Big Government Breeds Vice: Perverse Incentives of the Welfare State

Expanding the scope and power of government cannot make people more virtuous than they otherwise would be. But it certainly can make them less moral than they would have been in a free society. Vast government controls, social programs, and handouts, by encouraging permanent dependence on entitlements, lead to a steady decline in the moral characters of large numbers of people.

Showing that big government breeds vice does not require the assumption that politicians are in some way malevolent or that widespread immorality is their intention. Indeed, let us assume the contrary: a hypothetical world of entirely well-meaning and sincere politicians who believe that expanding government will ultimately improve the lives of the general public. They do not intend to do harm through their policies, but the harm ensues nonetheless. We need only several illustrations to see this unfortunate tendency at work.

Compare two possible worlds: A -- where all assistance to the poor and needy is furnished by private charitable organizations, and B -- where the government provides an extensive "social safety net" consisting of welfare for the chronically unemployed, Medicaid for those unable to afford health care, and taxpayer-funded drug rehabilitation programs for those who engage in self-destructive habits.

In World A, a man who has fallen on hard times can still get help, and there is a variety of private sources he can appeal to and plead his case. But he does not receive assistance automatically. Rather, the help he gets is conditional, both on his past and his present. If he has been an industrious, frugal, upright person who tried to provide for the future but encountered a series of misfortunes outside of his control, he is likely to get temporary assistance. Of course, he cannot rely on private aid permanently and therefore has a strong incentive to seek steady employment and rebuild his life as quickly as possible.

Indeed, before the establishment of the American welfare state in the 1930s, there existed a vast network of private charitable organizations focused on helping the worthy poor, a designation widely used at the time. Private donors had the opportunity to actually get to know the people they were assisting and to judge for themselves whether such individuals would indeed use charitable help to smooth the transition to autonomy. Of course, orphans, the elderly, and the disabled were also taken care of privately, because it was recognized that their predicaments were no fault of their own.

But in World A, there is no room for the man who squandered his money through wasteful habits or ruined his health through a self-destructive lifestyle. Addicts, delinquents, adulterers, and others who were ruined by vice rather than by unfortunate circumstances are not seen as the worthy poor and are allowed to suffer the consequences of their actions. Where every man has the right to decide whom he will help, he can refuse assistance to those who he believes will not use the aid to improve their condition in life.

Thus, in a system of solely private charity, there exists a great incentive for everyone -- especially for the poor -- to adopt consistent habits of virtue so as to be able to rely on the assistance of friends, neighbors, and charities during hard times. Furthermore, there is a substantial disincentive against immoral behavior, because the purveyor of vice will suffer the full physical and social consequences of transgressing against his own nature and his fellow human beings.

In World B, where the government provides extensive social services, the incentives become completely flipped. Unlike a private charitable donor or a neighbor extending a helping hand, the taxpayer has no choice over whom his money will help. Rather, some government official will make that decision for him. The official will engage in what economist Milton Friedman termed "Category IV spending," or spending somebody else's money on somebody else.

There is thus a severely weakened motivation for the official to ensure that taxpayer money does not go to fund the lifestyles of individuals whose unemployment or physical ailment was caused by their own vice. Furthermore, the bureaucratic tendency to make all procedures as uniform as possible will tend to lead to one-size-fits-all treatment of every welfare recipient, irrespective of his personal qualities and the reasons for his unemployment.

Hence, indiscriminate government provision of a "social safety net" eliminates the disincentives against vice that exist under a system of solely private charity. To add to the problem, government programs tend to crowd private charities out of the market for poverty relief. Since they are already forced to help the needy through their taxes, many citizens come to see it as increasingly less worthwhile to devote still additional money to private organizations.

But large government social programs go a step further. They are so structured as to actively encourage immoral behavior, especially among those with currently limited earning power. These individuals are faced with an alternative. Either they work hard, save diligently for the future, and forgo many present enjoyments in the hope of a better life, or they can give into some tempting vice and still get money. When choosing between money and hard work on one hand and money and no hard work on the other, many people are all too ready to abandon the hard work.

Indeed, the American welfare state has created a situation where multiple generations can subsist off of welfare without ever transitioning to autonomy or even thinking about it. Among the people who receive welfare, the incidences of violence, delinquency, broken families, drug use, prostitution, and other signs of vice are the highest. This is not to say that there are no worthy poor on welfare, but such individuals remain moral despite the perverse incentives built into the present system.

To add insult to injury, government minimum wage regulations make it illegal for a welfare recipient to work for less than some specified hourly rate. Thus, even if a man of a low skill level or scant education wishes to get out of the welfare trap, the law does not permit him to do so. He cannot take a job paying, say, $4.00 per hour, and use his work to learn valuable skills and habits that will increase his future earning capacity. He must remain on the dole, whether he wishes to or not.

Surely, a government whose controls discourage individuals from even trying to reach financial autonomy will ultimately lead many to think that efforts at self-improvement are ultimately not worth it, since the law is bound to frustrate them. When they abandon hope for their future, even the initially more upright welfare recipients will have no option left to them but to sink into immoral, self-destructive conduct.

I urge all the politicians who truly are benevolent and think that extensive government social services will somehow benefit the poor to recognize the perverse unintended effects of taxpayer-funded handouts to the needy. Indeed, such programs in reality amount to little more than a vast subsidy to vice.