YOU DECIDE: Should everyone get a $10,000 check?
Would you like to receive $10,000 every year for the rest of your life? Why, of course! I know I could find good uses for a $10,000 annual windfall, and I'm sure you could, too.
I'm talking not about winning the new North Carolina lottery, but about an annual $10,000 grant to every person 21 or older as a way to end poverty, provide everyone with health insurance and bolster retirement plans.
The scholar Charles Murray makes the proposal in a new book. Murray's idea is to take all the money government currently spends on assisting individuals or businesses — generally called “transfer payments” — and convert it to the annual $10,000 grants.
Could the government afford this?
First consider the fact the government already spends enough on transfers to give everyone $7,000 a year, according to Murray's calculations. So there would be a need for an initial increase in funding to achieve the $10,000 goal. But, Murray argues, his plan would actually be cheaper within a few years because it would replace several transfer programs, like Medicare and Medicaid, that are rapidly escalating in cost.
Why give the cash grant to everyone instead of limiting it to lower income or other needy persons?
One reason is simplicity. Under our current system, each transfer program has its own rules and regulations as to who is eligible and for how much. Thousands of bureaucrats at all government levels using significant resources spend countless hours operating the programs, and the rules confuse recipients. Murray eliminates this cost by saying that every adult gets the grant. He would, however, gradually reduce the annual cash amount as the person's income rose, but even the richest person would still receive $5,000.
The second reason for having everyone get the grant is that it reduces disincentive and fairness issues with the current system. Today, eligibility cutoffs have to be made, and there's always the question of where you draw the line. Plus, there's the problem that people whose income puts them just past a cutoff point may find themselves worse off, in terms of available resources, than they were when they had less income but received governmental assistance. Making everyone eligible for the grant — meaning there are no cutoff points — eliminates this problem.
With every adult receiving $10,000 annually, and with programs like Social Security, Medicare, Medicaid and Food Stamps abolished, would low-income persons, especially, be better off with the new system?
Murray claims yes, and here's why.
His plan would require that everyone use at least $3,000 of the grant to purchase health insurance. Murray says this would be enough for a basic policy as long as three reforms are made to the health care system: Everyone is rated the same by health insurance companies, state regulations on health care providers are relaxed and the same tax advantages that apply to company-provided health plans be extended to individually purchased plans.
Murray likewise sees advantages for retirement planning. He estimates a lifetime minimum-wage worker investing each year $2,500 of the annual grant in reasonable investments, and adding those investment returns to the continuing $10,000 grant in retirement, would be three times better off than with Social Security.
Of course, one big implication of the Murray idea is that it relies on people making good choices with their $10,000 grant. He partially addresses this concern by requiring the health insurance purchase, and he also says retirement savings could be mandated. Yet this still leaves almost half of the grant to be used any way the person wants. This is seen as a bonus by some and a problem by others.
There are many other ramifications of the Murray plan in areas like work, marriage and education that I don't have space to address. Suffice it to say that Charles Murray's idea of dramatically reworking our large governmental income transfer system will be hotly debated and discussed in the months ahead.
Get a head start and decide where you stand on this controversial new approach.
Dr. Mike Walden is a William Neal Reynolds Professor and extension