Reclaiming Welfare

How would the poor and the helpless be aided in a free society—a truly free society, in which individuals' right not to be interfered with in the pursuit of their own goals would be sacrosanct? In such a society, government would not take from you some of the fruits of your labor to assist me because I was hungry or unemployed or disabled. You might have a moral obligation to come to my aid, but the government, because of your rights, could have no political obligation and hence no legal right to enforce your responsibility by levying taxes and redistributing the proceeds. In such a society, then, help for the hapless would be up to free individuals and voluntary associations among them.

This answer, accustomed as we are to the idea of the welfare state, seems harsh in the extreme. But true advocates of a truly free society must bite this bullet. Let it be said, without trying to get off the hook, that defending this answer in a practical sense, by sketching the likelihoods and prospects, is impossible without first covering a lot of other territory: in such a society, there would be no "business welfare," either; we could reasonably expect an enormous outpouring of individual enterprise; and so on.

But what are we, as advocates of a free society, to make of the current debate about the capacity of philanthropy? Over the period 1981–84, the Reagan administration seeks a $115-billion reduction from previously projected outlays for federal social-welfare programs. President Reagan, whatever his critics may accuse him of, by no means espouses a dismantling of the welfare state. He has, however, accompanied the cuts with calls for "private-sector initiatives" and "a new spirit of voluntarism." But critics of the Reagan budgets say that nonprofit groups cannot possibly fill what has come to be called "the gap" or, more awesomely, "the $115-billion gap." And representatives of foundations, corporate philanthropy groups, and nonprofit social-service organizations scramble to outdo one another in the earnestness of their warnings that the government's apparent new-found faith in the private sector should not be overdone. Yet here we are, proposing that free individuals should not only make up for cutbacks but should reclaim the government's welfare function.

There's an insidious assumption that can make this position seem preposterous—an assumption central, for example, to the worry about "filling the gap." It is that each dollar cut from the federal budget must be replaced in the private-sector welfare world if people are to be adequately helped. If Reagan is cutting $115 billion, then corporations and foundations and individuals must come up with $115 billion more for nonprofit social-service providers, over and above their current contributions—$53.6 billion in 1981 for all charitable and educational nonprofit groups. The arithmetic seems painfully clear: it's highly unlikely.

But this is to assume that a dollar unspent by the federal government disappears into a black hole. In fact, it is a dollar left in someone's hands in the private sector. And every such dollar, whether it is saved or invested in plant and equipment, used to pay a worker or put toward a consumer purchase, directly or indirectly reduces the need for the very help seen to be in jeopardy. Not only that, but some portion of that dollar will in fact, on average, be donated to charity. Over the past decade, individuals (who account for 90 percent of donations) and corporations (5–6 percent) have aggregately devoted a steady percentage of their incomes to philanthropy.

There's another problem with the notion of dollar-for-dollar replacement—the idea that private groups, in their attempts to aid the disadvantaged, should be essentially replicating government efforts. This is to ignore the widespread recognition—across the political spectrum—that government welfare programs are massively inefficient and frequently create more welfare problems than they solve. People who have looked in detail at the provision of social-welfare services have found that the most effective help—getting to the people who need it, at low cost, and without fostering permanent dependence—is help provided on a small scale, on a small budget, by groups that, partly because they operate on a shoe-string, come up with innovative programs. Our cover story (see p. 23) details the workings of one such group in Pittsburgh.

In contrast, many have interpreted President Reagan's push for private initiatives to mean that American business should devote more profits to philanthropy. Even Reagan's Task Force on Private Sector Initiatives has joined the "5 percent club," urging that corporations increase their contributions from the current average of 1 percent of income to 5 percent. And Rep. David Durenberger (R–Minn.) warns that if the 1981 corporate tax breaks are not followed up with generous assistance, "the retribution against business will be swift, strong, and long-term."

Corporate philanthropy is one important source of help, and some firms are pioneering innovative solutions to problems that have defied government paternalism. Control Data (youth employment and inner-city revitalization) and Lincoln National Life Insurance (low-income housing) are but two examples. These programs are successful, however, precisely in their responsiveness to specific local needs met with as much dedication of time and energy as money. Jaw-boning corporations to willy-nilly fork over more profits is not the answer.

What "private-sector initiatives" should really be about is letting the private sector identify needs and figure out how to meet them—and giving the maximum freedom to do it. Robert Woodson of the National Center for Neighborhood Enterprise notes that the biggest problem facing neighborhood social-service groups is regulations and licensing requirements, usually from state and local governments. This is where arm-twisting from the feds might really pay off. Others worry about signs that the Reagan administration may tighten reporting rules and criteria governing contributions by foundations, reducing their flexibility to fund innovative new groups.

For too long we have gone along with the dogma that only educated experts and big bucks can aid the poor and the helpless. In this area, as in so many others, it's high time for a healthy dose of freedom all around.