In the United States of America, the state continues to deploy failed policies that violate basic economic principles to the detriment of the entire society it seeks to control. This failure can be seen in America’s Welfare State and progressive income tax program. The former subsidizes individual actions and life styles that can contribute to poverty and the later discourages income and wealth generation. Simply put, basic praxeology shows us when you subsidize something you will get more of it. Tax and regulate something you get less of it.
Since the amalgamation of the Revenue Act of 1916 and FDR’s New Deal, (in which the state used taxation, targeted subsidization, and regulation in an attempt to alleviate and or mitigate its definition of poverty among its citizens), the state began to extremely violate the aforementioned basic principles of human behavior.
In FDR’s “First New Deal” (1933–34), many programs were instituted using state subsidies to pay people who did not work and create new regulations for the banking and industrial sector which increased their moral hazard in an attempt to combat the impact and causes of the Great Depression.
FDR’s “Second New Deal” (1935–38) went further and fully institutionalized state involvement in the nation’s personal behavior in an attempt to address the effects of the ongoing economic crisis. Programs such as Social Security and the Fair Labor Standards Act would change America forever.
The state, in its infinite wisdom, seeing less than satisfactory results from FDR’s New Deal, thirty years later further increased its involvement in Americans’ personal lives with new programs, subsidies, and taxes during LBJ’s Great Society.
“Our aim is not only to relieve the symptom of poverty, but to cure it and, above all, to prevent it. No single piece of legislation, however, is going to suffice.”
– President Lyndon Johnson, 1964 State of the Union Address
Recently, according to the 2014 House Budget Committee Report, The War on Poverty: 50 Years Later the state’s return on investment has been less than satisfactory. Below are some conclusions from the report showing failure of the state to eliminate poverty by not understanding basic human behavior:
The War on Poverty at a GlanceDespite trillions of dollars in spending, poverty is widespread:• In 1965, the poverty rate was 17.3 percent. In 2012, it was 15 percent.• Over the past three years, “deep poverty” has reached its highest level on record.• About 21.8 percent of children live below the poverty line.1