Political Theory

Re: If all govt. welfare spending was eliminated, how much would be privately replaced?

EmperorNero — Wed, 26 Jan 2011 12:10:57 GMT

resist272727:
The main reason people seem to think that government must help the poor is that they do not believe people to be charitable enough to give up their own money without being forced to do so. Current levels of welfare spending in the U.S. (at all levels of government) are extremely high:

Health care vendor payments: $340 billion ($1,100/capita)

Social exclusion: $289 billion ($940/capita)

Unemployment: $282 billion ($910/capita)

Family and children: $126 billion ($410/capita)

Housing: $94 billion ($300/capita)

I do believe a great deal of this creates dependency and actually ends up hurting the poor, but I'd like to think those who truly need it (i.e. those with health problems, those who can't feed their families) would be able to get help from private charities. How likely is it that getting rid of government welfare would encourage people to give enough money to charity that is needed to help out the truly needy with few other options? I believe private charity is currently a little over $300 billion/year. How much would it go up if the $1 trillion+ govt. welfare spending was eliminated?

Nobody knows how much people would donate if welfare spending was abolished. The laissez-faire era saw an outpouring of private charity, and it is fair to say that charity would go up a lot. But the point is that it doesn't have to. The first reason for that is that just because you are spending a trillion doesn't mean you are doing much good. The economic fallacy most welfarists succumb to is confusing money and wealth, the same amount of money doesn't always buy the smae amount of goods. They assume that goods will magically appear if only we make the funds available to pay for them. But it's not like the rich eat half a ton of potatoes a day and live in 30 houses. It doesn't release a lot of resources to expropriate their money. Society can't afford a lot more food or health care for the poor because the rich have fewer super expensive suits. The only resources that the government can redistribute are those the free market produced anyways. And therefore most of the money that is redistributed by the government merely bids up the price of resources the poor would have had anyways. The more government subsidizes a product, the more it's price goes up. That hurts anyone who isn't on the government dole.

The second reason welfare does less good than it appears is that welfare is almost per definition present consumption at the expense of investment in the future. What makes society richer, what makes the poor better off and equalizes standards of living, is investing in improving productivity. We just have to contrast the standard of living a century ago, when kerosene lamps were considered a luxury of the rich, with the standard of living of today to know that progress does the poor more good than giving them a little bigger part of the existing pie. Welfare spending invariably takes resources that would have been used to improve productivity and uses them up for present consumption. If the US had abstained from welfare spending since the 30's, there probably wouldn't even be real poverty any more.

And I haven't even mentioned how welfarism creates dependency and lack of personal initiative, which causes a lot of the problems of the lower classes.

Re: If all govt. welfare spending was eliminated, how much would be privately replaced?

Merlin — Wed, 26 Jan 2011 11:47:39 GMT

Kick-ass post Prateek!

Re: If all govt. welfare spending was eliminated, how much would be privately replaced?

Prateek Sanjay — Wed, 26 Jan 2011 11:12:05 GMT

When you spend your own money on yourself, you economize and seek highest value.

When you spend your own money on somebody else, you economize but don't seek highest value.

When you spend somebody else's money on yourself, you don't economize but do seek highest value.

When you spend somebody else's money on somebody else, you don't economize and you don't seek highest value.

Private charity is the second and government welfare is the fourth. When people start economizing on charity, there will be less charity. So yes, there would be a reduction in charity. The difference is on whether that charity is done at a cost effective way. When charity is not cost effective, it is hard to argue whether anybody benefitted, especially since the poor himself pays the cost in sales tax, inflation, or reduced capital for jobs. When it is cost effective but is very little, it's a negligible and incremental benefit. So in either case, one may argue that society is neither better off nor worse off between replacing private charity and government welfare.

Re: If all govt. welfare spending was eliminated, how much would be privately replaced?

Caley McKibbin — Wed, 26 Jan 2011 05:59:54 GMT

My safe assumption is that people are less charitable with their own money.

Re: If all govt. welfare spending was eliminated, how much would be privately replaced?

bread — Wed, 26 Jan 2011 04:11:56 GMT

Personally, I would be willing to donate more to charitable organizations if my taxes wen't so high.

Re: If all govt. welfare spending was eliminated, how much would be privately replaced?

resist272727 — Sun, 16 Jan 2011 00:43:38 GMT

Maybe I should explain that this is hypothetical and that the question is: "Would private charity replace most or all governments fund that are 'necessary' to ensure that poor people can pay for their health problems and that children wouldn't have to suffer due to the economic status of their parents?"

Re: If all govt. welfare spending was eliminated, how much would be privately replaced?

Sebastian — Sun, 16 Jan 2011 00:28:37 GMT

http://www.chron.com/disp/story.mpl/metropolitan/7381016.html

Appearently goverment doesn't like helping people, and are afraid that when somepoeple take it upon themselves to help them is bad image for them.

Re: If all govt. welfare spending was eliminated, how much would be privately replaced?

Aristippus — Sun, 16 Jan 2011 00:06:16 GMT

The government wants more wind and solar power, so it gives money to these industries. The government wants less poverty, so it gives money to the relatively poor. Makes sense.

Re: If all govt. welfare spending was eliminated, how much would be privately replaced?

MaikU — Sat, 15 Jan 2011 23:04:29 GMT

welfare doesn't help the poor. It breeds them.

Re: If all govt. welfare spending was eliminated, how much would be privately replaced?

Merlin — Sat, 15 Jan 2011 22:47:25 GMT

Before or after the civil war that would ensue?

Re: If all govt. welfare spending was eliminated, how much would be privately replaced?

Solid_Choke — Sat, 15 Jan 2011 20:49:09 GMT

I very much doubt the existence of the state helps the poor on net. If it weren't for certain kinds of legislation, there would be extremely inexpensive housing (which currently cannot be build to do building codes) and much more (sub-minimum wage) employment to pay for it with. I would estimate that the (non-mentally ill) homeless population would be almost nonexistant without the states help. Also, without taxation, there would be a much larger amount of investment in capital goods. Therefore, real incomes would be much higher than they otherwise would be (meaning lower levels of poverty).

Re: If all govt. welfare spending was eliminated, how much would be privately replaced?

nirgrahamUK — Sat, 15 Jan 2011 20:40:23 GMT

I'll consult my crystal ball and get back to you...

If all govt. welfare spending was eliminated, how much would be privately replaced?

resist272727 — Sat, 15 Jan 2011 20:34:51 GMT

The main reason people seem to think that government must help the poor is that they do not believe people to be charitable enough to give up their own money without being forced to do so. Current levels of welfare spending in the U.S. (at all levels of government) are extremely high:

Health care vendor payments: $340 billion ($1,100/capita)

Social exclusion: $289 billion ($940/capita)

Unemployment: $282 billion ($910/capita)

Family and children: $126 billion ($410/capita)

Housing: $94 billion ($300/capita)

I do believe a great deal of this creates dependency and actually ends up hurting the poor, but I'd like to think those who truly need it (i.e. those with health problems, those who can't feed their families) would be able to get help from private charities. How likely is it that getting rid of government welfare would encourage people to give enough money to charity that is needed to help out the truly needy with few other options? I believe private charity is currently a little over $300 billion/year. How much would it go up if the $1 trillion+ govt. welfare spending was eliminated?