My Dad sent me a link the other day about entitlements, and how some of the most popular google searches in recent months have been people looking for ways to sign up for government benefits like unemployment, disability, etc. Also there was something about how a large fraction of Americans now depend on the government for at least part of their income. I don’t have a full understanding of these complex issues but here are some ideas about it floating in my head.

I agree that the entitlement system is unsustainable in the long-term. I’m reading a book right now called The Forgotten Man about the Great Depression that strongly argues against the New Deal, which was basically the start of the system we have today. The author argues that FDR’s heavy-handed, government oriented approach, which was partially inspired by observations of socialist policies in England, and to a lesser extent those of soviet Russia, stifled private sector innovation. She instead thinks Wendell Wilkie would have done a better job as president. On the other hand, according to this article, the historical origin of the entitlements was not out of the beneficence of the elite but rather a concession to avert European-style class warfare which could have led to an even more radical outcome (revolution), like it did in Russia and China.
“The Gilded Age plutocrats who first acceded to a social welfare system and state regulations did not do so from the goodness of their hearts. They did so because the alternatives seemed so much more terrifying.”
So as far as I can tell we are stuck between a rock and a hard place. Keeping entitlements undermines the strength of the national economy due to excessive tax burden on workers and investors, but eliminating them could lead to violent unrest among those who cannot make ends meet. I have no idea what the right solution is, but it seems likely it would have to involve some way of improving peoples’ training and education levels so that they can have the skills that are needed to survive. Here’s one social-entrepreneurial example along those lines that I admire: http://www.khanacademy.org/about . Another interesting, related question is, to what extent does technological change affect unemployment?

 

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