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Why Not Abolish the Welfare State?

How Much Are We Spending on Welfare?

That's not easy to find out. Robert Rector of the Heritage Foundation laboriously identified all of the federal programs that make benefits available based on low income. The full list, shown in Table I, includes many programs not listed under conventional government accounting and shows that the federal government currently funds at least 79 interrelated and overlapping means-tested welfare programs, not including Social Security and Medicare. In addition to their contributions to these federal programs, most states provide other programs, including programs for general assistance or general relief, public housing and medical general assistance. The amount spent under federal programs alone is quite large:

  • The total cost of means-tested federal and state welfare programs equaled $305 billion in fiscal year 1992 (the latest year for which complete statistics are available), or about 5.2 percent of GDP. 3

  • We estimate that figure will exceed $350 billion, or 5.3 percent of GDP, for fiscal year 1994.

  • This is the highest level of welfare spending in history, whether measured in inflation-adjusted constant dollars or as a percent of GDP. [See Figures I and II].

  • Today's total welfare spending is almost three and one-half times the $106 billion (in constant dollars) spent on welfare in 1980, the year Ronald Reagan became president.

  • Welfare spending is more than 35 times the $9.6 billion spent on welfare in 1965, when the War on Poverty began.
  • Today, America spends more on welfare than on national defense. 4

This spending is projected to continue growing at a fast rate. By 1998, the Congressional Budget Office (CBO) estimates that welfare spending will exceed $500 billion, an increase of more than 64 percent since 1992. 5

To put the size of the welfare system in perspective, consider the amount we spend in relation to the various measures of need:

  • If we took all of our welfare dollars and simply gave them to people who are living below the official poverty level, we could give every poor person $8,939. 6

  • This outright gift would equal $35,756 for a family of four -- more than the average family income for the population as a whole. 7

  • Looked at another way, the difference between the non-welfare cash income of poor people and official poverty level income (the "poverty gap") was about $94 billion in 1992. 8

  • Thus we could theoretically eliminate poverty in the United States through outright gifts of one-third of the amount we currently spend on welfare. 9

Of course, these are not practical suggestions. For one thing, some antipoverty funds go to near-poor people who might fall below the poverty level without welfare. A more important practical problem is that giving more cash to the poor would encourage the near-poor to earn even less. However, the above thoughts do raise questions about how wisely our antipoverty dollars are spent.

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 eive housing subsidies, and yet almost half of the families receiving housing benefits are not poor.