The End of Welfare As We Know It

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In the 1960s, Milton Friedman put forward the idea of a negative income tax. Essentially, Friedman’s proposal was that, rather than providing welfare, medical, retirement, housing, and job programs of all sorts, the federal government would simply send out checks to those whose income was below a certain level. In his newest book, “In Our Hands,” Charles Murray seeks to revive Friedman’s idea.

“In Our Hands” has two themes. The first is a conceptual presentation and description of a plan whereby every person in the United States over 21 would receive $10,000 per year from the federal government.

In exchange, most federal and some state programs would be eliminated: Social Security, Medicare, Medicaid, workers’ compensation, unemployment insurance, Supplemental Security Income, Temporary Assistance for Needy Families (the replacement of Aid to Families with Dependent Children), the Earned Income Tax Credit, WIC (Women, Infants, and Children) vouchers, food stamps, school lunch assistance, Head Start, Pell Grants, low-income housing assistance (Section 8), low-rent public housing, agricultural price supports, community development block grants, and many others. Murray identifies 108 line items and about $1.4 trillion of government spending to be eliminated. The 17 line items listed here account for over $1.2 trillion of the payments and programs that would end.

The second theme of “In Our Hands” is a description of a new, or perhaps an old, social order that Mur- ray would like to see come to pass. In this new order, government, especially the federal government, would play a much smaller role. Murray writes eloquently of a society in which private institutions would absorb many of the functions now performed by the welfare state.

From a libertarian perspective, the second theme of “In Our Hands” is more intriguing than the first. Would it be possible to scrap the welfare state, the panoply of programs and transfer payments enacted in the United States since the 1930s, and return the federal government to its pre-New Deal functions – primarily national defense?

Murray describes “In Our Hands” as a “thought experiment” (p. xv), and it is worthwhile to consider his concept of giving $10,000 (actually closer to $7,000 – Murray would require each person to purchase health insurance, which he estimates would cost $3,000 per year) to every adult before moving on to his vision of a society in which the federal government would play a far smaller role in American domestic life. It is hard to see how this approach would be an improvement over the status quo. One circumstance Murray does not much consider is whether individuals would misuse the money they receive from the federal government. He acknowledges this possibility, but believes it would not be significant.

This view is open to question. Regrettably, for far too many of the poor in America today, the problem is not poverty per se, but the personal characteristics that lead to poverty – drug and alcohol abuse, lack of education, lack of work skills and responsibility.

Indeed, Murray’s plan would likely make things worse. Giving many of the poor today – millions of people – a check for $583 per month (after deducting for health insurance) would simply provide them with the money to purchase more drugs or more alcohol and engage in socially destructive or nonconstructive activities. Also, many of the elderly, at least in the short run, would be worse off under Murray’s proposal, as $10,000 per year would be less than the amount they now receive from Social Security and Medicare combined. Finallly, many of those who are neither elderly nor poor, though they would receive new funds from the federal government, would be taxed more, with marginal tax rates reaching 60% for some income levels.

If Murray’s specific plan is disadvantageous, what of his larger vision of a society in which government, particularly the federal government, would

For far too many of the poor in American society today, the problem is not poverty per se, but the personal characteristics that lead to poverty.

 

playa much smaller role? There is much to be said for his perspective, but there is also much to be said against it.

Taxation and government spending at all levels have been relatively constant for decades in the United States at about 35% of GD with federal spending and taxing at about 20%, state at about 10%, and local at about 5% (all figures are generalized approximations and averages; actual figures vary year by year, and by state and locality). About two-fifths of federal spending is for defense, interest on debt, and other reasonably traditional functions of government. This leaves perhaps 12% of GDP at the federal level for the disputed areas that Murray would eliminate. About two-thirds of state and local government expenditures are for functions that are relatively unopposed (at least in concept), including schools, roads, police and fire departments, and jails. This leaves something just under a gift or so of GDP for Social Security and Medicare for the elderly, health care for the poor, unemployment benefits, welfare to mothers with children, and the like – the welfare state as we know it. Is this an excessively high proportion of GDP to be dedicated to those who are not productive or not as productive as they could be?

Murray is of the view that if all the various government welfare and social safety-net programs were to end, they would be replaced by private charities and private insurance that would perform the same functions better and more cheaply. He cites as evidence the private charities and insurance programs that existed before expansion of the welfare state.

It is an open question what would happen today. For this reason, gradualism and incrementalism are better ap-

What happens to those who become old, poor, uneducated, or disabled, notwithstanding that they, or their mothers, received $7,000?

 

proaches to reach libertarian ends than full-scale social reconstruction, which Friedrich Hayek termed constructivist rationalism.

Hayek himself advocated an extensive, continuing role for the state in domestic activity. In “The Constitution of Liber~” he argued that in industrial, urban society, demands exist on the part of the poor, the uneducated, the unintelligent, the unemployed and unemployable, the chronically ill, the mentally retarded and ill, the disabled, the young, and the old, among others – who, because of the greater impersonality of urban life, are less able to call on the assistance of others they know than are those in rural and agrarian communities.

Murray also unduly emphasizes the importance of pecuniary motivations on the part of welfare recipients. His view is that changing welfare benefits would strongly alter human behavior. Though he says: “Nothing is going to repeal the sexual revolution” (p. 108), he places too much hope in welfare policy changes alone, absent more fundamental behavioral change, to reduce the number of poor and uneducated people.

In any society in which the illegitimacy rate approaches one child in three, as is currently the case in the United States, there will be a great deal of poverty particularly among children. There are two approaches – one can either emphasize mitigating the conditions that exist or emphasize preventing such conditions from emerging in the future. It is likely that libertarian reform that works toward the gradual reduction of government services, programs, and transfer payments would coincide with greater individual responsibility and greater social conservatism generally.

It is valuable for thinkers such as Murray to put forward bold and creative proposals for reform. Moreover, the incidental sidelights he offers and the information he gathers make his work always worth considering. But libertarians should learn from the Fabian Socie the great British late-19th and 20th-century political organization, that ideas are typically most successful through gradual permeation and infiltration. No one knows for certain what the future has in store, or what the consequences of policies will be.

Murray’s vision of cash grants replacing the welfare state is wrong because the idea that individuals who are in some way needy should receive cash is a bad one. The idea that every- one (not just the needy) should receive cash is also bad. Moreover, what happens to all the people who become old, poor, uneducated, disabled, or unemployed anyway notwithstanding that they, or their mothers, received $7,000? Somebody is going to have to take care of them, if there is to be a peaceful and stable society.

At the same time, the ideas that society should move toward less government, and that existing government functions could be handled more efficiently if they were privatized and made to compete, are good. “In Our Hands” is significant not because most people will agree with it – they won’t – but because it will spur them to think about the vital and enduring question of the best way to organize and to order society.

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