Is a Better Life Worth Slower Growth?
President Joe Biden is staking his entire presidency on the claim that his $3.5 trillion American Families Plan will make life better for Americans.
But what constitutes a better life? Philosophers have been cogitating about what makes life better for millennia. Plato quoted Socrates at his trial as saying, “the unexamined life is not worth living,” choosing death over exile. Most people believe that Socrates made a noble choice, but the left-wing UK Newspaper The Guardian commented that “if you scratch many a noble ideal you can sniff the unmistakable aroma of elitism.” The Guardian opined that Socrates’ statement implied that “human beings who do not (examine life) …… have valueless, bestial lives. The noble ideal has a harsh implication: some in the herd of humankind may as well be animals, or dead.”
I think the Guardian is being too harsh, but they have a point. Most of us do not examine our lives in the kind of depth that Plato recommended. Most of us would consider a steady job, a roof over our heads, the ability to feed and clothe our family, and also the ability to save a little for our retirement to be a pretty good life. But life is not so easy and simple. Our competitive free market economy can make it difficult to hold a steady job or afford the house of your dreams.
Democrats (and even Republicans when it is near elections) believe that government can do many things to make peoples’ lives better. I mean, that’s what it says in the Constitution. The Preamble to the Constitution says that government is supposed to “establish justice, insure domestic tranquility, provide for the common defence, promote the general welfare and secure the blessings of liberty” for the people.
The Preamble (as I noted in Commander’s Intent, September 24, 2019) represents the intent of the Framers. To my mind the Preamble is the most important part of the Constitution (the rest is just nuts and bolts) and we should be guided by the Preamble when we try and define what the government should do. The nuts and bolts are the mechanisms necessary to fulfill the intent of the Preamble. Many people believe that promoting the general welfare grants the federal government the power to give certain people (but not all the people) transfer payments in the form of free medical care, food stamps, tax subsidies or other benefits as entitlements for their welfare.
But this was not the intent of the Framers. The Preamble was written in 1787 and welfare had a different definition in 1787 than it does now. Samuel Johnson’s Dictionary of the English Language, published in 1755, defines welfare as ”happiness; success; prosperity“. Transfer payments to help poor people, the handicapped or the unemployed used to be considered charity or the dole. People, especially Americans, used to take pride in not relying on charity. But not anymore. The name of these payments was changed to “welfare” and then “entitlements” to take the implied sting of disapproval out of such charitable transfers.
But the intent of the Framers has been completely disregarded for over fifty years and the expenditure of such transfer payments is now regarded as mandatory compared to Constitutionally obligated expenditures of the government that are now considered discretionary. So government expenditures grow exponentially despite herculean efforts to limit the growth of discretionary spending.
And now the Biden Administration wants to kick the transfer payments into really high gear (to the tune of an advertised $3.5 trillion over ten years but which is actually closer to somewhere between $5.0 and 5.5 trillion). But all these expenditures that are supposed to make life better come at a cost – the cost of slower economic growth. Supporters of the Biden Administration (citing John Maynard Keynes’ General Theory of Employment, Interest and Money) insist that these expenditures will stimulate demand and increase economic growth. But all the tax money that they intend to raise to pay for these transfers doesn’t just come from luxurious mansions and Lamborghinis, a lot of it comes from capital investment in America’s productive capacity. Taking money out of investment for entitlements will slow economic growth.
Pundits say the American Families Plan will Europeanize America as if this is a good thing. They point to Denmark as the happiest country on the planet despite high taxes to pay for its social welfare system. But between 1995 and 2015 the US economy grew almost twice as fast as Denmark’s. It also grew faster than the other Nordic countries (except Norway whose growth was driven by the discovery of oil) and much faster than France or Germany. It is true the Europeans appear content with slower growth but there are other factors behind this contentment besides the social welfare system (see; Nordic Fantasy, June 11, 2019).
But politicians, in their infinite wisdom, have come to the conclusion that the surest way to get reelected is to give voters free stuff so each election cycle they trot out new and wonderful benefits that they can provide, but only if they are elected. The problem is that the new benefits soon become old mandatory entitlements prompting politicians to trot out even more new heaps of free stuff. This is the logic behind President Biden’s $3.5 trillion American Families Plan (keeping in mind that the only reason that the plan is limited to $3.5 trillion is that some of the benefits are “temporary”).
All of this to make life better for Americans (and especially for American politicians). The contempt that these politicians hold for the ability of Americans to take care of themselves is thinly veiled. Highly educated progressive elites know what the people need much better than the people. Trump and his pack also offer a slew of benefits (just to different people).
But the European-style welfare state does more harm than just slowing down economic growth. There seems to be something missing. All these benefits and entitlements attend to peoples’ material needs. What ever happened to self-respect? Pride in accomplishing a task? Working hard to achieve your goals? Delaying current gratification to achieve future goals? These are the attributes that made America great and helped millions achieve their unique American Dream. All the trillions of dollars spent on the War on Poverty haven’t lifted up the poor but have impoverished their spirit and destroyed their communities.
If the American people were unidimensional and material goods were all that were necessary to fill their yearning souls with meaning, then perhaps transfer payments might do the trick. But the War on Poverty has taught us an important lesson (at least it has taught some of us an important lesson).
American blacks made more progress socially and economically before the War on Poverty was created to supposedly help them and other poor people. And Hispanics are not only a faster growing minority, but they are also gaining greater wealth as well by applying the American values of hard work and delayed gratification to build a better future (they are forced to work hard because illegal immigrants are not entitled to receive transfer payments). And Asians don’t really need any help because they are doing quite well without it, thank you very much.
And transfer payments can create unintended consequences that often negate the benefits the transfers provide. The War of Poverty might well have been named the War on the Black Community as the result of the many benefit programs has broken up black families and created a plethora of single parent families and fatherless children. Without stable families, efforts to educate poor children so that they can escape grinding poverty have been an utter failure.
Another example of the unintended consequences of government programs is the emergency unemployment benefits disbursed during the Covid pandemic that may be a significant factor in the shortage of workers that is hampering the US economic recovery from the pandemic. And the $3,000 to $3,600 credits for children included in the American Families Plan is guaranteed to have at least one consequence that I can think of – more children (fathers optional).
The Preamble to the Constitution makes it clear that the Framers did not intend to create a welfare state (the concept didn’t even exist in 1787), or a government that dominated the lives of the people but a government that gave the people the liberty to work toward their own unique American Dream.
It is true that early America did not live up to this vision, and not only because of slavery. And it is still true that America does not live up to its vision and potential. But the way to realize this potential lies in building the human capital of the American people and not in substituting dependency on government handouts for personal initiative.
The better life that is possible in America does not come from transfers of wealth. The better life does not come from a cradle to grave nanny state that disrespects the abilities of the individual. The masses of people swarming across our borders understand what makes for a better life because that is why they are trying to get into America, and even more hope that they or their children can become Americans in actuality. Just ask the guy mowing your lawn, or your taxi-cab driver, or farmhand (or the gal who cleans your office), why they came to America (because they are almost all immigrants) and they will tell you. Opportunity. The opportunity to work hard, save, educate their children and take pride in creating the happiness, success and prosperity of a better life for their family. That’s a better life that creates faster economic growth.
The liberty of the people motivated the creation of the US the Constitution that limited the power of government so that the people had the freedom to develop their own human capital to achieve their dreams. And it was the power of that human capital from millions upon millions of American citizens that propelled the United States to become the most powerful and prosperous country in the world. That liberation of human capital made possible by liberty is what makes the United States exceptional.
President Biden’s plans to make America more like Europe will undermine American exceptionalism and makes us more like every other country – the detriment of the American people and the rest of the world.