The Entitlement State

The Wall Street Journal provides what they call "a short history of the entitlement state."  Unsurprisingly, the essay concludes, "The looming debt downgrade only confirms what everyone knows: Congress has made so many promises to so many Americans that there is no conceivable way those promises can be kept."


The Journal is right to peg so much of our dire fiscal straights on the over-inflated welfare state.  Beginning under FDR in the 1940s, the WSJ tracks the growth of entitlements through LBJ's Great Society and the Social Security problems of the 1970s and then onto Obama's profligate spending today.  While correctly arguing that the left's counter-argument of military spending is a red herring ("But national defense spending was 7.4% of GDP and 42.8% of outlays in 1965, and only 4.8% of GDP and 20.1% of federal outlays in 2010. Defense has not caused the debt crisis."), the editorial is fair to pin some of the blame on the GOP.

Mr. Bush and Republicans did prove after 9/11 that the Washington urge to spend and borrow is bipartisan. Republicans launched a Medicare drug benefit, record outlays on education, the most expensive transportation bill in history, and home ownership aid that contributed to the housing bubble. The GOP's blunder was refusing to cut domestic spending to finance the war on terrorism. Guns and butter blowouts never last.

Whatever nuanced disagreements one has with this argument, the fact is clear that the federal government is spending far beyond its means.  Much of this is arguably the by-product of a process that encourages a lack of forward-thinking.  The American system - and to some degree human nature - encourages politicians to dole out perks today while placing the costs on future citizens.  As time progresses, entitlements are increasingly piled on and rarely are forward-looking politicians able to remove these newly constructed "rights".  Political and moral arguments are marched out to defend these handouts and so the fiscal burden grows.

To be fair, the blame cannot solely lie with politicians, but must also lie with the electorate who votes for politicians who swing perks their way.  Individuals and groups across the political spectrum lobby politicians for special treatment, not realizing or simply not caring that someone else will have to pay for it.  Even the most stalwart small-government folk are resistant to relinquishing the handouts that they receive (Medicare?).

This is a losing mentality - a short-sighted and fatal way-of-life.  Americans have, for far too long, thought about the benefits they receive from the government separately from the costs that are required to pay for these perks.  It has always been someone else or some other generation that will pay.  But this model of government has proven it cannot endure for any prolonged period of time.

The fiscal sanity of our government and the future of the state demands that we, as a nation, rework our way of thinking.  We have become far too comfortable, as individuals and a society, living beyond our means, but it cannot continue.  Citizens need to reevaluate what they expect to have and what they want others to provide for them.  Remember the government does not produce anything.  Whatever is provided by the government comes in one end and, with some loss along the way, goes out the other.

Government should be restructured to perform the essential duties for which a government is needed; namely providing certain common goods (roads, defense, rule of law) that all citizens benefit from and are unsuccessfully provided by the private market.  It should largely cease its role as a wealth re-distributor, both across time and class.  Whatever the argument one has about this program or that program, the fact is they are unsustainable in our society.  The welfare state has only been maintained over the past seven decades because of the wool over America's eyes - it has been stomached because nobody has been paying for the full extent of the entitlement state.  This ultimate grand bargain has allowed politicians to appease both those who want more and those who do not want to pay more (oftentimes the same people).  But the free lunch has ended and Americans must reconcile themselves to reality - we can never over the long-run get more than we produce.  Americans must realize that government is not a magical tool to solve society's woes or to enact some vision of morality, but a limited means of coordinating essential services that a society needs.

Redefining Poverty

There is a problem of definitions in American politics.  Although not a new phenomenon, it is unfortunately one that is rarely discussed.  In many instances, challenging the accepted political definition of certain words leads to harsh, acerbic, and often unwarranted attacks by those who wish to defend a political definition for their own partisan uses.

In a recent report, the Heritage Foundation has courageously taken a stand against the definition of one of these words - "Poverty".  The abstract to the full report states the following:

For decades, the U.S. Census Bureau has reported that over 30 million Americans were living in “poverty,” but the bureau’s definition of poverty differs widely from that held by most Americans. In fact, other government surveys show that most of the persons whom the government defines as “in poverty” are not poor in any ordinary sense of the term. The overwhelming majority of the poor have air conditioning, cable TV, and a host of other modern amenities. They are well housed, have an adequate and reasonably steady supply of food, and have met their other basic needs, including medical care. Some poor Americans do experience significant hardships, including temporary food shortages or inadequate housing, but these individuals are a minority within the overall poverty population. Poverty remains an issue of serious social concern, but accurate information about that problem is essential in crafting wise public policy. Exaggeration and misinformation about poverty obscure the nature, extent, and causes of real material deprivation, thereby hampering the development of well-targeted, effective programs to reduce the problem.

The report continues by discussing the standard of living experienced by most "poor" Americans and how high these are, both in historical comparisons and vis-à-vis other countries.  It makes the key argument that there is a need to separate the truly destitute (eg. those that chronically lack shelter, food, or clothing) from those that are just defined as poor.  Due to limited resources, this expansive definition of poverty has not only injured the truly destitute but provided for those that are arguably not needy.

The U.S. Census Bureau, which determines the poverty thresholds, bases their calculation of these thresholds on a 1963 study that looked at the Department of Agriculture's low cost food plan.  Surprisingly, it was not designed to reflect the daily needs of an individual or family.  "...[They] did not develop the poverty thresholds as a standard budget... a list of goods and services that a family of a specified size and composition would need to live at a designated level of well being." 

While the Census Bureau's "poverty thresholds" are only used for statistical purposes, the Department of Health and Human Services (HHS) further complicates issues by setting forth "poverty guidelines" for administrative purposes.  While these are generally based on the Census Bureau's numbers they are modified for various programs (for instance scaled up by some percentage).  These guidelines are what are used in most welfare programs.

Arguably both the Census Bureau's and HHS's definitions are exceedingly arbitrary.  As the Heritage report empirically supports, far too many are able to achieve substantial luxuries while nevertheless being deemed poor by the government.

A secondary source of definitional challenge comes from politicians who often use the term "poverty" in a relative sense.  A relative definition of poverty signifies that poverty is determined by some distance from a measure of "middle-class" - for instance the median income. This necessarily implies that the problem of poverty can never be solved, unless all incomes become very narrowly distributed around a median income.  Taken to its logical conclusion, in some perverse world, poverty could easily be eradicated by evaporating the wealth of the richest in a country without any concomitant change in the position of the poorest. By thus diminishing the "wealth gap," relative poverty would no longer exist. Obviously such a precept is laughable - no state would be better off by removing wealth from society - but it nevertheless is the natural conclusion of a doctrine of relative poverty.  In reality, "relative poverty" is nothing but a euphemism for "income inequality."

Instead, poverty should be measured in relation to what a person needs to achieve certain necessities, such as food, shelter, and clothing. By using an such an absolute measure, poverty is defined by essential characteristics not an arbitrary statistical formulation or relative comparison. This is undoubtedly a more just definition of poverty and puts the state in a better position to provide resources to alleviate poverty. It also provides proponents of the welfare state with a better position from which to defend the need for state assistance in eradicating poverty.

[By claiming the American definition of poverty is wrong, one does not mean there are not people who truly are in need, nor that there are not those who are truly poor in America.  But it does imply that a changed definition can have significant implications for welfare policies.]

It is to be expected that vested interests will attempt to avoid any discussion, let alone any changes to the definition of poverty.  Expansive definitions of poverty allow numerous constituents (particularly but not exclusively of the Democrats) to gain benefits at the expense of others.  It is unlikely that recipients of handouts (whether low- or high-income) will be willingly to abdicate their lucrative positions.  This is unfortunate and unfair.  In such times of economic difficulty and budgetary disorder it is necessary to carefully study if our current definitions and resulting policies have stepped beyond what is appropriate and into the realm of social and economic largess.

Arguably, much of our welfare state has become a system of wealth redistribution rather than a social safety net.  This is not so much a critique of the concept of the welfare state but of its abuse to fulfill abstract notions of social justice.  As Heritage points out, our working definition of poverty has become one much more about "income 'inequality'" than one of need.  This has arguably caused the state to venture far outside of its appropriate bounds and has indubitably contributed to our expanding fiscal woes.  According to the authors of the study, "President Obama plans to make this situation worse by creating a new 'poverty' measure that deliberately severs all connection between 'poverty' and actual deprivation... giving the President public relations ammunition for his 'spread-the-wealth' agenda."  A redefinition of "poverty" to more accurately reflect individuals' needs may not only help alleviate America's budgetary problems but allow a misappropriation of the system to revert to its moral underpinnings.

Time to Fix the Economy: The Debt Limit and Spending

Yesterday's vote on raising the debt limit was, as expected, voted down by the vast majority of the House of Representatives.  While Democrats, including Minority Whip Steny Hoyer (who voted against the bill), are hurling accusations of political theatre, the rejection of the "clean debt limit vote" was appropriate.  The message sent is unequivocal:  America cannot continue to spend beyond its means.  Cuts are needed and any increased ability to spend must be countered by reduced expenditures.

In a sense the Democrats are right.  This vote was not really about the debt limit.  Speaker of the House John Boehner (R-OH), said it clearly “It’s true that allowing America to default would be irresponsible....”  However, default is certainly not an issue, at least at this point.  Instead, the vote was much more about changing the prevailing economic discourse in this country, where for far too long it has been easy to spend beyond our means and push off the consequences.  It is necessary and laudable for Congress to stand its ground and show that there really is no such thing (anymore) as "easy money".

The debt limit may ultimately need to be raised (a default would be catastrophic), but not without meaningful reassessment of the government's fiscal condition.  We are, as a nation, spending far too much.  Former Republican governor of Utah and possible presidential candidate, John Huntsman eloquently articulated the need to reevaluate our economic position, in what can fairly be described as a campaign speech in today's Wall Street Journal.

Amongst other points, Huntsman argued that the debt level must be cut while difficult choices need to be made regarding Medicare, Social Security and other government expenditures including agricultural subsidies.  Even Sarah Palin has jumped in the fray, smartly calling for an end to all energy subsidies.

Boehner is taking this message directly to the president, in a meeting scheduled for today, where he and fellow GOP congressmen aim to push Obama to make deep spending cuts in order salvage the US's fiscal sanity.  Backed by a number of leading economists, Boehner argues that "“To help our economy grow and create jobs, any debt limit increase needs to be met with even larger spending cuts.”


The GOP and those 82 House Democrats that voted against raising the debt limit are right to stand firm.  America must realize that our situation is perilous and that it is time to adjust our system before it becomes too difficult.  Huntsman summed up the sentiment nicely "Some argue for half-measures, or for delaying the inevitable because the politics are too hard. But delay is a decision to let America decline. The longer we wait, the harder our choices become."

Race, The Welfare State, and Economics

The Wall Street Journal ran a very poignant interview with Walter Williams, a black economist at George Mason University, on the impact of the welfare state, racism, and the growth of government.  Mr. Williams most salient point is best summed up in a quote, "The welfare state has done to black Americans what slavery couldn't do, what Jim Crow couldn't do, what the harshest racism couldn't do... And that is to destroy the black family." 

Williams makes a powerful argument - one that needs to be made more often by the Right.  The so-called nanny state hurts even those it supposedly benefits.  If such an argument is convincingly sold to the voters, it will do much to scale back the expansive growth of government.

The Budget, Entitlements, and Government

In today's Washington Post, Robert Samuelson wrote a poignant editorial on the much needed buget cuts.  He argues that government benefits, once lavished upon the electorate, are largely (politically) unremovable, becoming in the eyes of the people "property rights."  Coupled with the desire to minimize taxes this creates an untenable budgetary mess.  Samuelson correctly argues that partisan interests - whether farm lobbies, the elderly, or others receiving undue government support - should recognize a moral need for change and put aside their self-interest for the national interest.  In other words, he calls for a rewriting of the social contract.

The thrust of the argument is on the areas of the welfare state (or benefit state to construct it more widely in order to include agricultural subsidies and the like) that need to be slashed; however, he does tepidly venture into the more philosophical realm of the role of the state when he discusses the defense budget.  Samuelson argues that cuts to defense should not be treated the same as cuts in other areas of the national budget because "[n]ational security is government's first job."  He, unfortunately, does not take this to the next level, namely by opening a discussion on what the proper role of government is.  Government's role within society has expanded enormously and if America is to not only solve its budgetary issues but also resolve the government's wayward drift, the people need to pin down what, philosophically speaking, the purpose of government is.