Freeman

ARTICLE

Welfarism Gone Wild

MAY 01, 1972 by HENRY HAZLITT

Henry Hazlitt is well known to FREEMAN readers as author, columnist, editor, lecturer, and practitioner of freedom. This article will appear as a chapter in a forthcoming book, The Conquest of Poverty, to be published by Arlington House.

Both Social Security and unemployment compensation were proposed in large part on the argument of Franklin D. Roosevelt and others in 1935 that they would enable the government to "quit this business of relief."

Though all the social "insurance" programs he asked for were enacted, together with a score of others, and though all of these supplementary or "substitute" programs have been constantly enlarged, direct relief, instead of showing any tendency to diminish, has increased beyond anything dreamed of in 1935.

The number of welfare recipients in New York City alone jumped from 328,000 in 1960 to 1,280,000 in October, 1971 (exceeding the total population of Baltimore) and was still growing. On March 10, 1971, the U. S. Department of Health, Education and Welfare reported that more than 10 per cent of the residents of the nation’s twenty largest cities were on welfare. In New York City, Baltimore, St. Louis, and San Francisco, it was one person in seven; and in Boston, one in five. The Mayor of Newark, N. J. told Congress on January 22, 1971 that 30 per cent of the population in his city was on relief.

For the whole country, the number of people on welfare grew from 6,052,000 in 1950 to 7,098,000 in 1960, to 9,540,000 in 1968, to 12,912,000 in September 1970, and to 14,480,000 in September, 1971.

Because payments to individuals kept increasing, total expenditures for relief grew still faster. Here is a condensed record:

Fiscal

year

All Funds

(000)

Federal Funds

(000)

1936

$     349,892

$     20,202

1940

1,129,660

279,404

1945

1,028,000

417,570

1950

2,488,831

1,095,788

1955

2,939,570

1,440,771

1960

4,039,433

2,055,226

1965

5,868,357

3,178,850

1970

14,433,500

7,594,300

1971

18,631,600

9,932,000

Sources:

U. S. Department of Health, Education and Welfare, NCSS Report

 

F-5 July 6,   1971;  and    Social Security Bulletin, December, 1971.

 

In the fiscal year 1971, relief expenditures of $18.6 billion were running at more than four times the rate of 1960, more than sixteen times the rate of 1940, and more than 53 times the rate of 1936.  

To economize on figures, I have not only confined myself to five-year interval comparisons, but I have not shown the division between state and local funds. Yet these comparisons are part of the explanation of the skyrocketing growth of these relief figures. It will be noticed that while the Federal contribution to direct relief expenditures was only 5 per cent in 1936, it was 25 per cent in 1940, 44 per cent in 1950, and 53 per cent in 1971. Yet relief was actually administered at the state and local level. In fact, it was for the most part administered by the cities and counties. The localities contributed only 26 per cent toward the total cost of the relief they handed out in 1940, only 11 per cent in 1950, 13 per cent in 1960, and 11 per cent in 1970. When a city government is contributing only 11 cents of its own for every dollar it pays out to relief recipients, it can distribute its political favors cheaply, and has little incentive to exercise vigilance against overpayment and fraud. Most of those who discuss the mounting cost of direct relief treat this figure in isolation as if it represented the total cost of "the war against poverty." In fact, it is only a small fraction of that cost, recently running in the neighborhood of not much more than a tenth. The following figures are from an official table of "Social Welfare Expenditures Under Public Programs."1

Year

Welfare Expenditures (millions of dollars)

State and Federal

Total                   Federal              Local

1935

1940

1945

1950

1955

1960

1965

1968

1970

1971

$    6,548

8,795

9,205

23,508

32,640

52,293

77,121

113,839

145,350

170,752

$ 3,207

3,443

4,399

10,541

14,623

24,957

37,720

60,314

77,321

92,411

$ 3,341

5,351

4,866

12,967

18,017

27,337

39,401

53,525

68,029

78,341

 

Revenue Sharing?

This gigantic total of $171 billion for "social welfare" is more than triple the figure for 1960 and more than 26 times the figure for 1935. Yet the 29-fold increase in Federal expenditures for welfare in the 35-year period, instead of reducing the burden on the states and cities, as originally promised, has been accompanied by a 23-fold increase even in that local burden.

A similar result is evident if we consider the cost of direct relief alone. Though the Federal government was contributing only 5 per cent of that total cost in 1936 compared with 53 per cent in 1971, the cost to the States and localities has increased 26-fold. So much for the theory that "revenue-sharing", or increased Federal contributions, do anything in the long run to reduce the burden of welfare spending on the states and localities. They lead merely to a total increase in that spending.

So the tendency of welfare spending in the United States has been to increase at an exponential rate. This has also been its tendency elsewhere. Only when the economic and budgetary consequences of this escalation become so grave that they are obvious to the majority of the people — i.e., only when irreparable damage has been done — are the welfare programs likely to be curbed. The chronic inflation of the last 25 to 35 years in nearly every country in the world has been mainly the consequence of welfarism run wild.

The causes of this accelerative increase are hardly mysterious. Once the premise has been accepted that "the poor", as such, have a "right" to share in somebody else’s income — regardless of the reasons why they are poor or others are better off — there is no logical stopping place in distributing money and favors to them, short of the point where this brings about equality of income for all. If I have a "right" to a "minimum income sufficient to live in decency", whether I am willing to work for it or not, why don’t I also have a "right" to just as much income as you have, regardless of whether you earn it and I don’t?

Once the premise is accepted that poverty is never the fault of the poor but the fault of "society" (i.e., of the self-supporting), or of "the capitalist system", then there is no definable limit to be set on relief, and the politicians who want to be elected or re-elected will compete with each other in proposing new "welfare" programs to fill some hitherto "unmet need", or in proposing to increase the benefits or reduce the eligibility requirements of some existing program.

No complete count seems to exist anywhere of the present total number of welfare programs. The $171 billion expenditure for social welfare in the fiscal year 1971 is officially divided into roughly $66 billion for "social insurance", $22 billion for "public aid", $11 billion for "health and medical programs", $10 billion for "veterans’ programs", $56 billion for "education", nearly $1 billion for "housing", and $5 billion for "other social welfare". But these sub-totals are in turn made up of 47 different groups of programs, and many of these in turn consist of many separate programs.²

A Jungle of Agencies

The weary taxpayer reads about such things as food stamps, job training, public housing, rent supplements, "model cities", community-action projects, legal services for the poor, neighborhood health centers, FAP, Office of Economic Opportunity (OEO), Medicaid, Old Age Assistance (OAA), Aid to the Blind (AB), Aid to the Permanently and Totally Disabled (APTD), Aid to Families with Dependent Children (AFDC), General Assistance (GA), manpower training programs, Head Start, VISTA, and on and on, and has no idea whether one is included under another, whether they duplicate each other’s functions, which, if any, have been discontinued, or which are just about to start. All he knows is that there seems to be a new one every month.

In 1969, Mrs. Edith Green, a Democratic Congresswoman from Oregon, asked the Library of Congress to compile the total amount of funds a family could receive from the Federal government if that family took advantage of all the public assistance programs that were available.

Taking a hypothetical family of a mother with four children — one a pre-schooler, one in elementary school, one in high school, and one in college — the library informed her of the following:

This family could collect $2,800 from public assistance; $618 from medical assistance because of AFDC; $336 in cash value for food stamps; and about $200 from OEO for legal services and health care. The family would also be entitled to public housing or rent supplements ranging in value from $406 to $636.

The preschool child would be entitled to enter Head Start, the average cost being $1,050 for each youngster. The child in high school would be eligible for $1,440 worth of services from Upward Bound and the youngster in college would be eligible for an education opportunity grant that could be worth anywhere from $500 to $1,000. He also would be eligible for a National Defense Education Act loan, and if he took advantage of the forgiveness feature, he could get an outright grant of $520. He would also be eligible for a work-study program costing in the neighborhood of $475. If the mother wanted to participate in the job opportunity program, this would be worth $3,000.

So this imaginary family, a mother with four children, would be able to take advantage of grants and services worth $11,513 for the year.

In another hypothetical case, a mother with eight children could total an annual welfare income of $21,093.³

In 1968 Congressman William V. Roth, Jr. and his staff were able to identify 1,571 programs, including 478 in the Department of Health, Education and Welfare alone, but concluded that "no one, anywhere, knows exactly how many Federal programs there are."

In February, 1972, administration witnesses testified before a Congressional committee that there were 168 separate Federal programs geared in whole or in part to combating poverty. But as the total expenditures of these 168 programs were only $31.5 billion (out of $92 billion of Federal "social welfare expenditures") this must have been an incomplete list.

While the Federal government keeps piling up new welfare programs, under Democratic or Republican administrations, almost every individual program shows a tendency to snowball. One reason is that when Congressmen propose a new program, the expenditure set in the initial year is almost always comparatively moderate, to allay opposition — the "entering wedge" technique; but annual increases in spending are built into the law. Another reason is that when a new welfare program is launched, it takes people a little while to catch on to it; and then the stampede begins. A still further reason is that the bureaucrats who administer the program — eager to demonstrate their own vicarious compassion and liberality, as well as the indispensability of their jobs — not only interpret the eligibility requirements very leniently, but actively campaign to advise potential "clients" of their "legal right" to get on the rolls.

There has been a great deal of discussion in the last few years regarding the extent of fraud and cheating among those on relief. From the very nature of the problem this can never be exactly known; but the evidence indicates that it is substantial.

In January, 1971, after a door-to-door check on welfare cases, the State of Nevada struck about 22 per cent of the recipients — 3,000 people — from the relief rolls. The State Welfare Director reported that they had been cheating taxpayers out of a million dollars a year through failure to report income from other sources, including unemployment benefits. The director blamed the frauds on a Federal regulation that permitted welfare applicants to obtain aid simply by stating that they met all qualifications.

In Michigan, state welfare officials discovered cases of money being pocketed by welfare clients for dental work which was never performed.

In California, a group of San Francisco Bay area residents — all fully employed — conducted an experiment to prove to county supervisors how easy it is to get on relief. They traveled the circuit of welfare offices, applying for and getting on welfare, usually without even furnishing identification. Governor Reagan said that "one managed to get on welfare four times under four different names in one day — all at the same office."

In his message to the California legislature, Governor Reagan pointed out: "The same government that requires a taxpaying citizen to document every statement on his tax return decrees that questioning a welfare applicant demeans and humiliates him."

A spot check of welfare rolls in New York City by the General Accounting Office, reported in September, 1969, showed that 10.7 per cent of all families on relief there did not meet the eligibility requirements, and that 34.1 per cent of those who were eligible were being overpaid.5

In 1971, New York City Comptroller Abraham Beame revealed that the city was losing $2 million a year as a result of forged checks. More millions were lost because people on relief falsely complained that they had not received their checks; they were mailed duplicates. Simply requiring those on relief to come and pick up their checks, rather than getting them by mail, lowered New York City’s welfare lists by about 20 per cent. It is impossible to know how much of the blame for the national and local welfare mess is to be put on relief cheaters and how much on loose administration. It is made so easy to get and stay on relief legally that cheating hardly seems necessary.

On January 12, 1969, The New York Times ran a front-page story under the headline: "Millions in City Poverty Funds Lost by Fraud and Inefficiency." It reported that "Multiple investigations of the city’s $122-million-a-year antipoverty program are disclosing chronic corruption and administrative chaos," and quoted an assistant district attorney as saying: "It’s so bad that it will take ten years to find out what’s really been going on inside the Human Resources Administration." The next day Secretary of Labor W. Willard Wirtz said that New York City had the worst administrative problem of any antipoverty program in any city in the country.

But the New York situation kept getting worse. In January, 1971, a welfare mother and her four children were assigned to the Waldorf Astoria, one of New York’s most elegant hotels, at a cost of $152.64 for two days. The City’s welfare agency claimed with a straight face that there was no room elsewhere. But many other routine practices of the City were almost as costly, with entire hotels "temporarily" filled with relief families at hotel rates. One family was put up at the Broadway-Central at a cost of $390.50 a week.. Another, a welfare family of fifteen, was put up at a Bronx motel at a rental that would add up to $54,080 a year.6

Dependent Children

Much the fastest growing relief program has been Aid to Families with Dependent Children (AFDC). In the ten years from 1960 to 1970 the number of people aided by this program increased from 3,023,000 to 9,500,000. Costs soared from $621 million in 1955 to $4.1 billion in 1970.

The nationwide cheating on this is probably higher than on any other welfare program. The reason is that a mother and her children, legitimate or illegitimate, become eligible for AFDC relief if there is no employed father present. The mothers report that the father has "deserted." "The fact is," according to one authority, "that in many cases the father never really deserts. He just stays out of sight so the woman can get on AFDC rolls. In slum areas, everyone knows this goes on. It is widespread in New York City." Governor Reagan reported that he knew there were 250,000 homes in California where the father had run out.

One of the fundamental causes for the huge and growing load of relief cases is that there is no adequate investigation of eligibility. The excuse offered by some welfare workers is: "It’s impossible to do adequate eligibility checks. There isn’t time. It’s a question of helping people who need help rather than catching people who need catching."

Still another reason why there is no adequate investigation of eligibility is that Federal bureaucratic regulations discourage it. As Governor Reagan has put it: "The regulations are interpreted to mean that no caseworker can challenge or question a welfare applicant’s statements."’

Instead of trying to reform this situation, the Department of Health, Education and Welfare seems mainly concerned to defend it. It has published and circulated widely a booklet called Welfare Myths vs. Facts. This turns legitimate criticisms into "myths" by grossly overstating them, and then produces questionable answers. For example:

"Myth: The welfare rolls are full of able-bodied loafers.

"Fact: Less than 1 per cent of welfare recipients are able-bodied unemployed males."

This figure, implying that it would have a negligible effect on welfare to find jobs for these men, is incredibly low. It is apparently achieved by treating any physical impairment, however trivial, as a qualification for family relief; it ignores employable women; and it ignores the fact that the average relief family consists of 3.7 persons, who would move off the rolls if the breadwinner went to work. Another example:

"Myth: Once on welfare, always on welfare.

"Fact: The average welfare family has been on the rolls for 23 months…. The number of long-term cases is relatively small."

A 23-month average for families on relief is hardly something to be complacent about, even if the figure is accurate. The Department’s own charts show that more than a third of those on welfare have been there three years or more. Moreover, the Department’s average does not count "repeaters." If a family were on relief for, say, 23 months, off a month, back on for another 23 months, and so on, it would not raise the average. Nor does any figure based on relief at any given point in time count the prospective remaining period each case will be on the rolls. Already families have been found on relief for three generations.8

Small wonder that President Nixon, in his State of the Union message of January, 1971, called the existing American relief system "a monstrous, consuming outrage."

 

—FOOTNOTES—

1 Statistical Abstract of the United States: 1971, table no. 430, p. 271, and Social Security Bulletin, December 1971.

2 See Social Security Bulletin, December 1971.

3 Human Events, December 13, 1969.

4 New York Times, February 16, 1972.

5 These examples were cited in an article "Welfare Out of Control" in U. S. News & World Report, February 8, 1971. By coincidence, Time and Newsweek also carried long feature stories on welfare in their issues of the same date, covering similar material.

6 Time, February 8, 1971.

7 U. S. News & World Report, March 1, 1971.

8 An excellent analysis Of the HEW Welfare Myths vs. Facts pamphlet appeared in The Wall Street Journal of January 27, 1972 by Richard A. Snyder, a member of the Pennsylvania Senate. 

ASSOCIATED ISSUE

May 1972

ABOUT

HENRY HAZLITT

Henry Hazlitt (1894-1993) was the great economic journalist of the 20th century. He is the author of Economics in One Lesson among 20 other books. He was chief editorial writer for the New York Times, and wrote weekly for Newsweek. He served in an editorial capacity at The Freeman and was a board member of the Foundation for Economic Education. 

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