A Handout, Never a Hand Up

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My dear friend Henry Olsen has a recent piece that I believe to be gravely mistaken. Inasmuch our disagreement bears on public matters that will be of vital importance in the years ahead, we’ve mutually agreed to noodle over it in these pages. I go first; Henry will comment when and as he sees fit.

Henry notes that Mr. Romney lost by a whopping 81-18 margin among voters who wanted a president who, foremost, “cares” about people like them. No doubt, that has something to do with the candidate’s blue-blood pedigree and the dog on the car roof, but Henry argues that it also reflects the public’s (or at least this voting bloc’s) discontent with a GOP message that is perceived as indifferent to ordinary folk’s aspirations. The GOP, he urges, should remember that “The Republican Party was founded in opposition to slavery, but it was also founded in support of the idea that government can give average people a hand up to achieve the American Dream.” By way of example, the Homestead Act and the Morrill Land Grant College Act provided subsidies for the millions of farmers who dominated mid-19th century America. That still is a model. Americans, Henry notes,

don’t want a government that is “hands on” in their lives, regulating, taxing and commanding their every move. When they need help, they don’t want handouts, and they don’t think others should get them either, whether titans of Wall Street or moms on welfare. And they don’t want government to be simply “hands off.” …  Americans want what conservatives have always said they want to give them, a hand up. 

The distinction between handouts and a hand-up is not always very clear, but I will follow Henry Olsen’s implicit presumption that there is a difference and, moreover, that voters can tell it. Also,  I have no idea whether a “hand-up” agenda would or would not spell electoral success (although I’m inclined to trust Henry on that score: he’s my go-to man for all things electoral). My question is whether the agenda is coherent and plausible for the country. My answer, in a word, is “no.”

When you have a dinner, a famous Gospel passage says, don’t invite friends and family. Not that there’s anything wrong with conviviality (the man who said it shared lots of meals, including his last, with friends); it’s that the invitees might be able to pay you back, and that corrupts them and you (unless you happen to be the Son of God). Instead, invite and feed the folks who can’t possibly pay you back—the poor, the crippled, the lame.

I don’t mean to mobilize the Gospel  to derive maxims of political conduct and organization. I do mean to suggest that politics partakes of the dinner paradox.

We provide for end-of-life care, homeless shelters, and emergency aid for disaster areas, no (or very few) questions asked. These are pure handouts. We’d like them to be provided through private charity to the extent possible; but  when that isn’t enough, government routinely provides additional assistance.

With the possible exception of off-to-the-gas-chamber, die-in-the-tunnel Randians, no one finds anything wrong with that—for excellent reasons. The programs do not (or at least need not) ask very much of government: just send the check.  While the handouts can be expensive (as with end-of-life care), the richest society ever on earth can surely find the means to fund them at a reasonable level. More important, pure handout programs carry relatively little risk of contagion and corruption. A program for the blind won’t willy-nilly come to cover the short-sighted. And while a few programs may have small incentive effects, by and large people don’t maneuver themselves into desperate situations to angle for government relief. Nor do the programs establish any viable precedent or model for K-Street artists. Funding homeless shelters does not entitle GE to park itself under the same umbrella: everyone knows the difference.

Hand-up programs are the polar opposite in all dimensions. Under those programs we ask, because we must, whether people deserve assistance (lest the hand-up become a mere handout or anybody show up). Such situational, discretionary judgments about people’s character and competence are vexing and difficult even for parents, who will often get them wrong; yet hand-up programs entrust government case workers with thousands of such decisions, with respect to unknown people. Moreover, one program leads to another: a small business loan produces a solar power loan produces a grant to Jeffrey Immelt.  “Julia” clambers from one program to the next; there never seems to be a time when she does not need, or receive, a hand up. And adverse incentive effects become pervasive and pernicious. People borrow to study when they should work; buy homes on credit when they should rent; rely on government “insurance” when they should save for old age; build windmills and $100,000 electric cars that burn up on New Jersey docks.

All this is nearly unavoidable. Hand-up programs, political economists have noted, can work without nasty incentive effects only under exceedingly narrow circumstances. They are like monetary inflation: the desired results transpire if, and only if, you can spring it on the country as a surprise and, at the same time, credibly promise never to do it again. That’s the Homestead Act and (for more recent examples) the GI Bill and the first deduction for home mortgage interest.  However, we are light years beyond that. Any additional hand-up program would simply be an add-on to an existing program. Even if one could think of a “new” program, everyone would expect it to be expanded, regardless over whether or not it succeeds.  Under these circumstances, a hand-up agenda spells the ruin of the country.

Take (for a random example) higher-ed hand-ups: the GI Bill expanded college access for awhile, until  colleges priced the subsidy into their product. Once they did, the “success” of the initial program prompted one expansion, and then another. Higher-ed support now produces a sea of blank faces who shouldn’t be in classrooms, a trillion dollars in unpayable student debts, a bloated higher-ed bureaucracy, and a taxpayer-fed, resentful intellectual class.  And yet the hand-up agenda says: more of the same.

If higher ed doesn’t do it for you, would housing? Every one of the programs that produced the bubble and its collapse was a hand-up program: the Community Reinvestment Act, the home mortgage deduction, subsidized loans and mortgages, Fannie and Freddie and FHA. This array of programs nearly brought the economy to its knees and dragged down millions of people, regardless of morally relevant distinctions among them. Cynical speculators lost, but so did folks who never wanted a hand up but whose mortgages are under water, courtesy of the government’s effort to expand homeownership. Needless to say, the politicians who did this to us feel no compulsion to say “sorry.” They have deflected the blame, and they have another hand-up program in stock: mortgage relief, by any means necessary. When and where will this end?

My point is not that hand-up programs can get out of hand, or that our institutions are incapable of administering them efficiently: all that is true, but it’s true of any government program. My point is that hand-up programs have gotten out of hand; that we cannot afford them; and that the country’s future depends on mowing them down. Tax reform, health care reform, entitlement reform, regulatory reform:  every single item depends on decimating hand-up programs. Any responsible party or political force in American politics will have to explain the situation and its urgency, and it will have to act on it. I’m not the world’s greatest political strategist, but telling the truth might be a better bet than a perennial “we don’t really mean it” refrain. It would in any event be more realistic and honorable.

The deeper point, which I am sure Henry Olsen appreciates, is the Lord’s paradox. Invite the crippled and the lame to the banquet that is America, but never your friends—not because you don’t like them; not because they don’t deserve it; not because anyone is acting on bad motives; but precisely because you like them and they may deserve it and you’re acting on good motives—and because once you’ve done it, nothing good can come of it.