Why abolishing the welfare state is the right thing to do

07 Feb

If you think government is a competent solver of social problems, think again.  The Star Ledger reported (“N.J. tax to help low-income people pay cable TV bills was instead used to plug budget hole,” Feb. 6) that a fund established in 2006 by the Corzine administration to help low income and disabled New Jerseyans pay their cable bills has never been used as it was intended.  In addition, to add insult to injury, the Christie administration “raided” the $9.4 million fund to balance this year’s state budget.

The Cable Television Universal Access Fund had bipartisan support, and is another example of the welfare state’s failure to “do good.” The Fund, which has been financed by a tax on cable companies, was never properly administered.   What a surprise.

Although the tax revenue was deposited in the CATUF, there is no legal requirement that the monies be spent according to the legislation that created the fund.  Imagine if a charity raised money for a dedicated cause and the executive director of the nonprofit used the funds for other purposes?  Wouldn’t the donors cry foul?  Moreover, wouldn’t politicians be the first ones on television decrying the unethical behavior of the charity’s managers and demand a criminal investigation?

But government is different.  It can act unethically and no one is fired let alone shamed in the press.  Moreover, there usually is no criminal investigation when a government screws things up.

As Peter Drucker remarked nearly 20 years ago in a Wall Street Journal op-ed, “It Profits Us to Strengthen Nonprofits,” “…government has proved incompetent social problems. Virtually all the success we have scored has been achieved by nonprofits.”

In Drucker’s seminal article, he predicts the collapse of the welfare state, well before the Great Recession of 2007-2009 put huge holes in the budgets of state and local governments.  Even in the early 1990s, Drucker realized that government is a poor vehicle to address pressing social ills.

When Drucker (1969) predicted the coming privatization revolution of the last three decades of the 20th century because of the gross incompetence of central planners of both the right and left around the world, critics scoffed at his remedy for the ills plaguing command and control economies. Yet, privatization has swept the world for the past four decades, and even in one of the last bastions of communism (Cuba), the Castro regime is encouraging its citizens to become entrepreneurs and less dependent on the state for their income.

Nevertheless, the welfare state ideology is so entrenched in American and around the world even as most nations are technically bankrupt because their unfunded liabilities, both Democrats and Republicans in America have their collective heads in the sand and still believe the welfare state can—and should–be saved.

This is the great tragedy of American society, the blind acceptance of a failed social model, the welfare state.  Instead of pursuing Drucker’s 1991 recommendation—nonprofitization–to prevent the coming financial debacle both Democrats and Republicans want to expand the welfare state as much as they think they can get away with in spite of the fiscal disaster that awaits us to make themselves feel good about helping low income and disabled folks in our society.

Presidents, governors and legislators who support the welfare state are “phony philanthropists”— a term Frederic Bastiat coined in his classic The Law more than 150 years ago to describe the political class using other people money (taxpayers) to do good.

Now more than ever we need to embrace both Bastiat and Drucker instead of Weinberg, Vitale, Chivukula, Malone and the other phony philanthropists in the legislature and the Christie administration if we want to create a humane society based on real charity.

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Posted in New Jersey, Nonprofits, Politics, Welfare state


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