Friday, June 11, 2004

Just Musing: This obviously isn't an original thought, but I've been turning over the idea of entitlement block grants -- granted to citizens.

Let's say that, on the day of your birth, the government deposits $100,000 dollars (the amount is debatable, obviously) into an FDIC-insured account for you. It earns interest -- not whopping, but nice -- and becomes your property (principal and interest), tax free, on your 18th birthday. This money is now yours to do with as you please: stocks, bonds, college, trade school, travel, investment in your own business, down payment on a house, savings, whatever. If you lose your job, it's money to retrain. It can fund a retirement nest egg. It can pay for a battered wife to pick up and leave, or a widow to make a new start. With some wise planning, it can do quite a few of these things over the years.

Here's the catch: This will represent the entirety of federal benefits for your lifetime. In return for this investment, the U.S. government removes itself from the entitlement racket for good.

Secondarily, states, counties, and towns are free provide relief, as they see fit, through that wonderful system called federalism. Want to move to a town that offers unemployment insurance? Your choice, and you'll pay for it in your city or property taxes. Obviously, it's imperfect -- one may not have unbounded choice of where to live -- but it sets up a situation where towns can essentially bid for residents, who then purchase, via taxes, the level of services they want.

There are certainly things that would need ironing out, but I think it's a workable idea. It would certainly save money.


1 comment:

Razor said...

As you said, I've heard of the idea before, but probably like you, never gave it much thought. Well, I'll try to give it just a bit more here. And, we'll leave aside the amount for the moment, other than to say it has to be generous-sized - perhaps there's a way to come up with a per-capita figure based on current expenditures (love to hear the debate on what is an "entitlement") and then tinker with that.

First off, there is a large segment of our population that does not want to be responsible for its future. We can laugh at it, but when we look at the looming Social Security crisis, you can appreciate just how serious it is. This attitude is likely to change with the coming generations, but it is an inherent obstacle. Many people today want the government to give them back their own money, at a ridiculously bad exchange rate, sometime in the future, rather than try to invest it themselves.

Custodians. Who takes care of that $100,000 while you're a kid? More importantly, what if you need that money before you're an adult? Or do we assume the government will continue to provide for the children until adulthood? If so, then you still need some safeguard on the money, b/c not every child has parents or parents that can be trusted. That will create its own bureaucracy, but admittedly somewhat minimal. Probably need something stronger than FDIC even.

While it's a good idea in many regards, what do you do with say, someone who is 45 years old, who legitimately used the money to achieve a productive life, and for whatever reason, is totally out of luck? There will always be those in society that want the government to help people who are poor. What if you become disabled? Are you talking about taking away federal/state programs for those people? That initial nest-egg may not even begin to cover their expenses.

I just don't know that this lump-sum solution will be able to overcome a bleeding heart (and I mean that in the more neutral sense). I suppose you can leave those things to private charities or churches. And maybe we would have just a fundamental shift in how those institutions operate.

I think the long-term good could be very influential, but the growing pains would be immense. Maybe need a phase-out period. Hmmm.