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De Omnibus Dubitandum - Lux Veritas

Sunday, September 26, 2021

The "Safety Net": The Goal Should Be To Minimize The Number Of People Depending On It


This post is about a situation where the correct public policy approach should be obvious to everyone, but the perverse incentives of government as usual push in exactly the wrong direction.

The issue is how many people should receive benefits, and in what amounts, from government “safety net” programs. From all I can find, there appears to be near-universal support for at least some level of government “safety net” for the poor. After all, no one wants to see fellow citizens starving for lack of food, or dying for lack of medical attention to a curable health condition, and so forth. And can we really count on private charity to fully provide for all the situations of genuine need among the population? Thus the result: Although the details vary greatly, every country with an advanced economy has an extensive system of “need”-based distributions of benefits to those designated as needy. But how many and which people should receive benefits, and how much?

In practice, the number of beneficiaries and level of generosity of a social safety net are inherently unstable. As soon as such a safety net comes into existence, there must inevitably be a line drawn between those who qualify for the benefits and distributions and those who do not. There will always be some elements of arbitrariness in the line-drawing; and the difference in “neediness” between the least-needy person who qualifies for benefits and the most-needy person who does not qualify may be so small as to be imperceptible. So shouldn’t the benefits then be expanded to include the next guy up the ladder? And how about the next guy after that?

An even worse problem than the fineness of the necessary distinctions is the arbitrariness. No matter how carefully eligibility criteria may be crafted, I submit that there will inevitably be many less needy people who qualify for and receive government safety-net benefits, while objectively more needy people fail to qualify. As one obvious example, some people with no income or significant assets at all may nonetheless be able to draw on substantial family resources (from parents, siblings, children, or more distant relatives) in times of need, while others may have just enough income or assets to fail to qualify but no family back-up of any kind. I personally know multiple twenty-somethings with well-off parents who nevertheless qualify for and use the Medicaid and food stamp programs. You probably do too. Hey, nobody said that parental income is part of the eligibility criteria!

Back in 2017 I had a post about downtown Manhattan City Councilwoman Carlina Rivera, who at the time of her election lived in subsidized “affordable” housing (via a federal housing voucher), even though her husband was the son of a partner of the law firm of Cravath, Swain & Moore — average per partner income of over $3 million per year. When caught, Rivera and the husband did not slink away in shame, but rather aggressively claimed that they had done nothing wrong — they had reported their “income” (including a substantial write-off for the husband’s business) accurately in the year in which they qualified for the voucher. Rivera remains as a sttting City Councilwoman today.

Let’s compare how families deal with lack of independence among members, to how governments deal with the same issue:

  • Families. Nearly all families deal at various times with the issue of transitioning members, generally offspring, from being dependent on family support to being independent and on their own. Sometimes the transition happens without need for much of a push from the parents, and other times a big push may be in order. But essentially all parents that I have known (and almost all of my friends of my generation have gone through this) have made it a priority to encourage and cajole and help the kids to become independent. I have observed every sort of technique being deployed, for example: gradually reduce and ultimately eliminate direct financial support; demand that the kid get a job; cut off payment for the cell phone; demand rent for continuing to live in the family house or, in the end, throw the kid out of the house; make the kid take care of the dog and the plants; put the kid to work for a family business; etc., etc. These techniques and others may ultimately fail, particularly in the case of children with some kind of serious mental or physical disability. Still, I have never observed a family where developing independence of the kids was not at least an important goal.

  • Government “safety net.” The issue is essentially the same, and the goal should be the same. But instead, in the real world, the dynamic is the exact opposite. Here are three factors that come into play:

    • The safety net programs are run by bureaucracies, and the fundamental imperative of every bureaucracy is to grow the bureaucracy. In the case of safety net programs, growing the bureaucracy means increasing the number of clients of the programs, rather than decreasing them. The bureaucrats are happy to sign up new beneficiaries, and it is no part of their priorities to try to move beneficiaries off the program and into independence.

    • Potential beneficiaries realize that the bureaucracies are soft touches, and quickly learn how to present themselves to qualify for handouts. Where mom and dad would not be fooled for a minute, the bureaucrats are eager for more clients and only too happy to help create and maintain dependency.

    • And then there are the elected officials in the legislative and executive branches. Many to most of them recognize the beneficiaries of handout programs as bought votes who will remain loyal to the incumbents as long the the programs and the benefit streams are maintained. This is clearly a fundamental strategy of the Democratic Party, although I would not say that Republicans are innocent on the issue.

And thus we come to the current blunderbuss Democrat “budget reconciliation” bill, stuffed with new and expanded “need”-based distributions to expand the “safety net,” from child care payments and tax credits, to higher education subsidies, to expanded Medicaid, to more home health services, and on and on. (Nobody even knows everything that is included.). The whole idea is a massive increase in the numbers of people relying on a government handout.

In general, the pushback to this bill from Republicans has been that all this is wildly expensive and unaffordable, and will be extremely destructive of the economy. All of that I agree with. But the much bigger issue is the transformation of the basic relationship between the people and the government into a situation where many more, and probably most people will expect to be taking government handouts and support that they don’t really need and could very easily live without. Who looks on this as a good thing? Shouldn’t the goal be to have as many people as possible develop the ability to live independently, without government support? It’s terrible for people to live on government handouts. It saps the spirit. Who would want it?


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