Friday, December 28, 2007

#65 - How the Welfare State HURTS the poor (Ron Paul 08)


As a former democrat creating mandates for a minimum standard of living seemed like a very reasonable and humanitarian thing to do, now that I know more about economics and have some regard for the notion property rights I think otherwise. Besides, much of the welfare legislation hurts the poor and middle class it intends to aid in the first place.

The Minimum Wage - While the cost of living has been going up, that is partly due to the welfare state. By forcing higher wages and increasing costs of imports you raise the costs of living (loss of purchasing power), especially these days when most of our goods are imports. When a minimum wage exists a few things happen.

- A firm can only afford to hire less employees, thus we have fewer jobs and people get laid off, which lowers productivity which means more jobs are lost as the company has to downsize or go out of business. With less firms, competition goes down, which lower quality and raises prices.

- In a truly global world, other nations firms are much more competitive wage wise, and so domestic firms face the decision of being put out of business by their competition or outsourcing their work, either way those jobs will be lost.

(NOTE: Ron Paul isn't planning on sending anyone out on the street. He has transitional programs for Social Security and Medicare that would cover those who need it without burdening the younger generation)

Medicare/Medicade - The statistics show more people were covered by health insurance before these programs existed. Without these programs and without all the federal agencies and mandates that favor pharmaceutical companies you'd have an increase demand of health care which expands the market for health insurance which will have the following consequences:

- More health insurance firms will be made to meet demand, creating jobs with benefits.

- Being able to buy insurance across state lines will give people more affordable options, plus increase competition which will lower prices and higher quality cause of competitions agencies

- eventually with all the new agencies a huge spike of the supply and alternatives in health insurance options will create a dip in prices (this wouldn't happen right away, but eventually).

- It also removes the barriers from non-profit and humanitarian groups from providing low cost/free health care to the poor on a local level

Public Schools - First off, Public Schools are mostly run and funded by the states, getting rid of the Department of education would only get rid of the Bureaucracy's and standardized testing that's lower the standard of education. Once the states are able to make decision about their schools you'll see some things happen.

- Different states will try different curriculum's/plans out and some will work better than others, when one state sees another state having a high level of education they will to attract new residents adopt the same system slowly creating a superior and affordable system.

- Some states might privatize schools, this would create huge demand for private schools which would create better paying teaching jobs and low cost schooling cause so many schools will open and begin competing over the new demand.

- Non-profit and Humanitarian organizations will again make sure the poor and needy will be educated without being restricted by the federal government in doing so.

This is the kind of change Ron Paul wants to bring to the US, but of course the congress is a huge barrier in doing so. While Ron Paul is strong on immigration, he ran on open borders in 1988, and still believes in a world with open borders but due to all these social programs hurting our job market and education it's impossible to do so until that has changed. So a world without the welfare state that has better education and more jobs would welcome immigrants with wide open arms.

No comments: