The Right Direction for Welfare Reform

The Present Welfare System Has Produced Disastrous Consequences

MAY 01, 1995 by LAWRENCE W. REED

Filed Under : Poverty

One of America’s greatest strengths has always been its extensive network of private efforts to solve personal, family, and community problems. When it comes to dealing effectively with such social concerns, government is not by a long shot the only game in town.

Indeed, given the expensive quagmire that government is widely conceded to have created with welfare programs, private efforts are providing a beacon for progress and reform. As management expert Peter Drucker has put it, agencies in the private sector “spend far less for results than governments spend for failure.” What America needs, he says, is “a public policy that establishes the nonprofits as the country’s first line of attack on its social problems.”

Private, nonprofit agencies are spearheading an unprecedented number of local programs to combat hunger, illiteracy, homelessness, welfare dependency, drug use, teen pregnancy, and other social problems. The secret to the success of such programs is accountability, since they are run by local people who are closest to the problems and have a strong incentive to manage resources wisely and get the job done. Michigan is home to two new and innovative programs that deserve special attention.

In October 1991, the State of Michigan ended its General Assistance (GA) program for able-bodied, single adults. What has happened since is a case study of the private sector cleaning up after a government mess. In the mid-Michigan town of Harrison, a group of concerned volunteers wanted to help former GA recipients by easing their transition to productive self-reliance. These volunteer efforts created a unique privately funded assistance center called Hard Times Cafe.

Every Thursday afternoon, former GA recipients and other needy people, ranging in age from 18 to 63, gather at St. Athanasius Church for a hot meal, companionship, and innovative counseling–all designed to instill new incentives for gaining control of their lives. They share their concerns in an atmosphere of trust and respect. They learn thinking, planning, and organization skills, as well as good work habits.

They also earn “Hard Times Dollars,” which are redeemable in personal needs items from soap to toothpaste. Recipients earn the goods, donated by churches and businesses, by displaying positive work habits while performing designated community service work. They do carpentry, maintenance, and gardening work; they plant trees; and they help out at a local YMCA camp. With sufficient “dollars” they can even obtain vouchers for rent, house payments, taxes, utilities, transportation, and medical needs, funded through private grants.

The government welfare system requires people to constantly affirm their inability to meet their personal and family needs. Hard Times Cafe does just the opposite: it infuses a “can-do” spirit of independence and rewards positive, pro-work attitudes. The project’s organizers report remarkable success.

Meanwhile, in Grand Rapids, another locally conceived program is helping people rebuild their lives. Faith, Inc., is a non-profit organization started by Heartside Area Ministries to help the homeless get jobs, training, and counseling.

During the daytime, Faith’s director, Verne Barry, seeks out homeless people, welfare recipients, and otherwise discouraged individuals from the area and offers them a chance to help themselves. In the evening, Faith, Inc., uses a portion of a 100,000-square-foot manufacturing warehouse owned by Hope Network (a work facility for the developmentally disabled), which is normally closed after 4 p.m. Faith employees teach these individuals, “whom everyone else has written off,” to perform light assembly and packaging jobs—real work needed to fill orders for private contracts awarded to Hope Network. At the end of the week, each employee receives a paycheck, many for the first time in years.

Faith ensures each individual receives counseling from a variety of private organizations in order to improve their work habits and lifestyles and overcome substance abuse and emotional problems. With very limited resources, Faith has helped several hundred people get off public assistance, either fully or partially, and many have moved on to higher paying, steady jobs.

The key to Faith’s success, according to Barry, is that its clients work. He questions government programs which spend millions of dollars annually to teach and train people “how to work” in lieu of the real thing. “At Faith, we don’t send them to ‘assessment school’ for six months to decide what career they would like,” he said. “We help them start working immediately. It’s essential to enhancing their self-worth.”

The experience of Hard Times Cafe and Faith, Inc., adds credence to this comment from Marc Bendick of the Washington, D.C.-based Urban Institute: “Through their small scale, non-bureaucratic nature, local knowledge, and personal relationships, neighborhoods, families, churches, and voluntary associations can respond rapidly, accurately and in a more acceptable manner to local and individual needs in ways that large, formal institutions such as government agencies cannot.”

Welfare programs operated by government may well be the most unpopular of all government initiatives–criticized by the social scientists who observe the effects, disdained by the taxpayers who pay the bills, and even unloved by many of the people who collect the benefits. Thirty years and billions of dollars after Lyndon Johnson fired the first shot in the War on Poverty, the enemy has won. The poverty rate has been essentially flat to slightly higher ever since. A new consensus seems to be emerging from among those who work closely with the poor: welfare has made worse the very problems it was intended to cure, and created a few new ones along the way.

Private initiatives like Hard Times Cafe and Faith, Inc., stand in stark contrast to their government counterparts that perpetuate poverty, undermine the work ethic, break up families, and promote illegitimacy. Unlike private efforts that stress character building, one-on-one mentoring, and a spiritual dimension, the impersonal public dole does nothing to resolve the behavioral poverty that keeps millions in demoralizing dependency. In the words of John Fund of the Wall Street Journal, “Ask yourself: If you had a financial windfall and wanted to help the poor, would you even think about giving time or a check to the government?”

The present welfare system has produced such disastrous consequences that it’s hard to imagine how a radical overhaul could do worse. The remedy is privatization—families assuming responsibility for their loved ones, churches meeting the needs of their flock, neighbor helping neighbor, private organizations assisting those who “fall through the cracks.”

True welfare reform may actually mean learning to trust ourselves again. That would indeed be revolutionary.


May 1995



Lawrence W. (“Larry”) Reed became president of FEE in 2008 after serving as chairman of its board of trustees in the 1990s and both writing and speaking for FEE since the late 1970s. Prior to becoming FEE’s president, he served for 20 years as president of the Mackinac Center for Public Policy in Midland, Michigan. He also taught economics full-time from 1977 to 1984 at Northwood University in Michigan and chaired its department of economics from 1982 to 1984.

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