Grassroot Perspective – July 25, 2003-Britain's Unstable Nanny State; Sanders Attacks; Slovakia's Tax Reform; Bush is Right on Welfare Reform

article top

“Dick Rowland Image”

”Shoots (News, Views and Quotes)”


– Britain’s Unstable Nanny State

A recent news report revealed that Great Britain’s National Health Service spends millions of pounds each year to treat foreigners and illegal aliens not legally entitled to free health care. If this policy sounds odious from the standpoint of taxpayers, at least it is a happy outcome for the recipients of the “free” services, who are not required to give the health clinics a social security number.

But can the U.K.’s welfare state remain “benevolent” indefinitely?

Not if it is to remain generous. Eventually it will have to reduce access to free services (or reduce quality), or it will have to become far more intrusive, according to Pierre Lemieux, research fellow at the Independent Institute.

“You can’t both have the Welfare State and avoid totalitarian controls forever,” writes Lemieux in a recent piece.

“The Welfare State cannot, in any meaningful way, assume responsibility for the welfare of the population without knowing much about its subjects, without imposing ID numbers and papers, without systems to detect need and abuse, and without secondary laws meant to protect its wards from imposing costs on the system (like people who don’t wear seat belts, who drink, who are obese, and so on and so forth).”

Lemieux quotes British observers well-placed to see that the nanny state’s policy of generous — and relatively unobtrusive — health care handouts is unsustainable.

But there is one beneficiary who clearly will benefit even if the welfare state becomes more obtrusive — the state and its functionaries, which will have more control over people too vulnerable or complacent to rebel against it.

Concludes Lemieux: “My hypothesis is that the state likes docile citizens. And who is going to be more docile that this Sudanese woman who came to the U.K. with her husband and two children, all HIV positive, and who says, ‘In Sudan, I would be dead. My children would be dead or orphans. Now, we have a happy life.’ The worst revolution this woman could ever participate in would be one aimed at increasing state power. Such subjects are no threat for the state apparatchiks. Only with more administrative tyranny can the Welfare State prevent itself from being screwed. The Welfare State and the Totalitarian State are the two faces of the same Leviathan Janus.”

Above article is quoted from The Independent Institute, The Lighthouse Volume 5, Issue 4

– Sanders Attacks

Vermont Rep. Bernie Sanders is at war with the pharmaceutical company GlaxoSmithKline. The company found that Canadian distributors were buying GSK’s products at Canadian price-controlled prices, then shipping them back into the U.S. to undercut the U.S. price (a practice which the U.S. Food and Drug Administration says is illegal.) So GSK quite logically stopped supplying their products to the Canadian distributors. (This was predicted in an EAI commentary published in July 2000).

Bernie is lead sponsor of a bill that would — get this — stop a U.S. company from declining to export its products to foreign companies for reimportation into the U.S. (Free Press, 5/6/03). In other words, Bernie wants to force pharmaceutical companies to import Canadian price controls, something that would destroy the U.S. industry; which of course is the point of Sanders socialism.

– Slovakia’s Tax Reform

Slovakia’s proposed flat tax could be a model for other European countries. To simplify the tax code and create a better economic climate, the government has proposed to scrap the current “progressive” system and replace it with a 20 percent flat-rate income tax for both households and companies (the corporate income tax rate currently is 25 percent, while personal income tax rates range from 10 percent to 38 percent). A simplified 20 percent value-added tax will be levied on all goods and services, eliminating preferences that currently exist for favored items. Capital gains will also be subject to a 20 percent tax, as well as taxes on dividends and transfers of property.

“The new tax framework should become effective as of January 2004, and it is part of an overall fiscal framework that will cut the budget deficit to 3.4 percent of GDP. We expect the flat tax will improve the business environment, mainly by increasing incentives to work and simplifying the tax system. The change should also attract more foreign direct investment, help create new jobs, and eliminate tax evasion. Our expectations are based on real world evidence. Similar changes to the tax system, including flat-rate income taxes, were adopted by Estonia (one of the 10 countries set to join the EU next year) beginning in 1995. Even though Estonia’s per capita GDP was 30 percent lower than Slovakia’s at that time, the flat tax has generated so much growth that Estonia’s economy leapfrogged ours in 2001.” — Ivan Miklos, Slovak finance minister (Wall Street Journal, 5/8/03.)

– The Key to Health Care Policy (as we have long been preaching) is getting people to take personal responsibility for their own lifestyles, not charging society for the costs of repairing the damage. A recent report from the Rand Corporation (RB 4549 2002) makes the point again. It found that the single biggest contributor to chronic health conditions and expenditures is not smoking, heavy drinking, or poverty, but obesity. Normal weight daily smokers were 25 percent more likely to have chronic health conditions than non-smokers. Normal weight heavy drinkers were 12 percent more likely to have chronic health conditions than light- or non-drinkers. But obese people were 67 percent more likely to have chronic health conditions than normal weight people. Obese people spend 36 percent more on health services, and 77 percent more on medications. Statistically (because so many people do it), overeating is far more of a health threat than smoking or boozing.

Above articles are quoted from The Ethan Allen Institute, The Ethan Allen Letter June 2003

”Roots (Food for Thought)”

– Bush is Right on Welfare Reform

By David Hogberg

In late February the Des Moines Register Editorial Board continued its assault on President Bush’s proposed welfare reform. The editorial bemoaned the fact that Bush’s welfare reform would increase the number of hours a week a welfare recipient must work from 20 to 26: it’s the work requirements that really stand to hurt people. It may not sound like a big deal to require welfare mothers to work more, but it is.

If the [Bush] legislation is imposed, [an] Iowa woman might need to work 24 hours in a job before her schooling could count for her “work requirement.” (It’s worth noting jobs are in short supply in the current economy.) That could result in her having to go to school part-time instead of full-time. If she makes even a little too much money at her job, both her child-care subsidy and tuition aid could be at risk.

That’s what stricter work requirements mean in the real world.

The Editorial Board appears to be ignorant of the research on the effect of work requirements on the decline of welfare caseloads. A July 2001 study by June O’Neill and M. Anne Hill found that the 1996 welfare reform law accounted for more than 60 percent of the increase in work participation. This strongly suggests that the work requirements in the 1996 welfare reform law had the intended effect. Furthermore, studies by both Heritage Foundation and Cato Institute found individual states that enforced work requirements with very strict sanctions (immediate loss of benefits) for noncompliance had larger declines in the welfare rolls than did states with less severe sanctions.

In what may be the most heartening news, these work requirements are beneficial to the income of single-parent families. A recent University of Michigan Study by Rebecca M. Blank and Robert F. Schoeni found that single-parent families in states with strict or moderate penalties for not working had higher gains in income than those in states with lenient penalties. The researchers stated:

This is perhaps surprising, since many have predicted that strong penalties would lead to greater impoverishment among those who lose their eligibility for welfare but are unable to replace benefits with earnings. Instead, it is the more lenient states with softer penalties where children’s income seems to have grown the least.

Given that strict work requirements have led to lower rates of welfare dependency and increases in income for former recipients, the Bush Administration is on the right track in making work requirements slightly more strict.

The Editorial Board further disparaged the proposed marriage counseling initiative in Bush’s plan:

The marriage initiatives are simply wrong. They don’t work. They only further stigmatize single motherhood and scapegoat single parents as the reason for poverty.

Much of our society does not stigmatize single motherhood but rather tolerates or even celebrates it-witness television shows like Murphy Brown and Friends. Given the well-demonstrated connection between single motherhood and poverty, a bit more stigma would seem to be in order.

What is most curious about the above quote is the claim that marriage initiatives “don’t work.” In this case, the Editorial Board is not ignoring the evidence, but rather misinterpreting it. The editorial is referring to two studies released last year that showed that welfare recipients in Connecticut and Iowa who had entered the workforce were less likely to get married than recipients who did not enter the workforce. Neither study showed that marriage counseling didn’t work because in neither case was marriage counseling part of the welfare program. There is no evidence that the proposed marriage counseling initiatives don’t work, because such programs do not yet exist.

President Bush’s welfare plan moves welfare in the right direction. It builds on a successful reform by strengthening the proven policy of work requirements, and introducing an experimental marriage counseling program. These reforms will further decrease dependence and enable more people to move out of poverty.

David Hogberg is a Research Analyst with Public Interest Institute.

Above article is quoted from Public Interest Institute at Iowa Wesleyan College, Institute Brief May 2003

”Evergreen (Today’s Quote)”

“A Rapidly Progressive Disease. Since my ordeal began in 1999, I can see that other professions, such as accounting, are also being saddled with government rules that will stifle or strangle them. What some other physicians and I are now experiencing will become more and more common, as Roberts and Stratton point out in The Tyranny of Good Intentions, until 1984 and Brave New World come to complete fruition. Then it will collapse and begin again from a Remnant. The cycle continues as a new Tower of Babel is always constructed.” — Don Kreutzer, M.D., Clarksville, MO

”’Edited by Richard O. Rowland, president of Grassroot Institute of Hawaii, 1314 S. King Street, Suite 1163, Honolulu, HI 96814. Phone/fax is 808-591-9193, cell phone is 808-864-1776. Send him an email at:”’ ”’See the Web site at:”’