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Free Money! No Strings Attached!
As many of you already know, economics — well, anything to do with math, really — is not my strong suit. I admit that up front. And welfare is about economics, so the fact that I think welfare is a disaster (having seen its manifestations play out, in caucasian shades of alabaster, lily and grayish-tan here in one of the least racially-diverse states in the Union) doesn’t mean I know how to fix it.
Welfare! That fluorescing, metastasizing collection of expansive and expensive programs originally intended to mitigate or eliminate the immediate and long-term effects of poverty in America. Here, as in the inner city, welfare has succeeded in ensuring that the basic needs of vulnerable Americans are being met, but the cost — not just in monetary terms but in blighted human lives — is high. A program intended to serve as a safety net has instead become a trap in which families remain enmeshed for generations.
Simply put, welfare too often rewards misbehavior and punishes those who attempt to make good choices, such as seeking entry-level or entrepreneurial employment, marrying the parent of one’s children, or moving away from economically depressed areas to cities or states where there are more jobs.
One solution could be to simply eliminate all welfare programs — AFDC, Social Security, disability, Medicaid, Medicare, fuel assistance, what-have-you — and let people either sink or get a job and swim.
This draconian measure is unlikely to be undertaken, even by the most heartless conservative. Even if some might be able to tolerate the spectre of ragged, starving adults staggering through the slums, we can’t let their kids go unclothed and unfed.
But I came across an idea here on Ricochet that was completely new to me. It is called the Guaranteed Basic Income (hereafter to be referred to as GBS) and is proffered as a substitute for as many welfare programs as we can think of.
What would happen if we replaced welfare with a single, annual tax-exempt payment of $20,000 to every citizen over the age of eighteen, with no strings attached? (NOTE: I chose $20k for ease of math; member Barfly tells me that it should be an amount a frugal person could scrape by on.)
Let’s imagine a welfare recipient — we can call her Fanta — single, eighteen years old, and does not yet have either a boyfriend or a baby. She lives in an inner-city neighborhood blighted by drugs, poverty and — why not? — racism. Jobs are few and far between, and those that exist do not pay well enough to be attractive when compared with welfare.
Under the present system, Fanta’s most rational, self-interested economic choice would be to get pregnant and go on welfare ASAP. Plenty of her friends and relatives have already taken this course, and are living comparatively well, from Fanta’s point of view.
If she decides to emulate them, the implicit message Fanta will receive along with her first check is: “We are giving this to you because you are damaged, defective, and/or a victim of forces you can neither control nor resist. You are incapable of determining the direction of your own life.”
Lucky for Fanta, she’s come of age under the GBI system. On her eighteenth birthday, she receives a check for twenty grand. Implicit message? You are receiving this check because you are a full, equal, free adult citizen of the United States of America.
Immediate objection! Why give Fanta money for not working?
Because we do it anyway and are extremely unlikely to stop doing it.
The real question is: what is the least-bureaucratic and most freedom-promoting way to give Fanta money? At present, any government “support” that Fanta will receive is processed, evaluated, and monitored by layers of social workers, program managers and assorted bureaucrats paid to enforce the byzantine rules and regulations that are intended to control how Fanta spends her money and therefore how she spends her life.
Eliminate all of that. One decent computer program could probably handle making a yearly, direct-deposit of 20k in every citizen’s bank account, including Fanta’s.
What could Fanta do with the money? If she was inclined to write the great American novel, compose experimental music, volunteer for a political campaign, or sit around on the couch watching Netflix, Fanta could pinch her pennies and live on it.
If she lived in an expensive city, she could pool resources with a few friends and live New Girl-style. Or she could move to a state or city with a lower cost of living. $20k is enough to buy a car in which to drive to, say, South Dakota with enough left over to pay the first months’ rent and security deposit on a new apartment.
Or, she could get a job. Even a low-paying McJob could make a big difference in Fanta’s standard of living, while allowing her to gain basic job skills and start on a resume. If she falls in love with a young man — as young women tend to — that young man would come with something more than sex appeal: he’d have his own $20. Naturally, so would all of Fanta’s other suitors, so it might behove Mr. Right to get a job and earn so he could look even better by comparison.
If they got married, they’d have $40k between them. If they decide they want to have a baby, the GBI might be enough to allow Fanta or her husband to stay home and take care of it, or it could pay for childcare while both parents continued to work.
What if Fanta is a drug addict and sticks the whole shebang into her veins or up her nose? What if she takes her $20,000 to Vegas and blows the whole thing in a single wild weekend?
Answer: Fanta has a problem.
She can ask her relatives for help. She can go to the Salvation Army. Both the family and the Salvation Army are, of course, free to demand very specific behaviors in exchange for aid, ranging from budgeting lessons to attendance at church services. But Fanta will only have to humble herself for a year: on her next birthday, our wastrel will have another chance, with a new check for 20k direct-deposited into her account.
The budget-busting part of this is, of course, that all Americans get the check. I know that sounds crazy… but I’d like to get rid of the condescending “Nanny knows best” implication that comes with more targeted government aid, and emphasize independence, agency and freedom. Ideally, those of us who don’t “need” $20k could be encouraged to think of it as money to be donated to charities and causes we care about but that — arguably—the government shouldn’t really be funding. (Big Bird?)
Published in General
At the moment, we give more to some than to others. Examples of this include: we give a lot to poor mothers of premature kids. That stuff is amazingly expensive. Cancer is less expensive, but still pretty steep.
If we replace Medicaid with a general cash payment and don’t mandate that some of it is spent on health insurance, there’ll be a lot of people who don’t buy insurance. We can insist that the healthcare system sucks up the cost, or we can accept that a lot more women and children will die in childbirth, develop permanent disabilities, and such.
If we do insist that they spend it on health insurance equivalent to medicaid, then that swallows a quarter of their income; part of the reason that $20k is easy to live on now is because insurance is subsidized.
A quarter of their income is tough, but it’s way worse for old folks. They would pay 5/8 of their income on insurance. In other words, they’d be taking a substantial cut from their current social security income before you even consider other benefits.
Take away their food stamps and they’re down another 1/12. Without housing benefits or heating benefits, that’s a recipe for French levels of elderly death when weather hits.
I’m not saying that the idea is a bad one, just that it’s not the no brainer that people often suggest. There is a reason that we channel money particularly to people in need, rather than giving enough for a person with a great need for money to everyone, or not giving enough for everyone to, for instance, get medical treatment.
The idea is that once you’ve blown your check, it’s gone and there isn’t any more.
How is that different from eliminating welfare altogether and there isn’t anymore? All this does is move the no more part from a point at zero to one after 20 stacks. With equal permanence.Eric Hines
In most of the versions of this, the check is a weekly or other regular sum. This is probably particularly likely in our ever more computerized age, where we could make it a second by second, such that if the elderly are compelled to buy insurance etc., they’d have their post-deduction welfare coming in at a rate of a cent every forty seconds or so.
This takes out a lot of the hardship from stupidity and costs the government nothing.
James of England I’m not saying that the idea is a bad one, just that it’s not the no brainer that people often suggest. There is a reason that we channel money particularly to people in need, rather than giving enough for a person with a great need for money to everyone, or not giving enough for everyone to, for instance, get medical treatment.
Ahh. Yes. Arahant said something about this too–what about people with serious disabilities? Having a preemie, muscular dystrophy, getting old—these aren’t things people can control. Nor, of course, is what sort of family you grow up in, what role models you had, whether your local government was incompetent and/or corrupt…
Okay, here’s something: we had an argument on another thread in which I said one thing I appreciated very much about Obamacare was that it allowed me to keep my young-adult children on my health insurance, something that proved (arguably) lifesaving for one.
Fanta has 20g. But Fanta plus her parents, her grandma and her brother have, between them, 100g, plus whatever any of the family members earn. Could they buy a family health insurance policy? Would that cover grandma if she has a stroke, as well as care for Fanta if she is diagnosed with Lupus, or has a preemie (with Mr. Fanta…so now we’re up to 120g.) In other words, could some of these problems be ameliorated by encouraging families to team up?
And/or encouraging charities (to which those of us for whom the 20g is extra would be encouraged to give) to pick up the slack?
In a way, I want the hardship to remain connected with stupidity… feedback! and I want Fanta to have capital. Though I suppose she could save up the capital, and that might be better all the way around.
If we just eliminated welfare—assuming that was politically possible—-we would then have have a whole lot of people with few job skills and no means of moving from the impoverished areas in which they have been trapped to the places where low-skilled jobs might be available. And their children, too.
I come back to a phrase in Cooke’s The Conservatarian Manifesto, that the point, the product of America is freedom.
And he’s pretty clear—freedom matters more than the profitability of companies, or global hegemony or any of the other things we value. Those things matter, but they are ultimately means to the end of making and keeping a free country for a free people.
Given that we aren’t inclined to let children starve as a punishment for their parents’ inability or disinclination to work, and thus are unlikely to abandon public assistance altogether, what is the most freedom-producing means of providing it?
If you have no money, and are hungry, waiting at the rate of three cents every two minutes for your food budget to come in is some hardship, although I concede it could be worse.
If you have no money, and will not get money in the future, some will die, some will place massive additional strains on charity, and some will commit crimes. Those crimes, incidentally, will often involve depriving recent recipients of their annual check of their newfound wealth. If you fill housing estates with victims well worth robbing, you’ll quickly find a severely unequal distribution of wealth.
If you have no money, and are hungry, waiting at the rate of three cents every two minutes for your food budget to come in is some hardship, although I concede it could be worse.
If you have no money, and will not get money in the future, some will die, some will place massive additional strains on charity, and some will commit crimes. Those crimes, incidentally, will often involve depriving recent recipients of their annual check of their newfound wealth. If you fill housing estates with victims well worth robbing, you’ll quickly find a severely unequal distribution of wealth.
Ah! But isn’t the frugal person who can save one of every three cents per two minutes going to be a target anyway?
Oh, I see. The person who has blown the ten bucks deposited 3 cents at a time has the alternative to theft of waiting another few days… And maybe sponging off his less profligate relatives in the meantime?
If the 20g (or the purchases made) are IN the housing estate, maybe…but if the 20g is in the bank, or invested as a down payment on a condo with good door locks in a neighborhood farther away from the ne’er do wells…? How do people who earn their money protect it from thieves?
I don’t think that family plans would make things significantly cheaper. If you mean “if Fanta gave her grandmother some of her money, then wouldn’t that reduce the burden on her Grandmother?” then, well, yes. If we make that charity voluntary, though, I suspect that few will donate all that much. If we make it involuntary then we’re missing the point of the CIB.
Ah, I wondered if you were reading that. I’m just over halfway in Ghettoside and just under halfway in Conservatarian Manifesto.
One way of conceptualizing it is that the government has a set pot of money*. They can distribute that how they want. In your scheme, lots of money is being diverted from people who have very little discretionary cash to people with lots, and from forms of money that make waste harder (food stamps, housing benefits, etc.) or that help people get into work (welfare, food stamps in some places), and turning them into cash. I mean, maybe we’re too generous to the poor at the moment, but it seems to me that if you’re wanting to cut support for the poor, it’s more efficient just to cut support for the poor.
Personally, I favor this policy; we should increase the retirement age for all Americans, rich and poor, for instance. My personal favorite policy with the unfortunate impact of redistributing wealth upwards is to have your social security payments cease when you hit retirement age, as happens in the UK. It means that older workers feel more valued and have more incentives to keep giving to society. Some will give just as much if they retire, through volunteering and such, but the numbers are small.
Still, giving money to the wealthy even as you take it back in taxes seems like an unnecessary distraction from working on the policy for the poor. It can be politically popular; Social Security exists in its current form almost entirely because the wealthy elderly are insanely territorial about “their” money. It just seems like poor policy.
*Before you start messing with the revenue side; I assume you can see that increasing income by $20k tax free would reduce revenue, for instance if you’re right that some families would give some of the additional money to charity, but I won’t go into that now.
I just thought of another social benefit—
Let’s say Fanta gets pregnant out of wedlock at 18 (it happens). The 20g is enough to support her and her baby, and thus does not encourage her to have an abortion the way cutting welfare altogether certainly would.
Nor does it incentivize having a baby, let alone having a second baby, since she wouldn’t get more money for more babies.
If we just eliminated welfare…we would then have have a whole lot of people with few job skills and no means of moving from the impoverished areas in which they have been trapped to the places where low-skilled jobs might be available. And their children, too.
The first step in the inflation problem this $20k to everyone achieves is to move the current price baseline up $20k. And we’re back to square one, with whole lot of people with few job skills and no means of moving…. Nothing has changed. This is the failure of all minimum wage laws, whether Seattle’s $15/hr or the offered $20k/yr.
I don’t actually get why 20g in a lump sum automatically raises prices, but 20g or more in various fiddley programs and things—or even 20g in workfare or the opening of a factory offering good jobs doesn’t?
The fiddly programs are inflationary–any demand is an upward pressure on prices. The present welfare system, though, is less inflationary than the $20k for everyone because not everyone is getting welfare dollars, while you’re including everyone in the $20/yr welfare program.
Too, where will the money come from for opening that new factory? You’re taking that money out of the private economy–away from the prospective factory owner, in part–and, after an inefficient middleman skims his cut, passing the remainder, unearned, to others. It won’t eliminate new factories, but it will reduce their number.
Finally, define “good jobs.” Apparently, minimum wage burger flipping isn’t, anymore, in too many circles.
…could some of these problems be ameliorated by encouraging families to team up?
And/or encouraging charities (to which those of us for whom the 20g is extra would be encouraged to give) to pick up the slack?
You mean, sort of like was suggested earlier in this thread, only as the first resort and not the last?
Eric Hines
The first step is not to live in the midst of criminals. The chief way in which people I’ve known who did not take that step retained wealth is by keeping it secret, which would not be an option in this case.
It’s true that if you put your money immediately into a house, you’ll be able to make it hard to rob you of your money, but you’ll also a: struggle to find a house in a good neighborhood you can buy with a $20k downpayment and no future income for the next year and b:, struggle to eat if your money is entirely tied up in a house.
If we make that charity voluntary, though, I suspect that few will donate all that much.
There are a number of studies that indicate Conservatives give more to charity than Liberals, by somewhere between 2.5:1 and 3.5:1. It also seems to be income independent: the poor and the rich in each broad group tend to give roughly the same per centage of their own incomes.
Which may be why Liberals want to mandate “charity” in the form of welfare–carefully funded with OPM–and Conservatives want actual charity to come first, with welfare targeted and last.
Don’t get too carried away by those ratios, incidentally: they’re against a small baseline.
Eric Hines
I’m not sure this economic analysis is complete. There would still be the same amount of money available. What you may see is perhaps a temporary bump in prices, but the economy isn’t made of just bikes. People are going to be competing for those checks.
I don’t know if you believe the chart in comment 8, but that suggests that a single mother with two kids under the current system in Pennsylvania will take in ~$45k at a zero income level. I’m not sure what the amount for one kid would be, but I’m sure she’s at more than $20. In other words, you’d be cutting her budget substantially and increasing the extent to which she’s suffering financially as a result of having the kid even more (under the current system, a kid increases both costs and income, under yours, the kid is a straight up loss). To the extent that her decision to keep the kid or not is financial, you’re increasing her odds of abortion.
One way of conceptualizing it is that the government has a set pot of money[.]
This is a common misconception. The government has no money at all of its own; it has only what we citizens allocate to it via the taxes we send in.
The rest of your comment I generally agree with; although we’ll likely disagree on implementation technique.
Eric Hines
I’m not sure this economic analysis is complete. There would still be the same amount of money available. What you may see is perhaps a temporary bump in prices….
The bump won’t be temporary; it’ll be permanent, because the money with which to demand will be permanent. The rise in price will stop at a higher level as the supply of bikes increases, but the price won’t come back down.
Eric Hines
The suggestion that a guaranteed income would be inflationary is incorrect. In macroeconomic terms, shifting money from one person to another has little or no effect on “aggregate demand.” For example, if wealthier people are taxed and the money given to poorer people, there might be an increase in demand for (and hence price of) goods and services preferred by poorer people — which might range from McDonald’s burgers to inexpensive clothing to cigarettes. But there would be an offsetting decrease in demand for (and hence price of) goods and services preferred by wealthier people — which might range from single malt scotch to BMWs to lawyers. The effects tend to offset each other, with no appreciable effect on the overall price level.
I’m an economically-illiterate tax-and-spend conservative, so naturally I haven’t thought about the revenue side at all! Maybe we’ll get to that?
And I’m perfectly happy spending money on the poor—that’s not the problem for me. I don’t even mind supporting lazy people—my grandmother’s side of the family was full of lazy people living off other people’s money (their grandparent’s), so who am I to judge?
What I don’t like is that the way we presently spend money on the poor isn’t funding happy, healthy, creative, interesting, meaningful lives. It’s funding (even encouraging) dreary, unhealthy, stupefying lives. That seems wasteful and abusive in a much broader and more important way than merely wasting the hard-earned dollars of taxpayers like me.
After all, the government wastes taxpayer money all the time. Under Reagan, we threw money at the military and while there were those stories about overspending on wrenches and toilet seats, at least we got a useful, functioning military out of it. I’d be okay with throwing money at the poor if the result was a lot of cheerful, educated, formerly-poor people, even if we had to tolerate a few $700 toilet seats along the way.
There’s an awful lot of waste in the present system—an awful lot of personnel, buildings, paperclips going to administer all these programs. Plus, the recipients waste it (e.g. overheating apartments) and the more enterprising do their best to monetize benefits so they can “waste” food money on something they might want more than food.
People with gumption cheat the system to try to get ahead—they hide the fact that they’re using their subsidized apartment as a daycare center, or renting the use of their couch to a friend, or they get a job but get paid under the table for it.
They are wasting time practicing patterns that are the opposite of what they would need as good employees and citizens.
Still, giving money to the wealthy even as you take it back in taxes seems like an unnecessary distraction from working on the policy for the poor. It can be politically popular; Social Security exists in its current form almost entirely because the wealthy elderly are insanely territorial about “their” money. It just seems like poor policy.
Yeah, we might have to means-test it. Sigh.
I’d rather not, not only to make it more politically viable (like SS) but because I would want the implicit message to be more empowering. “You get this because you are a citizen” instead of “you get this because you are a victim.”
I read it! Liked it a lot!
There is a possibility that the GI idea could be either inflationary or deflationary, depending on the overall incentive effect that it has upon work. I would expect two effects — a “wealth effect,” which means that a person who gets $20,000 would feel less need to work — and an “income effect,” because a reduction in their effective tax rate (see the “welfare cliff” discussion above) would give a greater incentive to work. Which effect will predominate is an empirical question (i.e. it can’t be answered theoretically, only by observing actual behavior).
If a GI program presented a significant work disincentive, then overall output would decrease, which would have an inflationary effect (though this could be offset by compensating monetary policy). Conversely, if a GI program presented a significant work incentive, then overall output would increase, which would have a deflationary effect (though this, too, could be offset by monetary policy).
Right—I was comparing it to eliminating welfare altogether, not to the present system…
One word: ludicrous.
Can you imagine the uproar when even the “rich”get the government chit? Oh, the inhumanity!
There is a solution to the welfare problem – get the Federal government out of the welfare business altogether. Let the states and municipalities provide whatever welfare systems they like. Privatize HUD or give the properties to the states. Replace food stamps, Medicaid and welfare with block grants – no strings. Base grants on census data, fixed based on total population with an inflation based adder allocated among the states. No cost of living adjustments; let the high cost states deal with that issue.
This baselines current spending and gives the states the power to find creative ways to fight poverty. Success is rewarded.
That’s my $.02.
Too, where will the money come from for opening that new factory? You’re taking that money out of the private economy–away from the prospective factory owner, in part–and, after an inefficient middleman skims his cut, passing the remainder, unearned, to others. It won’t eliminate new factories, but it will reduce their number.
Finally, define “good jobs.” Apparently, minimum wage burger flipping isn’t, anymore, in too many circles.
First—I must remind myself of this periodically—the GBI replaces welfare, and does not preclude working. I would imagine most people would do the math and think: Oooh, if I get a job flipping burgers instead of sitting around watching Netflix, I could buy a Jacuzzi, or a wedding dress.
I had another Fanta-sy. Let’s imagine that Fanta is really good at math. Under the present system, being good at math doesn’t really do much for her because having a baby, not studying accounting, is the way to achieve some semblance of an independent adult life. But with GBI, suddenly being good at math becomes a big advantage personally, but also potentially professionally. Just as the inner city must include a number of people who are good at math, like Fanta, there are bound to be a large number who are horrible at math, like me, who could use some help with the question of how to spend…or, dare we say, invest? their money. For example, by buying shares in that new factory…
Let me remind everyone that Charles Murray is a sociologist, not an economist.
It shows.
I know, Doug—the 20g for everybody is a big hitch, and my reasons for including it are mostly symbolic. Assuming I’m the Mad Queen, and I’ve decided that this is what we’re going to do, would there be a way to means-test it that would make it a little less ludicrous without making it a “you’re a victim” payment?
GBI is a lot sexier and more bumper-sticker-friendly than “get the Federal government out of the welfare business altogether. Let the states and municipalities provide whatever welfare systems they like. Privatize HUD or give the properties to the states. Replace food stamps, Medicaid and welfare with block grants – no strings. Base grants on census data, fixed based on total population with an inflation based [L?]adder allocated among the states. No cost of living adjustments: let the high cost states deal with that issue”
If you give block grants to the states, don’t the states then have to pay people to administer it?
Well, and I’m a chaplain, which definitely shows!