In his lecture “The Logic of Entitlement Reform,” Nobel Laureate Dr. Robert E. Lucas, Jr. said he is not in favor of abolishing the welfare system, but he suggested our country would be better served if welfare was not available to everyone, only the neediest 20 percent in the U.S.
“Every time we promise people something we reduce their incentive to work,” Lucas said. “That doesn’t mean we shouldn’t offer welfare. It’s got a price and it’s got benefits.”
Using himself as an example, Lucas explained that he receives a Social Security check each month that he doesn’t really need. He’s paid into the system and he receives the money, but he feels he’s one of the “lucky” ones who is being paid money he doesn’t require.
Looking ahead, Lucas feels one way to offset the deficit in the U.S. would be to offer Americans in their 30s and 40s the option to stop paying into Social Security and then “take their chances in private investments.”
Lucas explained that countries around the world routinely run budget deficits. Throughout U.S. history, there have been times of prosperity and times when there have been huge spikes in government spending, particularly during World War I and World War II. The problem, according to Lucas, is that the budget deficit in the U.S. and in many other countries has been dramatic and sustained. He feels the welfare system is handled in a very inefficient way and is a key source of the problem in the U.S.
“We don’t know who’s needy. We don’t know who is able. There is cheating going on in the system, everyone does it. People who get disability can essentially get their Social Security benefits sooner. The top two reasons are lower back pain and stress syndrome,” Lucas said.
Lucas is the John Dewey Distinguished Service Professor of Economics at The University of Chicago, a Fellow of the Econometric Society, the American Academy of Arts and Sciences, and the American Philosophical Society, and a member of the National Academy of Sciences. He is a past president of the Econometric Society and the American Economic Association. In 1995, he received the Nobel Memorial Prize in Economic Sciences and was recognized by the Royal Swedish Academy of Sciences “for having developed and applied the hypothesis of rational expectations, and thereby having transformed macroeconomic analysis and deepened our understanding of economic policy.” Prior to his Chicago appointment, Lucas was a member of the faculty of the Graduate School of Industrial Administration at Carnegie-Mellon University from 1963 until 1974.
Dr. Russell S. Sobel, who also addressed the UTC audience, was in full agreement with Lucas. Sobel earned his Ph.D. in economics from Florida State University. He has authored over 150 books and articles, including a Principles of Economics textbook. His research has appeared in the Journal of Political Economy and The Journal of Law and Economics, as well as media outlets such as The New York Times, The Wall Street Journal, The Economist Magazine, and the CBS Evening News. He serves on the editorial board for three academic journals, and has won numerous awards for both his teaching and his research. Sobel is a Visiting Scholar in Entrepreneurship at The Citadel.
The Scott L. Probasco, Jr. Chair of Free Enterprise sponsored the Burkett Miller Distinguished Lecture Series event.