Government Welfare Programs

The welfare state is the oldest con game in the world. First you take people's money away quietly, and then you give some of it back to them flamboyantly. – Thomas Sowell

Libertarians believe that private groups and individuals do a much better job of helping the poor than government does. Despite 40 years of government attempts to reduce poverty, there has been little progress made. This is because government welfare programs simply do not work as well as privately-funded ones for two reasons:

1. Higher administrative overhead. This refers to the cost of running the programs – paying the salaries of social workers and administrators, constructing buildings to run the programs from, etc. It is estimated that 75 cents of every dollar spent by government welfare programs goes to these overhead expenses, not directly to the poor people who the programs are supposed to help. This is in contrast to the 25 cents spent by private charities that help the poor. So most of our tax dollars end up paying the salaries of middle class administrators and social workers, and don’t actually help the poor.

Why is this? Because government programs have no incentive to minimize these costs. If a private charity became known for such inefficiency in helping the poor, donations would drop. However, government programs are funded by our tax dollars, which we are forced to pay no matter how poorly-run the programs they support are.

2. More fraud. Fraud is perpetrated both by the recipients of the programs, as well as by the administrators of them. Recipient fraud is estimated to make up one-third of welfare payments to the poor. This is mostly due to the centralized nature of government welfare programs. When dollars are disbursed by Washington bureaucrats who do not personally know the recipients, there are ample opportunities for fraud by recipients. In contrast, many private charities are locally-run, so there is far less opportunity for large-scale fraud.

Fraud is also perpetrated by the officials entrusted to administer the programs, because government programs invariably lead to corruption. Private charities are dependent upon donations to continue their mission, so any scandal involving embezzlement or misuse of donated funds will result in fewer donations and will threaten the organization’s existence. Thus private charities have a far greater incentive to prevent corruption than government welfare programs, which receive tax revenues no matter how corrupt the programs are.

But the worst problem with government welfare programs is that they displace private charities. In fact, while private charitable contributions had been steadily growing for most of the 20th century, they took a downturn around 1970 – not coincidentally at the same time as Lyndon Johnson’s “War on Poverty” began. People, knowing that the government was spending our tax dollars on the problem, no longer felt they needed to do anything personally to help poor people. Much greater strides would have been made against poverty had the government not interfered in charitable work.

Government welfare programs are only part of the problem, however. The definition of being poor is not being able to afford the things one needs – food, shelter, education, etc. All of these things cost much more than they would in a truly free market economy due to heavy government taxes and regulations. And minimum wage laws hurt the very poorest people, instead of helping them, because they result in fewer jobs for unskilled workers. These taxes and laws hurt the poor more than anyone, and perpetuate the cycle of poverty.

Libertarians want government to stop “helping” the poor and leave it to those who can get the job done. And if government taxes and regulations didn’t cost us half of what we earn, everyone would be better off and have more money to donate to charities that would actually help the poor.