Reinventing the Welfare State
March 29th, 2006I believe that everyone should be encouraged to strike out so long as they’re willing to step up to the plate. There isn’t a single reason on this Earth to ever deny someone the right or the means with which to express themselves. I’ve always admired those with ideas — even stupid ideas, and especially seemingly crazy ideas — that they express, because the alternative to expressing your thoughts, your emotions, your beliefs and your vision is the supression of yourself and silence. How silent would the forest be if only the best birds sang, and how terrible this world would be if no one ever spoke their thoughts.
My views on the Encouraging of Human Expression are not a tangent. They are my way to introduce us to this piece on the Welfare State, one of the finer articles I’ve read in ages. It begins with the truth, true and unequivocated: “This much is certain: The welfare state as we know it cannot survive.” The more people begin to talk like this, the better the dialogue on the well-being of Americans will be, for if we transform “How do we best preserve Social Security?” into “How can we best ensure the well-being of our citizenry?” we’ll all be in a better place. And that isn’t a knock against Social Security, either. Let’s turn to Charles Murray for his idea on the best solution:
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.
Consider retirement. Let’s say that we have a 21-year-old man before us who, for whatever reasons, will be unable to accumulate his own retirement fund. We accumulate it for him through a yearly contribution for 45 years until he retires at age 66. We can afford to contribute $2,000 a year and invest it in an index-based stock fund. What is the least he can expect to have when he retires? We are ridiculously conservative, so we first identify the worst compound average growth rate, using constant dollars, for any 45-year period in the history of the stock market (4.3% from 1887-1932). We then assume our 21-year-old will be the unluckiest investor in American history and get just a 4.0% average return. At the end of the 45-year period, he will have about $253,000, with which he could purchase an annuity worth about $20,500 a year.
That’s with just a $2,000 annual contribution, equivalent to the Social Security taxes the government gets for a person making only $16,129 a year. The government gets more than twice that amount from someone earning the median income, and more than five times that amount from the millions of people who pay the maximum FICA tax. Giving everyone access to a comfortable retirement income is easy for a country as rich as the U.S.–if we don’t insist on doing it through the structure of the welfare state.
Health care is more complicated in its details, but not in its logic. We do not wait until our 21-year-old is 65 and then start paying for his health care. Instead, we go to a health insurance company and tell it that we’re prepared to start paying a constant premium now for the rest of the 21-year-old’s life. Given that kind of offer, the health insurance company can sell us a health care policy that covers the essentials for somewhere around $3,000. It can be so inexpensive for the same reason that life insurance companies can sell generous life insurance cheaply if people buy it when they’re young–the insurance company makes a lot of money from the annual payments before eventually having to write the big benefit checks. Providing access to basic medical care for everyone is easy for a country as rich as the U.S.–if we don’t insist on doing it through the structure of the welfare state.
It’s a fascinating premise, and I predict that policy wonks will fall further for it as the years go by. In fact, I take the position that the currents of time will force this into being within the mainstream of American thought in about twenty years. And why not? The Culture of America is in for serious change, and we must learn to stop throwing things away and to better invest in the future. President Clinton used to call his Economic policies “Invest and Grow” Economics, and that idea, that mold, should be the one encasing policy.
Critics of this idea would argue, and do argue, that it might compromise the security of the Welfare State and endanger Medicare, Medicaid, and Social Security. That is likely so, but it isn’t as disturbingly sinister as special interests might make it out to be. It endangers their security because it is, on the surface and in reality, a better program. If it weren’t logical and sensible, then it wouldn’t be a threat to those programs! People often consider the Welfare of Welfare — the maintainance of the Status Quo in regard to the Welfare State — to be important. It’s why George Bush’s idea of Private Accounts added into Social Security were met so violently — and no, I do not like the Bush Proposal, but the Idea itself is not one that needs to be met with instant Death — and that’s because people want to keep things the way they are.
But who cares about maintaining present programs? By all means, if you’ve got a chance to upgrade what you have for something that’s substantially better in every way, do it. Innovation is the key to American society, and ideas such as this — the reinvention of the Status Quo — are key to American Liberalism, much like free and unfettered Debate is key to American Democracy. Change begins inside your head. And when that change comes, you’d better hold onto it and take it for every good it can bring. Ideas such as this are good because they prompt us to reimagine the world around us and think of the many ways in which we have to meet the challenges facing us.
But, also — Ideas like this are good because they make sense. And because they’d work. Make this the Federal Program for the American public, and leave any extra Welfare Programs up to each state to decide. And why not?
March 30th, 2006 at 4:59 pm
Why not? Murray’s “Plan” is absolutely RIDICULOUS.
My goodness, first of all: “There isn’t a single reason on this Earth to ever deny someone the right or the means with which to express themselves.” Yes, there is a single reason. Incitement to riot, for instance, is illegal. For good reason.
Second: Murray’s article doesn’t put forth the question “How can we best ensure the well-being of our citizenry?” It simply proposes a way in which we can keep money out of the hands of the Federal Government–the man’s a Libertarian! (Not to mention that he’s seriously deficient in the ‘Holding An Economics Degree’ department.)
Okay, shall we examine what Murray actually said?
Let’s say a business sells widgets to a little town for $5 a pop. Suddenly, the town makes a lot of money and all of the people begin receiving subsidies. And now the business can charge people $10 per widget. People who couldn’t afford the widgets before STILL can’t afford them, even with the extra income. What do you think would happen if we started handing everyone $10,000 a year?
(And just WHERE did the number $10,000 come from, anyway? Seems too suited to our base-10 counting system to be believable.)
Murray thinks that ‘the welfare state’ “drains too much of the life from life.” Because the welfare state, apparently, somehow encourages hedonism? (Interestingly enough, that same argument is made about Liberalism, and I don’t hear any raving [that can be taken seriously] for that to be dismantled.) But thanks to Murray, The Plan will restore meaning to our pitiful lives! Because we’ll all put our $10,000 checks together to achieve great things as a community.
Except, um, no. The greedy people will still be greedy, spending their monthly checks on themselves. The giving people will still be giving.
And I think it’s a pretty broad, rambling stroke to try to pin the return of virtue–honesty, compassion, and generosity–to “The Plan”.
Policy wonks would have to be stupid to “fall” for a plan like this.
And no. I’m not afraid of this plan because I think it’s a “threat” to current programs. I’m not afraid of this at all. I find it laughable.
March 30th, 2006 at 5:45 pm
I don’t think it’s ridiculous whatsoever. Not at all, or one bit. (I think it is a bit rough, and I’d like to read it all.) I don’t have an Economics degree, either. Coupling that with the fact that I happen to like his idea, I suppose that makes me ridiculous in all capital letters, too? And stupid? And laughable? I’m glad to find that you still hold my opinions in high regard.
I would point out that I was being rhetorical in regard to the “there isn’t a single reason on this Earth to ever deny someone the right or the means with which to express themselves” and there was no reason to take my comments out of context to make an obvious point about the legality of certain speech. Although I’m a firm believer in expression and in encouraging people, I didn’t mean it to be taken as an invitation for people to riot and let that be perfectly all right.
I think it’s nitpicking to look into that and see it as some sort of subtle endorsement of ALL speech, and I don’t see the relevance of your first point except as henpecking.
Usually, I find myself as amused by Libertarians as the next fellow, but I’m sympathetic to their stated goals. What’s wrong with taking a Libertarian-lite position, as I do, that the Federal Government should stay out of everything it doesn’t HAVE to get involved with? And if we did take your position, that his plan is merely about taking money out of the hands of the federal government, what’s so wrong with that idea in principal?
As it stands, of course Murray’s plan is about helping people and providing basic services to most people. His article starts with discussions of how we are incredibly rich and can afford to give people basic services. Murray’s Plan puts forth a manner in which to secure people’s retirement and health care through minimal cost. I think that makes it worthy of being called a plan that does more than reduce the money spent by the Federal Government.
I believe five thousand dollars of the Plan are to go to Health Care and Retirement funds. I am rather certain that your argument is off, however I do not have anything relevant to refute it with. I will soon be picking up the book and, presumably, it will have foreseen this.
I would say that raising the price from five to ten dollars, meaning that the widgets are still unfaffordable, is a stretch and no responsible business in a small town would hike prices that high knowing that much of the program’s funding goes to health care and retirement rather than leisure and that, because of this, the influx of new money to be spent on luxery would be relatively minimal.
I might be wrong, but I believe it has to do with the fact that this plan is meant to spend less than current entitlements and ten thousand winds up being a solid amount for people to save with.
I don’t believe Murray was making an argument that the Welfare System itself creates hedonism or anything of the like. I would concede in the interest of intellectual honesty that the Plan doesn’t create a return to virtue-honesty, compassion and generosity — although I don’t believe it would hurt, and I do think there’s something to be said about people coming together and using their money to invest collectively.
The thing is, we’re all greedy. About five thousand dollars doesn’t amount to an extraordinary amount, and so, if we go by the greed argument, I think human nature would compell people to come together and make investments with the goal of added money through collective investments.
I didn’t say you were afraid of the plan and I didn’t say you thought it a threat. I wasn’t about to accuse you of it, either, but I thank you for anticipating my arguments for me. I think they compliment your earlier insults quite well, if I do say so myself.
March 30th, 2006 at 6:59 pm
The problem with trying to take the money out of the Federal Government’s hands, standing alone, isn’t wrong, in principle. Lots of things are okay, in principle. I repeat: In Principle. They don’t always work in practice. Keeping money away from the Federal Government is fine–until you consider what then happens to that money, and what is lost by the re-routing of that money.
Murray’s recommendations are not about helping more people. That’s his asserted purpose, but I don’t buy his insistence for end-state redistribution as genuine. At all. “The Plan”, providing $10,000 to each qualified citizen, also provides an excuse to NOT provide a safety net when someone’s $10,000 is, for whatever reason, not enough.
“…I think that makes it worthy of being called a plan that does more than reduce the money spent by the Federal Government.” Maybe. But most likely not. Because “If we implemented the Plan tomorrow, it would cost about $355 billion more than the current system.” And would only begin to pay itself off in 2011. But we’d be more massively in debt. And all of his facts and figures about how much America would be saving?–Frankly, The Weather Channel can’t presume the weather accurately more than, what, a week into the future? I can’t easily buy into an idea that rests on predictions about the economy 20+ years into the future.
“The Plan” required that $3,000 a year be put into healthcare. That leaves $7,000 a year for IRresponsible businesses to exploit. And let’s say you’re right–the influx of new money spent on luxury is minimal. What about the old money–previously having been tied up with healthcare and retirement planning–that’s now available for spending? Demand is characterized by two things: consumers’ Ability and Willingness to purchase. If their Ability increases, the businesses would do themselves a favor to increase their prices.
Murray does argue that the welfare state encourages, if not creates, hedonism. Read from “For now, let me turn to a larger question:” to “The welfare state is pernicious ultimately because it drains too much of the life from life.” It’s all right there.
Sure, there’s something to be said for people using their money to invest collectively. Following the greed argument–people would not come together to invest as a group; they would invest their money in such a way that, at the end of the day, they end up on top of the heap. Murray’s plan encourages individualism. If it didn’t, he would support the allocation of people’s money to the Government–the ultimate in collective investing, when you think about it.
When I said that I was not afraid of Murray’s idea, I was responding to you saying that critics view it as a threat.
March 30th, 2006 at 7:18 pm
I didn’t say that all critics view new programs and ideas as “threats” for the sake of viewing them as threats. Some people genuinely believe that the current system works better.
I will agree that it’s fair and reasonable to ask questions about. Inquiry is the best way to strengthen any and all programs. Free and honest discussions, too. Paul O’Neill’s “Proper Process!” That said, I think you are overstating the damages by this plan.
You might not think his recommendations are about helping more people — I do. And if his idea wasn’t written by him with that goal, then my praise of it is because of that objective.
I think it would be well and proper for the States to handle additional benefits for their Citizens outside of Health Care and Retirement, personally. It’s an idea that I think should be looked into.
You might not take projections about money seriously, but most Economists do. What can I say — I trust the numbers. And, on the note of the debt, I think that the fear of debt is overstated in this country. But the fact is, that Social Security and other programs will be adding to our debt just as much over the years, but the Murray Plan would wind up causing less federal debt, I believe.
However, debt spending doesn’t bother me THAT much in regard to foreign affairs. Are the Chinese going to cripple their economy to cripple ours by pulling their money out or insisting we pay them back? It just doesn’t concern me that much, especially not just in the short term.
You’re right that Demand is characterized by Ability and Willingness. I don’t think that Americans would be willing to pay extravagent prices once they’re jacked up on everyday items by people because of an extra seven dollars doled out by the federal government. I think you’re overstating the threat to the poor from price gouging caused by this.
“The welfare state is pernicious ultimately because it drains too much of the life from life.” You’re stretching his meaning to be about hedonism itself. I’m a believer in a Purpose Driven Life. And, while I got that phrase from a Christian book, it’s not meant to be Religious. Just that, I think, everyone should live with Purpose and meaning of sorts.
My purpose is government and Love, not in that order, either. I feel happiest In Love and with a History Book, likely in that order. I love to read and debate and do things work related, just in fields that I enjoy. I love to work and have a lot of fun, too. I think you know my own preferences for leisure! But I wouldn’t be happy without work and without some purpose, and I think he’s attacking a lack of work and drive and purpose more than anything.
I think by Life he means doing things for yourself and working things out and investing and Living and doing things. I think he’s talking about lazyness and Driftingness in general more than “hedonism” specifically. But I’m not going to engage you in a debate over the merits and lacks of hedonism. I’m merely speculating and interpreting his comments to be what I interpret them to be.
The government is not the ultimate in collective investing. Murray’s plan does encourage individualism, and that’s a good thing. People should encourage individualism whenever they get the chance and whenever it’s possible and beneficial. At other times, we should all come together.
March 30th, 2006 at 8:50 pm
Judging by some of your comments, I’m not sure that you even read the article. If you did, you’re taking some incredible liberties in interpreting it.
You also took some incredible liberties in going off on several tangents, including babbling about your purpose in life…? Which was never up for debate? I’m not sure what you were trying to prove with that.
I’m also not sure that you have any interest in further discussing this other than to react to my comments in an attempt to get the last word. So I’m going to bow out.
March 30th, 2006 at 8:56 pm
About the liberties: I was engaging, in my own way, the idea of a purpose in life and things of that sort. I know it was not up for debate what my purpose in life was.
Judging by some of your comments, I might say the same, however, about the Liberties, particularly the idea that it couldn’t work or that the benefit of society isn’t a primary motivation of his.
I am sorry that you think I’m simply “react[ing] [to get the last word]”. Please accept my invitation to post another comment and have the last word on this discussion, if you wish to do so.