In May of 1993, Michael Bauman is a professor of theology and culture and director of Christian Studies at Hillsdale College. He is also a lecturer and tutor in Renaissance literature and theology as well as associate dean at the Centre for Medieval and Renaissance Studies in Oxford. He has been book review editor for The Journal of the Evangelical Theological Society for seven years. Formerly an editorial assistant at Newsweek, a pastor, chairman of the general education program at Northwestern Bible College, and associate professor of religion at Fordham University, Dr. Bauman is the author of more than 30 articles and eight books, including Pilgrim Theology: Taking the Path Theological Discovery (Zondervan 1992), Roundtable: Conversations with European Theologians (Baker 1990), A Scripture Index to John Milton’s De Doctrina Christiana (MRTS, 1989), Milton’s Arianism (Veriag Peter Lang, 1987), and editor or co-editor of Are You Politically Correct? Debating America’s Cultural Standards (Prometheus 1993), The Best of the Manion Forum (MRUP, 1991), and Hillsdale’s Christian Vision series.
Dr. Bauman’s remarks were presented at Hillsdale College’s Center for Constructive Alternatives seminar, “Morality and the Marketplace,” in September of 1993. Other published versions have appeared in the St. Croix Review and Welfare Reformed: A Compassionate Approach (Nashville: Adroit/P&R, 1993).
We think we are doing the right thing. We think that if we pass laws to raise their wages and lower their rent, if we give generously to help support mothers without husbands and children without fathers, we can aid the poor in their flight from poverty and alleviate much of their distress.
We are wrong.
We forget that good intentions are not enough, and that massive government programs carry unintended consequences. We forget that aiming is not hitting, and that meaning well is not necessarily doing well.
First, we think that if we pass laws mandating higher wages for the lowest paid workers, we can increase their income. We forget that the lowest paid workers are normally those with the least skill and experience and that in the marketplace they are the least desirable of all workers. By artificially elevating their wages, we make them even more undesirable, and make it increasingly unlikely that they can get or keep a job. We forget that a wage is not merely a selling price for a worker; it is a purchase price for an employer. So we pass laws preventing the least desirable workers from selling their services at a price their prospective employers can afford to pay.
We also forget that all workers work not merely for their employer, but for the consumer, and that consumers wisely try to make the most of their money. Nevertheless, due to our desire to be moral and compassionate people, we pass laws requiring employers to pay higher wages to their least desirable workers while, as good stewards of the resources God has given us, we choose not to buy the overpriced products of those who do as the law demands. We put them out of business, which creates more unemployed workers and more poor, whom we then foolishly try to help with more minimum wage laws.
Imagine if we decided to prop up the profits of the weakest auto manufacturer in Detroit by passing a law that put a minimum price of $25,000 on each vehicle it sold. This would dramatically increase the profits it enjoys from every sale. But, despite our good intentions, indeed because of our good intentions, that manufacturer would soon go out of business. No matter how much consumers might want to “buy American,” very few can or will pay $25,000 for automobiles comparable to those available elsewhere at half the legally mandated price. The same principle holds true when that which is being sold is not an automobile but an unskilled employee’s overpriced labor. When minimum wage laws are in effect, the choice often is not between the legally mandated wage and some other wage, but between the legally mandated wage and no wage at all.
To such well-intentioned but harmful legislative conniving, no thinking Christian or other religious believer ought to consent. If we want to make the marketplace more moral, or if we want to be agents of effective compassion, minimum wage laws are not the answer. Instead, as Hillsdale College economist Charles Van Eaton argues, we ought to encourage more entrepreneurship. Look at the examples of the late Ray Kroc and Dave Thomas. Far more than any government program ever has or could, the businesses they established—McDonald’s and Wendy’s—aid the poor as consumers by providing affordable, enjoyable meals outside the home—a privilege once reserved for the wealthy. They aid the poor as workers by providing all-important entry level jobs that allow experience to be gained and critical marketplace lessons to be learned, from the importance of appearance, punctuality, deference, teamwork, integrity and dependability to more sophisticated management and public relations skills. They also offer a modest wage to boot.
Entrepreneurs like Kroc and Thomas understand that you cannot climb the ladder of success without first getting on the ladder. They invite the poor to step onto the first rung and begin climbing. Hundreds of thousands of people prosper in precisely this way, all without spending even one tax dollar. Quite the opposite: These novice workers, as they rise from poverty, actually pay into public coffers. At one time or another, nearly one-eighth of the entire American work force has been employed by the fast food industry, and of that number, many previously poor workers have gone on to better jobs and a level of prosperity that otherwise would have remained unattainable. Some even have gone on to own fast food franchises themselves, which in turn help others stepping onto that first rung.
Second, we think that if we pass laws holding down the costs of urban housing, we can aid the poor by making more inexpensive lodgings available to them, perhaps diminishing homelessness in the process. We forget that a purchase price for a renter is a selling price for a landlord. The more attractive a price is for the one, the less attractive it is for the other. When landlords are forced to reduce their rents in the face of burgeoning tax and maintenance costs, those landlords wisely decide to allocate their investments in other ways. For example, when rent control ceilings make it unprofitable for landlords to rent their apartments, they often sell those apartments as condominiums and thus escape real estate taxes and the high cost of upkeep. Because the supply of condominiums increases, their selling price tends to go down, thereby aiding wealthy urban dwellers, the only ones who can afford to purchase them. Meanwhile, the price of the apartments still remaining on the market rises because their supply has shrunk.
In order to prevent this from happening, we occasionally pass laws prohibiting landlords from taking recourse to condominium conversion. This legislative ban proves counterproductive because it often means: (1) that landlords seek additional payments under the table from their renters, thus making life more difficult for the poor, who can scarcely afford the extra cost; (2) that landlords defer needed maintenance on their decaying buildings, again making life more difficult for the poor; and (3) that landlords get out of the housing business altogether, tear down their apartments and build parking lots—low-maintenance, high-yield investments that serve only those wealthy enough to afford the high cost of owning, operating, and insuring an automobile in an urban location.
We forget that, human nature being what it is, people respond to incentives. Instead of passing rent control laws in order to aid our poorer neighbors, we ought to give substantially reduced public utility rates and increased tax breaks to those who establish urban rental housing. This would make such housing more plentiful, more affordable, and more comfortable. In short, if we do anything at all by means of the state, we should do all we can to promote the supply side of the supply and demand equation.
The greater the incentives for property owners, the better it is for landlords. The better it is for landlords, the greater the supply of apartments. The greater the supply of apartments, the lower the price. The lower the price, the better it is for the poor. And the subsequent increase in urban rental units not only results in lower rental prices for renters but also provides more jobs for those who construct apartment buildings, as well as for those who service them and maintain them.
Third, we think that by transferring money as generously as we can afford to the mothers of illegitimate children, we can soften the pains of youngsters without fathers and of mothers without husbands. We forget what insurance companies call the “moral hazard,” which is insuring against a disaster in a way that encourages it to happen.
Insurance companies know all too well that people respond to incentives. If the fire insurance policy on a floundering business pays more money to the owner than the owner can get from operating it, that business may go up in smoke—literally. Likewise, if a life insurance policy pays off so lucratively that the insured’s beneficiaries are better off if the insured is dead, death sometimes results. If medical insurance covers too great a portion of medical expenses, people tend to apply for treatment of illnesses that are hardly illnesses at all, thus tying up doctors and hospitals with relatively trivial cases. In other words, when we reach the point of moral hazard, fire insurance causes fires, life insurance causes death, and medical insurance causes illness. Not surprisingly, insurance companies always try very hard to avoid the moral hazard inherent in insurance.
In our rush to do well for households without a male breadwinner, we forget that welfare is poverty insurance, and, as a result, we actually help cause the problem we intend to alleviate. By making illegitimate children a credential for increased financial support, we make certain more illegitimate children are born. And we do so in a particularly amoral way. As Patty Newman, author of Pass the Poverty, relates: “Can you imagine my shock when E went into a welfare department and said, ‘Do you mean to tell me that a woman can come in here every nine months and begin to get checks for another illegitimate child?’ The welfare man said, ‘Oh, no, Mrs. Newman, she has to claim a different man as father every time or else she doesn’t get the money.’”
Tragically, the more illegitimate children a woman has, the more deeply she becomes mired in poverty, and the less likely it is that she can ever extricate herself, despite the money she is given by government. Welfare is, in the words of Robert Rector, an incentive program from Hell. As long as we pay the poor to continue doing the very things that help make them poor in the first place, poor they shall remain.
Put differently, what you pay for is what you get. Because single motherhood is what we decide to pay for with our tax money, more single mothers are what we get. The tragic fact is that in the last decade or so in America, more than 80 percent of the children born in the urban black underclass were born out of wedlock and without an adult male to accept any financial responsibility for them. Of course, rising illegitimacy is neither a distinctively black nor a distinctively American problem. Sweden, for example, which subsidizes its unwed mothers even more generously than we do, has the highest rate of illegitimacy in the world. Just as when you tax something, you get less of it, when you subsidize it, you get more. Today, we are subsidizing immoral behavior on a grand scale. As a result, immoral behavior flourishes all around us, while those who practice it are harmed. This is no way to bring morality to the marketplace.
Another unintended consequence of our efforts to aid single mothers and their children is that low income husbands are made extraneous. Welfare actually drives them from the home. The average total relief package for a single mother with three children is more than $19,000 a year—tax free. By comparison, a traditional two-parent family of four with a higher income of, say $22,500, has only about $18,000 left after taxes. Poor women might be poor, but they are not stupid. Neither are poor young men, many of whom quickly realize that by their own efforts and means they are unable to provide as well for their families as does their rich Uncle Sam in Washington.
Uncle Sam is exceedingly tough competition. Too many mothers decide not to marry the fathers of their children; they marry welfare instead. Thus government makes cuckolds of millions of American men. As George Gilder, author of Wealth and Poverty, once observed, the modem welfare state has persuaded poor fathers that they are dispensable. They believe it; so do the mothers of their children. By means of our so-called compassion and generosity, we send the signal to many thousands of women—especially poor, young women eager to get out of their parents’ home and away from their parents’ control—that men are most useful as procreators, not as providers.
To men—especially poor, young men who tend to live more for the moment than the future—that same signal has a different but equally devastating effect. We teach them that, if they want it, sex is a game they can play for free. No longer is there heavy pressure upon them to face up to the consequences of sex outside marriage. No longer do they feel compelled to work long hours at difficult jobs in order to provide food, clothing, and shelter for the new lives they create or for the financially dependent women who help create them. That tab, young men quickly learn, will be picked up by the government, provided that they do nothing to help the mother or to assume responsibility.
With no compelling need to channel time and energy into acquiring useful skills and into applying those skills profitably in the marketplace, increasing numbers of young men simply take to the streets, where life gets boring and then gets much worse. Without work there is no economic prosperity, and without incentives there is no work.
In our misguided efforts to help those lying in the ditch of poverty—to be good Samaritans—we forget that whatever undermines traditional family values, traditional family roles, and traditional family ties undermines society itself. To such moral and social degeneration, we ought never to subscribe. Our first priority, as well as the first priority of any government program of poverty relief, ought to be to stabilize traditional family roles and responsibilities.
Fourth, by giving money to the poor, we think we simply are aiding and comforting the unfortunate in their time of difficulty. We forget that giving good gifts is an exceedingly difficult endeavor and that poverty is not always itself the problem; it is often the symptom of another prior problem. That is, if poverty (the lack of money) really were what ails the poor, supplying vast amounts of money surely would alleviate it. But after thirty years of Great Society-style, “War on Poverty” welfare programs—programs that have transferred (in 1990 dollars) more than $3.6 trillion to the poor—poverty is still winning. We ought to think about that for a minute: En the last thirty years, we gave a million dollars to America’s poor nearly four million times over, yet all the while poverty got worse. If the money earmarked for poverty relief in this year’s federal budget alone were given to the poor directly, we would have enough funds to raise every man, woman, and child in America above the poverty line and have a cool $60 billion left over to celebrate our victory.
Poverty is not primarily a lack of money; it is a lack of something else. While we throw record amounts of money at the problem, we forget that of the many reasons why people are poor, relatively few truly lie outside their own control or require external remedy. And because of this lapse, we fail to convince the poor that the surest way to get ahead in modern America is precisely the way their forefathers did it: Get a good education (which includes a mastery of English and math); work hard; save money; and invest.
Instead, we tell the poor that in order to get ahead they need to demand more money from government, as if financial improvement were a public entitlement, not a private achievement, and as if the modem poor were somehow incapable of succeeding by using the same means countless other Americans have used in the past. Then, apparently in an effort to waive the responsibility of the poor to make their own lives better and to lighten the “burden” such responsibility entails, we tell the poor that they are poor because the wealthy oppress them. In other words, we teach the poor to blame their poverty on prejudice.
In a perverse sort of way, of course, we are right. Indeed, prejudice does lead to poverty, though not always in the way we expect or explain. We convince the poor that the prosperous prosper only at someone else’s expense and usually by deceit and because of greed. Not only are such insulting generalizations untrue and instances of bearing false witness against our neighbors, they are crippling to the poor. If the poor believe that most wealthy people are exploiters and thieves who squash other people into poverty for personal gain, they will not be likely to climb the ladder of economic success. They will remain poor because they do not respect or try to emulate the achievement of others and because they are blind to the real path the wealthy typically take to success—hard work, diligence, ingenuity, sacrifice, and postponed gratification.
At our hands, then, the poor are convinced that they are poor primarily because of reasons they cannot change and over which they have no control. We teach the poor to be prejudiced themselves—prejudiced against the prosperous. That prejudice proves morally and economically debilitating. We blame poverty on prejudice and then promote prejudice among the poor. It is no wonder that many of the poor simply give up.
We forget not only that ideas have consequences, but that bad ideas have bad consequences. We forget that real poverty is at least as much a state of mind as it is a state of income. We also forget to tie our charity more securely to the sincere efforts of the recipient. We mistakenly decide to give aid to all the poor rather than to the deserving and industrious poor, that is, to those who are poor through no fault of their own, or whose escape from poverty can never be accomplished by their own efforts. In doing so, we ignore St. Paul’s prudent scriptural principle: “If a man will not work, he shall not eat.” (2 Thess. 3: 10, NIV).
We should remember that Christian love does not squander either its resources or itself in reckless disregard of individual character and actions. By obliterating the distinction between the deserving and the undeserving poor, we run contrary to the will and practice of God, who treats the undeserving poor as objects not of mercy but of wrath. In other words, we forget that real love helps those who cannot help them selves, and that it refuses to subsidize sluggardliness or indolence by doing for others what they can and ought to do for themselves. Christian love operates upon the premise that the defeat of poverty is a joint effort, or common endeavor, between the “haves” and the “have nots,” not a unilateral thrust by the “haves” only. The recipients of Christian charity ought to be either diligent workers or else unable. The undeserving poor must get nothing from their Christian neighbors but exhortation. To subsidize them is to make way for dependency and indolence, not prosperity. Worse, it is to do them moral injury.
As long as we fail to distinguish between the deserving and the undeserving poor, we teach others that poverty is an entitlement, a credential, and that the blessings of life and labor are ours for the asking or for the demanding, regardless of our contribution. People who believe this perverse message can never grow to be productive citizens. They are doomed to be mere wards of the state, forever impoverished in spiritual as well as material terms.
The welfare state not only tempts its recipients with nearly irresistible perverse incentives, it seduces those outside it as well, especially those who seek to administer it and those who pay for it. The German economist Wilhelm Ropke wrote:
“To expand the welfare state is not only easy, but it is also one of the surest means for the demagogue to win votes and political influence, and it is for all of us the most ordinary temptation to gain…a reputation for generosity and kindness. The welfare state is the favorite playground of a cheap sort of moralism that only thoughtlessness shields from exposure…Cheap moralism is anything but moral.”
We appear to be virtuous when we really are rather lazy “do-gooders” content to let the welfare bureaucrats handle all that “poverty unpleasantness” for us. We say, “Ah, but at least we ’feel good about ourselves.— More frequently than we care to admit, our poverty programs are thinly veiled efforts to enhance our self-esteem and to assuage our consciences by means of state programs. To imagine that by such shallow and self-gratifying efforts we can eliminate human poverty is shameless hubris, not charity and grace. The size of the federal budget is by no means an indicator of Christian compassion.
On many fronts and in many ways, our poverty programs fail to reduce poverty. What is worse, they tend to injure the very persons they are designed to aid. Because we fail to incarnate our good intentions with effective, well-conceived public policy, because, in the words of George Mason University economist Walter Williams, we fail to realize that truly compassionate public policy requires dispassionate analysis, and because we choose to think with our hearts instead of our brains, much of the blame is ours. We should realize that real prosperity is created from the bottom up, not from the government down. Wealth must be created, not redistributed.
And if we think the outcomes of the marketplace are not up to our moral standards, we must never again forget that true charity does not lead to the welfare state. The Kingdom of God and the Great Society lie in opposite directions. We can help the poor, but we must do so as good, rather than dangerous, Samaritans. Our first tasks are:
1. Put welfare programs in the hands of contributors, not recipients or bureaucrats. Welfare recipients and bureaucrats who profit from the enlargement of the welfare state actually have banded together to form lobbies on Capitol Hill, hectoring legislators to redistribute even greater shares of other people’s money and to do so as if access to this money were their God-given right. Gone is the notion that welfare is a form of charity or that escape from it is the responsibility of the poor. Welfare is now viewed as an entitlement. But if the poor have a natural right to the money earned by others, then charity, which is voluntary giving, is impossible.
Rather than assigning control of welfare payments to the poor or to bureaucrats, we ought to give increased discretion over charitable contributions to the donors themselves. This is done best by giving tax credits (not income deductions) for all documentable charity of, say, up to 40 percent of one’s total tax bill. This has the effect of making government charity compete for our philanthropy dollars, which will tend to make government programs more effective, more efficient, and less expensive.
2. Redefine poverty. Nearly 40 percent of those the U.S. government defines as “poor” own their own homes—homes that have more living space than that enjoyed by most middle class Europeans. “Poor” ought to retain its earlier definition: the lack of food, shelter, or clothing. And while we are engaged in the task of redefining, we ought to remind ourselves that the definition of compassion is not increased control of private income by government.
3. Re-educate the politicians and the poor. We must remind politicians that to promote the general welfare is not the same as promoting welfare generally. They ought to think not in terms of dollars but in terms of morality and responsibility and always keep in mind that welfare payments can prove psychologically addictive and debilitating both to those who receive them and to those who provide them. They also must remember that pride in including more and more people on the dole is misplaced; they are not political saints but political pushers when they encourage government paternalism.
As for the poor, we must remind them that it is not a shame to be poor; it is a shame to be lazy and unproductive. Generations of Americans knew how to be something many of today’s poor do not: how to be both poor and proud—proud of their modest but hard-won earnings, and of the natural human dignity that does not depend upon a bank account. Nor should the poor shun honest wages for honest work. Too many of today’s poor are not proud, they are arrogant. They consider themselves too good to do the menial labor one must perform in order to begin climbing the ladder of success. Yet they are not too proud to take welfare; they are too proud only to flip hamburgers. We must remind them that they have to begin at the bottom and do the jobs no one else wants do if they wish to stop being poor.
4. No perfect solutions are possible. Poverty cannot be eradicated; it can only be ameliorated. But at least we can keep it from getting much worse and prevent ourselves from making it so. We must not expend scarce resources trying to solve the insoluble. The good news is that there is a lot we can do, and we do not need government help to do it.
5. Abundance can be wrenched from scarcity only by following the Golden Rule of doing unto others as we would have them do unto us. In a world of scarcity, the important question is not how poverty is begotten but how wealth is achieved. It is easy to become poor and to stay that way. But to become rich, we must learn to supply our neighbors’ wants and needs. By being good Samaritans in the marketplace, we help not only ourselves but all mankind.
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