Are child subsidies a legitimate public investment?

Topics: Welfare
29 Aug 1994

From: ervan

Let me address the substance of your reply under a different
thread. Here is the part of the summary that I think is
relevant to the issue itself:

>>[Deductions help with the expense of raising children]
$The mere fact children are expensive is irrelevant to
the question of who should pay for them.
>>[Business get deductions]
$This is different.
>[No, it's the same, society is recognizing legitimate
expenses in each case.]

> [Tax policy can help dysfunctional families.]
> [Low income correlates with problems.]
$ CS does not help with raising children, e.g. welfare.
> [The government should place a high priority on children.]

Correlation does not imply causality. Does low income cause
alcoholism? Maybe. Does alcoholism cause low income?
Probably. Does low income cause spouse and child abuse?
Maybe. Does a certain attitude lead people to low paying jobs
and to familial abuse? Maybe.

Even if low earned income is causal, which I do not think is it
all obvious, it says nothing about unearned income being causal.
Consider again welfare. This very argument was made: more
money buys better nutrition, better education, low income and
high crime are correlated, therefore giving money to poor
children will address all of those problems. It has failed,
failed utterly. It has, in my opinion, exacerbated the
problem. The reasons are three fold:
1) The causality model was wrong. Poor education was more than
lack of money, even though that correlated.
2) Welfare taxes destroy productivity and sap income. Net real
wealth decreases. Income distribution is resistant to change.
Thus people near poverty are pushed into it while those in it
are helped only slightly.
3) The welfare system pays people to be poor. It has been very
succesful in encouraging people to be poor. This relates back
to my meta-claim. Liberals say that no welfare mother decides
to have another child in order to collect welfare. I have my
doubts about that, but to the extent that it is true, it is
irrelevant. Attitudes follow economics. Welfare has created a
class of people who see no way out and nothing else to do even
though they are not consciously trying to bilk the system.

Regardless, your claim that more money for dysfunctional
families helps kids is badly in need of support. Even if this
were true, it still begs my claim: why should someone who has
'problems' suddenly have a claim on the exploitive machinery of
the state?

In other words, is CS really a 'public good'? You may be
making a tyranny of kindness argument: that people should be
forced to donate to good causes. That's a moral judgement I
won't argue. It's explicitly tyranny of the majority however.

So, back to the economic question. At the bottom end, CS is
not working. The excess value generated by people receiving
AFDC is far less than what is spent on them. Do you have any
doubt of this? If so, tell me how you explain that the poverty
rate stopped going down when welfare started. At the top end,
we have people who are buying all of the things their kids need
still getting a tax deduction. How is spending public money on
them (via a deduction) any sort of an investment in children?
It's only an investment in their summer vacation home. That's
not a 'public good'. That leaves people in the middle. I
think a combination of the above two analyses are appropriate.
In part, their deduction does not go toward improving the value
of their children toward society and in part it goes simply
towards producing more children, thus bringing society right
back to where to started. CS is not a 'public good'.

While I'm at it, let me take on the sacred cow: public
education. Education is not a public good, contrary to
widespread opinion. Is it good to have an educated populance?
Yes, of course. But how much is it worth? And more
importantly, to whom does it have value? Is it an
internalizable value? The answer is 'yes'. It is wholly
internalizable. An educated person can charge more for their
skills. I am then willing to pay more for the product they
produce (or I get more of the product). Where is the value in
education that cannot be internalized in this way? If the full
value is internalizable, then there is no 'public good' in

What about the poor? There are loans. There are
apprenticeships. There is much to be learned outside of the
formal education system. Literacy was well over 90% in the
19th century before public education, when people were on
average much poorer than today. This is not a coincidence.
Public education is a massive failure.

> I think that helping future generations is important. Do you disagree?

I agree and the way to do it is to establish free markets.