Rewarding Failure; R. Renstrom

RewardineFailure RICHARD C. RENSTROM JIM AND MARY ANN are a typical hard-working middle-class Ohio couple. Both hold down full time jobs, and feel they must in order to support their five children on their $11,000 combined annual in comes. They live in a modest home and pay their bills promptly, but find it impossible to save anything. Across the street is another family. This family lives in a pre tentious home and drives an ex pensive luxury automobile. The father, however, is unemployed, which allows the family to receive $194 worth of food stamps each month plus the benefit of other social services. Unusual? No, unMr. Renstrom of Caldwell, Idaho, writes from many years of experience in various Federal and state programs dealing with the "disad vantaged." less you are aware that he is un employed because he was caught embezzling funds from his em ployer's till! A little further east, in New York, two brothers decide to buy homes for their families. One brother is industrious and goes to night school to qualify for a pro motion at his factory. The other brother drinks excessively and makes little effort to hold a steady job. In order to buy their homes, the first brother had to pay a steep interest rate and make a substan tial down-payment, while the sec ond brother discovered tha t he qualified for low-income housing which would cover most of his expenses and interest charges.

Across the country, in Idaho, 3 young mother with one child de515 516 THE FREEMAN September cides to divorce her husband. The family income is low enough to qualify her for the services of a taxpayer-supported "legal aid" lawyer to obtain the divorce. The divorced mother then receives wel fare payments. She bears two more children, both illegitimate. With the birth of each child she also receives an increase in her welfare allotment. Meanwhile, back in Chicago, a young lady seeks one of the many government grants or loans avail able to college students. Though an honor student, she finds that the modest sum her middle-class parents have saved for retirement disqualifies· her from any scholar ship help. Her friend, who is a mediocre student, has no difficulty at all in qualifying for several government grants. The earnings of the two families are about the same. But instead of trying to save for their old age the p~rents of the second girl have· spent their money on a beautiful home with fine furnishings, fancy cars, many vacations, and a high-stepping social life.

Further west, in California, a divorced mother of three decides not to work, which means that she may receive welfare, food stamps, free medical care, legal aid, rent subsidy, free school lunches, and other social services. For her to support such a standard of living would require a job paying $11,500 per year. Since there is small chance of her get ting such a job, she just sits - at the taxpayers' expense! The Cumulative Impact of Various Programs To the vast majority of hard working middle-class Americans these may seem like shocking sit uations. But the piling of one social program upon another has created a situation where such occurrences are becoming common place. The world of social pro grams has become so immense in recent years that no one person or bureau can ten just how many people are receiving these welfare handouts. The best educated guess is that in excess of thirty million people will receive some sort of a handout this year.

Proof of this is the cost, with social programs now being the largest portion of the $304 billion budget proposed by President Nixon for 1974-75. Total outlays for social welfare by Federal, state, and local governments are expected to exceed $200 billion this year - a fact attested to by the staggering tax load being borne by the middle-class wage earners of America. Perhaps the most tragic part of this mazeof social programs is the theme that has emerged in recent 1974 REWARDING FAILURE 517 years - a theme of rewarding fail ure. By rewarding laziness, im morality, a disinclination toward self-improvement, divorces, and even crimes, our society has put itself in the position of punishing the hard-working middle-class cit izen who pays the taxes and keeps his own house in order. Reeling under such an oppressive tax bur den, many middle-class workers are beginning to ask if perhaps our nation has made a mistake and gone down the wrong road.

The Economic Opportunity Act The mistake as they see it was the Economic Opportunity Act of 1964 - a landmark piece of legis lation that started this nation down a different path. With the "war on poverty" seemed to come a new philosophy - one of reward ing failure and punishing the tra ditional virtues of hard work and a sense of personal responsibility. The negative income approach came into use. If your income is above a certain figure you do not qualify, and if below, you do. An individual is not responsible for his own failures; it is a "cold and cruel society" which is at fault. For his failures and for society's transgressions against him, the "disadvantaged" would be show ered with program after program as well as a liberal infusion of cold cash. It has taken several years for these many programs to develop, of course, but it begins to be painfully clear to the middle-class American that he has come out on the short end of the deal. Take the popular Food Stamp program, for instance.

Dnder the guidelines, any fam ily with an income below a certain level and with no more than $1500 of liquid assets can receive the stamps. The program thus starts right off by punishing thrift. If you save a little for your retire ment you are punished; con versely, if you spend all your cash on wild parties or just the simple luxuries of life, you are rewarded. The stamps are purchased - the purchase price depending on the monthly income. Recipients can deduct taxes, some housing costs, medical expenses, and work ex penses when they compute their monthly income, so that a family of six can earn well over $700 a month before they are ineligible. With the increased price of food, this "free food" program has brought many angry responses from housewives across the land. "My husband works ten hours a day to feed our family," one wom an says, "yet the bars and pool halls are full of lazy men whose families are receiving stamps."

Another woman echoed an oft repeated comment that "the only 518 THE FREEMAN September people hauling steak and prime ribs out of the store these days are the rich and the food-stamp people. The rest of us middle-class people are lucky to afford ham burger." Perhaps the most shocking part of the food stamp scheme is that there are no criteria, other than income, to qualify. A man can lose his job because of committing a crime and qualify, hippies living in a commune on drugs with no desire to work can qualify, as can any bum in the country. Nowhere is there any need to work or even actively seek work in order to receive food stamps. Now~ere is this change of phi losophy more apparent than in our ever-expanding welfare rolls. We now have "welfare rights," which brought a sharp reply from one taxpayer I interviewed who said that "no man or woman has a moral right to charity, either through the tax system or from private sources. Welfare is a priv ilege, not a right."

Why Struggle? There are many shocking stories about the welfare game. Perhaps the most absurd is the case of one young lady who was put through a six-month medical sec retary's training program at the taxpayers' expense. She worked for several months after she graduated, only to quit her job and go back on welfare when she found it financially to her advantage to do so. As the employment service counselor later told me, "Noone should be denied the right to fail, but nobody should be paid to fail" ! The story of welfare recipients bearing illegitimate children and then receiving increased payments is well-known, of course. I wanted to find out if there was any way this could be stopped. "We can counsel them and offer birth con trol methods," one case worker told me, "but there is no way we can actually stop them from re ceiving increased benefits." The woman is thus rewarded for her immoral conduct, and society coughs. up more taxes to pay for her failures.

There are, of course, many other OEO type programs, all of which have a built-in criterion of rewarding failure. The Job Corps and the Manpower Development and Training Act are two which provide training opportunities for youth and adults. Not just anyone can qualify, of course, since it is first necessary to fail. The best way is to drop out of school or to loaf at the job. This brings up the question of just what percentage of poverty is caused by things within a per son's control and what percentage by outside forces. So I interviewed 1974 REWARDING FAILURE 519 dozens of counseldrs, job replace ment specialists., and case workers to get the answer. Laziness The answer they gave came through strong and clear: the single greatest cause of poverty is still laziness! Case worker after case worker voiced the same view that low incomes usually result from not trying very hard. The ones I interviewed agreed that society has an obligation to help those who are truly helpless, but there was also unanimous agree ment that our maze of social pro grams is encouraging an over whelming percentage of low income people to shun hard work and thus continue to qualify for the ever-expanding programs available.

In order to qualify for MDT A or Job Corps training a person must be below the income cri terion and preferably a school drop out. Once qualified, the re cipient is eligible for training that will cost anywhere from $1500 to over $4000 per year - all at the taxpayers' expense, of course. To struggling middle-class taxpaying parents who haven't failed, this may come as a bitter pill as they face the costs of keeping their own children in college. College costs have skyrocketed in recent years, of course, but what really hurts is the change in emphasis from "merit" to "need" to qualify for financial aid. It used to be that the students who dug in and got the grades received the financial aid. Now the emphasis is on helping low-income students, regardless of their ability, grades, or motivation. Under the Basic Educational Op portunity Grants program a stu dent can receive up to $1400 in a direct gift from the government each year, and there are other Work Study and Student Loan programs available. Students from middle-income families who might have saved a little for retirement need not waste time applying for these, however, since the complex formula used to determine "need"

will rule them out. The old Amer ican virtues of hard work and thrift are once again punished, and the "new" virtues of lazines8 and profligacy are rewarded. This change in scholarship phi losophy has had a profound effect upon our college campuses. "There is no such thing as a middle-class student on our campus any more," the admissions officer of a small private Western college told me. "All we have now are the rich and the poor - the middle-class family is gone from our school. I guess they are too busy paying taxes so the 'disadvantaged' students can attend," he said.

520 THE FREEMAN September Free Lunches This new theme of rewarding failure has even permeated the primary school system, where some of the students receive "free" lunches while the majority do not. "I don't object to a school lunch program," one mother of five told me, "but I just don't think it's fair that my husband and I both have to work hard to support our family and then pay taxes so that the children of lazy parents get free lunches while we have to send cold lunches with our kids because we can't afford the expense of five hot lunches each day." Many people I talked to felt the same, the consensus being that everyone should receive a free lunch rather than discriminate against those parents who work hard to support their families. School administrators also seemed to be in agreement that programs with negative qualifying criteria are destroying incentive to im provte one's lot in life.

Nor do the school programs end here. One of OEO's most signifi cant programs is the Neighbor hood Youth Corps - a program to put jobs into the hands of "dis advantaged" students. To qualify for these part time jobs a student must-you guessed it-come from a low-income family. No one ob jects to giving these kids a chance, of course, but is it fair to the middle-class student who wants a job and can't get one? Many Youth Corps supervisors told me the same story - jobs go begging for applicants due to the lack of motivation on the part of the dis advantaged, yet they can't give the job to a highly motivated middle class student who is desperately trying to earn money for college. "It's crazy," one school adminis trator told me, "when we punish the highly motivated middle-class kid whose parents pay the taxes by denying him the chance to fill one of these empty Youth Corps slots that are going begging."

Free Medicine Perhaps the biggest giveaway of all, however, is Medicaid. This medical care program for the dis advantaged provides a spectrum of free medical services far more comprehensive than any combina tion of Medicare, Blue Cross, and your pocketbook. Dental care, eye glasses, prescriptions, and even office calls are all covered, which prompted one physician to tell me that his "disadvantaged" patients were receiving better medical care than his own children! The. only way to qualify, of course, is to not earn very much. One hesitates to say anything against medical care for the poor, yet there was surprising agree ment among the medical and social 1971,- REWARDING FAILURE 521 people I interviewed that Medi caid, piled on top of all the other social programs, is destroying the incentive to improve one's income. As one physician told me, "Medi caid alone is not the problem, but rather it is all these things com bined that makes it so attractive to remain a low-income family."

These other things include such goodies as free legal help for any thing from criminal defense to divorce, along with representation to gain welfare "rights," rent sub sidies, low-income housing where the government pays all but one per cent of the interest (tem porarily suspended by President Nixon's orders), day care centers, free transportation,public health clinics, special education classes for teaching minority-group his tory and culture to those who re fuse to be "Americanized," and m~ny others - all paid for by hard-working middle-class citizens who are legally barred from the benefits of such programs. Where It All Ends This proliferation of poverty programs has placed such a tax burden on American middle-class families that they are bound to question a policy of rewarding failure, especially at a time when the price of everything seems to be going out of sight. Perhaps the greatest tragedy of all, however, is not the cost in dollars, but rather the subsidized encouragement of failure, immor ality, and irresponsibility. This new philosophy blinks at the real ity that plain old laziness is still the single greatest cause of pov erty in all the land. Present pro grams are wasting the taxpayers' dollars on people who lack the ability or desire to achieve the goals of such programs.

The present mind-boggling maze of Federal poverty programs is causing immense frustration among Americans who feel their traditional values of hard work, thrift, morality, self-improvement, and discipline are being punished. Let us not forget that America was built by hard work, not wel fare. Rewarding failure and pun ishing the traditional American virtues is not going to solve our problems - it is only going to lead us down the road to mediocrity. We need to redirect our re wards toward those people who make an honest effort to improve themselves, and away from pro gra.ms that encourage the recipi ents to remain on the-dole. We should maximize the opportunities to succeed through personal en deavor and open competition in the market, and above all, we should quit rewarding failure. ~ II ()WlA~,Jb 4 Revisited RIDGWAY K. FOLEY, JR. SEVERAL YEARS AGO, Leonard E. Read explained the function of the Foundation for Economic Educa tion, Inc., in a little pamphlet entitled "Speak for Yourself, John." As always, his message contained great merit: too many Americans recognize that the na tional situation is faltering badly but "they leave the task of speak ing out to organizations and pro fessionals and, by so doing, gain a false sense of discharging their social responsibility."1 Mr. Read's salient message and historical title started my think ing along a different but related path. Too few individuals in mod ern society speak for themselves - they prefer to descant and act I Read,Leonard E., "Speak for Your self, John" appearing as chapter 19 in the book, To Free or Freeze. (The Founda tion for Economic Education, Inc., Irvington-on-Hudson, New York, 1972).