Economic Escherism.

Gary Becker: Conservative Intellectual Of The Welfare State

By Lawrence Hunter

In a recent Wall Street Journal op-ed, Nobel laureate and Hoover Institution economics professor Gary Becker made a telling comment that revealed the intellectual poverty of Establishment Conservatism in America today:

It is a commentary on the extent of government failure that despite the improvements during the past few decades in the mental and physical health of older men and women, no political agreement seems possible on delaying access to Medicare beyond age 65. No means testing (as in Rep. Paul Ryan’s budget road map) will be introduced to determine eligibility for full Medicare benefits, and most Social Security benefits will continue to start for individuals at age 65 or younger.

Becker is an intellectual heavyweight whose views are enormously influential inside the Washington conservative establishment.  It is, therefore, distressing that rather than offering a post-welfare-state vision for America based on more freedom and less government, Becker offers Establishment politicians suggestions on how to preserve and protect the welfare state—suggestions that only would exacerbate the government failure he laments.

The government failure Becker observes is sown into the very fabric of the redistributionist, interventionist welfare state that created Social Security and Medicare as gigantic government Ponzi schemes.  The dire fiscal straits confronting Social Security and Medicare are merely the surface manifestations of the deeper, inherent contradictions of the majoritarian welfare state.  The welfare state undermines economic growth by perverting incentives to work, save, invest and produce, and replaces these virtues with incentives to take leisure, consume, borrow and parasitize on the rest of society.  Having encouraged man in the worst of his natural vices, the welfare then must try to control these vices with higher taxes and more onerous laws and regulations.

To avert constant fiscal crisis, welfare-state politicians raid the granaries to redistribute society’s seed corn as feed to the entitled masses.  The welfare state thus undermines future economic crops, which in turn leads to economic malnourishment and eventually economic starvation—that is if the welfare state is not first destroyed by its own enraged recipients whom the welfare state no longer can support in the style to which they have become accustomed.  As a preeminent scholar of public choice economics, Becker should understand these grim realities rather than urging politicians to seek some oxymoronic optimal redistribution through more government coercion.

Rather than going to the heart of the problem with the redistributive welfare-state — coercive government redistribution and all of its instrumentalities are morally wrong and economically self-destructive even for the supposed beneficiaries—Becker would lead us to believe a bit of tinkering and fiddling about the edges of a fatally flawed design can make the welfare state sustainable.  Becker-type “solutions” to fixing up the welfare state, which currently abound among establishment conservatives, are nothing more than disguised efforts to build an economic perpetual motion machine, to hang the superstructure of the welfare state from a sky hook, to thwart the Second Law of Thermodynamics by sneaking Maxwell’s Demon onto the congressional budget committee through the backdoor to sift and sort budget priorities. This isn’t sound economic design; it is Economic Escherism.

Stripped to its essence, Becker’s “solution” for Medicare and Social Security is just another scheme to save the welfare state by expanding the base of the Ponzi pyramid on which it rests—can you hear the words “tax reform” tinkling faintly in the background?

If Social Security and Medicare were structured as real, asset-based retirement-insurance plans in which benefits were an actuarially sound function of workers’ contributions to the plans throughout their working years, there would be no need (no right) for government to determine when workers retire nor would government have any legitimate interest in restricting workers’ payback from the plans on the basis of their means (wealth and income) at retirement.  In other words, Becker’s “solutions” reveal a fundamental commitment to coercive redistribution—the central organizing principle of the welfare state—and to the preeminence of the fiscal interest of the state over the financial interests of individuals—the central normative value of the welfare state.

Since George W. Bush poisoned the well on personal retirement accounts, the GOP has abandoned any effort to transform Social Security and Medicare into an asset-based retirement system based on workers’ real private investment in real assets they own. Paul Ryan made a gesture in that direction with his voucherized Medicare proposal, but he couldn’t see beyond his green eyeshade as Chairman of the House Budget Committee.  So he made the mistake of designing and justifying it as a budget-cutting exercise that actually expanded the reach of the welfare state and increased the government’s control over seniors’ health care choices.

Rather than transforming Medicare and Social Security into post-welfare-state retirement-insurance programs, Becker-style fixer-upper schemes serve only to expand and deepen dependency on government through tax hikes, price controls, rationing, means testing and benefit cuts, what I referred to in an earlier column as “perestroika reforms” to preserve the welfare state as we know it.  It is the GOP’s attempt to transform the New Deal into its own version of The Great Society with a stern Republican face, and it is destined to fail, politically as well as fiscally.

Politicians are addicted to spending and the power it brings them, which in turn has addicted the American people to government. Republican politicians think they can feed their own addiction to power by suddenly forcing dependent Americans, especially American seniors, to go through cold-turkey-austerity rehabilitation and then minding their P’s and Q’s on the dole. It won’t work. It will only cause social backlash.

When people perceive conservatives’ alternative to the welfare state to be a sort of Collectivism-Lite with an authoritarian twist, they will reject the conservative establishment’s thin gruel and demand the real deal from liberals whom they will vote into office by a landslide.

It is time conservatives woke up to the fact that average Americans are not interested in ravishing Social Security and Medicare, turning them into welfare programs, being forced to work into their seventies and receiving a lower rate of return for their efforts than they already are scheduled to receive.  If they don’t wake up, the political blowback will blow the conservative Grand Old Party away. The result will be an even more liberal Democratic Party unleashed to expand the welfare state, deepen dependency on government, launch Blitzkrieg class warfare and take America further down the path to ruination.

In short, intellectuals and politicians can’t save the welfare state by making it a worse deal for people; they will only make America a worse place to live if they try.