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There's a happy medium achievable between the straightforward blunt instrument of cash payments and systems whose targeting is so complex nobody understands their costs or benefits.

I'm unconvinced by neoclassical arguments by Friedman et al. on "distorting" for two reasons. Firstly there's nothing inherently wrong with introducing further "distortion" into the market unless you subscribe to the evidently false proposition that no person's ability to optimise their spending habits with respect to their budget constraint can be improved upon; that you're making individuals and society worse off for buying them healthcare when they expressed more interest in a hire-purchase agreement for a state-of-the-art pickup truck. I believe quite the opposite: people receiving government money aren't entitled to spend it on anything they want, and even with imperfect information a technocrat, will often be better at allocating some of that cash than the average welfare recipient.

Secondly, given differences between incomes, propensities to consume and the ease of introducing new supply into the market, a simple flat subsidy can distort markets more than targeted payments. Converting payments such as government funded health insurance to cash would have the effect of inflating the prices of ramen and particularly crappy apartments (since welfare recipients can live without the health insurance, albeit for less long, and there's not enough decent apartments in many areas). Given the relatively fixed supply of housing, people who already owned rental property would capture more benefit than any other industry, ironically because they chose to use their capital in a relatively unproductive manner. On the other hand, hospitals might be worse off, losing part of their customer base and seeing cost increases (notably unskilled labour). Since the government has the choice in how they distort the market, I'd rather they subsidise healthcare professionals than slum landlords.

I totally agree with your point about bare minimum safety nets encouraging innovation. Even those poor who are never going to launch world-changing startups might consider a stab at freelancing in an area they're more capable in than dishwashing once the risk of not having regular income is removed.

Lets assume that ten percent of Americans choose to take the ten grand/year you suggest.

Thats 30 million times ten times one thousand. Thats 300 billion dollars. That is ten times the cost for the war in Iraq back in 2001 and 2002 (both years). How on earth do you think the US could pay that considering that it has a deep deficit in the first place?

Well, in the first place, that's 8% of the federal budget, which seems like a pretty small price to pay for ensuring that everyone has a basic existence (minimal food/shelter). There are certainly stupider things we spend 8% of the federal budget on.

And in any case, one purpose is to be a replacement for the current piecemeal programs we have, which aren't cheap to begin with. Food stamps + Section 8 + EITC currently costs about $150 billion per year, plus some additional amount in bureaucracy and litigation due to complex rules, plus some additional economic damage caused by market distortion due to the fact that food stamps + section 8 aren't normal cash (EITC is better for that). That leaves maybe $100-150b, some of which is probably also redundant with existing welfare programs (I just picked three big ones), or about 3-4% of the federal budget.

If you want to keep it budget-neutral, how about an across-the-board 3-4% cut to all other budget categories in return? Or, we could just, as you point out, remove the temporary "overseas contingency operations" (Iraq/Afghanistan wars) supplement to the regular DoD budget, which is $125b in 2012, returning the DoD to its baseline budget. If I had a line-item veto pen I could pretty easily come up with another few hundred billion in savings if you'd like (cut agriculture subsidies, cut Medicare Part D, transition TSA/air-traffic-control to being fully user-fee-funded, do another round of domestic military-base closures through a BRAC-like process, etc., etc.). :)

I think you answered your own question. Spend the money on on people instead of the military. I am a fan of TVA type government workfare. It is not close to perfect, but it is better than the MIC. I would rather have contracters skimming graft off of construction and litter cleaning and boarding schools (my pet solution to inner city collapse) and science labs and music and dance troupes,than off of bombs and desert deployments.

I know you're just using it as comparison, but didn't the Iraq War start in 2003? And if this[1] is to be believed, the total cost of the war is ranging around $3.2-4 trillion. That's thirteen and a third years of your $300 billion scenario.

And it's not like that $300 billion just disappears into a black hole. Because poor people need it to live they are spending it immediately, which multiplies out across the economy, certainly more so than a war does. And I'm not even counting the human life cost of war. So yes, just giving people $10K a year isn't that bad considering what we have done.

I just love the thinking though: "we've spent all this money to kill people for no reason and now you expect us to feed Americans?!?!"

[1] http://costsofwar.org/

Well said ... plus, it would only cost half as much because we could get rid of the highly-paid bureaucrats administering the system (assuming they were capable of keeping a job elsewhere versus going on welfare themselves).

we already provide the bare minimum...we have welfare, social security, unemployment benefits, hospitals that are required to treat your broken arm even if you can't pay for it...all sorts of help from churches and other charitable organizations. i don't think there is any threat of anyone in the united states starving to death unless they are anorexic, addicted to drugs, infested with tape worms and too stubborn to see a doctor, or lost in the woods for a long time. what you're thinking of is a star-trek sort of world. we're a long way off from that. we're still in the jungle baby. just be glad you're alive and breathing and stop trying to convince uncle sam to take even more of my money or i'll just stop working and play call of duty all day and let you program all these websites for me.

I'm not sure what kind of world you live in, but: 1) the U.S. is quite wealthy overall and can easily afford to maintain a basic minimum standard; and 2) does not currently do so in any sort of effective way.

You're correct that we do spend a lot of money piecemeal to get some semblance of a safety net, which is one reason even libertarians like Hayek and Friedman suggest it would be better to just actually provide a direct safety net, in a much less distorting way, instead of this crazy mixture of special-case and bureaucratic safety nets. The main people promoting those seem not to be libertarians but nanny-state conservatives who want to somehow make sure that someone's food stamps are spent on food and not beer. To me, as a more libertarian-leaning sort of person (albeit in teh Hayekian sense), if they're getting $100 in assistance, I don't give a damn what they do with it past that point. Give it in cash, and if they squander it on vodka instead of buying food, well then that's their problem at that point.

I don't really believe your threat. Is the only reason you work because you couldn't live a $10k/yr subsistence living otherwise? You're not actually interested in creating things, exchanging value with people, etc.? That's certainly not the case for myself or most people who care about technology; I couldn't imagine sitting around playing call of duty all day, living off ramen in a cheap hovel in a bad neighborhood, if that option were offered to me tomorrow. Taxes certainly aren't much of a deterrent; once you add up all the exclusions and whatever I pay an effective 20% tax rate or so, and I'm not even in one of the lowest tax brackets.