Why Government Can't Be Trusted With Entitlements

The iconic job of governments is to fight wars of national defense. It's a short term thing, and the government commandeers all the resources of the nation, by taxation, inflation, debt to fight the war.

Then the war is over and the nation is saddled with the debt and the taxes and the inflated money supply. Time, as they used to say, for retrenchment.

But now government uses the tools of national mobilization to give seniors pensions and health care, to educate youngsters, and to relieve the poor.

I say this is wrong: morally, epistemologically, and logically. It is especially wrong to inflate the currency and increase the debt to pay for current programs.

First, the moral objection. The care of ageing parents is the responsibility of children. It is a moral horror to shift the burden of caring for the aged onto other peoples' children. It is a moral horror for middle-class people to shift the relief of the poor onto government functionaries. We should be relieving the poor and making the age-old distinction between the deserving poor and the undeserving poor as iconically represented by the drunkard dustman Alfred P. Doolittle. It is a moral horror to have government functionaries educating children in government child-custodial facilities. Instead, children should be educated by their parents in a collective effort among all the neighborhood parents -- and that usually means the neighborhood mothers.

OK, maybe we could have a government program to educate the children of illiterate parents, although I would much prefer the approach of the Catholic Church, and other voluntary approaches that might even include the assistance of billionaires.

Government is force. Are we moderns so depraved that we will not look after our ageing parents or relieve the poor or educate our children unless under the lash of government compulsion? I hope not.

Then there is the mal-appropriation of financial instruments for use by government. For instance, debt in the private sector is the loan of money usually backed by the commitment of collateral in case of failure to pay. Thus a car loan or a home mortgage is guaranteed by the use of the car or home as collateral. The car or home is seized by the creditor in case of non-payment. In the case of corporate debt, the bondholders have the power, specified in the bond covenant, to seize corporate assets in the case of failure to service the loan.

But this is impossible in the case of a government. For government is sovereign; it pays what it chooses, and the devil take the hindmost. Of course, it is usually foolish of a government not to pay on its obligations. But plenty of governments get away with it.

The basic situation of government is that it bets the nation as collateral when it runs up government debt. This makes sense in the case of a war, except that the government should really issue equity rather than debt to finance wars. But if you look at the US's federal debt, now north of $22 trillion, it is really playing poker with our money. Hey, I got your money, sucker! What yer goin' to do about it?

All these entitlement programs are also wrong from a logical standpoint. Governments cannot legally bind themselves -- or the entitlement beneficiaries -- the way that the law allows for private pensions and health care. In other words, if I sign up for a private pension scheme I have a contractual obligation with the corporation offering the scheme, and that puts burdens both on me and the corporation. What happens if I can't make the payments in the future? What happens if there is a great recession? What happens if the climate changes? What happens is that my pension provider and I make prudent adjustments to our mutual obligations. And the one thing that cannot be guaranteed is a fixed pension thirty years into the future. But government? It can change the law any time it wants. Thus every government entitlement program is not what it advertises, a "social insurance" program. It is simply government paying off its supporters with the cover of decent draperies. And, of course, with future pensions and health care "guaranteed" to the voters, the whole thing depends on the ability of the government to apply force in future years to make good its promises.

It really is astonishing how much faith people have in government. I suppose it is a faith in force, a natural human instinct to solve intractable problems by the magic of binding other people to obligations to look after us, and to punish them if they offend us.

I just want us to be better than that.