The $10,000 solution

SUPPOSE WE assume people on the other side of the political divide are not hateful, not bent on destroying America, but are instead, by and large, decent and sensible humans. Assuming that’s the case -- and really it is -- then a thought must occur to all but the fringes: If so many decent and sensible people believe X with that much conviction, there must be something worth thinking about in their position.

That “something” can be the basis for common ground. Because my corner of the political debate is domestic social policy, I will frame my question in terms of the coming crisis in entitlement spending and income support for the poor. What might each side find appealing in the other’s position?

I’ll go first. Though I’m on the right, I am sympathetic to the left’s argument that some people get the short end of the stick for reasons that are not their fault; that it is increasingly difficult for such people to compete in a global economy; and that, in a country as rich as the United States, everyone should have access to a decent standard of living. When the left has wanted to redistribute money to compensate the most unlucky, its heart has been in the right place.

Now for those of you on the left, does the following resonate? You know that in your own life, a decent standard of living has not been enough. Our deepest satisfactions come from what we have made of ourselves. Making something of life requires being allowed to make mistakes, learning from them and -- over time, with false starts -- working our way into valued places through our employment, our families or our communities.

This is what produces self-respect, and self-respect is indispensable to happiness. The catch is that self-respect must be earned. Earning it requires the freedom to act and taking responsibility for the consequences of one’s actions. When the right has wanted to maximize freedom and responsibility, its heart has been in the right place.

I think both of those positions, left and right, are hard to argue with. So here’s the deal: Let those on the right agree to generously support the unlucky, and let those on the left agree to provide that support without the massive controlling apparatus of the welfare state.

It’s actually easy to do. If you step back from the intellectual gridlock that passes for policy debate today, here is the overriding empirical reality: We are already spending about $1.5 trillion a year on transfer payments (Social Security, Medicare, Medicaid, income support programs, welfare and subsidies of all sorts, including corporate welfare). If we simply divided up the money we are spending anyway and gave it back to people in the form of cash, we could provide everyone with the resources for a decent standard of living, including money to pay for healthcare and save for retirement.

There are other benefits to this approach. No more taxpayer-financed freebies for favored corporations. No more subsidizing people who grow politically protected crops. A few hundred thousand government employees liberated for productive work. Perhaps most important of all: We would remove from the bureaucracies the responsibility for dealing with the human needs that remained, and relocate that responsibility to the people who can do something about them -- family, friends, neighbors, communities. In the process, we would revitalize the institutions through which people find those valued places I was talking about. We would take the stuff of life back into our own hands.

And we could do all this within a few years. If, for example, we cashed out income transfers and provided an annual grant of $10,000 to all American citizens age 21 and older, the projected cost of the new system would match the projected cost of the current system by 2011, and get cheaper from then on. And it would represent a dramatic increase in assistance for almost all low-income families, even in the most generous welfare states.

For example, today in California, a family with two parents and one child that earns just $10,000 is eligible for only about $8,000 in government cash and in-kind benefits plus Medicaid, if they successfully navigate all the hoops (and many do not) that the bureaucracies put them through. I am proposing instead to give all of those families a $20,000 check. A single woman with a child? She won’t have to rely merely on her $10,000. The father, if he is identified and alive, would now have a known income stream coming into a known bank account that any judge could tap with a court order.

If you’re worried about the plan giving money to the affluent, slap a surtax on the grant after a certain level of earned income. If you’re worried about transition costs, the short answer is that they will be high, but so will be the resources to pay for them -- by 2020, the projected cost of the $10,000 plan will be half a trillion dollars less than the conservatively projected costs of the system we have now. By 2028, the savings would be $1 trillion a year.

I use the $10,000 amount because it is a round number, produces a system that in a few years will be more affordable than the status quo and is large enough to produce the good things I claim. But there is nothing magic about it. If a team of economists determines that another figure is better, fine. The projected costs of the current system rise so steeply that a wide range of numbers will be affordable by the time the politicians can no longer avoid confronting the nation’s unsustainable increases in entitlement spending.

As the amount of money we spend on transfer payments continues to rise, while poverty endures, it must eventually become obvious to all that the problem is not a lack of money. The problem is that the government spends the money badly. Ordinary people, making decisions about their own lives, will do it better.