Brink Lindsey writes:
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.
He does not present any of this “overwhelming evidence,” only its alleged conclusion, so there is not much to argue with here.
But there are a few a priori insights about “welfare” that I’d like to mention.
First, there is no natural precept for charitable giving. A man is bound by natural law not to hate his fellow man and not to demonstrate such hatred by acting unjustly toward him by murdering or looting him. He is not required to love anyone or to show such love with tokens of friendship, such as donations. Love for strangers is not mandated at all by natural morality.
And in the absence of such love in the state of pure nature, interpersonal utility comparisons are impossible, and so “transfers” make no sense. The government takes $1,000 from Smith and gives it to Jones. Smith loses; Jones gains. Nothing whatsoever can be affirmed of the change in “total utility.” It cannot be calculated whether an absence of such a transfer decreases or increases human suffering, let alone “disastrously.”
Lindsey is simply pretending to be an all-loving saint who knows every motion of the people’s hearts and is therefore capable of maximizing total utility with his “transfers.” He longs for the power to shove around cash and “benevolently” scatter largess to the populace, because he, Lindsey, is such a good and wonderful person. He needs the authority to take from the callous, sinful, and hard-heated Smith whom Lindsey despises and impart the stolen money unto the humble, pitiful, and “needy” Jones whom Lindsey adores. But such delusions of grandeur are unbecoming a libertarian.
Moreover, no taxation is neutral. It has varied, depending on the type, pernicious side effects. For example, income taxation at its worst damages society in three ways: (1) by hampering an individual’s ability to accumulate wealth; (2) when the government spends the tax revenues on useless things, thereby misallocating scarce factors of production; (3) when those things are not merely useless but destructive of prosperity, as when government bombs kill innocent people and ruin property. Now in pure transfers, perhaps only (1) is extant. Nevertheless, society suffers net harm, e.g.:
But today taxes often absorb the greater part of the newcomer’s “excessive” profits. He cannot accumulate capital; he cannot expand his own business; he will never become big business and a match for the vested interests.
The old firms do not need to fear his competition; they are sheltered by the tax collector. They may with impunity indulge in routine, they may defy the wishes of the public and become conservative.
It is true, the income tax prevents them, too, from accumulating new capital. But what is more important for them is that it prevents the dangerous newcomer from accumulating any capital. They are virtually privileged by the tax system.
In this sense progressive taxation checks economic progress and makes for rigidity. (Mises, HA, 808-9)
Virtuous entrepreneurial risk-taking is discouraged by income taxation, as the reward is made smaller, while the risk is preserved.
Then there is the fallacious argument for progressive taxation from utility analysis. It is argued that a rich man benefits less from a marginal dollar than a poor man. To rob the former of $1,000 would be harming him less than so to rob to latter. Now the argument is unscientific for two reasons: first, it depends on interpersonal comparisons of utility (as we have already seen); second, it neglects the utility to people of money. We might argue that a rich person is rich precisely because he attaches higher utility to money and has devoted more effort to obtaining it. Even if we let these slide, however, the argument works for wealth, i.e., if we expropriate and distribute existing fortunes. It leads to the opposite conclusion, namely, regressive taxation, in the case of income. For a rich man presumably benefits “little” from an extra $1,000 of money income added to his net worth, and a poor man benefits “a lot.” Surely, a panhandler on the street will glow with joy upon receiving one grand; the same amount will leave a modern-day Croesus unperturbed. In order to equalize these marginal utilities, we would need to take away most of the poor man’s wage and leave most of the rich man’s in his hands.
Progressive income taxation does not equalize total utilities, because “net worth” and “rate of increase of net worth via an income stream” are completely different variables; and it does not equalize marginal utilities for the reasons just stated. Hence, the argument fails. Is that was the reason for Lindsey’s faux benevolence, he is clearly undone.
And so on regarding the social inefficiency of taxation.
It should be clear that “charity,” understood as (1) feelings of love toward a person and (2) the sacrament of such love of rendering help to him, is a precept not of nature but of grace. It’s a religious and specifically Christian injunction.
One immediate consequence is that it is morally repugnant to force non-Christians who do not feel any such charity to finance others through coerced “welfare.”
Now I’ve already argued that only if Smith loved Jones with love of friendship would a free gift of money by Smith to Jones, as per Smith’s own choice, unequivocally increase total utility.
But all these considerations are minor, and the problem is actually far more formidable. The main point is that works of mercy increase the love in one’s heart. Dostoyevsky asserts the importance of “active love. Strive to love your neighbor actively and indefatigably,” he advises. “In as far as you advance in love you will grow surer of the reality of God and of the immortality of your soul. If you attain to perfect self-forgetfulness in the love of your neighbor, then you will believe without doubt, and no doubt can possibly enter your soul. This has been tried. This is certain.” (Brothers Karamazov)
And that is ultimately the only reason to do such works. Service to mankind is rendered by Smith for the sake of Smith’s own virtues including the theological virtue of charity within him. It is through such humble service in grace that Smith earns his exaltation in glory and happiness in the life to come. The recipient of Smith’s charity Jones obtains temporal goods. Smith, in addition, obtains the eternal good of friendship with God and happiness in heaven. St. Thomas makes it abundantly clear: “Hence the intellect which has more of the light of glory will see God the more perfectly; and he will have a fuller participation of the light of glory who has more charity; because where there is the greater charity, there is the more desire; and desire in a certain degree makes the one desiring apt and prepared to receive the object desired. Hence he who possesses the more charity, will see God the more perfectly, and will be the more beatified.” (ST, I, 12, 6)
It should now be clear that coerced “welfare” shorts-circuits this dynamics. It still bestows the temporal goods on Jones (at a cost to Smith and with net loss to society), but Smith earns no eternal goods for himself. The “transfer” does not result in the moral improvement of the giver. Thus, the “welfare” state endangers Smith’s salvation. In this sense, it is a demonic institution and as such, an enemy to the human race.
This constitutes the first perversion of the welfare state, relating to love. The next post will consider the second one, relating to knowledge.