In this video, Geoffrey Canada of the Harlem Children’s Zone and Peter Druckmiller, a hedge fund manager, make their argument that the uncontrolled rise of entitlements and government debt is an unconscionable theft from children and the future generations. Finally, those who care about government and the future are starting to realize that protecting entitlements is not a liberal or a conservative issue, but a generational issue.
Entitlements now make up 67% of all federal money spent every year. That is up from 50% in 1994. And they are the fasted growing part of government spending. The result is ever-less money for education, infrastructure, and building a common world. Here is what Geoffrey Canada says:
We’re going to spend all of our kids’ money right now. Guys my age in their 60s. We are not thinking about the next generation now. I think this is a disaster for America.
We are going to spend money that ought to go toward education. It ought to go to their retirement. It ought to go to research and development. We are going to spend that money now on Medicare, Medicaid, and social security because we don’t have the courage to tell my generation, “Hey guys, we’re going to have to turn this down.”
Watch the video.
You can also read their editorial, “Generational Theft Needs to Be Arrested.”
The HAC blog has been worrying about the generational injustice of our entitlement system as well as the hollowing out of government. Click here to read "Generational Injustice." And "The War of the Generations."
I watched President Obama’s second Inaugural Address with my seven-year-old daughter. She had just completed a letter to the President—something she had been composing all week. She was glued to the TV. I found myself tearing up at times, as I do and should do at all such events. “The Star Spangled Banner” by Beyonce was… well, my daughter stood up right there in the living room, so I followed suit. The Inaugural Poem by Richard Blanco began strong—I found the first two stanzas powerful and lyrical.
The invocation of “One sun rose on us today,” is Whitmanesque, as is: “My face, your face, millions of faces in morning’s mirrors.” That second verse really grabbed me:
My face, your face, millions of faces in morning’s mirrors,
each one yearning to life, crescendoing into our day,
pencil-yellow school buses, the rhythm of traffic lights,
fruit stands: apples, limes, and oranges arrayed like rainbows
begging our praise. Silver trucks heavy with oil or paper—
bricks or milk, teeming over highways alongside us,
on our way to clean tables, read ledgers, or save lives—
to teach geometry, or ring-up groceries as my mother did
for twenty years, so I could write this poem.
I was hooked here, with Blanco’s rendition of a motley American life guided by a rising sun. But the poem dragged for me. I lost the thread. Still, I am so grateful for the continued presence of poetry at inaugural events. They remind us that the Presidency and the country is more than policy and prose.
In the President’s speech itself, there was too much politics, some prose, and a bit of poetry. There were a few stirring lines affirming the grand dreams of the United States. His opening was pitch perfect:
Each time we gather to inaugurate a President we bear witness to the enduring strength of our Constitution. We affirm the promise of our democracy. We recall that what binds this nation together is not the colors of our skin or the tenets of our faith or the origins of our names. What makes us exceptional -- what makes us American -- is our allegiance to an idea articulated in a declaration made more than two centuries ago:
“We hold these truths to be self-evident, that all men are created equal; that they are endowed by their Creator with certain unalienable rights; that among these are life, liberty, and the pursuit of happiness.”
Storytelling, Hannah Arendt knew, was at the essence of politics. The President understands the importance and power of a story and the story of America is one of the dream of democracy and freedom. He tells it well. Some will balk at his full embrace of American exceptionalism. They are right to when such a stand leads to arrogance. But American exceptionalism is also, and more importantly, a tale of the dream of the Promised Land. It is an ever-receding dream, as all such dreams are. But that means only that the dream must be kept alive. That is one of the purposes of Presidential Inaugurations, and President Obama did that beautifully.
Another stirring section invoked the freedom struggles of the past struggles for equality.
We, the people, declare today that the most evident of truths –- that all of us are created equal –- is the star that guides us still; just as it guided our forebears through Seneca Falls, and Selma, and Stonewall; just as it guided all those men and women, sung and unsung, who left footprints along this great Mall, to hear a preacher say that we cannot walk alone; to hear a King proclaim that our individual freedom is inextricably bound to the freedom of every soul on Earth.
The President, our nation’s first black President now elected for a second term, sought to raise the aspiration for racial and sexual equality to the pantheon of our Constitutional truths. Including the struggles of gay Americans—he mentioned gay rights for the first time in an inaugural address—the President powerfully rooted the inclusivity of the American dream in the sacred words of the Declaration of Independence and set them in the hallowed grounds of constitutional ideals.
When later I saw the headlines and the blogs, it was as if I had watched a different speech. Supposedly the President offered an “aggressive” speech. And he came out as unabashedly liberal. This is because he mentioned climate change (saying nothing about how he will approach it) and gay rights. Oh, and many saw it as unabashedly liberal when the President said:
For we, the people, understand that our country cannot succeed when a shrinking few do very well and a growing many barely make it. We believe that America’s prosperity must rest upon the broad shoulders of a rising middle class. We know that America thrives when every person can find independence and pride in their work; when the wages of honest labor liberate families from the brink of hardship. We are true to our creed when a little girl born into the bleakest poverty knows that she has the same chance to succeed as anybody else, because she is an American; she is free, and she is equal, not just in the eyes of God but also in our own.
How is it “liberal” to value the middle-class and pride in work? There was nearly nothing in this talk about the poor or welfare. It was about working Americans, the people whose labor builds the bridges and protects are people. And it was about the American dream of income and class mobility. How is that liberal? Is it liberal to insist on a progressive income tax? Granted, it is liberal to insist that we raise revenue without cutting expenses. But where was that said?
And then there are the swarm of comments and critiques about the President’s defense of entitlements. Well here is what he said:
We understand that outworn programs are inadequate to the needs of our time. So we must harness new ideas and technology to remake our government, revamp our tax code, reform our schools, and empower our citizens with the skills they need to work harder, learn more, reach higher. But while the means will change, our purpose endures: a nation that rewards the effort and determination of every single American. That is what this moment requires. That is what will give real meaning to our creed. We, the people, still believe that every citizen deserves a basic measure of security and dignity. We must make the hard choices to reduce the cost of health care and the size of our deficit. But we reject the belief that America must choose between caring for the generation that built this country and investing in the generation that will build its future. (Applause.) For we remember the lessons of our past, when twilight years were spent in poverty and parents of a child with a disability had nowhere to turn.
If I read this correctly, the President is here saying: We spend too much on health care and we need to cut our deficit. Outworn programs must change and we need innovation and technology to improve our schools even as we reduce the cost of education. We must, he says, “make the hard choices to reduce the cost of health care and the size of our deficit.” Yet we must do so without abandoning the nation’s creed: the every American has equal worth and dignity. This is a call for changing and rethinking entitlements while cutting their cost. It is pragmatic and yet sensible. How is it liberal? Is it now liberal to believe in social security and Medicare? Show me any nationally influential conservative who will do away with these programs? Reform them, yes. But abandon them?
More than a liberal, the President sounded like a constitutional law professor. He laid out broad principles. We must care for our fellow citizens. But he left open the way that we might do so.
Perhaps the most problematic section of the President’s speech is this one:
We do not believe that in this country freedom is reserved for the lucky, or happiness for the few. We recognize that no matter how responsibly we live our lives, any one of us at any time may face a job loss, or a sudden illness, or a home swept away in a terrible storm. The commitments we make to each other through Medicare and Medicaid and Social Security, these things do not sap our initiative, they strengthen us. They do not make us a nation of takers; they free us to take the risks that make this country great.
Here the President might sound liberal. But what is he saying? He is raising the entitlement programs of the New Deal to Constitutional status, saying that these programs are part of the American way of life. He is not wrong. No Republican—not Reagan, not Romney, not Paul Ryan—proposes getting rid of these programs. They have become part of the American way of life.
That said, these programs are not unproblematic. The President might say that “these things do not sap our initiative, they strengthen us. They do not make us a nation of takers; they free us to take the risks that make this country great.” But saying it does not make it true. There are times when these programs care for the sick and unfortunate. And yet there are no doubt times and places where the social safety net leads to taking and weakness. It is also true that these programs are taking up ever more of our national budget, as this chart from the Government Accounting Office makes clear.
The President knows we need to cut entitlements. He has said so repeatedly. His greatest liability now is not that he can’t control opposition Republicans. It is that he doesn’t seem able or willing to exert leadership over the members of his own party in coming up with a meaningful approach to bring our entitlement spending—spending that is necessary and rightly part of our constitutional DNA—into the modern era. That is the President’s challenge.
The problem with President Obama’s speech was not that it was liberal. Rather, what the President failed to offer was a meaningful example of leadership in doing what he knows we must do: Rethinking, re-imagining, and re-forming our entitlement programs to bring them into the modern era.
One of our Arendt Center members sent me this latest article from Fareed Zakaria. The numbers can be dizzying, but the basic thesis is one that we at the Arendt Center have been worrying about: Overspending on entitlements and debt are bringing about a situation in which the essential public role of government is being crowded out by its social demands. As Zakaria writes,
The continued growth in entitlements is set to crowd out all other government spending, including on defense and the investments needed to help spur the next wave of economic growth. In 1960, entitlement programs amounted to well under one-third of the federal budget, with all the other functions of government taking up the remaining two-thirds. By 2010, things had flipped, with entitlement programs accounting for two-thirds of the budget and everything else crammed into one-third. On its current path, the U.S. federal government is turning into, in the journalist Ezra Klein's memorable image, an insurance company with an army. And even the army will have to shrink soon.
No doubt government has the role of helping its citizens in need. And our modern entitlement programs are an essential part of a just polity. But we now risk misunderstanding government for insurance. So much so that, according to the a report by Third Way, in 2029 the US will spend as much on social security, Medicare, Medicaid, and debt payments as it takes in from taxes. Everything else we want to spend money on as a country will have to come from either higher taxes or further debt.
The real problem here is not economic so much as political. It is easy to say that the US has always been partisan and that it is very American to disdain government. Zakaria offers perspective, citing a 1975 report from the Trilateral Commission entitled The Crisis of Democracy, that predicted gloom in the United States and Europe. We should be aware of a human tendency to elevate our present difficulties into tragic flaws. And yet, simply because last time things worked out, we should not assume that they will this time as well.
What is different this time? While the United States remains a vibrant economy, its political system is increasingly broken. It is captured by special interests and addicted to debt. We spend $4 on our elderly population for every $1 we spend on our young. Schools are failing. We are cutting public pensions and obliterating private pensions outright with 401k savings programs that don’t provide people enough money to live on. Bridges are falling. Our roads, railways, and airports are in disrepair. And our political debate is consumed with taxes and spending. I know wise cynics say politics is politics, but the present idiocy does seem different. We should never assume that just because it worked out the last time, it will again. There are moments of new occurrences in politics. And it is possible that our current political crisis really does portend something new.
At least the public seems to think so:
Anger with politicians and institutions of government is much greater than it was in 1975. According to American National Election Studies polls, in 1964, 76 percent of Americans agreed with the statement "You can trust the government in Washington to do what is right just about always or most of the time." By the late 1970s, that number had dropped to the high 40s. In 2008, it was 30 percent. In January 2010, it had fallen to 19 percent.
Zakaria offers numbers upon numbers. I am sure some are more right than others. But the overall trend is undeniable. His essay is more than worth a read.
Since our recent weekend read from Roberto Unger regarding the upcoming presidential election is generating so much discussion, we thought we would re-run this "Quote" of the week from Roger Berkowitz that was originally posted in February. "The Courage to Lead" seemed an apt follow up .
"Whoever entered the political realm had first to be ready to risk his life, and too great a love for life obstructed freedom, was a sure sign of slavishness. Courage therefore became the political virtue par excellence."
Courage is the first virtue of politics; and cowardice is one reason politics is so lame today. Politicians hem and haw, searching for an answer that won't offend. They serve up focus-group tested sound bites, making them seem less like people then robots. It is as if leaders have gone on strike; unwilling—or unable—to make decisions anymore, except when forced to.
- The President's healthcare plan might have been courageous, if it had actually dealt with the rising cost of healthcare and the unchallenged assumption that everyone has a right to all the healthcare they want at all times.
- Paul Ryan and Ron Wyden's joint plan for entitlement reform might actually have been courageous, if it had called for shared sacrifice of the wealthy as well as the poor and shrinking middle classes.
- President Obama's current budget plan, calling for a 1% decrease in discretionary spending over 10 years, would be courageous, if it didn't leave mandatory entitlement programs like Medicare, Medicaid, and Social Security to grow by 96% over the same 10 years. By 2022, under the President's budget, 77% of the Federal Government's budget will be non-discretionary spending—an abdication of democracy and leadership that is increasingly taking the vast majority of political decisions out of the hands of those elected to govern the nation.
- And in Europe, Angela Merkel and the German political elite have simply waited while first Greece and then Ireland, Portugal, Italy, and Spain have flirted with disasters. Greece and Italy are now governed by technocratic governments specifically empowered to override democratic decisions. As chilling as that sounds, it is in many ways simply a foretaste of what is coming to the rest of us, as we hand increasing power over our fates to technocratic decision makers. Driven by an overriding concern for efficiency and growth, our politics is increasingly governed by economic decision-making.
To re-imagine leadership for today, we might begin with thinking about what Arendt meant by courage as the chief virtue of politics.
First, courage is the virtue of the person who leaves the security of private life and risks death and ridicule for an idea. Who needs the headache of running for politics or sleeping out in the cold in Zuccotti Park? It is risky and time-consuming, when one could be making money, dining out, or playing with the kids. To throw oneself into the political fray takes chutzpah—and not a little courage.
But simply entering politics does not make one courageous, especially when we are speaking about those who make their living by politics. Professional politicians, lobbyists, and aides don't risk their lives and livelihood; on the contrary, politics is the means with which they secure their fortunes.
Beyond the business of politics, the courageous politician must exercise freedom—something more difficult and rare than usually imagined. Freedom, which Arendt calls the "raison d’etre of politics,” names the ability to "call something into being which did not exist before, which was not given, not even as an object of cognition or imagination and which, therefore, could not, strictly speaking, be known." Freedom thus demands the courage to act without a script in ways that make others pay attention. The free act surprises; it is noticed.
What elevates such a free act to political relevance is that it not only surprises, but it also inspires. The free act (freedom and acting are synonyms for Arendt) leads others to act as well. By way of responses, the free act is talked about and turned into stories. In this way the free act re-narrates and thus re-makes our common world. That is why the free act is political and how it can change the world.
In 1946, shortly after arriving in the U.S. as a Jewish refugee from Germany, Arendt wrote, "There really is such a thing as freedom here and a strong feeling among many people that one cannot live without freedom." Arendt loved America, and became a citizen eagerly. Still, she worried that the greatest threat to American freedom was the sheer size of America alongside the rise of a technocracy. The scope of this country combined with the rising bureaucracy threatened to swallow the love for freedom she saw as the potent core of American civic life. How could free acts be meaningful, and not be swallowed up by the nation's voracious appetite for the new.
Arendt's answer is that political action must be measured in terms of greatness. Not only must political action be courageous action, action in the public sphere that can either succeed or fail. Political action must also aim at immortality. It must seek not merely to shock, but to build new stories, new institutions, and, thus, new worlds. Political leaders, Arendt argued, are those who act in unexpected ways and whose actions are so surprising and yet meaningful as to inspire the citizens to re-imagine their sense of belonging to a common people with a common purpose.
As politics becomes increasingly driven by the democratic and technocratic need to appeal to the wishes of the people, Arendt asks, how can we maintain the ideal of freedom and the possibility of leadership? This is an especially timely question. Amidst the leaderless paralysis of our current politics, one wonders where real, unifying leaders might come from — leaders, in the words of David Foster Wallace, who “help us overcome the limitations of our own individual laziness and selfishness and weakness and fear and get us to do better, harder things than we can get ourselves to do on our own.” Such leaders seem unlikely to develop under the current system.
If we are to foster the kinds of leaders who might call us to our better selves, we will need to welcome those who show courage. It is too easy to tear down and criticize those who enter politics. New ideas are immediately suspect, and just as quickly shown to be self-interested and partisan. All of this is true. But we need to make room for failure in politics if we are going to find the risk-taking leaders we need.
Occupy Wall Street focused attention on one conception of class conflict-the super wealthy against the 99%. As successful as OWS was in spreading its message, almost no legislative agenda emerged.
The Tea Party focused its attention on the tax burdens faced by the middle classes and the upper middle classes. The villain for the Tea Party is not the .5% who earn over $3 Million every year, but the firefighters and policemen and teachers who protect us and educate our children. The battle the Tea Party is fighting is against a vision of big government that is part reality and part fantasy.
The Tea Party's battle goes to the heart of who we are as a nation and it is less a battle between rich and poor than between progressives and conservatives. The Tea Party has given laser-like focus to what will now be a defining battle of the decade: Is the government going to continue to play a leading role in providing our health care, protecting the environment, and supporting our industries.
After Tuesday, one must face the facts that the Tea Party is winning in the democratic forum. Four votes Tuesday make this clear.
•Scott Walker's victory in the recall election in Wisconsin proves that even in democratic states with a historically pro-union electorate, the anger against public unions is palpable.
•Voters in San Diego and San Jose approved referendum that not only cut future pension benefits for public workers but more radically cut pensions for current workers as well.
•The City Council in Stockton, California granted the City Manager authority to declare bankruptcy—Stockton would be the largest city ever in the US to have done so.
It is important to note that the battle is not over welfare or even over healthcare. Scratch beneath the surface and the Tea Party is not anti-welfare. In The Tea Party and the Remaking of Republican Conservatism, Theda Skocpol and Vanessa Williamson, Harvard scholars who have interviewed adherents of the new insurgency in different regions of the country, report that:
83% of South Dakota Tea Party supporters said they would prefer to “leave alone” or “increase” Social Security benefits, while 78% opposed cuts to Medicare prescription drug coverage, and 79% opposed cuts in Medicare payments to physicians and hospitals…. 56% of the Tea Party supporters surveyed did express support for “raising income taxes by 5% for everyone whose income is over a million dollars a year.
While the Tea Party activists are eager to shrink government, they do not seem to welcome a decimation of the welfare state. If the battle is not over a minimal welfare state, it is a battle over public sector unions.
Why are public sector unions so important?
My colleague and Arendt Center friend, Walter Russell Mead, articulates an answer. At the core of the democratic left for decades has been the "belief in a strong, well-funded state." The many diverse environmentalists, egalitarians, and progressives have various agendas, but all depend on a vibrant bureaucracy to guide and rationalize public and private life. Some want government to fund schools and universities; other want government to save the environment; another group wants government to guarantee racial, sexual, gender, and religious equality; many want government to provide universal healthcare or guarantee a college education to anyone who wants it. In all these cases, what progressives want, in Mead's words:
Is control of the progressive, bureaucratic government machinery of the 21st century [which] is both the prize for whose control they struggle and the agent they hope will make their dreams real.
Mead encapsulates why the battle over public sector unions is so crucial at this juncture:
A Democratic Party dominated by its public sector unions is a party married to government and to bureaucracy. To the degree that the public unions shape its agenda, the Democrats become a lobby for the servants of the state. For the unions who represent its employees, the bureaucratic, civil service state is a solution permanently in search of new problems to solve and new worlds to conquer. The power of the public unions within the party pulls Democrats much farther to the left than they would otherwise go.
This is one reason the Wisconsin reforms stimulated such a powerful and united emotional wave of push back from virtually every section of the left. The threat to the public unions isn’t just a threat to a powerful source of funding for left-liberal candidates and to strong organizations with political experience and muscle; it’s a threat to the heart of the left coalition and to the structures that give the left much of its power in Democratic and therefore in national politics.
But the dominance of the public unions in the left had consequences for the left itself — bad ones. In contemporary America, the public sector unions are essentially a conservative constituency. That is, their core goal is to get more resources in order to fight all but superficial change in the structures their members inhabit. They want ever growing subsidies to the postal service, the public school system, the colleges and universities, even to health care — but they do not want the kind of reforms that could make these institutions more efficient, more productive, more serviceable.
Mead offers wise counsel. One can of course believe that the reason for the victories in Wisconsin, San Jose, Stockton, and San Diego is simply the deep pockets of the Koch brothers. And those pockets are deep and deceptive. But money alone does not explain the voters' abandonment of public unions and the progressive model. The nation is seriously rethinking the role of the state and the public in our lives. We should be thinking with them. You can read more of Mead's post here.
Are the Tea Party and Occupy Wall Street part of the same phenomenon? Both are populist responses to increasingly out of touch political, business, and intellectual elites. Many on the left point out that the Tea Party is predominantly white and older. That is true. And yet these privileged, older, white people feel they are losing control of their country. They are resentful. Many on the right point out that the Occupy Wall Street movement is largely made up of privileged liberal arts graduates. They are right. But these graduates have been sold a false bill of goods, told that their gold-plated educations would guarantee them the ability to live well while doing what they want. They see their colleagues working on Wall Street making millions in questionable ways. They are also resentful.
Beyond resentment, both sides also can articulate claims of justice. For Tea Partiers, the coddling of illegal immigrants has become a defining issue of the unwillingness of the elite to enforce the law. For Occupiers, the extraordinary wealth of the upper 1% (actually, the top .5%) is a rallying cry that something truly is wrong with our political system.
This week in the New York Review of Books, Sam Tanenhaus takes a closer look at the Tea Party phenomenon and its influence on Republican politics. One surprising conclusion is that the Tea Party is not the force that is driving Republicans to their most conservative and right wing positions. On the contrary, Tanenhaus portrays the Tea Partiers as more moderate than extremist:
In The Tea Party and the Remaking of Republican Conservatism, Theda Skocpol and Vanessa Williamson, Harvard scholars who have interviewed adherents of the new insurgency in different regions of the country, report that
fully 83% of South Dakota Tea Party supporters said they would prefer to “leave alone” or “increase” Social Security benefits, while 78% opposed cuts to Medicare prescription drug coverage, and 79% opposed cuts in Medicare payments to physicians and hospitals…. 56% of the Tea Party supporters surveyed did express support for “raising income taxes by 5% for everyone whose income is over a million dollars a year.”
These views, which are aligned with those of moderate Republicans and Democrats, corroborate the findings in a 2010 New York Times poll of Tea Partiers, which concluded: “Despite their push for smaller government, they think that Social Security and Medicare are worth the cost to taxpayers.”
The Tea Party that Tanenhaus describes is one that overwhelmingly wants to preserve social security and Medicare, two programs that are often targeted angrily by Republican politicians. While the Tea Party activists are eager to shrink government, they do not seem to welcome an decimation of the welfare state.
What unites the Tea Party and Occupy Wall Street movement is a conviction that America is abandoning its exceptional history as a land of freedom, law, and equality. For the Tea Party, we are experiencing a cultural decline, one epitomized by illegal immigration and welfare—two issues that have been wrongly painted in overly racial hues. For Occupy Wall Street, the decline is imagined as a takeover by the rich of an American meritocracy and also of our democratic politics—although often forgotten is the fact that the wealthy are neither homogeneous nor exclusively conservative.
What the Tea Party represents is the latest version of a long-standing conservative insurgency in the United States, a movement that has wielded influence but never had the votes or power to dominate the Republican party or the country. Occupy Wall Street offers a new force in recent American Politics, a left-wing insurgency. As such, it has much to learn from and even work with in the Tea Party. One might begin by thinking more deeply about the place of the Tea Party in American politics, and for that there are few better places to begin that Tanenhaus' essay. Enjoy it for this weekend's Weekend Read.
A reader responds to my post on The Great Cultural Divide and reminds me that perhaps Charles Murray's most interesting suggestion in his new book, Coming Apart: The State of White America, 1960–2010, is for a Basic Income Guarantee (BIG) or what used to be called a "negative income tax." The post, by a reader named Murfmensch, reads:
Murray also calls for a Basic Income Guarantee to replace all other government provisions. I think his particular proposal would harm the wrong people. He thinks provisions for “widows and orphans” have wrought harms that I don’t see. However, I think a Basic Income Guarantee, funded by a tax on pollution and/or income past twice the median, would increase the number of people conducting civic, cultural, entrepreneurial, and political work. Alaska has a small BIG and it seems to help out in this way.
One point Murray made at a conference was interesting. With a BIG, not only would people receive money they need, others would [not] know you are receiving money.
While I don’t know what amount would “do the trick” I think a BIG would offer a corrective to problems that Hannah Arendt diagnoses as stemming from a “job-holder” society.
The Basic Income Guarantee is basically a refashioning of the proposal for a negative income tax (NIT), which is commonly thought to have originated with economist Milton Friedman, who advocated it in his 1962 book, Capitalism and Freedom. I have long been an advocate of a negative income tax, for many of the reasons Murfmensch mentions.
A negative income tax, as Friedman wrote in 1968 in Newsweek,
is to use the mechanism by which we now collect tax revenue from people with incomes above some minimum level to provide financial assistance to people with incomes below that level.
The point is to replace the overlapping and bureaucratic welfare programs in society (welfare, food stamps, unemployment, etc.) with a simple cash payment to every citizen.
Let's imagine that every person would receive—to take just one number often used—$8,000/year. Whatever the number, it is one we determine is necessary to live with some dignity in contemporary society. If you make $0 in a year, you receive $8,000 from the IRS—in essence a negative income tax. If you make $5,000, you'd receive $3,000. Anyone making more than $8,000 pays no taxes on that first $8,000 and begins paying the "positive" income tax on all extra income that supports those who make nothing. A family of four with no income would receive $32,000/year. With your base income you can do whatever you want. You can freeload or work, your choice. You can be an artist or a father. These are your choices.
The advantage of the negative income tax is that it offers a guaranteed minimal cash payment to every person and yet does away with the dehumanizing and costly apparatus of the welfare state. We could still offer Social Security, Medicaid, and Medicare. But all other bureaucracies go. Everyone, rich and poor, fills out the same tax forms. Those who choose not to work (let's stop calling them poor) simply get a check. They don't have to use food stamps or live in a shelter or apply for welfare. They can share apartments or group houses with others. There is no long-term unemployment insurance. They can simply use their money to live as they will.
Obviously some people will benefit pretty well doing nothing. Some will game the system and freeload. But the real advantage is that for those who don't care about making lots of money, for those who choose professions with inconsistent and often low remuneration, and even for those who simply prefer raising a family or doing community service to working, there is another option. You can basically choose to drop out of the jobholders society and the rat race with the security that you will have enough money to survive. Sure, you won't be buying fancy clothes or driving a big car. You won't be able to send your kids to fancy schools. But you can take years off work to take care of a dying relative or choose to be an artist, craftsperson, or thinker and know that in those years when you don't make enough to live on you will have a guaranteed income every year that you need it.
What the negative income tax or the Basic Income Guarantee does is make it possible to choose to opt out of the economy without stigma or danger to one's health and ability to live.
Political thinkers and economists on the left and right have embraced these proposals since Friedman originated them. There have been two major sticking points.
On the right, the fear of freeloaders and thus the desire to prevent people from choosing not to work—which is something I think is one of the great advantages of the program. There is a real debate about whether the negative income tax will increase laziness or free people to do what they love. It is probably some of both.
On the left, the fear is what happens when someone spends their money unwisely and then has nothing left. Once we get rid of welfare and food stamps to replace them with the negative income tax, there is always the danger that people will end up starving out in the cold. This too is a real risk and no doubt it will happen. There is of course charity, but that may not be enough for some people. And what about parents who waste their children's guaranteed income?
Questions remain about the negative income tax and there are details to be decided. But the benefits of negative income tax are worth these risks on both right and left. It seems that this is an Arendtian idea whose time has come.
Read an interview with Milton Friedman on the Negative Income Tax Here.
Read and essay in the NY Times about the Negative Income Tax Here.