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rowynThis proposal is written by a libertarian, published in the Wall Street Journal, and suggests a replacement for America's existing welfare system (in this case, I believe, refering to all entitlement plans, from welfare to unemployment insurance to Social Security and Medicare/Medicaid). It's nothing new for libertarians to want to ditch these systems, of course. But what I find particularly intriguing about it is that I think ![[livejournal.com profile]](https://www.dreamwidth.org/img/external/lj-userinfo.gif)
apanthropomorph and some of my other liberal friends would actually like the suggested alternative.
As with many libertarian ideas, this one is grandiose, sweeping in scope, does not lend itself to being scaled down, and is accordingly unlikely to ever be implented. I'm not sure if I think it would work or not.telnar and I, when discussing the replacement of the income tax with a flat sales tax on everything, had a similar notion of giving a "check for being American" to everyone, but we never considered one this sizeable; ours was less "guaranteed income stream" and more an acknowledgement that a flat sales tax is too onerous on the poorest Americans.
$10,000 a year is not much in the wealthier parts of the country, but it's enough to live on in many areas. In fact, it's enough that, coupled with my existing savings, I could afford to retire from my current job today without a large drop in my lifestyle.
Does being 'enough to live on' make it a good idea, or a bad one? On the one hand, unlike the current welfare system, there's not a large barrier to work. It's not a question of "You can work OR you can get your government check". You get your government check regardless of how much you work. A lot of people might find incentive to work simply from wanting more stuff, just as people work two and three jobs now to make ends meet. Even I would still look for ways to earn money; perhaps working part time at the bank, or perhaps by selling stories or art.
The greatest danger to the system is that not enough money would come in to match the entitlements going out. But maybe that's not the risk I think it is. After all, Bill Gates wouldn't stop working for $10 million a year, he's certainly not going to quit for $10,000. How many high-end professionals would turn into slackers if they had a modest guaranteed income stream?
How many low-end workers, in fast food restuarants and the like, would?
I admire the simplicity of the plan. No need to prove need, no application process, nothing to prove except that you're an American, over the age of 21, and only getting one check. The plan is certainly still vulnerable to fraud, but oversight of the program would be vastly simplified as compared to the current one. Plus, there'd be no question over whether a fraud attempt was intentional or the result of a misunderstanding of the rules. ("How could you not know that you're only supposed to get one check?!")
In fact, my only real concern about it is the possibility that it might not be self-sustaining. I don't mind if 10% or 20% of the country turns into slackers who never work again, as long as the remaining workforce is willing and able to do enough work that their taxes will still pay for the Plan.
I'm not sure whether that'd be the case or not. Would those who make $100,000 a year and paid $40k in taxes resent those who did nothing, who laid back and collected their checks? Would the people who did nothing resent the ones who earned so much more through their own industry, and demand an increase in their entitlement? Or would they simply figure "If I need a little more money, I can always get a job"?
It's an interesting idea, at least. Maybe I'll read the book. Alas, like all other such bold plans, it'll almost certainly never be put to the test.
apanthropomorph and some of my other liberal friends would actually like the suggested alternative.
A Plan to Replace the Welfare State
By CHARLES MURRAY
This much is certain: The welfare state as we know it cannot survive. No serious student of entitlements thinks that we can let federal spending on Social Security, Medicare and Medicaid rise from its current 9% of GDP to the 28% of GDP that it will consume in 2050 if past growth rates continue. The problems facing transfer programs for the poor are less dramatic but, in the long term, no less daunting; the falling value of a strong back and the rising value of brains will eventually create a class society making a mockery of America's ideals unless we come up with something more creative than anything that the current welfare system has to offer.
So major change is inevitable -- and Congress seems utterly unwilling to face up to it. Witness the Social Security debate of last year, a case study in political timidity. Like it or not, we have several years to think before Congress can no longer postpone action. Let's use it to start thinking outside the narrow proposals for benefit cuts and tax increases that will be Congress's path of least resistance.
The place to start is a blindingly obvious economic reality that no one seems to notice: This country is awash in money. America is so wealthy that enabling everyone to have a decent standard of living is easy. We cannot do it by fiddling with the entitlement and welfare systems -- they constitute a Gordian Knot that cannot be untied. But we can cut the knot. We can scrap the structure of the welfare state.
Instead of sending taxes to Washington, straining them through bureaucracies and converting what remains into a muddle of services, subsidies, in-kind support and cash hedged with restrictions and exceptions, just collect the taxes, divide them up, and send the money back in cash grants to all American adults. Make the grant large enough so that the poor won't be poor, everyone will have enough for a comfortable retirement, and everyone will be able to afford health care. We're rich enough to do it.
Consider retirement. Let's say that we have a 21-year-old man before us who, for whatever reasons, will be unable to accumulate his own retirement fund. We accumulate it for him through a yearly contribution for 45 years until he retires at age 66. We can afford to contribute $2,000 a year and invest it in an index-based stock fund. What is the least he can expect to have when he retires? We are ridiculously conservative, so we first identify the worst compound average growth rate, using constant dollars, for any 45-year period in the history of the stock market (4.3% from 1887-1932). We then assume our 21-year-old will be the unluckiest investor in American history and get just a 4.0% average return. At the end of the 45-year period, he will have about $253,000, with which he could purchase an annuity worth about $20,500 a year.
That's with just a $2,000 annual contribution, equivalent to the Social Security taxes the government gets for a person making only $16,129 per year. The government gets more than twice that amount from someone earning the median income, and more than five times that amount from the millions of people who pay the maximum FICA tax. Giving everyone access to a comfortable retirement income is easy for a country as rich as the U.S. -- if we don't insist on doing it through the structure of the welfare state.
Health care is more complicated in its details, but not in its logic. We do not wait until our 21-year-old is 65 and then start paying for his health care. Instead, we go to a health insurance company and tell it that we're prepared to start paying a constant premium now for the rest of the 21-year-old's life. Given that kind of offer, the health insurance company can sell us a health care policy that covers the essentials for somewhere around $3,000. It can be so inexpensive for the same reason that life insurance companies can sell generous life insurance cheaply if people buy it when they're young -- the insurance company makes a lot of money from the annual payments before eventually having to write the big benefit checks. Providing access to basic medical care for everyone is easy for a country as rich as the U.S. -- if we don't insist on doing it through the structure of the welfare state.
There are many ways of turning these economic potentials into a working system. The one I have devised -- I call it simply "the Plan" for want of a catchier label -- makes a $10,000 annual grant to all American citizens who are not incarcerated, beginning at age 21, of which $3,000 a year must be used for health care. Everyone gets a monthly check, deposited electronically to a bank account. If we implemented the Plan tomorrow, it would cost about $355 billion more than the current system. The projected costs of the Plan cross the projected costs of the current system in 2011. By 2020, the Plan would cost about half a trillion dollars less per year than conservative projections of the cost of the current system. By 2028, that difference would be a trillion dollars per year.
Many questions must be asked of a system that substitutes a direct cash grant for the current welfare state. Work disincentives, the comparative risks of market-based solutions versus government guarantees, transition costs, tradeoffs in health coverage, implications for the tax system, and effects on people too young to qualify for the grant, all require attention in deciding whether the Plan is feasible and desirable. I think all of the questions have answers, but they are not one-liners; I lay them out in my book.
* * *
For now, let me turn to a larger question: Assuming that the technical questions have answers, do we want a system in which the government divests itself of responsibility for the human needs that gave rise to the welfare state in the first place? I think the reasons for answering "yes" go far beyond the Plan's effects on poverty, retirement and health care. Those issues affect comparatively small minorities of the population. The more profound problem facing the world's most advanced societies is how their peoples are to live meaningful lives in an age of plenty and security.
Throughout history until a few decades ago, the meaning of life for almost everyone was linked to the challenge of simple survival. Staying alive required being a contributing part of a community. Staying alive required forming a family and having children to care for you in your old age. The knowledge that sudden death could happen at any moment required attention to spiritual issues. Doing all those things provided deep satisfactions that went beyond survival.
Life in an age of plenty and security requires none of those things. For the great majority of people living in advanced societies, it is easily possible to go through life accompanied by social companions and serial sex partners, having a good time, and dying in old age with no reason to think that one has done anything significant.
If you believe that's all there is -- that the purpose of life is to while away the time as pleasantly as possible -- then it is reasonable to think that the purpose of government should be to enable people to do so with as little effort as possible. But if you agree with me that to live a human life can have transcendental meaning, then we need to think about how human existence acquires weight and consequence.
For many readers of The Wall Street Journal, the focus of that search for meaning is bound up with vocation -- for some, the quest to be rich and famous; for others, the quest to excel in a vocation one loves. But it is an option open to only to a lucky minority. For most people -- including many older people who in their youths focused on vocation -- life acquires meaning through the stuff of life: the elemental events associated with birth, death, growing up, raising children, paying the rent, dealing with adversity, comforting the bereaved, celebrating success, applauding the good and condemning the bad; coping with life as it exists around us in all its richness. The chief defect of the welfare state from this perspective is not that it is ineffectual in making good on its promises (though it is), nor even that it often exacerbates the very problems it is supposed to solve (though it does). The welfare state is pernicious ultimately because it drains too much of the life from life.
The Plan returns the stuff of life to all of us in many ways, but chiefly through its effects on the core institutions of family and community. One key to thinking about how the Plan does so is the universality of the grant. What matters is not just that a lone individual has $10,000 a year, but that everyone has $10,000 a year and everyone knows that everyone else has that resource. Strategies that are not open to an individual are open to a couple; strategies that are not open to a couple are open to an extended family or, for that matter, to half a dozen friends who pool resources; strategies not open to a small group are open to a neighborhood. The aggregate shift in resources from government to people under the Plan is massive, and possibilities for dealing with human needs through family and community are multiplied exponentially.
The Plan confers personal accountability whether the recipient wants it or not, producing cascading secondary and tertiary effects. A person who asks for help because he has frittered away his monthly check will find people and organizations who will help (America has a history of producing such people and organizations in abundance), but that help can come with expectations and demands that are hard to make of a person who has no income stream. Or contemplate the effects of a known income stream on the young man who impregnates his girlfriend. The first-order effect is that he cannot evade child support -- the judge knows where his bank account is. The second-order effect is to create expectations that formerly didn't exist. I call it the Doolittle Effect, after Alfred Doolittle in "My Fair Lady." Recall why he had to get to the church on time.
The Plan confers responsibility for dealing with human needs on all of us, whether we want it or not. Some will see this as a step backward, thinking that it is better to pay one's taxes, give responsibility to the government and be done with it. I think an alternative outlook is wiser: The Plan does not require us all to become part-time social workers. The nation can afford lots of free riders. But Aristotle was right. Virtue is a habit. Virtue does not flourish in the next generation because we tell our children to be honest, compassionate and generous in the abstract. It flourishes because our children practice honesty, compassion and generosity in the same way that they practice a musical instrument or a sport. That happens best when children grow up in a society in which human needs are not consigned to bureaucracies downtown but are part of life around us, met by people around us.
Simply put, the Plan gives us back the action. Institutions and individuals alike thrive to the extent that they have important jobs to do and know that the responsibility to do them is on their heads. For decades, the welfare state has said to us, "We'll take care of that." As a result, we have watched some of our sources of life's most important satisfactions lose vitality. At the same time, we have learned how incompetent -- how helpless -- government is when "taking care of that" means dealing with complex human needs. The solution is not to tinker with the welfare state. The solution is to put responsibility for our lives back in our hands -- ours as individuals, ours as families, and ours as communities.
Mr. Murray, the W.H. Brady Scholar at the American Enterprise Institute, is the author of "In Our Hands: A Plan to Replace the Welfare State," published this week by AEI Press.
As with many libertarian ideas, this one is grandiose, sweeping in scope, does not lend itself to being scaled down, and is accordingly unlikely to ever be implented. I'm not sure if I think it would work or not.
telnar and I, when discussing the replacement of the income tax with a flat sales tax on everything, had a similar notion of giving a "check for being American" to everyone, but we never considered one this sizeable; ours was less "guaranteed income stream" and more an acknowledgement that a flat sales tax is too onerous on the poorest Americans.$10,000 a year is not much in the wealthier parts of the country, but it's enough to live on in many areas. In fact, it's enough that, coupled with my existing savings, I could afford to retire from my current job today without a large drop in my lifestyle.
Does being 'enough to live on' make it a good idea, or a bad one? On the one hand, unlike the current welfare system, there's not a large barrier to work. It's not a question of "You can work OR you can get your government check". You get your government check regardless of how much you work. A lot of people might find incentive to work simply from wanting more stuff, just as people work two and three jobs now to make ends meet. Even I would still look for ways to earn money; perhaps working part time at the bank, or perhaps by selling stories or art.
The greatest danger to the system is that not enough money would come in to match the entitlements going out. But maybe that's not the risk I think it is. After all, Bill Gates wouldn't stop working for $10 million a year, he's certainly not going to quit for $10,000. How many high-end professionals would turn into slackers if they had a modest guaranteed income stream?
How many low-end workers, in fast food restuarants and the like, would?
I admire the simplicity of the plan. No need to prove need, no application process, nothing to prove except that you're an American, over the age of 21, and only getting one check. The plan is certainly still vulnerable to fraud, but oversight of the program would be vastly simplified as compared to the current one. Plus, there'd be no question over whether a fraud attempt was intentional or the result of a misunderstanding of the rules. ("How could you not know that you're only supposed to get one check?!")
In fact, my only real concern about it is the possibility that it might not be self-sustaining. I don't mind if 10% or 20% of the country turns into slackers who never work again, as long as the remaining workforce is willing and able to do enough work that their taxes will still pay for the Plan.
I'm not sure whether that'd be the case or not. Would those who make $100,000 a year and paid $40k in taxes resent those who did nothing, who laid back and collected their checks? Would the people who did nothing resent the ones who earned so much more through their own industry, and demand an increase in their entitlement? Or would they simply figure "If I need a little more money, I can always get a job"?
It's an interesting idea, at least. Maybe I'll read the book. Alas, like all other such bold plans, it'll almost certainly never be put to the test.
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no subject
Date: 2006-03-23 05:22 pm (UTC)Which is why we may as well get over this "democracy" thing already and just have a king. How much worse could it be?
no subject
Date: 2006-03-23 08:22 pm (UTC)For some reason, the names "Slobodan Milosevic" and "Saddam Hussein" are popping into my head, and suddenly our clumsy, corrupt, inept version of a republic doesn't seem so bad. O_O
no subject
Date: 2006-03-23 08:28 pm (UTC)no subject
Date: 2006-03-23 05:23 pm (UTC)If the insurance companies want to sign on to this, and it seems like an interesting possibility from the potential perspective of a health insurance carrier, it has more potential to get implemented.... though I'm not sure how much.
The sweeping level of change this plan entails make it much harder sell due to the difficulty of modeling the changes it would cost...
Would the universality of health coverage (you HAVE to spend at least 3K on you health insurance) result in much change in the cost associated with health care? would the 3K/year plans actualy provide solid indemnity plan level coverage (doubtful) or coverage significantly reduced in quality from what I get from my employer now? What about your coverage from your employer? Benefit/compensation packages would be TREMENDOUSLY affected.
Would administration of this system be better served by knocking off the first 10K of taxes someone would pay? what rate of taxes would be needful?
Bet he tries to cover a bunch of this in the book; don't know if he succeeds. At least it's not a Modest Proposal.
no subject
Date: 2006-03-23 08:31 pm (UTC)$3K per year is a reasonable cost for insurance; I have a friend who has catastrophic health insurance (eg, it ONLY pays in the event of serious injury or illness) and pays all expenses out of pocket. His insurance costs are well under $2K per year. A lot of the costs of health care are from administrative costs: the overhead of haggling with doctors and verifying claims and so forth. If you cut down on this by having consumers pay for services out-of-pocket (or using something like a medical savings account) then insurance costs would drop, too. Also, if insurers had a guarantee that even young and healthy people had insurance -- eliminating the selection bias on insurance, where the people most likely to get sick are the ones most likely to buy it -- that should allow premiums to drop, too.
The sweeping level of change this plan entails make it much harder sell due to the difficulty of modeling the changes it would cost...
I think this is the real sticking point. It's so hard to predict what effect it would have on the economy, and getting it wrong could be disastrous.
no subject
Date: 2006-03-23 06:16 pm (UTC)no subject
Date: 2006-03-23 06:16 pm (UTC)So until someone points out a horrible structural flaw in the idea, I'm all for it, but like you I really don't see it happening.
Post Scarcity
Date: 2006-03-23 08:18 pm (UTC)no subject
Date: 2006-03-23 07:31 pm (UTC)no subject
Date: 2006-03-23 08:13 pm (UTC)One of the problems with the dole is that, as you earn more money through work, you get less money from the dole. Why would you work more when you could get just as much (or close to as much) money for doing nothing?
Under Murray's plan, you neither lose nor have the government check reduced by working. I think this is a key distinction. If I work five hours a week, I'll get five hours a week of additional pay. If I work 40, I'll get 40.
It's true that a lot of people might feel "why bother working when my government stipend will pay the basics?"
But how many people really work just to cover the basics? I work forty hours a week; my "basics" could be covered on a third of my salary. True, I get some money for health care by virtue of workng 40 hours a week, and employers mostly encourage their employees to work full-time. I think most people work to get "more stuff"; being handed a minimum income isn't going to stop them from working to get even more -- as long as they DO get EVEN MORE, rather than "a little bit more" or "just the same".
Like you, I don't really like the entitlement attitude, especially when it comes at the cost of involuntary participants (ie, taxpayers). On the other hand, I do see a certain appropriateness to a social safety net. I don't really think that 80 year old men should be living on the street because they didn't save enough money for retirement. I don't think a young woman ought to die of diabetes because she didn't get insurance when she was healthy and can't afford treatment now. Yes, those were choices these people made, but I'm not thrilled with the prospect of making them live, or die, by them.
These problems don't have to be addressed by government handouts; they can be solved by private charities or within the structures of family and friendship. But America has already decided to address the problem with government: Very Large Government. If Mr. Murray's alternative really would be cheaper in the long run than our current system, that makes it appealing to me. Of course, that's a big IF, as is the "and IF implementing it doesn't tank our economy".
no subject
Date: 2006-03-23 09:31 pm (UTC)The plan above has no such strings; everybody gets it, regardless of income.
Governments are reacting to the current system in way that seems bizarre, until you realize that welfare is, first and formost, for government employees: When they detect welfare fraud, they set about to change the laws so that they can no longer detect it.
California has just done this. People were being caught committing perjury on their welfare applications, and being prosecuted. So, Calfornia no longer requires a signature, and thus you can no longer be prosecuted for perjury.
Incidentally, Alaska writes a check to every Alaskan citizen, every year. My last exposure to this was several years ago; it was about $1300 then.
The above-described plan in the Lady Rowyn's post is even-handed. There are some issues, such as the mentally ill and/or homeless -- but look what we do for them now: We spend enough money "studying and administering the homeless problem" to buy every homeless person in the country a house, every year.
Right now, our taxes on GDP (gross domestic product) are 18%. France's has exceeded 60%, destroying their economy, and the French are rioting at this very moment because it's not enough.
===|==============/ Level Head
no subject
Date: 2006-03-26 05:51 am (UTC)I like this proposal of an existence wage, but my main qualm is that the United States is almost certainly too materially poor to implement it.
no subject
Date: 2006-03-26 02:21 pm (UTC)You know, I just finished a really long follow-up entry to this post, and it all pretty much boils down to your sentence above. :)
no subject
Date: 2006-03-28 08:06 pm (UTC)