Making the Case for Bleeding Heart Libertarians

Opposition to the welfare state has been a defining element of libertarian thought—and one that in recent decades has had an enormous influence on the American conservative movement. The notion that downward redistribution picks the pockets of makers and doles it out to layabout takers is regularly voiced, not just by libertarian activists, but by Republican congressmen and Fox News commentators.

For radical libertarians who believe that only a minimal state or outright anarchy is consistent with our natural rights to property, the matter could not be simpler: taxing rich Peter to pay poor Paul is theft, full stop. Few conservatives go this far. Most grudgingly recognize a government role in helping the poor and insuring against various hazards of life. Nevertheless, small-government, libertarian-leaning conservatives regularly argue that the welfare state has grown out of control and is in bad need of serious pruning. Indeed, this is the position more than any other that adds the modifiers “small-government” and “libertarian-leaning” to conservatives of the Tea Party/Freedom Caucus stripe.

As a self-described “liberaltarian,” I have come to a different point of view. I believe that, in the world we live in, a robust welfare state is a necessary element of a healthy free society. Contrary to usual libertarian assumptions, I see overwhelming evidence that government social programs greatly improve outcomes in key dimensions of human welfare. And I see no reason to think that there is any invisible hand that could guide the voluntary nonprofit sector toward matching or improving on the government’s record. I therefore conclude that a purist libertarian program of severely reducing or completely zeroing out the welfare state would result in disastrous increases in human suffering. Compared to a typical progressive, I’m much more likely to be concerned about dependency traps and other perverse incentives, excessive and overweening bureaucracy, and rent-seeking shenanigans of various sorts. That said, my views clearly diverge from those of conventional libertarians and small-government conservatives.

I do not seek here, though, to convince my anti-welfare-state friends that they are wrong. Rather, I only want to persuade them that, for now and for the foreseeable future, opposition to the welfare state—in particular, pursuit of policy changes that reduce benefits provided—is self-defeating.

The brute fact that confronts libertarians and their conservative sympathizers is that most of what modern government does is highly popular. Americans are, to employ the usual formulation, “philosophically conservative and operationally liberal.” In other words, while majorities will tell pollsters in general terms that the government is too big and does too many things, when it comes to specifics they typically say government should do more of just about everything, foreign aid being about the only regular exception. The popularity of small government generalities tricks libertarians and conservatives into thinking they have public support, but when it comes time to actually cut something they see that support evaporate.

The unbudgeable reality, then, is that there is near-universal demand for activist government to address problems of public concern. Responding that a particular problem lies beyond the scope of government’s rightful authority is almost always an exercise in utter futility.

Getting to the small-government conservative ideal—rolling back the Great Society and New Deal and restoring the traditional Constitutional order of narrowly enumerated powers—is therefore going to be a long-term proposition, if it’s possible at all. “Libertopia,” variously defined as the night watchman state or full-blown anarcho-capitalism, is even further over the horizon. The political culture today is no more hospitable to the radical shrinking of government than medieval political culture was to freedom of religion. That culture will need to change, and change dramatically, before most of the long wish list of libertarian political changes enters the realm of the possible. Until that culture changes, the only way to win broad support for repealing this regulation or that program is to make a clear and convincing case that doing so will reduce suffering and give ordinary people more of what they want. Arguments that it’s simply wrong for government to be involved will fall on stone deaf ears.

In planning any long-term campaign for political change, the sequencing of reforms is of enormous importance. Issues should be prioritized in descending order of ripeness. In other words, the focus should always be on those issues where the case that reform will help ordinary people is strongest and most persuasive. For those seeking to push in a specifically libertarian direction, each reform should set the stage for the next step of liberalization—which is to say, it needs to succeed in a way that strengthens the credibility of reformers and broadens the constituency of people who have benefited from libertarian change.

Specifically, libertarians and small-government conservatives need to sequence their long-term reform strategy so as to chip steadily away at their most serious political vulnerability. The biggest knock against advocates of smaller government, which we have all heard countless times, is that they really only care about rich and successful people who don’t need the help and protection that big government provides. This widespread perception is one obvious reason there are so few libertarians: most people aren’t rich and successful, so most people figure that they will lose out if libertarians get their way. This perception has been aided by the fact that far and away the most prominent arenas for small-government advocacy have been cutting top tax rates for the rich and entitlement and anti-poverty programs for everybody else.

Put all this together, and two clear rules for proper sequencing emerge:

Rule 1: Don’t reduce government benefits for ordinary people until all subsidies and privileges for the well-to-do have been dismantled.

Rule 2: Don’t reduce government benefits for the poor and disadvantaged until all government policies that harm the poor and disadvantaged have been reformed.

For small-government supporters, America’s contemporary Leviathan is a target-rich environment: so many laws and programs to repeal, so little time! Accordingly, a selective focus on some issues but not others is inevitable. So how about exercising that selectivity in a way that puts libertarian reformers squarely on the side of the little guy? No sacrifice of principle is called for; all that is needed is the intellectual clarity to set priorities.

Even for radical libertarians who think all redistribution is wrong, it shouldn’t be too difficult to see that redistribution from poorer to richer is especially bad—and thus more morally urgent to target. And there is certainly no shortage of reverse Robin Hood policies, on both the fiscal and regulatory sides. States and localities dole out over $80 billion a year in zero-sum incentive subsidies to bribe corporations to locate facilities in their jurisdictions. Farm subsidies bestow the lion’s share of their largesse on big agribusiness. Tax preferences, from the mortgage interest deduction to 401(k)s to 529 college savings plans, disproportionately benefit high earners in the top brackets while forcing the rest of us to pay more taxes.

As to upward redistribution through regulation, Steven Teles and I have just written a whole book on the subject. Massive subsidies for excessive risk-taking generate megafortunes in the financial sector. Excessive protections for patents and copyrights pad fat profits for Hollywood, Silicon Valley, and Big Pharma. Occupational licensing helps to jack up doctors’ and lawyers’ incomes far above international averages. And increasingly restrictive land-use controls, especially in the big coastal cities, boost housing wealth for lucky insiders while stymying opportunity for everybody else. These four policy areas receive in-depth attention in our book, but as we note there, this is just the tip of the iceberg.

The rationale for the first rule of proper sequencing is that, whatever the case for redistribution generally, policies that make the rich richer at the expense of the rest of us are the most difficult to justify. The argument, then, is that the proper focus of cutting government should be on weak claims, not weak claimants, and thus that it is wrong to go after the latter when the former are still being honored.

As to the second rule, which focuses specifically on policies to aid the poor and disadvantaged (as opposed to the universal social insurance programs like Social Security and Medicare), the rationale is that it is wrong to cut government aid to the needy when their very neediness has been created or at least worsened by other government policies. Before withdrawing the government’s helping hand from people, better first to remove the government’s boot heel from their necks.

And make no mistake: the weight of that boot can be crushing. Residential segregation in areas of concentrated poverty and crime as a legacy of past government discrimination, policing that adds to rather than protects from threats of abuse and predation, failing schools that impart no marketable skills, a system of petty regulatory fines that traps its victims in modern-day peonage, the War on Drugs and its fostering of gang violence, prosecutorial policies that currently hold 1 percent of the adult population in cages and condemn one-eighth of adult men to an employment-killing criminal record—is it really surprising that the vulnerable population in need of outside assistance is as large as it is? And is it not both obtuse and cruel to urge the government to curtail that assistance even as government harms to the poor proceed at full throttle?

Considerations of proper sequencing are not the only reason for advocates of smaller government to rethink their opposition to government transfer payments. It’s also important to keep in mind how the political economy of spending programs differs from that of tax incentives and regulations. Transfer payments are transparent: who receives the checks and how much everything costs are all out in the open. By comparison, exactly who gets how much from tax breaks is not obvious, while who wins and who loses from regulations as well as the total costs they impose are questions swathed in obscurity.

Because of these differences, the political constraints on spending are more effective than those on tax breaks and regulations. When overt redistribution is on the table, there is relatively more attention paid to whether the use of tax money is appropriate; because it is generally recognized that spending is ultimately paid for by taxes, there is at least some pushback against more free ice cream for others. For tax breaks, on the other hand, there is relatively little recognition that they are the equivalent of government spending; indeed, many libertarians and conservatives think of them as steps in the direction of smaller government. (In fact, there is no functional difference between giving people a break on their taxes if they do X and taxing everybody the same but then writing checks to people if they do X.) Meanwhile, regulatory policymaking is frequently so complex and arcane that only interested insiders know what is going on.

In light of the above, libertarians and conservatives would be well advised to channel the desire for activist government toward fiscal transfers and away from the tax and regulatory codes. Alas, they have generally done the opposite: most of the energy in the “free market movement” has been expended on cutting taxes (often through targeted breaks) and restraining spending. As a result, government social spending is at lower levels here than in other advanced economies, but tax preferences are generally much higher. Those tax preferences, though, are terrible social policy. The lion’s share of their benefits go to the biggest earners who can claim the biggest deductions. And redistributing via regulation can be even more dysfunctional. Consider the enormous expense of bailing out, first the savings-and-loan industry, then the mortgage-backed-securities industry, in the name of encouraging homeownership—and contrast the simple and direct alternative of cutting checks to people for cover part of their down payment. By misdirecting their efforts and focusing too much on spending, libertarians and conservatives have created, not smaller government, but a bloated and wasteful “kludgeocracy.”

Calling off efforts to cut benefits under social insurance and anti-poverty programs does not mean libertarians and conservatives should ignore the welfare state. Current policies are in serious need of reform, and libertarian ideas have a vital contribution to make. Social programs are shot through with perverse incentives and bureaucratic micro-management; the sensitivity of libertarians and libertarianish conservatives to these kinds of problems gives them the tools to improve the quality, effectiveness, and efficiency of the safety net.

Libertarians and conservatives don’t even have to give up trying to shrink the welfare state. After all, there are other ways to cut social spending besides reducing the help they provide to people. For one thing, you can reduce the cost of providing that help through deregulation. Health care offers a dramatic case in point, as prices for medical services today have been grossly inflated by government policies (e.g., occupational licensing, fee-for-service reimbursement schedules, and patent protection for pharmaceuticals). Change those policies and the cost of Medicare, Medicaid, and other government healthcare subsidies will decline.

Another way to shrink the welfare state is to reduce the demand for its services. A more dynamic, fast-growing economy will raise employment and wages. An overhauled, more competitive education system will produce young people with more marketable skills and thus better able to support themselves.

But if libertarians and conservatives are really serious about reducing demand for the welfare state, they will need to go beyond politics and create new non-state institutions and organizations that provide a viable alternative. Over fifty years ago, Richard Cornuelle issued a challenge to small-government supporters in his book Reclaiming the American Dream: roll back the welfare state, not by complaining about it, but by outcompeting it. Cornuelle urged libertarians and conservatives to turn their energies to what he called the “independent sector,” building new institutions and organizations in civil society to meet the public needs currently addressed by government. The independent sector will grow strong again when its leaders realize that its unique indispensable natural role in America is to compete with government,” he argued. “It must be as eager as government to take on new public problems.”

A half-century after Cornuelle wrote those words, the gap between public needs and the capacity of civil society has only grown. I have concluded that this fact discloses a failure of libertarian ideas: I don’t believe it is possible for the nonprofit sector to outperform government in protecting people from certain downside risks of life in a complex, highly urbanized, individualistic society. At the very least, though, it reveals a failure of effort. I would be happy for opponents of the welfare state to prove me wrong. But first they have to try.

More at Source: Why Libertarians and Conservatives Should Stop Opposing the Welfare State – Niskanen Center

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