Monday, April 16, 2012

A sustainable government

With our current government, sustainability appears to be a problem.  Deficits get more out of hand every year it seems, and the overall debt is simply astronomical.  It can be serviced only providing that the economy continues to grow steadily.  And as we're seeing now, that's not a very safe assumption.

But we also find ourselves contemplating universal health care.  How can we even think about this with our budgeting problems?  And yet, the logic is inescapable: single payer countries pay less per capita on health care than we do.  

But single payer means centrally managed, and there are downsides to that too.  But something has to give, because reality is staring us in the face and insists single payer is clearly superior to what we currently have, but our culture prefers a free market.  Can we get the best of both?

I think we can.  I think I have a solution that creates a free market that is freer and better than it's ever been in this country.  My solution removes all government involvement in education, welfare, social security, and health care (except for some regulation, because I believe it is necessary, just like we regulate certain aspects of car insurance).  Not just reduced, eliminates.  Hopefully the libertarians and fiscal conservatives and free market believers are sitting up and taking notice.

My solution also prevents the poor from being severely disadvantaged or being left out.  No one will be dying in the streets from lack of health care.  Indeed, under this plan, only the truly mentally ill would be homeless and destitute.

So hopefully I have your attention now.

The plan involves a simple and universal living stipend and it's utterly simple.  Choose a percentage of mean income that everyone should receive that can ensure a minimal sustainable life assuming they will have to pay for food, housing, health care.  Say 1/3, just for arguments sake.  Levy a flat tax on all income of 33% on everyone, no deductions.  Redistribute the money equally amongst all taxable adults.  That's it.

Now, usually data on income only gives the median income, but I can estimate the mean. Wolfram Alpha tells me total personal income in the US is 13.26 trillion. There are about 230 million adults in the US, which makes the mean income about $58,000.  So, 1/3 of that is $20,000.  Given $20,000 we are asserting that a person should be able to afford health care, food and shelter and other basics.  Probably if they are frugal enough, they can, and with some government regulation of health care insurance, it can probably be made affordable too.  If a couple pools their resources, $40,000 is plenty to handle basic expenses.

But now, health care can be handled by the free market without having any uninsured, because having a minimal level of health insurance would have to be mandated, like car insurance.  After all, if you have a stroke in the street, we are going to treat you, so therefore you must be part of the insurance pool.  Our humanity demands this of us, and so we all demand you buy into it to pay for it.  The lack of any insurance and source of funding for people we do nonetheless provide health care for is a large source of expense in the current system. 

Education can be handled by the free market too, because we can also expect that people have the money to pay for education.  Children receive no stipend until a certain age, so there is no financial benefit to having children.  However, a couple receiving $40,000 a year could afford some education for their children.  

Social security is no longer needed - this is social security.  For everyone.  Same with welfare: this is it.

So now we've removed the biggest unsustainable parts of the government's budget.  Of course, we'd have to get military spending in line too (I don't think any plan works without dramatically reducing our military spending and wars), but that's a separate issue.  The remaining government needs for money add up to about $2.2 trillion. That includes federal, state and local spending, with all pension, welfare, health care, and education spending removed. Military spending makes up about $900 billion of that. $2.2 trillion is about 16.5% of the 13.26 trillion total personal income. It could be paid for with an additional 16.5% float tax rate, bringing the total rate to 50%.

So, we are taxing everyone 50% of their income, and redistributing 33% and using the remaining 16.5% for additional government services.  If you are making $25,000/year currently, you would pay $12,500 and receive $20,000, for total take home of $32,500.  Compare that to what such a person would currently pay, some small amount of income tax, but %15 percent social security tax, 8% sales tax - or probably taking home $20,000.

Someone who makes $80,000 would keep $60,000, which is fairly on par with current levels, again taking social security and sales tax into account.

Someone who makes $500,000 would keep $270,000, and now we see that clearly, the bulk of the money is coming from the wealthy, and your opinion on that will likely vary with your chosen ideology.

However, the point I want to stress is how much of a free market this is enabling.  Not only is the government no longer providing education, health care and welfare, but now everyone in the country is able to take part meaningfully in the free market.  With more people able to make real choices with their money (and not forced, they actually have enough power to reject economic relationships they currently often can't), they add to the markets ability to efficiently allocate resources and provide price discovery.


  1. Yeah, but that means people get money without having to work. And conservatives simply can't be having with that.

  2. I guess I can't please everyone :-)

  3. I have been thinking about another scenario, more inline with the single payer, 'socialism' model. I like your idea, Actually I think I like it better. I think that the main thing that needs to be added is a system for incentivising entrepreneurship. After all, I believe the premise is that down the road we will be in a post-scarcity economy, and that un-employment is sky high high. With the living stipend, people will have the opportunity start businesses, develop new technologies, and create art/entertainment without risking their financial security. What I am thinking is that there could be some sort of barter economy, and that really good stuff would come out of this and 'graduate' into the cash economy. Many people will be of the mind do spend their free time constructively, but many will need incentives that could be designed by the government (or the free market).

  4. Of course the problem with such incentives is you can't know you're incentivising the right thing, and it costs money, which has to be taken from something else.

    As for a separate barter economy for pre-market-ready goods, I think that's quite likely. I think we already see some of that in open-source software where people trade on reputation long before they cash in monetarily on creating a successful open-source project.