A pragmatic approach to welfare
Too often, discussions about social security spending become caught up in ideological battles about less vs more spending, as well as the effects of dependancy traps. Whilst it is true that dependancy traps are real and incredibly problematic, and that government welfare is by design inherently inefficient, there’s a lack of practical solutions proposed to the present, bureaucratic system.
One proposed alternative is Universal Basic Income (UBI). This involves using tax revenue to issue direct monetary payments to either the unemployed or the populace as a whole. Forms of UBI have received high-profile support, including from former Democratic presidential candidate Andrew Yang, who suggested in an interview with Ben Shapiro that people be given a choice between UBI and their current benefits. Another proponent was economist Milton Friedman, who proposed a negative income tax as an alternative to welfare:
For all of UBI’s merits, it does have a flaw — some small minority of people will always, inevitably, make irresponsible financial decisions and choose to live off the benefits of welfare as opposed to seeking employment. These people are likely to remain reliant on social security payments.
The Australian Government’s controversial Cashless Debit Card, whilst unrelated to UBI, is another scheme which has strong merit. Such a card would bring social security into the 21st century, and could allow for administrative costs to be reduced whilst maintaining the present quality of welfare. Instead of welfare recipients going to a physical welfare office and being manually processed and distributed with cash, it can simply be electronically added to the card’s account.
What I propose is mostly combination of the two, whilst as best as possible mitigating concerns about UBI and government surveillance. First and foremost, such a scheme would modernise welfare and improve its efficiency. At present, 70 percent of welfare spending in the United States goes to paying the bureaucracy and not to recipients. Even a minor improvement in the system’s cost efficiency would be a benefit for both the taxpayer and the recipient.
At the same time, it must be acknowledged that some will refuse to spend responsibly. While we ought not to restrict what people can spend their own money on, if their income is coming from taxpayers, it should be used to fulfil the purpose of having any kind of welfare system to start with. That said, we shouldn’t treat all welfare recipients the same way regardless of why they’re on benefits and how they use them.
Dependancy traps are created when people don’t have enough incentive to get off welfare. If one can sustain irresponsible habits, such as excessive drinking (which most welfare recipients don’t), on welfare, then some are bound to do so. A benefit of digitisation is that social security can be tailored to the individual so as to reduce this issue.
One idea is for an anonymised algorithm to detect certain bad spending habits and, after giving a warning, restrict them. So long as the majority of welfare recipients are responsible with the funds they receive, this will not effect them. Recipients could even be given an option between receiving comparatively less income or receiving more but with these strings attached. The system would not record personal details which, combined with a reduction in bureaucracy, should hopefully make it less likely that data ends up in the wrong hands.
Digitising welfare presents its own problems, as it has been shown to be disastrous in practice. However, these issues can be rectified. Furthermore, algorithms learn and are hence unlikely to repeat the same mistake time after time.
Combined with a negative income tax or other form of UBI, a cashless social security debit card, with or without certain conditions, has the ability to reduce welfare spending by cutting administrative costs. This is achieved without worsening the outcome, and without hurting welfare recipients who use the system for its intended purpose.
