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Efficiency Experts for the Welfare State

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Bordered by two oceans, encompassing 3.8 million square miles, and populated by more than 325 million people, the United States is a vast country. But although the United States is not yet a cradle-to-grave welfare state like many European countries, it is also a vast welfare state.

There are in the United States about 80 means-tested welfare programs. These are programs that provide benefits or payments on the basis of the beneficiary’s income or assets. U.S. welfare programs provide cash, food, housing, utility subsidies, medical care, and social services to poor, disabled, and lower-income Americans. Total annual spending on these programs is more than $1 trillion, with more than 75 percent of the funding coming from the federal government. Welfare continues to be the fastest-growing part of government spending. The United States spends about sixteen times as much on welfare as it spent in the 1960s, yet the federal poverty rate remains nearly unchanged.

Welfare programs

More than 5 million low-income households in the United States receive federal rental assistance through the Section 8 Housing Choice Voucher program. Most recipients of federal housing assistance pay 30 percent of their adjusted income toward rent. The government pays the rest of the rent up to a certain amount.

The Supplemental Nutrition Assistance Program (SNAP [formerly known and still referred to as food stamps]) is administered by the Food and Nutrition Service (FNS) of the U.S. Department of Agriculture. Recipients of food-stamp benefits receive a deposit on an EBT card each month that can be used only for prepackaged food items. Although SNAP is a federal program, it is operated by the 50 states. Today, about 13 percent of the population is on food stamps.

Medicaid is government-funded health care for poor Americans of any age and people with certain disabilities. It is the largest federal domestic program (after Social Security and Medicare) and the primary source of health-insurance coverage for low-income populations and nursing-home long-term care. Medicaid is jointly financed by the federal government and the states but designed and administered by the states within federal guidelines. Medicaid covers more than 70 million Americans at an annual cost of almost $600 billion.

The most egregious of the means-tested welfare programs is the Temporary Assistance to Needy Families (TANF) program, which replaced the Aid to Families with Dependent Children (AFDC) program in 1996. The TANF program distributes cash directly to welfare recipients to spend however they please. States receive block grants from the federal government to design and operate TANF programs. In an average month, approximately 3.5 million Americans receive TANF benefits. The majority of poor families with children receive some form of cash assistance from the government.

Other means-tested welfare programs include the Low Income Home Energy Assistance Program (LIHEAP); the Children’s Health Insurance Program (CHIP); Women, Infants, and Children (WIC); Head Start; Healthy Start; Supplemental Security Income (SSI); the National School Lunch Program (NSLP); the School Breakfast Program (SBP); the Special Milk Program (SMP); the Elderly Nutrition Program; the Commodity Supplemental Food Program (CSFP); subsidized low-income phone service; and Pell grants for college students.

Some welfare programs aren’t means-tested at all, such as Unemployment Compensation, which is overseen by the U.S. Department of Labor and administered by the states. It provides “unemployment benefits to eligible workers who become unemployed through no fault of their own, and meet certain other eligibility requirements.”

Other welfare programs are not generally recognized as such — such as Medicare and Social Security — because they are funded by payroll taxes. But in neither case does the amount of taxes collected fully pay for the program. There is also absolutely no relation between the amount of taxes paid and the amount of benefits received. To those should be added refundable tax credits, which give people tax “refunds” of money that they never paid in.

Welfare reform

Back in April, Donald Trump signed the Executive Order Reducing Poverty in America by Promoting Opportunity and Economic Mobility. Among other things, it states that “it shall be the policy of the Federal Government to reform the welfare system of the United States,” “reduce the size of bureaucracy,” “streamline services to promote the effective use of resources,” “reduce wasteful spending by consolidating or eliminating Federal programs that are duplicative or ineffective,” “enforce work requirements that are required by law,” and “strengthen requirements that promote obtaining and maintaining employment in order to move people to independence.” The executive order directs the secretaries of the departments of the Treasury, Agriculture, Commerce, Labor, Health and Human Services, Housing and Urban Development, Transportation, and Education to

  • review any public assistance programs of their respective agencies that do not currently require work for receipt of benefits or services, and determine whether enforcement of a work requirement would be consistent with Federal law and the principles outlined in this order.
  • review any public assistance programs of their respective agencies that do currently require work for receipt of benefits or services, and determine whether the enforcement of such work requirements is consistent with Federal law and the principles outlined in this order.

House Speaker Paul Ryan (R-Wis.) applauded the president’s executive order: “Combining work requirements with work supports is an effective strategy for helping Americans move from welfare into the labor force.” The Heritage Foundation, a conservative think tank headquartered in Washington, D.C., maintained that the president was “right” to address the pressing issue of welfare reform and offered “four specific actions the Trump administration and Congress” could take, including strengthening work requirements, “to achieve the president’s objectives and ensure the welfare system helps the people it serves rather than hurting them.”

Also back in April, Housing and Urban Development (HUD) secretary and former Republican presidential candidate Ben Carson announced a new plan that would require Americans receiving federal housing assistance to contribute more of their income toward rent and give public-housing authorities permission to impose work requirements on tenants. HUD proposed increasing the minimum rent paid by rental-assistance beneficiaries, excluding those 65 and older and those with disabilities, from $50 to $150. Carson said the “current model of public housing is unsustainable, in both dollars and common sense.” The current system creates “perverse incentives, including discouraging these families from earning more income and becoming self-sufficient.” Revamping rental policies would give property owners, housing authorities, and residents a system that is “simpler, less invasive and more transparent.” A month later, Carson backed off on HUD’s plan to triple the minimum rent paid by rental assistance beneficiaries because the proposal to increase the minimum rent was no longer “urgent,” owing to a congressional increase in the HUD budget.

The initial farm bill (H.R.2) released in April by the House Agriculture Committee sought to reform the food-stamp program by encouraging persons capable of working to work or participate in other activities in order to receive food-stamp benefits. The Heritage Foundation didn’t think the reforms went far enough and recommended five steps Congress could take to encourage work in the food-stamp program. Changes were needed in the bill in order to create more “effective” and “reasonable” work requirements for the food-stamp program. The former administrator of New York’s food-stamp program, who is now a fellow at the American Enterprise Institute (AEI), another conservative D.C. think tank, believes that the significant flaw of the food-stamp program is that it “does not sufficiently emphasize work.” He praises the farm bill for helping to improve the food-stamp program “by encouraging work and earnings to fight poverty at its roots.” The bill’s “reforms are a good way to help people in need find and retain employment” and “are an important step toward realizing SNAP’s proper mission as an antipoverty program.”

At the beginning of the year, the Trump administration issued new guidelines through the Centers for Medicare & Medicaid Services that allow states to impose work requirements for able-bodied persons to receive Medicaid. It followed interest in Medicaid work requirements by House Republican lawmakers from different factions and several Republican governors. “The Medicaid expansion has created a perverse incentive for states to provide benefits to able-bodied adults at the expense of the elderly, the blind, and the disabled,” said Rep. Gary Palmer (R-Ala.). “A work requirement would help states focus their limited resources on the truly needy.” Conservatives are also upset that judges have overturned some state bans on Medicaid’s covering transgender medical procedures.

The TANF program was reauthorized in 2006. Since 2010, it has been kept operating by continuing resolutions. In May, after the House of Representatives Committee on Ways and Means released a discussion draft to reauthorize the program, Angela Rachidi, a research fellow with AEI, authored an article on the program (“A Way Forward on TANF”) in which she maintained that “it’s time to fix the things that have not worked well in TANF, and strengthen those that have.” Although she praised the “key positive changes” proposed by the House Ways and Means TANF discussion draft for its “positive improvements,” she also expressed concern that the “lack of evidence to support change in work activities,” “lack of research support,” and “outcome measures” were not “enough to hold states accountable.” She concluded that the discussion draft “is a good starting place to refocus TANF on employment and make many needed changes to the law.”

The Republican-controlled Congress last year passed a joint resolution (H.J.Res.42) “disapproving the rule submitted by the Department of Labor relating to drug testing of unemployment-compensation applicants.” This legislation makes it tougher for applicants to qualify for unemployment-compensation benefits by making it easier for states to require drug testing for benefit recipients.

Republicans want to save and preserve Medicare and Social Security. According to the latest Republican Party platform,

We intend to save Medicare by modernizing it, empowering its participants, and putting it on a secure financial footing.

As the party of America’s future, we accept the responsibility to preserve and modernize a system of retirement security forged in an old industrial era beyond the memory of most Americans. Current retirees and those close to retirement can be assured of their benefits. Of the many reforms being proposed, all options should be considered to preserve Social Security.

The GOP’s new tax-reform plan increases the amount of refundable tax credits. Republicans are more concerned about eliminating the complexity, fraud, and improper payments in the Earned Income Tax Credit (EITC) program than in eliminating the program itself.

Welfare tests

Although most welfare programs are means-tested, there are some other tests that welfare should be subjected to: the Constitution test, the government test, and the market test. Is welfare constitutional? Is providing welfare the proper role of government? Is the free market able to provide for those in need?

The Constitution grants to Congress the power to do only about thirty things. Most of those powers are listed in the 18 paragraphs found in Section 8 of Article I on the legislative branch. Elsewhere in the Constitution, Congress is given the authority to do very little. Everything else is reserved to the states — even without the addition of the Bill of Rights and its Tenth Amendment. As James Madison, the father of the Constitution, explained in Federalist No. 45, “The powers delegated by the proposed Constitution to the Federal Government, are few and defined. Those which are to remain in the State Governments are numerous and indefinite.” As much as the majority of Americans may wish it so, the Constitution does not authorize the federal government to institute welfare programs, operate welfare programs, fund welfare programs, or give the states block grants to operate welfare programs.

In a free society, the only possible legitimate functions of government are defense, judicial, and policing activities. As libertarian theorist Doug Casey has explained, “Since government is institutionalized coercion — a very dangerous thing — it should do nothing but protect people in its bailiwick from physical coercion. What does that imply? It implies a police force to protect you from coercion within its boundaries, an army to protect you from coercion from outsiders, and a court system to allow you to adjudicate disputes without resorting to coercion.” But as he points out, “the U.S. Government is only marginally competent in providing services in those three areas. Instead, it tries to do everything else.”

There is no justification for any government action beyond keeping the peace, prosecuting and punishing those who initiate violence against person or property, providing a forum for dispute resolution, and constraining those who would attempt to interfere with people’s peaceful actions. It is not the proper role of government to administer welfare, provide public assistance, fight poverty, maintain a safety net, have entitlement programs, ensure that everyone receives a guaranteed basic income, assist the disabled, create jobs, aid the needy, help the disadvantaged, or subsidize anyone’s wages, housing, or health care. In a free society, there is simply no justification for any government action beyond keeping the peace, prosecuting and punishing those who initiate violence against person or property, providing a forum for dispute resolution, and constraining those who would attempt to interfere with people’s peaceful actions.

There is no question that, as Doug Casey has also said, “Everything that needs doing can and will be done by the market, by entrepreneurs who fill the needs of other people for a profit.” But the market can also allocate resources to those in need. It is well known that lawyers do pro bono work. But generosity is a hallmark of Americans in general. According to the Giving USA Foundation, “Americans gave $410.02 billion to charity in 2017, crossing the $400 billion mark for the first time.” And “giving by individuals represented 70 percent of total giving.” When a natural disaster strikes somewhere in the world, Americans regularly open their wallets and purses.

Government charity crowds out genuine charity. Americans would no doubt give more of their money to individuals and charitable organizations if Uncle Sam weren’t so generous with the taxpayers’ money. All Americans should be able to keep the entirety of the fruits of their labors and give or not give to those in need as they see fit. But charity must be voluntary. A free society includes the freedom to be generous or stingy, benevolent or miserly, charitable or uncharitable. But that is up to each individual American to decide.

When it comes to the tests of the Constitution, the proper role of government, and the free market, welfare fails all three tests.

Republicans and conservatives

Because welfare is clearly unconstitutional, because it is an illegitimate function of government, and because charity can be provided by the free market, what are we to make of Republican and conservative welfare-reform plans? The conclusion is inescapable: Republicans and conservatives are efficiency experts for the welfare state. They may talk about the Constitution, limited government, and the free market, but that’s all it is: just talk.

The problem with welfare programs is not that they need to have work requirements, more restrictions, drug testing, or lower subsidies and be reformed, modernized, more effective, and more efficient. The problem with welfare is simply that it is immoral to take money from some Americans and give it to other Americans.

Republicans and conservatives have no philosophical objection to the existence of any welfare program. Their attitude toward welfare is the same as their attitude toward government grants, programming by NPR, and actions undertaken by Planned Parenthood. It is only when grant money is doled out for outrageous things, NPR promotes progressive causes, or Planned Parenthood performs abortions that Republicans and conservatives get upset.

Republicans and conservatives are welfare statists just like Democrats and progressives. They all believe that government should take money from some Americans and redistribute it to other Americans, after it is filtered through the government bureaucracy.

Libertarians

In contrast to Republicans and conservatives there are the libertarians. They believe that as long as a man doesn’t infringe upon the liberty of others by committing, or threatening to commit, acts of fraud, theft, aggression, or violence against their person or property, the government should leave him alone to pursue his own happiness, engage in commerce, make his own choices, take part in economic enterprises, keep all of the fruits of his labor, and accumulate wealth — all without license, permission, regulation, or interference from the state.

Libertarians reason that —

  • It is immoral for the government to redistribute wealth.
  • No one is entitled to receive welfare benefits no matter what his situation or how much he needs the money.
  • It is wrong to take money from those who work and give it to those who don’t.
  • “The rich” have no legal obligation to help “the poor,” no matter how much money some government bureaucrat or private busybody thinks that “the rich” ought to hand over.
  • If welfare programs had work requirements, more restrictions, drug testing, and lower subsidies, they would still be unconstitutional.
  • If welfare programs were reformed, modernized, more effective, and more efficient they would still be illegitimate.
  • If welfare were given only to those who “deserved” it, it would still be immoral.
  • Charity should always be private and voluntary.

Libertarians alone consistently maintain that providing welfare of any kind is an unconstitutional and illegitimate function of government. Therefore, no Americans whatsoever — whether they are single mothers, pregnant, children, hungry, disabled, sick, elderly, unemployed, disadvantaged, or poor — should receive any welfare benefits from the government of any kind or for any reason. The government has no resources of its own. Everything it has to give to some Americans has first been involuntarily transferred out of the pockets, purses, and bank accounts of other Americans.

The simple difference between Republicans and conservatives and libertarians when it comes to welfare is that Republicans and conservatives want to make the welfare state more efficient and libertarians want to dismantle it. Who, then, are the real believers in the Constitution, limited government, and the free market?

This article was originally published in the September 2018 edition of Future of Freedom.

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