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STAFF NEWS & ANALYSIS
Delusions of Welfare
By Daily Bell Staff - January 12, 2016

State child welfare system failing to protect youth … Until I had to deal with the Florida Department of Children and Families, I thought some of the criticism of it was unwarranted. Now I remember someone said, "It takes a village to bring up a child." I say that because when I called I was told three times only the person receiving funds from the agency could make a complaint. Does that account for why some children die because no one in the family could "interfere"? – Letter to the Bradenton Herald

Dominant Social Theme: Government welfare needs to work better. But even if it doesn't, I'll get mine.

Free-Market Analysis: There are numerous delusions associated with state welfare. Here, we will discuss two of the main ones. Our thanks to economist Gary North for a recent article that clarified our understanding.

Begin with this letter to the editor, above. It makes certain perfectly logical assumptions about the way that welfare services ought to work. The letter writer, assuming the person is not being ironic, believes that adjustments in the system will make it operate properly.

In fact, even today many well-meaning people believe that the problems with government stem from not having systems in place that encourage efficiency and appropriate results.

If only the proper authorities were alerted, the difficulties might be resolved so that people can get the level of care they deserve.

More from the letter:

When a DCF family has to get food from a shelter to feed a family or not pay the rent, something is very wrong. When a family suddenly has its monthly payment drastically reduced, without explanation, something is wrong … Who is going to rewrite the rules of procedure for this vital department to protect the children?

Unfortunately, when it comes to government services, expecting that someone sooner or later will right what is "wrong" by "rewriting the rules" is probably a forlorn hope.

No matter the intentions of these sorts of critics, a monopoly government service is not going to change for the better when there is no real outside competition to induce discipline.

But there is a second delusion that perpetuates the welfare state.

In a recent column entitled "Lake Wobegon Economics and the Welfare State," economist Gary North explains.

First, he provides a definition of "Wobegon economics." It is "the widespread belief that, with respect to paying the bills run up by the welfare state, everyone will pay less than his fair share."

In elaborating on this, North cites libertarian James Dale Davidson who, he recalls, appeared in 1974 on "The Tonight Show Starring Johnny Carson."

Carson asked him to describe how Congress spends money. He said it was like a credit card with no limits. The voters hand this card to all members of Congress. Davidson asked the viewers to imagine what would happen under these repayment conditions.

At the end of the year, all of the bills run up by the Congress would be paid equally by each Congressman's district. It didn't matter how much each district received; all of them would pay the same amount. The impulse would be obvious: every Congressman would spend as much as he possibly could in a quest to get more for his district from the federal government than his district paid into the federal government. There would be no restraint on spending. He then said this is close to how Congress operates.

North admires this observation. "Today, the size of the federal deficit testifies to the accuracy of Davidson's hypothetical scenario."

In fact, North believes that Lake Wobegon economics has advanced considerably and is certain to "bankrupt the West's national governments at some point."

Will voters call a halt?

This is the crux of North's article. He believes they will not. Each voter, you see, is intent on trying to get more than his or her "fair share" of welfare benefits. And therefore the system will perpetuate itself until collapse.

North points out that the welfare state, at least in the US, is nowhere near as pervasive as ordinarily portrayed. It is not nearly "womb to tomb," though it is characterized that way. Thus, people are constantly scrambling to try to figure out strategies to gain more "free money."

The middle class pays into the system, hoping that it will receive more in payments than it puts in. It's Lake Wobegon economics. Everybody hopes to take out more than he put into it. Yet at the same time, they insist that they have paid for all of the benefits they take out …They say that it is their entitlement. They have paid into the system, they insist.

He uses Social Security as an example. Most people believe they will live longer than the statistical average and thus will benefit more than others. This certainty, no matter how ill-founded, undermines resistance to the system.

"Bottom line," North writes, "people think they're going to beat the odds."

These two misperceptions go a long way toward explaining why people continue to tolerate the inefficiency and waste of welfare generally.

First, people do not understand that it is a monopoly service that cannot be changed for the better. The idea, perpetuated by politicians, is that better management can address and rectify issues associated with dysfunctional services.

The second misperception is that because people are forced to pay into welfare systems via taxes, they quite naturally wish to take back more than they have put in.

People often believe the problems associated with government services will be fixed … someday. And even if they aren't, people believe they are clever enough to "game" the system and emerge with compensation not granted to others.

Both of these assumptions are fallacies. The first is obvious and the second can be proven by the statistics of mortality. Most people won't "beat the system."

In order to preserve one's estate and make it grow, people need to accept that the parts of their income that go to supporting the system are in too many cases no longer of benefit to them.

To have a generous retirement and to help the next generation, people need to plan as if government services did not exist. They need to take "human action" to do what they can to plan AROUND government confiscation.

Certainly government services may exist, inefficient as they are, to be claimed in old age but in no way is this a certainty.

Those who look clearly at the West's current fiscal and monetary distress should be well aware that they need to count on their own resources for their future well-being and to help the next generations.

After Thoughts

It's an uncomfortable truth, but one that ought to be internalized.

Posted in STAFF NEWS & ANALYSIS
  • lulu

    To get more than one has put in requires emulating the banksters and other uber rich. Maybe they can give classes.

  • Praetor

    This is an excellent article! And is full of profound truth! People need to except the fact government is stealing from them, and the money is gone. In a proverbial since, the money has been spent on ‘ wine and women’, the money is no more! People should find every way possible to not give money to the government and the system that surrounds it. Of course if you receive a paycheck there is no avoidance and property tax unavoidable. People need to starve the beast and help it along to it final conclusion. There are ways, risky, but there are ways. But look at the alternative. It comes down to slavery or freedom!!!

  • Demonocracy

    Social Security’s latest announcement states that they need to give the public time to prepare and that congress needs to act immediately because their BROKE!

    “Social Security’s and Medicare’s projected long-range costs are not sustainable with currently scheduled financing and will require legislative action to avoid disruptive consequences for beneficiaries and taxpayers. The sooner that lawmakers take action, the wider will be the range of solutions to consider and the more time that will be available to phase in changes, giving the public adequate time to prepare. Timely resolution of the financial imbalances will prevent the uncertainty currently facing the disabled population from being experienced by other Social Security and Medicare participants. Earlier action would also provide more opportunity to ameliorate adverse impacts on vulnerable populations, including lower-income workers and people already significantly dependent on program benefits.”

    https://www.ssa.gov/OACT/TRSUM/

  • RJ O’Guillory

    …I quit reading this essay at this point…..”These two misperceptions go a long way toward explaining why people continue to tolerate the inefficiency and waste of welfare generally”. The programs and “entitlements” I was forced to pay into since I was 16 years of age were not voluntary…but were forced upon us, and they were not referred to as welfare when they were forced down our throats. I worked for forty years under such a system, and still paid for a personal retirement…so the identification of SSI or SS Disability as…”welfare”…is pure horse-dung. Whether or not I “live longer” than their actuarial tables predicted is really not my problem is it? I paid into the system under the threat of force….all based upon a series of promises and commitments that one of the contractual parties conveyed to the other. Now that it is time to pay out for all those promises made from a corrupt, bankrupt and financially, politically-drained fund…the thieves and corrupt pigs such as the author of this journalistic-tripe all want us to all go away, forgetting the owed monies and promises. I think we should drag all such people out into the street…charge them with fraud, treason and crimes against humanity …and then after conviction…hang them from a lamp pole.
    RJ O’Guillory

    • Several points come to mind., First, you evidently believe that because you have “paid in” you have a moral right to receive what you have been promised. In this case, unfortunately, your rights may collide with reality. Second, various forms of retirement benefits are not uniform but are redistributed in various ways. This does indeed constitute a kind of welfare in that some people get more than they paid in and some less. Finally, we didn’t set up system but are merely commenting on it. And we would encourage you to read everything you can about these issues, no matter how unpleasant. Forewarned is forearmed.

    • bluff bunny

      One of the Democratic candidates said that ‘drug addiction is a sickness and should be treated under obamacare… can’t they imagine what that would do, to people who ARE sick or hurt because of unforeseen issues? Once drug addicts start flooding the medical system, it will go broke in a hurry!

      • You mean kind of like what happened in Portugal? (http://mic.com/articles/110344/14-years-after-portugal-decriminalized-all-drugs-here-s-what-s-happening#.P5OGEbi2E) Yes… how awful would that be!

        If you’re a reader of TDB you know that the entire world is shifting to treating drug use as a public health issue rather than a criminal problem … Look up UNGASS 2016 if you’re interested in becoming aware of what’s happening, along with several of Anthony Wile’s editorials.

      • RJ O’Guillory

        …the truly humorous part of my situation…I was a two-decade, Federally Protected Whistle Blower who worked all over the world as a low-level executive with US DoD for 24 years…at the age of 49 I was “discovered” to have been genetically epileptic my entire life, and experiencing “unobserved seizures” throughout my lifetime. After driving off a 200 foot cliff at 70 mph, and suffering through hundreds of seizures…in spite of my forty years of work and “contributing to the system”…it still took them over a year and a half to “approve” of my disability and to pay me. They are liars, thieves, international war criminals and gangsters. The entire rotting fish needs to be left to waste away in the puddle of dripping corruption that it has been…whole classes of bankers, political, law, military and judicial leadership…(as well as members of the media) need to be brought up on treason charges…as well as aiding or abetting the destruction of our Constitutional Republic. And when convicted, hanged. I never wanted to participate in any of their forced programs, so I see no reason why I should shy away from acquiring what is owed me, after a lifetime of forced-participation…and incredible productivity for a unknown-disabled-person! Screw the government or anyone who thinks they have the right to limit or take away from what was promised, and to heck with the idea that we should somehow feel guilty about taking what is owed to us. It is all psychological-mumbo-jumbo designed to make those of us who earned our benefits somehow feel guilty about wanting, needing or using those promised benefits. If they are having a hard time covering the costs, how about we close 2/3rds of our empire’s military bases and start paying out what is owed?

        • Col. Edward H. R. Green

          RJ O’Guillory,

          No one has a valid right to anyone else’s property because no one is a slave to another human being; therefore no one has a right to receive SS, given the coercive means by which it is funded.

          The one and only just and moral way to reimburse everyone who was forced to pay into SS would be to force the government to sell, at a public unreserved auction, ALL of the land and other assets it controls (therefore owns), that is, the state and national parks, forests, wilderness areas, etc. The reimbursements would be pro-rated, 100% tax-free, and paid as a lump sum, with zero restrictions on what the recipient can do with the money–spend it, squander it, save it, invest it as he/she sees fit. Those who have received more than what they were forced to pay in and are over the age of 70 could continue to receive so-called “benefits” funded from a part of the auction proceeds until they die.

          Those who purchased that former government property would be free to exploit it as they see fit, to develop it, preserve it, whatever, entirely at their own risk and expense.

          I am not the first to propose this solution. See George Reisman’s essay on this subject.

          All other forcibly-funded welfare schemes must be completely, permanently, and unconditionally terminated as well, with the people who were victimized by the legalized theft of their monetary property–but theft nonetheless–reimbursed, too, by the same means. Charity, that is, privately and voluntarily offered assistance is the only moral means of assistance that anyone, regardless of the depth of their plight, may receive from anyone BECAUSE it is voluntarily offered, in accordance with the benefactor’s private property rights and personal standards of giving.

          Unfortunately, there are millions of people–so called “Americans”–with a vested interest in seeing the welfare state status quo continue and expand, and many of them would be more than willing and happy to murder anyone who seriously tried to terminate it, for in their sociopathic minds they regard other people and their wealth as the means to their own ends.

          Therefore, it is more likely that rational and just solutions like those that George Reisman has proposed will never be allowed to be implemented. The welfare state will continue to be propped up until it finally and inevitably collapses, like a rotted structure that can no longer be buttressed, leaving its supporters dazed in mindless bewilderment, and its credulous victims devastated amid its rubble.

          • WinChll

            to force the government to sell, at a public unreserved auction, ALL of the land and other assets it controls

            Provided that land has not been collateralized? “Our Land as Collateral for National Debt”:
            http://www.newswithviews.com/brownfield/brownfield59.htm

            And then search Obama’s land grabs.

    • alaska3636

      I like the courage it takes to know that you’ve been committed to a ponzi scheme and still pull every stinkin’ cent out of it that you can – the future be damned. I can’t blame you. I would probably do the same thing.

    • usdollars76

      Well said. This is what I tell the politicians that knock on the door at election time. I relish watching their face as they quickly walk down the driveway.

    • Samarami

      But don’t you understand, Mr. O’Guillory, that those were merely “contributions”? Ha ha ha ha. Sam

  • Samarami

    This outlines the nature of the science of rulership from time immemorial. “Democracy” was indeed a stroke of genius — to keep the hoi polloi enchanted and worshipful of psychopaths in the play called “Our-Great-Nation”.

    It always backfires. Empires always fail. Many of the people tend to survive and rebuild.

    And what the hey — as John Maynard Keynes is quoted to have said, “…in the end we’re all dead…” (as his retort to detractors). Why worry about my kids? Or my grandkids?

    Or you? (I’m old — 81).

    Sam

    • Praetor

      Yes, the nihilist do have a negative view of life on earth, but they also enjoy living that negative life in luxury, wealth and power, do they not. Maybe that is why someone invented the after life, yes you can get away with that here, but you won’t get away with it there, you will pay for your negative deeds. Who is to say John Maynard Keynes is not paying for his negative way of life!!!

    • Fred Bastiat

      I can’t attribute the quote, but something like: “old age is always 15 years older than me.”. Ha, not sure why I thought of that, suppose I’ve been feeling like I need to push the definition again!

      Your writing betrays you as someone who does give a damn about the following generations. Well, keep carrying the light of ethics as far as you can, someone will be there to take it on. They’ll never remember we carried it a little of the way, but thats okay.

      • Samarami

        Thanks!

        And if you’re “…15 years older than me…” I can tell you one thing: you’re plumb old! 🙂

        However, you still might not be “…over the hill…” as long as you can place one foot in front of the other.

        Sam

        • Fred Bastiat

          Hoping I make it to your age; 48. All the children are raised, waiting on grandkids. Not like I want to die, but there was a certain peace that came with the children becoming independent. Hard to explain.

          Abstaining from beans, please keep contributing.

  • alaska3636

    Just read North’s article. It is typically lucid and persuasive. I would only take exception to the point he makes that all gamblers think they can “game” the system. Many people gamble for fun and nothing else. Trivial point but it undermines his conclusion, which is otherwise solid.

    It will be interesting to see how the welfare state plays out. My own experience in discussing the topic with mostly middle-,upper-middle-class people is the perception that social security will be gone for our generation. These are above-average intelligence people and they will plan accordingly, regardless of how the feel about the actual mechanism of wealth transfer. Everyone else? Nobody (NOBODY) will give up free anything in this climate of cultural decadence and moral relativity. People will accept and move on from shock, but not until they have been shocked nearly to death.

    Optimism: the welfare state goes out with a whimper and people pick up and move on.
    Pessimism: political splintering (in evidence already) and the rise of a revolutionary ethos. Historical precedents: China, Japan, Russia, France, Germany, Italy, Spain.

    No country founded on the spirit of independence has been given the opportunity to rediscover its values until now. Prepare for anything.

    • alaska3636

      Martin Armstrong, conveniently supplies:

      “Therefore, history repeats because humanity never changes. What drives it is the majority swinging back and forth much like Republican vs. Democrat political victories. History is not made by the ideas of individuals; the individuals are produced as a response to the shift in the flow of history that behaves in a continuous manner by responding in the same manner to forces no matter what century we look at. Once we abandon the deep analysis of people like Hitler and step back from the individual to observe the collective community, suddenly history takes shape, which conforms, like everything else, to the laws of physics. So yes, we will see a European revolution. It is inevitable.”

      http://www.armstrongeconomics.com/archives/41730

      Revolution or devolution? History seems to tirelessly march onward…

  • Bruce C.

    Another reason that most/many(?) people think “welfare” will continue and be there for them is largely because it seems inexorable.

    Note that Davidson’s comment on the Carson show was in 1974, and he wouldn’t have used that analogy if it weren’t already obvious and understandable to most of the show’s audience, which means it was probably “true” at least 10 years before that. So however foreboding that “joke” was the system has persisted for 42 years since, and counting. The US national budget was just over $1 trillion dollars in 1974, the national debt was around $200 billion (and the rest of the world was so worried about that they started demanding gold instead of dollars), and interest rates were on the rise because of it. How things have changed since. Here we are in 2016 and the national budget is about $3.6 trillion, the national debt is roughly $19,000 billion (and gold is the least loved form of money in the world), and interest rates are at historical lows. In the meantime, welfare – or “transfer payments” – are at an all time high. Even non-citizens and myriad foreign countries receive largess from the US government. No wonder people today think it will last longer than their grandparents thought it would.

    Furthermore, a lot of people don’t understand some of the distinctions between the various forms of welfare. Social Security, for example, was never a “forced retirement savings” program. It was always an arrangement for working people to subsidize the elderly. That means the only way that current “retirees” can receive SS income is for younger people to provide it via payroll taxes (barring the US Treasury/Fed literally “printing” money.) Since the ratio of retirees to workers has increased, along with the decrease in worker incomes, that system is bound to hit the wall, but “who knows when”? There always seems to be another 15 to 20 years projected before “things get serious politically.” National income “inequality” also plays into this because FICA (SS and Medicare payroll taxes) are levied only on the first $115,000 of personal income, so millionaires and billionaires who take in about 40% of the national income pay no more into the SS and Medicare system than the average middle class couple. More to the point of this article, however, is that people are mistaken if they think they’re simply getting their money back when SS pays out. Instead they’re simply living off the productivity of those who are still working – or, more precisely, paying payroll taxes currently. The “social contract” is basically, “work for me, as I worked for your grandparents.”

    Outright welfare, like food stamps and public housing and utilities and healthcare and child credits and (non) earned income credits, etc. are paid out of “general revenues” which means income tax revenues from you, me, and businesses. Basically, if the economy slows down for long those government expenses will cease because the priority will be to feed the government core. But that’s been theoretically true for decades and here we are. There hasn’t even been a slowing of the rate of increases to those programs, never mind a stabilization or lessening. For how much longer can this go on is anyone’s guess. I would think at least a cap on those expenditures if not a reduction would provide some sort of indication, but we’re not even there yet.

    Nevertheless, personally, I would plan to not receive any entitlements from the government. Things can, and probably will, devolve quickly when things start to go. In fact, I also plan to not ever see the money I’ve put into retirement programs like IRAs and 401ks. As far as I’m concerned they will be either taxed away, confiscated by “bail-ins” , or monetarily devalued. If I’m wrong about any of that then good for me/us but I’m not counting on it.

  • henrybowman

    “He uses Social Security as an example. Most people believe they will live longer than the statistical average and thus will benefit more than others. This certainty, no matter how ill-founded, undermines resistance to the system.”

    I don’t pay into Social Security because I think I’m going to live longer than anybody else. I pay because if I don’t, men with guns will come and drag me to prison. And for most of my life, I paid it because my employer removed it from my paycheck before I could even get my hands on it. So exactly what “resistance” is possible under these conditions?

    • Samarami

      Seeing reality, Henrybowman, is the beginning of achieving sovereignty. I salute you for that insight.

      Words, words, words. Even in “libertarian” circles, those words can play into the dominant social themes upholding the motives of central planners. Gary North’s article (one of his best) almost presents social security as simply one big mistake (unless you read around and between the words). As if, perhaps central political authority would not be so bad after all — if they just wouldn’t make these gigantic, stupid blunders such as social security. We might just need “powers-that-be” to lead and guide us.

      Social Security probably works very well. Exactly as planned. Well, kinda as planned. To form and fashion a completely subservient, collectivist, non-individualistic “society”. And, as always, when you can rob other people’s resources, you never have to worry about paying the bill. Dr North’s article points to that end result: “Congress (whatever definition you choose to place on ‘Congress’) will default”.

      There is no such thing as “jurisdiction”. There is only force of arms. You’ve got to believe the man with the loaded gun. Sam

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