I would like to start with a disclaimer: I am not trying to bash the idea of welfare. As I have stated before, I find it morally wrong to sentence people to pain and suffering (starvation) for not being able to earn a living wage, and I would even submit that it is morally wrong to allow people to starve because they are unwilling to work to earn a living, unless there is not enough to go around. That said, I would like to explain some of the problems with our implementation of welfare in the U.S.
The first problem with U.S. welfare, and possibly the most corrupting, is that promise of welfare benefits can be used by political candidates to bribe the middle and lower classes. This is essentially buying votes. Many Americans, especially conservatives, think that the lower class is composed mostly of people who are too lazy to work. This is not true. A significant portion of the lower class have jobs, and many of them have multiple jobs. These people are working to earn a living, but their wages are so low that they still need welfare to survive. What can they do when offered an obviously corrupt political candidate that promises to feed them immediately, or a rather less corrupt candidate who promises to make better jobs available sometime in the next 4 years?
The second problem is based on the above statement that lower class wages are so low that even full time work is not enough to live on. Besides the obvious cause of greedy employers, part of the cause is welfare itself. Welfare causes inflation. This is primarily true of welfare given to people who are not working for any income. Economists often recognize this, but they miss something more insidious. Welfare also decreases wages. This may seem absurd at first, but consider this: If employers do not pay enough for an employee to survive, that employee will either find a better job, or will starve and die. Neither of these scenarios is good for employers, as either way they will have to hire and train new employees, or they will be understaffed. This is a fairly strong incentive to pay fair wages. Now though, the government is covering some of the slack with welfare. If a household of three is getting $350 a month in food stamps, that is $4,200 a year less that the employer has to pay for that family to survive. Businesses benefit more from food stamps than individuals because of this. Even worse though, the businesses benefiting are not the high end businesses that are advancing technology and improving civilization. The businesses benefiting are businesses like WalMart, McDonald's, and Home Depot. They are the businesses that already underpay their employees. So really, the U.S. welfare system is driving inflation and subsidizing the lowest, most depraved businesses.
The third problem is one that most people are already aware of. The U.S. welfare system is a trap. To get on welfare, a person has to be below a certain level of poverty. This level of poverty is low enough that people can be above it, but still not be able to support themselves. Getting onto welfare is easy for people in that gap. They can just quit their jobs or cut their availability so they get less hours of work. Getting out is extremely difficult. Much of the lower class has discovered that as they try to get out of poverty they reach that point where they no longer qualify for welfare, but they still cannot survive without it. So they carefully skate the line so they have the largest income they can without loosing their welfare benefits. Many people accuse these members of the lower class of taking advantage of the welfare system. What else can they do though? Should they keep trying to get out of poverty, and starve to death for the next two or more years that it takes?
The forth problem is cost of living. The Federal government has no business administrating welfare, because it is impossible for them to do it effective at a reasonable cost. State governments have the resources to determine fair welfare for their residents at a fairly low cost. The Federal government does not have these resources, because they do not operate at a state level and cannot do so efficiently. Since cost of living varies widely across the U.S., it is necessary that welfare benefits be determined regionally to be fair and effective. The cost of doing this, for the Federal government, is is extremely high compared to the states.
These are only a few of the problems with the U.S. welfare system, but they are the worst, and they are the ones that are causing our welfare system to fail. The conservatives are right that our welfare system needs fixed, but their solutions are often very short sighted. Liberals say that there is nothing wrong with our welfare system, or that it can be fixed merely by increasing its scope; they are wrong. Each of these problems needs to be dealt with individually. There is no single fix-all solution to this problem. And, there is a problem.
Lord Rybec
First problem (politicians use benefits to win votes): I would not call this "bribery" because there's no conflict of interest. Any harm caused by voting for more benefits affects the majority of voters.
ReplyDeleteThere is also a converse effect where politicians use resentment toward people receiving benefits (implying that they are lazy, and often focusing on poor people, women and minorities.) A solution to the first problem might be able to solve this converse problem simultaneously.
Second problem (benefits raise prices and lower wages, helping the worst businesses): This is a modest and self-limiting effect. If we could make a better welfare system without fixing this side effect, we shouldn't let it stop us.
Thid problem (benefits provide an incentive not to work): Most people fly off on a tangent when they get this close to the heart of the problem. By themselves benefits remove an incentive to work: deprivation - but that is a coercive and immortal incentive system and we should be glad to be rid of it. Benefits do not remove the other, more important incentives to work: profit and pleasure. Unfortunately the way we choose to distribute benefits makes people sacrifice the profit and pleasure of work for security.
Fourth problem (federal vs states): States already do much of the heavy lifting of the welfare system. I think this is being addressed more than you give credit, but it's a very complex issue, so it's probably worth exploring. As with the third problem, I don't think we should a priori reject an improved welfare system just because it is too centralized or too decentralized.
I disagree with your assessment of the second problem. As an example, I would like to point out our current situation with higher education costs. Government grants for education are a form of welfare. Pell Grants offer up to $5,500 per year. In addition, it is currently very easy to get loans (I believe subsidized Stafford loans offer up to $4,250 per year). Before these were easily available, most college students, even those from poor families, could work their way through college. As more subsidies and loans became available for college students, prices for college started to increase. This affect has not been self moderating. (Note that the Pell grant was deigned to pay for most of tuition and school supplies, and loans were designed to help pay living expenses. Most schools now cost so much that most of both the Pell grant and the loan are spent on tuition and supplies.) Now, it is impossible for the majority of students to afford college without either grants and loans, or help from a wealthy benefactor (or at least one scholarship). In fact, experts are starting to suggest that potential college students need to carefully weigh their options, because the cost of college is no longer always justified by the increase in wages that come with a degree (I read a Deseret News article a few weeks ago about a guy that got a law degree at a prestigious college, and now cannot pay back his loans because the best wages he can find are not enough).
DeleteThis effect is moderated primarily by the rate of increase of benefits. When welfare benefits increase slowly, businesses cannot raise prices or lower wages without causing themselves problems. If the benefits increase quickly, the problem becomes worse. The real problem though is inflation. If wages are not increasing, and benefits do not increase, then inflation will catch up and push people back into poverty conditions. The problem with this is that benefits must increase to keep up with inflation, but if benefits increase, businesses will feel like they do not have to increase wages because welfare is still covering the difference (this is especially true for people who are getting more from welfare than from work earnings). Of course, I have already shown that businesses do not go to any effort to make sure wages keep up with inflation (you may recall my article about how inflation over the last 50 years is 649%, while average wage increase is 75%), so there is plenty of evidence supporting this.
Anyhow, I think that the evidence provided by the absurd increases in the cost of higher education is enough to show that this effect is by no means self moderating. (I would also argue that increases in medical costs can be partially attributed to the availability of government health care for the poor. The other part can be attributed to increases in education costs, which go back to the availability of grants and loans.)
Now, to be clear, I am not saying that welfare is a bad thing that causes these problems. I am saying that businesses, including educational institutions, are taking advantage of the availability of additional funding to raise prices. I think this is extremely unethical, because the additional funding is being provided to help those in need, not to justify increasing prices. And worse, when welfare systems are taken advantage of like this, it widens the poverty gap to include more people who do not qualify for welfare.
Note that what I am saying boils down to one ironic thing: Large businesses are taking advantage of welfare more than single mothers who intentionally don't work so they can stay on welfare. It may not be obvious, or even intentional, but it is true. I don't know how to fix this, but I do know that we have hired a group of people to fix problems like this for us. If only Congress would do its job.
Lord Rybec