Obama doesn’t want to just write welfare recipients checks. But what if we did?

August 8, 2012

In Mitt Romney's new welfare reform attack ad, an ominous voice declares, "Under Obama’s plan, you wouldn’t have to work. You wouldn’t have to train for a job. They just send you your welfare check." This, suffice it to say, is false. What the administration has done is start accepting applications for waivers from specific requirements of the welfare reform law to allow states to experiment with new models, such as paying employers rather than recipients and promoting job training. They haven't accepted any waivers yet, and so speculating about specific policy changes at this point is just that — speculation. And with welfare reform's architect saying he thinks the waivers move in the right direction, the likelihood that they'll undermine the bill's intention is pretty low.

But it's worth noting that a lot of people on both the left and right have proposed doing exactly what Romney falsely attacks Obama for (not actually) proposing: solving poverty by just writing checks. Milton Friedman, the libertarian Nobel laureate economist, proposed a version of this idea called a "negative income tax," in which every household would be given a check for a set amount, such that some people actually had a negative tax burden. That got picked up by the Nixon administration, in particular then-aide and future U.S. Sen. Daniel Patrick Moynihan, and Congress almost passed a version of the proposal. George McGovern proposed a $1,000 tax credit for every man woman in child during his 1972 run against Nixon, which he called a "demogrant". So in 40 years, we've gone from both major party candidates supporting just writing people checks, to the very idea that a candidate would support that being the subject of an attack ad.

Despite the current unpopularity of the idea — commonly known as a "basic income" when it takes the form of an unconditional payment to all citizens — among policymakers, it has some adherents among intellectuals, including Charles Murray of AEI - of The Bell Curve and Coming Apart fame - and the political philosopher Philippe van Parijs. It's also been adopted as a poverty reduction measure in Brazil and Namibia, with promising results.

The most recent version of the idea introduced in Congress was California Rep. Bob Filner's "A Tax Cut for the Rest of Us Act," designed by basic income activists, which would have replaced the standard deduction of the income tax with a $2,000 credit per adult and $1,000 credit per child, both fully refundable. The bill, introduced in 2006, didn't catch on, only gaining one other cosponsor, and is not large enough to eliminate poverty, but it did give tax analysts a chance to crunch the numbers on what a basic income would actually cost.

According to Citizens for Tax Justice, a left-leaning think tank and advocacy group, the Filner proposal came to (pdf) $186 billion annually, a figure made lower by the fact that the credit is optional, only applies to those who doesn't itemize deductions and replaces rather than supplements the standard deduction. The structure of basic income also makes it easy to calculate the cost of bills of different sizes. Basic income activists have pegged the amount for a full basic income at $10,000 per adult and $2,000 per child. Here's how much proposals between Filner's and that plan would cost, given the current size of the population:


Source: Author's calculations

Filner's proposal, not including any offsets from repealing the standard deduction, would cost a little over $500 billion a year. A plan with $5,000 grants for adults, or about half the $10,000 annual poverty line for adults, costs about $1.25 trillion a year, and Murray's proposal to give $10,000 annually for every adult over 21 comes to about $2.25 trillion.

Those are big numbers and even if you eliminated programs like the Earned Income Tax Credit, child tax credit and Social Security, which a sufficiently large basic income could replace, it would require big revenue increases. But then again, they could have big effects. Murray's proposal would grant a family of four $20,000 a year - well over the $15,000 a year poverty threshold, and so effectively eliminate poverty for such families. A single adult would get $10,000, or about the poverty threshold for those households.

All of which is to say that while Mitt Romney mocks the idea of just sending checks to fight poverty, the idea has an impressive intellectual pedigree, including among conservatives. Perhaps we should give just writing checks a shot.

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Sarah Kliff · August 8, 2012