Welfare programs treat the symptoms of poverty, not the cause. As a result, they will never be the solution to ending poverty, nor are they designed to be a lasting solution. We have created a massive, cumbersome bureaucracy to administer an ineffective welfare state that, at best, locks millions of Americans into a station in life above destitution but far from their potential.
This welfare-industrial complex sustains itself by defending a complicated set of disconnected programs that collectively do not and have not been shown to systematically move large numbers of people permanently out of poverty. As has been noted wryly by many social commentators, the challenge with eliminating poverty (from the perspective of the welfare bureaucracy) is that without poverty we would no longer need so many anti-poverty bureaucrats. So, if welfare in fact perpetuates poverty, then who are the primary beneficiaries?
More than fifty years of experience and empirical evidence make clear that government assistance benefits bureaucrats more than the poor it is purportedly designed to help. While this is not doubt due in part to the traditional targets of criticism, such as widespread inefficiency and incompetence in government, those trying to alleviate poverty through state intervention face a far more fundamental challenge – government assistance alone will not transform lives.
The short-term benefits from welfare that keep life at best bearable are more than offset by the extent to which they disincentive the kinds of behaviors associated with long term success. The incentive to form strong families is diminished through the provision of a broad range of specific assistance programs available only to single mothers. The incentive to buckle down and finish one’s education is diminished by the existence of an option to live a meager but sustainable life on public assistance.
It’s a tragedy when a rise in income is more than offset by the resultant disqualification for certain benefits. The continued existence of high implicit marginal tax rates disincentivizes career advancement by forcing workers to consider whether the additional work and responsibility associated with a promotion is worth what is often a small or non-existent increase in “after tax and benefits” take home pay.
Despite the dramatic increases in wealth and prosperity our country has enjoyed in the last half century, we see the impact of these disincentives in the struggle too many families still experience.
Consider the fact that real per capita income has increased from under 24,000 to over 56,000 dollars (in 2013 dollars) since the late 1960’s. Looking at the income needed to keep a four person family out of poverty in 1967, we see that the household would have needed to capture no less than 27% of their “proportionate” share of GDP (i.e. the share they would receive if incomes were perfectly divided per person).
Fast forward to today, and the same family would only need to take home approximately 12% of their family’s proportionate share of the national income, meaning the transition out of poverty should be far less of struggle than it used to be.
Despite this extraordinary economic progress, given the aforementioned disincentives regarding family formation and work, fewer people are able to stay above the poverty line than was the case in the late 1960’s. This is even though over 18 trillion dollars has been spent on welfare since President Johnson declared his war on poverty in 1964, which has barely moved the needle on the poverty rate in this country.
Further evidence that the welfare state is increasingly sustained for the benefit of those who make a good living administering it can be found through an examination of the programs that comprise welfare today. As recently as the late 1990’s, almost 60% of all welfare spending was in the form of direct cash benefits. By 2014, this form of assistance had fallen to roughly 25%, which increases the administrative burden to deliver the same amount of support. While the exact number of federal welfare programs fluctuates, your taxes are used to fund over 100 separate anti-poverty programs, each with their own requirements, budgets, and workers generally impossible to fire.
What could possibly justify this byzantine structure given the evidence that direct cash transfers are at least as effective as other forms of welfare? Clearly, the drivers of anti-poverty policy have little or nothing to do with what actually reduces poverty.
Stated plainly, the war on poverty and the nearly 20 trillion dollars spent have been a failure. To address this, we must first accept that handouts are not a path to prosperity. A person must have both the ability and motivation to provide for themselves and their families. We must transition away from any form of government intervention that disincentivizes work and prosperity. The only path to sustained poverty reduction is skill building, as production must come before consumption.
Ultimately, a person’s station in life can only be improved by investing in themselves, such that the returns to their work can grow as their value to others grows in turn. So long as a person lives off the work of others, his or her station in life will only rise so far as they will permit. America was not founded on the premise that your destiny should lay in the hands of others, and we should fight to ensure that it will not be our future.
Damon Dunn is a fellow in Business and Economics at the Pacific Research Institute.