Abject Failure of the Welfare State

An impartial, objective analysis of government programs that have the word “public” pre-pended to the program are abject failures.  The purpose of this article is to analyze three government programs; public housing, public education, and public assistance.  The evidence overwhelming supports these government programs are abject failures.  Furthermore, if the Patient Protection and Affordable Care Act, colloquially referred to as ObamaCare, is implemented expect that program to be an unmitigated failure as well. 

Public Housing

How well has the three trillion dollars spent on public housing worked out for America, especially poor Americans?   In the book, American’s Trillion-Dollar Housing Mistake, author Howard Husock of the Manhattan Institute for Policy Research examines the reasons public housing failed:

Why is government in the housing business?  The standard answer is because the market fails to provide adequate supply, particularly to house the nation’s poor.  Thus an array of government programs from vouchers, mammoth housing construction, favorable tax policies, and top-down mandates on cities and towns take up the slack caused by “market failure”…

How did we get here?  Husock says that three “remarkably tenacious” myths perpetrate the government as “houser” argument:  1) the market will not provide housing for the poor; 2) by taking the profit motive out of the equation the state can do better than small property owners in providing housing; and, 3) the moral qualities of the poor are a product of their housing environment.

Eliminating the profit motive from the equation is eerily similar to the arguments for health care reform and the public option.  The government incorrectly and brazenly assumes that as a non-profit provider of goods and services they are more competitive than a private insurer, and better suited to meet the needs and demands of the consumer or marketplace.  The government interjects itself as housing provider, subsidizer, landlord, and property management company.  Public housing results failed miserably to meet market needs, reduce costs, or eliminate poverty.

Furthermore, specific government intervention through the Community Reinvestment Act and government sponsored entities (GSE) Fannie Mae and Freddie Mac were culpable in the sub-prime mortgage debacle in the housing market which greatly contributed to the financial industry problems in 2008 and the current economic situation.  Government mandates placed upon lending institutions modified industry business practices that required down payments, decent credit, and verifiable income from mortgage applicants.  Instead, the mandates forced lenders to provide sub-prime loans to unqualified applicants.  Fannie-Mae frequently bundled those loans and sold them to investors; which in turn used them as collateral against other securities.  All perfectly legal, and under the careful and watchful eye of numerous Congressional committees and federal agencies, led the housing market and the economy into a free fall.  All these well-intentioned regulations resulted in numerous unintended consequences.

Public Education

In 1979, President Jimmy Carter signed into law the Department of Education Organization Act.  On the day President Carter signed the bill he said…

The Department of Education bill will allow the Federal Government to meet its responsibilities in education more effectively, more efficiently, and more responsively…

Fourth, a Department of Education will save tax dollars. By eliminating bureaucratic layers, the reorganization will permit direct, substantial personnel reductions. By enhancing top-level management attention to education programs, it will earn improved educational services at less cost.

The budget appropriated for the Department of Education from 1980 through 2008 as well as the high school graduation rates are summarized below.

Appropriation Year

(in Thousands)

2000 Dollars
(in Thousands)

On-Time Public High School Graduation Rate

















Sources:  National Center for Education Studies, Department of Education – Budget History  Note:  2008 graduation rate is from 2006 as that is the last actual, non-projected year available.

Any fair-minded person would generally accept high-school graduation rates as a reasonable barometer to measure the impact of federal government education spending.  In 2000 constant dollars the Department of Education budget has nearly doubled from 29 billion dollars in 1980 to 55 billion dollars in 2008, while the on-time public high-school graduation rate is flat. According to the goals outlined in President Carter’s statement I categorically state they have not eliminated bureaucratic layers, they have not substantially reduced personnel, nor have they improved services at less cost.  On a side note, the American Recovery and Reinvestment Act of 2009 appropriated an additional 98 billion dollars to the Department of Education. 

Furthermore, the educational landscape is the cluttered with two major labor unions; the National Education Association (NEA) and the American Federation of Teachers (part of the AFL-CIO).   According to the NEA’s 2007 LM-2 filing with the Department of Labor they had nearly $353 million in receipts, expended $32 million in political activities and lobbying, and expended $80 million in contributions, gifts, and grants.  A partial list of recipients include; ACORN, Campaign for America’s Future, GLSEN (Gay, Lesbian and Straight Education Network), National Council of La Raza, USAction, and Women’s Voice, Women Vote.  The NEA’s Oregon affiliate stated…

The major purpose of our association is not the education of children, rather it is, or ought to be the extension and/or preservation of our members’ rights.

Undoubtedly, the only correlation between federal education spending levels and public high-school graduation rates is increased spending doesn’t improve graduation rates.  Union leadership obstructs real meaningful educational reforms as the union’s primary objectives are counter to improving our children’s education.  The political reality aligns union leadership with high-level government politicians and bureaucrats to control and define society through the auspices of better education for our children, while confiscating more of our hard-earned money.  Quite simply, parents working within their local communities and states are better equipped to address educational needs and implement appropriate solutions.  Lastly, there is the unconstitutionality of federal involvement in education, but that is an entirely beyond the scope of this article.

Public Assistance (Welfare)

Public assistance (a.k.a. Welfare) is a monumental government failure.  A Heritage Foundation Report titled “Obama to Spend $10.3 Trillion on Welfare:  Uncovering the Full Cost of Means-Tested Welfare or Aid to the Poor” by Robert Rector, Katherine Bradley, and Rachel Sheffield states this on welfare spending…

There are 70 federal welfare programs across 14 different federal agencies (one of which was public housing).  In fiscal year 2008, total government spending on means-tested welfare or aid to the poor amounted to $714 billion.  This equates to roughly $16,800 for each poor person in the United States.  Welfare spending was 13 times greater in FY 2008, after adjusting for inflation, than it was when the War on Poverty started in 1964.  Means-tested welfare spending was 1.2 percent of gross domestic product (GDP) in 1965 and in 2008 it is 5 percent of GDP. 

 Since the beginning of the War on Poverty, government has spent $15.9 trillion (in inflation-adjusted 2008 dollars) on means-tested welfare.  In comparison, the cost of all other wars in U.S. History was $6.4 trillion (in inflation-adjusted 2008 dollars).  Do not conclude that I support all war efforts just because I’m comparing public assistance costs to the cost of all wars.  It is meant merely to be a point of comparison.

Under President Obama, government will spend more on welfare in a single year that President George W. Bush spent on the war in Iraq during his entire presidency.  While campaigning for the presidency, Obama lamented that “the war in Iraq is costing each household about $100 per month.”  Applying the same standard to means-tested welfare spending reveals that welfare will cost each household $560 per month in 2009 and $638 per month in 2010.

According to President Obama’s budget projections, federal and state welfare spending will total $10.3 trillion over the next 10 years (FY 2009 to FY 2018).  This spending will equal $250,000 for each person currently living in poverty in the U.S., or $1 million for a poor family of four. 

Call me skeptical, pessimistic, or whatever you’d like, but centrally planned, government run social programs are abject failures.  The evidence bears this out.  This is why we must bind the federal government to its legitimate constitutional authority and return to federalism.


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Filed under Economy, Public Policy

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