Book Review: The Wayward Welfare State by Roger A. Freeman

(Hoover Institution on War, Revolution and Peace, Stanford, CA 94305)
511 + xvii pages • $35.00 cloth
      The book’s principal findings and conclusions are also available in a paperback volume, A Preview and Summary of “The Wayward Welfare State” 112 + xii pages • $8.95

Dr. Freeman ponders the prospect of Western Civilization as he examines the enormous human and material resources that the American people over the past quarter-century have invested in hundreds of governmental programs, some of which originated in the New Deal but most during the New Frontier and Great Society eras. This book attempts to evaluate the cost of these programs as well as their returns, positive or negative. It is a masterful study by a man who has been an economist with Stanford’s Hoover Institution since 1962, and is now Senior Fellow Emeritus.

Today the nation is faced with crucial decisions over the division of resources between the requirements of national defense and demands for domestic services. Aggravating the issue is the accompanying struggle for more or less redistribution of income from the more productive to the less productive segments of society.

These entitlement or transfer programs, including Social Security, grants-in-aid to state and local governments, and subsidies to farmers and others, now cost Uncle Sam in excess of $400 billion a year, or 56% of total federal spending, compared with only 35% in 1960 and 27% in 1955.

This escalation in transfer payments can only undermine the drive to improve productivity, augment capital formation and restore prosperity. Total transfers are now far larger than total federal procurement, defense and nondefense, and total federal payroll, civilian and military. Indeed, they are greater than the 1981 defense budget and the 1981 total estimated expenditures for new plant and equipment in the U.S. combined. Hence Freeman’s justifiable assertion that our welfare state is “wayward,” i.e., out of control. Similar lack of control is evident throughout the West—in Canada, for instance, Scandinavia, Britain, France, Italy, the Netherlands, and West Germany—apart from, of course, Eastern Europe.

Witness the failure of social programs in health, education, housing, crime prevention and aid to families with dependent children. Welfarism has contributed to rising illiteracy, sagging productivity, more broken homes, more absent fathers, more unwed mothers, greater crime in all dimensions, and of course surging inflation and an increasingly sputter-and-spurt economy. Rightfully, Freeman thus poses the question: “Can Western Civilization survive?”

The problem President Reagan faces in trying to rein this wayward welfare state is an old one. President Roosevelt warned in his 1935 State of the Union message that “continued dependence on relief induces a spiritual and moral disintegration fundamentally destructive to the national fibre,” and declared: “The federal government must and shah quit this business of relief.” On signing the 1935 Social Security Act he said: “I can see the end of public assistance in America.”

President Kennedy likewise urged Congress and the nation to reverse the trend of welfarism. He signed a bill on July 26, 1962, “shifting the emphasis of the nation’s welfare program for the needy from the dole to rehabilitation,” saying that it “makes possible the most far-reaching revision of the public welfare program since it was enacted in 1935. This measure embodies a new approach—stressing services in addition to support, rehabilitation instead of relief, and training for useful work instead of prolonged dependency.”

Again, President Johnson, on signing the Economic Opportunity Act of 1964, said: “We are not content to accept the endless growth of relief or welfare rolls. We want to offer the forgotten fifth of our people opportunity and not doles.”

President Carter prepared a similar plan and stated in his accompanying message of August 6, 1977: “As I pledged during my campaign for the presidency, I am asking the Congress to abolish our existing welfare system, and replace it with a job-oriented program for those able to work and a simplified, uniform, equitable cash assistance program for those in need who are unable to work . . . combine effective work requirements and strong work incentives.”

The most impressive failure is Social Security, whose trust fund is fast approaching zero. Freeman argues that Social Security is increasingly insecure. He notes that it has a deliberately built-in antiwork bias, with its limits on wage and salary income that can be earned by bene ficiaries from ages 65 to 72. What is equally significant: more than half of the workers no longer wait until age 65 to collect retirement benefits: half the men and nearly two-thirds of the women who demanded and were awarded Social Security in 1976 were 62 to 64 years old.

The question whether America and Western Civilization can survive is indeed relevant. Welfarism has become a state of mind; Washington has become a public trough. Government, the problem, is still looked upon as a solution. Can a people who voted themselves into this mess vote themselves out of it? New York economist A. Gary Shilling noted that most Americans are now dependent on government pay, government pensions, welfare aid, subsidies, bail-outs or other forms of income derived from the public treasury. Such dependency increased from 36.7% in 1960 to 50.2% in 1979.

Roger A. Freeman has performed a public service with this monumental work, which amply documents the foresight of Mr. Justice Brandeis who warned us a half century ago that: “Experience should teach us to be most on our guard to protect liberty when the government’s purposes are beneficent . . . The greatest dangers to liberty lurk in insidious encroachment by men of zeal, well-meaning but without understanding.”

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