Competition in Welfare

The presidential campaign did not produce a single concrete proposal for major welfare reform. That is rather remarkable since government spending on welfare, income maintenance, and health amounted to $208 billion in 1975—a sum sufficient to provide $8,035 apiece for every man, woman, and child below the poverty line. Even after adjusting for inflation and population growth, real social welfare spending has more than tripled since 1960, soaring from $315 per capita to $957 (in 1975 dollars). Granted that some of these programs have other purposes, their main rationale has been to alleviate economic hardship. Yet it is obvious that most of this money is not going to the poor.

A series of scandals has plagued nearly every government welfare scheme, particularly in housing and Medicaid, suggesting that a sizable chunk of these tax dollars simply fattens the incomes of those providing the subsidized services or of those administering the programs. Food stamps probably drive up the price of processed foods, for example, and housing subsidies do the same to house prices.

About the Author

Alan Reynolds

Alan Reynolds, National Review’s economics editor from 1972 to 1976, is a senior fellow at the Cato Institute and the author of Income and Wealth.

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The presidential campaign did not produce a single concrete proposal for major welfare reform. That is rather remarkable since government spending on welfare, income maintenance, and health amounted to $208 billion in 1975—a sum sufficient to provide $8,035 apiece for every man, woman, and child below the poverty line. Even after adjusting for inflation and population growth, real social welfare spending has more than tripled since 1960, soaring from $315 per capita to $957 (in 1975 dollars). Granted that some of these programs have other purposes, their main rationale has been to alleviate economic hardship. Yet it is obvious that most of this money is not going to the poor.

A series of scandals has plagued nearly every government welfare scheme, particularly in housing and Medicaid, suggesting that a sizable chunk of these tax dollars simply fattens the incomes of those providing the subsidized services or of those administering the programs. Food stamps probably drive up the price of processed foods, for example, and housing subsidies do the same to house prices.