Central banks usually feel the urge to pretend to know more than they can, in order to inspire “confidence” in themselves.
William Voegeli’s Liberty Forum essay reminds us of the absurdity of so much American political discourse of the past 60 years. The call for greater state-mandated redistribution and entitlements in order to “oppose the drift into the homogenized society” and “fight spiritual unemployment,” to combat “loneliness and boredom” and “build a richer life of mind and spirit” sounds comical, even pathetic after decades in which those policies created atomized societies, emptied out inner cities, and fueled violence, poverty, and despair. The solution to all of those problems, manifestly caused by the very entitlement programs of the Great Society, was, of course, more entitlements.
Voegeli offers an intellectual survey of the burning wreckage of American welfare statism. (I resist calling it “liberalism.”) I offer another view, which is about political incentives. Arthur Schlesinger and Lyndon Johnson’s speechwriters may have waxed lyrical about the alternative of a richer life of mind and spirit created by the welfare state to combat soulless wealth, but there was another dynamic at work that I believe has more explanatory power. That dynamic is the dynamic of political power itself.
One way to garner political support is to offer targeted benefits to voters and, more specifically, to make them dependent on those benefits, such that not voting for those who promise them will risk not receiving them. Consider important and concentrated voting blocks, two of which feature prominently in the history of the American welfare state.
One is farmers, who represent a very small fraction of the American population, but who have disproportionate power in the U.S. Senate, as low-population agricultural states have the same number of Senators as densely populated industrial states. Farmers, precisely because of their small numbers, enjoy low transaction costs that fuel the redistributionist game. It’s an arrangement that imposes incrementally small costs on large numbers of people to award large benefits to small numbers of people who are better organized. The classic example is sugar farmers. They are easy to identify, well-organized, and able to mount a common lobbying effort that results in rents worth hundreds of millions of dollars over time, a boon far greater than the transactions costs expended. In contrast, sugar consumers, while far more numerous, are difficult to identify, costly to organize, and lose only a few pennies with each cup of coffee. The consequence of this disparity is redistribution from the many to the few.
Farmers received massive subsidies, including guaranteed floor prices, thanks to the incoherent jumble that characterized Herbert Hoover’s response to what was to become (thanks to those policies and their continuation by Franklin Roosevelt) the “Great Depression.” Those policies quickly morphed into entitlements that were maintained by the disproportionate political power of farmers. (And, notably, those policies kept food prices higher than they would have been, making it more expensive for everyone else to eat but imposing a disproportionate burden on the poor, who tend to spend a larger percentage of their income on food. The solution, of course, was to subsidize food purchases for the poor with “food stamps.”)
The other is urban, African-American voters. The sociologist Frances Fox Piven documented how the War on Poverty and the Great Society were rooted in the details of American partisan political struggle. In the 1950s, black voters were becoming increasingly important to the national electoral contest. Republican presidential candidate Dwight Eisenhower had received 21 percent of votes cast by black Americans in 1952 and that percentage had risen to 39 percent in 1956. Richard Nixon won the support of 32 percent of black voters in 1960.
As Piven observed,
By 1960 the Democrats felt that the black vote, especially in the cities, had become crucial in presidential elections. (The story of how Kennedy had captured Illinois by a mere 8,000 votes, the result of landslide majorities in the black South Side wards of Chicago, quickly became fixed in Democratic lore.) Yet blacks had not become integrated into urban political parties, nor were the agencies of city governments giving blacks a share of patronage, power, and services commensurate with their voting numbers. To remedy this imbalance, the Kennedy-Johnson administrations gradually evolved a two-pronged approach: First, they developed a series of novel programs directed to slums and ghettos, bypassing both state and local governments; second, they encouraged various tactics to pressure city agencies into giving more services to blacks.
The Great Society put federal money directly into urban neighborhoods, bypassing state and city administrations that were at the time dominated by either southern racist white Democrats, white ethnic coalitions (people of recent Polish, Italian, Irish, or other European extraction) or (even worse from the perspective of Democratic strategists) Republicans. Had the funds gone through Democratic machines dominated by old southern Democrats, urban white ethnics, or Republicans, they would not have reached the urban African American voters whom the national Democrats were targeting. The goal was to make those voters increasingly dependent on, and thus loyal to, the national Democratic Party.
The strategy inaugurated a major realignment in American politics and proved to be remarkably successful. In 2012, President Obama received 93 percent of African American votes (down from 95 percent in 2008). It was through and through a political strategy. Black voters have been locked in to the Democratic Party thanks to a combination of Great Society programs and the talent for stupidity of their Republican opponents, who have too often have failed signally to welcome black voters, Hispanic voters, and immigrants into their party.
All in all, electoral politics was in the driver’s seat. Arthur Schlesinger’s talk of “qualitative liberalism” was in the backseat. Such blather may have appealed to the readers of the Saturday Review, but the fundamental incentives were not “the precious and time honored values of community with neighbors and communion with nature,” in the words of Lyndon Johnson (or his speechwriters), as he launched a program that would hollow out and destroy those communities. The driving impulse was to lock in a previously volatile voting constituency.
The “antipoverty programs” of the American welfare state not only secured a major voting bloc for one party (thus immensely polarizing American partisan politics along racial lines), they also had enormous consequences for the economic wellbeing of millions of people. Black youth unemployment rates had been comparable to, and often lower than, white youth unemployment until the Great Society programs were initiated, at which point the numbers began to diverge. Black youth unemployment rates are now roughly double those of Asian and white youth and 50 percent higher than among Hispanic youth. The poverty rate in the United States, which had been falling steeply in the 1940s, 1950s, and even 1960s, stopped falling in the 1970s, when the Great Society programs were entrenched, and began to climb slightly, while labor-force participation among young African American males dropped substantially.
Because of the visible failures of the “War on Poverty,” many Americans, regardless of their race, associated “welfare” with programs targeted at inner-city black populations. This is not accurate. In fact, the money involved in programs targeted at the poor or at minorities amounts to a fraction of the total controlled and allocated by the American welfare state. The major growth has been in age-related entitlements, notably Medicare and Social Security. Surprisingly to some, but not to those who pay attention to the political dynamic, “the growth of entitlement spending over the past half-century has in truth been distinctly greater under Republican administrations than Democratic ones.”
There has been a dramatic expansion of the welfare state that goes far, far beyond the poor, and certainly far beyond politically targeted African American constituents. It’s generated unfunded liabilities that imperil the future of the country. The biggest expansions have not been among means-tested entitlements, but among middle-class entitlements. Money is taken from one pocket and put into another. The welfare state has created a modern “tragedy of the commons.” When what we produce is considered a common pool, each has an incentive to exploit the common pool to exhaustion.
Each person seeks to get as much as he can from his neighbors, but at the same time his neighbors are trying to get as much as they can from him. The welfare state institutionalizes what the French economist Frédéric Bastiat called “reciprocal plunder.”
Because we can plunder each other, people reason, “if I don’t get that government subsidy, someone else will.” They justify taking government funds on the grounds that they’re “just getting back what they paid in taxes” even when some of them are getting a lot more than was ever taken from them. Everyone has an incentive to take, and because we’re plundering each other, we not only spend resources to plunder our neighbors, but we also spend resources to avoid being plundered by those same neighbors, which makes all of us worse off to that extent. Moreover, we are increasingly being plundered beyond all sustainable levels. The result—exhaustion—is where we’re heading now.
Governments have promised so many benefits to so many constituencies, all at the expense of each other, that the system has become unsustainable, but who among us volunteers to give up his benefits? We might do so in exchange for lower taxes, but we don’t even get that choice. Governments can borrow the money and put the taxes off until later—that is, until after the next election, when they’ll promise even more, to be financed by more borrowing. And they can make promises without accounting for them at all.
The consequence has been an increase in indebtedness that is staggering and yet mostly hidden. The burden of debt held by the public (the national debt) attracts some (but not much) attention, to be sure, but it’s a small fraction of the outstanding obligations of the U.S. government. As Jagadeesh Gokhale points out, “The U.S. fiscal imbalance is about seven times the total national debt held by the public. In other words, if current unfunded spending commitments to future generations of older people are included, the underlying national indebtedness of the U.S. government is seven times the published figure.”
William Voegeli, in his admirable essay, concluded with a reminder about unintended consequences. I do not believe that the dependency was unintended. Beyond the political intention, and satisfactory political results, though, I do believe that the other consequences of dependency were unforeseen: notably the harmful effects on family life, the rise of out-of-wedlock births (with attendant consequences), and the rise of crime between the 1970s and the 1990s. I recall having dinner in the mid-1980s with a retired U.S. Senator who had played a role in the 1960s in the Great Society. We discussed Charles Murray’s then-new book, Losing Ground: American Social Policy, 1950-1980. I thought it might be like waving a red flag in front of a bull. I was wrong. With some sadness, he told me that “We wanted to help people. We didn’t intend to destroy families.”
 From Hanes Walton, Invisible Politics: Black Political Behavior (Albany: State University of New York Press, 1985), p. 123.
 Frances Fox Piven, “The Great Society as Political Strategy,” in Richard A. Cloward and Frances Fox Piven, The Politics of Turmoil: Poverty, Race, and the Urban Crisis (New York: Vintage Books, 1975), pp. 271–83, pp. 271–72.
 Deliberately creating dependency as a political strategy was not invented by the Kennedy or Johnson administrations. I address that history more systematically in “Bismarck’s Legacy,” in Tom G. Palmer, ed., After the Welfare State (Ottawa, IL: Jameson Books, 2012), pp. 33-54; the American experience is covered on pp. 40-48. Available online at http://studentsforliberty.org/wp-content/uploads/2012/04/After-the-Welfare-State-PDF.pdf.
 Walter E. Williams, Race and Economics: How Much Can Be Blamed on Discrimination? (Stanford: Hoover Institution Press, 2011), pp. 41–43.
 Charles Murray, Losing Ground: American Social Policy, 1950–1980 (New York: Basic Books, 1984), introduction to 1994 tenth anniversary edition, p. xviii.
 See Nicholas Eberstadt, A Nation of Takers (West Conshohocken, PA: Templeton Press, 2012), p. 23.
 Frédéric Bastiat, Selected Essays on Political Economy, trans. Seymour Cain, ed. George B. de Huszar, introduction by F. A. Hayek (Irvington-on-Hudson: Foundation for Economic Education, 1995). Chapter 5: The State 1. Available at oll.libertyfund.org/title/956/35453
 Jagadeesh Gokhale, The Government Debt Iceberg (London: Institute of Economic Affairs, 2014), p. 7, available as pdf at http://www.cato.org/sites/cato.org/files/books/government-debt-iceberg.pdf.
 One that he did not mention, but which contributed to the disastrous rise in violent crime from the 1970s onward, was the “War on Drugs,” more properly the “War on People Who Buy and Sell Drugs.” It’s certainly contributed to one of the more shameful aspects of American life, which is the staggering percentage of Americans who are in prison.