WELFARE PROGRAMS ARE A BAD DEAL - by Judge Jim Gray

WELFARE PROGRAMS ARE A BAD DEAL - by Judge Jim Gray 01/06/08

Government minimum wage laws and welfare programs were designed to do good things. But like so many other well-intended efforts, they are a bad deal for almost everyone concerned. They are unhealthy for the poor, inappropriate for the wealthy, and conceptually flawed.


Let’s first address the poor. The great thinker Dr. Milton Friedman once said that “You very seldom find poor people testifying in favor of the minimum wage. The people who do are those who receive or pay wages much higher than the minimum.”  


One of the people Dr. Friedman was referring to was John F. Kennedy who, when he was still in Congress, testified that he wanted to pass minimum wage laws to protect the textile workers in his district from competition from the “cheap labor” in the South. Kennedy candidly acknowledged that “the effect of minimum wage law is to produce unemployment among people with low skills. And who are (they)? In the main, they tend to be teenagers and blacks, and women who have no special skills, or have been out of the labor force and are coming back.”


And Kennedy was right. Face it, there are some people who are actually not worth the $7.50 per hour that California now requires be paid for a minimum wage. So what happens when these laws are passed? Employers go to great lengths to reduce the numbers of the unprofitable employees that they hire or retain. Think “automatic check-out machines” at Home Depot and other similar stores. These machines are more cost effective than the minimum wage employees, even if you consider their purchase price and upkeep expenses. Consequently those people lose their jobs. 


So ask yourself, is it better for society to have fewer people paid a slightly higher wage, or is it more productive to have many more people actually employed?


In my view the answer is that society critically needs more entry-level jobs. That would beneficially address the needs of most teenagers, and also many people currently without job skills. It would also give them the opportunity to learn and demonstrate a work ethic. And when that happens, many of them will either quickly show their employers that they are worth more than they are being paid and get a raise, or they will move on to a different and higher-paying job.  


In that regard I am reminded of a bumper sticker I once saw that proudly proclaimed: “Broken English, Spoken Perfectly.” These are people who can get ahead if they are afforded the chance to pursue the American Dream. But under the welfare system that opportunity is mostly squandered.


Of course, there will always be people who cannot support themselves, so what is to happen with them? Well, for decades we have been putting those people on welfare programs. And what has been the result? Decades of poverty. In fact, since the beginning of the so-called “War on Poverty” in 1965, our country has spent more than $5 trillion trying to reduce the burdens of the poor. But what have we received for this enormous expenditure of resources? Mostly more poverty.


So these government welfare programs should not be abandoned because we are pinching taxpayer pennies or because we are uncaring about the poor. They should be abandoned because they do not work, and are actually a vicious trap for the poor.


What does work? America has become great because of what I call the four pillars that are guaranteed in our Constitution, which are Liberty, Property Rights, Free Markets and Free Minds, and a fair and foreseeable Administration of Justice. We should do everything we reasonably can to bring everyone in our country into the mainstream of those four pillars.


But that certainly does not end the inquiry. What about those people who obtain jobs for $6 or so per hour? Certainly people cannot live in today’s world while earning $48 gross for a full working day. What happens with them, or the people who are unemployed?


Well, the first thing to do after we end the welfare programs is to establish a dollar-for-dollar tax credit up to a certain maximum amount for donations to private charities that address the needs of the poor. Private charities will do this work far more productively than the government.  


The second thing to do, as was addressed in an earlier column, is to appreciably reduce the obstacles for people to pursue entrepreneurial opportunities. Today huge numbers of people work illegally “off the books” in areas like hairstyling, tailoring, auto repair, “gypsy” taxi cabs, and ad hoc catering and child care services. We should change the system so that they can do this work legally and above-board. Then their customers can decide if their work is worth the money or not.


And thirdly, we simply must improve our government-run school system. Stay tuned for that one, because it will be addressed here in a future column.


Finally, for those people who still “fall through the cracks,” we should provide them with dormitory-style living and two or three hot and nutritious meals per day under a system of government contracts. Everyone in our society should have somewhere to go that is safe, warm and dry. But our tax money should actually be spent for food, clothing and shelter, and not for non-necessities, administration and fraud.  


Of course those who are able should be required to work at chores around the premises in partial payment for the benefits received. But overall this approach would at the same time provide a secure and safe environment for the poor, while also providing them with an important incentive “to earn the extra dollar” and improve their position.


Probably the best approach to effect this system would be for all cities in our country to be required to provide a certain number of beds based upon their population. That way no city would have to support more people than its fair share. 

 

But now let’s also address the welfare system for the wealthy. Are there such programs? Absolutely! One of them is the system of subsidies to our country’s farmers. For example, between 1995 and 2002 our government paid a whopping $114 billion in farm subsidies, and the payments have actually increased since that time. What is the rationale for this largesse? The stated purpose is to help our country’s small farmers.  


But it does not work that way. In actuality, a full 77 percent of the money goes to the top 10 percent of the beneficiaries, and most of those are large farming enterprises. For example, between the years 2003 and 2005, $9.4 billion went to people who claimed entitlements through partnerships, joint ventures, corporations or other business entities. That does not sound like helping small farmers to me. As further proof, people who lived in downtown New York City actually received payments of $4.2 million during this same period of time.  


Of course, the lower 80 percent of the beneficiaries, who actually are the small farmers, received an average of only about $846 per year. So in summary and contrary to the stated purpose, these subsidies actually make it much harder for small farmers to compete!


The second rationale for the so-called farm support system is to stabilize food prices. As the argument goes, if there is a surplus of crops, prices will fall too much and farmers will lose money. So supposedly to more stabilize this market, between 1995 and 2002 some farmers were actually paid $14 billion by the taxpayers not to grow anything! Of course, this interference in the free market only really creates mischief. In addition these government subsidies have actually and appropriately resulted in sanctions against our country from the World Trade Organization for interfering in the world market.


Why is the system not more closely monitored to help it to achieve its stated goals? For two reasons. First, the federal laws are much too vague to allow the proper monitoring of the hundreds of thousands of farm-subsidy payments that are made each year. And second, the government employees are not well enough trained and funded to be able to monitor the recipients’ eligibilities any better. As a result, the government only is able to run fact-checks on about 1,000 applications each year.


So why is this system perpetuated? The answer to that question, like so many others addressed in this column, is politics. Wealthy farmers have a powerful political lobby. Of course they are quite anxious for these payments to continue, and will politically punish any member of Congress that jeopardizes their entitlements. In my view this situation is living proof of the old saying that “If you want to rob Peter to pay Paul, you can always count on the support of Paul.”


So that’s the way it is. I thought that you would be interested in hearing where a lot of your tax money is going, and the poor results that are being gathered from it. And I also thought that maybe in this election year you might want to talk to your members of Congress about this situation and see what they propose to do about it. If anything.

James P. Gray is a Judge of the Superior Court in California, the author of Why Our Drug Laws Have Failed and What We Can Do About It - A Judicial Indictment of the War on Drugs (Temple University Press, 2001) and Wearing The Robe - The Art And Responsibilities of Judging In Today's Courts, has a blog at http://judgejamesgray.blogspot.com/. http://www.judgejimgray.com, and can be contacted at www.judgejimgray.com.