Escaping the Rat Maze of the Welfare State

By Jonah Goldberg

Friday, January 10, 2014

This week marks the 50th anniversary of Lyndon Johnson's "War on Poverty," and as the joke goes, "Poverty won." Five decades after a blizzard of programs began descending on the American people, the poverty rate remains essentially unchanged.

That's a little unfair. What counts as poverty today would not have seemed so impoverished 50 years ago, when many of the poor lived without electricity and were no strangers to hunger. Today, the biggest health problems of the poor are more likely to stem from obesity than anything approaching starvation. Defenders of the war on poverty -- and the massive bureaucracy that has built up around it -- insist that underfunding is to blame.

That's a tough sell. The Heritage Foundation's Robert Rector estimates that we've spent $20 trillion on these programs -- not counting Medicare and Social Security. We spend $1 trillion to $2 trillion more every year, depending on how you do the math. But apparently for liberals, that's still too stingy. Perhaps the problem isn't how much we're spending, but how we're spending it.

If you drew a Venn diagram of where the hard left and the libertarian right agreed, the overlapping shaded part would include a bunch of social issues -- gay marriage, drug legalization, etc. -- but almost no economic issues. Save one: the Universal Basic Income.

The UBI is a pretty simple idea. Everyone gets a check from the government. (Actually, it's a little more complicated than that depending on how you implement it, but you get the idea.)

Charles Murray, my colleague at the American Enterprise Institute and a legendary libertarian social scientist, wrote a wonderful book a few years ago, "In Our Hands," in which he proposed an annual grant from the federal government of $10,000 for every American over 21 who stayed out of jail and still had a pulse. He was building on arguments made by two titans of libertarianism, Friedrich Hayek and Milton Friedman, who also supported some version of a UBI.

On the left, the idea has been popular for generations as a way to instantaneously alleviate poverty and to defeat the ol' devil of income inequality.

So what's the catch? Why aren't we getting a fat check from Uncle Sam every month? Some cite the cost, which obviously would be hefty. But that's a secondary problem. The real sticking point is that the libertarian argument is largely an either/or proposition, while the left-wing version is a both/and deal. The libertarians want to liquidate much of the welfare state and convert it into cash payments. The left's version is that the money would, for the most part, augment the welfare state.

New York University professor Lawrence Mead identified the chief flaw with both the libertarian and left-wing approaches to fighting poverty, either through existing welfare programs or through a UBI: the "competence assumption." This is the presumption that the intended beneficiaries of government anti-poverty programs always "behave rationally enough to advance their own self-interest." We all know enough people in our own lives (never mind what we know about ourselves) to realize this isn't always the case. Lots of folks are determined to do things that aren't in their long-term self-interest.

The problems afflicting many poor people are often of their own making, at least in part. Having children before getting married, dropping out of high school, etc., are transparently bad choices that millions of people make. (Also, some anti-poverty programs create incentives that make bad decisions seem rational.) But many poor people have just had rotten luck. There's good reason to believe that, with a little help, they can work their way up the economic ladder. And for countless others, the truth probably lies somewhere in between.

For 50 years, we've run a massive experiment around one approach: that bureaucrats and social planners can fix the lives of others by telling them how to live. For some it's worked, for others it's been an abject failure. But few can claim it's all been a smashing success.

Perhaps a compromise can be worked out. Why not give poor people a choice? They can stay within the rat maze of the current welfare state, or they can cash out. According to Rector, 100 million Americans receive aid from the government at an average cost of $9,000 per recipient. Surely some of them are equipped to spend that money better than the government. Why not give them a shot at proving it? If they fail, they can always switch back to the old system. If they succeed, well, that'd be a real victory in the war on poverty.