Different River

”You can never step in the same river twice.” –Heraclitus

If the government ended all welfare programs for the poor, what would happen? Would they get jobs and get rich (or at least, non-poor)? Would private charities take up the slack? Some combination of both?

These questions are not easy to answer directly, but we can answer the reverse question. Suppose there were no government welfare, but extensive private charity. If the government started welfare programs, would private charity be reduced?

The answer — not surprisingly, at least to this economist — is yes. Prior to the 1930s, there was very little government support for the poor. There were of course poor people, and there was help for them, but most of it came from religious (and other private) organizations. Then along came the New Deal — the first modern government welfare programs — and church spending on help for the poor dropped 30%.

This is the result of a new study by economists Jonathan Gruber and Daniel M. Hungerman.

Think about this. If government aid to the poor means religious organizations spend less on the poor, they can spend that money on other things — so is government aid to the poor in effect government subsidy of religion?

Of course, this assumes that donations received fall by less than the amount spending on the poor falls. Which is not a sure thing. First, some (not all) people who donate may stop donating, or donate less, when they find out the money is being used for something else. And second, people will have to pay the higher taxes to support the government welfare programs, so they may have less net income available to donate.