The Welfare State Goes Bust

This is part three. Click here to read the entire series.

I doubt that Yuval Levin would disagree with very much of what I wrote in the second post in this series. I expect that most Republican politicians and voters would agree too, in actions if not in words.

Republicans have repeatedly voted to extend unemployment insurance. Paul Ryan's plan preserves Social Security. Yuval Levin's own 5 principles for reform contemplate a healthcare system in which "the poor and the old would still have heavily subsidized coverage and much of the middle class would still have moderately subsidized coverage."

So is this perhaps just a discussion of more vs. less? In the 1990s, federal spending as a share of GDP was reduced below 20% of national income. The crisis and the Obama response have pushed spending up to 25%. Could we translate Yuval Levin's essay as a call to return to the old proportion?

Yes and no. Yes he's certainly calling for spending less. (In that, I agree with him - although I doubt we'll get back below 20% anytime soon).

But Yuval Levin is engaged in something more than hype when he says that his plan goes "beyond the welfare state." Here's the key line:

essentially all government benefits — including benefits for the elderly — should be means-tested .... Americans below 55 or so ...  should expect public help only if they are in need once they retire. Means-testing should, to the extent possible, be designed to avoid discouraging saving and work. And private retirement savings should be strongly encouraged and incentivized, so that people who have the means would build private nest eggs with less reliance on government.

In other words: You might get some degree of state help if you need it. But you had better not count on it. And it will be delivered in ways that will open larger and larger differences between those who receive state aid and those who do not. In short: Medicaid for the old.

In other words, what we are contemplating here is not the end of the "welfare state" as most Americans use the term, a state that aids poor people. What is contemplated is the end of social insurance, at least as it applies to healthcare for retirees: a state to which all contribute on more or less equal terms and from which all draw benefits on more or less equal terms.

More to come…