Wednesday, November 20, 2013 | Issue #2169
A Check in Every Mailbox?
Marc Lichtenfeld, Chief Income Strategist, The Oxford Club
| A Note From the Editorial Director: We usually steer clear of social policy debates. But Marc's discussion today on how to end the welfare state and eliminate poverty was just too important to ignore. And if it saves taxpayers money, all the better.
Read his piece. Then tell us what you think by clicking the comment link. Let's start the discussion.
- Andrew Snyder |
 If you think Obamacare is socialist, you ain't seen nothin' yet.
There is a program being talked about right now that seems so socialist you'd think Karl Marx is applauding in his grave. And it has nothing to do with President Obama. In fact, he may not even be aware of it.
I'll explain in a minute.
First, to Switzerland.
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The Swiss government is considering a proposal to provide every Swiss citizen with a "basic income" of $2,800 per month, no matter the individual's need. Every citizen, whether a homeless heroin addict or a CEO, would receive the same check. And that's on top of Switzerland's generous benefits for its citizens.
The idea is that it would dissolve poverty and do so in a way that saves the poor person's dignity - because they are not applying for a handout, but are simply receiving the same thing as everyone else.
Your eyes are rolling so hard I can hear them.
Return those eyes front and center because what I'm about to tell you next will shock you.
Coming to America?
A similar policy is being considered in the United States.
No one in Congress is yet willing to attach their name to the idea, but people with strong connections to Washington are talking about it.
And it's not just liberals who are in favor of such a program. Charles Murray, of the conservative think tank the American Enterprise Institute, is in favor of the idea, as was economist Milton Friedman.
Murray's book In Our Hands: A Plan to Replace the Welfare State supports this very idea. He suggested that every American over 21, who stays out of jail and "has a pulse," receive $10,000 per year.
Those on the left like the idea that the poor will receive help. The right sees the possibility to streamline and/or eliminate services that cost a lot of money and resources. Instead of a person applying for welfare, food stamps, housing assistance, heating assistance, etc., they would simply receive one check.
The government would be able to close down or dramatically reduce several departments, while the recipient would receive the aid they need and avoid the time-intensive and often frustrating task of navigating the various government agencies.
And before you dismiss all recipients of governmental aid as lazy abusers of the system, consider:
- Many recipients do have jobs. For example, the U.S. federal government spends $7 billion a year on benefits like Medicaid and food stamps for fast-food workers. In a well-publicized story, a McDonald's staffer of its McResource helpline was recorded telling a fast-food employee how to apply for food stamps.
- A Canton, Ohio, Wal-Mart is asking people to donate canned goods for Wal-Mart employees.
- Next year, under Obamacare, someone in a three-person household working full time at $13 an hour is eligible for Medicaid. There are millions of people in that situation.
Currently, federal and state governments spend $750 billion annually on programs for the poor. A basic income would eliminate those programs.
Even if it weren't a large enough basic income like what is being proposed in Switzerland, a smaller amount could make a significant impact.
Keep in mind that Murray's idea is different from what will be voted on in Switzerland. Murray's plan calls for the abolition of most, if not all, aid programs.
It Makes Sense
It's a nice idea to think that by providing everyone with a basic income we could eliminate poverty in this country. And for many of the hardworking poor, it would make a meaningful difference in their lives and the lives of their children.
But I don't live in La La Land. We all know that there are people who would take the money and squander it on things other than basic needs. So it wouldn't fix everything for everybody. But who knows, maybe being aware that there is no longer a safety net and they would have to be responsible for themselves might spark a few people to get their lives in order.
When I first read about this idea, I nearly had a violent physical reaction. The idea that folks not interested in working would receive a handout drives me berserk.
But I have a soft spot for people who do the right thing, work hard and try to improve their family's lives but are stuck in jobs with little chance for real economic gain.
And then there's the practical side of me. What if by giving everyone a basic income, we could eliminate government bureaucracies such as welfare, HUD and Medicaid, and leave people up to their own devices to obtain housing and medical care?
The more I thought about it, the more it started to make some sense. Sure, it's a redistribution of wealth. But our wealth is already being redistributed in the form of welfare, food stamps, Medicaid, etc.
I'm no policy expert. Just a guy who has grown tired of the nanny state. I'm not heartless and neither are most Americans. People who need help should be able to get that help.
But they should be free to receive and spend their money with no strings attached. Not a few dollars here for heating assistance, a few dollars more for childcare, etc. In other words, here's a lump sum to help ensure your most basic needs are met. Figure it out like most people do.
This would of course still cost a fortune. But perhaps eliminating the basic income for anyone already making a high level of income could reduce costs. And of course, the elimination of all of those government programs would also lower the expense.
It could spark the economy. If everyone had extra cash on hand, the money would be spent, tax revenue would increase and jobs would be created.
Could It Happen?
Only a conservative could propose the idea and get away with it. Can you imagine the backlash if this were Nancy Pelosi's idea? Politically, it's such a big (and maybe crazy) idea that the chances of it happening in America are close to zero.
But it's an interesting thing to think about, and I'll be watching the outcome in Switzerland.
What do you think? Is the idea crazy, or is it so crazy that it just might work? Tell us your thoughts in the comments section on the website, or by clicking the comment link.
Good investing,
Marc
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