Adelberg: Laissez-Welfare

Modernizing the welfare state can empower struggling Americans.

by Steven Adelberg | 2/13/18 12:45am

America is a nation built by powerful ideas. In the 18th century, the Framers wove the democratic, individualistic ideals of the Enlightenment into the moral and constitutional fabric of the nation. In the 19th century, laissez-faire liberalism allowed free men and free markets to unleash an unprecedented wave of innovation and growth while uniting the country through commerce. In the 20th century, the revolution spearheaded by then-president Franklin D. Roosevelt brought the struggling masses back into civil society by establishing an expansive, ambitious welfare state and restoring America’s commitment to egalitarianism. In the 21st century, our nation must wrestle with the ramifications of these past revolutions and use new ideas to actualize our timeless values of liberty, equality and prosperity.

While democracy and free markets have succeeded in expanding liberty and prosperity, the 20th century Franklin D. Roosevelt-Lyndon B. Johnson welfare state has failed to produce real equality. After spending a staggering $22 trillion and 54 years in the War on Poverty, the federal welfare state has failed to meaningfully decrease America’s poverty rate. Entitlements like Social Security face insolvency as they explode the federal debt to over 100 percent of GDP. Rife with welfare cliffs, fraud and low rates of aid directly reaching recipients, the 20th century welfare state has failed to adequately address American poverty.

The achievements of the 18th and 19th centuries teach America a fundamental lesson reinforced by the failures of the 20th century that is necessary for success in the 21st century: Government works best when it uses loose legal frameworks to co-opt individual liberty, not when it employs sprawling, restrictive bureaucracies to work against it. As America grapples with systemic poverty and faces a new wave of globalization-induced structural unemployment, the old system is leaving millions economically marooned and politically disenfranchised by distant bureaucrats. Welfare is meant to provide a basic standard of living and social mobility to those who struggle to climb the ladders of a free market system — bureaucratic state-activist welfare has not achieved its purpose. The over-regulated system of today is heavy-handed and ineffective. We need a simplified system that acts in bold strokes and empowers individuals to improve their position in society. In the 21st century, the clunky welfare state must give way to a self-driving, hands-off framework of negative income taxes and a universal basic income.

The earned income tax credit is a step in the right direction, but much more substantial reform is needed. Negative income tax rates for the lower class would restore the incentive to work and reduce the role of the state in welfare. The convoluted welfare system of the 20th century forced many recipients of aid to choose between their benefits or a pay raise, creating a perverse incentive that perpetuated poverty. This conditional “aid” also brought unprecedented amounts of state intrusion into lower class households — as Malcolm X described in his autobiography, “[the social workers] acted as if they owned us, as if we were their private property.” This cannot be tolerated. We need negative income tax rates to keep meddling agents of the state out of lower-class family lives and redouble the incentive to work.

Negative income taxes would also reverse decades of stagnant wage growth and help workers afford key investments that drive upward mobility. The average median income has stagnated or declined since 1999 as the costs of higher education and healthcare continue to sky-rocket. Poor health care and poor education are known poverty traps — by empowering the lower class to pursue new skills and healthier lives, the negative income tax promises to keep social mobility within closer reach for millions of Americans.

To reach the Americans who do not have an income that can be negatively taxed, the United States should sweep aside the 83 overlapping federal welfare programs and entitlements with a single universal basic income. Universal basic income directly ensures a minimum standard of living to every American, actualizing the FDR-LBJ social contract with the American people in full while erasing the bureaucratic mess they left in their wake. If the purpose of welfare is to ensure a basic standard of living for all people, why not directly provide it to them? Direct cash transfers are among the most efficient ways to fight poverty, putting economic power where it is needed and keeping decision-making close to the ground. A regime of paternalistic programs aimed at improving social choices, the U.S. government gives only 26.5 percent of welfare spending directly to the poor through cash assistance. But the poor do not need Washington bureaucrats to stage an intervention. They need the necessities of life. By ensuring that every American family can put food on the table and have a roof over their head, the universal basic income sets the working class free from a zero-sum struggle to live paycheck-to-paycheck and allows them to work toward positive goods like healthcare and education that generate upward mobility.

The universal basic income alone could practically eradicate poverty in the United States. Despite overall spending on social insurance totaling about $2.7 trillion in fiscal year 2016, over 43.1 million Americans lived below the poverty line that same year. A universal basic income of $8,000 would have brought any individual earning at least $4,000 per year above the poverty line; universal basic income could potentially be cheaper than the present system. This program could succeed where the 20th century welfare state failed. Spending on entitlements is expected to increase in years to come, making it imperative to render the ways in which we fight poverty more efficient and impactful. If America remembers the fact that all men are created equal and provides federal benefits equally through a universal basic income program, the United States can virtually eliminate poverty within its borders.

Each century of American history is defined by a revolutionary idea that pushes the boundaries of liberty, equality and prosperity. Implementing universal basic income and establishing a negative income tax rate would provide liberty to lower class families like the one Malcolm X grew up in, equality to the 43.1 million Americans living in poverty and prosperity for all Americans. With the promise of progress before us and the lessons of the past behind us, the time is now to redefine the 21st century and trigger a fourth American revolution in our civil society.