NCPA - National Center for Policy Analysis

We Should Pursue Incremental Steps to Welfare Reform

May 20, 2015

Over the past 50 years, the United States has created an enormous, complex and costly welfare state. Federal, state and local governments have spent more than $20 trillion on such programs since the start of the War on Poverty in 1965. Yet, the current welfare system has failed to make the poor independent or to increase economic mobility among the poor and their children.

There are three approaches to a guaranteed national income - a universal basic income, a negative income tax, or a wage supplement - that offer potential advantages over our current welfare system.

  • First, a guaranteed national income would be simpler and far more transparent than the current welfare bureaucracy.
  • Second, a guaranteed income program would reduce paternalism and government in­volvement in the lives of poor people. It would also do more to bring participants into main­stream economic life.
  • Third, directly providing cash assistance, as opposed to in-kind aid, would more effectively alleviate poverty. It would also allow recipients to develop life skills they will need when they get to the point where they are more indepen­dent.
  • Fourth, a well-designed guaranteed nation­al income could provide better incentives for work and marriage than the current welfare system.
  • Finally, depending on the level at which it is set, a guaranteed national income could, in theory, significantly reduce poverty.

But what sounds good in theory tends to break down when one looks at questions of implementation. There are serious trade-offs among cost, simplicity and incentive struc­ture.

  • A universal basic income would be simple to implement but would cost far more than the current welfare system.
  • A negative income tax might be affordable but would likely be complex and it would potentially discourage work.
  • A wage supplement like the Earned Income Tax Credit could encourage work, but it would not be universal, and therefore it could not fully replace the cur­rent welfare system.

Source: Michael Tanner, "The Pros and Cons of a Guaranteed National Income," Cato Institute, May 12, 2015.


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