Wednesday, March 22, 2006

Charles Murray offers entitlement fix

Charles Murray wields Ockham's Razor like Zorro wields his sword. He has reshaped America's views on welfare, affirmative action, and the critical importance of intelligence in society. His ideas have contributed enormously, yet they are at their most simple level commonsensical and able to be stated quite pithily.

Welfare fails not because it does not provide materially for those in want, but because it is intrinsically at odds with what it means to live a fulfilling and meaningful life. Contrasting the existence of America's "poor" with that of materially destitute but much richer denizens of other countries illustrates this profoundly.

Affirmative action fails not because it does not have a lasting effect on perceived racial inequity, but because it engenders racial hostility by putting duller minorities with sharper whites (and Asians), all the while doing nothing to help the less endowed portion of minority communities.

Wealth and knowledge inequality stem not so much from differences in external environment as they do from differences in IQ. The irony is that as the global playing field becomes increasingly flat, the disparity between the brightest and dullest is going to expand, not narrow.

And so Murray's insight into how to tackle the entitlement deluge that's going to crash on shore when the baby boomers start retiring in droves is characteristically concise: scrap all the bureaucracy and give the money directly to the people:
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.
Equitable wealth transfer. Ideally, it strikes a compromise between robin hood economics and laissez faire capitalism. Americans will pay income taxes, the wealthy pulling almost all of the weight, but it will be distributed in even amounts to all the citizenry. So you're not disproportionately giving to an indigent's crack habit at the expense of a hard-working janitor struggling to raise a couple of kids.

Murray proposes $7,000 a year in direct transfer, plus $3,000 a year for medical insurance and $2,000 a year for retirement (invested in index funds, which will obliterate the "return" on Social Security over a person's lifetime). This puts everyone at a base above the poverty line. Assuming these benefits begin accruing at the age of eighteen, about three-fourths of the US population would receive them. That comes to $2.7 trillion annually. The 2006 federal budget is only $2.6 trillion, and $700 billion (.7 trillion) of that is for defense spending and interest on the national debt. That's a prodigious shortfall. Murray is aware of this, but points out that in the future it will represent a smaller number than the budget as it is currently drawn up:

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.

Unfortunately, that argument didn't sell Bush's privatized social security accounts. Two trillion up front for greater savings in the future is going to meet resistance when the federal deficit grows by $10,000 every second and we drop $700 dollars a year per American just to pay interest on the debt.

Some other concerns I have:

-This places a financial disincentive on having children. If a single man gets the same distribution as a father of four, the latter is going to realize less real benefit. However, this could be a net positive. By essentially taking away welfare programs that reward penury folks for having children, it could close the wealth gap and boost the nation's average IQ. But anything that might lower the national birth rate needs to be critically examined.

-Who is entitled? Only American citizens? What about resident aliens? And illegals? The latter would have to be explicitly denied or it would be a disaster. Legislation would have to bar mendacious laws or judgments granting in-state tuition to illegals.

-Will this have a deleterious effect on job-seeking among the working poor? A couple bringing in $20,000 in cash and benefits plus $4,000 a year for retirement may give up job searching altogether, solidifying a permanent underclass rather than chipping away at it.

-What are our guarantees that new social programs do not sprout after this is introduced? Nothing would be worse than having direct wealth transfer payments as merely an augmentation to the current welfare state. Addicts, idiots, and squanderers are still going to find their way into indigency. Once the government gives it, it becomes almost impossible to get them to take it away.

He raises some of these concerns vaguely and indicates that he lays out answers to them in his new book, which I will definitely digest in the near future.

Even if it strikes you as idyllic or unworkable, give credit to Murray for bringing the idea up. The second half of his piece goes into how direct payments will inherently foster personal responsibility because everyone will have benefits directly in their control. No one will have an excuse for why they cannot even afford a meal and a change of clothes. It will aid the government in keeping the peace. They will know where your bank account is that the money is transferred to, so if you don't play by society's rules, it'll cost you fifteen grand on top of traditional forms of punishment. He also argues it will create a sense of community: Friends, family, and partners can pool their resources for joint ventures, giving those with otherwise bleak prospects a chance at economic empowerment.



amz said...

Murray's book: In our hands. Check it out here.

lindsey said...

You'd have to make receiving the money contingent on working or searching for work.

crush41 said...


Under Murray's plan monthly stipends would be wired to bank accounts. While this wouldn't force people to work, it would impose a hefty monetary penalty for dead-beat parents, criminals, drug addicts, and so on. Also, there would be no "penalty" for searching for full-employment/promotion as there is in the contemporary welfare system.