The Welfare State
Bryan Caplan eloquently summarizes the libertarian view of the welfare state:
I’m against forced redistribution, even to help the deserving poor. Still, unless you buy the whole libertarian package, I understand taxing the rich to help the poor. What I can’t understand is taxing everyone to help everyone. Means-tested programs like TANF and Medicaid aren’t crazy; they take from Peter to pay Paul. Universal programs Social Security and Medicare are crazy; they take from Peter to pay Peter.
Even if you’re not into economics, universal programs should strike you as pointless. But they’re actually worse: When you tax Peter to pay Peter, you distort Peter’s incentives along the way. Of course, even means-tested programs require taxation. But they require much lower taxation than universal programs.
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Just think about how small government would be if only the bottom decile got full Social Security and Medicare benefits, and these benefits were phrased out over the second decile. Right now, these programs are about 35% of the budget and growing fast. With this means-testing formula, they would shrink down to roughly 5% (or even less, since the richer live longer).
Admittedly, if we got to this point, I still wouldn’t be satisfied. The day we started means-testing all redistribution, I’d furrow my brow and ask, “So charity should be compulsory, but immigration restrictions are OK?” But I’ll take what I can get.
There is a pragmatic argument to be made for continuing redistribution. As Tyler Cowen put it, “the nation-state will remain the fundamental locus for redistribution. That means helping the poor at home more than abroad; a decision to do otherwise would destroy political equilibrium and make everyone worse off.”. But anyone who supports redistribution at all should advocate open immigration to the greatest extent which is politically feasible.
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