This is what we should do to reform the current federal welfare system. Roll up the 13 welfare programs into a single program that pays cash to the poor and lifts nearly all Americans out of poverty. Start with $8,000 annually per adult and $5,000 per child and reduce those amounts as individuals earn income from wages and self-employment. This would cost us $263 billion annually, raising most Americans out of poverty. We currently spend $363 billion on 13 welfare programs, so take the savings, $100 billion, and pay down the deficit. That is a meaningful contribution toward deficit reduction. The poor get more cash and flexibility, the program is simple and much easier to manage, and we help reduce the deficit. At the same time, we should change the welfare philosophy to add a quid pro quo before benefits are paid – we need to establish “something for something.” No more pure handouts; low-income Americans of sound mind and body have much to offer, and the nation has many needs.
Milton Friedman and Martin Luther King would agree that a guaranteed income is the best way to attack poverty in the United States. See their opinions on the Negative Income Tax and Universal Basic Income pages and the Poverty Quotes Page.
Our current system of 13 independent programs has many problems associated with it, such as inconsistent treatment of low-income Americans, not enough benefits for those in extreme poverty, and work and marriage penalties – See the Welfare Issues Page. A new, simplified welfare system paying cash to the poor would solve these problems. The poor would much prefer the money to the myriad of in-kind benefits they receive today and could stretch the dollars further to improve their standard of living. This would give the poor far more dignity and control over their lives. It would also make welfare much cheaper for the taxpayer. In-kind benefits are expensive.
A new federal welfare program that paid a base income level to the poor would allow state and local governments to refocus their programs. States and localities spend an additional $220 billion yearly on welfare, not including Medicaid (See State and Local Expenditure Page).
The goal of welfare should be to help the poor help themselves. To achieve this goal, welfare should be designed as “something for something.” When we give something, we should get something. We should structure welfare with a quid pro quo when working with those of sound mind and body who can help themselves.
Something for something doesn’t need to be fully reciprocal – the value of the benefits given doesn’t have to equal the value of something received. Here is a complete analysis of helping the poor to help themselves.
This is not a call for government employment of those on welfare, but instead turning our programs into a “hand up” instead of just a “hand out” as exists today. This philosophical change would help foster pride, help the poor acquire new skills and independence, and tell the poor they have an essential contribution to the nation’s productivity. Because …. they do!
A cash benefit program could be structured like this:
Guarantee a minimum income of $8,000 annually for all adults in poverty. As the person makes money from a job or self-employment, lower the $8,000 benefit by $.50 for every dollar the individual earns. For example, if the individual has a part-time job and makes $5,000 a year, they would still get a guaranteed income payment of $5,500 per year. This means the individuals’ overall yearly income level would be $10,500.
For every parent in poverty, establish a guaranteed income of an additional $5,000 per child, which drops ten cents for every dollar the parent earns.
Based on Census Bureau population and income statistics, such a program would have cost the federal government $263 billion in 2018 (see details below). In 2019, we spent $363 billion on thirteen bureaucratic and complex welfare programs, much of it on the middle class. If we reformed welfare by replacing the complex programs with a simple cash payment to welfare recipients, we could move virtually all Americans out of poverty and save $100 billion at the federal level.
The following file contains the assumptions, cost estimates, and data sources for a new Guaranteed Income Program.
When we think about welfare reform, we need to THINK BIG. Washington is thinking small. An example of this is the Lifeline Program. In Washington today, the FCC is creating a new database to tax, distribute, approve, and manage a program to give one phone subsidy per household, totaling $9.25 monthly. The low-income qualification is complex and funded through a special tax levied on all phone bills. All this for a $9.25 monthly benefit – how silly is that? We are going the wrong way – we are letting Washington get more complex, trivial, and less effective at eliminating poverty. Whether you are a believer in government or not, this is not effective. Ineffective government hurts us all. The percentage of the population in poverty remains flat, but we spend more and more money (See Poverty and Spending Over the Years). Those in extreme poverty continue to be ignored while our government focuses elsewhere. It is time to reform the whole system – think big.
More cash for the poor, less deficit spending – everybody wins. Why don’t we simplify our welfare system and pay cash to the poor? Why don’t we do it? Is it because we don’t trust the poor to handle cash correctly? Is it because we are afraid of costing jobs in Washington? Is it because we think cash redistribution goes against our American values of self-reliance, but in-kind benefits somehow do not? What else could it be? Why do we ignore the homeless on the street and yet have a welfare system costing us more than twice what it would take to end poverty? It makes no sense. We need a grassroots effort to facilitate change.
Creating a cash foundation for the poor would transform charities. Not-for-profit charities could concentrate their programs on education, training, life skills, drug and alcohol dependency, etc., as they work directly with the poor. Today’s complex system leaves too many economic holes that charities seek to fill. A cash foundation for the poor would help to close these gaps and allow non-profit organizations to focus on the people, not the money or goods. Today’s complex system is a challenge for charities to work around. A simple cash system would help them concentrate on helping the poor learn life skills to advance their standard of living.
Contact your Congressman – Here is a template.
Spread the word – Point people to the website – FederalSafetyNet.com.