October 22, 2015

Report Shows Increase in Welfare State Spending Increases Inequality

Founding Father Benjamin Franklin once observed “that the more public provisions were made for the poor, the less they provided for themselves, and of course became poorer.”
A new report from the European Central Bank suggests that Franklin spoke more truthfully than he could have ever imagined.
Specifically, the report found a correlation between welfare and income inequality.

“An increase in welfare state spending goes along with an increase — rather than a decrease — of observed wealth inequality,” the report revealed.
According to the Washington Free Beacon, the European Central Bank explained that “this happens because social services act as substitutes and households are therefore less incentivized to accumulate wealth.”

Confused? Perhaps the following example might make things clearer.
Imagine what would occur if a 7th-grade teacher were to give all her students an A, regardless of their class participation and actual grades. The students would naturally lose the motivation to pay attention and perform well. As such, they would learn nothing and wind up entering the 8th grade completely unprepared.
The same thing happens with welfare.
Economist Thomas Sowell explained this phenomenon in his book “Wealth, Poverty and Politics” (H/T The Wall Street Journal):
To the extent that the expanding welfare state allows more people to live without working — and thereforewithout earning income or developing their own human capital — supporters of the welfare state are contributing to the very income disparities they so much decry.

Exactly. Welfare makes people complacent, so they stop making a concerted effort to improve themselves and their skills. Over time, they grow sullen, unhappy and entitled. Even worse, they lose the ability to function independent of the federal government.
To genuinely assist the poor, we need to prove them with opportunities, not handouts.
Like Franklin himself said, “And, on the contrary, the less was done for them, the more they did for themselves, and became richer.”

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