Tag Archives: welfare state.

2 cartoons illustrate the fate of socialism from the Cato Institute

Cato Institute scholar Dan Mitchell is right about Greece and the fate of socialism:

In my speeches, especially when talking about the fiscal crisis in Europe (or the future fiscal crisis in America), I often warn that the welfare state reaches a point-of-no-return when the number of people riding in the wagon begins to outnumber the number of people pulling the wagon.

To be more specific, if more than 50 percent of the population is dependent on government (employed in the bureaucracy, living off welfare, receiving pensions, etc), it becomes rather difficult to form a coalition to fix the mess. This may explain why Greek politicians have resisted significant reforms, even though the nation faces a fiscal death spiral.

But you don’t need me to explain this relationship. One of our Cato interns, Silvia Morandotti, used her artistic skills to create two images (click pictures for better resolution) that show what a welfare state looks like when it first begins and what it eventually becomes.

These images are remarkably accurate. The welfare state starts with small programs targeted at a handful of genuinely needy people. But as  politicians figure out the electoral benefits of expanding programs and people figure out the that they can let others work on their behalf, the ratio of producers to consumers begins to worsen.

Eventually, even though the moochers and looters should realize that it is not in their interest to over-burden the people pulling the wagon, the entire system breaks down.

Then things get really interesting. Small nations such as Greece can rely on permanent bailouts from bigger countries and the IMF, but sooner or later, as larger nations begin to go bankrupt, that approach won’t be feasible.

I often conclude my speeches by joking with the audience that it’s time to stock up on canned goods, bottled water, and ammo. Many people, I’m finding, don’t think that line very funny.

___________________

The Department of Health and Human Services administers the huge and fast-growing Medicare and Medicaid programs. These programs fuel rising health costs, distort health markets, and are plagued by waste and fraud. The department also runs an array of other expensive subsidy programs, including Head Start, TANF, and LIHEAP. Growth in HHS spending is creating a federal financial crisis, and the 2010 health care law sadly makes the situation worse.

The department will spend $910 billion in 2011, or $7,710 for every U.S. household. It employs 68,000 workers and runs more than 420 subsidy programs.

Milton Friedman – Roots Of The Welfare State


Timeline of Government Growth

  • See this timeline for key events in the department’s growth.

Reading Room

Cato Experts

Spending Cuts Summary

  • Here are proposed reforms to save $81 billion annually in the short-run and prevent federal health costs from consuming a growing share of the economy in the long-run.

Downsize This!

  • Medicare Reforms. Medicare should be transformed into a system based on vouchers, individual savings, and competitive insurance markets.
  • Medicaid Reforms. Federal spending on low-income health care should be converted to block grants for the states.
  • TANF and Welfare Spending. Welfare reforms in 1996 created Temporary Assistance for Needy Families, but this sort of aid should be provided by private charities.
  • Head Start and Other Subsidies. HHS funds a vast array of other subsidy programs, many of which are wasteful and ineffective.
  • 2010 Health Care Legislation. The law expanded Medicaid, added new taxes and subsidies, created new bureaucracies, and did little to reduce cost growth in health care.

The government of the United States is a definite government, confined to specified objects. It is not like the state governments, whose powers are more general. Charity is no part of the legislative duty of the government.

– James Madison. A paraphrase from Elliot’s Debates regarding a proposed subsidy bill, House of Representatives, January 10, 1794.

Related posts:

FRIEDMAN FRIDAY Levin on Milton Friedman: ‘One Thing to Have Free Immigration to Jobs, Another for Welfare’ By Michael Morris | January 16, 2015

____________ Levin on Milton Friedman: ‘One Thing to Have Free Immigration to Jobs, Another for Welfare’ By Michael Morris | January 16, 2015 | 5:12 PM EST During his show on January 15, 2015, Nationally syndicated radio host Mark Levin recalled the famed economist Milton Friedman and explored an important reason why open immigration, despite […]

Levin on Milton Friedman: ‘One Thing to Have Free Immigration to Jobs, Another for Welfare’ By Michael Morris | January 16, 2015

_____________________ Levin on Milton Friedman: ‘One Thing to Have Free Immigration to Jobs, Another for Welfare’ By Michael Morris | January 16, 2015 | 5:12 PM EST During his show on January 15, 2015, Nationally syndicated radio host Mark Levin recalled the famed economist Milton Friedman and explored an important reason why open immigration, despite […]

Open letter to President Obama (Part 691) Milton Friedman did not favor free immigration with existing welfare state in USA

Open letter to President Obama (Part 691) Milton Friedman (Emailed to White House on 6-25-13.) President Obama c/o The White House 1600 Pennsylvania Avenue NW Washington, DC 20500 Dear Mr. President, I know that you receive 20,000 letters a day and that you actually read 10 of them every day. I really do respect you for trying to […]

Open letter to President Obama (Part 683) Milton Friedman’s solution to the welfare state

Open letter to President Obama (Part 683) Milton Friedman (Emailed to White House on 6-25-13.) President Obama c/o The White House 1600 Pennsylvania Avenue NW Washington, DC 20500 Dear Mr. President, I know that you receive 20,000 letters a day and that you actually read 10 of them every day. I really do respect you for trying to […]

“Friedman Friday” Milton Friedman had a solution to the welfare state!!!

I have written about the tremendous increase in the food stamp program the last 9 years before and that means that both President Obama and Bush were guilty of not trying to slow down it’s growth. Furthermore, Republicans have been some of the biggest supporters of the food stamp program. Milton Friedman had a good […]

Thomas Sowell and Milton Friedman’s answer to the welfare problem in 1980 will still work today

_____________________________________ Milton Friedman On Charlie Rose (Part One) The late Milton Friedman discusses economics and otherwise with Charlie Rose. _________________________________________ Milton Friedman: Life and ideas – Part 01 Milton Friedman: Life and ideas A brief biography of Milton Friedman _____________________________________ Stossel – “Free to Choose” (Milton Friedman) 1/6 6-10-10. pt.1 of 6. Stossel discusses Milton […]

Milton Friedman had a solution to today’s welfare mentality!!!

  I have written about the tremendous increase in the food stamp program the last 9 years before and that means that both President Obama and Bush were guilty of not trying to slow down it’s growth. Furthermore, Republicans have been some of the biggest supporters of the food stamp program. Milton Friedman had a […]

Milton Friedman did not favor free immigration with existing welfare state in USA

Milton Friedman did not favor free immigration with existing welfare state in USA Milton Friedman – Illegal Immigration – PT 2 Uploaded on Dec 18, 2009 (2 of 2) Professor Friedman fields a question on the dynamics of illegal immigration ________________ Heritage Responds to Senator Rubio on Immigration Study Amy Payne May 8, 2013 at […]

The Welfare trap can be destroyed by Milton Friedman’s negative income tax

The best way to destroy the welfare trap is to put in Milton Friedman’s negative income tax. A Picture of How Redistribution Programs Trap the Less Fortunate in Lives of Dependency I wrote last year about the way in which welfare programs lead to very high implicit marginal tax rates on low-income people. More specifically, they […]

Hong Kong and the Miracle of Compounding Long-Run Growth March 11, 2016 by Dan Mitchell (with video from Milton Friedman)

Testing Milton Friedman: Free Markets – Full Video Hong Kong and the Miracle of Compounding Long-Run Growth March 11, 2016 by Dan Mitchell Hong Kong is a truly remarkable jurisdiction. Can you name, after all, another government in the world that brags about how little it spends on redistribution programs andhow few people are dependent on […]

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2 cartons illustrate the fate of socialism from the Cato Institute

Cato Institute scholar Dan Mitchell is right about Greece and the fate of socialism:

In my speeches, especially when talking about the fiscal crisis in Europe (or the future fiscal crisis in America), I often warn that the welfare state reaches a point-of-no-return when the number of people riding in the wagon begins to outnumber the number of people pulling the wagon.

To be more specific, if more than 50 percent of the population is dependent on government (employed in the bureaucracy, living off welfare, receiving pensions, etc), it becomes rather difficult to form a coalition to fix the mess. This may explain why Greek politicians have resisted significant reforms, even though the nation faces a fiscal death spiral.

But you don’t need me to explain this relationship. One of our Cato interns, Silvia Morandotti, used her artistic skills to create two images (click pictures for better resolution) that show what a welfare state looks like when it first begins and what it eventually becomes.

These images are remarkably accurate. The welfare state starts with small programs targeted at a handful of genuinely needy people. But as  politicians figure out the electoral benefits of expanding programs and people figure out the that they can let others work on their behalf, the ratio of producers to consumers begins to worsen.

Eventually, even though the moochers and looters should realize that it is not in their interest to over-burden the people pulling the wagon, the entire system breaks down.

Then things get really interesting. Small nations such as Greece can rely on permanent bailouts from bigger countries and the IMF, but sooner or later, as larger nations begin to go bankrupt, that approach won’t be feasible.

I often conclude my speeches by joking with the audience that it’s time to stock up on canned goods, bottled water, and ammo. Many people, I’m finding, don’t think that line very funny.

___________________

The Department of Health and Human Services administers the huge and fast-growing Medicare and Medicaid programs. These programs fuel rising health costs, distort health markets, and are plagued by waste and fraud. The department also runs an array of other expensive subsidy programs, including Head Start, TANF, and LIHEAP. Growth in HHS spending is creating a federal financial crisis, and the 2010 health care law sadly makes the situation worse.

The department will spend $910 billion in 2011, or $7,710 for every U.S. household. It employs 68,000 workers and runs more than 420 subsidy programs.


Timeline of Government Growth

  • See this timeline for key events in the department’s growth.

Reading Room

Cato Experts

Spending Cuts Summary

  • Here are proposed reforms to save $81 billion annually in the short-run and prevent federal health costs from consuming a growing share of the economy in the long-run.

Downsize This!

  • Medicare Reforms. Medicare should be transformed into a system based on vouchers, individual savings, and competitive insurance markets.
  • Medicaid Reforms. Federal spending on low-income health care should be converted to block grants for the states.
  • TANF and Welfare Spending. Welfare reforms in 1996 created Temporary Assistance for Needy Families, but this sort of aid should be provided by private charities.
  • Head Start and Other Subsidies. HHS funds a vast array of other subsidy programs, many of which are wasteful and ineffective.
  • 2010 Health Care Legislation. The law expanded Medicaid, added new taxes and subsidies, created new bureaucracies, and did little to reduce cost growth in health care.

The government of the United States is a definite government, confined to specified objects. It is not like the state governments, whose powers are more general. Charity is no part of the legislative duty of the government.

– James Madison. A paraphrase from Elliot’s Debates regarding a proposed subsidy bill, House of Representatives, January 10, 1794.

Marco Rubio hates big government about as much as I do

Marco Rubio hates big government about as much as I do.

Star Parker

Star Parker

Marco Rubio’s Courageous Speech

Florida’s young Republican Senator Marco Rubio gave an important speech at the Reagan Presidential Library in California that has set off the liberal talking head universe.

He had the temerity to suggest that the huge growth in government’s role in American life over the last century “actually weakened us as a people.”

The resulting onslaught from liberal blogs and cable hosts comes as no surprise because Rubio directly took on the idol at which liberals worship – Big Government.

But his analysis was courageous and profound.

Eighty percent of Americans are not happy with the direction of the country. And, new Gallup polling shows that only 17 percent are positively disposed toward the federal government.

Americans want answers.

Senator Rubio, in this speech, stepped up to the plate to provide answers.

If liberals disagree, they are going to have to get equally serious. They’ve certainly got to do better than MSNBC’s Ed Schultz, calling Rubio “a political hack” who wants “to get rid of social safety nets.”

Our fiscal crisis is undeniable. The trillions in debt we’ve taken on to finance massive government spending has resulted in the unthinkable downgrading in rating of our government’s bonds.

But Senator Rubio took a bold step beyond looking at our problems just as an accountant.

He suggested that we cannot separate our budget from our culture. The culture of government has displaced the culture of personal responsibility.

I have been making the point for years regarding what the welfare state culture has done in our black communities. How it has created a permanent underclass, defined by family breakdown, sexual promiscuity, disease, and crime.

American culture has changed profoundly over these years that Americans have come to increasingly believe that government social engineering can solve life’s problems and challenges.

A snapshot of today’s American family shows how much things have changed, even compared to 1981 when President Reagan took office.

Since 1980, the percentage of babies in America born to unwed mothers has doubled, from 20 percent to 40 percent.

Fifty two percent of Americans over the age of 18 are married today, compared to 72 percent in 1960.

Among blacks, 44% of the population over 18 has never been married, compared to 17% in 1960.

Sixty four percent of American children today live in a home with two married parents, compared with 75 percent in 1980 and 87 percent in 1960.

And, according to the Pew Research Center, 44 percent of those between ages of 18 to 29 “agree marriage is becoming obsolete.”

We used to be a nation, as Senator Rubio pointed out, where parents raised and cared for children, then those children cared for their aging parents. Where neighbors cared for neighbors.

We might note that the welfare state idea is not an American invention but an import from Europe. We also might note that about 20 percent of Europeans attend church regularly, half that of Americans.

Europe is characterized today by low birth rates – so low that they are not replacing themselves – and high unemployment rates. The unemployment rate in France has hovered between 8 and 11 percent over the last 25 years.

We must wonder if even we can take on our fiscal problems, if traditional American family life can be restored, and if we believe it even matters.

It is to Senator Rubio’s considerable credit that he has stood up to argue that we must look at the picture of our nation in its entirety. That we cannot separate our budget matters and our attitude toward government from our overall culture and our personal behavior.

What is before us today is not a battle of competing numbers but a battle of competing visions.

Is America to continue in the direction of welfare state materialism? Or will this be a free nation under God?

Dan Mitchell on Debt Deal: drifting to Greek-style fiscal meltdown

It is sad that they passed this debt deal. They just kicked the can down the road.

Debt Deal: Politicians Win, Middle Class Loses

by Daniel J. Mitchell

Daniel J. Mitchell is a senior fellow at the Cato Institute, a libertarian think tank based in Washington.

Added to cato.org on August 2, 2011

This article appeared on CNN.com on August 2, 2011.

America is on a path to becoming a Greek-style welfare state. Thanks to the Bush-Obama spending binge, the burden of federal spending has climbed to about 25% of national economic output, up from only 18.2% of GDP when Bill Clinton left office.

But that’s just the tip of the iceberg. Because of a combination of demographic forces and poorly designed entitlement programs, federal spending could consume as much as 50% of economic output by the time the baby boom generation is fully retired.

One symptom of all this excessive spending is that Washington is awash in red ink. We’re now in our third consecutive year of trillion-dollar deficits and the politicians just had to increase the nation’s $14.3 trillion debt limit.

Daniel J. Mitchell is a senior fellow at the Cato Institute, a libertarian think tank based in Washington.

 

More by Daniel J. Mitchell

But it wasn’t easy getting there. Just as happened with the “government shutdown” debate in March, Republicans and Democrats had fierce disagreements over the right approach. They bickered until the last minute and then finally agreed to more than $900 billion of supposed spending cuts and the creation of a “supercommittee” charged with proposing another $1.5 trillion of deficit reduction.

So which side won this fight? Republicans are bragging that they got spending cuts today, a promise of spending cuts in the future, and no tax increases. Democrats, meanwhile, are chortling that they took the debt issue off the table until after the 2012 elections, protected their favorite programs and created a supercommittee that will seduce the GOP into a tax increase.

Ignore that bragging. The easy answer is that politicians of both parties were the victors and taxpayers are the ones left in the cold.

In other words, the budget deal was a victory for the political establishment.

Here’s why Republicans are winners. They get to tell their tea party activists that they forced Obama to cut spending. It doesn’t matter that federal spending will actually be higher every year and that the cuts were based on Washington math (a spending increase becomes a spending cut if outlays don’t climb as fast as some artificial benchmark).

They also get to tell their anti-tax activists that they held the line. Perhaps most important, the supercommittee must use the “current law” baseline, which assumes that the 2001 and 2003 tax cuts expire at the end of 2012. But why are GOPers happy about this, considering they want those tax cuts extended? For the simple reason that Democrats on the supercommittee therefore can’t use repeal of the “Bush tax cuts for the rich” as a revenue raiser.

This means that most Republican incumbents are well-positioned to win re-election.

Here’s why Democrats are winners. Thanks to the magic of government math, despite all the talk of budget cuts, discretionary spending will be more than $100 billion higher in 2021 than it is this year. And since defense spending in Iraq and Afghanistan presumably is winding down, this means even more money will be available for domestic programs.

In addition to telling the pro-spending lobbies that the gravy train is still on the tracks, they also get to tell the class-warfare crowd that there’s an improved likelihood of higher taxes for corporate jet owners and other “rich” people. Notwithstanding GOP assertions, nothing in the agreement precludes the supercommittee from meeting its $1.5 trillion target with tax revenue. The 2001 and 2003 tax legislation is not an option, but everything else is on the table.

This means that most Democratic incumbents are well-positioned to win re-election.

It’s worth pointing out that this doesn’t mean all Republicans and all Democrats are happy about the deal. The hard-core conservatives are upset that the deal is mostly smoke and mirrors on the spending side and that there may be a tax-increase trap on the revenue side.

The hard-core liberals, by contrast, are angry that there are any spending cuts, even ones based on Washington math. Moreover, they want higher tax rates on upper-income taxpayers today, not a supercommittee that may or may not follow through on soak-the-rich policies in the future.

One group of people, however, unambiguously got the short end of the stick in this budget deal. Ordinary Americans are caught in the middle. They’re not poor enough to benefit from the federal government’s plethora of income-redistribution programs. But they’re not rich enough to have the clever lobbyists and insider connections needed to benefit from the high-dollar handouts like ethanol subsidies and bank bailouts.

Instead, middle-class Americans play by the rules, pay ever-higher taxes, and struggle to make ends meet while the establishment of both parties engages in posturing as America slowly drifts toward a Greek-style fiscal meltdown.