Social Security may or may not be a Ponzi scheme, but it prevents people — especially poor people — from saving and investing for their own retirement in ways that would allow them to build real, inheritable wealth.
Beyond the programs themselves, there is the simple fact that every dollar that the welfare state consumes to pay for itself is one fewer dollar that individuals have to spend the way that they want to, however that may be. As the French economist Frederic Bastiat put it in his parable of the shopkeeper with the broken window, “He would, perhaps, have replaced his old shoes, or added another book to his library.” Or to put it in today’s context, he might have purchased health care, saved for his retirement, or donated to charity. He might have started a business and hired workers. Or he might have spent it entirely on pleasure or frivolities. He might even have bought energy-inefficient light bulbs.
Whatever he might have done, he is now deprived of that choice. He is, in fact, less free.
Once paternalism is accepted in principle, there is no limit to the actions that government may take in controlling our lives and restricting liberty. The ultimate result, as Friedman writes, is “dictatorship, benevolent and maybe majoritarian, but dictatorship nonetheless.”
As we debate the ever-expanding welfare state and all its consequences — joblessness, a crushing debt burden on our children and grandchildren, and the loss of opportunity for the neediest among us — let us not forget the other casualty of big government: freedom.