From Senator Daniel Patrick Moynihan in 1967 to today’s warning from Andrew Mellon: Welfare will destroy America.
Posted December 14, 2010on:
A “Must read” again. We are on the brink of bankruptcy and the government of Obama is putting more and more people on welfare because by extending the unemployment benefits now beyond the unheard of 99 weeks our government is creating another dependent class. Not only the poor are on welfare and the elderly thru Social Security but now the young workers thru Unemployment Insurance. Who is left to become dependent upon the government? Or is the “other people’s money” that Margaret Thatcher spoke of finally running out in America?
A study done in Sweden, one of the most Progressive countries in the world found that people tend to get a job right before their benefits expire NO MATTER WHEN THAT EXPIRATION DATE IS. Whether it is 36 weeks which was the standard for years here in the United States or the 99 weeks that the Progressive Democratic congress has voted it up tow in the past two years. Sweden has as a result greatly altered their worker’s unemployment benefits. When will we? I am not sure that our congress ever will cut back on the unemployment safety net because they want the workers of the United States to remain a groups of citizens dependent on government rather than themselves. BB
I did something I seldom do, I carried over not only the entire article but the comments as well. (There is only 112 of them at this point.) Andrew Mellon is one of the most astute liberty loving individuals of our time. I have made his blog Mellon’s Musings. a part of my daily visits tho I have only “pimped” his article from Big Government Blog. His bio reads: “Andrew Mellon is a liberty-loving student at Columbia University (oxymoronic though that may be). Writing deep behind enemy lines, Mellon covers issues political, social and economic with a Classical Liberal bent. He worked on his first campaign when he was five-years-old and has been fighting to return the country to its founding principles ever since. If you enjoy his pieces, check out his blog, Mellon’s Musings.
This particular article is a must read. Not only a must read, but a must understand! This is going to happen. It will happen at some point in the future; maybe tomorrow maybe next week or next year but it will happen. You must prepare for it. We are all going to suffer when the chaos comes. And as is usual; the poor among us will suffer the most. Prepare yourselves and your families as best you can. I would say save money but probably it would be better to buy up and save food. Glenn Beck has been telling us to remember our Grandmother’s root cellar where she stored food over the summer to carry the family thru the winter. I mention this as being the best course of action for those of lower income because the dollar won’t be worth much with hyperinflation. At the same time you should save as much money as possible so you can continue to pay your rent or mortgage and utilities. You will survive because people do. Families and friends pull together and help each other. We as a people have survived before but this time will simply be so much worse because we have been made dependent on the nanny state which is not going to be there for us any more. The biggest entitlement programs will simply have to go since they now take up one half of our national budget: No Social Security, no Medicare, no Medicaid, no government services of any kind for anyone at all! Only the necessary police services for our personal security and possibly the city utilities. Our nation has come to the point where there simply is no more money and soon there will be no more lenders. Remember: we are now borrowing from China to pay the interest on our debt to China! But as things continue to get bad for the people of the United States and the people stop buying then China too will suffer because the imports from China will decrease causing factories to close in China. Do you see the connection and how our fall will cause another because we have become so inter dependent as nations? It is like tying your income to your neighbors work and spending habits and having him spend like a drunken sailor. We Americans have been the drunken sailor!
(Sigh) Please read the article . BB
Ironically enough, the medicine applied by our state as the antidote for our ills has proven to be poison. The welfare state is killing our nation. Today entitlement spending makes up nearly half of our budget. Long term, we know that there will be no way to pay off our unfunded obligations — we will go bankrupt. There will be three options ultimately, though ultimately can come quite suddenly: default, hyperinflation or abolition of the welfare state.
Default is considered by many to be an impossible option as it would likely lead to mass chaos given the necessary suspension of many government services, not to mention the practical reality that WE are the collateral in the event of default. To default is to be honest, and to be honest is anathema to the state.
Hyperinflation in my view is the most likely outcome given the massive increase in the money supply, which is good for politicians until it hits because it allows them to kick problems down the road and impose a stealth tax. Currently, government is toeing the line between monetizing debt and intervening to keep its borrowing rates down, while incentivizing banks to keep money in their vaults or pump it into the stock market.
I believe that as the downturn goes on the government will blame the banks for the lack of economic growth and force them to allocate credit to chosen political entrepreneurs and other bad credit risks, leading to massive inflation in prices which they will likely blame on evil speculators and greedy price gouging companies. Hyperinflation would allow the government to pay for the welfare state – by writing entitlement checks in worthless dollars and lead to economic paralysis as constantly rising prices would make economic calculation and thus commerce impossible.
The final option would lead to the crucifixion of politicians. Of course, this might not be such a bad thing. All joking aside, there is a reason that entitlement spending is categorized as “mandatory” spending in our budget. It is wrongfully viewed as an essential function of a civilized western nation, and its end would be met with a serious backlash from all of the welfare state’s recipients.
(The screaming will be loud and hysterical when Social Security and Medicare are cut! Look what happens when there is even a hint that Medicare may be cut just a speck which the $500,000 really is. The elderly have grown accustomed to being care for by the nanny state and they feel they have a right because of being bad mannered enough to get old entitles them to special treatment. And they feel no concern for the young who are trying to pay the bills or the future children who will pay their bills! BB)
Yet while default is the most honest option, hyperinflation the most likely and abolition the most untenable, in my view it is the third option which is the inevitable end, regardless of the path we choose, with the only question being whether we take our lumps now or at some unknown and jarring point in the future.
But it never had to be this way. Back in February of 1887, Texan farmers were struggling as a severe drought was killing their crops. Congress was looking to pass an appropriations bill to bail out the ailing farmers. President Grover Cleveland had the following to say on the matter:
Though there has been some difference in statements concerning the extent of the people’s needs in the localities thus affected, there seems to be no doubt that there has existed a condition calling for relief; and I am willing to believe that, notwithstanding the aid already furnished, a donation of seed grain to the farmers located in this region, to enable them to put in new crops, would serve to avert a continuance or return of an unfortunate blight.
And yet I feel obliged to withhold my approval of the plan as proposed by this bill, to indulge a benevolent and charitable sentiment through the appropriation of public funds for that purpose.
I can find no warrant for such an appropriation in the Constitution, and I do not believe that the power and duty of the general government ought to be extended to the relief of individual suffering which is in no manner properly related to the public service or benefit. A prevalent tendency to disregard the limited mission of this power and duty should, I think, be steadfastly resisted, to the end that the lesson should be constantly enforced that, though the people support the government, the government should not support the people.
The friendliness and charity of our countrymen can always be relied upon to relieve their fellow citizens in misfortune…Federal aid in such cases encourages the expectation of paternal care on the part of the government and weakens the sturdiness of our national character, while it prevents the indulgence among our people of that kindly sentiment and conduct which strengthens the bonds of a common brotherhood.
Unfortunately, as we well know future politicians failed to heed these words. Due in large part to the New Deal and Great Society legislation, post-Lochner era court decisions and ideological subversion of the left in media and academia, the state became the paternalistic figure that it is today. The welfare state imposed on the people the notion that we were morally required through the force of government to help out our fellow man, an inherently immoral argument. In so doing, the state became the institution of moral hazard.
By providing aid to untapped politically lucrative constituencies for many of life’s woes, the state altered the character of the American people. When before, life was based on self-reliance, innovation and entrepreneurship, today a wide swath of American life is based on dependency, complacency and politics, an ironic assertion in that we built our wealth that funded the welfare state on the very foundations that the welfare state undermines. George Will outlined this transformation eloquently in his CPAC speech.
The demoralizing nature of the welfare state in absolving people from making decisions on matters of health, career and retirement in altering our character necessarily altered our actions, the sum of which make up our economy. By taking long term planning out of the hands of people, the welfare state led us to increase our time preferences. Time preference refers to our relative short term or long term orientation. When we prepare for the long term, we make prudent decisions such as saving more and borrowing and spending less, in expectation of reaping greater rewards down the road. On the other hand, when government taxes, reducing returns on capital and removes the need for cogent planning, we become more short term oriented, valuing more highly instant gratification achieved through spending and borrowing more to consume today. High time preferences result in low capital formation, high real interest rates and diminished prosperity.
It should be noted that politicians are not immune to time preferences. Since politicians are concerned most with getting re-elected, and the state came to be seen as the mechanism for spreading the wealth around to various voting blocs, naturally there grew a conflagration of welfare programs (using the term welfare loosely) funded through direct taxation, inflation and debt with little regard for the future.
The psychological and concomitant economic effects of the redistributive state cannot be understated. What has been consistently understated is what the world would look like without the welfare state. If we were to abolish Social Security, Medicare and Medicaid, billions of dollars would return to the hands of the people. People would have to plan their lives more carefully and responsibly and redevelop the drive that had been taken from them by the state, and they would allocate these new funds accordingly. This influx of new cash to be reallocated according to the preferences of consumers would lead to unimagined innovations.
How many new hospitals, pharmaceutical companies and insurers would crop up? How many more dollars would people save for retirement and in so doing invest in the private sector? How many charitable organizations would be created for people to voluntarily help their fellow man? How many government bureaucrats would be unleashed into the economy and employed in productive jobs? How many productive jobs would the private sector create? How many people would pick themselves up out of poverty? One fascinating anecdotal example of the types of innovations that occurred when the government did not coddle people from cradle to grave was the institution of the fraternal society, one of the functions of which was healthcare provision under “lodge practice,” whereby society members could voluntarily pool their money and draw upon it when in need of medical care. Prices were low and service was of quality until government intervened and destroyed the practice.
Now surely, as a practical matter the scrapping of the welfare state would cause great disruption, and people expecting to receive and/or reliant on benefits would incur immediate hardships. But with the infusion of capital back into the hands of private individuals making decisions for themselves, in the long run our standard of living would increase, our competitive advantage in the world would widen and we would restore the national character to which Cleveland spoke. We would reverse the demoralization and economic stagnation induced by the state. We would see the bountiful unseen benefits blocked by the massive edifice of the state that holds our people back. It bears remembering that we didn’t grow wealthy with a safety net under us in the first place.
Our society was built on the non-aggression principle. Individuals should be free to pursue purposeful ends so long as they do not harm others. Government’s role is to protect us from external harm by providing defense, public safety and the courts. By government attempting to protect us from the harm of our own decisions, imposing morality on the people through forcing some to subsidize others, government becomes an immoral, socially and economically destructive institution and perpetuates a cycle of intervention, dependency, crisis and further intervention.
As the healthcare debate rages on, and in context of the reality on the ground today, it surely seems as if we are miles from the end of the welfare state. But indeed, we are going to arrive at the end of the experiment of the Ponzi welfare scheme, and it will not be by government fiat but by gravity. This will be a blessing in disguise, though the short term pain of a sudden collapse will be great. Traumatic as the collapse of the welfare state will be for those reliant on it, collapse will go quite a ways towards restoring power back with its rightful owners, the people.