In Search of Equity
© 2020 Karl Albrecht. Adapted from Blueprint for a New Amerrica
Reading Time: 8 minutes
“A candle loses none of its light
when it lights another candle.”
—Rumi (13th Century Arab Philosopher)
Should the government provide health care for everyone? What about a free college education? Should we force businesses to pay a minimum wage? Should people living in ghettos get money, without having to work for it? Do we want cradle-to-grave services like the Scandinavian countries have, and the high taxes that come with them?
Over the many years of the Republic’s life, Americans and their governments have opted for a bewildering inventory of public services. In addition to military protection, homeland security, law enforcement, and public works, we’ve created a national postal system, an interstate highway system, a national park system, state colleges and universities, and a vast program of scientific and medical research.
When Americans consider the matter of public services—assistance of various kinds provided to citizens by government agencies—the national conversation tends to polarize around two contrasting views. One holds that government should provide a wide range of services for its citizens, especially those facing financial hardship and the effects of disadvantaged environments. The other holds that government should stay out of people’s lives and let them fend for themselves.
On one side of the debate, the eternal bogeyman quickly raises its head: “Socialism.” The “nanny state.” “Do we want the government to do everything for us?” And, “Who pays for all those services?”
Some advocates and activists, who self-identify as Libertarians or quasi-Libertarians, go so far as to insist that we limit government activities to a very narrow range of crucially important requirements, such as defense, criminal justice, and the control of national borders.
On the other side, the traditional American values of compassion and concern for those who, for various reasons cannot help themselves, weigh heavily on the conversation. Many social activists argue that unbridled capitalism has given us an economic landscape where a very few people and corporations own and control an enormous percentage of the wealth in today’s society.
We’ve never taken a real systems view of this vast range of public services provided by governments all across the Republic.
In many ways, the treatment of public services in the national conversation reflects the polarization we’ve considered a number of times in this writing—that of the Shared-Fate Society vs. the Zero-Sum Society. Maybe we can set aside our convictions for a short while, put our opinions on probation, and take a fresh look at this critical component of our Republic.
The Public-Private Trade-off
Socialism comes in degrees. So does capitalism. Both have their fans and their detractors. Both have their ideological high priests, who preach their respective gospels.
Ever since the start of the Cold War in the 1950s, US presidents and their political operatives have relentlessly conditioned Americans to react to the term socialism with fear and alarm. It has become an emotionally loaded word, with evil connotations.
But not all post-war cultures give the same emotional loading to the term that Americans have. The term socialism fits very comfortably into the national conversations in countries like the UK, Germany, France, Italy, Spain, the Netherlands, and the Scandinavians. In those societies, it typically refers to collective economic solutions, implemented by governments on behalf of the people, and not any Marxian notion that the government owns and controls everything.
Socialism, American Style
In the US, we’ve had a quasi-socialistic society and economy for a long time—a sort of “socialism lite.”
Consider: in the US, we have a free public education system that offers a basic educational experience to everyone who wants it. We have a national retirement system, which we call Social Security. We have national, state, and local systems that provide social services and financial assistance for people in dire need. We have a government administered system for healthcare insurance, available to Social Security recipients, called Medicare. We have a vast collection of hospitals and other treatment centers for eligible veterans of the armed forces.
On the other hand, we don’t have government owned corporations running our primary industries—no national airline, no national oil company, no national steel company, no national bank. We have a government-operated postal system like many European countries do, but no government operated telecom system as many of them do.
Let’s Dump the Dichotomy
When we argue about socialism vs. capitalism, we fall into a false dichotomy. We don’t have to take either choice to extremes. It makes less sense to think of them in either-or terms—we must choose one or the other—and more in both-and terms—we use a combination of both practices.
In today’s kindler, gentler America, we might think of them more constructively as neo-capitalism and neo-socialism, as we’ve discussed before.
Can Everyone Have a Piece of the American Pie?
Let’s begin our investigation of Public Services with a grand question: in a society and an economy like America, can every single person—ideally, at least—have a decent material standard of living? Or, will some people lose out because we just don’t have enough to go around? Can we all make it somehow, or do we have to face a harsh Darwinian truth?
At a basic minimum, such a standard of living would include:
- Physical security and personal safety.
- A place to live, however modest.
- Food, clothing, and other necessities of ordinary living.
- Access to a basic level of medical care.
- Protection from catastrophic loss—injury, a health disaster, or economic ruin.
- The basic necessities of life in old age or infirmity.
- A basic sense of dignity.
Myths and Truths About Public Assistance, a.k.a. “Welfare”
Opposition to government programs intended to help people at the bottom of the economic scale tend to rest on three particular claims, which hold that:
- We just can’t afford to support all the people who don’t make enough money to have a basic standard of living, as described above.
- Many—perhaps most—of the “people on welfare,” who receive regular financial assistance from government entitlement programs, could actually work but don’t want to. They lack the character, conscience, and work ethic to pull themselves up by their bootstraps, so they content themselves with a survival level of existence that demands little of them.
- Giving handouts to people, especially over long periods of time, tends to destroy their motivation to help themselves, and renders them chronically dependent on the society.
Proponents of all three claims tend to make their case with broad generalizations, sometimes punctuated by some newsworthy case example. Advocates of a much more extensive public service operation tend to invoke what they consider the higher American values of cooperation and compassion.
But seldom does the debate about Public Services benefit from a grounding in basic facts and evidence, so I propose to illuminate the discussion by paying attention to some mega-facts—a few useful and important truths.
Let’s Face the Facts and Figments
We have a service economy and a service culture. Services of all kinds now form the basic structure of the American economy. Government-provided services, as well as commercially marketed and provided services, make up the lion’s share of the economy.
Back in 1800, 90 percent of Americans lived on farms. By 1900, that number had dwindled to 40 percent. Today, about 2-3 percent of the US population manages to produce enough food for themselves, all the rest of us, and a fair part of the rest of the world.
Meanwhile, manufacturing jobs in the US declined from a peak of 31 percent in 1900, to the present level of about 9 percent.
That means that the third component, the service sector, has grown to nearly 80 percent of the economy. One service industry alone—healthcare—contributes 17 percent of our GDP.
Workers’ wages, for the most part, haven’t kept up with economic growth. While paychecks today show much higher dollar amounts than they did in the 1960s, when economists adjust the payroll figures to remove the effects of inflation they find that real wages—based on actual buying power—have barely changed over the past 30-40 years. Studies suggest that, if the federal minimum wage—most recently standing at $7.25 per hour—had risen in step with corporate profits, it would stand somewhere near $25 per hour today.
As we’ll see, that one fact alone almost tells the whole story of the “welfare problem.”
Phenomenal gains in corporate efficiency and productivity over the years have led to steadily rising profits. One would expect that workers would have shared in that prosperity, and that an hour of work today would buy a lot more at the supermarket than it did decades ago. Instead, most of the gains have gone to the shareholders and the executives who run the companies, in the form of higher stock prices.
Not surprisingly, corporate managers have taken advantage of every conceivable method for holding down wages. Outsourcing production processes to countries with very low labor costs; the declining bargaining power of trade unions; and the replacement or down-skilling of many jobs by information technology have all combined to keep real wages low. Growing service industries like fast food, retailing, and much of healthcare have produced lots of new jobs, but mostly low-paying ones.
All of these factors have combined to cause the much-discussed massive, long-term economic tilt, or wealth imbalance, as profits have flowed disproportionately to the owners—the shareholders, the highly paid executives who run them, and the Wall Street investors who trade them—and far less to the workers themselves.
The Welfare State?
Public assistance programs, a.k.a “welfare” payments, have grown steadily over the years, both in the numbers of people receiving support and the amounts paid. During the Depression years, government organizations like the Works Progress Administration created jobs for millions of Americans who suffered from the Great Crash of 1929. Public assistance became a big national priority with the creation of the Social Security Administration, under President Franklin Roosevelt, in 1935.
Federal and state programs now include cash income supplements, food assistance (mostly food stamps), healthcare services, unemployment insurance, housing subsidies, education subsidies, and childcare subsidies.
Recent figures show total state and federal welfare spending (not including Social Security), at about $850 billion per year, more than we spend for Defense. The Veterans Administration, which provides medical services for America’s 21 million vets, as well as the well-known GI Bill program for educational support, spent a further $200 billion in the most recent year.
do we spend too much on entitlements?
The federal government’s annual budget of $4 trillion amounts to about 20 percent of GDP, and entitlement spending takes about one-fourth of that amount, or 5 percent of GDP.
Consider the food stamp program—known as the Supplemental Nutritional Assistance Program, or SNAP, operated by the Department of Agriculture. Let’s check to see how many people actually receive food stamps, compared to the number we might expect based on typical unemployment rates.
Using an unemployment rate of about 5 percent of the civilian workforce, which currently numbers about 158 million people, we might expect to see about 7 to 8 million people receiving food stamps, assuming every unemployed person signed up for those benefits.
Recent figures indicate, however, that 42 million people receive food stamps under the SNAP program—six times as many as the total unemployed population. Food stamp expenditures average about $4 per day per person—probably enough to survive in most cases, but not enough to dine out often.
What happened? Why, or how, has the “welfare population” exploded? Could we have that many people ripping off the system? We’ll always have some level of cheating and fraud, but—42 million people?
A B.F.O.—Blinding Flash of the Obvious
The basic evidence we’ve just reviewed points to one big, stark conclusion:
Four decades of steadily rising living costs, combined with stagnant real wages, have pushed more than 10 percent of America’s people into insolvency and dependence on government financial support.
During the same period, corporate stock prices—a barometer of accumulating profits—have risen at an average rate of 11 percent, compounded, year on year.
Lately, economists tend to refer to these below-the-line people as the working poor. They have jobs but don’t earn enough money to fully support themselves or their families independently. Costs of living vary widely across the country, but federal planners estimate that about 13 percent of full-time workers fall below the poverty line, as they call it.
Back to the original question: can we afford to support so many people? Can we sustain such large entitlement programs and such large numbers of dependent people?
Actually, we can and obviously we have. We don’t have mass starvation in America, and however loudly some political figures might complain, we’ve managed to provide for the vast majority of people in need. We certainly don’t have a perfect system, an efficient one, or even a fair one, but the one we have has basically worked.
Going forward, however, we’ll need different economic solutions—a new logic of public services and public assistance, as we’ll see shortly. As we’ll see in the following discussion, we can’t sustain the rising costs of government programs with our antiquated system of income taxes. Chapter 7 (Revenue) outlined a revolutionary new concept of public finance, which promises to generate significantly more revenue that the current obsolete system of income taxes.