In the United States, people generally associate income redistribution with Democrats and a “pull yourself up by your bootstraps” mentality with Republicans. In practice, however, both parties have created extensive programs aimed at helping the poor. This is what a theory such as the popular Median Voter Theorem predicts. The average, middle-of-the-road American supports welfare programs to aid the poor; therefore, politicians enact such programs to win elections.
Those outside of the two main parties, however, are not trying to win elections. They can afford to be more ideologically pure. As an example, dogmatic libertarians are opposed to welfare of any shape or size. While some of their arguments are quite powerful, this radical approach will have little effect on public policy. America has spoken, and they support a welfare state. In a Democracy, the public gets what the public wants. If libertarians would like to improve upon anti-poverty policy, they should work from the pragmatic assumption that there will be welfare. Their goal should be gradual improvement of the status quo, not abolition.
This article will briefly suggest one possible pragmatic reform, before addressing the major arguments made against income redistribution to the poor.
A Pragmatic Reform of the Welfare State
According to the Heritage Foundation, approximately $647 billion will be spent on anti-poverty programs in 2010. At the same time, Grist Magazine reports that approximately 13% of Americans live below the poverty line, amounting to roughly 39 million people. If the $647 billion was simply distributed to each of the 39 million people living below the poverty line, each person would receive approximately $16,500. The U.S. Department of Health and Human Services reports that the poverty line for a family of 3 is $18,310. In other words, without much change to the current amount of anti-poverty spending, the United States could essentially eliminate poverty by directly redistributing cash instead of indirectly providing goods through anti-poverty programs.
This perfectly segues into the proposal for welfare reform I suggested in a recent article: a Negative Income Tax. Outside of health and education, there should be no anti-poverty programs. Instead, cash should go directly to poor persons in the form of cash. This would eliminate the amount of money lost in the inefficiency of delivering non-cash items to those in poverty. Such a program would both respect society’s desire for income redistribution, while tremendously improving upon the status quo.
Arguments Against Income Redistribution
The opposition to government-provided welfare has several arguments, some better than others:
1. Non-profits and families are better equipped to provide a safety net than government agencies. Quite possibly true, but not relevant. Non-profits are subject to the public goods problem. Numerous people in society will free-ride on the charity of others. These free-riders will enjoy the benefits of low poverty without having to contribute a single dime. This means that the private and non-profit sectors will not provide as much aid to the poor as society would like.
2. Having government provide an effective safety net steals the opportunity for people to be charitable. This argument certainly has some truth to it. However, helping the poor escape the trials of poverty should take precedence over making better-off people feel good about themselves. In addition, there are several other means to perform charitable acts toward fellow man, as well as dramatically poorer humans around the world. Finally, with a Negative Income Tax, citizens can take pride in knowing their tax dollars are actually helping the poor.
3. An expanding welfare state will inevitably lead down the path to an authoritarian regime, or serfdom. This is the argument attributed to the great Austrian economist Friedrich Hayek, although it has become parodied to an extent by some people on the Right. This argument was certainly more convincing during most of the 20th century, but no longer possesses the same force. Examples around the world have shown that it is quite possible for a prosperous and booming free-market economy to exist alongside a generous welfare state. Denmark and Sweden, of late, are two perfect examples. Citizens of neither country could be mistaken for serfs.
Admittedly, the United States is an entirely different country demographically than these Nordic countries, and an ever-increasing welfare state would lead to horrible results. Nonetheless, this argument calls for a focused and limited type of redistribution, such as the NIT, instead of large, inefficient government programs. The logical conclusion is not a complete lack of income redistribution.
4. Welfare programs act as a disincentive for a poor person to acquire a job. Certainly true, but the Negative Income Tax would reduce this effect when compared to the status quo. A main goal of welfare policy should be to minimize this disincentive.
5. Immigrants will come to America for welfare handouts, instead of work. This can certainly be a problem for an overly-generous welfare state, but it need not be one. Guest-worker programs and immigrant-exceptions for welfare can eliminate this problem. Even if immigrants cannot receive welfare benefits, there will still be no shortage of people seeking a better life by moving to America.
In addition, almost all welfare currently goes to Americans who are better-off than the vast majority of the world. Immigration acts to improve the well-being of people trapped in extreme poverty. True compassion for the poor would prioritize free immigration above an overly-generous welfare state. Nonetheless, both can exist in unison, especially a welfare system as simple and targeted as the Negative Income Tax.
6. Government does not have the right to force one citizen to help another citizen, especially considering relatives are not even legally required to help each other. This is an extremely compelling argument, especially for those sympathetic to the right of the individual as a supreme priority. For a pragmatist, however, this bridge has been crossed. Government has, rightly or wrongly, taken on the role of helping citizens through involuntary “donations” by other citizens.
In sum, the relevant policy question now is how to optimally guide government’s hand in caring for the welfare of poorer citizens, while reducing any damage done. To that end, Congress should slowly phaseout all of the existing Federal anti-poverty programs (except for health care and education) and enact a well-designed Negative Income Tax in their place.
Brian Reidl, “Federal Spending by the Numbers 2010.” The Heritage Foundation.
Sarah K. Burkhalter, “Facts and figures on poverty in the United States.” Grist Magazine.
“The 2009 HHS Poverty Guidelines.” U.S. Department of Health and Human Services.