On Magaziner’s Contention That Welfare Is an Entrepreneur Builder


The progressives at RIFuture were thrilled to hear Democrat General Treasurer Seth Magaziner inject some pro-welfare spin into the recent Small Business Economic Summit:

“If you’re going to have a successful entrepreneurial climate,” said Magaziner, “you have to have a climate where it’s okay to take risks and it’s okay to fail. I do worry a lot, particularly at the Federal level, about what is going to happen in terms of the social safety net… because, if you want people to take risks, if you want people to stick their neck out and start a business and face the possibility of failure, it’s much harder to develop that climate if people will have to worry that if they fail they’ll lose their health coverage, they’ll lose their home, they’ll lose their ability to feed young kids.

“As we watch what happens over the next few months in Washington, whether it’s this talk of repealing Obamacare without a replacement or gutting the Department of Labor, just keep in mind, somewhere in a restaurant kitchen right now in Rhode Island, there is someone who has the skills, the talent, maybe even the capital to start their own restaurant, and the factor that they have to think about is ‘If it doesn’t work out, am I going to be okay?’ …”

His vision is one in which the availability of government handouts allows people to jump for the gold ring, but is that how it really works?  It’s not an area that I’ve figured out how to research, extensively, but the simple assumptions of his logic give reason to doubt it.

  • We’ll call “Scenario 1″ Magaziner’s imagined circumstance of a person who has a job but is hesitant to risk their comfort by striking out as a business owner.  The question not asked is why that skilled worker would not be able to find another job if the business venture fails.  Indeed, one wonders whether the fear of lacking the opportunity for welfare is much greater than the fear of lacking a job and going on welfare.
  • In another scenario, call it “2,” we’ve got people relying on government services and using that as their jumping-off point; are they going to be more or less inclined to jump for a leap than those who see a job as their platform?  They’re certainly likely to be less well positioned to succeed, inasmuch as the rational sequence is pretty obvious: welfare, low-level job, experienced job, ownership.

Now look at this, indicating that the promise of lower taxes and reduced regulation is a business booster:

The share of business owners who say now is a good time to expand is three times the average of the current expansion, according to the NFIB’s data. More companies also said they plan to increase investment and keep hiring, which reflects optimism surrounding President-elect Donald Trump’s plans of spurring the economy through deregulation, tax reform and infrastructure spending.

Strictly in terms of economics, which is what Magaziner is attempting to spin, the question is whether the rules that progressive legislatures, like Rhode Island’s, impose on employers (to give employees benefits and security) and the cost of the welfare state move resources and security to those who will maximize its use for the value of the economy.  In terms of human well-being, what’s needed are more jobs, not more government dependency, and that means less taxation and government meddling.