Medicaid Reform

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Guaranteed Income

U.S. Proposals

There have been a variety of proposals for a guaranteed income (GI) to replace the panoply of programs that constitute the safety net, including Medicaid. The following are listed in reverse chronological order.

  • Charles Murray. Murray, a libertarian,  proposed a constitutional amendment to provide a guaranteed income of $10,000 a year for all American adults over the age of 21 who are not in prison. Designed to replace all current welfare programs as well as agricultural subsidies and corporate welfare, he argued it would be cheaper than maintaining the current welfare system in the coming decades. A full version is described in his book In Our Hands: A Plan To Replace The Welfare State (2006). after someone’s total annual income reached $25,000 a 20 percent surtax tax would be imposed on “incremental earned income,” capped at $5,000 once someone earns $50,000 a year.
    • Unlike many GI plans, Murray’s proposal requires that $3,000 of the $10,000 grant be spent on health insurance.
    • This coverage should cover high-cost single events such as surgery, all genetically based diseases and catastrophic long-term illnesses or disability. Insurance carriers would have to treat the entire population as a single pool
  • Milton Friedman. This Chicago School economist advocated a negative income tax (NIT), which would not guarantee a set income for every adult, but would provide payments to Americans based on how much below a certain threshold they earned. Friedman conceded that the NIT “reduces the incentives of those helped to help themselves, but it does not eliminate that incentive entirely, as a system of supplementing incomes up to some fixed minimum would. An extra dollar earned always means more money available for expenditure.”  According to economist Veronique de Rugy, “There is some evidence that a guaranteed minimum scheme would undermine incentives to seek employment. Four landmark experiments in the 1960s and ’70s examined the Negative Income Tax’s impact on labor supply. The recipients of NIT grants tended to work fewer hours compared to control groups that did not receive the grants.”
  • Friedrich Hayek. The Austrian economist advocated a “minimum income for everyone” in the third volume of Law, Legislation, and Liberty (1979), characterizing it as a “wholly legitimate protection against a risk common to all.”
  • Thomas Paine. A fierce champion of liberty, Paine proposed a national income in the pamphlet Agrarian Justice (1795): 1) those age 21 should be paid fifteen pounds sterling, “as a compensation in part, for the loss of his or her natural inheritance, by the introduction of the system of landed property;” 2) the sum of ten pounds per annum, during life, would be paid to every person reaching the age of 50. 

Proposals in Other Countries

  • Switzerland. The Swiss are set to vote on whether their country should introduce a basic national income of 2,500 Swiss Francs ($2,800) a month for every adult, regardless of their salary or net worth. A date for the vote has yet to be announced (Reason, 11.26.13).

Analysis

  • National Review‘s Jim Manzi argued in 2011 that of all the policy options tested, only welfare policies that included work requirements pushed people off welfare and back to self-sufficiency. Manzi concluded that taxpayers’ moral aversion to subsidizing sloth will ultimately undermine any move to a guaranteed income or negative income tax scheme that lacks work requirements. People, he demurs, seem to prefer the paternalism (Veronique de Rugy, Reason, March 2014).