Monthly Stipends vs. The Welfare System

      People are beginning to think about and discuss incentives! Good! At last! Why is that? Because, as one of my true heroes Dr. Milton Friedman often said, “Incentives matter!” To explain further, he also said, “You get more of what you subsidize and less of what you tax.” And today we are subsidizing victimization and taxing performance. So what are we getting more of? (Easy question to answer.) In addition, people are also beginning to see that if we merge the ability to receive welfare with work requirements, people’s incentives to get jobs would be increased. And that is true. But we are also discovering that the expense of administering this bureaucratic approach outweighs the benefits. But we do want people to have incentives to work, so what approach should we use?

      The answer again comes from Dr. Friedman, who proposed that we use what he calls a Negative Income Tax. (I fully agree with his approach, but call it a monthly stipend program because I don’t like to use the word “negative.”) And what is that approach? With the numbers just being used for illustrative purposes, each person who is over 18 years of age and is either a citizen or here legally with a Green Card who earns no money would receive a government stipend of $18,000 each year, probably broken down into monthly payments of $1,500. But then for each dollar they earned between zero and $36,000 they would lose 50 cents of their stipend, so everyone would always have an incentive to earn the extra dollar. (Furthermore, no one would pay any taxes upon their first $36,000. Thus people who earned exactly $36,000 per year would neither receive any stipend nor pay any income taxes.) And it would not matter if people had just lost their jobs, decided to go back to school, or were just plain lazy. Then all other welfare programs would be abolished, except for people who have truly special needs.

      Think of the positive incentives people would have to improve themselves, as well as the administrative cost savings and the decrease of the government’s intrusions into people’s lives! As a further benefit, talking about incentives, under today’s welfare programs mothers and fathers now have a financial incentive not to live with each other. Why? Because a mother receives more welfare if the father does not live with her and her children than if he does. Harmful result! And that is not to mention that the father can also receive his own higher welfare payments if he lives alone. (Furthermore, by the way, are you aware of the statistic that well more than half of everybody in prison in our country today grew up in a family without a father in residence?) So let’s pursue the approach of a monthly stipend, and do away with our welfare system! What do you think?

Quote for the week: “The difference between genius and stupid is that genius has its limits.” Albert Einstein
Judge Jim Gray (Ret.)