In a previous comment I hypothesized a sudden end to welfare and what the effect would be on family structures. In response, one of the commentators said that such a thing had been done before (in the 1800’s) and that it was Dickensian and there would be a return of the “poor house”. In the video above you can see a complete Q&A with the economist Milton Friedman on the affects and side effects of the welfare state. I recommend watching the debate between him and the idealistic 70’s students and others. It is too bad that his lessons are being learned the hard way.
The “War on Poverty” – started with great idealistic goals – has failed. Don’t get me wrong. It has had positive and negative effects. Look at the graph below of the poverty rate in the US:
The data was only tracked starting from 1959. The initial decline is out of a recession and was the norm prior to that. It would cycle between 5 and 25% along with the economy. First of all, let’s look at the positive. The War on Poverty and Welfare has kept the poverty rate stable. It has specifically helped the temporary poor during economic crises. Those who are not caught up in long term poverty stay out of it and are helped back out through these programs. What this gets rid of is the historic peaks of poverty in the 20 – 25% range seen during economic crises of the past. But this is mitigated by the extremely negative effects of such a manipulation of the natural economic cycle. What has been created is something that did not exist before the War on Poverty. A permanent underclass of 15% that are stuck forever in poverty. It has decreased social mobility. It has kept the number from falling below 10% as it did in previous decades and centuries. It has increased the gaps between rich and poor.
And it has destroyed the family of this 15% by providing an alternative social structure to the family. If welfare ended tomorrow, we would see an increase in the number of poor for years at a time during recessions. But we would see greater declines below 15%, greater mobility, and fewer social issues such as the breakup of the family. In my mind, the negatives of the welfare state far outweigh the positives. The bottom line is it doesn’t work.
Poor houses are not some horrid thing. The welfare state is a poor house. Public housing plus food stamps is the government equivalent. We should decry the end of the poor house because we took away the private and much more effective way of dealing with the poor. There is zero chance of a return to the industrial era world of Dickens in the UK. We live in a different place and a different time. We would have more positive benefits from a return to private charity over government programs. We would put families back together and end the permanent underclass.
The most important thing we can do to help the poor is NOT welfare. It is economic growth. Growing economies are the largest single factor to help the poor. And if you don’t believe me, just go ask India. Economic Freedom and less government interference is the key to helping the poor. Stop making people get licenses for cutting hair or doing nails or other economic enterprises. Stop interfering with small businesses with incredible burdens like Obamacare. Stop creating minimum wages that drive businesses towards automation and greater efficiencies and let people work. Stop “helping” so much and get out of the way. That is the best way you can help.