A Better Safety Net

People are more apt to try daring things with a safety net. This holds true for both sports and financial decisions. With a well-designed financial safety net in place, people have more opportunity to change careers or start a business. A society with a broad social safety net can be more entrepreneurial than the one we have. Consider the famous case of J.K. Rowling. She wrote the first Harry Potter book while on the dole. The British government got its money back in taxes and then some.

But as conservatives are quick to note, a social safety net also enables people to be reckless, stupid and or lazy. For every J.K. Rowling there are many slackers, hippies, and bums.

Given the choice between wage slavery, hellish sweatshops, and paupers starving in the streets; and paying taxes to support some slackers and hippies, most voters in rich nations opt for the latter. And as I grow older and more soft-hearted, I tend to agree with them. But I still sympathize with the conservative complaints. Here’s the thing: a badly designed social safety net pushes people into being slackers, hippies, and far worse.

We have a badly designed safety net. We have a welfare system which actively encourages sloth, promiscuity, profligacy and criminality. Not only that, our welfare system is more than a safety net to keep people from hitting the very bottom. We have nets at multiple levels, thus encouraging the middle and even upper classes to become irresponsible and dependent. And the nets catch people on the way up as well as on the way down.

Conservatives are right to complain.

But here is the hard lesson for conservatives: a safety trampoline is much more expensive than the theoretical safety spider web. Often do I hear on conservative talk radio: “If you simply divide up what we pay in social programs to all the poor then the poor would be well off.” This is momentarily true, but very quickly breaks down. The underlying reasoning is fatally simplistic.

Suppose we were to start with no welfare programs and then add up how much it would take to bring each poor person up to the poverty line. For example, with a poverty line of $12,000/year, a single man making $11,000/year needs a $1000/year in government checks to be out of poverty. A single man making $9000/year needs $3000. If we add all these checks together we get a number much smaller than the cost of today’s welfare state. That’s even after figuring in administrative costs and a generous dollop of waste, fraud and abuse.

But it wouldn’t work for long. In fact, it would fail catastrophically and quickly at that. If the government were to guarantee a total income of $12,000, why work for $11,000? Why not quit work entirely? The result would be exactly the same. Everyone under the poverty line would have zero incentive to work at all. Worse yet, those making a bit above the poverty line might decide that a life on the dole is preferable to going to work. Why work for $13,000 per year if you can get $12,000 per year doing nothing?

And note that I used $12,000/year as a round value for the poverty line line for a single person. The value for a family of 2 is something like $16,000/year (rounded up). A married couple not working thus qualifies for a $16,000 check, whereas two single people qualify for two $12,000 checks; i.e., $24,000. Hello breakdown of marriage!

Stingy welfare is not conservative.

The way out of the conundrum is to be more generous. Don’t just give $12,000 in government benefits to nonworking poor single people. Give it to every adult citizen. Make the largesse unconditional and you don’t pay people for bad behavior.

Yes, this is expensive. But we are almost there already. We have the personal exemption, standard deduction, earned income credit, Medicare, Social Security, the home mortgage deduction, health insurance deductions, guaranteed student loans, and a host of smaller programs which target the poor and middle class alike. We could scrap all these programs and simply give every adult citizen a monthly check.

That is, we could treat the federal government as a business, with every voter as a single shareholder. Each shareholder gets a monthly dividend check.

Yes, this may look expensive on paper, but for most people this will simply be a rebate of taxes paid. And the results of this broader safety net are very conservative.

For the sake of completeness, I’ll note that there is a solution for stingy conservatives: exact a price on receiving government largesse. The price needs to be something the poor can pay but that those who can work won’t want to. Newt Gingrich’s infamous orphanage proposal is a famous example. However, Gingrich’s proposal was about as popular as these guys:

If you want to risk turning the United States of America into Northern California – a giant Republican-free zone – then go for the Gingrich proposal or something similar. Otherwise, if you want to restore conservative values to the lower classes, follow Charles Murray and embrace the idea of a citizen dividend.

A Quick Note to Liberals

I have aimed this section at conservatives, assuming that the liberals in the audience would like the idea of a citizen’s dividend – or basic income guarantee as it is sometimes called. After all, noted leftists Cloward and Piven proposed a conspiracy to destroy the existing welfare system to force us in that direction back in the 1960s. But yes, such a move would get rid of a lot of professional liberal jobs.

So let me add a wee bit more motivation. Today, the government has outsourced part of the welfare system to employers. This may be fine and dandy for Exxon and Apple, but it is a major burden for startups and Mom and Pop operations. If you want to see a mostly human scale economy, then go for the citizen’s dividend. Mom and Pop businesses will thrive again. Local government will be meaningful. The People will rediscover civics.