Neoliberal Welfare Policy for the U.S. 2/17

The Federal government is too clumsy

Policy for the welfare state should be based on the following considerations:

1. People suffer economic hardship for a variety of reasons. Some of their problems are not their fault, and some of their problems could be alleviated if they made better choices.

2. Some countries with very admirable welfare policies have populations much smaller than the United States.

3. The more remote you are from the people you want to help, the clumsier will be your efforts to help them.

4. Means testing allows you to avoid sending checks to people who are well off, reducing the budgetary cost of programs. But means-testing creates adverse incentives for the working poor.

The fact that there are many sources of economic hardship implies that providing assistance is a complex problem. The more remote you are from individuals, the less likely that you will design and implement programs that target their needs. The success of countries like Singapore, Norway, and Sweden, which in terms of population are about the size of a large U.S. city, suggests that we do not need to deal with economic hardship entirely at the Federal level. The more programs that we implement with means testing, the more we discourage people from working, saving, and getting married.

Given these considerations, as a neoliberal I would approach the problem of economic hardship as follows:

I would phase out every existing Federal program to deal with economic hardship. Some programs, such as food stamps, could be phased out relatively quickly.

But it would take a long time to phase out Social Security and Medicare in a reasonably fair way. I think that the best approach is to raise the age of eligibility (the “retirement age”) for these programs. Raise it by a little for people close to the current retirement age. Raise it by a lot for younger people, along with reducing their payroll taxes.

Then I would divide up the responsibility for dealing with economic hardship into three units. The Federal government would provide a small universal basic benefit, perhaps as little as $10,000 per year for family of four. Governments of large metropolitan areas would provide targeted assistance to their populations. State government would provide targeted assistance to people living in rural areas and small towns.

Needless to say, $10,000 a year is not enough to meet the needs of a family of four. It is not supposed to be enough. Most heads of households are capable of earning an income, and we want them to continue to do so, even as their income is supplemented by the universal benefit. Those households with hardly any capacity to earn income, or who face large medical bills or other uncontrollable expenses, would be supported by the targeted assistance programs provided by state and local governments.

Targeted assistance could mean different things in different jurisdictions, depending on the way that policy makers assess the population’s needs and the effectiveness of different programs. Some jurisdictions might experiment with a lot of mental health interventions. Some might give funds to social service agencies to dole out to recipients according to perceived needs. Others might use specific in-kind benefits, such as housing vouchers, food stamps, or vouchers to use for health insurance and medical services. Others might offer more flexible benefit programs, which could be spent at the discretion of the recipient on health, education, housing, or food, but not on entertainment or on goods that are “purely for consumption.”

Some jurisdictions might attack a household’s problems piecemeal, while others might try for a more holistic solution. Some might try an approach that is very paternalistic, while others might try an approach that gives beneficiaries a lot of leeway to succeed or fail on their own.

This version of the neoliberal welfare state takes account of the four considerations I outlined above. It would eliminate “one size fits all” programs at the Federal level, and instead allow state and local jurisdictions to consider the specific needs of their beneficiaries. There would be much more responsibility placed on governments that oversee populations closer to the size of the most successful welfare states, and we could hope that policies would improve as they evolve. It also would increase the role of officials who are less remote from those beneficiaries.

Finally, under the current collection of means-tested Federal programs for housing, food, medical care, child care, and general income assistance, someone who earns a modest income can lose so much in benefits that it does not pay to work at all, and it does not pay to pool one’s income with someone else by getting married. Replacing those programs with a small universal basic income would make working and marriage more attractive while still providing support to households with little means.