Alright, it’s time to confront the elephant in the room (and the donkey, as well): there’s no way I can hope to reform the budget and tax processes without dealing with social welfare programs. They make up a large portion of the nation’s spending, and as the American population grows older (and we increasingly expect our government to become ever more generous with the handouts), the point will come where they simply outpace our ability to pay for them. If we hope to get the budget under control, welfare must be reformed dramatically.
There’s where I come in. Using all my powers as the (sadly, fictional) ruler of the land, it is time to lay down a few decrees and change the welfare system for the better. Luckily, I don’t have to create a brand new system from whole cloth; there are more than a few examples that already exist. I’ve found one in particular that seems to meet all my needs, and then some.
-Scrap The Current System: Rather than trying to patch over the problems with welfare and other government aid programs, a process that has been going on since at least the time I was born, I’m going to burn everything to the ground and start from scratch. With few exceptions (Social Security, military and civil service pensions), all checks currently going out from the government will cease. Before you get up in arms too much, they will be immediately replaced with the new system…
-Institute a Negative Income Tax (NIT): Essentially, if you make a small amount of money (or none at all), rather than the government taking away money at tax time, you’ll end up being paid by the government. You won’t receive a huge amount from this negative income tax; the amount will be somewhere in the neighborhood of the poverty line, or something like $8,000 for each adult and $4000 for each child in the household. Either way, the amount will be indexed to inflation to allow for future growth.
-Have the NIT Decrease Less Than Other Income Increases: You might justifiably ask at this point, ‘why would anyone both to work a low wage job if (a) they are getting a fairly decent amount of money from the government and (b) that money will disappear if they have another source of income?’ Well, that’s a bit of a trick question; the NIT amount will not drop to zero if someone in the household gets a minimum wage job. Instead, for every dollar that the welfare recipient brings in, the amount he or she receives will decrease by 25 to 50 cents. In this way, there will be smooth income growth as earned income begins to replace the NIT income. The incentive to work rather than relying solely on the NIT will be present, for anyone hoping to increase their income.
Administer the NIT Through Specialized Debit Cards: An attempt to ensure that the money distributed through the NIT goes to helping the recipients to acquire things like food, water, and shelter, without worries that it will find its way to less reputable parts of the city. Not to imply that all welfare recipients are criminals or drug dealers, however, some of them undoubtedly will be, by the rules of probability if nothing else, and minimizing the ease with which government welfare can travel into the black market is one step in the right direction to decreasing such problems. To simplify things a bit, though, it would be possible to arrange for a direct deposit of your rent/mortgage payment each month, as well as paying off any utilities, so you don’t have to worry that your landlord won’t have a debit machine in his apartment..
The Solution, In Action
How would something like this work in real life? Let’s consider a quick little scenario: you are the sole breadwinner for a family of three. Unfortunately, you lose your job (as so many have done lately), and suddenly need to go on welfare. You file to enter the welfare system, and receive benefits somewhere in the range of $20,000 each year. Not much to write home about, but enough to keep your head above water and provide for the necessities in life. Assuming you had an adequate emergency fund, these payments (a bit more than $1500 each month) should provide a decent, if not fun-filled and action-packed, existence until you can get back on your feet.
Of course, in times when jobs are hard to come by, sometimes you have to make compromises. In this case, you take a part-time job earning minimum wage, pulling in only about $10,000 a year. If that would cut your NIT benefits down to nothing, the clear choice would be to NOT work at all, at least not until you can find something that pays better. But since this job will only offset $5000 of your benefits, you can take the part-time job and still do right by your family. (Since the $15,000 in remaining benefits plus the $10,000 from the job total more than the $20,000 of benefits by itself.)
From there, you could add on another part time job, decreasing your benefits (but increasing your overall pay) or get a full-time job if possible; either way will increase your overall income, with the NIT covering the shortfall of your paycheck(s) until you hit $40,000 in total work income. As your income from other sources ramps up, the payments from the negative income tax will decrease; if things go south, the payments will start to resume.
Not bad for a welfare system, right? That’s my plan to reform welfare in a nutshell; hopefully, it sounds rational and reasonable (to say nothing of logical) to all of you out in reader land.