When debating the efficacy of free markets, one of the biggest concerns some people have is the valid, “But what about the really poor people?” and they will use that as justification for enacting policies that provide a “social safety net” in order to help people who may have lost their way and need a little help. We have been living in an ever expanding welfare state since the Great Depression, and it has become abundantly clear what kind of effects it has. Perpetuating policies that continually hurt the production of wealth and inhibit the ability for people to get good jobs, with the justification that it’s okay because there is a government net to catch you when it goes wrong, is an insane and laughable concept.
Let’s take a look at some statistics that show what welfare is effectively doing to working people. The Illinois Policy Institute came out with a fantastic study recently that mapped out the “Welfare Cliff” and it shows how broken our welfare system is by creating disincentives for people who want to get off government dependency and work. The study shows an astonishing statistic that a single mother working a job that earns $36 an hour ends up having a lower household income than a similar mother working for only $12 an hour because of all the extra benefits the woman working $12 an hour is given. It doesn’t take a world-renowned economist to see how this welfare structure is bound to fail. It’s an economic fact that people respond to incentives. If you tell people to go out and get a job that pays well but not as well as working a less strenuous job with welfare benefits, which do you think many people would choose? I have no incentive to put in extra hours or do top-quality work if at the end of the day I could do less and still get more in return. This is not the same thing as saying all people are lazy, it’s simply stating that it is more economically sensible to get the most bang for your buck. However, doing this would mean less people are actually paying for more goods and services, meaning costs naturally would go up. This means that people then need more assistance or a better job with better pay to cover the rising costs of living.
People on the Left would say the solution is obviously to raise wages (particularly minimum wage because those people have the hardest time getting by). Once again, they have fundamentally ignored the actual issue. By raising the price of labor artificially, you force employers to raise costs, cut workers hours (or lay some off), or cut benefits that they used to get, like insurance. You have, again, created more people who need government assistance than before.
Another solution the Left falls on is, of course, raising taxes. However, all you have to do is apply the same logic that we just did to welfare and we see the argument crumble. If moving up the socio-economic ladder meant getting more of your money taken away, then why move up at all? You’re better off keeping your lower salary or not working at all with excess benefits then losing that to make more. This is why during the Obama Administration we saw the labor force participation rates at 30 year lows. People are better off not working.
Thomas Sowell had this to say about it: “Even when they [impoverished people] have the potential to become productive members of society, the loss of welfare state benefits if they try to do so is an implicit ‘tax’ on what they would earn that often exceeds the explicit tax on a millionaire. If increasing your income by $10,000 would cause you to lose $15,000 in government benefits, would you do it? In short, the political left’s welfare state makes poverty more comfortable, while penalizing attempts to rise out of poverty.”
It makes no sense for productivity to be stifled in order to be “fair” to the less productive. If you want to help the poor, the best way to do that is to grow the economy and incentivize production. Redistribution does not work. The Left will tell you, “But we only want to take from the top 1% and 2%!” It’s important to distinguish who actually falls into those categories. US Global Investors tells us to be considered 1% in America, you only have to make $500 thousand dollars. A great living to be sure, but hardly the millionaires and billionaires we heard so much about from Bernie Sanders and the like. To be in the top 5% you only have to make between $180 thousand and $300 thousand, depending on how expensive the area you’re living is, according to Business Insider. This is why it is nonsensical to advocate wealth redistribution because you’re mostly hurting the small and mid-size business owners who provide the backbone of the American economy. If you confiscated 100% of the wealth from the top 1% you would get about $600 billion and you could pay for “free healthcare for everyone” for about 5 months.
It’s a saying many people have probably heard but it still rings true: “the best welfare program is a job.” The only way to create jobs is to let the market work and allow businesses to produce and invest in new ventures that create jobs and allows for a competitive labor market where people who work hard are rewarded with rising wages and steady income. Recently, Oxfam came out with an article that tried to paint the era of “neoliberalism” as failing because the richest 8 people have more than the poorest 50%. They conveniently left out the fact that during that time, world hunger, poverty, illiteracy, and child mortality rates have all fallen and continue to trend that way. What they also don’t tell you is that people, even in the US, who have jobs and steady income, but have debt to pay off, are considered part of that “poor” group. Meaning a homeless man in Zimbabwe with no money but also no debt, is considered richer than a middle class American with student debt. It’s completely misleading and doesn’t give nearly the full picture.
Get the government out of the way of business and allow them to be competitive in the global economy. Free trade and less regulatory burden help incentivize people to work and innovate. There is no need for “social safety nets” if no one has to use them. However, in a study done by Dan Mitchell of International Liberty shows a Laffer Curve dynamic between welfare spending and poverty and that there is a sustainable amount of welfare that doesn’t outpace the amount a person can make in the labor force. The government currently spends nearly a trillion dollars on anti-poverty programs each year; that equates to each impoverished family getting $87 thousand a year, yet 47 million are still in poverty. Government bureaucracy is wasteful and only provides a fraction of what we give them on the actual issue. In stark contrast the amount of money from private charities like Red Cross and Doctors Without Borders that go directly to helping the poor is between 85-92%. Imagine if those charities got a trillion dollars every year to work with?
Let’s stop pretending the government is the only solution to the world’s problems, when in reality “charismatic” politicians only seem to bury more problems under piles of bureaucracy. The government does not have a monopoly on compassionate helping and it’s time we started to do it ourselves.
Sources:
https://d2dv7hze646xr.cloudfront.net/wp-content/uploads/2014/12/Welfare_Report_finalfinal.pdf
http://thf_media.s3.amazonaws.com/infographics/2012/10/special-welfare-spending-2012_HIGHRES.jpg
https://object.cato.org/sites/cato.org/files/pubs/pdf/PA694.pdf
http://gssq.blogspot.com/2017/01/life-in-what-oxfam-calls-era-of.html
* Erik Picone is a marketing major at Emerson College with a minor in political communications. He enjoys making political commentary on various social media sites to help spread the message of liberty.
Latest posts by Being Libertarian (see all)
- Ron Paul Revolution Takes Over The Libertarian Party - May 30, 2022
- Secession: The Lost Aspect of Federalism - April 16, 2022
- Democracy & Freedom: A Contradiction in Terms - February 15, 2022
