The Deadly Legacy of the Welfare State Lies in New Orleans

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Among the most tragic scenes in the Hurricane Katrina disaster was that of the thousands of poor people — almost all of whom were African Americans — who were stranded at the New Orleans Superdome and Convention Center, desperately waiting for the federal government to come and save them.

Why were they stuck there when thousands of others had already left the city? Because they were too poor to save themselves from death and disaster. They lacked the money to drive out of town and get a motel room for a few days before the hurricane struck.

Leftists are now saying that the New Orleans disaster shows that federal-government assistance to the poor and needy is more necessary than ever.

What in the world could leftists be thinking? It is leftist economic ideology — reinforced unfortunately by modern-day conservative “reform” philosophy — that is responsible for the horrible economic plight in which the New Orleans poor find themselves.

After all, don’t forget: The economic situation in New Orleans comes 70 years after President Franklin D. Roosevelt converted the federal government into a welfare provider for the poor and needy. Under FDR, the primary purpose of the federal government became to relieve poverty through the coercive confiscation of wealth from “the rich” in order to redistribute the money to “the poor.” This was the era in which Americans witnessed the advent of Social Security, a bankrupt tax-and-transfer program that ultimately became the crown jewel of the socialistic welfare state.

Thirty years after the New Deal came Lyndon Johnson’s Great Society, in which Johnson declared “war on poverty” all across America. Here we saw the advent of Medicare and Medicaid along with hundreds of other federal programs whose supposed aim was to abolish poverty, once and for all.

Decade after decade, the federal government became a massively growing tax-and-spend engine that sucked trillions of dollars of income and savings out of the pockets of the American people in order to fund ever-growing federal programs to “help the poor.”

And now New Orleans. Here in its spectacular glory is the magnificent result of 70 years of the welfare state — of the federal “war on poverty.” Tens of thousands of people lacking sufficient money to enable them to escape oncoming disaster for just a few days — dependent on the federal government for their salvation — desperately waiting for federal officials to deliver food and water to them — and to pick them up and deliver them to government-run refugee centers around the nation.

In other words, the 70-year-old New Deal—Great Society “war on poverty” has left tens of thousands of people destitute (or dead) in New Orleans and looking to the federal government for their salvation.

Yet, according to leftist commentators, this just confirms that we need to wage the federal “war on poverty” more fiercely than ever before.

What deadly and destructive leftist nonsense!

New Orleans is proof positive of the bankruptcy of leftist economic ideology. For it is the welfare state itself and its 70-year-old FDR—LBJ federal “war on poverty” that have left those tens of thousands of people in New Orleans penniless, waiting for the federal government to come save, feed, transport, and house them. What leftists don’t want to face is that it is their beloved socialistic welfare state itself that has doomed tens of thousands of people in New Orleans — and elsewhere — to a life of poverty and governmental dependency.

The scam of the welfare state

The welfare state has got to rank near the top of the biggest government scams in history.

In a totalitarian state, the ruling regime has the omnipotent power to confiscate people’s land and money. In a democracy, however, government officials have to come up with ingenious ways to seduce people into consensually giving up their money and their freedom (or to sacrifice other people’s money and freedom).

But whether it’s a totalitarian or a democratic regime, the driving force for politicians and bureaucrats remains the same: money and power.

Permit me to share with you a bit of personal experience in this regard.

I grew up in Laredo, Texas, during the 1950s and 1960s. The Census Bureau said that Laredo was the poorest city in the United States. My father, an attorney, was actively involved in Democratic Party politics, and Laredo was a Democratic stronghold, able to guarantee a block vote of several thousands.

My father once told me that when Lyndon Johnson was elected president in 1964, he got the mayor of Laredo on the phone and said, “Joe, the federal floodgates are open. Just tell me what you need.” Laredo became a federal “model city” in Johnson’s national “war on poverty,” and federal funds flowed into the city.

What a joke. The millions in federal dollars that flowed into the pockets of local officials did nothing more than produce a mindset of federal dependency among the people of Laredo — and in fact ensured that many of them would remain mired in poverty and governmental dependency for years to come.

One of the most popular federal programs in Laredo was public housing. In fact, ironically, the very first public housing project in Laredo, the Colonia Guadalupe, was built in the 1930s in large part through the efforts of my maternal grandfather, Matias de Llano, who had obviously bought into FDR’s socialist New Deal schemes.

Who could possibly be against public housing? Only those who “hate the poor,” right? That’s what welfare-state advocates always say, right?

As a child growing up in the poorest city in the United States, I believed in the leftist welfare-state junk. For starters, as a fifth-grader I actually campaigned for John Kennedy and Lyndon Johnson in the 1960 presidential race, and I even met and spoke with Johnson at a campaign barbecue at the LBJ ranch in Johnson City. In junior high school, I was Lady Bird Johnson’s America Beautification Campaign representative in Laredo, which enabled me to secure a spot at a Beautify America ceremony at the White House.

When I returned to Laredo in 1975 to practice law, I campaigned for Democratic Party candidates. I was appointed to the Legal Aid Board of Trustees (free legal aid for the poor). I was also the local ACLU representative for Laredo.

In other words, I have leftist or liberal credentials. There wasn’t any doubt in my mind that the federal government should be helping the poor. In fact, I couldn’t figure out how anyone could honestly oppose federal monies being used to help the poor, especially since the money was free anyway. To me, the argument was simply over how much to fund, and my opinion was: the more, the better.

The first house I purchased was in about 1977 for about $50,000 in a brand new middle-class subdivision in north Laredo. The developer was a high-school friend of mine. He also was Mexican American, which wasn’t unusual, since Laredo was about 98 percent Mexican-American. He had grown up fairly poor and had not attained a college degree. His new subdivision turned out to be a resounding success, and he was making lots of money.

One day, local and federal officials announced that they had decided to build a new public-housing project next door to our housing subdivision. Their plan was to move people from southern Laredo, which was the poorest part, to northern Laredo, which was the prospering part. Their rationale: so that “the poor could mix with ‘the rich.’”

There was one big problem, however, with their rationale: While I had been fortunate to have grown up in a middle-class family, the overwhelming number of people in our new subdivision were poor — or, more accurately, had come from poor families. Their parents had worked hard throughout the 1950s and 1960s, saving their money and getting their children educated, and those children were now returning to Laredo to higher-paying jobs than their parents had had.

Everyone in our new subdivision knew what everyone else around the country knows: that public housing lowers the value of neighboring homes. Thus, it shouldn’t surprise anyone that not only were the new homeowners angry, so were their parents. After all, here were young people who were breaking out of poverty with the purchase of nice middle-class homes in a nicer part of town — houses that were rising in value, only to be told by federal and local officials that they needed to “mix with the poor” from the neighborhoods that most of them had left and where their parents still lived.

Perhaps I should mention that there was money involved — a large amount of money for Laredo at that time. It turned out that the public-housing project could have been built in another part of town for $1 million less. Recognizing that federal monies come from U.S. taxpayers, this discovery motivated us to raise the money to purchase a 1/2-page ad in the Washington Post thanking the taxpayers of America for their $1 million gift. That in turn generated a telegram to me from a congressman in which he invited me to Washington to testify about the project. We must have been stepping on some big toes, however, because I never heard from him again and he never responded to any of my inquiries regarding his invitation to testify.

As most people undoubtedly know, proponents of public housing (and other welfare-state programs) hit opponents with what have become standard bromides: “You’re a racist” and “You hate the poor.” Of course, their slurs were silly when slung against us in Laredo, given that practically everyone in Laredo was Mexican-American and poor.

Despite our opposition, the government officials and the fat cats won. That public-housing project in Laredo was built next door to our new subdivision. By that time, I had concluded that the welfare state had nothing to do with love of the poor and everything to do with love of money and power.

The assault on capital and charity

What leftists always block out of their minds is that the federal government is neither a fountain of wealth nor a producer of wealth. Instead, the only source of its funds is monies that are taxed or borrowed from people in the private sector.

Imagine that federal and state income taxes, Social Security taxes, and Medicare and Medicaid taxes had been abolished 10 years ago, along with the welfare-state programs they fund. Let’s assume that each of the families at the New Orleans Superdome and the Convention Center has paid, say, $500 per year in those taxes, which I think would be a fairly low estimate. That would mean that if they had chosen to save the money, each of those families would have had a $5,000 nest egg (plus interest), a sum that would have been more than sufficient to get them out of town and into a motel room for a while before Hurricane Katrina struck.

Or consider people who have paid, say, $5,000 per year in welfare-state taxes. That would mean that if such taxes (and the welfare programs they fund) had been abolished 10 years ago, today they would have had $50,000 in a savings nest egg, plus interest. That would be providing lots of New Orleans families today with a bit of personal financial security.

Another aspect to the welfare-state scam is how they’ve conned the poor into believing that there is an inherent war between an employer and employee. Nonsense! It is in the interest of every employee that the business for which he is working succeeds and prospers, because the more that the business earns, the more there is to pay the employees. How does the employee ensure that his employer will pay him more money? By checking wage rates in other businesses and, if necessary, gravitating toward those that are offering to pay more. Thus, it is in the interests of employees that surrounding businesses succeed and prosper as well.

That’s why it is such a tragedy, as far as the poor are concerned, that poor people have succumbed to the welfare-state con that it is in their interests for the government to tax the rich, supposedly in order to give the money to the poor. (Usually, the money goes to well-heeled government officials and government contractors.) For, again, it is in the interests of the poor that the rich succeed and prosper!

How is this so? Because the key to rising standards of living, especially for the poor, lies in rising levels of productive capital in society. What does that mean? It means tools, equipment, and anything that makes workers more productive. (See “The Keys to Economic Development,” a speech I delivered in Brazil last year.)

When a farm worker uses a tractor, he produces more than when he uses a hoe. But the only way that the farmer can purchase the tractor is to either dig into his savings or go to the bank and borrow the money, which means digging into other people’s savings. The tractor makes the worker more productive, which increases profits for the farmer, which provides the basis for paying workers higher wages, especially when competing farmers are prospering and investing in the same way. Farmers don’t give raises to workers because they love them but because competition and self-interest force them to do so. Thus, it is in everyone’s interests — and especially the employees — that as many farmers (and other businesses) succeed and prosper as possible because there are then more businesses competing for workers with the offer of higher wages.

Thus, contrary to what welfare-state advocates and federal officials have told us all our lives, the key to rising standards of living, especially for the poor, lies in savings, not consumption — savings on the part of employers and savings on the part of employees. Again, savings give rise to capital, which makes workers more productive, which ultimately raises wages, which enables people to save more.

But who saves today? Or, more accurately, who is able to save today? Not the middle class and if they’re not able to save, certainly the poor aren’t able to do so either. And the reason is that the federal government — our federal daddy — our great paternalistic god — the welfare state — confiscates so much of people’s income in the form of income taxes, Social Security taxes, health-care taxes, and monetary debasement (i.e., inflation, reflected by ever-increasing prices) in order to fund its massive, ever-growing welfare (and warfare) expenditures.

“But if Medicare and Medicaid were abolished, doctors would never help the poor; they would just die in the street for lack of care,” cry the leftists. Oh? Perhaps they can explain how it is that doctors in Lousiana, Texas, and elsewhere are devoting countless hours of free services to the New Orleans refugees.

This phenomenon of voluntary charity was no different in my hometown of Laredo when I was growing up, before the passage of Medicare and Medicaid. Hundreds of poor people would flood into doctors’ offices every day, and I never heard of a single doctor who turned away anyone for inability to pay. The doctors, who had the nicest homes in town, simply subsidized their free work with the money they were making from those who were paying.

But today doctors are as dependent on Medicare and Medicaid as their patients are. The great narcotic of the welfare state has caused consumers and doctors alike to lose faith not only in the free market but also in the concept of voluntary charity. Everyone has lost faith in himself and in others.

We need a political revolution

The failure of socialism lies in those scenes in New Orleans in which tens of thousands of African Americans were waiting for the federal government to come and save them instead of having the independent financial means to save themselves. The welfare state has not only failed to eradicate poverty, it has guaranteed its continuation. Even worse, unlike the free market, which nurtures independence and self-reliance, the welfare state has guaranteed a nation of federal dependency for the poor.

Leftists have it wrong and, for that matter, so do conservatives. The answer to what happened to poverty-stricken African Americans in New Orleans is not to expand the welfare state or, as conservatives maintain, to reform it.

What this country needs is a good political revolution, one in which the poor people of this nation demand — yes, demand — the abolition of all welfare-state programs and the taxes that fund them.

The New Deal has failed. The Great Society has failed. The “war on poverty” has failed. The welfare state has failed. Socialism has failed.

The future of our nation lies not with the leftist ideologues, who have saddled our nation, especially the poor, with their deadly and destructive socialist economic ideology. And it lies not with conservatives, who abandoned free-enterprise principles and embraced socialist ones after Lyndon Johnson buried their man, Barry Goldwater, in the 1964 presidential election.

The future of our nation lies with the repeal of the 70-year-old federal “war on poverty” and all the taxes that fund it. If only the poor would pierce through the lies, deceptions, and scams that underlie the socialistic welfare state, they could help us to overcome the leftist-conservative devotion to big government and lead our nation toward the principles of economic liberty, free markets, prosperity, charity, self-reliance, and financial independence.

September 8, 2005

Jacob Hornberger [send him mail] is founder and president of The Future of Freedom Foundation.

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