Working on Welfare

How to reform the system

Virginia Postrel from the April 1994 issue

(Page 3 of 6)

Hobbs: That's why it needs to be tested. I would also like to make one more point. Why is this going to work fiscally, when we're going to pay more to people to do the job than we were paying when they were on welfare? The answer is two-fold: One, a whole bunch of people aren't going to show up to take these jobs, because there's a massive underground economy out there. Oregon said at the beginning that 25 percent of the people offered these jobs wouldn't come to take them. But the more important thing is that they're going to compress the amount of time spent on welfare. They think they're going to cut it by 50 percent. And if they do either one or both of those things, we're going to find that there's a tremendous cost savings.

Murray: Well, I've been listening to this interchange, and part of me would really like to see Oregon do this. I would also like to see someone try Mickey's simple plan. But I'm convinced they won't work. Successful government programs are simple, they deal in great big, obvious incentives, and they have almost no mechanism associated with them at all. So if you can't get rid of welfare the way I want to--which is to dismantle the whole thing lock, stock, and barrel--I think we at least ought to put on the table Milton Friedman's old idea of the negative income tax--not as tried in SIME/DIME, the Seattle and Denver income-maintenance experiments in the '70s, but rather as a replacement for the entire social-welfare system. Everything--unemployment insurance, welfare, food stamps, subsidized housing, Social Security, everything. There would be an amendment to the Constitution which says that with the single exception of the negative income tax, the government shall make no payment of any kind, in kind or in cash, to any individual.

Kaus: Charles, I'm shocked that you say that. Your profound contribution to the welfare debate has been to say the key question is, "Do we give single mothers--non-working single parents--enough cash to sustain the underclass?" This your "enabling" theory. You are now proposing a negative income tax that would give non-working, single mothers enough cash to sustain them. Therefore, by your own theory, you would be perpetuating the underclass.

Murray: Would you like to hear why I could nonetheless hold this bizarre position? Yes, I knew you would. If you have this as a replacement for everything else, you continue to have the fundamental constants in this equation, which are that sex is fun and that babies are endearing. So, in that sense, you are in fact enabling a single young woman to have a baby without a husband. On the other hand, you have the following dynamic set up. The negative income tax kicks in at the age of 18 whether or not you have a child. This means that you have 16-year-old girls looking at their 18-year-old sisters and people in school and what do they see? They see some of these girls hitting 18 with no encumbrances in the form of babies, and, as endearing as those babies are, the 16-year-olds see that if they don't have any children they can spend this minimum income doing all sorts of fun things. They see other women who are hitting 18 and who are spending their income on diapers and baby food. If you demand a system in which the government supports people--as seems to be the case with a large part of the American population--you should offer the most innocuous form of that system, and one which provides a clear and present penalty for having a baby-- namely, that you have this money out there which you could otherwise spend on yourself that you're going to have to spend on the kid. Would this be perfect? No. Would it be worse than the current system? And there I think Friedman had it right. It's going to have disadvantages, but it's a hell of a lot better than what we have now.

Kaus: I'm still shocked. I'm shocked that the foremost critic of our welfare state turns out to be for a massive expansion of the welfare state to cover--

Murray: You are talking about Milton Friedman, I suppose?

Postrel: Remember that he is getting rid of--

Murray: I'm getting rid of everything, including Social Security.

Kaus: Well, you're still enabling the underclass to survive and flourish. My question is, why is that preferable to my scheme, which ends the checks that sustain non-working families but offers a job to everybody who wants one?

Murray: Because the government will screw it up. Even if you could get through your plan as it currently stands, the day after it goes into effect we will start to see the erosion of it. The erosion will consist of all the different ways in which exceptions will be created, and the business of showing up at the job site will become a scam because it's so tough to make government bureaucrats act like job supervisors. They have no incentive whatsoever to demand performance. Over a period of a few years it will become a joke. The government does one thing quite efficiently, and that is write checks, and that's all the government does in the negative income tax. Now, by the way, let me just put on the record, and this maybe should be italicized: I would rather have the welfare system ended altogether than have a negative income tax. But the fact is that in late 20th-century America it's hard to put together a political consensus to do something that doesn't involve vast amounts of government support.

Kaus: I accept your arguments against my plan that it could turn into a boondoggle, a swamp of non- work. My argument is let's give it a try--

Murray: I'm willing to give it a try.

Kaus: It seems to me the negative income tax, in addition to not having a prayer of ending the underclass, will be subject to the same sort of erosion.

Murray: That's why you literally would have to have a constitutional amendment saying the federal government shall not dispense payments in cash or kind to individuals with this one exception. And given what happens to the Constitution, probably that won't even work. No, basically, there is no hope, Mickey.

Hobbs: I have a bigger problem with the negative income tax than its impracticality, and that is paying people not to work. Eighty-five percent of the people have already said that people should work for welfare. It finally got through to Bill Clinton and other elected officials, so they're now saying the same thing.