Bryan Caplan  

You Grew Up in Poverty? Okay, Here's Some Money

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My Response to Donald Trump... Slate.com's overconfidence was...
A modest proposal for fans of social justice: Have the government give money to adults who grew up in poverty.

The goal of the program, of course, is to (a) help people who are statistically likely to be poor, and (b) partially equalize cumulative lifetime well-being by making adult income higher if your childhood income was low.

What's special about the program: It closely targets the statistically poor with minimal disincentive effect.  Poor parents can't make money by having extra kids, because minors receive nothing.  The checks start coming once the poor kids are legally adults.  The recipients retain normal incentives to acquire skills and work, because the size of the checks depends on their family income when they were kids, not their current income.  The program might slightly discourage teen labor, but that's about it.

I'm against this program, of course.  But why would normal people oppose it?


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COMMENTS (17 to date)
Seth Green writes:

https://givedirectly.org/ is this except a non-profit. Lots of "normal people" endorse the model of giving people cash with no strings attached i.e. http://www.givewell.org/charities/top-charities. So it doesn't seem that far-fetched to me that people would support something similar if the government implemented it in America.

Anon writes:

If I gave you the option of going back in time, halving your parents salary/wealth but then giving it back today (inflation adjusted) would you take it?

Most, if not all, people would say no. Even if the deal was sweetened by saying the money would grow at 10%, 20%, whatever. Higher parental income in youth creates greater opportunity. No one would pass on the upside

Matthew writes:

I doubt the public would like this. The analogy that comes to mind is property taxes. The public generally supports graduated income taxation, but the property tax is the most hated tax http://businessweekly.readingeagle.com/americas-most-hated-tax/ and if we had a wealth tax, that would be even more hated than the property tax, despite the fact that property and wealth are highly correlated with income, and perhaps more meaningful measures in their own right.

Generally speaking, people are much more comfortable with fiscal policies tied to current behaviors (labor, consumption, smoking etc) than characteristics (how much you own, how tall you are, who your parents were). The dominant media narrative in reaction to this would be how unfair it is, and how easy it would be to change by making it dependent on one's own income instead of their parents' income.

ThomasH writes:

Tell me more about the proposal.

Is it paid for from a progressive income tax? By eliminating all the quirks of the corporate income tax that make the average rate different from the marginal rate? By a tax on CO2 emissions? Sounds like a great idea. By eliminating the wage tax on the first X thousand of income? By shifting from income tax deductions to partial income tax credits? By eliminating the ethanol mandate and increasing the gasoline tax to hold the price the same? Charging users of federal infrastructure investments (canals, ports, highways) for capital costs and upkeep?

Great idea!

Is it paid for by reducing the Federal portion of Medicaid? Having a higher discounted NPV cut off for public investment during recessions than in normal times? In reducing SS payments? Reducing the subsidies for low income people buying insurance under ACA? Reducing the number of IRS employees looking for tax fraud? Reducing the EITC?

Bad idea!

Of course liberals are not normal. :)

ThomasH writes:

Sorry, I just can't pass up talking about more ways to make "Caplancare" :) an even better idea.

Fund it by decriminalizing schedule 1 drugs, privatizing TSA, etc. etc.

James Hanley writes:

I'm agnostic about it, but I think there's a reasonable "normal person" argument along the lines that childhood poverty can set you permanently behind in a variety of ways that aren't easily made up in later life, such as educational opportunities (can bad K-12 education readily be compensated for as an adult?) and perhaps more importantly, in the health that comes from decent childhood nutrition.

Possibly poor education and health as a consequence of childhood poverty would cost more to try to compensate for throughout the long period of adulthood than to prevent during the shorter period of childhood.

The perverse incentive for parents may be the lesser price to pay.

Peter H writes:

Not really a "normal person" argument, but this would probably be unconstitutional in the US, or else incredibly expensive. The critical question is: "how do you deal with immigrants?"

My mother is a successful attorney who grew up in Communist Romania. By any measure, she grew up in poverty. Does she get the biggest possible check?

If we exclude people raised abroad, that's discrimination on national origin, which is subject to the same level of constitutional scrutiny as discrimination based on race (basically, it's never allowed). If we include people raised abroad, we guarantee that immigrants from poor countries get enormous benefits.

Brad writes:

I think one argument would be that many of our programs are set up to help children of poor families be provided for when their parents can't.

Lets say a irresponsible drug addict has 5 kids and no job. Without transfers those kids lead a pretty miserable life (actually even with transfers life is pretty miserable).

Now one ameliorating effect would be the fact that the parents probably also grew up in poor families so they would be recieving the subsidy and if the parents did not grow up in poor families their children probably have the potential for support from grandparents.

Ben writes:

Maybe I'm missing something, but this does seem to have a big incentives problem. Rich people won't choose to become poor just so their children can reap the rewards of this program, of course. But people near the threshold probably would. Consider a person making just a little above the threshold income. By cutting back on their hours slightly, they could guarantee that all of their children would benefit from the program. Unless that small cutback resulted in a large increase in suffering, the decision would seem to be a slam dunk. So you're encouraging all the people at the low end of the income distribution to work less hard, and to avoid taking a slightly better-paying job. Seems fairly perverse to me.

Adam writes:

After we get the basic program, politicians can run to add new benefits, like compensation for psychological poverty and misspent youth. After that, bullying and imagined hurts. Pretty soon we've got a huge bureaucracy implementing and evaluating all kinds of protocols, thresholds and tests. So, yes, it's a very good idea.

Adam writes:

After we get the basic program, politicians can run to add new benefits, like compensation for psychological poverty and misspent youth. After that, bullying and imagined hurts. Pretty soon we've got a huge bureaucracy implementing and evaluating all kinds of protocols, thresholds and tests. So, yes, it's a very good idea.

Dan writes:

It's bad idea. Here are two problems of the top of my head:

1) People who grew up poor do not acquire the skills necessary to spend wisely.

2) The notion that lump sum payments do not affect work incentives, exist only in the mind of economists.

Br@d writes:

If recipients became ineligible for all federal poverty programs, then perhaps I could support it.

Vlad writes:

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Joe writes:

I think because of the publics' make work bias and the strange social role that having a job has would make this untenable.

Though why not expand it to minors in foster care? I mean, I think a 16 to 17 year old may not use it optimally, but they certainly wouldn't use it to rape or beat themselves silly, which in some jurisdictions would be an improvement.

I mean right now we give the cash to foster famalies who may or may not spend it on the kids. Or farm then out to WWASP camps at inflated prices in shady gov deals.


AS writes:

Where would the money come from? If it comes from voluntary contributions then it seems harmless. But if it comes from coercive taxation then it seems to violate the fundamental property rights of taxpayers by spending their money in ways they might not consent to. All spending should be consensual.

Granite26 writes:

The average person would not support this because the overlap between people who believe in wealth distribution and people who believe that welfare babies are a serious policy concern is very small.

Unless you believe welfare babies are a serious concern, you aren't going to be willing to condone misery now on order to improve incentives later.

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