Hi Everyone,
US West's post about the protests in France provoked a response from me which provoked a response from LTG. All of that got me thinking it would be interesting to open a thread about what the limits of the welfare state are. I'll get things started by saying that there are two limits: a practical limit (i.e. what society can afford), and a philosophical limit (i.e. what society is obligated to provide).
For the purposes of this discussion let's use a really broad definition of the welfare state that includes direct transfer payments, government funded pensions, subsidies, funding for public education, bail outs of big companies to prevent layoffs, public works projects etc. I'm thinking of pretty much everything a government can spend money other than the military.
I'll start with the practical limit first. Obviously this varies by country quite a lot. I think the obvious hard limit is that governments cannot afford to risk ruining their national economies for the sake of providing additional welfare benefits. There is a point at which borrowing to pay for welfare states becomes unsustainable. There is also a point at which taxes become so burdensome that it hinders economic growth significantly. The Tea Party crowd are of the opinion that the US has already reached both of these practical limits. I disagree. We are among the least taxed people in a democracy and we currently pay among the lowest tax rates in modern American history. To the extent that our debt and deficit have become a problem it is largely because of the exceptionally low taxes that we pay (and the military adventures in which the previous administration embroiled us). A marginal increase in our tax rate could solve the other problem. This will be politically controversial but I tend to vote for candidates that advocate this solution.
Countries like France are bumping up against their practical limit. Debt and deficit levels are very high in France and their tax rate is relatively high (especially when you include sales taxes and value added taxes). They have to make adjustments and since they are probably at the point where they get diminishing if not negative returns to raising taxes the best way to make that readjustment is to reduce benefits. This will be political unpopular and people have a right to protest their reduced benefits. But if I was a voter in France I'd vote for a reduction in those benefits for the good of the society and the long term sustainability of the welfare state.
As for the philosophical limit, I think the purpose of the welfare state should be to ensure that being born with the deck stacked against you economically or having made poor decisions should not be a fatal condition. Basic human needs such as shelter, food, access to health care and education should be provided by the state if an individual cannot provide for them themselves. But I do not think that society has an obligation to ensure that everyone has a prosperous life style. We have a right to expect that our basic human needs will be met and it is reasonable to expect society to be willing to invest in our education to make us more productive members of society. But I do not believe we have a right to expect much beyond that.
Unless we are willing to insist that everyone regardless of their effort on their own behalf (or on society's behalf) is entitled to an identical standard of living, we must allow for variance in life style according to the variance of people's luck of birth, decision making in life and their own work effort. I contend that allowing for such variation is desirable because it provides a useful incentive for individuals to work not only on their own behalf but also on behalf of society. But at the very least the practical limit on the welfare state probably makes it necessary. Once we agree that such variation in living standards is desirable or at least necessary, then any debate about the welfare state boils down to where exactly we should draw the line for benefits levels based on what we can afford.
