Social Security, Medicare and Medicaid: A Radical Proposal

Social Security, Medicare and Medicaid cost U.S. taxpayers more than $1 trillion a year, or 9% of the US gross domestic product. Some economists predict the cost will rise to 30% by 2050. Author Charles Murray says he has a better idea. Get ready for this; Murray proposes giving every one of us $10,000 a year. It may sound crazy at first, but he contends it would actually save money in the near and long terms. Here's how:

Murray, a fellow at the conservative American Enterprise Institute, is an expert on domestic social policy. He predicts a looming crisis in entitlement spending and income support for the poor. In his view, the issue is something that should trouble both Democrats and Republicans alike, and the determination and cooperation of both will be required to solve the problem.

The conservative scholar thinks that in order to compete in a global economy and maintain a decent standard of living, a profound change needs to take place in America. And he has just the idea. It's radical, and its big. Really big.

In his estimation, people gain self-respect and pride through self-determination. Taking responsibility for our economic well-being is preferable to what he calls "the massive controlling apparatus of the welfare state."

The rather stunning reality is that the U.S. spends about $1.5 trillion a year on what he calls "transfer payments" in the form of Social Security, Medicare, Medicaid, income support programs, welfare and subsidies of all sorts, including corporate welfare.

Murray proposes dividing up the money we're already spending and giving it back to people in the form of cash. This, he believes, would provide everyone with the resources for a decent standard of living, including money to pay for healthcare and save for retirement.

Under his proposal, taxpayer-financed subsidies for favored corporations would end, as would agricultural and crop subsidies. This, he contends, would shrink the Federal government and "liberate few hundred thousand government employees for productive work." But most importantly, in Murray's view, this would remove the responsibility for dealing with human needs from the bureaucracies and shift it to the newly empowered citizenry. Essentially, it would give power, freedom, and responsibility back to the people.

And he claims it could all be done within a few years by ending "income transfers" and instead providing an annual grant of $10,000 to all American citizens age 21 and older. According to Murray, the projected cost of his plan would equal the projected cost of the current system by 2011, and get cheaper from then on. He also contends that the plan would result in a significant increase in assistance for almost all low-income families, even in the most generous welfare states.

Murray uses the example of a hypothetical California family with two parents and one child that earns just $10,000 annually. They're currently eligible for only about $8,000 in government cash and benefits plus Medicaid, assuming they know how to successfully navigate all the hurdles of a government bureaucracy to claim it. His proposal would instead give all of those families a $20,000 check - $10,000 for both adults. And a single woman with a child wouldn't have to rely solely on her $10,000 since the father, if identified and alive, would have a known income stream coming into a known bank account that a judge could draw from with a court order.

The plan would also be progressive; affluent Americans would pay a surtax on the grant after a certain level of earned income.

Yes, Murray admits that the transition costs will be high initially, but will make economic sense rather quickly. By 2020, the projected cost of the $10,000 plan will be half a trillion dollars less than the conservatively projected costs of the current system. By 2028, the savings would be $1 trillion a year.

As a conservative, Murray contends that increasing transfer payments has not, and will not, cure the problem of poverty. He simply believes that government control of taxpayer money is inefficient and that Americans can make better decisions about their own lives for themselves.

Most economists know that current trends cannot continue. The nation's increasing entitlement spending is simply unsustainable. Murray is open to suggestions from other economists on his plan and the $10,000 figure. He chose it, he says, because it is a round number that within a few years will be more affordable than the status quo and is large enough to have a positive impact on the lives of most Americans. But one way or another, the costs of the current system are projected to become so burdensome that politicians can no longer avoid confronting the issue.