Odd, no? The convergence of the egalitarian left and the libertarian right? Though the motivation here is mainly to reduce government waste, rather than to actually help people. But, hey, you take what you can get.
Murray: We start with a country that is the richest country in the world, with most of its people having lots of money (compared to any historical standard), ample money to provide for their own retirements, medical care, and the rest of it. On top of this national wealth, we then add more than $1 trillion to help people provide for comfortable retirement and medical care, and so forth. And guess what? We still have millions of people without comfortable retirements, without adequate medical care. And only a government can spend that much money that ineffectually.
The alternative I suggest is give every adult American, age 21 and older, $10,000 a year. And let them run with it.
Borders: So $10,000 for every single American? As soon as you turn 21 you start getting this money?
Murray: That's right. And there are a couple of key points to be made here because some folks will be thinking of past attempts at negative income taxes which provided a floor under income and certain experimental programs. And this is different. This is not a floor. This is not a case of, "if you make less than $10,000 a year we will top up your income to $10,000." This is $10,000 period. And so if you're making $10,000 a year, your net is $20,000. If you're making $20,000 a year, your net is $30,000.
There are some complications down the road, but they aren't very important. I'll just mention them real quickly.
At $25,000 of earned income you start to pay a surtax on the grant, and that reaches a maximum of half the grant. So at $50,000 you only have a net of $5,000 from the grant. The reason for that is pretty simple--that you want to give upper income people something for all the money they're putting into taxes right now to provide for their own medical care and retirement, and they get that net of $5,000. And I argue it's a better deal than what they're getting now.
But the other main point is that the surtax doesn't kick in until $25,000 of earned income. So the negative work incentives are pretty small.
Borders: Do you know of any other countries that have tried anything like this? Or is this entirely new?
Murray: The idea is a direct descendant of Milton Friedman's proposal for negative income tax. George Stigler sometimes gets the credit for that. But George Stigler himself says it was suggested to him by Milton Friedman back in the early 1940's. So it's a direct descendent of that idea, considerably revised, but on a much bigger scale and doing much more. I'm not using this just to cure poverty. I'm using this money to take the place of Social Security and Medicare and Medicaid and all the rest of those kinds of things.
Borders: I take it that your system, to get the $10,000 per year, we would have essentially to abolish all other entitlements and transfers.
Murray: That's absolutely essential. It's not on top of an existing system of payments; it is instead of.
Tuesday, March 28, 2006
Henry and I (and here and here) tossed around the idea of a Universal Basic Income as a kind of pie in the sky idea. And yet here comes Charles Murray (yes, this Charles Murray) proposing...