I have mentioned a few times that I used to determine eligibility for welfare benefits at the Department of Social Services. During my two years there, I discovered a number of problems with the way the state handled welfare. Some were specific decision made by the state, others were problems inherent in any state run welfare system.

For example, the decision my county made to refuse to prosecute welfare fraud was not a problem inherent in welfare. Nor was the fact that welfare recipients could use future welfare payments to repay the benefits they had fraudulently received. Likewise, the decisions about what would and would not count as an asset when means testing recipients, are specific to our current system. And the list could be extended indefinitely.

But I am not writing to discus the shortcomings caused by our specific implementation of welfare. Instead, I want to look at those problems inherent in every state run welfare system,  and to compare those inherent problems to the alternative of a private charity.

Hopefully by the end of this essay I will have convinced my readers that there are certain problems that logically must exist in a state run charity, and that those problems are great enough that returning to exclusively private charity is the most sensible course for the state to adopt.

The first problem inherent in state welfare is that it is rules-based. At first this may not seem to be much of a problem, as we are so used to the situation, but it really is. By having firm rules governing eligibility, we create two related but opposite situations, truly needy individuals who are disqualified for technical reasons and those who "game" the system, using their knowledge of the rules to get as many benefits as they can, whether they are truly needy or not.

The first case is pretty simple to understand. Some people simply do not meet the requirements, regardless of their need. For example, when I was doing eligibility determinations, there was a rule that one could not have voluntarily quit their last job. It makes sense, as we don't want people quitting jobs and going on welfare. But there were circumstances where it ended up in unfair results. For example, a woman who quit her job to raise her children, whose husband then abandoned the family was still seen as a "voluntary quit". Likewise a man who left one job to take another, but was injured and rendered disabled before starting the new job was also considered to have voluntarily left his previous job. These may be unusual circumstances, but fixed rules make such situations inevitable. Of necessity, rules are rigid and designed to cover the most common circumstances, so, inevitably they will sometimes exclude those that everyone would agree should be receiving aid.

The opposite case is much more common. Many, many people, either from an aversion to work, or simply to maximize their benefits until they find work, will arrange their lives and finances so that they fit the rules perfectly. This is actually more harmful than the previous rule-based problem, as the rules are designed to define poverty, and, as a result, closely adhering to the rules usually works to make the individuals less employable and less likely to ever support themselves. For example, even after the reforms of the mid-1990's, the system does discourage even small part-time jobs, as benefits drop off much faster than wages rise, making it unlikely welfare recipients will gain any work history or job skills. But, of course, the best example comes from the era before the reforms when having additional children was actually beneficial to the unemployed¹. Both of these show how adherence to the rules may bring better benefits to the recipients, but serves to mire them deeper in poverty and dependence.

So, if rules bring such harmful results, what is the alternative? Can we develop a state system of welfare that does not have these disadvantages? Can we change the rules to better encourage employment and self-reliance? Or can we have a system without fixed rules?

The answer to all of of those question is no.

To answer the final question first, there is simply no way we can have a welfare system without rigid rules, they are inherent in the system. The only alternative to having rigid rules is to leave benefit disbursement up to the case worker. The fact this is unworkable should be immediately obvious. First, every denial would become an immediate lawsuit, as the person denied would allege prejudice, personal animosity, incompetence, or anything else to get a windfall of lost benefits and damages. Second, an exceptionally sympathetic worker could easily bankrupt the state by approving outrageous amounts for every recipient. Third, there would be no way the state could anticipate required costs, or control those costs, as the payments would be purely random, based on the whims of eligibility workers. Finally, I doubt any voter would long accept a system where the taxes he paid were paid out on the say so of a low level civil servant.

So, if we are stuck with rules, are they necessarily all as bad as the ones we have now? The answer is yes and no.

As I said, there are some problems with our current system which can be fixed, they are not inherent in all welfare systems. But those are not the problem. What is a problem is that welfare, of necessity, lends itself to being gamed, and those who game the system in so doing inevitably hurt their chances of ever leaving the roles. It is all quite logical. The purpose of welfare rules are to establish who is sufficiently poor to receive benefits. So, those who try to meet as many qualifications as possible, to get the most benefits, will emulate the behaviors of the most destitute. Of necessity, by making themselves appear not just poor and unemployed, but unemployable, they will make themselves so. Perhaps two illustrations will help.

First, we scale up benefits as more people are added to a family. This usually entails raising benefits as another child is born. This makes sense, as more mouths to feed increases the pinch the family feels. However, it also means that one wanting the most benefits will keep adding children until the cost of another child is greater than the benefit increase. Of course, as it actually gets cheaper to feed children after a certain point (the per-person cost of cooking for 8 is less than cooking for 2), there really is no break-even point. This was somewhat mitigated by the reforms of the 1990's, which refused additional cash for children born after one started getting welfare. But, there are other incentives, such as food stamp increases, WIC increases, and section 8 preferences², which make this reform less effective than anticipated.

A second example can be found in those classified as disabled. In order to distinguish between disability and simple medical problem, the law was written to call someone disabled only if he could not work for the next 12 months in the opinion of a doctor. The problem is that this means those who are receiving benefits due to disability have no incentive to try to better their situation. Even if they thought they could work a few hours a week, they would not do so, as they would lose all benefits the moment they earn even one dollar. The definition itself means they will want to remain disabled³ until they find a job which pays substantially more than the value of their disability cash payments and medical benefits.

Of course we could change the specifics of these definitions, we could redefine disability to allow 10 hours of work per week, we could make a lot of tiny adjustments, but they would not do away with the underlying problem. The problem is that rules will always be required for a state run welfare system and those rules will inevitably cut off some who really deserve benefits, and will be manipulated by those who don't want to work. And, as a consequence of trying to fit themselves to the rules, those recipients who try to game the system will end up making themselves ever less likely to leave the rolls and become productive once again.

Those are not the only negative results of rules. Rules also make the system excessively costly, and extremely slow.

The costs coming from rigid rules should be obvious. Just look at the size of any social services office building, or count the eligibility workers. The amount of documentation required of the recipients requires many hours of work from the clerks for each case. Nor is that all. Because we are dealing with fixed rules, the cases must be periodically audited for compliance by the central authority, increasing the costs. Nor is that all. With such a complex system of rules, administered by a small army of workers, the system also needs extensive training, a large managerial infrastructure, extensive data storage and retrieval, and all the other attendant support structures of a large bureaucracy. The IT revolution has reduced some of the costs of data storage⁴, but not enough to bring down the truly massive costs of all that management and training. Running a large bureaucracy is always expensive, and a rules-driven system always requires a large bureaucracy.

And, with bureaucracy and rules comes the inevitable slow down. The welfare system is just not fast. I don't think anyone, anywhere on the political spectrum will argue with me here. I was considered a very fast worker, and it still took me a minimum of two weeks to get any but the most simple case approved. The system is just not set up for rapid response. (As evidenced by the fact that "expedited benefits" rules require benefits must be issued within 3 weeks.) As the rules require a large number of supporting documents, there is just no way to make the system more responsive. And, as the rule-based system must remand documentary evidence, there really is no way to do away with those delays. The slow pace is simply inherent in the system.

So, if the state run welfare system must be slow and costly, will inevitably force some deeper into poverty while denying benefits to others truly in need, what is the alternative?

The alternative is something which exists today, but which has been deemed "inadequate" to deal with poverty since the Great Society began.⁵ Private charity.

Private charity avoids all the problems of rules. As money is either being distributed directly by those who donated it, or is being distributed by someone the donor trusts, private charity is not bound by the same rules as the state. They can give to the needy who do not fit state rules, and they can refuse to give to those fitting technical definition of poverty who do not seem truly needy. By avoiding rules, private charity is also more efficient and faster. They do not need documentation and have no massive bureaucracy, so more money gets to the recipients and faster.

Private charity also has a few benefits welfare does not. First, private charity is unlikely to become a way of life. They are under no obligation to continue giving to someone simply because he remains "poor", meaning private charity can cut off anyone who seems interested in living off charity forever, which may also serve as a spur to find work.

But the biggest advantage of private charity is that it is voluntary. The state welfare system takes tax dollars (effectively collected at the end of a gun) and gives it out. Private charity takes money from those who choose to give it. As our society is supposed to be ruled by the consent of the governed, I would think money provided voluntarily is better than that coerced from tax payers. I know there is an argument that we can coercively tax for things like defense and police, as all benefit and we have a "free rider" problem, but I don't see charity and welfare falling in that category.

So, what are the objections against replacing state welfare with private charity?

Most of these boil down to the idea that there just would not be enough charity, but that seems absurd. If we, as a people, have voted to tax ourselves to provide welfare, would we not, logically, be inclined to provide private charity if that tax burden were removed? And if, as I said, private charity is more efficient, we would actually have more money going to the poor.

Of course, the counter argument is that we may say we want welfare, but we would not give if we were not forced. But that seems an argument against welfare to me. If we only give because of government coercion, it seems to me that welfare does not really represent the will of the governed, and should be eliminated for that reason alone. If we only give because the laws have been enacted by congress and we go to jail if we don't pay taxes, then I say it should no longer be a law.

I personally believe we will see quite a bit of charity, especially if taxes are reduced with the end of the Great Society programs. Americans are still giving to charity now, even as they are taxed to support a massive welfare system. How much more would they give if they were not shouldering that burden?

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1. Prior to welfare reform many on the left argued that people would not intentionally have babies on welfare for money, as "it costs more to raise a baby than they get in benefits". Of course, this assumes the mothers were taking adequate care of their children, which is arguable, but even if we assume that, it simply isn't true. These critics were looking only at AFDC (Aid to Families with Dependent Children) cash payments, or maybe AFDC and food stamps, and drawing conclusions. They simply ignored the additional medical benefits for the mother during pregnancy and for some time after giving birth, the day care subsidies (which were often a disguised cash handout, as the child care was provided by a close relative, who split the money with the recipient), the food benefits from WIC, the preferential treatment in receiving section 8 housing, and a host of other advantages another child could bring. WIC alone covered enough costs to make a lie of the assertion. But, if nothing else, I think the fact that women on welfare continued to have babies, and at a rate higher than the rest of the population, argues that they did not see those children as a disadvantage.

2. For some the greatest incentive to have extra children is in medical benefits. At a certain income level, mothers do not qualify for the same medical coverage their children receive. However, if they are pregnant, they will get the same coverage as their children. It was certainly not the intention of those who wrote the rules, but the result is that, for those who have substantial medical bills, there is a strong incentive to stay perpetually pregnant. For the truly destitute, this was not an incentive prior to the reforms, as they did get pretty decent coverage. After the reforms, benefits cut off after a set time for the mother, so they are now in the same situation as those with a slightly higher income, making this incentive strong for the totally destitute as well.

3. I know many will wonder how someone can "stay disabled" if their health improves. But any eligibility worker will tell you that there are doctors in every district who would certify a man had a hysterectomy if they were paid to do it. It is not a coincidence that the same doctor was named in over 50% of my disability cases. These doctors' names are known to every recipient, usually because they are passed around in the social service waiting rooms. And some clever doctors actually leave cards or fliers in the waiting rooms themselves.

4. I left just prior to the real data explosion. Some state agencies had shifted to PCs, but we were still mostly using smart terminals attached to several mainframes. It was an electronic system, but paper was still a large part. Our record room held only the past year or so of  files. The older files were stored off site for seven years. Once they had been inactive for seven years, they were shipped to a workshop where prisoners on work detail shredded them. Given the confidential data in those folders, that last part always worried me.

5. Obviously, private charity is far from inadequate to deal with poverty. The real reason it was dismissed by the left was that it was not under state control. The left has a tendency to think any private incentive cannot succeed, and thus needs to be replaced with a state solution.