by Carl Milsted, Jr.
In my previous column I listed the many merits of replacing a huge array of tax exemptions and welfare programs with a citizens’ dividend; that is, simply have the government send every U.S. citizen a monthly check of a couple hundred dollars or so a month (more for seniors).
In that column I focused on how such a system would reduce bureaucracy, make American made goods more attractive, and illegal immigration less attractive. This week I want to focus on the benefits to the poor.
Compared to the amount from certain welfare programs, the amount I propose for a citizens’ dividend may appear a bit small. However, the money would come with no strings attached. This multiplies the benefit greatly.
Consider public housing. The government spends billions building public housing complexes which are quickly degraded and often become dangerous criminal warrens. A couple hundred a month is enough to rent a home – if you share it with several others. This worked for me in grad school.
Or consider the old Aid to Families with Dependent Children. Who could be against helping out a single mother? In itself, such help is a good thing. The problem comes from such aid being conditional. If aid is limited to single parents, then it pays to get divorced, or never marry in the first place. The result is an expanded free-sex culture and fatherless children. This is a prescription for continued poverty, high crime rates and overflowing jails.
A citizens’ dividend would go to the parents regardless of marital status. Since there are economies of scale to running a household, the economic incentive would be in favor of marriage (whether formal or informal) as it has been throughout most of human history.
Or consider a program that attempts to alleviate poverty by giving money to those who earn below a certain minimum income. Suppose we give them the difference between the minimum income and what they make. At first glance it appears we could get everyone above the poverty line for surprisingly little money.
Unfortunately, such a program would eliminate the economic incentive to work for all those below the minimum income. The result would be a large subculture of laziness and envy. There would also be additional crime, since criminal income would not be reported against the minimum income.
Under the citizens’ dividend, creative loafers might be able to get by without working, but they would still have significant incentive to work. Each dollar earned would make one a dollar better off (minus taxes).
Similar logic holds for any program that helps people based on wealth (vs. income). A conditional program discourages thrift. Save money and you lose your benefits.
Working, staying married, being polite enough to live in a shared housing arrangement, thrift…these are all habits that lead one out of poverty. It is high time we adopted a program that helps the needy without paying people to be poor.
Carl Milsted, Jr. is a senior editor for The Free Liberal.