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Criticisms of welfare


The modern welfare state has been criticized on economic and moral grounds from all ends of the political spectrum. Classical liberals, libertarians, and conservatives often argue that the provision of tax-funded services or transfer payments reduces the incentive for workers to seek employment, thereby reducing the need to work, reducing the rewards of work, and exacerbating poverty. On the other hand, socialists typically criticize the welfare state as championed by liberals and social democrats as an attempt to legitimize and strengthen the capitalist economic system, which conflicts with the socialist goal of replacing capitalism with a socialist economic system.

Advocates of classical liberalism, economic liberalism and neoliberalism, such as modern adherents of the Chicago school of economics faulted the New Deal version of social insurance for creating "notches" that perverted economic incentives.

The government, Milton Friedman and others argued, told the poor: make more money and we will take away your free housing, food stamps, and income support. People are rational, Friedman said, so they will not work for long if they get nothing or next to nothing for it. The big difference between the Malthusian conservative critics of social insurance in the early nineteenth century and the Chicago critics of the 1970s is that the Chicago critics had a point: Providing public support to the "worthy" poor, and then removing it when they began to stand on their own feet, poisoned incentives and was unlikely to lead to good outcomes. And so, from 1970 to 2000, a broad coalition of conservatives (who wanted to see the government stop encouraging immorality), centrists (who wanted government money spent effectively), and leftists (who wanted poverty alleviated) removed the "notches" from the social-insurance system. Presidents Jimmy Carter, Ronald Reagan, George H. W. Bush, Bill Clinton, and even George W. Bush and their supporters created the current system, in which tax rates and eligibility thresholds are not punitive disincentives to enterprise.


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