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Friday, May 25, 2012

Government Beneficence and Other Fairy Tales

Every benefit is also a burden.

I admit I’m amused by the unceasing economic and political malarkey that flows from the pundits at MSNBC. Many of these gems come during its promos, which, as viewers of the network know very well, promote not its programs but all-pervasive government.

The two I have in mind today are from Lawrence O’Donnell and Rachel Maddow. Maddow states that “older Americans are doing okay even in these hard times” thanks to Social Security: “It is not a Ponzi scheme. It is not bankrupting us. It is not an outrage. It is working.”

In the other one O’Donnell indignantly defends the post-World War II GI Bill: “The GI Bill put my father through college. He then was able to earn a living to put his five kids through college. It’s the most successful educational program we’ve ever had in this country—and the critics called it . . . welfare.” Now according to Politifact (see link above), no one called the college benefits in the GI Bill “welfare.” (“Yet some fretted that the law’s unemployment compensation element would encourage laziness.”) But we’ll ignore O’Donnell’s untruth.

Where to begin? Starting with Maddow, her claim that Social Security is “working” appears less impressive than she must think when one recalls that it’s only a matter of taking money from one group of people and mailing checks to another group. Whether or not you think that is proper, it’s not rocket science. Yet the government has managed to screw it up, which does make Maddow’s claim look a little odd. Last year the Social Security trustees said the unfunded liability was $21.4 trillion. That’s “the difference between all taxes that will be paid and all benefits received over the lifetimes of everyone in the system now—workers and beneficiaries alike,” USA Today reported. (Medicare, which presumably Maddow also thinks is working, is even deeper in the hole.)

Maddow also misses the point that when Social Security transfers money from younger workers (and their children) to older folks, the recipients benefit at the expense of those who may be much less well off than they are. Does she realize that Social Security operates on a pay-as-you-go basis? This gives the program at least something in common with a Ponzi scheme. (I analyzed that claim here.) Maddow may think all this is just fine (I call it legal plunder), but she should at least give us a sign that she understands it.

O’Donnell’s Turn

What about O’Donnell? Despite the facts, I’ll assume he is correct to claim that the critics of the GI Bill called it “welfare.” Is there something wrong with calling it that? This issue can quickly get caught up in sentiment, since the GI Bill was passed to benefit World War II vets. (Money for college was not the only feature.) O’Donnell is indignant presumably because he regards “welfare” as a term of abuse. That may be because in the political context welfare indicates a forced transfer, arranged by government, from one person or group to another. Whatever you think of the GI Bill, there is no doubt it was a forced transfer. The armed bureaucracy took money from taxpaying wage earners (many of them vets) and gave it to other people. The law was passed in 1944, so the benefits weren’t part of the promised compensation package for (conscripted) members of the armed forces.

Moreover, it is undoubtedly the case that workers who did not go to college were financially worse off because some of their income was transferred to college students. Decide for yourself if that was proper.

Both O’Donnell and Maddow seem to want to pretend that government payouts are free, as though bestowed by Santa Claus or the tooth fairy. Obviously they are not. Rather, they are burdens, and those burdens often fall on individuals who are far less well off than the recipients of government beneficence.

  • Sheldon Richman is the former editor of The Freeman and a contributor to The Concise Encyclopedia of Economics. He is the author of Separating School and State: How to Liberate America's Families and thousands of articles.