NCPA - National Center for Policy Analysis


June 20, 2006

The welfare state should be abolished, and programs like Social Security, Medicare and Medicaid should be replaced by a payment of $10,000 a year to every American adult, says Charles Murray, author of "In Our Hands: A Plan to Replace the Welfare State."

This new plan would be more affordable than the current system and would empower and oblige individuals to take responsibility for themselves and others, not just as a way to confront poverty, but because individual self-determination is the correct organizing principle for society, says Murray.

However, there are many problems with his plan, says Clive Crook, of the National Journal:

  • By using his own numbers and switching instantly and comprehensively from the present system of benefits to his plan, Murray leaves us with a shortfall of $355 billion a year -- which, at three percent of gross domestic product (GDP), is a very large sum.
  • And even if everything Murray says is true, financing that enormous gap for the next few years, with the public finances already deep in deficit, would be challenging.
  • Putting the instant shortfall and the ongoing transition cots aside, the cost paths that Murray is comparing are not very plausibly defined, partly because he is right that the costs of the present system are unsustainable.
  • Murray also probably underestimates the long-term cost of his universal $10,000 a year; he lets this grant rise in line with inflation, and he allows for further upward slippage owing to demographic factors, but the annual payment stays constant in real terms.

Moreover, Murray asks people to believe that his plan is not just affordable but fiscally compelling, but as it stands, it is neither, says Crook.

Furthermore, it would be better for the country if the coming, unavoidable, piecemeal reform of the welfare state were guided by some wise general principles, says Crook.

Source: Clive Crook, "Why Murray's Big Idea Won't Work," National Journal, April 1, 2006; based upon: Charles Murray, In Our Hands: A Plan to Replace the Welfare State, AEI Press, March 25, 2006.

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