Welfare for Everyone
The law of unintended consequences has bitten us on the butt with welfare. You can call it ‘cycle of poverty,’ or ‘dependency,’ or some other phrase, but what you get are people on welfare who are not acting like you and I think we would act if in the same situation. I reject the notion that they are acting different because they, themselves, are different. What is different is the state of being on welfare. We think we can imagine it but we can’t.
I am not talking about being poor. I can imagine being poor, I was poor. And I am not talking about relative wealth. Unhappiness about relative wealth causes envy. It does not cause dependency.
The problem is means testing. Means testing has two parts, both of them bad. The first part is the loss of privacy, dignity and autonomy. Every month the government must know every detail of your financial (and personal) life so that it might determine how much money you should get. Did you make some money baby-sitting? How much? Did you move to a cheaper apartment? What is the new rent? Did the father of one of your children move back in? What day? How long did he stay? Did he contribute any money to rent? To food? Does he have a job? Where? What does he make per week? Did you move in with your mother? Does she charge you for rent? How much? Does she help with the food? How much? Were you able to save a couple bucks last month? How much?
There is a reason kids leave the nest at age 18. In order to grow to full adulthood, they must become autonomous from mom and dad. If you are on welfare, the government is mom and dad, and it won’t go away.
The other bad part of means testing is what the government does with all the information it collects each month. It customizes benefits. Make money at a job, you get less welfare. Move back in with mom and pay no rent, get less welfare. Marry a man with a good job, get less welfare.
Like many moms and dads, the welfare system can be error-prone, inconsistent, and maddening. Welfare is a large, complex bureaucracy that has the highest error rate of any government agency – an error rate that floats between 25% and 50%. Imagine having to deal with a bureaucracy on a monthly basis to receive the money you need to live on. Every time you tell the bureaucracy there has been a change in your life, your benefits are adjusted. There is a 25-to-50% chance the adjustment will be wrong. If they give you too little, you must argue with three layers of bureaucrats to try and fix it. If they give too much, you better not spend it because should they discover the error six months later, they will demand that you pay it back. If a real mom and dad acted that way, the family would be labeled dysfunctional.
Republican supply-side types love to talk about marginal tax rates and how they affect behavior. They say the rich will work less and produce less if the top tax bracket is too high. (Some say anything over 25% is too high.) Apparently the poor are not supposed to be affected by marginal tax rates. Unlike the rich, they are supposed to rush out and get a low paying job so that they can get off welfare. They are not supposed to notice that a cut in welfare is like a rise in taxes. They are not supposed to notice that if a $400-a-month new job results in a $300 a month cut in benefits, (and $30 a month in social security taxes) then their real-world marginal tax rate is over 75%.
In any means-tested welfare system, it is inevitable that the government will become a suffocating, ham-fisted, cold-hearted and maddening mom and dad, and it is inevitable that this mom and dad will reward dependent behavior and punish independent behavior. You can tinker with the details all you want, you can’t, and won’t, change those two facts.
At this point, you may be telling yourself that it is impossible to have a welfare system that is not means tested. Otherwise, anyone can ask for and receive welfare whether they need it or not. Hold on to your hat. This next paragraph is not a joke. I am serious. You must promise not to laugh, and promise not to quit reading.
Every adult citizen in the country should get the same welfare check each month regardless of income, regardless of wealth. Only two conditions: one, be a citizen, and two, be an adult. Since those two things don’t change every month, there would be no monthly form to fill out. You don’t have to tell mom and dad anything. Live your life your way and no matter what you do, you get a check each month. No questions asked.
How do we pay for this? With taxes, duh. And not just any taxes, personal income taxes only. Welfare is personal. Businesses and corporations should not pay for welfare, people should.
Assume a personal income tax scheme that had a single flat-tax rate with zero deductions or credits. This is cute, follow along: everybody pays the same flat percentage of income in taxes. Everyone receives the same flat amount in welfare. Get it? See how it works?
If you don’t have a job, you get straight welfare. If you have a part-time or low-paying job, you get slightly more in welfare than you pay in taxes. If you have an average job, you pay slightly more in taxes than you get in welfare. The higher your income, the more you pay in taxes as compared to welfare. When you combine the two and view them as two halves of a whole program, you get a non-means-tested welfare program that blends seamlessly into a single flat-rate progressive income tax program.
I would do the math for you but that would be boring; do it yourself. I have no idea what numbers to use, but it would sure be an interesting political debate. What is a more fundamental question of governance than how much should we give the poor, and how much should we tax ourselves? In my world, these two fundamental questions would be clearly linked. The higher the monthly welfare check, the higher the tax rate, and vice versa.
What do we value more, the security of a nice fat check coming in rain or shine, or the freedom of getting to keep and spend a greater percentage of what we earn from our own labor. Obviously, if we choose too big a monthly check, we face eventual economic ruin, but to choose too small a check, if we show too little compassion, we not only shame ourselves, we court trouble.
You notice I said only adults get the money. When does a kid become an adult? If a kid graduates from high school, she starts receiving welfare checks one month after graduation. If she drops out, she doesn’t start receiving checks until she turns 20.
What about kids? A welfare mother with three kids did not have three accidents. She chose to have additional kids while on welfare. Call me a heartless bastard, but government should not reward such choices with extra money each month. A woman without kids will get the same monthly check as a woman with 6 kids.
Before you get too upset with me, however, don’t forget the men. Under the new system, men get the same monthly check as women. If mom and dad don’t live in the same home, the parent raising the child gets a portion of the welfare check that would otherwise go to the other parent. Imagine Fast Eddie. With the birth of Fast Eddie’s first child, Eddie must now split his check with the person raising his child 50/50. With the birth of Eddie’s second child, his check is divided 33% to mom #1, 33% to mom #2, and 33% to Fast Eddie. By Eddie’s ninth child, Eddie is getting only 10% of his check.
Imagine a new generation of 12-year olds that thoroughly and completely understand that their government will give them a monthly check each and every month for the rest of their lives once they graduate from high school. Imagine that the little girls fully know and understand that the amount of that check will not go up should they have children. Imagine that the little boys fully know and understand that their check will go down with every child they father. I am willing to bet that such children will pay greater attention in their sex education classes and be more likely to apply what they learn.
In the long run, there should be fewer children being born into poverty and fewer children born into fatherless homes. Today’s welfare system subsidizes irresponsible fatherhood.
Okay, but what about the financial well being of the kids that are still born into poverty? First, the portion of dad’s check will help. Second, mom is free to stay with the grandparents and not lose any benefit. (Unlike today.) Third, mom is free to share expenses with another single mother without losing any benefits. (Unlike today.) Fourth, there are things government can do to aid the kids without giving money to mom. Examples are: Free breakfasts and lunches at school, free school uniforms, free pre-school, free day care, and free health care.
Administrative costs would plummet. Instead of one large welfare office in each city, each bank and savings & loan would be a mini-welfare office. The bank would take the application form (very short, about half a page), maybe a certified copy of a birth certificate, a set of fingerprints and send them on to bureaucracy central. You can apply in as many banks under as many different names as you want, but if the fingerprints match an existing recipient, you go to jail. (While you are in jail, your monthly check will either go completely to the caretaker of your children, or to the government to pay for your room and board.)
Would such a program satisfy society’s entire obligation to the poor? Not really. While all the welfare eligibility workers would be fired, social workers would remain. Homeless shelters would remain. Church charity would remain. Job training programs would remain. Maybe these programs will ask the participants to pay a bit out of their monthly checks for these services, maybe not.
Will people be more or less likely to get jobs if the government gives them a check each month? Answer: “more likely.” Reason one: the safety net will mean fewer people on the dysfunctional “bottom” of society. The mentally functioning homeless would always have the means to get off the streets, even if it is only a shelter. Once in a shelter, they will have the ability to save a bit each month to save for an apartment, clean clothes, and other necessities for job hunting. Reason two: the poor will get to keep the same percentage of their income as everyone else. Reason three: the poor are not different from you and me. Give them autonomy and the same marginal tax rate as everyone else, and they will behave like everyone else. They will seek work.
If everyone is on welfare, and everyone would be, then no one can be stigmatized for being on welfare. They can be stigmatized for not having a lot of money, and for not being employed, but they can look everyone in the eye and say that they are not receiving one penny in government handouts that everyone else isn’t getting. This may sound like a small thing, but it isn’t.
p.s.: Obviously, Social Security, Unemployment Insurance, Worker’s Compensation, Aid to the Disabled, and any other government program that involves payments to individuals would be adjusted accordingly once these checks started flowing. People receiving payments under these programs would not receive a dime more than they do now. The Earned Income Tax Credit would be replaced completely. Working people would get checks they never got before, but they would lose all of their tax deductions, credits, and exemptions. When all the dust settles, this is not really the break-the-bank idea it first seems.
C E Sutton
I am not talking about being poor. I can imagine being poor, I was poor. And I am not talking about relative wealth. Unhappiness about relative wealth causes envy. It does not cause dependency.
The problem is means testing. Means testing has two parts, both of them bad. The first part is the loss of privacy, dignity and autonomy. Every month the government must know every detail of your financial (and personal) life so that it might determine how much money you should get. Did you make some money baby-sitting? How much? Did you move to a cheaper apartment? What is the new rent? Did the father of one of your children move back in? What day? How long did he stay? Did he contribute any money to rent? To food? Does he have a job? Where? What does he make per week? Did you move in with your mother? Does she charge you for rent? How much? Does she help with the food? How much? Were you able to save a couple bucks last month? How much?
There is a reason kids leave the nest at age 18. In order to grow to full adulthood, they must become autonomous from mom and dad. If you are on welfare, the government is mom and dad, and it won’t go away.
The other bad part of means testing is what the government does with all the information it collects each month. It customizes benefits. Make money at a job, you get less welfare. Move back in with mom and pay no rent, get less welfare. Marry a man with a good job, get less welfare.
Like many moms and dads, the welfare system can be error-prone, inconsistent, and maddening. Welfare is a large, complex bureaucracy that has the highest error rate of any government agency – an error rate that floats between 25% and 50%. Imagine having to deal with a bureaucracy on a monthly basis to receive the money you need to live on. Every time you tell the bureaucracy there has been a change in your life, your benefits are adjusted. There is a 25-to-50% chance the adjustment will be wrong. If they give you too little, you must argue with three layers of bureaucrats to try and fix it. If they give too much, you better not spend it because should they discover the error six months later, they will demand that you pay it back. If a real mom and dad acted that way, the family would be labeled dysfunctional.
Republican supply-side types love to talk about marginal tax rates and how they affect behavior. They say the rich will work less and produce less if the top tax bracket is too high. (Some say anything over 25% is too high.) Apparently the poor are not supposed to be affected by marginal tax rates. Unlike the rich, they are supposed to rush out and get a low paying job so that they can get off welfare. They are not supposed to notice that a cut in welfare is like a rise in taxes. They are not supposed to notice that if a $400-a-month new job results in a $300 a month cut in benefits, (and $30 a month in social security taxes) then their real-world marginal tax rate is over 75%.
In any means-tested welfare system, it is inevitable that the government will become a suffocating, ham-fisted, cold-hearted and maddening mom and dad, and it is inevitable that this mom and dad will reward dependent behavior and punish independent behavior. You can tinker with the details all you want, you can’t, and won’t, change those two facts.
At this point, you may be telling yourself that it is impossible to have a welfare system that is not means tested. Otherwise, anyone can ask for and receive welfare whether they need it or not. Hold on to your hat. This next paragraph is not a joke. I am serious. You must promise not to laugh, and promise not to quit reading.
Every adult citizen in the country should get the same welfare check each month regardless of income, regardless of wealth. Only two conditions: one, be a citizen, and two, be an adult. Since those two things don’t change every month, there would be no monthly form to fill out. You don’t have to tell mom and dad anything. Live your life your way and no matter what you do, you get a check each month. No questions asked.
How do we pay for this? With taxes, duh. And not just any taxes, personal income taxes only. Welfare is personal. Businesses and corporations should not pay for welfare, people should.
Assume a personal income tax scheme that had a single flat-tax rate with zero deductions or credits. This is cute, follow along: everybody pays the same flat percentage of income in taxes. Everyone receives the same flat amount in welfare. Get it? See how it works?
If you don’t have a job, you get straight welfare. If you have a part-time or low-paying job, you get slightly more in welfare than you pay in taxes. If you have an average job, you pay slightly more in taxes than you get in welfare. The higher your income, the more you pay in taxes as compared to welfare. When you combine the two and view them as two halves of a whole program, you get a non-means-tested welfare program that blends seamlessly into a single flat-rate progressive income tax program.
I would do the math for you but that would be boring; do it yourself. I have no idea what numbers to use, but it would sure be an interesting political debate. What is a more fundamental question of governance than how much should we give the poor, and how much should we tax ourselves? In my world, these two fundamental questions would be clearly linked. The higher the monthly welfare check, the higher the tax rate, and vice versa.
What do we value more, the security of a nice fat check coming in rain or shine, or the freedom of getting to keep and spend a greater percentage of what we earn from our own labor. Obviously, if we choose too big a monthly check, we face eventual economic ruin, but to choose too small a check, if we show too little compassion, we not only shame ourselves, we court trouble.
You notice I said only adults get the money. When does a kid become an adult? If a kid graduates from high school, she starts receiving welfare checks one month after graduation. If she drops out, she doesn’t start receiving checks until she turns 20.
What about kids? A welfare mother with three kids did not have three accidents. She chose to have additional kids while on welfare. Call me a heartless bastard, but government should not reward such choices with extra money each month. A woman without kids will get the same monthly check as a woman with 6 kids.
Before you get too upset with me, however, don’t forget the men. Under the new system, men get the same monthly check as women. If mom and dad don’t live in the same home, the parent raising the child gets a portion of the welfare check that would otherwise go to the other parent. Imagine Fast Eddie. With the birth of Fast Eddie’s first child, Eddie must now split his check with the person raising his child 50/50. With the birth of Eddie’s second child, his check is divided 33% to mom #1, 33% to mom #2, and 33% to Fast Eddie. By Eddie’s ninth child, Eddie is getting only 10% of his check.
Imagine a new generation of 12-year olds that thoroughly and completely understand that their government will give them a monthly check each and every month for the rest of their lives once they graduate from high school. Imagine that the little girls fully know and understand that the amount of that check will not go up should they have children. Imagine that the little boys fully know and understand that their check will go down with every child they father. I am willing to bet that such children will pay greater attention in their sex education classes and be more likely to apply what they learn.
In the long run, there should be fewer children being born into poverty and fewer children born into fatherless homes. Today’s welfare system subsidizes irresponsible fatherhood.
Okay, but what about the financial well being of the kids that are still born into poverty? First, the portion of dad’s check will help. Second, mom is free to stay with the grandparents and not lose any benefit. (Unlike today.) Third, mom is free to share expenses with another single mother without losing any benefits. (Unlike today.) Fourth, there are things government can do to aid the kids without giving money to mom. Examples are: Free breakfasts and lunches at school, free school uniforms, free pre-school, free day care, and free health care.
Administrative costs would plummet. Instead of one large welfare office in each city, each bank and savings & loan would be a mini-welfare office. The bank would take the application form (very short, about half a page), maybe a certified copy of a birth certificate, a set of fingerprints and send them on to bureaucracy central. You can apply in as many banks under as many different names as you want, but if the fingerprints match an existing recipient, you go to jail. (While you are in jail, your monthly check will either go completely to the caretaker of your children, or to the government to pay for your room and board.)
Would such a program satisfy society’s entire obligation to the poor? Not really. While all the welfare eligibility workers would be fired, social workers would remain. Homeless shelters would remain. Church charity would remain. Job training programs would remain. Maybe these programs will ask the participants to pay a bit out of their monthly checks for these services, maybe not.
Will people be more or less likely to get jobs if the government gives them a check each month? Answer: “more likely.” Reason one: the safety net will mean fewer people on the dysfunctional “bottom” of society. The mentally functioning homeless would always have the means to get off the streets, even if it is only a shelter. Once in a shelter, they will have the ability to save a bit each month to save for an apartment, clean clothes, and other necessities for job hunting. Reason two: the poor will get to keep the same percentage of their income as everyone else. Reason three: the poor are not different from you and me. Give them autonomy and the same marginal tax rate as everyone else, and they will behave like everyone else. They will seek work.
If everyone is on welfare, and everyone would be, then no one can be stigmatized for being on welfare. They can be stigmatized for not having a lot of money, and for not being employed, but they can look everyone in the eye and say that they are not receiving one penny in government handouts that everyone else isn’t getting. This may sound like a small thing, but it isn’t.
p.s.: Obviously, Social Security, Unemployment Insurance, Worker’s Compensation, Aid to the Disabled, and any other government program that involves payments to individuals would be adjusted accordingly once these checks started flowing. People receiving payments under these programs would not receive a dime more than they do now. The Earned Income Tax Credit would be replaced completely. Working people would get checks they never got before, but they would lose all of their tax deductions, credits, and exemptions. When all the dust settles, this is not really the break-the-bank idea it first seems.
C E Sutton