Programs for the Poor are Poor Programs

Ezra Klein (Wonkblog) has a brief interview with Georgetown’s David Super on how poorly programs for the poor have functioned (and how good HealthCare.gov appears by comparison).  The alternatives discussed include outsourcing to private contractors (bad) and implicitly providing more resources (good).

One alternative that is not discussed:  providing benefits through a fractional negative income tax (NIT). If one assumes that the government has some responsibility for providing for the poor, the NIT has a number of advantages. It minimizes administrative costs and complexity, government paternalism, and the disincentives to work. Milton Friedman—credited with first bringing the NIT into the policy debates—does an excellent job of explaining the basic features of the proposal in a 1968 episode of Firing Line.

For those interested in placing Friedman’s fractional negative income tax proposal in the larger context of social policy, a useful resource is a recent intellectual biography of Milton Friedman by William Ruger. Those unacquainted with the negative income tax—and some of the difficulties that are intrinsic in the proposal—might enjoy the overview by Jodie Allen at the Concise Encyclopedia of Economics.

Given that President Obama is emphasizing the issue of income inequality, both parties seem convinced that we need significant tax reform, and there is a fair amount of experience with the Earned Income Tax Credit, perhaps there will be a window of opportunity to revisit the NIT.

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