Saturday, October 22, 2011

The unpleasant solution to the public benefits problem



Social welfare schemes have a built-in tendency to grow and multiply, as politicians discover it is in their interest to expand them, and add new ones. Recipients of public largess tend--understandably--to support parties, politicians and programs that deliver the benefits.

If we want to know how all this ends we need look no farther afield than the countries of the Euro zone. Greece is the first to crack under the strain of debts it cannot pay; it will not be the last. Here in the United States are not at the breaking point yet but we are getting there. We are making the same mistake; we are spending money we do not have. Of course it seems like a good idea at first to dole out benefits at public expense, but there is a very considerable downside. It is  difficult to shrink social spending, a process that amounts to clawing back benefits from people who have become accustomed to think they deserve them.

Indeed, the United States' highly touted welfare reform under Clinton did not lead to permanent reductions in welfare spending; the total outlay has instead increased, when you consider all programs combined.

Well, if that isn't going to work there is another solution, which is to do nothing, or give lip service to the idea of reform while making only small cosmetic changes, and let the costs run up. That can't go on forever, but it will eventually solve the problem, when everyone wakes up and sees they are redistributing less pie as time goes on. When there is no more pie the situation will obviously require fresh consideration. I don't know if anything less than that--a large scale economic breakdown--will be sufficient to prompt reconsideration of the basic dynamic: social programs are easy to grow, difficult to shrink.

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