Tuesday, April 26, 2011

The Welfare State's Security Illusion

In Wisconsin, Henry Olsen writes, white working class voters are returning to the Democrats. They see the GOP attack on government union collective bargaining rights as a threat to their economic security. Are they right?

Or are they just selfish, welfare state addicts selfishly sucking benefits from their fellow citizens? That's what Dennis Prager argues. The welfare state teaches people to become selfish, he writes.

Capitalism teaches people to work harder; the welfare state teaches people to want harder. Which is better?

I marvel that we have ever had a society in which people refrained from grabbing the maximum that their political power allowed. In the simple predatory warfare of the agricultural age the idea was to loot the rest of the world to bring home booty. In the welfare state the idea is that every entitlement is a "right." The politics of entitlement is a politics of indignation at the very idea of "give-backs," rights that can be taken away.

The magic of capitalism, of course, is that you can only amass a pile of rights--expressed as money income or property--if you give the world something really useful. Thus the monkey is on your back to discover something that the world wants, and is willing to pay for. The entitlement philosophy is the opposite: you deserve benefits and rights just because you are a member--of the nation, the union, the identity group.

Obviously, the truth lies in the middle. The whole point of humans as social animals is that we get protection from the big, bad world because the social group protects us. But the social group cannot work unless its members willingly work to benefit their social group.

The miracle of capitalism is that it is a system that rewards people for actions that benefit society; it exploits their natural selfishness in ways that are typically socially useful. The welfare state, on the other hand, encourages people in selfish and free-rider behavior; it rewards people that form powerful political coalitions and that establish a moral case for support by the rest of the community.

We know, of course, that the welfare state is coming to an existential crisis. The mechanics of the welfare state encourages politicians to promise rights and benefits to voters that can never be delivered. But how can you tell that the promises are empty? The economy is big and wealthy, and surely the rich can afford to pay a little more.

The only time you really get to know if the politicians have promised too much is when you get to a sovereign debt crisis--like Greece, Ireland, and Portugal.

Democrats mourn that today's Republicans seem to be intent on wrecking the national finances by voting for tax cuts in the face of big deficits. They are right of course. We know that the only way the welfare state will ever stop growing is if we cut the supply of revenue and bring on the fiscal crisis that will cut the supply of money to the welfare state beast.

That is the only way to break the illusion that the welfare state offers security.

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