objectives to control by the government, as well as the constant cry of inequality among classes.

Not only does welfare hurt people, but it doesn't help the economy either. In his article "Paying the Unemployed Does Not Stimulate the Economy," in The Freeman, James C. W. Ahiakpor makes a valid argument: "Many in Congress as well as the President and some of his economic advisers have argued that extending the period for paying the unemployed will stimulate the U.S. economy out of its sluggish performance. Would any of them consider as valid an argument that giving money out of their own pockets to an unemployed member of their household would promote the financial prosperity of that household? Would they not correctly see such financial contribution as merely a transfer within the household? Would they also not be eager to nudge the unemployed to get up quickly and find a job? ... So why don’t they apply the same logic to the economy as a whole? The only tenable answer is that they are under the spell of the economic miseducation inflicted on the minds of economists and many among the general population by John Maynard Keynes. They believe that consumer spending drives the economy, without having stopped to consider from where consumers get the means to spend."

Welfare itself stems from a good intention, but it does not bring good outcomes in the end. Welfare means dependence, falling productivity, and as Bono of U2 aptly stated, "a Band-aid. Free enterprise is the cure." In other words, free enterprise brings more opportunity and a higher standard of living than any government can promise or give.

The Welfare Cliff

Of course people should be concerned about the world's poverty-stricken people. It is a worthwhile cause to fight for: reduce the poverty in our world, fight hunger, see that everyone has clean water, etc. Being concerned about the "welfare" of others is only natural however selfish we are. 

Some people today seem to think that the world's poverty should be dealt with by the government because it is their responsibility. 

Flickr image by Ben Phelps-Rohrs

But to say such a thing as that, is to say that it is my responsibility, my family's responsibility, and everyone else paying taxes in the United States to give to the less fortunate or the poverty-stricken. Responsibility. 

It is my belief that, being a Christian, I should help others. 

It is not the help itself that I have a problem with. It is where the help is coming from. 

My opinion is that of the French economist Fredric Bastiat, whom I will quote from his fantastic book The Law.

"You say: 'There are persons who have no money,' and you turn to the law. But the law is not a breast that fills itself with milk. Nor are the lacteal veins of the law supplied with milk from a source outside the society. Nothing can enter the public treasury for the benefit of one citizen or one class unless other citizens and other classes have been forced to send it in. If every person draws from the treasury the amount that he has put in it, it is true that the law plunders nobody. But this procedure does nothing for the persons who have no money. It does not promote equality of income. The law can be an instrument of equalization only if it takes from some persons and gives to other persons. When the law does this, it is an instrument of plunder. 

With this in mind, examine the protective tariffs, subsidies, guaranteed profits, guaranteed jobs, relief and welfare schemes, public education, progressive taxation, free credit, and public works. You will find that they are always based on legal plunder, organized injustice."

The Welfare State in one way or another, through taxes or borrowing, is paid for by the public. So when people think that they are getting something from the government for nothing, think again. Think about all those people, including those who receive welfare benefits (who pay for certain taxed products), who are plundered by each other. Independent (welfare-free) citizens who are paying heavy taxes to provide for the welfare of others when they could be giving so much more to society through their productiveness. At the same time, welfare recipients are being plundered by independent citizens because these poverty-stricken people could be so much better off. So it's plundering of plunderers. 

I will in my next post give my opinion on how to help the poverty-stricken, and to forewarn: it does not involve government assistance that is supposedly "owed" to its citizens.