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Brooks Wilson's Economics Blog: Jeffrey on Social Welfare Programs

Thursday, February 17, 2011

Jeffrey on Social Welfare Programs

(HT Drudge Report) Terence Jeffrey’s article, “Jeffrey on Socialism's Trajectory: Obama's HHS Is Bigger Than LBJ's Government,” is an interesting blend of the good, the bad and the ugly.  To be sure, the bad and the ugly are small, and the good is big.  His main point is that in the past increased spending on social welfare programs has dramatically increased the size of government and placed us on a socialist path to ruin and that Patient Protection and Affordable Care Act (healthcare reform) pushes us further down that path.

The ugly is the overuse of the word “socialism.”  The Merriam-Webster Dictionary defines socialism as
a system or condition of society in which the means of production are owned and controlled by the state.
None of the programs he mentions, Social Security, Medicare, Medicaid, the prescription drug benefit, and now healthcare reform is a socialist program.  The government exercises control without owning the means of production.  Like socialism, the healthcare programs, as they have been designed and implemented, have weakened markets by limiting the role of prices. Socialism is only one road to serfdom. 

The bad is the exaggeration of the growth of government associated with the introduction of Medicare and Medicaid in 1965 and the prescription drug benefit in 2003.  He introduces his ideas with an interesting fact he discovered while examining the historical tables published with Obama administration’s $3.7 trillion budget.  If the budget is passed as the administration proposes, the Department of Health and Human Services will spend $909.7 billion, more than the entire 1965 inflation adjusted budget of $822.6 billion.  The fact is a good literary tool because it catches the eye, but it also exaggerates the still impressive growth of government.  It exaggerates because America’s population and wealth have grown; we should expect a bigger budget.  Measuring the budget as a percentage of gross domestic product is a more meaningful measure. 

As Jeffrey noted, budget expenditures, which were 17.2% of GDP in 1965, grew to 25.3% of GDP in 2010.   Expenditures by Health and Human Services represented a miniscule .68% of GDP in 1965 to 6.25% in 2010.  The contribution of Health and Human Services expenditures to the total budget is similarly impressive.  Those expenditures were 6.24% of total budget expenditures in 1965 and grew to 24.7% in 2010.

The good was Jeffrey’s brief tour of important events leading to an expansion of the size of government.  In 1937, Roosevelt attempted to pack the Supreme Court with politically like-minded justices.  He failed to pack the Court, but he succeeded in intimidating it.  Social welfare programs deemed unconstitutional prior to the attempted Court packing were found constitutional thereafter. Medicare and Medicaid began in 1965 and government grew.  The prescription drug benefit was signed into law in 2003 and the government grew.  The new programs are at least correlated with an increase in the size of the federal government as a percentage of GDP and because they programs have grown rapidly, they are probably one of the causal factors of government’s growth. 

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