A Really Scary Idea — That Just Might Make Sense

Charles Murray proposed this last week on the subscription side of The Wall Street Journal, and it rotated into OpinionJournal.com yesterday.

His plan to replace the welfare state, is radical, initially repugnant I am sure to many, appears to have significant moral gaps, and lacks quite a few details. But it grows on you, and could be the best idea out there to prevent the entitlements train wreck:

This much is certain: The welfare state as we know it cannot survive. No serious student of entitlements thinks that we can let federal spending on Social Security, Medicare and Medicaid rise from its current 9% of gross domestic product to the 28% of GDP that it will consume in 2050 if past growth rates continue. The problems facing transfer programs for the poor are less dramatic but, in the long term, no less daunting; the falling value of a strong back and the rising value of brains will eventually create a class society making a mockery of America’s ideals unless we come up with something more creative than anything that the current welfare system has to offer.

So major change is inevitable–and Congress seems utterly unwilling to face up to it. Witness the Social Security debate of last year, a case study in political timidity. Like it or not, we have several years to think before Congress can no longer postpone action. Let’s use it to start thinking outside the narrow proposals for benefit cuts and tax increases that will be Congress’s path of least resistance.

The place to start is a blindingly obvious economic reality that no one seems to notice: This country is awash in money. America is so wealthy that enabling everyone to have a decent standard of living is easy. We cannot do it by fiddling with the entitlement and welfare systems–they constitute a Gordian Knot that cannot be untied. But we can cut the knot. We can scrap the structure of the welfare state.

Instead of sending taxes to Washington, straining them through bureaucracies and converting what remains into a muddle of services, subsidies, in-kind support and cash hedged with restrictions and exceptions, just collect the taxes, divide them up, and send the money back in cash grants to all American adults. Make the grant large enough so that the poor won’t be poor, everyone will have enough for a comfortable retirement, and everyone will be able to afford health care. We’re rich enough to do it.

And Murray is only about 5 years ahead of a problem that may become intractable not long after that:

….. There are many ways of turning these economic potentials into a working system. The one I have devised–I call it simply “the Plan” for want of a catchier label–makes a $10,000 annual grant to all American citizens who are not incarcerated, beginning at age 21, of which $3,000 a year must be used for health care. Everyone gets a monthly check, deposited electronically to a bank account. If we implemented the Plan tomorrow, it would cost about $355 billion more than the current system. The projected costs of the Plan cross the projected costs of the current system in 2011. By 2020, the Plan would cost about half a trillion dollars less per year than conservative projections of the cost of the current system. By 2028, that difference would be a trillion dollars per year.

He claims to have answers to the devilish details in his book.

The idea may be the equivalent of the flat tax in the fiscal policy arena; everyone likes to talk about it, but no one will risk their political career and take up the banner.

But the status quo alternative is an inevitable march towards the nearly impossible problems of Germany and France.

Murray’s idea deserves serious consideration.
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UPDATE: Max Borders interviews Murray at TCS Daily.