December 23, 2013

Uncle Sam's Allowance

Last month blog friend T Greer suggested "a lump-sum 'demogrant' or Milton Friedman's negative taxes" as a funding alternative for private health insurance, which would replace Obamacare. His premise was that the needy could be provided for with minimal distortions to the free market. I found the idea meritorious and proposed extending it to every area of government assistance, replacing every single solitary government aid program with an unrestricted cash income for every adult. I pitched it as "Uncle Sam's Allowance" to be used in an otherwise purely capitalistic unregulated free-market."

I was hoping for robust discussion but even TG was mute. Re-reading my proposal today I see I was very short on details of the principle, but a segment on last week's MSNBC Krystal Ball show brings the idea into mainstream conversation. Prompted by a publicity stunt in Switzerland she asked why not "eliminate poverty" by giving everyone a minimum income or "mincome" from the government?

"Every non-incarcerated adult citizen gets a monthly check from the government. Other safety net programs are jettisoned to help pay for the mincare, and poverty is eliminated."

First off, I might never have taken such an idea seriously had I not read Friedman propose a negative income tax or R.A. Heinlein describe a birthright paycheck from a fabulously productive and prosperous civil society. But I and Reason's Matthew Feeney am willing to entertain this proposal by Ball, although my conditions may be non-starters for her. Nonetheless, I would like a discussion here on the subject because I agree with Feeney's conclusion:

"Rather than make the principled argument against the redistribution of wealth, libertarians would do better if they were to argue for a welfare system that promotes personal responsibility, reduces the humiliations associated with the current system, and reduces administrative waste in government."

Very well, here are my Terms:

1) ALL other safety net programs must be jettisoned. Permanently.

2) Executive branch agencies created to carry out safety net programs must be jettisoned. Permanently.

3) Mincome payments must not be means tested. Everyone qualifies and is due the same monthly (or weekly) amount, regardless of income or wealth.

4) Anyone who does not voluntarily decline his mincome is ineligible to vote.

I won't go into all of the advantages of this system since most of you are already preparing to pounce on it's failings. Let me address one of them preemptively - immigration.

Expand the system beyond national borders. Make it internationally universal. I haven't run any numbers but my starting point for negotiating the monthly mincome is to divide the cumulative sum of every national tax in the world by the number of adult humans in the world, and negotiate downward from there. Instead of funding waste and corruption we could be giving cash to folks to "feed their families." What could be more swell?

I still have my doubts. Give some people a dollar and they will demand two, then three. But at least such a plan would make the nature and extent of redistribution fully transparent, rip out government waste fraud and abuse root and limb, and make it possible to cease the practice where the takers are permitted to vote the amount of their share from the makers.

Economics and Markets Philosophy Posted by JohnGalt at December 23, 2013 3:16 PM

I was thinking about you -- there was a thing yesterday on a $7K/year benefit.

Now, it strikes that $583/month will not silence the crowd that demands a $15/hr. minimum wage or free contraception for life for all Georgetown Law School students. I am philosophically "in" if somebody has numbers.

Worldwide? I love thinking big but think freedom and property rights are a required foundation. The corruptocrats painted poignantly in "The Beautiful Tree" will get all the money.

But US, yes let's go. How much can we swing?

Posted by: jk at December 23, 2013 3:41 PM

What would stop prices from rising so that the mincom now becomes ultra poor again?

Posted by: Terri at December 24, 2013 10:04 AM

Larry Kudlow has been pushing the GOP to push a proactive, pro-poor agenda, a'la Jack Kemp. It scrapes against the rusty sides of my libertarian philosophy but a good case can be made for RepublicanWelfare® (cf. Medicare Part D versus ObamaCare). Kudlow asks why we don't just give vouchers to the poor and let them buy insurance.

@Terri: not sure this is intrinsically inflationary. When the wind did it to Scrooge McDuck, it affected the velocity of the money supply.

The flaw, however, is that "the poor," tautologically predisposed to bad money management, will occasionally blow the 7K on lotto tickets and crack. Then their children will be featured in Democratic campaign ads: "we've got to do something!"

Posted by: jk at December 24, 2013 10:47 AM

A few thoughts.

1) I would not go with world wide. We are still in competition with countries like China and Russia. Until authoritarian governments are gone from this Earh cash hand outs in far away climes will do us more harm than ill.

They will also be hard to implement - how many U.S. burecrats do we have capable of giving these funds ut to be the 240 million people who speak Bahasa Indonesia, for example? Plus, I would like to test it out in US before exporting it to the rest of the world. It is a good idea, but an untried one. If it works other countries will see the benefits of applying it themselves.

2) Peg it to inflation or something of that sort so rising prices don't ruin the proposal on the long term.

3) I am not sure how badly the poor are ideologically predisposed to throw their money away - esp. if they understand that their is nothing else they will get.

I am also inclined to think that charities and churches can pick up any slack.

4) Question - JG, why do you feel #4 is a necessary precondition?

Those are my initial thoughts. Good post.

Posted by: T. Greer at December 25, 2013 3:03 AM

First some coarse data. From the wiki 'US Population' page and the rest from federalsafetynet-dot-com

With 317.3 million persons in the US, roughly 80 percent of which are aged 15 or older, each could be paid the annual poverty income ($11,720) for a sum total of just under $3T. This is nearly four times the total government spending on anti-poverty programs so my original proposal would have to cut the allowance from $225 per week to around $56, or find some way to remove 3/4 of the adult population from the allowance program. The latter solution seems both feasible and likely.

The reason for condition number 4 is to prevent the runaway vote buying that we see in the present system. Recipients can't be given a mechanism to vote themselves a bigger allowance.

Further, an inflation peg would be a back door to the same problem.

Regarding international implementation, it first seems that there's not enough wealth yet to spread around that thin. Perhaps in time, as capitalism's influence expands and ramps up prosperty. But yes, it must be tied to freedom and would be the most effective foreign aid program ever.

Again, I'm still not sold but the initial feasibility is established.

Posted by: johngalt at December 25, 2013 8:35 PM

In further support of condition #4, I see it as a valuable self-selection incentive to strip off 75% of potential recipients.

Posted by: johngalt at December 25, 2013 8:42 PM

An important omission from condition 3 is that all persons receive equal treatment under law including, not least of all, an equal rate of taxation. This would result in 20-25% of allowance disbursements coming back into the treasury. The net result is more recipents or, heaven forfend, a reduction in expenditures.

Posted by: johngalt at December 25, 2013 9:17 PM

So the most important novelty of my plan seems to be the replacement of means testing and phase outs with every individual having a choice between voting in any elections whatsoever or receiving a government allowance.

My over-under for the allowance choosers is in the range of 25% but that is strictly conjectural. Here's a poll question for you:

If government offered to pay you $225 per week, taxed as income, in return for NOT voting in any government elections, would you accept or decline?
Posted by: johngalt at December 25, 2013 9:37 PM

Very Heinleinian.

But I think it rubs against a respect (bordering on adulation) for the franchise. Since the Constitution was adopted it has been amended four times to expand the franchise. Speaking of, does your plan run afoul of emanations and penumbras the 24th?

The right of citizens of the United States to vote in any primary or other election for President or Vice President, for electors for President or Vice President, or for Senator or Representative in Congress, shall not be denied or abridged by the United States or any State by reason of failure to pay any poll tax or other tax.

I understand and sympathize with your reasons. But the blog pragmatist sees a big sell in trading all welfare for the mincome, thereby testing tg's belief in the fundamental fiscal chops of the disadvantaged. I don't share his sanguinity but agree that private charity can bridge any gaps.

But to sell that with a diminution of the franchise seems a double stuff of difficult positioning.

Posted by: jk at December 26, 2013 10:42 AM

It's always a challenge to limit the scope of these pie in the sky plans, whether in practice or mere postulation. I take your point about complicating the tradeoff but tell me how it can possibly succeed, long-term, without severing the "vote for more stuff" linkage?

I see a reshaping of the democratic process as a necessary precondition for consenting to "just a little" redistribution. Keep things the way they are and the esteemed producer's only resort is to Go Galt.

Is trading one's franchise for a state allowance Constitutional? Why not, if it is a matter of reversable (on no shorter than an annual basis) choice? Besides, that Amendment is closer to FDR than to Jefferson and Madison. And it also has an "out" - "2. The Congress shall have power to enforce this article by appropriate legislation."

Posted by: johngalt at December 26, 2013 12:07 PM

It strikes me as politically unfeasible. I am not sure how necessary it will be either - in his discussion of a demogrant Charles Murray made a sharp observation: every time anyone tries to change the amount paid it will become the biggest political issue in the arena, for their won't be any other social issues in the arena. Every adjustment will be battled over ferociously. It won't be easy for it to be changed often and it will be hard for the payment's size to "creep" larger.

I think if we simply made it a requirement that a supermajority must approve changes in the payment size then most of the potential problems would go away.

Posted by: T. Greer at December 28, 2013 12:25 PM | What do you think? [11]