Now the Welfare Mess
OCTOBER 01, 1962 by HENRY HAZLITT
When the Senate rejected President Kennedy’s Medical Care for the Aged bill by the narrow vote of 52 to 48, he denounced the vote as "a most serious defeat for every American family… We have to decide," he continued, "the
Was the defeat of the medicare bill a defeat, or was it really a victory, for most American families? May it not at least be better to "stand still" for a while than to keep going in the wrong direction—further and further away from individual initiative and self-help, and deeper and deeper into the paternalistic welfare state?
How deep we have already got into the welfare state is documented in the July monthly letter of the First National Bank of
Limit to Taxes
This tremendous total does not include such welfare-related activities as farm price supports, urban renewal, aid to depressed areas, and so forth.
The money to pay these gigantic welfare benefits did not come out of some magical fourth dimension. It came out of taxes—nearly half out of a flat tax on payrolls. If the employer’s contribution is considered to be in lieu of higher pay for the worker (as in the long run it must be)the tax on the workers is now at 61/4 per cent. The combined tax is now scheduled to rise to 71/4 per cent next year, to 81/4 per cent in 1966, and to 91/4 per cent in 1968. The President’s medicare program, if enacted, would add another 1/2 of 1 per cent. Yet even Secretary Ribicoff declared last February : "I think we have reached a stage of almost maximum taxation under social security. In my mind, I place that at 10 per cent of payroll."
Rates have to be raised to keep the program solvent. But it is a real question whether presently scheduled rates are high enough to do this. No serious thought is given to the enormous "unfunded liabilities" already assumed by the social security program. Official actuaries have placed these at $350 billion. One former actuary places them at $650 billion.
Yet hardly a week goes by in which a further piling up of liabilities is not recommended. Several Administration proposals would “liberalize" unemployment insurance further.
In the last year or so, reports of abuses and scandals in the welfare programs have been mounting. The bank letter cites a few. From
It is obvious that handing out generous welfare benefits to idle people while imposing heavy tax burdens on those who work and produce can only discourage ambition and responsibility, work, production, and economic growth. The President’s medicare program would give heavy (unearned) benefits to the present aged and load the cost onto the present young.
The whole social security system is in urgent need of re-examination.
Reprinted by permission from Newsweek,