Book review: The High Cost of Good Intentions

I was feeling fiscally conservative this past month, so I picked this book up. I’m not very loyal when it comes to politics– I’m not good at being a team player, I hate mud-slinging down purely partisan lines, and I like to try to find the good in everyone. But I do like a good argument, and this book did that for me. I had a conservative awakening of sorts when I read An Anthology of Conservative Thought during my first year in graduate school. I still turn to it on occasion, because it is just so good. I think The High Cost of Good Intentions may have been a recommendation based on my conservative bookshelf.

Good Intentions is a history of welfare programs in the United States. You may think, well, that all began with FDR’s New Deal, right? That would be correct on a large scale, but The US pioneered welfare programs back from the days in the Revolutionary War in the form of military pensions for disabled veterans. These served a clear purpose: to provide for those who could no longer work due to injuries acquired in service to one’s country. But what started out as a clearly limited program (the beneficiaries were only soldiers who had acquired injuries during the war) quickly grew to include those deemed equally “worthy”. What about those who can’t prove their injury was due to the war? What about those who got a debilitating injury after the war? What about their surviving spouses, children, etc after they die? What started out as a limited program quickly expands to the point where expenses surpass calculation due to both weak enforcement of defined qualifications and sometimes abuses, the worst occurring during the Civil War where there was widespread corruption.

There are a few clear themes throughout the book:

  1. Well-defined programs with specific aims are increasingly liberalized with unintended consequences and sky-rocketing costs. An offer of entitlement ultimately changes the playing field. Any system of incentives will change how people behave, and you can end up subsidizing self-destructive behavior.

These miscalculations are invariably due to Congress’s failure to appreciate how an offer of entitlement assistance can cause individuals to change their circumstances to qualify for aid they have previously lived without.

The ADC program itself was apparently contributing to the rising number of broken homes and out-of-wedlock births. Welfare’s incentives made it too easy for fathers to avoid their parental responsibility and for poor mothers to rely on government aid rather than their own resources to meet their living expenses.

Dispersed spending authority had created what is known in social sciences as a tragedy of the commons. Authorizing committees had little incentives to restrain their entitlement programs unless other committees did also.

  1. Welfare program expansions happen both when the budget is doing well (hey look! we have money) and when the budget is doing bad (we need to help stimulate the economy) for an endless cycle of growth Congress is constantly breaking into the cookie jar. It is virtually impossible for Congress to let a pile of money go untouched. That money you’re paying into payroll taxes isn’t being stashed away accruing interest, or being put to work, like your money would be in a saving account. And the philosophy that the government needs to stimulate the economy during economic hardship that started during the Great Depression only accelerates growth of welfare programs.
  2. Welfare program expansions e.g. social security raises are used as a political lever often aligning with elections. You thought this was new? It was really bad during the Civil War. The Republican Party was virtually founded on veteran pension from the Civil War:

The Republican Party, calling itself the “party of the Union”, used pensions to align the American electorate behind it in the 1890s.

  1. Welfare programs are virtually never trimmed back even if we can’t pay for it. The previous generation can’t bear to do away with existing benefits, but is more than willing to raise taxes on the next generation.

Was it fair for Congress to impose high taxes on future generations that it was unwilling to impose on the current generation?

Payroll taxes paid by current workers were used to finance higher benefits for current retirees.

  1. Social security was originally built on an earned-right basis: you got what you paid into the system. While still symbolically in place, it is now a wealth redistribution system than anything else. This was how FDR was able to sell his Social Security program to congress: it wouldn’t have passed any other way. It’s still supposed to function like that: kind of a like an enforced retirement saving account, with competitive interest rates when compared with other retirement savings accounts. But the government doesn’t treat its payroll taxes like that. It’s just another pot of money. You think your money is at work, being used in ways to get a return on investment? They’re not. When they’re not being shuffled off to support other failing programs, your payroll taxes are being used to fund liberalizations of the existing program.

The book is a fascinating look at U.S. history through the lens of its entitlement programs. They are things you either didn’t learn in your U.S. history class, or maybe skipped or fell asleep for. But when strung together with an overarching narrative, they really strike a cord. I was particularly interested in the more modern events. The book actually goes all the way up to Obamacare, as yet another continuation of liberalized benefits. But something has changed now: Congress is kinda out of money these days, so instead of starting a new welfare program with its own tax, the federal government has to work by mandate. We’ll see how that goes, right?

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