1. FREE TO CHOOSE CHAPTER 4 CRADLE TO GRAVE

2. I. INTRODUCTION Election of 1932 was watershed event It marked a major change in opinion about the role of gov’t Stats: from founding to 1929, federal spending was less than 3% of national income; since 1933, federal spending has never been less than 20%

3. I. INTRODUCTION What is the purpose of welfare?

4. I. INTRODUCTION “The members of FDR’s brain trust were drawn mainly from the universities- in particular, Columbia University. They reflected the change that had occurred earlier in the intellectual atmosphere on the campuses- from belief in individual responsibility, laissez-faire, and a decentralized and limited government to belief in social responsibility and a centralized and powerful government.” Failure of nationalization has simply altered the direction of big gov’t W. Allen Wallis on socialism: “intellectually bankrupt after more than a century of seeing one after another of its arguments for socializing the means of production demolished- now seeks to socialize the results of production.”

5. I. INTRODUCTION Discuss recent developments in socializing the means and results of production

6. I. INTRODUCTION James R. Dumpson: “As I looked at the film, I had a growing sense of anger. Anger that that position failed to recognize that the system that was being attacked was necessary in our capitalistic, free enterprise system that by its own failure produces poverty, and therefore requires governmental intervention in the interest of those people caught in the traps of poverty.” Why do we need welfare? Does Mr. Dumpson provide the answer?

7. II. THE EMERGENCE OF THE MODERN WELFARE STATE Germany Britain Sweden Is there a predestined amount of poverty?

8. III. RESULTS OF THE WELFARE STATE A. Social Security “We find it hard to conceive of a greater triumph of imaginative packaging than the combination of an unacceptable tax and an unacceptable benefit program into a Social Security program that is widely regarded as one of the greatest achievements of the New Deal.” Update statistics on Social Security.

9. Workers Per Social Security Beneficiary In 1950, there were 16.5 workers per social security recipient. By 2008, the figure had fallen to only 3.2. By 2030, there will be only 2.2 workers per retiree. As the worker / beneficiary ratio falls, a pay-as-you-go system becomes less viable. 1950 2004 2030

10. U.S. Population Age 65 and Over (millions) The growth rate of the elderly population will accelerate as the baby boomers move into the retirement phase of life during the years following 2010. This will place strong pressure on both the Social Security and Medicare programs. The U.S. Population 65 and over: 1980 –2008 and Projections to 2030 1980 1970 2000 2020 2010 0 20 40 60 80 2030

11. Percentage of OASI taxable payroll Coming Deficit Between Payroll Tax Revenues and Benefit Expenditures Currently, Social Security taxes exceed expenditures. But, deficits will occur as the Baby Boomers retire. Given current payroll taxes and promised benefits, larger and larger deficits will occur in the years following 2016. Social Security tax revenues to finance retirement benefits Social Security outlays 10 12 14 16 1993 19982003 2008 20132018 2023 20282033 2040 18

12. III. RESULTS OF THE WELFARE STATE B. Public Assistance Over 100 federal programs to help the poor 1978: $90 billion a year for programs Census figures for poverty don’t include income in kind What is an “in kind” payment?

13. III. RESULTS OF THE WELFARE STATE C. Housing Subsidies Department of Housing and Urban Development created in 1965 1978: 20,000 staff disbursing more than $10 billion per year Beneficiaries have been property owners, middle-income families, and developers Why haven’t housing subsidies been more effective?

14. III. RESULTS OF THE WELFARE STATE D. Medical Care Arguments for socialized medicine in US: 1)Costs will be reduced Rebuttal: no way 2)Medical costs are beyond means of most Americans Rebuttal: total expenditures on private and gov’t medical care = 2/3 of that spent on housing, ¾ of that spent on autos, 2.5 times that spent on alcohol and tobacco Discuss recent developments in health care reform.

15. IV. THE FALLACY OF THE WELFARE STATE “Voluntary gifts aside, you can spend someone else’s money only by taking it away as government does. The use of force is therefore at the very heart of the welfare state- a bad means that tends to corrupt the good ends.” Discuss “leaky bucket” of welfare Four ways to spend money video:

16. IV. THE FALLACY OF THE WELFARE STATE

17. V. WHAT SHOULD BE DONE “We need some way to ease the transition from where we are to where we would like to be, of providing assistance to people now dependent on welfare while at the same time encouraging an orderly transfer of people from welfare rolls to payrolls.” 2 essential components of a program: 1)Replace all current specific programs with a single comprehensive program of income supplements in cash (negative income tax) 2)Unwind Social Security while meeting present commitments Negative income tax must replace all existing welfare, not be added to the list

18. VI. WHAT IS POLITICALLY FEASIBLE? Martin Anderson: “…To become a political reality the plan must provide a decent level of support for those on welfare, it must contain strong incentives to work, and it must have a reasonable cost. And it must do all three at the same time.” Discuss potential alternatives for reform.

19. VI. WHAT IS POLITICALLY FEASIBLE? Does capitalism, by its own failure, cause poverty? Are people in poverty excluded from the capitalist system? Does failure of private sector cause poverty and welfare programs? What is the responsibility of the top 80% to the bottom 20%? Does your answer change if the bottom 20% is above or below the poverty line? Take welfare away. Would those people find a job? Does minimum wage influence that process?