In Our Hands by Charles Murray
In Our Hands: A Plan to Replace the Welfare State by Charles Murray
AEI. 214 pp. $20.00
Charles Murray first came to wide public attention in 1984 with his controversial book, Losing Ground. With a mixture of statistics and “thought experiments” involving a hypothetical couple named Harold and Phyllis, he argued that the anti-poverty programs of the 1960′s had halted and then reversed the social and economic progress being made until then by the poor, especially African-Americans. The book’s final chapter raised the audacious question of whether eliminating government assistance to the poor might not do more to solve the problem, by empowering those able to work and helping to put an end to the deepening culture of dependency.
Though initially provoking heated debate, Losing Ground‘s main claim eventually became broadly accepted, contributing substantially to the changes in welfare policies of the late 1990′s. These, by limiting access to public assistance, produced a dramatic decline in the number of people receiving welfare and a rise in the number of those gainfully employed.
But Murray himself never believed the changes went far enough, and the continuing woes of the welfare state have only confirmed his anxiety. His new book, In Our Hands, offers a remedy to those woes, which he has always seen as not just economic but moral and cultural in the broadest sense. Surprisingly, his plan would involve giving not just to the poor but to every adult American a sizable government check every year for life: in other words, a guaranteed income.
As Murray acknowledges, his plan is the latest incarnation of an idea first developed in the 1940′s by the economist George Stigler and later embraced and popularized by Milton Friedman on the Right and Robert Lampman, a University of Wisconsin economist, on the Left. Known as the “negative income tax,” it formed the basis of Richard M. Nixon’s Family Assistance Plan, put forth in his very first year in office as the centerpiece of his domestic-policy agenda, then spearheaded by Daniel P. Moynihan. Presidents Ford and Carter later offered their own versions, as did national leaders in Britain, Canada, and other countries. None, however, enjoyed much success in getting the idea enacted. In the United States, the election of Ronald Reagan, who had opposed Nixon’s plan, sounded its death knell.
In attempting to revive it now, Murray proposes to give $10,000 annually to every adult earning less than $25,000. Those crossing the income threshold of $25,000 would gradually receive less. At $50,000 of earnings, the payment would be reduced to a floor of $5,000, after which it would decline no more.
This is of course an expensive proposition. To pay for it, Murray would terminate all other forms of federal and state aid, not only to the elderly, the disabled, the unemployed, the sick, and the poor but also to farmers, students, public-housing tenants, children in day care, and a long list of businesses, nonprofits, and other groups that receive governmental assistance. According to Murray’s calculations, the money realized by ending these programs would be almost enough to fund his proposal immediately. By 2011, he estimates, even with its sums adjusted annually for inflation, his plan would cost no more than the programs it is replacing (assuming they grow as much as currently projected). After another decade, it would be generating sizable surpluses.
Not only would the U.S. Treasury be better off under this arrangement, argues Murray, but so would most Americans. By investing a portion of their annual government checks in private savings accounts, including those managed ultra-conservatively, future retirees would usually wind up with higher pensions than they would enjoy under Social Security—and they would still be getting their guaranteed-income checks, too. Likewise, if they used some of their payments to purchase medical insurance, they would be able to obtain as much health care as they do now, and probably on a more economical basis—particularly if laws were put in place permitting the creation of low-cost medical clinics and eliminating subsidies for high-cost health plans.
Not only the middle class would come out ahead, but so, above all, would the working poor and the unemployed. Indeed, writes Murray, the plan would “end involuntary poverty”: even after taking retirement and health-care payments into account, it would provide more money to most families than they receive from current assistance programs, even in the most generous states. The main exception would be single mothers without earnings, who (depending on where they live) might lose their eligibility for welfare and other specific benefits that currently exceed $10,000 annually.
In addition to the economic advantages he sees for his plan, Murray remains faithful to the larger view espoused in Losing Ground: namely, that the way government treats its citizens can strengthen, or weaken, families and communities. In his earlier book, he stressed that the rewards of programs like Aid to Families with Dependent Children (AFDC) had something to do with the proliferating incidence of single motherhood. Here, he predicts that a carefully calibrated guaranteed income might improve the behavior of young men otherwise tempted to abandon the women they had impregnated, since they would quickly discover how hard it was to hide their government checks from child-support collectors.
Murray sees a variety of other social pluses in the plan. With an annual income guarantee of $10,000 (or if married, $20,000), financially hard-pressed workers would have more leeway to move and change jobs, save for further education, or start a business. Couples would gain more freedom to make choices about marrying, becoming parents, or staying at home to raise children. With a greatly diminished set of government programs to turn to for help if they acted recklessly, more of them, Murray believes, would act responsibly. And the wholesale abolition of the welfare state could lead as well to a reinvigoration of the nation’s charities, enabling them not only to do a better job of providing services to those who need them but also fostering the virtues of generosity and compassion and strengthening civic ties within communities.
With large budget deficits looming inexorably, especially as “baby boomers” start to retire, all this would seem almost too good to be true. Given our current political stalemate, it probably is. But Murray, even while conceding the point, asks his readers to suspend judgment. After all, he suggests, if Social Security, Medicare, and other government programs continue as they are, their economic and social costs will in any case become so onerous that seemingly radical ideas like his can come to appear more feasible and, inevitably, more appealing.
Still, even on its own terms, it must be said that Murray’s plan fails to solve the pivotal problem that has beset all previous efforts to create a negative income tax. Because of how its payments are calculated, such a tax can either provide adequate help to the needy or reinforce work and families. It cannot do both at the same time, at least not while keeping government spending under control.
Murray starts his plan at $20,000 for a couple that has no other income—a generous amount that would, in fact, put a two-parent family with two children above today’s federal poverty line. But over half of our poor families are headed by a single parent. Such a parent would get only $10,000, an amount substantially below the poverty threshold and up to half of which would presumably have to be devoted to medical insurance and a retirement fund. Nor, in Murray’s scheme, would there be supplemental sources of assistance, such as food stamps or housing allowances, other than what might be provided by charities, many of which would themselves have suffered financially from the elimination of federal spending on social programs.
To avoid this pitfall, one might contemplate increasing the initial payment. But since that would mean increasing payments across the board, not just to the poorest of the poor, it would entail its own problems, substantially increasing costs and at the same time diminishing the plan’s work incentives. In the examples Murray provides, anyone crossing the income threshold of $25,000 would already lose approximately 60 percent of each additional dollar earned; only at earnings of $50,000 does the loss drop to 40 percent (approximately the current marginal tax rate at that income level). Raising the initial benefit to help single parents (or others with very low incomes) would only make this situation worse. Either the annual check would have to be phased down at an even faster rate, creating a discouragingly high tax burden for lower-middle-class recipients, or larger sums would have to go to a much bigger group of people, rapidly multiplying the program’s total costs.
To his credit, Murray offers a number of ingenious explanations as to why these problems might not be insurmountable in reality. He also counters possible objections to the plan’s purported effect on a person’s incentive to work. According to research on negative-income-tax plans of the 60′s and 70′s, he writes, secondary earners—mainly spouses and teen-age children—are indeed likely to reduce their working hours when benefits are given, but a family’s chief breadwinner is more apt to stay on the job full-time. To those who have suggested that a guaranteed income might actually increase divorce rates (since the money could be used as alimony), Murray responds that his own version could just as likely encourage families to stay together and thereby reduce the financial problems facing single mothers.
However these and other issues might play out in practice, it may be doubted whether even Charles Murray’s considerable and well-deserved reputation as a social-policy analyst can rescue an idea so likely to stir deep-seated opposition from different quarters. Arguments advanced by Moynihan and others on behalf of earlier models of the negative income tax never managed to convince those certain they were either mean-spirited attempts to harm the poor or hare-brained notions that would wreak havoc on low-wage businesses. Nor should one minimize the difficulty of getting all 50 states, as well as the federal government, to agree to any such plan.
Nonetheless, it would be a mistake to be dismissive. Like Losing Ground, In Our Hands is a powerful “thought experiment,” designed to push discussion of the problems of the welfare state past those perduring habits of mind that have blocked every effort to think seriously about the immense fiscal and social challenge that lies ahead of us. Like Losing Ground, too, it is informed by a profound moral vision of what makes for a healthy society and a self-confident citizenry. Fifteen years after Losing Ground was published, Murray’s way-out ideas had not only become discussable, they were being framed into law. Could it happen again?