The Entitlement State Is Morally Bankrupt

Yaron Brook and Don Watkins

After Rick Perry called Social Security a Ponzi scheme, pundits everywhere smugly assured the world that Perry is crazy because, after all, the government can never really go bankrupt: it can always print money to pay its debts. Of course, that’s hardly a comfort to those who know what hyperinflation can do to an economy.

In any case, Perry can be commended for daring to violate the first law of politics: whatever you do, do not question entitlements. Despite the fact that the big three entitlement programs–Social Security, Medicaid, and Medicare–have the U.S. government facing upwards of $100 trillion in unfunded liabilities, they largely remain a third rail: touch not lest ye be voted out of office.

Why are they sacrosanct? Because, whatever else you can say about the entitlement state, no one disputes that it’s a moral imperative. Inefficient? Maybe. Expensive? You bet. But morally questionable? Absolutely not.

The problem with the entitlement state is not simply that it is bankrupting this country–the problem is that it is morally bankrupt.

The basic principle behind the entitlement state is that a person’s need entitles him to other people’s wealth. It’s that you have a duty to spend some irreplaceable part of your life laboring, not for the sake of your own life and happiness, but for the sake of others. If you are productive and self-supporting, then according to the entitlement state, you are in hock to those who aren’t. In Marx’s memorable phrase: “From each according to his ability, to each according to his needs.”

As we’ve argued in past columns, no system that treats you as other people’s servant can be called moral. What made America the noblest nation in history was that it was the first country founded on the idea that each of us has a right to live and work for our own sake, that it’s our own job to try to make the most of our life, and that the government’s sole purpose is to protect our freedom to do so.

Some have raised objections to this line of argument, however. Here are three of the most popular objections.

1. “The entitlement state is no different from insurance.”

When Social Security first passed, under FDR, most Americans regarded being “on the dole” as shameful. One way the program garnered widespread support was by positioning itself, not as welfare, but as insurance. Medicare would later take the same tack. You pay in when you’re young and healthy, and when money is paid out to you, you’re not going on the dole–you’re simply getting back what’s yours.

This was always a fraud. Your taxes aren’t invested in order to generate your future benefits–they are used to supply benefits to current enrollees. If a private insurance company operated that way, racking up $100 trillion in debts it couldn’t pay, it would be bankrupt and its executives would be sent to prison.

But the most vital difference is this: the entitlement state is involuntary. For the rational person, insurance is something he chooses to buy when he judges that a given policy represents a net gain. Even in a voluntary, competitive system where profit-seeking companies tailor policies to your individual needs, insurance isn’t for everyone. A young entrepreneur might rationally decide to forego homeowners insurance in order to make his fledgling business a success. But the entitlement state forces us into costly, one-size-fits-all programs regardless of whether we think it’s in our personal interest.

2. “The entitlement state benefits everyone.”

Far from offering genuine benefits, whenever the government takes people’s money and decides how that money is “best” spent, it makes life harder for rational people. A rational person needs the freedom to plan his own life, make his own choices, and support his own existence. Consider the impact of Social Security.

In a world without Social Security, the rational person would think about his own long range plans and interests. He might rationally decide that he loves working and never wants to retire, or that he’d rather invest his current income in growing his business today and start saving once he has established himself. When he does invest, he will think carefully about where to park his savings, consulting experts, judiciously diversifying. As a result he will know where his investments stand and why, and will not be at the mercy of a political process that might raise the retirement age, curtail promised “benefits,” etc. For him, Social Security is all downside. All its alleged benefits he could attain much better on his own.

So why is he deprived of this freedom to live and plan his own life? Because some people may choose not to plan.

Social Security, and the entitlement state more broadly, institutes a basic injustice: the rational and productive are sacrificed in the name of the irrational. “From each according to his ability, to each according to his needs.”

3. “But what about those who can’t take care of themselves?”

Sure, some people say, most of us would thrive without the entitlement state–but what about those who can’t? What happens to them? Don’t they starve in the streets?

In any industrialized nation, it is only a fraction of a sliver of a minority who are unable to support themselves, and even in the days before America’s entitlement state, they didn’t starve in the streets. Most turned to friends and family. Many others turned to voluntary social insurance programs run by private mutual aid societies, like the Security Benefit Association. And some turned to private charities.

If Americans a century ago could flourish without an entitlement state, how much easier would it be today, when even most “poor” people own cars and color TVs?

The entitlement state was never needed to ensure that the unable got fed. It is and always has been geared, not to the unable, but to the unwilling: to that entitlement mentality that expects payment “according to his needs.” And by rewarding that mentality, we foster that mentality.

The entitlement state is geared to the unwilling at the expense of the willing and able. What could be greater evidence that it is morally bankrupt?