Chapter 8. Welfare and the Welfare State. Why the Welfare Crisis?
Almost everyone, regardless of ideology, agrees that there is something terribly wrong with the accelerating runaway welfare system in the United States,
a system in which an ever-increasing proportion of the population lives as idle compulsory claimants on the production of the rest of society.
A few figures and comparisons will sketch in some of the dimensions of this galloping problem.
In 1934, in the middle of the greatest depression in American history,
at a nadir of our economic life, total government social welfare expenditures were $5.8 billion,
of which direct welfare payments, public aid, amounted to $2.5 billion.
In 1976, after four decades of the greatest boom in American history, at a time when we had reached the status of having the highest standard of living in the history of the world, with a relatively low level of unemployment,
government social welfare expenditures totaled $331.4 billion, of which direct welfare amounted to $48.9 billion.
In short, total social welfare spending rose by the enormous sum of 5,614% in these four decades, and direct welfare aid increased by 1,856%.
Or, put another way, social welfare spending increased by an average of 133.7% per year during this 1934 to 1976 period,
If we concentrate further on direct welfare, we find that spending stayed about the same from 1934 to 1950, and then took off into the stratosphere, along with the post-World War II boom.
In the years from 1950 to 1976, in fact, welfare aid increased by the huge sum of 84.4% per year.
Now, some of these enormous increases can be accounted for by inflation, which diluted the value and purchasing power of the dollar.
If we correct all the figures for inflation by putting them in terms of constant $1958,
That is, where each dollar has roughly the same purchasing power that the dollar could command in 1958.
Then the relevant figures become as follows.
1934, total social welfare spending $13.7 billion.
Direct welfare aid $5.9 billion.
In 1976, total social welfare spending $247.7 billion.
dollars, Direct Welfare Aid, $36.5 billion.
Even if we correct the figures for inflation then, social welfare spending by the government
rose by the vast amount of 1,798% or 42.8% per year over these 42 years, while Direct
Direct Welfare Aid rose 519% or 12.4% per annum. Furthermore, if we look at the figures
for 1950 and for 1976 for Direct Welfare Aid, corrected for inflation, we find that welfare
spending went up during the intervening boom years by 1,077% or 41.4% per annum. If we
We adjust the figures still further to correct for population growth.
Total American population was 126 million in 1934, 215 million in 1976.
Then we still get an almost ten-fold increase in total social welfare expenditures, from
$108 to $1152 per capita in constant $1958, and a more than tripling of direct public
Aid, from $47 in 1934 to $170 per capita in 1976.
A few more comparisons.
From 1955 to 1976, years of great prosperity, the total number of people on welfare quintupled,
from 2.2 to 11.2 million.
From 1952 to 1970, the population of children 18 years old and younger increased by 42%.
The number on welfare, however, increased by 400%.
The total population remained static, yet the number of welfare recipients in New York
City jumped from 330,000 in 1960 to 1.2 million in 1971.
Clearly, a welfare crisis is upon us.
The crisis is shown to be far greater if we include in welfare payments all social welfare
aides to the poor, thus federal aid to the poor nearly tripled from 1960 to 1969, leaping
from $9.5 billion to $27.7 billion.
State and local social welfare expenditures zoomed from $3.3 billion in 1935 to $46 billion,
a 1300% increase. Total social welfare expenditures for 1969, federal, state and local, amounted
to a staggering $73.7 billion. Most people think of being on welfare as a process external
to the welfare clients themselves as almost a natural disaster like a tidal wave or volcanic
eruption that occurs beyond and despite the will of the people on welfare.
The usual dictum is that poverty is the cause of individuals or families being on welfare.
But on whatever criterion one wants to define poverty, on the basis of any chosen income
It is undeniable that the number of people or families below that poverty line has been steadily decreasing since the 1930s, not vice versa.
Thus, the extent of poverty can scarcely account for the spectacular growth in the welfare clientele.
The solution to the puzzle becomes clear once one realizes that the number of welfare recipients
has what is called in economics a positive supply function.
In other words, that when the incentives to go on welfare rise, the welfare rolls will
lengthen and that a similar result will occur if the disincentives to go on welfare become
weaker.
Oddly enough, nobody challenges this finding in any other area of the economy.
Suppose for example that someone, whether the government or a dotty billionaire is not
important here, offers an extra $10,000 to everyone who will work in a shoe factory.
Clearly, the supply of eager workers in the shoe business will multiply.
The same will happen when disincentives are reduced.
for example, if the government promises to relieve every shoe worker from paying income taxes.
If we begin to apply the same analysis to welfare clientele as to all other areas of
economic life, the answer to the welfare puzzle becomes crystal clear.
What then are the important incentives, disincentives, for going on welfare, and how have they been
changing?
Clearly, an extremely important factor is the relation between the income to be gained on welfare as compared with the income to be earned from productive work.
Suppose, to put it simply, that the average or going wage, very roughly the wage open to an average worker, in a certain area is $7,000 a year.
Suppose also that the income to be obtained from welfare is $3,000 a year.
This means that the average net gain to be made from working before taxes is $4,000 a year.
Suppose now that the welfare payments go up to $5,000, or, alternatively, that the average wage is reduced to $5,000.
The differential, the net gain to be made from working, has now been cut in half, reduced from $4,000 to $2,000 a year.
It stands to reason that the result will be an enormous increase in the welfare roles,
which will increase still more when we consider that the $7,000 workers will have to pay higher taxes in order to support a swollen and virtually non-tax-paying welfare clientele.
We would then expect that if, as of course has been the case, welfare payment levels have been rising faster than average wages,
An increasing number of people will flock to the welfare rolls.
This effect will be still greater if we consider that, of course, not everyone earns the average.
It will be the marginal workers, the ones earning below the average, who will flock
to the welfare rolls.
In our example, if the welfare payment rises to $5,000 a year, what can we expect to happen
to the workers making $4,000, $5,000, or even $6,000.
The $5,000-a-year man who previously earned a net of $2,000 higher than the welfare client
now finds that his differential has been reduced to zero, that he is making no more, even less
after taxes, than the welfare client kept in idleness by the state.
Is it any wonder that he will begin to flock to the welfare bonanza?
Specifically, during the period between 1952 and 1970, when the welfare rolls quintupled
from 2 to 10 million, the average monthly benefit of a welfare family more than doubled
from $82 to $187, an increase of almost 130% at a time when consumer prices were rising
In 1968, the Citizens Budget Commission of New York City compared the 10 states in the
Union having the fastest rise in welfare rolls with the 10 states enjoying the lowest rate
of growth.
The commission found that the average monthly welfare benefit in the 10 fastest-growing
states was twice as high as in the 10 slowest states.
Only welfare payments per person averaged $177 in the former group of states and only $88 in the latter.
Another example of the impact of high welfare payments and of their relation to wages available
from working was cited by the McCone Commission investigating the Watts Riot of 1965.
The Commission found that a job at the minimum wage paid about $220 a month, out of which
Which had to come such work-related expenses as clothing and transportation?
In contrast, the average welfare family in the area received from $177 to $238 a month,
out of which no work-related expenses had to be deducted.
Another powerful factor in swelling the welfare rolls is the increasing disappearance of the
The various sturdy disincentives for going on welfare.
The leading disincentive has always been the stigma that every person on the welfare dole
used to feel.
The stigma of being parasitic and living off production instead of contributing to production.
This stigma has been socially removed by the permeating values of modern liberalism.
Furthermore, the government agencies and social workers themselves have increasingly rolled out the red carpet to welcome and even urge people to get on welfare as quickly as possible.
The classical view of the social worker was to help people to help themselves, to aid people in achieving and maintaining their independence and to stand on their own feet.
For welfare clients, the aim of social workers used to be to help them get off the welfare roles as quickly as possible.
But now, social workers have the opposite aim, to try to get as many people on welfare as possible, to advertise and proclaim their rights.
The result has been a continuing easing of eligibility requirements,
A Reduction in Red Tape and the withering away of the enforcing of residency, work or
even income requirements for being on the dole.
Anyone who suggests, however faintly, that welfare recipients should be required to accept
employment and get off the dole is considered a reactionary moral leper.
And with the old stigma increasingly removed, people now tend more and more to move rapidly
toward welfare instead of shrinking from it.
Irving Kristol has trenchantly written of the welfare explosion of the 1960s.
This explosion was created, in part intentionally, in larger part unwittingly, by public officials
and public employees, who were executing public policies as part of a war on poverty.
And these policies had been advocated and enacted by many of the same people who were
were subsequently so bewildered by the welfare explosion.
Not surprisingly, it took them a while to realize that the problem they were trying
to solve was the problem they were creating.
Here are the reasons behind the welfare explosion of the 1960s.
1.
The number of poor people who are eligible for welfare will increase as one elevates
the official definitions of poverty and need.
The war on poverty elevated these official definitions.
Therefore, an increase in the number of eligibles automatically followed.
2.
The number of eligible poor who actually apply for welfare will increase as welfare benefits
go up, as they did throughout the 1960s.
When welfare payments and associated benefits, such as Medicaid and food stamps, compete
compete with low wages, many poor people will rationally prefer welfare.
In New York City today, as in many other large cities, welfare benefits not only compete
with low wages, they outstrip them.
3.
The reluctance of people actually eligible for welfare to apply for it, a reluctance
based on pride or ignorance or fear, will diminish if any organized campaign is instituted
to Sign Them Up.
Such a campaign was successfully launched in the 1960s by a. various community organizations
sponsored and financed by the Office of Economic Opportunity, b. the welfare rights movement,
and c. the social work profession, which was now populated by college graduates who thought
it their moral duty to help people get on welfare, instead of, as used to be the case,
helping them get off welfare.
In addition, the courts cooperated by striking down various legal obstacles, for example,
residence requirements.
Somehow, the fact that more poor people are on welfare, receiving more generous payments,
does not seem to have made this country a nice place to live, not even for the poor
on welfare, whose condition seems not noticeably better than when they were poor and off welfare.
Everything appears to have gone wrong. A liberal and compassionate social policy has bred all
sorts of unanticipated and perverse consequences.
The spirit that used to animate the social work profession was a far different and a
libertarian one. There were two basic principles. A, that all relief and welfare payments should
should be voluntary by private agencies rather than by the coercive levy of government,
and b, that the object of giving should be to help the recipient become independent and
productive as soon as possible.
Of course, in ultimate logic, b follows from a, since no private agency is able to tap
the virtually unlimited funds that can be molted from the long-suffering taxpayer.
Since private aid funds are strictly limited, there is therefore no room for the idea of
welfare rights as an unlimited and permanent claim on the production of others.
As a further corollary of the limitation on funds, the social workers also realized that
there was no room for aid to malingerers, those who refused to work, or who used the
aid as a racket.
Hence came the concept of the deserving as against the undeserving poor.
Thus, the 19th century laissez-faire English agency, the Charity Organization Society,
included among the undeserving poor, ineligible for aid, those who did not need relief, imposters,
and the man whose condition is due to improvidence or thriftlessness, and there is no hope of
English laissez-faire liberalism, even though it generally accepted poor law government welfare, insisted that there be a strong disincentive effect, not only strict eligibility rules for assistance, but also making the workhouse conditions unpleasant enough to ensure that workhouse relief would be a strong deterrent rather than an attractive opportunity.
For the undeserving poor, those responsible for their own fate, abuse of the relief system could only be curbed by making it as distasteful as possible to the applicants, that is, by insisting, as a general rule, on a labor test or residence in a workhouse.
While a strict deterrent is far better than an open welcome and a preachment about the recipient's rights,
the libertarian position calls for the complete abolition of governmental welfare and reliance on private charitable aid,
based as it necessarily will be on helping the deserving poor on the road to independence as rapidly as possible.
There was, after all, little or no governmental welfare in the United States until the depression of the 1930s.
And yet, in an era of a far lower general standard of living, there was no mass starvation in the streets.
A highly successful private welfare program in the present day is the one conducted by the three-million-member Mormon Church.
This remarkable people, hounded by poverty and persecution, immigrated to Utah and nearby states in the 19th century, and by thrift and hard work, raised themselves to a general level of prosperity and affluence.
Very few Mormons are on welfare. Mormons are taught to be independent, self-reliant, and to shun the public dole.
Mormons are devout believers and have therefore successfully internalized these admirable values.
Furthermore, the Mormon Church operates an extensive private welfare plan for its members,
based again on the principle of helping their members toward independence as rapidly as possible.
Note, for example, the following principles from the welfare plan of the Mormon Church.
Ever since its organization in 1830, the Church has encouraged its members to establish and maintain their economic independence.
It has encouraged thrift and fostered the establishment of employment-creating industries.
It has stood ready at all times to help needy, faithful members.
In 1936, the Mormon Church developed a Church Welfare Plan, a system under which the curse of idleness would be done away with,
The evils of a dole abolished, and independence, industry, thrift, and self-respect be once
more established amongst our people.
The aim of the Church is to help the people to help themselves.
Work is to be enthroned as the ruling principle of the lives of our Church membership.
Mormon social workers in the program are instructed to act accordingly.
According to this principle, welfare workers will earnestly teach and urge church members
to be self-sustaining to the full extent of their powers.
No true latter-day saint will, while physically able, voluntarily shift from himself the burden
of his own support.
So long as he can, under the inspiration of the Almighty and with his own labors, he will
supply himself with the necessities of life.
The immediate objectives of the Welfare Program are to 1. Place in gainful employment those
who are able to work. 2. Provide employment within the Welfare Program, insofar as possible,
for those who cannot be placed in gainful employment. 3. Acquire the means with which
to supply the needy, for whom the Church assumes responsibility with the necessities of life.
Insofar as possible, this program is carried on in small, decentralized grassroots groups.
Families, neighbors, quorums and wards, and other church organizational units may find
it wise and desirable to form small groups for extending mutual help one to the other.
Such groups may plant and harvest crops, process foods, store food, clothing and fuel, and
and carry out other projects for their mutual benefit.
Specifically, the Mormon bishops and priesthood quorums are enjoined to aid their brethren
to self-help.
In his temporal administrations, the bishop looks at every able-bodied needy person as
a purely temporary problem, caring for him until he can help himself.
The priesthood quorum must look at its needy member as a continuing problem until not alone
His temporal needs are met, but his spiritual ones also.
As a concrete example, a bishop extends help while the artisan or craftsman is out of work
and in want.
A priesthood quorum assists in establishing him in work and tries to see that he becomes
fully self-supporting and active in his priesthood duties.
Concrete rehabilitation activities for needy members enjoined upon the priesthood quorums
Quarums include placing quorum members and members of their families in permanent jobs.
In some instances, through trade school training, apprenticeships, and in other ways, quorums
have assisted their quorum members to qualify themselves for better jobs, assisting quorum
members and their families to get established in businesses of their own.
The prime objective of the Mormon Church is to find jobs for their needy.
To this end, the finding of suitable jobs under the welfare program is a major responsibility
of priesthood quorum members.
They and members of the Relief Society should be constantly on the alert for employment
opportunities.
If every member of the Ward Welfare Committee does well his or her work in this respect,
Most of the unemployed will be placed in gainful employment at the group or ward level.
Other members are rehabilitated as self-employed.
The Church may aid with a small loan, and the member's priesthood quorum may guarantee
repayment from its funds.
Those Mormons who cannot be placed in jobs or rehabilitated as self-employed are to be
given, insofar as possible, work at productive labor on Church properties.
The Church is insistent on work by the recipient as far as possible.
It is imperative that people being sustained through the bishop's storehouse program work
to the extent of their ability, thus earning what they receive.
Work of an individual on welfare projects should be considered as temporary rather than
permanent employment.
It should, nevertheless, continue so long as assistance is rendered to the individual
through the bishop's storehouse program.
In this way, the spiritual welfare of people will be served as their temporal needs are
supplied.
Feelings of diffidence will be removed.
Failing other work, the bishop may assign welfare recipients to aid individual members
who are in need of help, the aided members reimbursing the Church at prevailing wage
rates.
In general, in return for their assistance, the welfare recipients are expected to make
make whatever contributions they can to the church welfare program, either in funds, produce,
or by their labor.
Complementary to this comprehensive system of private aid on the principle of fostering
independence, the Mormon Church sternly discourages its members from going on public welfare.
It is requested that local church officers stress the importance of each individual,
Each family and each church community becoming self-sustaining and independent of public
relief.
And, to seek and accept direct public relief all too often invites the curse of idleness
and fosters the other evils of dole.
It destroys one's independence, industry, thrift, and self-respect.
There is no finer model than the Mormon Church for a private, voluntary, rational, individualistic
Public Welfare Program.
Let government welfare be abolished and one would expect that numerous such programs for
rational mutual aid would spring up throughout the country.
The inspiring example of the Mormon Church is a demonstration that the major determinant
of who or how many people go on public welfare is their cultural and moral values rather
than their level of income.
Another example is the group of Albanian-Americans in New York City. Albanian-Americans are an
extremely poor group, and in New York they are almost invariably poor slum dwellers.
Statistics are scanty, but their average income is undoubtedly lower than that of the more
highly publicized blacks and Puerto Ricans. Yet there is not a single Albanian-American
on Welfare. Why? Because of their pride and independence. As one of their leaders stated,
Albanians do not beg, and to Albanians taking welfare is like begging in the street.
A similar case is the decaying, poor, largely Polish-American and almost totally Catholic
community of Northside in Brooklyn, New York. Despite the low incomes, blight, and old and
and deteriorating housing in the area, there are virtually no welfare recipients in this
community of 15,000.
Why?
Rudolf J. Stobierski, president of the North Side Community Development Council, supplied
the answer, they consider welfare an insult.
In addition to the impact of religion and ethnic differences on values, Professor Banfield
Banfield in his brilliant book The Unheavenly City has demonstrated the importance of what
he calls upper-class or lower-class culture in influencing the values of their members.
The definitions of class in Banfield are not strictly income or status levels, but they
tend to overlap strongly with these more common definitions.
His definitions of class center on the different attitudes toward the present and the future.
Upper and middle class members tend to be future-oriented, purposeful, rational and self-disciplined.
Lower class people, on the other hand, tend to have a strong present orientation, are capricious,
hedonistic, purposeless, and therefore unwilling to pursue a job or a career with any consistency.
People with the former values therefore tend to have higher incomes and better jobs.
and lower class people tend to be poor, jobless, or on welfare.
In short, the economic fortunes of people tend, over the long run, to be their own internal
responsibility, rather than to be determined, as liberals always insist, by external factors.
Thus, Banfield quotes Daniel Rosenblatt's findings on the lack of interest in medical
Social Care due to the general lack of future orientation among the urban poor.
For example, regular checkups of automobiles to detect incipient defects are not in the
general value system of the urban poor.
In similar fashion, household objects are often worn out and discarded rather than repaired
at an early stage of disintegration.
Not buying is easily accepted without an awareness of the length of payments.
The body can be seen as simply another class of objects to be worn out, but not repaired.
Thus, teeth are left without dental care.
Later, there is often small interest in dentures, whether free or not.
In any event, false teeth may be little used.
Corrective eye examinations, even for those people who wear glasses, are often neglected,
regardless of clinic facilities.
It is as though the middle class thinks of the body as a machine to be preserved and
kept in perfect running order, whether through prosthetic devices, rehabilitation, cosmetic
surgery, or perpetual treatment, whereas the poor think of the body as having a limited
Benfield points out furthermore that lower class death rates are, and have been for generations,
far higher than for upper class persons.
Much of the differential is caused not by poverty or low incomes per se, as much as
by the values or culture of the lower class citizens.
Thus prominent and particularly lower class causes of death are alcoholism, narcotics addiction, homicide and venereal disease.
Infant mortality has also been far higher among the lower classes, ranging up to two and three times that of upper groups.
That this is due to cultural values rather than to income level may be seen in Banfield's comparison of turn-of-the-century Irish immigrants
with Russian-Jewish immigrants in New York City.
The Irish immigrants were, in those days, generally present-minded and lower class in
attitudes, while the Russian-Jews, though living in overcrowded tenements and on an
income level probably lower than the Irish, were unusually future-minded, purposive and
upper class in their values and attitudes.
At the turn of the century, the life expectancy at the age of 10 of an Irish immigrant was
was only 38 years, whereas for the Russian Jewish emigrant it was more than 50 years.
Furthermore, whereas in 1911 through 1916, in a study of seven cities, the infant mortality
was over three times as high for the lowest as compared to the highest income groups,
the Jewish infant mortality was extremely low.
As in illness or mortality, so in unemployment, which obviously has a close relation to both
poverty and welfare.
Banfield cites the findings of Professor Michael J. Peori on the essential unemployability
of many or most of the persistently low-income unemployed.
Peori discovered that their difficulty was not so much in finding or learning the skills
for Steady, Well-Paying Jobs, as in the lack of personal fiber in sticking to such jobs.
These people are inclined to high absenteeism, leaving their jobs without notice, being insubordinate,
and sometimes stealing from the employer.
Furthermore, Peter Dohringer's study of the Boston Ghetto labor market in 1968 found that
about 70 percent of job applicants referred by neighborhood employment centers received
Job Offers, but that over half of these offers were rejected, and of those accepted, only
about 40% of the new workers kept their jobs for as long as one month.
Dohringer concluded, much of the ghetto unemployment appears to be a result of work instability
rather than job scarcity.
It is highly instructive to compare the descriptions of this common refusal of the lower class
Men Accustomed to a Street Corner Style of Life, to Living Off Women on Welfare and to Hustling, Are Seldom Willing to Accept the Dull Routines of the Good Job
Hub.
Pondering the lack of success of welfare workers in luring these men away from a life of irresponsibility,
sensuality and freewheeling aggression, Goldner proclaims that they judge the proffered bargain
to be unattractive, give up promiscuous sex, give up freely expressed aggression and wild
spontaneity, and you or your children may be admitted to the world of three square meals
The interesting point is that from both ends of the ideological spectrum, both Banfield
and Goldner agree on the essential nature of this process, despite their contrasting
value judgments on it.
That much of persistent lower class unemployment, and hence poverty, is voluntary on the part
of the Unemployed Themselves.
Goldner's attitude is typical of liberals and leftists in the present day, that it is
shameful to try to foist even non-coercively bourgeois or middle-class values on the gloriously
spontaneous and natural lower-class culture.
Fair enough, perhaps, but then don't expect or call upon those same hard-working bourgeoisie
to be coerced into supporting and subsidizing those very parasitic values of idleness and
irresponsibility which they abhor, and which are clearly dysfunctional for the survival
of any society.
If people wish to be spontaneous, let them do so on their own time and with their own
resources, and let them then take the consequences of this decision, and not use state coercion
If the major problem with the lower class poor is irresponsible present-mindedness, and if
it takes the inculcation of bourgeois future-minded values to get people off welfare and dependency,
and Pache the Mormons. Then, at the very least, these values should be encouraged and not discouraged in society.
The left liberal attitudes of social workers discourage the poor directly by fostering the idea of welfare as a right and as a moral claim upon production.
Furthermore, the easy availability of the welfare check obviously promotes present-mindedness,
business, unwillingness to work and irresponsibility among the recipients, thus perpetuating the
vicious cycle of poverty welfare.
As Banfield puts it, there is perhaps no better way to make converts to present-mindedness
than to give a generous welfare check to everyone.
Generally, in their attacks on the welfare system, conservatives have focused on the
and the ethical and moral evils of coercively mulking the taxpayers to support the idol,
while the leftist critics have concentrated on the demoralization of the welfare clients
through their dependency on the largesse of the state and its bureaucracy.
Actually, both sets of criticisms are right.
There is no contradiction between them.
We have seen that voluntary programs such as those of the Mormon Church are keenly alive
and, in fact, earlier laissez-faire critics of the Dole were just as concerned with the demoralization as with the coercion over those forced to pay for welfare.
Thus, the 19th century English laissez-faire advocate Thomas Mackay declared that welfare reform consists in a recreation and development of the arts of independence.
He called not for more philanthropy, but rather for more respect for the dignity of human life, and more faith in its ability to work out its own salvation.
And McKay poured his scorn on the advocates of greater welfare, on the vicarious philanthropist, who in a reckless race after a cheap popularity, uses the rate, that is, the tax, extorted from his neighbors,
from his neighbors, to multiply the occasions of stumbling set before the crowd who are
only too ready to fall into dependence.
McKay added that the legal endowment of destitution implied by the welfare system introduces a
most dangerous and at times demoralizing influence into our social arrangements.
Its real necessity is by no means proved.
Its apparent necessity arises mainly from the fact that the system has created its own
on Dependent Population.
Elaborating on the theme of dependence,
McKay observed that the bitterest element
in the distress of the poor arises not from mere poverty,
but from the feeling of dependence,
which must, of necessity, be an ingredient in every measure
of public relief.
This feeling cannot be removed, but is rather
intensified by liberal measures of public relief.
McKay concluded that the only way in which the legislator or the administrator can promote
the reduction of pauperism is by abolishing or restricting the legal endowments provided
for pauperism.
The country can have, there is no doubt of it, exactly as many paupers as it chooses
to pay for.
Abolish or restrict that endowment, and new agencies are called into activity.
England's natural capacity for independence, the natural ties of relationship and friendship,
and under this head I would include private as distinguished from public charity.
The Charity Organization Society, England's leading private charity agency in the late
19th century, operated precisely on this principle of aid to foster self-help.
As Mallet, the historian of the society, notes, the COS embodied an idea of charity which
claimed to reconcile the divisions in society, to remove poverty and to produce a happy,
self-reliant community.
It believed that the most serious aspect of poverty was the degradation of the character
of the poor man or woman.
Indiscriminate charity only made things worse.
It demoralized.
True Charity demanded friendship, thought, the sort of help that would restore a man's
self-respect and his ability to support himself and his family.
Perhaps one of the grimmest consequences of welfare is that it actively discourages self-help
by crippling the financial incentive for rehabilitation.
It has been estimated that, on the average, every dollar invested by handicapped persons
in their own rehabilitation brings them from $10 to $17 in the present value of increased
future earnings.
But this incentive is crippled by the fact that, by becoming rehabilitated, they will
lose their welfare relief, social security disability payments, and workman's compensation.
As a result, most of the disabled decide not to invest in their own rehabilitation.
Many people, moreover, are by now familiar with the crippling disincentive effects of
the social security system, which, in glaring contrast to all private insurance funds, cuts
off payments if the recipient should be brazen enough to work and earn an income after age
62.
In these days, when most people look askance at population growth, few anti-populationists
have focused on another unfortunate effect of the welfare system.
Since welfare families are paid proportionately to the number of their children, the system
provides an important subsidy for the production of more children.
Furthermore, the people being induced to have more children are precisely those who can
afford it least.
The result can only be to perpetuate their dependence on welfare and, in fact, to develop
generations who are permanently dependent on the welfare dole.
In recent years, there has been a great deal of agitation for the government to supply
daycare centers to care for children of working mothers.
Allegedly, the market has failed to supply this much-needed service.
Since the market is in the business of meeting urgent consumer demands, however, the question
to ask is why the market seems to have failed in this particular case.
The answer is that the government has ringed the supply of day care service with a network
of onerous and costly legal restrictions.
In short, while it is perfectly legal to deposit one's children with a friend or relative,
no matter who the person is or the condition of his apartment, or to hire a neighbor who
will be taking care of one or two children, let the friend or neighbor become a slightly
The State will generally insist that such day care centers be licensed, and will refuse to grant the license unless registered nurses are in attendance at all times. Minimal playground facilities are available, and the facility is of a minimum size.
There will be all sorts of other absurd and costly restrictions which the government does not bother to impose on friends, relatives and neighbors, or indeed on mothers themselves.
Remove these restrictions and the market will go to work to meet the demand.
For the past 13 years, the poet Ned O'Gorman has been operating a successful privately financed daycare center in Harlem on a shoestring.
but he is in danger of being put out of business by bureaucratic restrictions
imposed by the New York City government. While the city admits the dedication and
effectiveness of O'Gorman's Center, the storefront, it is threatening fines and
ultimately the coercive closing of the Center unless he has a state-certified
social worker present whenever there are five or more children in attendance.
As O'Gorman indignantly remarks,
Why on earth should I be forced to hire someone with a piece of paper that says they've studied social work and are qualified to run a daycare center?
If I'm not qualified after 13 years in Harlem, then who is?
The example of daycare demonstrates an important truth about the market.
If there seems to be a shortage of supply to meet an evident demand, then look to government as the cause of the problem.
Give the market its head and there will be no shortages of daycare centers,
just as there are no shortages of motels, of washing machines, of TV sets, or of any of the other accoutrements of daily living.
Burdens and Subsidies of the Welfare State
Does the modern welfare state really help the poor?
The commonly held notion, the idea that has propelled the welfare state and maintained it in being,
is that the welfare state redistributes income and wealth from the rich to the poor.
The progressive tax system takes money from the rich,
while numerous welfare and other services distribute the money to the poor.
But even liberals, the great advocates and abetters of the welfare state, are beginning to realize that every part and aspect of this idea is merely a cherished myth.
Government contracts, notably of the military, funnel tax funds into the pockets of favored corporations and well-paid industrial workers.
Minimum wage laws tragically generate unemployment, especially so among the poorest and least skilled or educated workers.
In the South, among teenage Negroes in the ghettos, and among the vocationally handicapped.
Because a minimum wage, of course, does not guarantee any worker's employment, it only
prohibits, by force of law, anyone from being employed at the wage which would pay his employer
to hire him.
It therefore compels unemployment.
Economists have demonstrated that raises in the federal minimum wage have created the
and the well-known Negro-White Teenage Employment Gap and have driven the rate of male Negro
teenage unemployment from an early postwar rate of about 8 percent to what is now well
over 35 percent, an unemployment rate among teenage Negroes that is far more catastrophic
than the massive general unemployment rate of the 1930s, 20 to 25 percent.
We have already seen how state higher education redistributes income from poorer to wealthier
citizens.
A host of government licensing restrictions, permeating occupation after occupation, exclude
poorer and less skilled workers from these jobs.
It is becoming recognized that urban renewal programs, supposedly designed to aid the slum
Some housing of the poor, in fact, demolish their housing and force the poor into more
crowded and less available housing, all for the benefit of wealthier subsidized tenants,
construction unions, favored real estate developers, and downtown business interests.
Unions, once the pampered favorites of liberals, are now generally seen to use their governmental
privileges to exclude poorer and minority group workers.
Some price supports, jacked ever higher by the Federal Government, mulked the taxpayers
in order to push food prices higher and higher, thereby injuring particularly the poor consumers,
and helping not poor farmers, but the wealthy farmers commanding a large amount of acreage.
Since farmers are paid per pound or per bushel of product, the support program largely benefits
The Wealthy Farmers. In fact, since farmers are often paid not to produce, the resulting
taking of acreage out of production causes severe unemployment among the poorest segment
of the farm population, the farm tenants and farm workers.
Zoning laws in the burgeoning suburbs of the United States serve to keep out the poorer
citizens by legal coercion, very often Negroes who are attempting to move out of the inner
The Federal Bureau of Reclamation subsidizes irrigation water to well-to-do farmers in the West,
thereby depriving the urban poor of the natural resources they need.
The U.S. Postal Service charges high monopoly rates on the first-class mail used by the general public
in order to subsidize the distribution of newspapers and magazines.
The FHA subsidizes the mortgages of well-to-do homeowners.
The Federal Bureau of Reclamation subsidizes irrigation water to well-to-do farmers in the West,
thereby depriving the urban poor of the natural resources they need.
by depriving the urban poor of water and forcing them to pay higher water charges.
The Rural Electrification Administration and the Tennessee Valley Authority subsidize electric
service to well-to-do farmers, suburbanites and corporations.
As Professor Yale Brozen sardonically observes, electricity for poverty-stricken corporations
such as the Aluminum Corporation of America and the DuPont Company is subsidized by the
The tax-free status of the Tennessee Valley Authority.
27% of the price of electricity goes to pay the taxes imposed on privately operated utilities.
And the government regulation monopolizes and cartelizes much of industry, thereby driving
up prices to consumers and restricting production, competitive alternatives, or improvements
in products.
For example, railroad regulation, public utility regulation, airline regulation, oil proration laws.
Thus, the Civil Aeronautics Board allocates airline routes to favored companies and keeps out and even drives out of business smaller competitors.
State and Federal oil proration laws provide for absolute maximum limits on crude oil production,
and thereby driving up oil prices, prices that are further kept up by import restrictions.
And government throughout the country grants an absolute monopoly in each area to gas, electric and telephone companies,
thus protecting them from competition and sets their rates in order to guarantee them a fixed profit.
Everywhere and in every area, the story is the same,
A Systematic Molting of the Mass of the Population by the Welfare State
Most people believe that the American tax system basically taxes the rich far more than it taxes the poor,
and is therefore a method of redistributing income from higher to lower income classes.
There are, of course, many other kinds of redistribution, for example, from the taxpayers to Lockheed or General Dynamics.
But even the federal income tax, which everybody assumes to be progressive, taxing the rich far more than the poor with the middle classes in between, does not really work that way when we take into account other aspects of this tax.
For example, the Social Security tax is blatantly and starkly regressive, since it is a soak the poor and middle class tax.
A person making the base income, $8,000, pays fully as much social security tax, and the amount is rising every year, as someone making $1 million a year.
Capital gains, mostly accruing to wealthy stockholders and owners of real estate, pay far less than income taxes.
Private trusts and foundations are tax exempt, and interest earned on state and municipal government bonds is also exempt from the federal income tax.
We wind up with the following estimate of what percentage of income is paid overall by each income class in federal taxes.
In 1965, those earning under $2,000 paid 19% of their income in federal tax.
Federal Tax.
Those earning between $2,000 and $4,000 paid 16% of their total income in Federal Tax.
Those earning between $4,000 and $6,000 paid 17% of their income in Federal Tax.
Those earning between $6,000 and $8,000 paid 17% of their income in Federal Tax.
Those earning between $8,000 and $10,000 paid 18% of their income in federal tax.
Those earning between $10,000 and $15,000 paid 19% of their income in federal tax.
And those earning over $15,000 paid 32% of their income in federal tax.
The average percentage of income paid in federal tax during 1965 was 22%.
If federal taxes are scarcely progressive, the impact of state and local taxes is almost
fiercely regressive.
Property taxes are a. proportional, b. hit only owners of real estate, and c. depend
on the political vagaries of local assessors.
The following is the estimate of the percentage of income extracted overall by state and local taxes.
For 1965, those earning under $2,000 paid 25% of their income in state and local taxes.
Those earning between $2,000 and $4,000 paid 11% of their income in state and local taxes.
Those earning between $4,000 and $6,000 paid 10% of their income in state and local taxes.
Those earning between $6,000 and $15,000 paid 9% of their income in state and local taxes.
Those earning over $15,000 paid 7% of their income in state and local taxes.
The average percentage of income paid in state and local taxes in 1965 was 9%.
Following are the combined estimates for the total impact of taxation, federal, state and local, on income classes.
In 1965, those earning under $2,000 paid 44% of their income in all taxes.
Those earning between $2,000 and $6,000 paid 27% of their income in all taxes.
Those earning between $6,000 and $8,000 paid 26% of their income in all taxes.
Those earning between $8,000 and $15,000 paid 27% of their income in taxes.
And those earning over $15,000 paid 38% of their income in all taxes.
The average percentage of income paid in 1965 in all taxes was 31%.
Still more recent 1968 estimates of the total impact of taxes on all levels of government
Amply confirm the above, while also showing a far greater relative rise in the three years of the tax burden on the lowest income groups.
In 1968, those earning under $2,000 paid 50% of their income in taxes.
Those earning $2,000 to $4,000 paid 35% of their income in taxes.
Those earning $4,000 to $6,000 paid 31% of their income in taxes.
Those earning $6,000 to $8,000 paid 30% of their income in taxes.
Those earning $8,000 to $10,000 paid 29% of their income in taxes.
Those earning $10,000 to $25,000 paid 30% of their income in taxes.
Those earning $25,000 to $50,000 paid 33% of their income in taxes.
And those earning $50,000 and over paid 45% of their income in taxes.
Many economists try to mitigate the impact of these tell-tale figures by saying that the people in the under $2,000 category, for example, receive more in welfare and other transfer payments than they pay out in taxes.
But of course, this ignores the vital fact that the same people in each category are not the welfare receivers and the taxpayers.
The latter group is socked heavily in order to subsidize the former.
In short, the poor and the middle class are taxed in order to pay for the subsidized public housing of other poor and middle-income groups.
And it is the working poor who are socked a staggering amount to pay for the subsidies of the welfare poor.
There is plenty of income redistribution in this country, to Lockheed, to welfare recipients,
and so on and on. But the rich are not being taxed to pay for the poor. The redistribution is within
income categories. Some poor are forced to pay for other poor. Other tax estimates confirm this
chilling picture. The Tax Foundation, for example, estimates that federal, state and local taxes
extract 34% of the overall income of those who make less than $3,000 per year.
The object of this discussion is not, of course, to advocate a really progressive income tax
structure, a real soaking of the rich, but to point out that the modern welfare state,
highly touted as soaking the rich to subsidize the poor, does no such thing.
In fact, soaking the rich would have disastrous effects, not just for the rich, but for the
poor and middle classes themselves.
For it is the rich who provide a proportionately greater amount of saving, investment capital,
entrepreneurial foresight, and financing of technological innovation that has brought
the United States to by far the highest standard of living for the mass of the people of any
country in history.
Killing the rich would not only be profoundly immoral, it would drastically penalize the
very virtues, thrift, business foresight and investment that have brought about our remarkable
standard of living.
It would truly be killing the goose that lays the golden eggs.
What can government do?
What then can the government do to help the poor?
The only correct answer is also the libertarian answer, get out of the way.
Let the government get out of the way of the productive energies of all groups in the population,
rich, middle class and poor alike, and the result will be an enormous increase in the
welfare and the standard of living of everyone, and most particularly of the poor, who are
the ones supposedly helped by the miscalled welfare state.
There are four major ways in which the government can get out of the way of the American people.
First, it can abolish, or at the very least drastically reduce, the level of all taxation,
taxation which cripples productive energies, savings, investment, and technological advance.
In fact, the creation of jobs and increase of wage rates resulting from abolishing these
Inequality in these taxes would benefit the lower income groups more than anyone else.
As Professor Brozen points out, with less attempt to use state power to compress the
inequality in the distribution of income, inequality would diminish more rapidly.
Low wage rates would rise more rapidly with a higher rate of saving and capital formation,
and inequality would diminish with the rise in income of wage earners.
The best way to help the poor is to slash taxes and allow savings, investment and creation
of jobs to proceed unhampered.
As Dr. F. A. Harper pointed out years ago, productive investment is the greatest economic
charity.
Wrote Harper, According to one view, sharing a crust of bread is advocated as the method
of charity.
The other advocates savings and tools for the production of additional loaves of bread,
which is the greatest economic charity.
The two views are in conflict because the two methods are mutually exclusive in absorbing
one's time and means in all the choices he makes day by day.
The reason for the difference in view really stems from different concepts about the nature
of the economic world.
The former view stems from the belief that the total of economic goods is a constant.
The latter view is built on the belief that expansion in production is possible without
any necessary limit.
The difference between the two views is like the difference between a two- and three-dimensional
perspective of production.
The two-dimensional size is fixed at any instant of time, but the third dimension, and therefore
Therefore the size of the total is expandable without limit by savings and tools.
All the history of mankind denies that there is a fixed total of economic goods.
History further reveals that savings and expansion of tools constitute the only way to any appreciable
increase.
The libertarian writer Isabel Patterson put the case eloquently, as between the private
What philanthropist and the private capitalist acting as such take the case of the truly
needy man who is not incapacitated, and suppose that the philanthropist gives him food and
clothes and shelter when he has used them, he is just where he was before, except that
he may have acquired the habit of dependence.
But suppose someone with no benevolent motive whatever, simply wanting work done for his
own reasons, should hire the needy man for a wage.
The employer has not done a good deed, yet the condition of the employed man has actually
been changed.
What is the vital difference between the two actions?
It is that the unphilanthropic employer has brought the man he employed back into the
production line on the great circuit of energy, whereas the philanthropist can only divert
Energy in such manner that there can be no return into production, and therefore less
likelihood of the object of his benefaction finding employment.
If the full role of sincere philanthropists were called from the beginning of time, it
would be found that all of them together by their strictly philanthropic activities have
never conferred upon humanity one-tenth of the benefit derived from the normally self-interested
and Efforts of Thomas Alva Edison, to say nothing of the greater minds who worked out
the scientific principles which Edison applied.
Innumerable speculative thinkers, inventors and organizers have contributed to the comfort,
health and happiness of their fellow men, because that was not their objective.
Second, and as a corollary to a drastic reduction or abolition of taxation, would come an equivalent
Reduction in Government Expenditures.
No longer would scarce economic resources be siphoned off into wasteful and unproductive
expenditures, into the multi-billion dollar space program, public works, the military
industrial complex, or whatever.
Instead, these resources would be available to produce goods and services desired by the
mass of the consuming population.
The outpouring of goods and services would provide new and better goods to the consumers
at far lower prices.
No longer would we suffer the inefficiencies and the injury to productivity of government
subsidies and contracts.
Furthermore, the diversion of most of the nation's scientists and engineers to wasteful
military and other governmental research and expenditure would be released for peaceful
Social and Productive Activities, and Inventions Benefiting the Nation's Consumers.
Third, if the government also cut out the numerous ways in which it taxes the poorer
to subsidize the wealthier, such as we have named above, higher education, farm subsidies,
irrigation, Lockheed, etc., this in itself would stop the government's deliberate exactions
upon the poor.
By ceasing to tax the poorer in order to subsidize the richer, the government would aid the poor
by removing its burdens from their productive activity.
Finally, one of the most significant ways in which the government could aid the poor
is by removing its own direct roadblocks from their productive energies.
Thus, minimum wage laws disemploy the poorest and least productive members of the population.
The privileges to trade unions enable them to keep the poorer and minority group workers
from productive and high-wage employment.
And licensing laws, the outlawing of gambling, and other government restrictions prevent
the poor from starting small businesses and creating jobs on their own.
Thus, the government has everywhere clamped onerous restrictions on peddling, ranging
from outright prohibition to heavy license fees.
Investing was the classic path by which immigrants, poor and lacking capital, were able to become
entrepreneurs and eventually to become big businessmen.
But now this route has been cut off, largely to confer monopoly privileges on each city's
retail stores, who fear that they would lose profits if faced with the highly mobile competition
of street peddlers.
Typical of how government has frustrated the productive activities of the poor is the case
In the mid-1960s, Dr. Matthew, over the opposition of the New York City government, established a successful interracial hospital in the black section of Jamaica, Queens.
He soon found, however, that public transportation in Jamaica was so abysmal that transportation services were not available.
Medical Hospital in the black section of Jamaica, Queens.
He soon found, however, that public transportation in Jamaica was so abysmal that transportation
service was totally inadequate for the hospital's patients and staff.
Finding bus service inadequate, Dr. Matthew purchased a few buses and established a regular
bus service in Jamaica, service that was regular, efficient and successful.
The problem was that Dr. Matthew did not have a city license to operate a bus line.
That privilege is reserved to inefficient but protected monopolies.
The ingenious Dr. Matthew, discovering that the city did not allow any unlicensed buses
to charge fares, made his bus service free, except that any riders who wished could buy
a 25-cent company bond instead whenever they rode the buses.
So successful was the Matthew bus service that he proceeded to establish another bus
line in Harlem.
But it was at this point, in early 1968, that the New York City government took fright and
cracked down.
The government went to court and put both lines out of business for operating without
licenses.
A few years later, Dr. Matthew and his colleagues seized an unused building in Harlem owned
by the city government.
The New York City government is the city's biggest slumlord, owning as it does a vast
amount of useful buildings abandoned because of non-payment of high property taxes and
rotting away, rendered useless and uninhabitable.
In this building, Dr. Matthew established a low-cost hospital at a time of soaring hospital
costs and scarcity of hospital space.
The city finally succeeded in putting this hospital too out of business, claiming fire
violations.
Again and again, in area after area, the role of government has been to thwart the economic
activities of the poor.
It is no wonder that when Dr. Matthew was asked by a white official of the New York
City government how it could best aid Negro self-help projects, Matthew replied, Get out
Another example of how government functions occurred a few years ago, when the Federal
and New York City governments loudly proclaimed that they would rehabilitate a group of 37
buildings in Harlem.
But instead of following the usual practice of private industry and awarding rehabilitation
contracts on each house individually, the government instead awarded one contract on
on the entire 37-building package.
By doing so, the government made sure that small, black-owned construction firms would
not be able to bid, and so the prize contract naturally went to a large, white-owned company.
Still another example.
In 1966, the Federal Small Business Administration proudly proclaimed a program for encouraging
New Black-Owned Small Business
But the government put certain key restrictions on its loans.
First, it decided that any borrower must be at the poverty level.
Now, since the very poor are not apt to be setting up their own businesses,
this restriction ruled out many small businesses by owners with moderately low incomes,
just the ones likely to be small entrepreneurs.
To top this, the New York Small Business Administration added a further restriction.
All blacks seeking such loans must prove a real need in their community for filling a recognizable economic void.
The need and the void to be proved to the satisfaction of remote bureaucrats far from the actual economic scene.
A fascinating gauge of whether or to what extent government is helping or hurting the poor in the welfare state is provided by an unpublished study by the Institute for Policy Studies of Washington, D.C.
An inquiry was made on the estimated flow of government money, federal and district, into the low-income Negro ghetto of Shaw Cardozo in Washington, D.C., as compared to the outflow that the area pays in taxes to the government.
In fiscal 1967, the Shaw-Cardozo area had a population of 84,000, of whom 79,000 were black, with a median family income of $5,600 per year.
Total earned personal income for the residents of the area for that year amounted to $126.5 million.
The value of total government benefits flowing into the district, ranging from welfare payments to the estimated expenditure on public schools during fiscal 1967, was estimated at $45.7 million, a generous subsidy amounting to almost 40% of total Shaw-Cardozo income.
Perhaps, but against this we have to offset the total outflow of taxes from Shaw-Cardozo,
best estimated at $50 million, a net outflow from this low-income ghetto of $4.3 million.
Can it still be maintained that abolition of the entire massive unproductive welfare
state structure would hurt the poor?
That could then best help the poor and the rest of society by getting out of the way,
by removing its vast and crippling network of taxes, subsidies, inefficiencies, and
monopoly privileges.
As Professor Brozen summed up his analysis of the welfare state,
the state has typically been a device for producing affluence for a few at the expense
of many.
The market has produced affluence for many, with little cost even to a few.
The state has not changed its ways since Roman days of bread and circuses for the masses,
even though it now pretends to provide education and medicine, as well as free milk and performing
arts.
It still is the source of monopoly privilege and power for the few, behind its facade of
providing welfare for the many.
The Negative Income Tax
Unfortunately, the recent trend, embraced by a wide spectrum of advocates with unimportant
modifications from President Nixon to Milton Friedman on the right to a large number on
the left, is to abolish the current welfare system not in the direction of freedom but
toward its very opposite.
This new trend is the Guaranteed Annual Income or Negative Income Tax or President Nixon's
Family Assistance Plan.
Writing the inefficiencies, inequities and red tape of the present system, the guaranteed
annual income would make the dole easy, efficient and automatic.
The income tax authorities will pay money each year to families earning below a certain
base income.
This automatic dole to be financed, of course, by taxing working families making more than
the base amount.
The estimated costs of this seemingly neat and simple scheme are supposed to be only a few billion dollars per year.
But there is an extremely important catch.
The costs are estimated on the assumption that everyone, the people on the universal dole as well as those financing it,
will continue to work to the same extent as before.
But this assumption begs the question.
For the chief problem is the enormously crippling disincentive effect the guaranteed annual income
will have on taxpayer and recipient alike. The one element that saves the present welfare system from
being an utter disaster is precisely the red tape and the stigma involved in going on welfare.
The welfare recipient still bears a psychic stigma, even though weakened in recent years,
and he still has to face a typically inefficient, impersonal and tangled bureaucracy.
But the guaranteed annual income, precisely by making the dole efficient, easy and automatic,
will remove the major obstacles, the major disincentives to the supply function for welfare,
and will lead to a massive flocking to the guaranteed dole.
Moreover, everyone will now consider the new dole as an automatic right, rather than as a privilege or gift, and all stigma will be removed.
Suppose, for example, that $4,000 per year is declared the poverty line, and that everyone earning income below that line receives the difference from Uncle Sam automatically, as a result of filling out his income tax return.
Those making zero income will receive $4,000 from the government.
Those making $3,000 will get $1,000, and so on.
It seems clear that there will be no real reason for anyone making less than $4,000 a year to keep on working.
Why should he, when his non-working neighbor will wind up with the same income as himself?
In short, the net income from working will then be zero,
and the entire working population below the magic four thousand dollar line will quit
work and flock to its rightful dole.
But this is not all.
What of the people making either four thousand dollars or slightly or even moderately above
that line?
The man making forty five hundred dollars a year will soon find that the lazy slob next
door who refuses to work will be getting his four thousand dollars a year from the Federal
Government.
His own net income from 40 hours a week of hard work will be only $500 a year.
So he will quit work and go on the negative tax dole.
The same will undoubtedly hold true for those making $5,000 a year, etc.
The baleful process is not over.
As all the people making below $4,000 and even considerably above $4,000 leave work
Work and Go on the Dole, the total dole payments will skyrocket enormously, and they can only
be financed by taxing more heavily the higher income folk who will continue to work.
But then their net after-tax incomes will fall sharply until many of them will quit
work and go on the dole too.
Let us contemplate the man making $6,000 a year.
He is, at the outset, faced with a net income from working of only $2,000, and if he has
to pay, let us say, $500 a year to finance the dole of the non-workers, his net after-tax
income will be only $1,500 a year.
If he then has to pay another $1,000 to finance the rapid expansion of others on the dole,
his net income will fall to $500, and he will go on the dole.
Thus, the logical conclusion of the guaranteed annual income will be a vicious spiral into disaster, heading toward the logical and impossible goal of virtually no one working and everyone on the dole.
In addition to all this, there are some important extra considerations. In practice, of course, the dole, once set at $4,000, will not remain there.
Irresistible pressure by welfare clients and other pressure groups will inexorably raise the base level every year, thereby bringing the vicious spiral and economic disaster that much closer.
In practice, too, the guaranteed annual income will not, as in the hopes of its conservative advocates, replace the existing patchwork welfare system.
It will simply be added on top of the existing programs.
This, for example, is precisely what happened to the state's old age relief programs.
The major talking point of the New Deal's federal social security program was that it
would efficiently replace the then existing patchwork old age relief programs of the states.
In practice, of course, it did no such thing, and old age relief is far higher now than
it was in the 1930s.
An ever-rising social security structure was simply placed on top of existing programs.
In practice, finally, President Nixon's sop to conservatives that able-bodied recipients
of the new dole would be forced to work is a patent phony.
They would, for one thing, only have to find suitable work, and it is the universal experience
The various schemes for a guaranteed annual income are no genuine replacement for the
universally acknowledged evils of the welfare system.
They would only plunge us still more deeply into those evils.
The only workable solution is the libertarian one, the abolition of the welfare dole in
in favor of freedom and voluntary action for all persons, rich and poor alike.