Charles Murray And $10,000 For Everyone
By Justin Gardner | Related entries in Economy, Money, Social Programs
Want 10K a month year for life after you turn 21? (I just corrected the month/year thing. BIG mistake. Thanks to Brainster for pointing it out.)
Well, that’s the plan Charles Murray’s new book, In Our Hands : A Plan To Replace The Welfare State, puts forth and it is certainly intriguing…especially once you start digging into it.
But first, before we really get into this…a little dose of reality from the author in a Tech Central Station interview:
The economists say “first, we assume a free market”; “first, we assume frictionless prices,” and so forth. And so I will be the first to acknowledge to my readers that I am not under the illusion that Congressmen are going to read this book and say, “by George, this is it and we’re going to enact it.” I am trying to enter into the debate a radical new way of doing business that is going to take a while to sink in to the political consciousness enough to have a chance to be considered seriously.But that’s one ground rule. My readers have to say, “OK, we understand this is not politically feasible right now.” But the ground rule facing me is that I have to be practical about it. I have to say, this would work — not just in theory. If this were implemented, it would really do all the good things I say it would do in the 21st century United States. So that’s one aspect of thinking about what I’m proposing.
Okay, so now that it’s established we’re talking about something that won’t happen next year…let’s begin.
Murray recently talked to National Review and explained his plan further:
If you’ve reached your 21st birthday, are a United States citizen, are not incarcerated, and have a pulse, you get the grant, electronically deposited in monthly installments in an American bank of your choice with an ABA routing number. If you make more than $25,000, you pay part of it back in graduated amounts. At $50,000, the surtax maxes out at $5,000. I also, reluctantly but with good reason, specify that $3,000 has to be devoted to health care. Apart from that, you can use the grant for whatever you want. Enjoy.
And here are the benefits concerning retirement, again from Murray…
Someone turning 21 has about 45 years before retirement. The lowest average real return for the U.S. stock market for any 45-year period since 1801 is 4.3 percent. Round that down to 4 percent and work the magic of compound interest. Just a $2,000 contribution a year amounts to about $253,000 at retirement. A low-income couple that has followed that strategy retires with more than half a million dollars in the bank plus $20,000 continuing annual income from the grant. Sounds comfortable to me. As for “foolproof,� think of it this way: All of the government’s guarantees for Social Security depend on the U.S. economy growing at a rate that, at the very least, is associated with an historically worst average return of 4 percent in the stock market (actually, it needs a much stronger economy than that). Absent economic growth, no plan is foolproof. With economic growth, mine is.
Now this plan leaves Social Security alone, meaning it doesn’t replace it, but in the long run it very well may (my words, not his). Of course, since Murrary is factoring in market forces, he doesn’t want to be so bold. An understandable position.
Also, Murray discusses the potential costs, and how our government will be saving nearly $500 billion a year in the long term…
Right now, the plan I propose is more expensive than the current system. As of 2011, costs would be equal. And let’s fact it, there’s no chance it’s going to be implemented before 2011. And by 2020, the projected costs of the plan are about half a trillion dollars a year less than the projected costs for the current savings. So there are savings in the out years.
An important note, the estimates of 4% per year are lower than rates current savings accounts are offering. Sure, the economy could change, but it doesn’t change the fact that those are the numbers currently. And if you’re talking about the overall market performance, those numbers are extremely conservative.
Personally, I think the left will decry Murray for two reasons. He co-authored The Bell Curve and he thinks that the welfare state harms its recipients. Those are two unpopular positions in liberal circles, and I understand why. I won’t defend The Bell Curve because I think that historic, economic and social hardships have been a key factor in the development of the intellect of minority populations in our society. To be fair, some scientists have come to Murray’s defense…and they very well could be correct. But to Murray’s second point, I do have a gut feeling that his other assertion, that the welfare state doesn’t help those same people rise out of their circumstances, has merit.
Now, concerning Murray’s ideas, a quasi-similar offer has been put forth in recent books such as The Stakeholder Society, which proposed a 80K grant given to everybody once they reached 21. That plan would have been funded by a 2% tax of the top 41%. To be sure, an interesting idea as well.
In any event, let’s discuss Murray’s proposition and see what comes of it. Read the interviews and tell me what you think.
Also, listen to Tech Central Station’s podcast of Murray’s interview here.
(h/t: The Mighty Middle & Centerfield)
This entry was posted on Monday, April 3rd, 2006 and is filed under Economy, Money, Social Programs. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.
April 3rd, 2006 at 9:02 am
Interesting premise. I disagree however that modern day savings accounts reach a 4% rate of return. The only place you find anything remotely close are a handful of online banks’ money market accounts, some with or without check writing priveledges. The majority of banking institutions, especially the brick and mortar banks, don’t even approach this rate for their premier customers. The handful of banks I know of that are in the ball park (and there are probably others): HSBC, ING, Emigrant Bank, Stonebridge Bank. No standard savings accounts are at this rate however.
April 3rd, 2006 at 9:04 am
I think I can sum up Murray’s plan like this:
Give everyone welfare so we don’t have to call it welfare anymore.
In my mind, his “solution” is just a semantic one.
April 3rd, 2006 at 10:23 am
Fascinating idea, but if we’re just going to be giving things out, I’d rather pay for everyone to have healthcare. Unless you force people to put the money into savings, most people will not save a dime of their annual handout (found money tending to be spent a lot faster than earned money).
I have a strong aversion to any such magic-bullet solution.
April 3rd, 2006 at 11:10 am
Read closer. 3K of that 10K has to spent on healthcare.
And yes, true, some people would spend it unwisely. But that’s their cross to bear since there would be nothing else to fall back on.
April 3rd, 2006 at 11:26 am
Justin, yeah, I saw the $3000 part. But why do it that way? Why use the populace as a healthcare middleman when you could just transfer the money straight from the government to the medical industry. I do believe that people will make smarter medical choices if they’re spending their own money but will they view the $3000 as their own money? It’s not like they get to spend it on a new TV if they don’t elect to spend it on a needless visit to the emergency room.
Also, in regards to people who don’t save their handout, are you willing to just let them suffer? Sure the fault would be theirs but the burden will still be ours. I’m not at all opposed to spending government money to help Americans out, but I don’t see where just dispensing cash like an ATM is the best course of action. Money alone does not create opportunity. There has to be more to it, I think.
April 3rd, 2006 at 12:31 pm
I’ll repeat the comment I made over at Michael’s place.
It’s easy to write the words “subsidies to business” but removing them will be much, much more difficult. One of the key problems is that the subsidy recipients don’t see them as subsides: they seem them as their due. Patents, copyrights, licensing, highways, and air traffic control are all subsidies to business. The common law system is a subsidy to lawyers. Avoidance of malpractice, i.e. accepted practice, as the standard for doctors (rather than harm) is a subsidy to physicians. Bankruptcy law is a subsidy to business (and individuals).
Nobody wants $10,000 a year if everybody else is also getting $10,000 a year. They want the big score and they want more than the other guy. Each and every constitutency will fight to defend its subsidy for its very survival (in a lot of cases that’s pretty much what it means).
It’s politically impossible. The sort of thing that comes out in a dorm room bull session.
Another problem is that for this to work there has to be the political will to allow those who spend their $10,000 imprudently to starve, bleed to death, or die of exposure. Otherwise you’re just piling $10,000 per person per year on top of our existing system. The Swiss could manage it. We can’t.
April 3rd, 2006 at 1:30 pm
Well, if people buy healthcare, they’re buying a plan…not just trips to the emergency room. But maybe I’m not understanding you correctly.
Individuals over 21? Yes. Children? No. And Murray has a plan for children too.
In any event, I’m going to read the book and get more info.
April 3rd, 2006 at 2:06 pm
Justin:
Let them suffer? How very Republican of you! ; )
I should read the book too, but I wasn’t assuming the $3000 would be earmarked for a health plan. I assumed it would be available to cover deductibles, co-pays and out-of-network expenses. But maybe it’s only for those who don’t otherwise have healthcare.
April 3rd, 2006 at 2:21 pm
True, people want to compete, but I think you’re ignoring the other side of this coin. So, I’ll throw some of them out there. Having this extra capital will help people create more of an ownership society. It will encourage more homebuying. It will encourage more marriage. And it could certainly help the hopelessness that plagues many who are below the poverty level, and don’t have the skills nor the means to climb out of it. There will be still be competition. People will still want to make more money. But an even, fair distribution of the money would create a more equal society on a whole.
Listen, we need new ideas. This is one. There will be more. But what’s bugging the $#!+ out of me is how easily people will ignore this without really digging into it.
That’s happening right now in every major metropolitan city…and those people are getting nothing from the government because they have no address.
Listen, we can’t cure all of these problems, but giving people the means to find shelter and adequate healthcare is important. And so here is a plan. Like it or not, Murray’s ideas tackle them head on and actually save us a TON of money in the long run.
April 3rd, 2006 at 2:24 pm
What I’m saying is that certain people are going to fall through the safety nets, regardless of whether we like it or not. This plan isn’t going to fix it, but it’s a start towards providing people with real money that they can spend to empower themselves.
April 3rd, 2006 at 3:26 pm
“Want 10K a month for life after you turn 21?
Well, that’s the plan Charles Murray’s new book….”
Hate to spoil the party here, but that’s $10K per annum.
April 3rd, 2006 at 4:05 pm
Instead of tripping off on preconceptions and political claptrap, how about you read this interview with Murray himself
THEN start talking…
April 3rd, 2006 at 4:08 pm
Oh shoot, you’re right. Damn. Thanks Brainster.
April 3rd, 2006 at 4:31 pm
I thought this quote was interesting:
I am more and more sympathetic to the proposition that in the lottery of life some people come up with the short end of the stick on a whole bunch of different dimensions. It’s not so bad if you don’t have an IQ of 130 if you’re beautiful, charming, or industrious. After all, there are all sorts of bundles of qualities that make it very hard to rank people from “high” to “low.”
It is also true that there are substantial numbers of people who are not that smart, not that beautiful, not that charming, not that industrious, for reasons that they have no control over — and they’ve gotten the short end of the stick. So if I’m talking about using government to redistribute some resources to that person, I’m not going to lie awake nights thinking that I’ve done some awful thing by helping them out. I’m happy with this compromise.
Welcome to liberalism, Mr. Murray.
April 3rd, 2006 at 8:27 pm
OK, I read the interview. I still call bullshit. It must be recognized that our form of capitalism will always have the long term unemployed, the permanently unemployed and the perpetually underemployed. Mr. Murray’s proposal says that these people will receive $7000 a year after the $3000 paid for a health plan. No more. No food stamps. No Section 8 help to pay the rent. What country or planet do the people who think that this can cover rent, food, utilities and clothing live on? Let me guess, their answer relies on overstressed private charities suddenly having lots more money. I also love Mr. Murray’s generalization that anyone outside of his approved of segments of government is living a non-productive life.
Libertarianism, the only philosophy dumber than communism.
April 3rd, 2006 at 10:04 pm
To Justin: thanks for balanced coverage of a very interesting proposal. It’s (IMHO) exactly the kind of thing that Donklephant and other centrist blogs should be addressing since it crosses traditional lines.
To Blue: it’s not just semantics! Without having read the book, I’ll bet that a key part of the argument is that much of current welfare money is wasted on bureacracy. Also, cash is *empowering* in a way that a long list of programs (food stamps, Section 8, blah, blah, blah) is not. For example, people who have ambition but currently no resources could pool their funds to start small companies.
To Tom: many on the libertarian/center/right have at least as much compassion for the poor as those who embrace “liberalism”; the key disagreement is over means not ends. (I know it’s fashionable in many quarters to demonize the right, but it’s mostly wrong and certainly counter productive.) To cite just one example: Milton Friedman has been talking about a similar idea for decades.
To Jim S: $14K/yr for a couple (married or not), $28K/yr for 4 roomates who share a house — just to pick 2 scenarios. No, it’s not living high on the hog, but it looks pretty decent for someone who doesn’t have a job.
Libertarianism is all about the freedom of people to make choices; not sure why you are so hostile to that philosophy.
April 5th, 2006 at 9:00 pm
The reason for my “hostility” is because Libertarianism is a philosophy with as much of a basis in reality as communism. It believes in the fairy tale that capitalism is so pure and good and perfect that it is capable of providing a job for everyone who wants one and that the only people who can have the system fail them are those who fail the system by being lazy. While there are those who fit that description they aren’t the majority of the poor by any means. And Murray’s proposal comes down to pretending to give a damn.
April 17th, 2006 at 1:49 am
[...] And yes, much like Charles Murray’s plan to reform the Welfare State in his book ‘In Our Hands’, this new flat tax idea calls for accountability for those who want rebates. How? They have to show they’re buying health care and save for their retirement. That retirement part isn’t in this new flat tax plan, but maybe it should be. [...]