Cash payments, in place of complex welfare programs, may be a step toward extricating government from the lives and ambitions of low-income Americans.
Most of the discussion about the reconciliation bill proposed by the Biden administration concerns the amount of its spending—the so-called top-line number. That public focus is not surprising. One and three-quarter trillion dollars, even if it is cut down from twice that amount, is a lot of money for the government to redistribute by anyone’s calculation.
But another central fact about the proposal in its boldest form is the abridgment of means-testing for benefits—it totally abandons means-testing for many of the programs and imposes only weak tests for others—and its gutting of work requirements. Thus, the most far-reaching form of the bill, regardless of whether it is ultimately passed, shows the ambition of progressives to transform the idea of social welfare from a safety net focused on the poor to a universal transfer scheme.
Moreover, the left’s enthusiasm for wealth taxes and punitive surcharges as the only exactions on individuals used to pay for new programs also confirms that their underlying ideal is no longer to maintain a program of social insurance by requiring contributions from the population at large but to use redistributive welfare programs to create a more generally egalitarian society.
The danger of this egalitarian vision goes beyond the size of the transfer payments needed to bring it about. To be sure, the taxes needed to fund these transfer payments discourage the work and risk-taking that grow the economic pie for everyone. The surcharges in the bill fall on the working rich, who are likely to work less as a result. The proposed wealth tax on billionaires and the initially proposed tax on their unrealized capital gains are particularly foolish. Employing capital in the right place is a key to economic growth. The very wealthy have become rich by making good decisions about where to employ capital, and they should be encouraged to continue to make wise allocations. Moreover, taxing unrealized gains on only public companies incentivizes founders of companies to keep them private, making it harder for those who are not entrepreneurs to share in the gains of a dynamic capitalist society.
But egalitarianism also has non-economic costs. Unlike a basic safety net, universal welfare programs undermine personal responsibility because they support people who can provide for themselves. Moreover, they wrongly assume that the government can measure everyone’s welfare so as to equalize it. But an individual’s level of satisfaction depends on preferences and psychological traits that the government cannot possibly know. In using a solely economic measuring stick to impose more equal distribution of resources, the government not only reduces economic growth but interferes with a social welfare it cannot comprehend.
Equalitarianism and its Defects
A debate among philosophers illuminates what is at stake in the movement to eliminate means testing and soak the rich. John Maynard Keynes famously stated: “Practical men who believe themselves to be quite exempt from any intellectual influence, are usually the slaves of some defunct economist. Madmen in authority, who hear voices in the air, are distilling their frenzy from some academic scribbler of a few years back.” This observation is true as the shape of political programs as of economic policy.
A cradle to grave universal welfare state combined with a focus on reducing the wealth of the most well-off can be justified by some egalitarian academic theories. Take “resource egalitarianism”—defended by Ronald Dworkin. If everyone deserves “equal resources,” then billionaires’ immense wealth is offensive even as compared to others who are well off. Egalitarianism of resources also militates against means-testing, because the point is to bring everyone to the same level, not simply to help the worst off.
“Luck egalitarianism”—another popular academic theory—in practice ends up at much the same place. Luck egalitarians want to make sure that people’s inequality is due only to their own choices, not to bad luck. The focus on eliminating luck might seem to prevent egalitarianism from swamping personal responsibility. But the problem for luck egalitarians is that it is impossible for the government to figure out how much luck as opposed to choice is responsible for a person’s situation. And some of those choices in fact depend on the good or bad fortune of native endowments such as a tendency toward conscientiousness. Separating these factors out is a matter for God, not government.
In response to this intractable difficulty, some luck egalitarians have dropped any practical requirement that there be an inquiry into how much luck is responsible for an individual’s situation. If the need to show bad luck is attenuated, however, luck egalitarianism becomes largely indistinguishable from an egalitarianism mandating equality of welfare. And for the same reasons that it is difficult to determine what role luck plays in a life, it is difficult to compare welfare across persons. People have different endowments and preferences that are largely unknowable but affect their welfare substantially. Some people have a makeup that makes them content to be middling. Others need to excel to be happy. One person has tastes that require a lot of income to support. Others revel in their frugality. Even if the state aspires to become a panopticon, it cannot see into our souls.
Sufficientarianism as a Critique of Egalitarianism
One powerful philosophical critique of egalitarianism is libertarianism. For libertarians, no fact about any individuals’ resources — the absolute amount or its divergence from others—gives them a claim on anyone else’s resources without their voluntary consent. Robert Nozick’s Anarchy State and Utopia is the most brilliant modern restatement of the natural rights justification for this position.
But libertarianism is not the reigning philosophy of America or any other modern democracy. The United States has long had social welfare programs. In my view, the most charitable explanation of our more limited welfare state is a position that political philosophers call sufficientarianism. This theory requires that people have enough resources to live their lives effectively. But as George Sher of Rice University, a leading proponent of sufficientarianism, suggests, that requirement does not mean giving people enough resources to live their lives as effectively as others or as effectively as they may wish. People have different endowments and they should recognize that they must match their aspirations to their talents. Indeed, this recognition is a part of what we mean by wisdom.
What resources are sufficient to live effectively is a matter of debate. But it is a mistake to think that this question can be resolved simply by determining the right amount of transfers from the state. An effective—indeed flourishing—life is best lived not through transfers, but through work. Accordingly, an essential part of sufficientarianism requires a society that permits and encourages people of different endowments to gain more resources for themselves. A society organized along sufficientarian principles thus would be focused on getting rid of barriers to such capacities, like licensing laws that protect incumbents at the expense of insiders, and improving public schools by creating more competition among them. And sufficientarianism will tend to allow a larger role for private charity than egalitarianism. The patchwork of individual beneficence cannot possibly make everyone exactly equal in either resources or welfare, but it may contribute greatly to sufficiency. And private charity is likely to focus on helping people live effectively rather than just live off transfers.
When it comes to the welfare provided by the state, sufficientarianism justifies means-testing of entitlements. The state does not have to give everyone the same entitlement to assure that the least well-off have resources to live effectively. Nor does it suggest that we should particularly target billionaires for redistribution of resources or indeed for elimination. The philosophy does not require us to equalize welfare or resources among those who have enough to live effectively.
Sufficientarianism also does not make the impossible demands on centralized knowledge that equalitarianism does. It is much easier to conclude that someone who does not have food or shelter is in need of assistance than it is to assess the welfare divergences among people who meet some minimum standard of living and differ not only in income but also in many other attributes.
The Conservative Welfare State
“A decent provision for the poor is the true test of civilization,” Samuel Johnson once said. Johnson, of course, was not an egalitarian of any kind, but a conservative. His conservative position challenges the socialist welfare state as well the libertarian night watchman state.
While the right often depends on libertarian rhetoric in attacking the welfare state, it is not particularly effective. The elimination of the welfare state has never been achieved in any modern democracy and seems to be at odds with diffuse sentiments of concern for the truly needy. A version of sufficientarianism, however, seems consistent with a version of the limited, conservative welfare state. It provides a justification for a means-tested, responsibility-protecting social safety net. Most importantly today, it offers a critique of an egalitarianism that threatens to undermine the values of liberty and responsibility at the core of the American experiment.