Our current system of benefits is at once expansive, administratively complex, and extremely time-consuming to utilize. Just to give a few examples, a low-income household with a child might have EITC, Medicaid, CHIP, TANF, SSI, SNAP, LIHEAP, housing vouchers or subsidized housing, and more. Each of those things must be applied to separately. Each of those administrations means-tests applicants separately. Further, they kick in at various income levels, creating some of the ‘benefits cliffs’ discussed in the short video above.
Imagine the savings of time, money, and destructive incentives if, instead, we just gave everyone cash every and added a progressive tax that maxed out at the total of that monthly payment. Low-income workers could focus on improving their lives and becoming taxpayers instead of spending countless hours on applications for aid. They could work towards promotions without worrying about suddenly having a lower real income because they make $1 more per hour. Setting aside for a moment the stress reduction on these people, the gains to productivity would be enormous on a national level. We would completely eliminate a major obstacle.
There are times that people who qualify for benefits do not apply because they don’t know about the benefit or they don’t understand it. Sometimes homelessness stems, not from an insufficiently generous safety net, but because of an overly confusing one. Further, the sudden loss of a benefit from a small wage increase can be devastating for a family.
Some benefits, such as childcare or healthcare, can disappear suddenly at higher income levels and a family is once again struggling to breathe – because of a rise in take-home pay. High levels of stress are proven to reduce productivity and these effects bleed over onto children. So not only are people wasting hours filling out applications to prove that they are, indeed, poor, they are less effective when they are at work. Meanwhile, their kids do poorly in school because they have not been given enough quality time with their parents and they are, at times, malnourished. The effects on the child are nearly always permanent.
A simpler system paying out a livable benefit would be unlikely to cost more, either. Melissa Kearns, an economist, estimates an annual outlay of $180 billion would completely eradicate child poverty. That’s not a small sum of money, but it is a small fraction of what we pay for benefits now. A new healthcare program in Maryland paying hospitals based on the number of patients in their system instead of per visit looks to be improving both health outcomes and accumulating significant savings. Rolling Medicare and Medicaid together would eliminate redundancies, saving us more money. Sending out checks is cheaper than running numerous administrations that often overlap.
We also all already know that existing measures are ineffective. The moment the economy took a dive, there were calls across the board for aid to people who lost their jobs. If our benefits programs actually did the job they were designed to do – provide for individuals out of work until they can get back to work – this would not have been necessary. Stimulus would automatically be injected into the economy when the job losses began to mount.
Welfare needs to be reformed and the longer we wait, the more damage we are going to do to ourselves. Losses to productivity due to wasted time and bad incentives can never be gotten back. Simplicity reduces costs and makes programs more effective. Sending everyone a check and then collecting the money as income tax is, by far, the simplest way to implement a safety net. We could have three separate programs: a monthly check to people over 18, a monthly check to the guardians of people under 18 (a much lower number, obviously), and a public healthcare option. We spend over $2.5 trillion per year on benefits programs. We should be getting much more. The biggest bang for the buck is, well, the buck.