I suggest trying to actually help someone. With the bottom 20% of the population not being very sharp limits their ability to learn or navigate the welfare system. Many are un-mentorable when you try to help. You get their lives back on track and then they are underwater again with some silly decisions.
Our liberals don't try using their own resources and haven't learned that monopoly agencies make decisions in their own self-interest, which is rewarded by cutting benefits to the most needy and providing benefits to those whine the most and make them look productive.
I have tried to help some marginal people and it is hard and sometimes impossible. The people that really need help are often not competent enough to fill out stupid government forms and work the system. The marginal people without a "helper" in their corner will loose benefits from SSI to section 8 housing as some bureaucrat screws up.
There's a huge problem with mobility of citizens. Federal programs can tax people wherever they live, and can exclude recent immigrants. Without border control (or at least barriers to changing jurisdiction), states are very constrained in designing closed-loop programs.
Most people won't move just to optimize taxes, but some will. Living where taxes are low when you have income, and where benefits are high when you don't seems pretty tempting...
Right. While people claimed it was a 'myth', in fact, the 'welfare magnet' effect is real, as deftly chronicled by Jason DeParle in "American Dream", and which eventually caused Wisconsin to implement changes which led to Clinton's welfare reform effort (most of the purportedly 'hard' requirements of which, as Kaus has explained, have in practice been all but neutralized and gutted by a series of quiet actions in the Obama and Biden administrations.)
One of the reasons given behind the nationalization of those reform efforts was the 'race to the bottom' / 'hot potato' problem to which you allude. People may want to be generous to their own local poor, but if stinginess chases the poor away to other places and allows one to lower taxes besides, the incentives push all but the most flush and politically secure localities (cough, San Francisco, cough) away from providing more help.
The obvious solution to this would be to impose reasonable minimal duration residency requirements, such that one must be a genuine 'local' to qualify for local help from the government.
But SCOTUS tells us that is Unconstitutional and thus illegal. It started with Edwards (1941) knocking down California effort to prevent bringing indigent nonresidents into the state (the past is a foreign country!) But the big case is Shapiro v Thompson (1969, 6-3, Warren Court, naturally, though Warren himself dissented). Also Graham (1971, illegal to restrict to citizens too) Zobel, and Saenz v Roe (Also a California law aimed at nonresidents, 1999).
There are a lot of great ideas about welfare reform which are obviously a lot better than anything we're doing today. But cases like those make decentralization impossible as a practical political reality and thus nip nearly all those efforts in the bud.
Another neoliberal social reform would be to de-link health insurance from employment. a) It raises unnecessary issues about employers imposing their preferences ("religious liberty or otherwise) on the insurance choices of employees. b) In practice it is much more expensive to employ low wage workers relative to their marginal product. It is just another wage tax to finance a consumption transfer, but a tax that is higher on low wage workers.
$2500 per year, per person, about $200 a month, would probably help a lot, to a very few unlucky but mostly responsible poor.
Yet this "per household" is just another testing scheme, if it's not per person. And if it IS per person, let it be clear it is per person. An unmarried woman with more kids gets more cash.
(not so good).
A man and a woman getting married lose no cash (very good).
The huge binary drop-offs in eligibility are the main means-test problem, either 100% or 0% of some benefit, at some clear level. Instead we need to move towards benefits at multiple levels, like 10% intervals of 90, 80 ... down to 20, 10, 0.
Maybe even 100 intervals of 1%.
But for most non-poor folks, it's a nice little UBI bonus that does help, tho for most poor folks, with bad lifestyle choices, it reduces their discomfort at continuing to live with their bad lifestyle choices, of some drug, alcohol, sex, gambling addiction or another.
What those poor folk need are jobs, and paths towards more self-respect.
I’m not sure what the absolute size of a governing entity has to do with the policy parameters of social programs.
I agree with raising the age eligibilities of Social Security, but mainly as a way of undermining th the idea of a “retirement age.”
Neither social security or Medicare not unemployment insurance should be financed with a wage tax. Use a VAT to tax consumption, not income.
The problem with too much devolution to states – great for innovation -- is that states for competitive reasons cannot tax very progressively. Maybe large unblocked grants could work.
"states for competitive reasons cannot tax very progressively"
What is 'very'? In California, after deductions and exemptions a family with household income of 60k pays little state tax, but not very far into the six figures this climbs to marginal 9.3% and some high earners or those taking capital gains (which California treats the same as income) can go above 13%. They seem able to sustain that progressivity despite the competive reasons of other states not having any income taxes at all.
If 37% is what it takes for True Scotsman progressive state taxes, then the constraint is as much the federal take as it is competition with other states. Everyone thinks that California is a high, progressively taxed state, but they are apparently wrong, because progressive actually means taking nearly everything.
I think we should just acknowledge that SS, Medicare, and Medicaid aren't going anywhere. It is immensely unpopular and has no constituency that supports it. Trends in recent times have been for expansion, and my own company thinks there is a realistic chance of lowering, rather than raising, the Medicare eligibility age. The electorate isn't getting any younger, and the party that is ideologically opposed to the welfare state is disproportionately old and white. I think it's time to be smart and stop wasting effort on this pipe dream.
It's pointless to lament that it will drive us to bankruptcy. Quite frankly, that is probably in the cards. Between now and bankrupt lets try our best.
I think the number one goal of reformers should be to reward higher TFR in the middle class. That's has the best effect on the long run fiscal situation. Earlier Medicare retirement age for people who had more kids! Big child tax credit that never fades out. School vouchers.
I hate means testing and I hate strings attached. Just get rid of them. Make benefits as universal and simple as possible.
Countries that have tried to use financial incentives to boost fertility have generally failed. All this would do is give parents more money without leading to a significant increase in children (and disproportionately those children we would get would grow up to be among our least - or negatively - productive; it's not rich/smart people that are going to have more kids for a few thousand dollar handout). It'd just expedite the path to bankruptcy and get little/nothing in return.
I have yet to see a country offer child benefits even remotely close to the actual costs of having children.
We don't know what would happen if a country actually internalized such costs. According to the government raising a child costs $272,000, and that doesn't include unpaid labor or K-12 schooling (another $200,000 if you returned the money to parents themselves). If you actually gave people like $2k/month per kid then we would really see if incentives could work.
Seems this should result in Fed gov actually doing what it should in light of the US Constitution. How would tax policy work under pushing lots downstream both at Fed level and local level?
Compare a remarkable study by Hilary Hoynes and Jesse Rothstein, "Universal Basic Income in the United States and Advanced Countries," Annual Review of Economics 11 (2019) 929-58. Here is a link to the un-gated typescript:
The authors find that UBIs are a very inefficient, costly way to alleviate poverty:
"We develop a framework for describing transfer programs, flexible enough to encompass most existing programs as well as UBIs, and use this framework to compare various UBIs to the existing constellation of programs. A UBI would direct much larger shares of transfers to childless, non-elderly, non-disabled households than existing programs, and much more to middle-income rather than poor households. A UBI large enough to increase transfers to low-income families would be enormously expensive." (Abstract)
The authors adduce some evidence that small UBIs -- i.e., UBIs roughly at the level Arnold Kling has in mind -- don't discourage work, but do increase children's body mass index:
"Universal but not basic income:
We know of only two examples of universal programs without strict eligibility requirements, though in each case the transfers are too small to qualify as a basic income as we define it. The Alaska Permanent Fund is a demogrant (with varying yearly payments), financed by the state’s oil revenues. Payments in recent years range from $1,000 to $2,000 per year. Jones and Marinescu (2018) use a synthetic control design to evaluate the program and find that the dividend had no effect on employment. They attribute this to a positive general equilibrium effect - the additional income leads to higher consumption, boosting labor demand – that offsets the negative income effect.
The Eastern Cherokee Native American tribe provides a demogrant to its adult members, financed out of revenues from tribal casinos. Payments, around $4,000 per person per year, do not depend on employment status, income, or residence on reservation. Several studies identify effects of the payments using difference-in-differences designs, comparing Native American children from families receiving the transfers to non-Native children from the same geographic area in North Carolina, before and after the transfers began. The payments had positive impacts on children’s educational attainment and criminal arrests (Akee et al, 2010) and on children’s emotional and behavioral health (Akee et al. 2018), though they increased children’s body mass indices (Akee et al. 2013). Akee et al. (2010) find no impact on labor force participation, even though the payment recipients were not a large share of the local labor force so general equilibrium effects were unlikely.
There is no reason to expect that families would have felt stigmatized for receiving payments under either the Alaska or the Eastern Cherokee programs. However, in each case the payments were relatively small. It is possible that a larger payment would have had more transformative effects on labor supply." (Section 6.A)
My intuition is that a crux of sound welfare reform is to re-calibrate means-tested programs with gradual phase-outs that encourage work. Or is that like squaring a circle?
But the economics of welfare programs are secondary. The primary problem is culture, especially norms of responsible household formation.
I agree with a phase out of existing Federal programs dealing with economic hardship. I have two questions however.
First, regarding social security and medicare, is not the most equitable manner of phase-out simply doing away with those programs for anyone who has not yet begun to pay in? Mortality would take care of the rest.
Second, why must discarded government programs be replaced with other government-sponsored welfare programs? There was a time when most aid was private in nature. One might argue that government welfare programs "crowd-out" the myriad of private and charitable organizations that have historically dealt with these problems. Given that "[t]he more remote you are from individuals, the less likely that you will design and implement programs that target their needs", it seems private organizations based in communities would be far better at dealing with true cases of need. Private aid would also help resolve incentive problems that arise from government aid.
If there weren't such a problem with polarization of cultural and moral values in the United States, I would be much more sanguine about these ideas. Unfortunately in many regions of the country, the norm is that the poor should never face accountability of any sort, while the norm everywhere else is hatred of the poor.
Perhaps an equilibrium would eventually be reached after people adjust to the new incentives created by the new system. I can't imagine that process taking much less than a century, though, in which time the suffering incurred would be massive in scale. That is my prediction at least.
It's generally recognized that the crazy-quilt of benefits is suboptimal. What are the factors that prevent a large scale compromise that consolidates them? What kind of compromises would work?
We have a crazy quilt for a combination of historical reasons, but also because each particular kind of subsidized benefit can appeal emotionally to a distinctive form of sympathy about distress and the extending of help and relief to show that we care.
What that means is that any attempt at simplification will leave open the possibility of people getting into these kinds of sympathy-triggering troubles, which some of them are always certain to do, and one cannot 'blame the victim'. That creates a cause to champion - catnip for progressive activists - but also sets up the dynamic of concentrated and intense interests vs diffuse and half-hearted resistance.
So, whatever one does, the crazy quilt is sure to resurrect itself, and there is no such thing as a binding contract in ordinary legislation. So one would have to go far beyond mere ordinary reform to get something like this done in a way one could trust to last.
What I think this misses is the reason why SS and Medicare exist, which is that corporate lobbyists during the New Deal era sought to externalize their pension costs to the federal government, having been dissatisfied with the competition between states that resulted in the externalization of those costs to the state. Political progressives have promoted a myth that welfare is about being nice to people, because they are just such angels, or that the government is "better" at providing this type of compensation than companies are.
Neoliberals tend to be more in favor of corporate dynamism and competition than the New Deal corporatists were. The quandary is that corporations themselves are not terribly in favor of dynamism and competition: rather, they will use as much state power as they can grasp at to limit competition. So the issue is not really the people so much as it is imposing discipline on corporate America, properly reifying their costs away from the government and towards their own coffers.
I agree that welfare should not be comfortable. A modest proposal for means testing would be that anyone getting public assistance should be put to the same relatively strict household budget tests that are imposed by federal bankruptcy courts. It makes no sense whatsoever that judges will put bankrupt people on a budget, but other branches of the same government will stand by as many exploit the welfare system to live lush lifestyles. For example, my mother is a millionaire who owns European beach property, but she bills her expensive experimental brain cancer treatments to the government because she like anyone else of any sophistication appears to be a pauper deserving of the deluxe super-Cadillac health plans provided by the government. She doesn't pay a penny. And there are many like her!
While I think you have a good description of why eliminating Federal Social Security and Medicare wouldn't work (progressives will not stand for the state-to-state inequality that would result) I think you might be pushing modern cost concerns backwards in your explanation for Social Security at least. Hardly anybody had a pension in the 1930s, and given that life expectancy was around 60 in 1935 a government benefit that started paying at 65 wasn't going to relieve much. The prevailing explanation for the boom and bust cycle of capitalism at the time was 'production push' which we often associate with Marx's theories. Overproduction of goods causes a collapse in selling prices which causes a collapse in wages and employment and so on in a downward spiral until the excess production is cleared. Nobody was thinking in terms of monetary theory thus many of the Hoover and FDR programs were directed at shoring up *prices* as well as absorbing excess labor to drive up wages (the whole pay people to dig holes and then fill them up theory). The idea behind Social Security was to buffer future cycles by permanently removing marginal low-paid workers from the labor force to put a floor under wages for the people who needed them, men supporting families.
When SS was invented, the VAT had not been invented, so the program that was supposed to transfer consumption toward older people was unfortunately financed with tax on wages which has the double disadvantage of raising the costs to employers of employing people AND makes the finances more vulnerable to demographic changes.
You're also missing that SS was a hefty amount of money when benefits started to be paid. Before SS, pensions were used for different reasons than they are today. It was in the words of Gordon used "primarily as a weapon against turnover and unionization. Pensions were conditional on lengthy and uninterrupted service." According to Gordon's sources, 80% of workers in steel, paper, chemicals, electrical, and machinery manufacturing along with railroads, public utility work, bankers, and insurers were covered by private pensions before 1935. It was also used as a competitive means of compensation as well. This is hard to understand from our post-New Deal perspective because of the NLRA and similar regulations which weaken unions, particularly private sector unions. I think you are viewing SS' formation ex post facto how later economists came to view it rather than through the lens of its messy political and commercial origins. From a libertarian perspective, it's an interesting historical dynamic as well.
The current system is a hodge-podge of Federal, local and state resources, with federal grants, federal revenue sharing and federal programs. And constraints created by a mix of poor individuals, poor families, poor neighborhoods, poor cities, poor counties, and poor states. Today’s column is maririage counseling by a priest.
I suggest trying to actually help someone. With the bottom 20% of the population not being very sharp limits their ability to learn or navigate the welfare system. Many are un-mentorable when you try to help. You get their lives back on track and then they are underwater again with some silly decisions.
Our liberals don't try using their own resources and haven't learned that monopoly agencies make decisions in their own self-interest, which is rewarded by cutting benefits to the most needy and providing benefits to those whine the most and make them look productive.
I have tried to help some marginal people and it is hard and sometimes impossible. The people that really need help are often not competent enough to fill out stupid government forms and work the system. The marginal people without a "helper" in their corner will loose benefits from SSI to section 8 housing as some bureaucrat screws up.
There's a huge problem with mobility of citizens. Federal programs can tax people wherever they live, and can exclude recent immigrants. Without border control (or at least barriers to changing jurisdiction), states are very constrained in designing closed-loop programs.
Most people won't move just to optimize taxes, but some will. Living where taxes are low when you have income, and where benefits are high when you don't seems pretty tempting...
Right. While people claimed it was a 'myth', in fact, the 'welfare magnet' effect is real, as deftly chronicled by Jason DeParle in "American Dream", and which eventually caused Wisconsin to implement changes which led to Clinton's welfare reform effort (most of the purportedly 'hard' requirements of which, as Kaus has explained, have in practice been all but neutralized and gutted by a series of quiet actions in the Obama and Biden administrations.)
One of the reasons given behind the nationalization of those reform efforts was the 'race to the bottom' / 'hot potato' problem to which you allude. People may want to be generous to their own local poor, but if stinginess chases the poor away to other places and allows one to lower taxes besides, the incentives push all but the most flush and politically secure localities (cough, San Francisco, cough) away from providing more help.
The obvious solution to this would be to impose reasonable minimal duration residency requirements, such that one must be a genuine 'local' to qualify for local help from the government.
But SCOTUS tells us that is Unconstitutional and thus illegal. It started with Edwards (1941) knocking down California effort to prevent bringing indigent nonresidents into the state (the past is a foreign country!) But the big case is Shapiro v Thompson (1969, 6-3, Warren Court, naturally, though Warren himself dissented). Also Graham (1971, illegal to restrict to citizens too) Zobel, and Saenz v Roe (Also a California law aimed at nonresidents, 1999).
There are a lot of great ideas about welfare reform which are obviously a lot better than anything we're doing today. But cases like those make decentralization impossible as a practical political reality and thus nip nearly all those efforts in the bud.
Another neoliberal social reform would be to de-link health insurance from employment. a) It raises unnecessary issues about employers imposing their preferences ("religious liberty or otherwise) on the insurance choices of employees. b) In practice it is much more expensive to employ low wage workers relative to their marginal product. It is just another wage tax to finance a consumption transfer, but a tax that is higher on low wage workers.
$2500 per year, per person, about $200 a month, would probably help a lot, to a very few unlucky but mostly responsible poor.
Yet this "per household" is just another testing scheme, if it's not per person. And if it IS per person, let it be clear it is per person. An unmarried woman with more kids gets more cash.
(not so good).
A man and a woman getting married lose no cash (very good).
The huge binary drop-offs in eligibility are the main means-test problem, either 100% or 0% of some benefit, at some clear level. Instead we need to move towards benefits at multiple levels, like 10% intervals of 90, 80 ... down to 20, 10, 0.
Maybe even 100 intervals of 1%.
But for most non-poor folks, it's a nice little UBI bonus that does help, tho for most poor folks, with bad lifestyle choices, it reduces their discomfort at continuing to live with their bad lifestyle choices, of some drug, alcohol, sex, gambling addiction or another.
What those poor folk need are jobs, and paths towards more self-respect.
I’m not sure what the absolute size of a governing entity has to do with the policy parameters of social programs.
I agree with raising the age eligibilities of Social Security, but mainly as a way of undermining th the idea of a “retirement age.”
Neither social security or Medicare not unemployment insurance should be financed with a wage tax. Use a VAT to tax consumption, not income.
The problem with too much devolution to states – great for innovation -- is that states for competitive reasons cannot tax very progressively. Maybe large unblocked grants could work.
"states for competitive reasons cannot tax very progressively"
What is 'very'? In California, after deductions and exemptions a family with household income of 60k pays little state tax, but not very far into the six figures this climbs to marginal 9.3% and some high earners or those taking capital gains (which California treats the same as income) can go above 13%. They seem able to sustain that progressivity despite the competive reasons of other states not having any income taxes at all.
13% is less than 37%
If 37% is what it takes for True Scotsman progressive state taxes, then the constraint is as much the federal take as it is competition with other states. Everyone thinks that California is a high, progressively taxed state, but they are apparently wrong, because progressive actually means taking nearly everything.
I think we should just acknowledge that SS, Medicare, and Medicaid aren't going anywhere. It is immensely unpopular and has no constituency that supports it. Trends in recent times have been for expansion, and my own company thinks there is a realistic chance of lowering, rather than raising, the Medicare eligibility age. The electorate isn't getting any younger, and the party that is ideologically opposed to the welfare state is disproportionately old and white. I think it's time to be smart and stop wasting effort on this pipe dream.
It's pointless to lament that it will drive us to bankruptcy. Quite frankly, that is probably in the cards. Between now and bankrupt lets try our best.
I think the number one goal of reformers should be to reward higher TFR in the middle class. That's has the best effect on the long run fiscal situation. Earlier Medicare retirement age for people who had more kids! Big child tax credit that never fades out. School vouchers.
I hate means testing and I hate strings attached. Just get rid of them. Make benefits as universal and simple as possible.
Countries that have tried to use financial incentives to boost fertility have generally failed. All this would do is give parents more money without leading to a significant increase in children (and disproportionately those children we would get would grow up to be among our least - or negatively - productive; it's not rich/smart people that are going to have more kids for a few thousand dollar handout). It'd just expedite the path to bankruptcy and get little/nothing in return.
I have yet to see a country offer child benefits even remotely close to the actual costs of having children.
We don't know what would happen if a country actually internalized such costs. According to the government raising a child costs $272,000, and that doesn't include unpaid labor or K-12 schooling (another $200,000 if you returned the money to parents themselves). If you actually gave people like $2k/month per kid then we would really see if incentives could work.
Seems this should result in Fed gov actually doing what it should in light of the US Constitution. How would tax policy work under pushing lots downstream both at Fed level and local level?
Compare a remarkable study by Hilary Hoynes and Jesse Rothstein, "Universal Basic Income in the United States and Advanced Countries," Annual Review of Economics 11 (2019) 929-58. Here is a link to the un-gated typescript:
https://gspp.berkeley.edu/assets/uploads/research/pdf/Hoynes-Rothstein-UBI-081518.pdf
The authors find that UBIs are a very inefficient, costly way to alleviate poverty:
"We develop a framework for describing transfer programs, flexible enough to encompass most existing programs as well as UBIs, and use this framework to compare various UBIs to the existing constellation of programs. A UBI would direct much larger shares of transfers to childless, non-elderly, non-disabled households than existing programs, and much more to middle-income rather than poor households. A UBI large enough to increase transfers to low-income families would be enormously expensive." (Abstract)
The authors adduce some evidence that small UBIs -- i.e., UBIs roughly at the level Arnold Kling has in mind -- don't discourage work, but do increase children's body mass index:
"Universal but not basic income:
We know of only two examples of universal programs without strict eligibility requirements, though in each case the transfers are too small to qualify as a basic income as we define it. The Alaska Permanent Fund is a demogrant (with varying yearly payments), financed by the state’s oil revenues. Payments in recent years range from $1,000 to $2,000 per year. Jones and Marinescu (2018) use a synthetic control design to evaluate the program and find that the dividend had no effect on employment. They attribute this to a positive general equilibrium effect - the additional income leads to higher consumption, boosting labor demand – that offsets the negative income effect.
The Eastern Cherokee Native American tribe provides a demogrant to its adult members, financed out of revenues from tribal casinos. Payments, around $4,000 per person per year, do not depend on employment status, income, or residence on reservation. Several studies identify effects of the payments using difference-in-differences designs, comparing Native American children from families receiving the transfers to non-Native children from the same geographic area in North Carolina, before and after the transfers began. The payments had positive impacts on children’s educational attainment and criminal arrests (Akee et al, 2010) and on children’s emotional and behavioral health (Akee et al. 2018), though they increased children’s body mass indices (Akee et al. 2013). Akee et al. (2010) find no impact on labor force participation, even though the payment recipients were not a large share of the local labor force so general equilibrium effects were unlikely.
There is no reason to expect that families would have felt stigmatized for receiving payments under either the Alaska or the Eastern Cherokee programs. However, in each case the payments were relatively small. It is possible that a larger payment would have had more transformative effects on labor supply." (Section 6.A)
My intuition is that a crux of sound welfare reform is to re-calibrate means-tested programs with gradual phase-outs that encourage work. Or is that like squaring a circle?
But the economics of welfare programs are secondary. The primary problem is culture, especially norms of responsible household formation.
My guess is that even w/o a federal income tax states would have marginal rates lower than 37%
Jew will not tolerate any such thing.
I agree with a phase out of existing Federal programs dealing with economic hardship. I have two questions however.
First, regarding social security and medicare, is not the most equitable manner of phase-out simply doing away with those programs for anyone who has not yet begun to pay in? Mortality would take care of the rest.
Second, why must discarded government programs be replaced with other government-sponsored welfare programs? There was a time when most aid was private in nature. One might argue that government welfare programs "crowd-out" the myriad of private and charitable organizations that have historically dealt with these problems. Given that "[t]he more remote you are from individuals, the less likely that you will design and implement programs that target their needs", it seems private organizations based in communities would be far better at dealing with true cases of need. Private aid would also help resolve incentive problems that arise from government aid.
If there weren't such a problem with polarization of cultural and moral values in the United States, I would be much more sanguine about these ideas. Unfortunately in many regions of the country, the norm is that the poor should never face accountability of any sort, while the norm everywhere else is hatred of the poor.
Perhaps an equilibrium would eventually be reached after people adjust to the new incentives created by the new system. I can't imagine that process taking much less than a century, though, in which time the suffering incurred would be massive in scale. That is my prediction at least.
It's generally recognized that the crazy-quilt of benefits is suboptimal. What are the factors that prevent a large scale compromise that consolidates them? What kind of compromises would work?
We have a crazy quilt for a combination of historical reasons, but also because each particular kind of subsidized benefit can appeal emotionally to a distinctive form of sympathy about distress and the extending of help and relief to show that we care.
What that means is that any attempt at simplification will leave open the possibility of people getting into these kinds of sympathy-triggering troubles, which some of them are always certain to do, and one cannot 'blame the victim'. That creates a cause to champion - catnip for progressive activists - but also sets up the dynamic of concentrated and intense interests vs diffuse and half-hearted resistance.
So, whatever one does, the crazy quilt is sure to resurrect itself, and there is no such thing as a binding contract in ordinary legislation. So one would have to go far beyond mere ordinary reform to get something like this done in a way one could trust to last.
What I think this misses is the reason why SS and Medicare exist, which is that corporate lobbyists during the New Deal era sought to externalize their pension costs to the federal government, having been dissatisfied with the competition between states that resulted in the externalization of those costs to the state. Political progressives have promoted a myth that welfare is about being nice to people, because they are just such angels, or that the government is "better" at providing this type of compensation than companies are.
Neoliberals tend to be more in favor of corporate dynamism and competition than the New Deal corporatists were. The quandary is that corporations themselves are not terribly in favor of dynamism and competition: rather, they will use as much state power as they can grasp at to limit competition. So the issue is not really the people so much as it is imposing discipline on corporate America, properly reifying their costs away from the government and towards their own coffers.
I agree that welfare should not be comfortable. A modest proposal for means testing would be that anyone getting public assistance should be put to the same relatively strict household budget tests that are imposed by federal bankruptcy courts. It makes no sense whatsoever that judges will put bankrupt people on a budget, but other branches of the same government will stand by as many exploit the welfare system to live lush lifestyles. For example, my mother is a millionaire who owns European beach property, but she bills her expensive experimental brain cancer treatments to the government because she like anyone else of any sophistication appears to be a pauper deserving of the deluxe super-Cadillac health plans provided by the government. She doesn't pay a penny. And there are many like her!
While I think you have a good description of why eliminating Federal Social Security and Medicare wouldn't work (progressives will not stand for the state-to-state inequality that would result) I think you might be pushing modern cost concerns backwards in your explanation for Social Security at least. Hardly anybody had a pension in the 1930s, and given that life expectancy was around 60 in 1935 a government benefit that started paying at 65 wasn't going to relieve much. The prevailing explanation for the boom and bust cycle of capitalism at the time was 'production push' which we often associate with Marx's theories. Overproduction of goods causes a collapse in selling prices which causes a collapse in wages and employment and so on in a downward spiral until the excess production is cleared. Nobody was thinking in terms of monetary theory thus many of the Hoover and FDR programs were directed at shoring up *prices* as well as absorbing excess labor to drive up wages (the whole pay people to dig holes and then fill them up theory). The idea behind Social Security was to buffer future cycles by permanently removing marginal low-paid workers from the labor force to put a floor under wages for the people who needed them, men supporting families.
When SS was invented, the VAT had not been invented, so the program that was supposed to transfer consumption toward older people was unfortunately financed with tax on wages which has the double disadvantage of raising the costs to employers of employing people AND makes the finances more vulnerable to demographic changes.
I know we're not supposed to reply to each other, but I'm borrowing this argument from New Deal, Old Deck: Business and the Origins
of Social Security, 1920-1935 by Colin Gordon. https://journals.sagepub.com/doi/10.1177/003232929101900203
You're also missing that SS was a hefty amount of money when benefits started to be paid. Before SS, pensions were used for different reasons than they are today. It was in the words of Gordon used "primarily as a weapon against turnover and unionization. Pensions were conditional on lengthy and uninterrupted service." According to Gordon's sources, 80% of workers in steel, paper, chemicals, electrical, and machinery manufacturing along with railroads, public utility work, bankers, and insurers were covered by private pensions before 1935. It was also used as a competitive means of compensation as well. This is hard to understand from our post-New Deal perspective because of the NLRA and similar regulations which weaken unions, particularly private sector unions. I think you are viewing SS' formation ex post facto how later economists came to view it rather than through the lens of its messy political and commercial origins. From a libertarian perspective, it's an interesting historical dynamic as well.
The current system is a hodge-podge of Federal, local and state resources, with federal grants, federal revenue sharing and federal programs. And constraints created by a mix of poor individuals, poor families, poor neighborhoods, poor cities, poor counties, and poor states. Today’s column is maririage counseling by a priest.