Safety Nets and Slippery Slopes

 | 

There’s been a theme hammered in dull thuds recently by the establishment media: anyone who opposes expansion of the welfare state is a hypocrite because everyone is on the dole. The New York Times has run several such stories; lesser outlets have followed suit.

Before you gag on this rancid bit of partisan meat, let me say that I think this is a hopeful sign. The hacks are framing the argument in this way because they expect criticism of the welfare state to pick up through the course of this election cycle. As it should. They hope to inoculate the administration against such criticism; in the process, though, they’ll draw attention to related issues that don’t help their cause. These related issues include:

  • the sloppy logic and language of welfare advocacy,
  • the growing role of moral hazard in public policy,
  • the effect of high marginal tax rates on productivity, and
  • the slippery slope of unintended consequence.

Let me sketch out quickly how these all connect with one another.

The recent charges of hypocrisy are merely the latest example of the establishment media’s obtuseness and doublespeak on the topic of welfare. In the statist catechism, the terms “safety net” and “earned entitlement” are supposed to refer to sharply distinct sorts of programs — the former involves straightforward income redistribution, the latter involves a group of programs into which beneficiaries have paid. But the two are often confused. The headline of one Times article reads “Even Critics of Safety Net Increasingly Depend on It.” The article proceeds to focus on the effects of growing middle-class dependence on Social Security and Medicare, which are supposed to be “earned entitlements” and not part of the “safety net.”

The jargon is all so imprecise and indirect that the headline-writing mediocrities at the Times might be forgiven for getting confused.

Of course, there might be a more devious impulse at work — intentionally confusing programs into which people have paid with those into which they have not might be an attempt to blur important distinctions. To make “middle-class” recipients of earned entitlements the moral equivalents of the “poor” recipients of safety-net money. And if everyone’s the same, statist catechism goes, no one can criticize.

The “moral” in this equivalence gets to my next point. The sloppy logic and fuzzy language — intentional or not — may create only an ersatz version of moral equivalence but it encourages very real moral hazard.

Moral hazard has been an interest of mine for a number of years. It takes various forms in various circumstances, but the common conclusion is simple: If people are insulated from the effects of bad outcomes, they produce more bad outcomes.

In matters of public policy, the most evident example of moral hazard is a high marginal tax rate. And this is more closely related to welfare policy than it might seem on first glance.

On the low end of the income spectrum, a high marginal tax rate creates a permanent underclass; on the high end of the income spectrum, it encourages productive people to go Galt. More important, the moral hazard of taxing people stupidly creates a slippery slope; when a person drops down the socio-economic ladder, it becomes harder for him to climb back up.

If a person’s annual income falls from $40,000 to $20,000 because of a lost job or a business reversal — but that person picks up $15,000 in benefits as a result — he’s being insulated from the effects of his lower income. The benefits, which he’ll lose if his income recovers, become part of the effective marginal tax rate that discourages the climb back to $30,000 or $40,000. He’s more likely to accept his reduced circumstances and welfare benefits. Said another way: the same mechanism that acts like a safety net to someone sliding down the slope can act like a barrier to someone scrambling back up.

The problem with managing marginal tax rates is that tax systems are crude tools. The U.S. income tax tables create a roughly-hewn “stair-step” system of increasing rates. And the government benefits made available to low-income earners exaggerate the steps. At some points, a slight increase of income results in a much larger effective tax rate. In these cases, the slope isn’t just slippery — it’s negative. One solution to a negative slope would be modify the tax table to include thousands of tiny steps rather than a few rough ones; another would be to reject the step system entirely and move to a nonlinear formula for calculating the income tax rate each earner pays.

If the establishment media is right and everyone is on the dole, we need to criticize the welfare state more. Not less.

In the 1970s, Milton Friedman suggested a third option that he called the “negative income tax” (based on earlier proposals by Henry Hazlitt and Juliet Rhys-Williams). This negative tax would replace all other benefits; instead of numerous programs subsidizing food, shelter, child care, health care, etc., there would just be one lump-sum payment which would be phased out gradually as a person’s income increased. His idea was mauled and transformed into what we know today as the Earned Income Tax Credit; but the current incarnation is a far cry from what Friedman had in mind. His goal was to minimize bureaucracy and control fraud in the welfare apparatus. Our system today, an income redistribution scheme that pretends to be an “earned entitlement” program, maximizes all of that.

We’ve always known that income redistribution strips all parties — sponsors and beneficiaries — of their humanity and, especially the beneficiaries, of their dignity. Forty years ago, Daniel Patrick Moynihan predicted that the U.S. welfare state would damage beneficiaries, precisely as it has. If the establishment media is right and everyone is on the dole, we need to criticize the welfare state more. Not less. And we need to get rid of any administration that enables it, even if the alternatives aren’t inspiring.

This sharp truth will cut through hacky charges of hypocrisy from outfits like The New York Times.




Share This


The News About the News

 | 

When I was a child, we subscribed to two newspapers a day. The Los Angeles Times arrived early in the morning, and the Herald-Examiner plopped onto our doorstep in the late afternoon, usually thrown by my friend Dennis Miller, who had a paper route. (Back then, moms felt safe letting their young boys ride their bikes by themselves every day and knock on doors asking for money once a month.) I always liked the Examiner better, because the photos were a little larger, the stories a little racier, the features a little more entertaining. I didn't realize back then that it was intentional: morning papers contained cold gray news for people in a hurry; evening papers provided lighter fare and racier storytelling for readers who wanted to relax and unwind after a hard day.

With the advent of television news, then cable news, then electronic news, print news has become less and less profitable. Newspapers around the country are cutting back on stories, letting staffers go, and just plan folding up. When documentarian Andrew Rossi received permission to hang out with a video camera at the New York Times offices for a whole year, he didn't know that the demise of print journalism would become the focus of the story; no good documentarian ever knows exactly where the film will end up. But that's where Page One: Inside the New York Times went, and the result is a sometimes lively, sometimes somber, mostly interesting story about the past, present, and future of journalism.

Page One is a bit character heavy in the beginning as it introduces several side stories at once. The character who shines with the most luster is David Carr, the eccentric Monday columnist for the Business section of the Times who focuses primarily on media issues. One of the ironies pointed out in the film is the fact that the Times found it necessary to open a desk in 2008 to cover the demise of the media, and Carr does it in this film with a protective vengeance.

What's cool about Carr is that he lived first, and became a respected journalist second. A self-described cokehead in his youth, he spent some time in jail before becoming a respected writer. He wrote for a number of alternative publications before joining the Times when he was approaching 50. As a result, his voice, both written and spoken, is often unfiltered and unabashed, providing most of the humor in what is often a gray documentary.

But what is killing print journalism? First is the need for profits. Subscription rates will never be able to cover the costs of writing, printing, and delivering the news. Advertising revenue is the true source of support for newspapers, and ad revenue in print media is down everywhere. As a result, coverage is down, and serious coverage is down even more. Who's going to cover city hall when readers only want to know what Lindsay Lohan is up to? And since readership determines advertising rates, more fluff is passing for news these days.

Second is the need for speed. People used to be willing to wait for the scheduled newspapers, with an occasional "Extra" in which to "read all about it" when breaking news called for the editor to "Stop the presses!" Today's tech-savvy consumers, by contrast, are constantly in touch with breaking news, through texting, Twitter, Facebook, and other instant news feeds. They expect to know what's going on, moments after it happens.

On the other hand, the blogosphere's post-now, check-facts-later mentality gives print media the edge in accuracy and credibility. Carr wryly disparages the "caco-phony" of Twitter, even though he grudgingly admits that Twitter is a "wired collective voice" that gives him a sense of what people are talking about. One important scene in the documentary demonstrates a typical 10 a.m. meeting at the Times, where several editors and reporters sit around a table discussing stories currently in progress. There is an air of calm as they take the time to check facts, discuss context, consider reader interest, and check facts again.

Nevertheless, the documentary pulls no punches in reporting on the Times' gross mistakes, including the Jayson Blair scandal and Judith Miller's 2002 articles reporting weapons of mass destruction in Iraq that turned out not to exist. Miller defends herself by saying, "If your sources are wrong, you're going to be wrong." Blair was simply lying. I'm not sure which is worse — being naively hoodwinked or being deliberately devious.

One of the most shocking revelations in the film is the "end of the war" in Iraq that was neatly choreographed by NBC execs to coincide with the 6:30 news. The documentary claims that NBC simply wanted to give viewers a "mission accomplished" closure to the story. So they filmed their reporter accompanying "the final combat troops leaving Iraq" and broadcast it live on the evening news, even though the Pentagon had made no such announcement. It reminded me of the ending of Ray Bradbury's Fahrenheit 451, when protagonist Guy Montag watches an innocent pedestrian being chased down, caught, and killed in his stead, just to give viewers the satisfaction of "closure" on the evening news.

The film touches on dozens of areas affecting journalism today. All of them are interesting and important, but the film's own cacophony of information prevents it from having a strong central storyline. In a way, this presentation is more real and honest than a neatly tied story with a beginning, middle, and end. Life doesn't always have a climax on page 72. Nevertheless, it's a fascinating film, well worth viewing.


Editor's Note: Review of "Page One: Inside the New York Times," directed by Andrew Rossi. Magnolia Pictures, 88 minutes.



Share This
Syndicate content

© Copyright 2017 Liberty Foundation. All rights reserved.



Opinions expressed in Liberty are those of the authors and not necessarily those of the Liberty Foundation.

All letters to the editor are assumed to be for publication unless otherwise indicated.