Let’s Privatize the Welfare State

Have you ever given money to the food stamp program? Do you know anyone who has?

Actually, some people do occasionally make gifts to federal entitlement programs. But gifts to the entire federal government were a paltry $241 million in 2010, the last year for which statistics are available. By contrast, Americans donated almost $300 billion last year to private sector charities in addition to volunteer time valued at $158 billion.

The money we spend on food stamps (technically called the Supplemental Nutrition Assistance Program, or SNAP) almost all comes from coercive taxation, rather than charitable contributions. For example, the United Way of Dallas donated $50 million to 90 private charities last year. The food stamp program was not among them. Even the government’s charitable giving program for federal employees ($270 million to 20,000 non-profit groups) does not list the food stamp program as an option.

What brings this to mind is Paul Krugman’s column the other day in which he claimed that:

The food stamp program…tries to provide modest but crucial aid to families in need. And the evidence is crystal clear both that the overwhelming majority of food stamp recipients really need the help, and that the program is highly successful at reducing “food insecurity,” in which families go hungry at least some of the time.

But if Krugman is right, why aren’t all the private givers, including federal workers, giving to it? Why are they instead choosing soup kitchens, Meals on Wheels and hundreds of other ways of caring for people who need help?

What Oliver wanted

The answer, I believe, is obvious. See, for example, FreedomWorks’ case against food stamps. And in case it isn’t obvious, I propose a market test: Let the food stamp program compete on a level playing field against every other anti-poverty program, private or public.

But first things first. There are about 47.8 million people on food stamps. And even though the economy is improving, jobs are more plentiful and wages are increasing, the number of food stamp recipients is rising, not falling — now reaching one in every five households in the country.

Clearly this is not a program that is designed to reach a few people who happen to be down on their luck. And food stamps are only the beginning.

On an average day in the United States, 18.7 million children are getting a free lunch in our nation’s public schools. Another 2.7 million children are getting reduced price lunches. All told, more than two thirds of all the children attending public schools are getting subsidized lunches — which accumulate to about 5.2 trillion lunches every year.

And the problem doesn’t end there. Children who need a free lunch, it turns out, also need a free breakfast, and almost half the children are in this program as well. In fact on an average day, 11.7 million children are getting a free or reduced price breakfast, courtesy of the U.S. taxpayers.

Then there is dinner — available in areas where at least half the children qualify for a subsidized lunch. The Congressional Budget Office estimates that there will be 21 million children charging their dinner to Uncle Sam by 2015, rising to 29 million in 2020.

Have you ever stopped to consider how much of modern life is conditioned by the fact that millions of young women are having children they cannot support? Turns out that the same parents who can’t afford to feed their children also can’t afford to house them or pay for their medical care. They also fail to provide a home environment that is conducive to learning. That’s why there is now a big push for government funded preschool. Is government-funded day care next?

Since the taxpayers are picking up the whole tab anyway, maybe we would be better off removing all these children and raising them in an Israeli-like kibbutz.

I am one of the few writers who seems to be appalled by the immorality of bringing children into the world that you cannot support. [See “Bad Parents, Poor Kids.”] But even if you are not moved by moral concerns, consider the dollars and cents at stake.

Years ago, George Gilder and Charles Murray did pioneering work showing that the welfare state was not benignly helping people in temporary need. It was subsidizing a lifestyle. With the passage of time the case for that position has gotten stronger and stronger.

By way of anecdotal evidence, take the case of Orlando Shaw. He has fathered 22 children by 14 different women and pays not a dime of child support. As a result, Tennessee taxpayers are forking over more than $7,500 a month. Food stamps and welfare make his lifestyle possible.

On the academic front, University of Chicago economist Casey Mulligan estimates that half the excess unemployment we are experiencing can be directly tied to the incentive effects of entitlement programs. In other words, half the people who should have a job don’t have one because we are paying people not to work.

How could things be different? In Privatizing the Welfare State (study, book), Michael Stroup and I wrote:

There is mounting evidence that the private sector does a better job at getting aid first to those who need it most, at encouraging self-sufficiency and self-reliance, at encouraging the family unit, and at using resources efficiently. Currently, the federal government has a monopoly on welfare tax dollars. It is time to end this monopoly by allowing private citizens to make decisions on how their welfare tax dollars should be spent.

For the food stamp program, the proposal would work like this. Each taxpayer would be able to allocate up to $2,000 of taxes owed to any qualified charity providing assistance to indigent people. Taxpayers could make their gifts at any time during the year and claim a credit on their April 15th tax return. [BTW, this is all back of the envelope, but I think a credit of up to $2,000 is roughly budget neutral.]

I’m even willing to let the food stamp program have all the default money. That is, if a taxpayer doesn’t claim a private charity credit, the food stamp program gets to keep his $2,000. But every dollar that taxpayers give to a private charity is a dollar the food stamp program must forgo.

Of course, our more general proposal was not confined to food stamps. We would subject all welfare programs to this kind of public/private agency competition.

Thoughtful readers will no doubt think of possible objections and I would love to hear about them in the comments section. Stroup and I considered 21 possible objections and you may want to consult those as well.

Comments (35)

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  1. Charles Johnsen says:

    Trouble is, government will cheat. First, they will insist on approval of charities and guess what will happen to a specifically Christian branded or Tea Party branded charity? Of course, it will be the IRS that makes the decisions. Second, Congress will just add more and more to the budget to make up for the money they lose because we give it to somebody else. Third, the lazy media will go after the private charities and will surely find some scandal, something they never do with government programs.
    Remember what they have done to the community and charity hospitals over the last 60 years.

    • JD says:

      Probably right, government is self-serving. Real competition doesn’t exist there.

      • Adam says:

        There’s a problem with ascribing competition to a notion of charity though. People rarely trip over themselves to help someone else more than the next guy. The help as much as they feel comfortable with, not with notions of outperformance.

  2. Vicki says:

    Great video.

  3. John Fembup says:

    Private charities rely mostly on voluntary, private contributions. They cannot tax anyone. The money I donate goes to the charity of my choice, in the amount I choose.

    But I just don’t feel charitable toward the government. It has the power to tax. It takes more when it wants more. I cannot depend on the government using money it controls for the things I want to use my discretionary money for. So I don’t see a reason to give voluntarily to the government.

  4. Studebaker says:

    The Food Stamp program is a joke. It’s nothing more than a politically palatable way to redistribute income. Money is fungible. If it is not spent on food, it can be spent on other things. Thus, Food Stamps (although used only for food) frees up other funds for things like rent, beer, or clothing. Welfare Reform (such as it was) was popular because Americans object to the idea that people get money for nothing. Food, on the other hand, is perceived as charity for the hungry. Hunger tugs at the heart strings. Throughout history, hunger was an ever-present problem for the poor. It is no longer. Hunger is a symptom of another problem. Hunger is a symptom of child neglect, of drug abuse, of dementia.

  5. Casey Mulligan says:

    I hope somebody revisits the Goodman and Stroup hypothesis. Perhaps their book came out at the wrong time (1986): when anti-poverty programs for non-elderly people were just a small slice of the federal budget and their impact on the aggregate economy was presumably commensurate with their small size. Privatizing welfare deserves more investigation in 2014 when even middle class people will be receiving hundreds of billions of means-tested federal subsidies and the effects on the aggregate economy aren’t trivial any more. The income distribution has also changed a lot since 1986.

  6. Dewaine says:

    I think that this would definitely be a step in the right direction, but I worry about government playing fair.

  7. Gabriel Odom says:

    When I was younger, my family was rather impoverished. I recall waiting in line to apply for food stamps ans WIC money as a child. What always struck me as odd then (and completely ironic now) is that the people around me in line always had the nicest clothes, and all the kids had the thing called a Gameboy. I didn’t know what it was, but it looked fun.

    I realize now that some people truly need food stamps and government welfare. However, the vast majority (in my experience) simply gamed the system. For instance:

  8. Dewaine says:

    “On the academic front, University of Chicago economist Casey Mulligan estimates that half the excess unemployment we are experiencing can be directly tied to the incentive effects of entitlement programs. In other words, half the people who should have a job don’t have one because we are paying people not to work.”

    Public discourse ignores these realities.

  9. Greg Scandlen says:

    And yet, with all this there are television commercials around here that claim one-in-six Americans are at risk of starving to death — or something, maybe it is that they don’t know where their next meal is coming from. (I guess I could be included in that number — I haven’t yet decided whether to have lunch at McDonald’s or Burger King today. Ergo, I don’t know where my next meal will be coming from.)

    But there seems to be an entire Hunger Industry that makes a very good living from “serving the poor.” Just as there are industries for Climate Change, Saving the Polar Bears, Ending the War on Women, and so on and so forth.

    I guess we are very lucky to be living in a country that is wealthy enough to actually pay people for being hysterical.

    • John Fembup says:

      “And yet, with all this there are television commercials around here that claim one-in-six Americans are at risk of starving to death — or something”

      Never forget one-in-four humans are Chinese – – but that still does not mean your neighborhood or mine is 25% Chinese. Distribution counts for something. And the distribution of hunger aligns pretty closely with poverty. Not a surprise. Also not to minimize the problem. Yet it’s simply a falsehood that one-in-six of “my neighbors” or my co-workers” is going hungry.

    • Mark Kellen says:

      The real irony is when no one pays close attention to the placement of billboards so that the “hunger industry” billboard (one in six children starving) is next to the “fat industry” billboard.( one in three children obese). Apparently we do not have a total food problem, just a distribution problem.

  10. Billy says:

    “And even though the economy is improving…”

    What economy are you a part of? That certainly isn’t the one I live in.

  11. Jackson says:

    “By way of anecdotal evidence, take the case of Orlando Shaw”

    That’s a highly specific example, and is certainly not the norm. There’s a mountain of evidence that the opposite is in fact true: men are being forced to care for children that they have no ties to.

    • Janice Michaud says:

      As a small group health insurance agent, I have to tell my business owners not to pay for dependent coverage as I find it is the case that employees do have 5 dependents in different zip codes.

  12. Laura says:

    Our political system is a kilter when it pours billions into solving a non-existent crisis and peanuts into solving a real crisis. The false crisis of one-in-six hungry Americans can gain votes for a political party, justify large budgets for federal agencies, and can give contributors a good feeling about themselves. The food crisis sidesteps issues of individual responsibility by placing the onus for feeding its people on government. It is up to government to solve a problem for which the sufferers bear no responsibility.

    • Janice Michaud says:

      Good point Laura,
      A rating agency to determine what percentage of the dollar actually goes to the problem, and a breakdown of admin, political contributions as well as an analysis of what the side effects are. This could be done privately. Government’s role would dimimish as Toto pulled back the curtain.

  13. Wanda J. Jones says:

    Isn’t this how democracies implode? It’s more than food stamps. What would happen if anyone receiving such subsidies would not be able to vote?

    Wanda Jones
    San Francisco

  14. Al Baun says:

    It seems that Dr. Goodman’s disapproval of public spending on the food stamp program, school lunch programs, and “millions of young women [who] are having children they cannot support”, might lead to the good doctor mentioning the most effective private program which would impact all three is … Planned Parenthood (of which all contributions are currently fully deductible).

    Charitable contributions basically equates to people diverting their public liabilities to their personal interests. Since ‘Government’ is not an evil entity, but rather sets of public impartial guidelines executed by our fellow elected citizens, history and common sense tells us that private charities are too biased to impartially address all of our public needs, therefore the need for publicly funded safeguards must take precedence over personal tax deductions and credits.

    I suggest that people not be limited on how much they give to private charity, but I disagree that any of it qualify for tax credits or deductions. Government (people’s will) must come first.

    • Charles Johnsen says:

      People’s Will? Marxist BS. We have a Constitution which protects us from the “people’s will”! Democracy unlimited is tyranny and we are almost there.

      • Al Baun says:

        Charlie, I see you have been listening to too much Dr. Savage and Levin.

        A Congressman is put into position per the Constitution and by the ‘people’s will’. The President is put into position per the Constitution and by the ‘people’s will’. The ACA was enacted per Constitutional Process and through the representatives of the ‘people’s will’. We live in a socialist society and world. Cut the theatrics, turn off your radio, and improve existing society, not simply rant idioms.

        • Charles Johnsen says:

          The ACA was not enacted “per Constitution Process”, whatever that is, but bypassed the checks and balances between States and the House, between Congress and the President. Not one person read the bill before it was passed. And the Supreme Court shamed itself in this matter.
          Socialism is tyranny and war and is our ancient pattern of elites and surfs, from the beginnings of cities to the evils of Fascism and socialism (to be redundant) in the last Century. The only real political progress in the last five hundred years is 1776 and our First Constitutional Convention. The pretence that Marxism is an advance is risible. It is the same old stuff humanity has suffered under from the beginning. Yes, we live in a socialist world. But the theories and doctrines of central control and “democracy” driven by media hysteria are growing old and weak. Modern thought is freedom. Socialism brought down Babylon, Israel, Greece, Rome, the USSR, Hitler, the British Empire, and all of the other control freaks of history.
          One more: ObamaCare is not socialism, it is Fascism. Even though, cf above, I see very little difference in the two, the very definition of Fascism is government granting monopolies to private businesses. Everybody got their slice of the pie: trial lawyers, corporate hospitals, unions and their companies, drug companies, key Senators, especially insurance companies. Everybody except doctors and patients and tax payers. What Harry Reid and Obama did is pure Fascism. It almost makes me yearn for the also failed, but cheaper, British system.

          • Charles Johnsen says:

            replying to myself. I was not clear that socialism was the REASON the ancient (and modern) governments failed. Tyranny works–for a while. But eventually all central control fails and people, growing and building and baking for their own livelyhood, produce enough wealth to rebuild the society that socialism/tyranny destroyed. And the swords come back with their protection racket and the cycle begins all over again. Humanity is blessed/cursed with this dualism: yearning for freedom and longing for security. The genius of America was the balance it maintained between the two by limiting the powers of democracy and officials and law.
            Marxism, the religion of atheism, is dead wrong. The cycle itself is not progress. Freedom is progress and freedom thrives in Christendom.

            • John Fembup says:

              Government’s sole reason to exist is to serve the people. The people do not exist to serve the government.

              The more that government expects the people to serve it, the closer it is to a monster state.

              The more that people believe that their highest duty is to serve the state, the closer we are to a population of slaves.

          • Al Baun says:

            1) The PPACA was passed by the Senate in December of 2009 with 60% of our representatives voting for it. The PPACA then went to the House and again was passed with a majority. It was then signed into law. That is called Constitutional Process!

            2) The core legislation for the PPACA was available for over a year to any member of Congress to read. The assertion that ‘NO ONE’ read it is irresponsible.

            3) When laws are challenged, as were SS, Medicare, and the ACA, the Constitutional Process prescribes that the SCOTUS review it. IT DID and was found Constitutional, like it or not. Your “shamed itself” comment is disrespectful of the Constitution and Process.

            4) Your Henny-Penny like rant decrying Marxism, Fascism and the end-of-times is a bit overboard for simply not liking a piece of legislation. Your rejection of Constitutional Process is also un-nerving.

            Here is the poke … I would wager that you have already looked at the ACA sites for lower health coverage for yourself … unless you are already receiving care through one of the many other legal government subsidized programs like Medicare, TriCare, VA, Medicaid, etc. Be honest.

            • John Fembup says:

              Al I take it you are firmly against any increase in the debt limit – given that the debt limit is defined by a law passed in the House, passed in the Senate, and signed by the President.

              Be honest.

              • Al Baun says:

                John, I’m not sure I follow your point. If government process incurs debt, we must honor that debt. If government process creates laws, we must honor those laws. Again, government is just a process, not an entity to do battle with. Our friends and neighbors are elected to implement that process, which includes paying our bills on time and NOT trying to legislate through the budget, as the House Republicans seem to be trying now.

              • Greg Scandlen says:

                Yes, like liberals everywhere, Al Baun believes in defending all of the “laws of the land.” That is why they were so strongly opposed to any changes to “Don’t Ask Don’t Tell” and the Defense of Marriage Act.”

                • Al Baun says:

                  The operative word was ‘honor’ the laws, not ‘defend’ the laws. As long as the laws are on the books, we must honor and obide by them. That is why I sent my man, Barack, in there … to change the DADT and DOMA. Mission Accomplished.

                  Now if the Repubs want to change the ACA, work according to Constitutional Process, not holding the country hostage.

  15. Patrick skinner says:

    The Feds will never allow it, as the do not allow taxpayers to invest ANY. Of our retirement SS. If we could invest our own SS then the Feds could not borrow(steal) our contributions and give the money to someone else. It’s all about control(power)!

  16. Ron says:

    Georgia allows its citizens to allocate $2500 of their Georgia income tax to private schooling. There is a maximum allowed across the state of about $50M (indexed to inflation). Companies can allocate up to $7,000 for private education. You have to actually apply for the tax credit. (first come each year are the first to get it). The individual and corporate allocations allow for private school scholarships for those with financial needs. We are proposing a similar approach to fund the Georgia Charity Care Network that provides healthcare to the uninsured (CBO estimates about 20-30M after OBamaCare). This model works and could be a model for national privatizing of welfare.

  17. Glenn Smith says:

    Who can understand Krugman? I’ve always had trouble on this topic. But this morning a couple of thoughts came to me. Maybe he is a personification of the uncle Ross Perot used to refer to as locked in the attic.
    Another possibility is that he is actually a satirist which requires us be more analytical in reviewing his writing.
    The third possibility is that he uses some of his Nobel prize money to pay the NYT to keep him on. He certainly brings them lots of attention.