Bryan Caplan  

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Americans have severe misconceptions about what the welfare state does. They believe that it cares for the poor. But in fact, it primarily cares for the old.

I shared this misconception before I studied economics. My undergraduates have it before I disabuse them. And yet another excellent survey by the Kaiser Family Foundation shows that my experience is representative. Asked to name the two largest chunks of the federal budget, the leading responses are foreign aid and welfare. Social Security comes in fifth.

Table 16: Americans' Views Of The Two Largest Areas Of Federal Government Spending

Spending Type % Selecting Area as One of Two of the Largest Areas of Federal Spending
Foreign aid 41%
Welfare 40%
Interest on fed. debt 40%
Defense 37%
Social Security 14%
Health 8%

So what? For one thing, if Americans understood these basic facts, it would arguably undermine support for the welfare state. People imagine that the welfare state is saving the poor from starvation, when it is primarily showering money on the elderly, regardless of need. The poor would not be much worse off after abolition than they are now, because we don't actually do much for them.

But there is another effect of these budget misconceptions that I did not grasp until recently, when I began reading Julian Simon's classic, The Economic Consequences of Immigration. (A close substitute is available online). One of the main reasons why people oppose immigration is that they believe that immigrants burden domestic taxpayers. Simon calculates that, contrary to popular belief, they don't.

Impossible? Not at all. Simon explains that immigrants are usually young when they arrive. That means that they pay Social Security, Medicare, and similar taxes for decades before they start to collect. How can that balance out all the extra welfare that immigrants use? Part of the answer is that they don't use that much more. But the most compelling answer is to connect the basics of the budget to the basic facts about immigrants' demographics:

1. The welfare state primarily helps the old, not the poor.
2. Immigrants are moderately more likely to be poor, but vastly less likely to be old.
3. Expected net effect of immigration on the budget: Positive.

When you analyze this further, you may realize that immigration is often a bad deal for border states even though it is a good deal for the country overall. Programs for the old are federal, but state governments and the feds share responsibility for programs for the poor. That's yet another good reason to ignore the border states' angry demands for stricter border controls.

P.S. Illegals turn out to be an especially good deal for natives. According to Simon, most of them still have Social Security and Medicare taxes deducted from their earnings. But since they don't have valid SS numbers, they are unlikely to ever collect their old-age benefits. As is so often the case, these reviled scapegoats more than pull their own weight.


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COMMENTS (9 to date)
Half Sigma writes:

I'm not arguing with the general point, but offhand I think that welfare is one of those state expenses mandated by the federal government, so only citing federal figures understates it.

But of course, it's nothing compared to whopping Social Security expenses.

Buckaroo writes:

By the welfare state, you mean here, Medicare and Social Security, which along with Medicaid, account for most of the money going to the "welfare state".

There is also the EITC, which benefits the young by helping working poor families. This one used to be bipartisan, though conservatives have targeted it - making the rules really complicated so many eligible families don't participate, and devoting significantly more IRS resources to auditing EITC returns than other aspects of IRS code compliance.

Medicaid benefits the poor, mainly the young and the elderly. It's under attack, too. A pity, since enough money is going into publicly funded health care that we ought to be able to provide more coverage to more people.

Ah yes, and then there are food stamps, which the President considers to be a farm subsidy worth cutting. Cut direct payments to millionaire farmers? Never! Cut food stamps to single moms? Right-oh!

Tim Wise writes:

A more significant beneficiary of the welfare state, at least at the local level -- more specifically, Arlington County, Virginia -- may be the county employees (both county and school district). A year ago, the County Manager determined that over the past few years, county spending was increasing at 7.4%, which is probably twice the rate of inflation over that period. It's also true that the biggest driver of local Arlington spending is payroll where most employees get a COLA as well as step increases. On the schools side, those pay increases amount to 5% for each additional year.

Tom West writes:

For one thing, if Americans understood these basic facts, it would arguably undermine support for the welfare state.

Indeed, I'll argue it. I think there's an argument that if Americans understood how *little* they're giving to the poor, they might feel far better inclined towards the programs they do have. After all, there's far fewer people who want to get rid of foreign aid once they understand how little is spent on it.

John writes:

While I believe that people are remarkambly uninformed about how are government works, this survey you linked to is ten years old (1995). Wonder how things would look today...

Mark writes:

Your analysis implicitly presumes that "the poor" and "the old" are mutually exclusive. In fact, this is pretty obviously untrue. One of the biggest benefits of the Social Security program has been the enormous reduction in poverty among the elderly which it has brought about.

Miracle Max writes:

You could have it backwards. The public overestimates the extent to which the Gov aids the able-bodied non-elderly and dislikes it for that reason. If they understood how little goes for that purpose support for the State might be higher.

The Right has been capitalizing for decades about aid to the able-bodied, not to the elderly and disabled.

Steve Miller writes:
While I believe that people are remarkambly uninformed about how are government works, this survey you linked to is ten years old (1995). Wonder how things would look today...

I was going to give you a link to the GSS questions on welfare, but after looking at them again I realized that most of the data on welfare attitudes in the GSS is nearly twice as old as the SAEE that Bryan linked to. So in an imperfect world, 1995 data on attitudes is fairly current.

Not that I'd expect attitudes to have changed much, anyway. Why would they?

Josh writes:

"Your analysis implicitly presumes that "the poor" and "the old" are mutually exclusive. In fact, this is pretty obviously untrue. One of the biggest benefits of the Social Security program has been the enormous reduction in poverty among the elderly which it has brought about."

I think it is arguable to suggest that they are mututally exclusive groups, as far as the US is concerned anyway.

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