The High Cost of Good Intentions

Auteur

John F. Cogan is the Leonard and Shirley Ely Senior Fellow at the Hoover Institution and a faculty member in Stanford University's Public Policy Program.

Résumé
This book traces the evolution of U.S. federal entitlement programs from the Revolutionary War to modern times to identify and understand the common economic and political forces that have caused their nearly continuous growth.

Contenu

Contents and Abstracts1Introduction chapter abstractThe book addresses the question of how and why federal entitlement programs have grown so large and have become so far removed from the ideals on which they were founded. It presents a history of major federal entitlement programs from the beginning of the Republic to the present, showing how they evolved and explaining the forces that caused their evolution. The programs covered include Social Security, Medicare, Medicaid, food stamps, other welfare programs, and nineteenth- and early twentieth-century veterans' disability pensions. These programs have sprung from the noble intention of providing assistance to people who are destitute through no fault of their own. As well-meaning and beneficial as many entitlements may be, they have come at a high cost, measured by lower national savings, higher public debt, and slower economic growth. Today, entitlements present the United States with a fiscal challenge unlike any other in the nation's history. 2Creating Legislative Precedents: Revolutionary War Pensions chapter abstract Revolutionary War pensions were the nation's first entitlement program. The program's evolution provides an early glimpse of Congress's tendency to liberalize entitlements and the forces that drive Congress. The original federal program limited annual pensions to Continental Army soldiers and seamen who became impoverished as a result of disabling wartime injuries or illness. Congress enlarged and expanded these benefits until, in the 1830s, they covered virtually all Revolutionary War seamen and soldiers, including volunteers and members of the state militia, and their widows, regardless of disability or income. Each liberalization was justified on the grounds that it was providing pensions to veterans who were no less worthy of assistance than veterans who were already receiving pensions. Each established a new base of benefits from which Congress considered subsequent liberalizations. Each was a result of political pressures generated by large federal budget surpluses. 3An Experiment with Government Trust Funds: Navy Pensions chapter abstract The navy pension fund program was the federal government's first trust fund. It was financed by a single, dedicated source of revenue: prize money from the sale of captured enemy and pirate ships and their contents, commonly called "booty." The navy pension's early history provides a second example of Congress's tendency to liberalize entitlement program eligibility whenever surplus funds are available. However, in the case of navy pensions, it was surpluses of prize money in the trust fund rather than overall federal budget surpluses, that mattered. The trust fund's insolvency in 1840, the direct result of an ill-considered benefit expansion, serves as an early warning for Social Security and Medicare trust funds. 4The First Great Entitlement: Civil War Pensions chapter abstract The Civil War pension program followed the same evolutionary path as earlier veterans' pensions, except on a far grander scale. The program evolved into a general disability and retirement program for virtually all Union soldiers. At the program's peak in 1896, pensions were provided to nearly 1 million Union soldiers and their survivors, and annual pension expenditures reached an extraordinary 40 percent of federal budget expenditures. The program's liberalizations were fueled by large federal budget surpluses. In the late nineteenth century, the Republican Party used generous Civil War pension benefits to gain electoral advantage. The pensions played an important role in the realignment of the American electorate behind the party in the 1890s. The pension program also spawned America's first national, single-issue lobby: the Grand Army of the Republic. The GAR exerted a powerful influence on pension legislation and served as a forerunner to large twentieth-century lobbying organizations. 5Repeating Past Mistakes: World War I Veterans' Benefits chapter abstract Congress enacted World War I disability pension programs with the objective of preventing a repeat of the Civil War pension program's excesses. The novel programs were designed to alleviate future political pressures to liberalize disability pensions as veterans aged. These programs proved to be no match for claims for benefits by ineligible veterans and the availability of large budget surpluses. Congress not only extended World War I veterans' pensions as it had previous wartime pensions; it did so at a much faster pace. Promises of benefits, called "bonus" payments, by a 1924 law spawned mass marches by veterans in cities throughout the country demanding their promised entitlement benefit. The most memorable of these was the 1932 Bonus Expeditionary Force march on Washington, D.C., which ended when troops under General Douglas McArthur's command drove the veterans from the city. 6Retrenchment: Roosevelt and the Veterans chapter abstract The first year of the Roosevelt administration witnessed the largest reduction in an entitlement program in U.S. history. Franklin Roosevelt terminated pensions for 450,000 veterans and reduced the amount of monthly pensions for thousands of veterans who remained on the rolls. The story of how he achieved this result provides lessons for future presidents. The president made a strong moral and economic case for terminating veterans and used the budget crisis created by the Great Depression to prod Congress to give him the authority to cut pensions. Throughout the remainder of the president's first two terms, President Roosevelt used his veto power and other powers of the office of the president to sustain the vast majority of these reductions. 7The Birth of the Modern Entitlement State chapter abstract The New Deal marks the beginning of the modern entitlement system. Until the New Deal, federal entitlements were restricted to people who had performed a specific government service, mainly veterans. The New Deal expanded federal entitlements to people in the population at large, state governments, and private businesses. The landmark Social Security program provided retirement benefits to industrial workers. New federal welfare programs entitled state governments to matching payments for their welfare programs. Unfortunately, important lessons from the government's experience with wartime veterans' pensions went unheeded. The New Deal entitlements also ushered in a new era for the federal courts. The Supreme Court allowed the New Deal entitlements to pass constitutional muster under the "general welfare" clause. Once federal entitlement rights had been granted, the courts adjudicated the nature and extent of these legal rights, eventually creating welfare entitlement rights where none had been legislated. 8The Consequences of Social Security Surpluses chapter abstract Congress again demonstrated its inability to withstand pressures to increase entitlement benefits when surplus funds are available. The 1935 Social Security Act called for the program to build up a large reserve fund during the program's early years that could be drawn on in later years to finance benefits in lieu of higher payroll taxes. The "large reserve" debate led congressional liberals and conservatives to join together in 1939 to use the surplus to raise benefit levels, add survivors' benefits, and delay a previously scheduled payroll tax increase from taking place. 9A New Kind of Entitlement: The GI Bill chapter abstract The Servicemen's R…