If Congress — once it reopens the government and gets back to its usual business of redistributing taxpayers’ money — has any interest in reforming our burgeoning welfare state, they might look, of all places, to Europe, where serious reforms are underway.

Leading the way is Great Britain. While in the United States the federal government funds 126 separate anti-poverty programs, 72 of which provide cash or in-kind benefits to individuals, Britain is consolidating its six major welfare programs (the jobseeker’s allowance, the income-support allowance, the employment-support allowance, the child tax credit, the working tax credit, and housing benefits) into a single grant.

While someone receiving the seven most common U.S. benefits (Temporary Assistance for Needy Families, Medicaid, food stamps, WIC, housing assistance, utilities assistance, and free commodities) rakes in more than $35,600 in benefits in the ten most generous states, Britain has now capped the new consolidated grant at no more than £500 per week (about $40,000 a year) for a family, and just £350 (about $29,000 a year) for single individuals. It is estimated that as many as 40,000 households — about 1.6 percent of those receiving benefits — will have their total benefits reduced as a result of the benefit cap.

The idea, according to welfare secretary Ian Duncan Smith, is that “benefits should be a safety net — but not something that gives claimants an income out of reach of many hard-working families.”
At the same time, by moving away from a patchwork of different programs to a single universal credit, Britain will shift welfare payments to put a greater emphasis on children. It is estimated that the consolidation means some 2.8 million British households, mostly couples without children, will eventually receive lower benefits (although current recipients are being held harmless during the transition), while some 3.1 million households will actually get more money.

Moreover, the benefits will now be paid in a monthly lump sum, rather than weekly or biweekly, and paid directly to the recipient rather than to intermediaries like landlords. The poor will be treated like adults, with responsibility for their own finances, rather than childlike wards of the state.

And there will be a greater overall emphasis on moving recipients from welfare to work. “We want to help people find a job and move away from benefits,” Duncan Smith explained.

Meanwhile in the Netherlands, King Willem-Alexander’s speech to parliament in September, written for him by the government of Prime Minister Mark Rutte, warned that “the classic welfare state of the second half of the 20th century … brought forth arrangements that are unsustainable in their current form.”

The Rutte government plans to reform the welfare state with the understanding that “people must take responsibility for their own future and create their own social and financial safety nets, with less help from the national government.”

Even the so-called “Nordic model,” long touted by advocates of the welfare state, is undergoing profound changes. Sweden long ago enacted significant reforms to its safety net, including the partial privatization of its social-security system. This August, Finland announced plans to increase the effective retirement age, cut payments to students, and reform maternity leave. And in Denmark, the government has said that the time has come to embrace the “modernization of the welfare state,” adding that the system “needs to prioritize things in a new way and create the best possible conditions for people to get a job.” In fact, the Danish government has already slashed the length of unemployment benefits from four years to just two.

Perhaps the last holdout, Norway, long buoyed by oil revenue, elected a new center-right government this fall on a platform that called for, among other things, cutting taxes, reducing bureaucracy, and reforming the welfare system to better encourage entrepreneurship. The new government has plenty of public support for its plans: A recent survey by Fafo, a Norwegian research foundation, reported 51 percent of Norwegians supported reducing welfare benefits in order to secure economic growth.

While the government shutdown is ostensibly about Obamacare and debt, the real underlying question is the future of U.S. government spending, which is a question of the welfare state. Those on the right often say that if we don’t change direction, we’ll end up like Europe.

Meanwhile, Europe seems to finally be learning its lesson. Will we?


There can be no growth without abolishing huge regulation, huge taxation, and huge political corruption.  Basil Venitis, venitis@gmail.com, http://themostsearched.blogspot.com


15% of Americans are poor.  Record poverty is not the result of insufficient welfare spending.  Every year, the American government spends a trillion dollars on means-tested welfare aid.  The U.S. has record-high poverty, because of bad policies that have damaged the economy and failed to create jobs. In the long term, the lack of self-sufficiency has been caused by a massive welfare state that discourages work.

 

One of the great fallacies of our time is that if government doesn't do something, no one will. Its corollary is that if you are opposed to the government doing something, that you are opposed to anyone performing that function at all. These disastrous fallacy color much of our national debate concerning heath care, education, poverty, housing, disaster relief, and other issues.

 

The welfare system is unfair to everyone: to taxpayers who must pick up the bill for failed programs; to society, whose mediating institutions of community, church and family are increasingly pushed aside; and most of all to the poor themselves, who are trapped in a system that destroys opportunity for themselves and hope for their children. 

 

We should eliminate the entire social welfare system. This includes eliminating welfare agencies, food stamps, subsidized housing, and all the rest. Individuals who are unable to fully support themselves and their families through the job market must, once again, learn to rely on supportive family, church, community, or private charity to bridge the gap.

 

Half of taxpayers do not pay taxes, while receiving generous federal benefits. Talk about a perfect fiscal storm. On the one hand, more and more spending on dependence-creating programs. On the other, an ever-shrinking number of taxpayers to pay for these programs.  

 

It’s worth recalling what Thomas Jefferson called the sum of good government in his first Inaugural Address: a wise and frugal government, which shall restrain men from injuring one another, which shall leave them otherwise free to regulate their own pursuits of industry and improvement, and shall not take from the mouth of labor the bread it has earned.  We’re drifting further and further from this ideal. Let’s hope that citizens wake up before we go too far down this dangerous path.

 

An important factor in retarding the EU economies is the expensive social welfare entitlements enjoyed by Europeans. While the U.S. federal and state governments spend roughly 18 percent of GDP on pensions, welfare, and health care costs, the EU spends nearly 29 percent. The list of entitlements seems endless: unemployment benefits, welfare payments, pensions, paid maternity leaves, child-care subsidies, free university education, expansive sick leave, restricted working hours, generous paid vacation and holiday leave, and government-provided health care. As EU champion T. R. Reid puts it, falling into the EU government safety net is like falling into a large, soft bed with a down comforter for protection against the cold and a matron standing by with a warm cup of tea to soothe discomfort.

 

As desirable as these boons may be, they all cost money and depend on an expanding economy that creates jobs and increases tax revenues. As we currently see in Greece, a sluggish economy has the opposite effect, constricting the funds available for welfare spending. At the same time, social spending continues to increase as the demand for more entitlements grows and an aging, longer-living population stresses budgets further. Given that by 2050 the EU economies will have a mere two workers for every retiree, the EU social welfare paradise is heading for bankruptcy. 

 

When government assumes increasing responsibility for needs that civil society can provide, it crowds out the responsibilities and resources of private institutions. Government is well suited to meeting needs that require the exercise of coercive power but poorly equipped to address other needs, including the problems of the heart that often contribute to poverty and social breakdown.

 

Government programs can shape people’s sense of responsibility and obligation for each other. For instance, Social Security and similar government programs that provide for the elderly can influence people’s sense of responsibility to take care of their parents and grandparents. Government-funded unemployment benefits can diminish a community’s sense of obligation to its neighbors who lose their jobs. Furthermore, government welfare lowers private giving to the poor.  10 percent increase in a state’s welfare spending correlates with a 3 percent decrease in charitable giving by its citizens.

 

Government social welfare spending can also crowd out private efforts to help those in need. For example, before Medicare Part D was enacted in 2003, two-thirds of Medicare enrollees received prescription drug coverage from nongovernmental providers.  Analysts have since found that the new drug benefit resulted in a crowd-out rate of 72 percent. For every seven prescriptions now paid for by the government, five would previously have been privately financed.

 

The State Children’s Health Insurance Program (SCHIP) has had a similar crowd-out effect. In 2007, according to the Congressional Budget Office, 25 percent to 50 percent of those covered by previous SCHIP expansions were likely crowded out of private coverage. 

 

In whatever field it occurs, this crowding out yields the same result: Government programs and funding push the organizations best equipped to care for those in need to the periphery, while the government assumes more responsibility and control over more resources.

 

 

ENTITLEMENTS VERSUS GIFTS

 

A government that oversteps its legitimate limits and undermines the proper responsibility of other institutions is acting not only unconstitutionally, but also unjustly. Such an expansive government also works against the best interests of those in poverty. Government serves best when it establishes and maintains the social conditions that allow families, churches, and ministries to nurture healthy relationships and allow businesses to provide opportunities for work.

 

Calling for limited government does not mean ignoring the plight of those in poverty.  Limited government is a component of a larger framework that benefits people in need. That framework recognizes not only material needs, but also familial, spiritual, moral, emotional, and social needs.

 

This framework leaves room for each institution to play its proper role and do what it does best. It allows families, churches, and nonprofits to meet basic needs, nurture healthy relationships, and develop virtuous citizens. Within this framework, businesses provide opportunities for work and expand wealth, and government safeguards lives, property, and institutions. Together, limited government, free enterprise, and a strong civil society foster the kind of communities that enable people to escape poverty.

 

As the West copes with long-term unemployment, it’s important to ramp up social supports. Unstable finances can create unstable families. As blue-collar jobs vanish, working-class communities have seen an increase in divorce rates, as have fragile families — cohabiting couples raising children outside of marriage, who face a higher probability of splitting up.  Increasingly complex family structures can put financial pressures on families and on single parents, while creating emotional pressures on children, compounding the cycle of poverty.

 

Giving gifts can be a powerful thing. Gifts create a kind of momentum of good will that bind both giver and receiver in a more personal relationship. The giver often is motivated by the desire to help, while the receiver usually is motivated by gratitude to give back, at a minimum, an expression of thanks. 

 

This seemingly basic dynamic is important when it comes to tackling social ills. If conditions permit, gift-givers often have a vested interest in seeing that the desired objective of their help is achieved. For example, we desire the recipient to use our gift of money to purchase food instead of illegal drugs. By the same token, the receiver often desires to demonstrate good stewardship of the gift, by using it wisely rather than wastefully.  

 

Entitlements foster a different social relationship, mainly because governments typically deliver the benefits through impersonal, top-down programs. These aren’t personal, voluntary acts taken on behalf of a friend, neighbor or someone else we know. Entitlement programs are funded by taxes, which government mandates under threat of penalty. The requirement often fosters a sense of resentment among taxpayers rather than a desire to help others.

 

And on the other side, an entitlement mentality tends to undercut the feeling and offering of gratitude. In fact, sometimes that sense of entitlement tempts recipients to “play” the system, leading to waste, fraud and long-term dependence on the dole.

 

Ever-expanding entitlements aren’t just a fiscal liability; they're a moral threat as well. They have the power to shape cultural attitudes and social dynamics. Americans need to be aware of this potential, so we not only can avoid financial collapse but also foster the kinds of relationships most conducive to genuine compassion and flourishing.

 

Effective anti-poverty efforts pursue conditions and policies that create opportunities and incentives to work. History shows this is better achieved by free markets than by government control.

 

Policies allowing markets to determine prices and people to reap the fruits of their labor are more likely to encourage innovation, risk-taking, entrepreneurship and investment — activities that also create new jobs. Excessive regulations, punitive taxation and redistribution schemes stunt these dynamics.

 

Libertarian policies create economic conditions that expand opportunities to work and generate upward mobility for all. Without these conditions, many end up trapped in an impersonal and degrading system. The government welfare system was intended to serve as a safety net against extreme poverty. In dire situations, when civil society can’t meet people’s basic needs, the government does have an interest in providing material support. However, this safety net should neither discourage healthy behaviors, such as work and marriage, nor crowd out smaller, voluntary organizations. And it should not foster long-term dependence on government, but rather help people get back on their feet — like a trampoline rather than a hammock.

 

Welfare policies were discouraging work and marriage, hurting many of the very people they intend to help. In 1996, American reforms to the central federal assistance program for needy families added work requirements and policies to encourage marriage and strengthen families. As a result of these new incentives, welfare caseloads were cut in half. Work participation increased as well, particularly among the most disadvantaged. Ten years after the reform, 1.6 million fewer children were living in poverty, and by 2001 black child poverty dropped to its lowest rate in national history.

 

People trapped in poverty need relationships that provide personal knowledge and meaningful connections, access to private organizations that offer extensive care and accountability, the opportunity to work and provide for their loved ones and secure social conditions buttressed by the rule of law. Libertarian policies advance these goals and allow each institution in society to do what they do best in serving the common good.