The Social Safety Net. What are the Alternatives?

Binyamin Appelbaum and Robert Gebeloff had an interesting piece in the NYT this weekend entitled “Even Critics of Safety Net Increasingly Depend on It.”  An early quote provides the context:

 The government safety net was created to keep Americans from abject poverty, but the poorest households no longer receive a majority of government benefits. A secondary mission has gradually become primary: maintaining the middle class from childhood through retirement. The share of benefits flowing to the least affluent households, the bottom fifth, has declined from 54 percent in 1979 to 36 percent in 2007, according to a Congressional Budget Office analysis published last year.

Rather than restating a host of projections that many of us know all too well, the remainder of the piece works through a variety of vignettes of individuals—largely middle class or lower middle-class–who depend on various parts of the welfare state (e.g., Medicare, Social Security disability). In most cases, they  recognize the problem of fiscal imbalances and they detest liabilities being passed on to future generations; many seem like rank-and-file tea party advocates who advocate cutting the size of government.  At the same time, they have few alternatives to the safety net. There comments are in many ways tragic. Here is one example:

She [Barbara] believes that she is taking more from the government than she paid in taxes. She worries about the consequences for her grandchildren. She said she would like politicians to propose solutions.

“We’re reasonable people,” she said. “We’re not going to say, ‘Give it to me and let my grandchildren suffer.’ I think they underestimate seniors when they think that way.”

But she cannot imagine asking people to pay higher taxes. And as she considered making do with less, she started to cry.

“Without it, I’m not sure how I would live,” she said. “With the check I’m getting from Social Security, it’s a constant struggle on making sure that I pay my rent and have enough left for groceries.

“I haven’t bought a Christmas present, I haven’t bought clothing in the last five years, simply because I can’t afford it.”

While I doubt that there is anything approaching a random sample in this piece, the stories are touching and worth reading as you reflect on the long-term liability crisis. The long-term fiscal imbalances cannot be addressed without significant reform in the largest entitlement systems and increases in revenues. But several of the characters in this article (1) recognize this fact but (2) clearly have no sense of how they could survive without the current levels of support.

Obviously, the expansion of the safety net has been accompanied by changes in social norms and the displacement of private institutions. At one time, people like Barbara might have been confident that their extended families and congregations would never let them fall into abject poverty in the absence of public programs. But it is difficult to imagine that a significant reduction in entitlement spending would lead to a revivification of a world that has long passed, at least on a timeline that would be relevant to current beneficiaries.

Reform will come—the status quo simply cannot be maintained. But reform will impose a great deal of pain in a nation where so many have come to depend on the state for so much and there are few live alternatives.

EDITORIAL UPDATE: Those interested in more of Marc’s thoughts on this subject should look here as well.

14 thoughts on “The Social Safety Net. What are the Alternatives?

  1. The goal of the collectivist politician is power. In the democratic Western World,for the most part,that power can be achieved by buying votes. Votes can be bought by promising people “pie in the sky” social welfare programs called “Entitlements.” But before any transfer of wealth can proceed a collectivist needs a constituency of dis-functional citizens.And,in order to make them dis-functional and dependent the pillars that support self responsibility and self reliance must be undermined. In America,before the New Deal and the Great Society most people relied on their families,their churches,private associations,private charities and their own initiative to survive hard times. But gradually all of the above were replaced by a so called government “safety net.” This “safety net” was funded by taxes,sometimes forcibly taken out of people’s paychecks, and by borrowing and deficit spending on a large scale. By undermining the pillars of a free society (low taxes,sound money,light regulations on business,little or no public debt etc.) the economic system was destroyed to the point of a large segment of the population being forced to rely on government assistance.for survival.This eventually led to the Middle Class,as Lenin proclaimed,to be “ground between the forces of taxation and inflation” in order to pay for the programs and support the bureaucracy that runs it. Today,the American Middle Class is shrinking at an alarming rate. It is being crushed by taxes,inflation and debt. Of course the demagogue collectivist politicians never blame government for the problem,but instead, go on a campaign of Class Warfare. They blame the so called “rich” for the problems of the many and call for more and higher taxes and more stringent regulations which in essence, caused the problems in the 1st place. This is an age old tactic used by politicians from the beginning of time. America was built by a pioneering spirit of self reliance and individual responsibility and initiative. Things that are lacking in today’s “victim” generation. Only by dismantling the bankrupt Welfare State and returning to a nation of independent self reliant citizens can America once prosper again. This is,without a doubt, a very difficult task to achieve. But it can be and must be done for the sake of future generations.

  2. The way to deal with this is to exempt current recipients of the various welfare programs (including Social Security and Medicare which arguably are or could be paid for in advance by recipients).

    Incentives matter. You can’t blame people for responding to them. Change the incentives and you will get a different result.

  3. You know, I see a lot of these sorts of broad assertions that extended family and churches would have, in the past, picked up the slack for impoverished elderly and disabled. I have yet to read, however, any scholarship suggesting this is true. I’m not saying it’s not. Certainly, my great-great-grandmother lived with my Mom’s family until she passed away (my 3G, not my Mom) in the mid-1950s. I’m just hesitant to generalize from that single example, and I wonder what the research shows.

    It’s my understanding that Social Security didn’t just rise sui generis from the mind of Franklin Roosevelt as a cynical attempt at “vote buying.” Rather, poverty rates among the elderly and disabled were very high and suffering was widespread. Social Security was a response to this. True? If so, can we really expect churches and families to pick up the slack where they didn’t before? I don’t know, but I don’t find unsupported assertions that they will all that convincing.

  4. My parents have pension income of just under onehundredthousand per year and about a million in investments. They are in their mid seventies. They collect social security income on top of that. They have collected since they were 63. My in-laws collect about the same in pensions and have even more invested. They also collect social security. They have collected since they were 65. There is something wrong with this picture.

    Social security, as it was originally conceived, was supposed to keep old people from finishing their days in the streets. It was never meant to be gravy for the affluent. I believe a little means testing would go a long ways towards resolving some of the funding shortfalls. Also, eliminating the cap on the amount of earned income subject to payroll tax would help.

    1. Progressive indexing would be quite useful (e.g., benefits for low wage workers are indexed as they currently are, benefits for high wage workers are indexed with the CPI, with moderate wage workers getting a blend). The chief objection from the left is that any efforts to transform Social Security into a means tested program with transform it into a poor person’s program (i.e., it will be transformed from a universal “insurance” program into a “welfare” program) and this will make it politically vulnerable.

      1. Given that the program is completely invulnerable, I would welcome any step which would make the program vulnerable.

  5. Everett…..There are plenty of sites on the internet that will explain how, previously to Social Security, nobody was thrown into the gutter to die of starvation. Just google private charity before Social Security or any such queries. However,one of the main reasons that Social Security is bankrupt today is that 80 years ago the average American only lived about 58 years, Today the average life expectancy is around 78 to 80 years. In other words people are living longer and healthier lives. I would say that 75 years old is replacing 65 years old as a retiring age.

    1. If you take the longer life expectancy and add (1) changing demographics reducing the number of taxable workers per beneficiary (2) growth of payments above the CPI (indexing uses the CPI-W), and (3) the use of trust funds that are not genuine stores of wealth, and you have a pretty good recipe for trouble.

  6. The idea that an elderly person without gobs of money would maintain his/her own household is a post-war phenomenon in America. Prior to WWII, elderly or spinster relatives lived with their extended families, or were rotated from family member to family member. They slept wherever a bed could be set up (or, more commonly, a pallet could be thrown) and were expected to contribute to the host family in some way, by cleaning house, minding children, spinning wool, or whatever they were capable of doing. It’s the idea that non-working elderly should be subsidized by society to maintain the same quality of life they had before retirement – with the associated cost of maintaining a separate household – that is bankrupting the country today.

    Add to that fact the fact that everybody “needs” more today than they did before 1945 – the cost of housing, utilities, telephones, computers, new clothes, more expensive medicine – and you see why living apart from one’s family, as an older person, is prohibitively expensive. My own father grew up in a house that had been passed down in the family for 100 years (i.e. paid for), had no power or running water (the well was dug 150 years ago), no phone, and virtually no medical care available. If you got sick, you died. People simply got by with less out of pocket expenses. Oh and his grandfather lived in another (paid for) house on the same farm but ate with his family (my father’s mother washed and mended his clothes and cooked for him). My father’s grandmother simply died one day – likely from a stroke but nobody really knew.

    My father’s mother and her sister were orphaned at 4 and 6 respectively. Their great-grandfather farmed them out to one of his grandchildren who had 4 boys around the same age. It’s just what people did “back then”.

    1. Let’s be honest. This makes for a very unattractive picture of libertarianism.

      If a social democrat related this story to me and said, “This is what a society would look like under libertarianism” then, I, as a libertarian would feel the need to defend my positions. So what would I say?

      I would say something like, “given the reality of the social welfare state and its displacement of family care, no one who’s serious is proposing simply abolishing the thing tomorrow.

      Continuing, I would say: like the kitten who sprinted up to a high branch on a tree and finds it difficult to come down, we cannot get out of this mess instantly. What we are trying to do is replace 75 years of the non-development of civil society. We have to rebuild those structures. No one knows exactly how to do it. But the first step is weaning ourselves from the “heroin” of entitlement benefits through means-testing (no checks for rich people) and austerity (smaller checks for everyone). Then, perhaps more importantly, we must legalize the vast panoply of “blocked exchanges,” voluntary for-profit trades that are illegal merely by (democratic) fiat.

      I do not claim to know all the answers. But I do know that this is a question we must begin working on ASAP.

  7. Don’t you wonder, though, if rent prices would drop due to less government money in the system? Rent is based on supply and demand. If suddenly seniors received less in social security, or someone who was receiving government aid received less…are you telling me that all of those landlords supplying cheap housing would not respond in kind? They want to be receiving rent. They want to fill their apartments and condos with renters.

    So don’t you think that part of the reason rent is at a certain $$ level is due to the fact even poor people and those on S.S. can afford it? Which means adding government support to the economy actually increases the cost of living b/c people know even the poorest have a certain amount of income.

    Just a thought…

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