A New Economic Empowerment

In the last election, Mitt Romney’s controversial comments about the 47% who don’t pay income taxes effectively marginalized a large portion of people who are willing to vote Republican. On a daily basis, whether it is on Twitter or on other social media outlets, conservatives refer to the unemployed as lazy moochers and the like. How do conservatives expect to get their votes when they continuously disparage them?

One start would be to use simple human compassion and the idea of economic empowerment when talking about the poor’s financial situations. This would demonstrate that yes, we do care about their plight. We have to promote policies that show we really do desire about wide-spread prosperity. More importantly, we need to promote policies that don’t contradict the tenets of limited government, individual liberty, and personal responsibility.

I will briefly outline some policy proposals that I think will not only have electoral appeal to the lower class (and others as well), but will improve people’s lives. I will broadly group them into three categories:

  • Immediate economic relief
  • Protecting equal opportunity
  • Preserving upward mobility

Immediate Economic Relief

Despite good intentions, most government programs fail to help the poor better their lives. All too often, the focus is not on people, but on building bureaucracy. There is a better approach that is less bureaucratic and — more importantly — helps people now.

My first idea is to institute a negative income tax. Here are some of the basics of the idea and a few arguments for it.

The NIT is easy to describe. “The basic idea,” Friedman wrote in a 1968 Newsweek column, “is to use the mechanism by which we now collect tax revenue from people with incomes above some minimum level to provide financial assistance to people with incomes below that level.” Already, he pointed out, no one pays taxes on the first few thousand dollars of income, thanks to personal exemptions and deductions. Most earners pay a fraction of their “positive taxable income”—that is, the amount by which their earnings exceed that first few thousand dollars. In Friedman’s plan, the poor would similarly receive a fraction of their “negative taxable income”—the amount by which their earnings fell short of that level. This direct cash grant would replace all other welfare programs for the poor, which, Friedman rightly observed, were generating a huge bureaucracy and extensive welfare dependency. But wouldn’t the NIT—in effect, a government-guaranteed income—still be a disincentive to work, just as no-questions-asked welfare benefits were before being reformed in the 1990s? “Any state intervention, any income redistribution, creates disincentives and distortions,” admits Gary Becker, a University of Chicago economist and Friedman disciple. “But if society decides that a certain level of redistribution must take place, the NIT is the best [and] the most minimally distorting solution ever devised.”

To limit the disincentive, Friedman argued, the NIT should be progressive. Say the government drew the income line at $10,000 for a family of four, and the NIT was 50 percent, as most economists recommend. If the family had no income at all, it would receive $5,000—that is, 50 percent of the amount by which its income fell short of $10,000. If the family earned $2,000, it would get $4,000 from the government—again, 50 percent of its income shortfall—for a total post-tax income of $6,000. Bring in $4,000, and it would receive $3,000, for a total of $7,000. So as the family’s earnings rise, its post-tax income rises, too, preserving the work incentive. This is very different from many social welfare programs, in which a household either receives all of a benefit or, if it ceases to qualify, nothing at all. The all-or-nothing model encourages what social scientists call “poverty traps,” tempting the poor to not improve their situations.

Robert Moffitt, an economist at Johns Hopkins University and a leading authority on the NIT, notes another advantage of the program over other forms of state assistance: “No stigma attaches to the NIT.” Everyone fills out the same forms, and no infantilizing government meddles with a household’s food, shelter, and health care, as under the current system.


Yet another NIT advantage is a freer labor market. No minimum wage would be necessary, since a minimum income would now be guaranteed. This would boost employment: as economists recognize, a legal minimum wage tends to increase joblessness by discouraging employers from recruiting unskilled labor. The NIT would reduce illegal immigration, too. Managed by the IRS, it would apply only to citizens and legal residents, and since it would eliminate welfare programs, aliens would have less incentive to cross the border illegally

The NIT would do away with the various bureaucratic programs such as WIC and food stamps (which also double as a handout to special interests), would increase employment, and decrease illegal immigration.

Another policy to champion would be a sound money policy. Ron Paul holds many positions that deserve criticism, but he’s right about the Federal Reserve. The Fed’s printing press has been in overdrive since the Great Recession hit. Inflation has been pushing up the price of food and fuel for all Americans. Reintroducing a sound money policy and getting the Fed’s focus back on fighting inflation will bring some price stability to basic commodities.

Protecting Equal Opportunity

As conservatives, we should protect the equal opportunity of all Americans to better their lives. Unfortunately, we really can’t say that all Americans have equal opportunities in this era of “too big to fail” and crony capitalism. We as conservatives and libertarians must strongly oppose both. If a bank or any other business makes bad business decisions, then that business must go out on its own and not be bailed out by the government. We need to stop corporate welfare to companies such as Solyndra, to other private businesses receiving money (even smaller ones), and we need to stop other special incentives from government. We shouldn’t have socialism and safety nets for the rich and laissez faire capitalism for everyone else.

Lastly, student loans cannot be discharged in bankruptcy court like credit cards can. That should change. Hopefully this would not only give relief to young graduates who are struggling to pay student loans, but also encourage much needed reforms in our financial aid programs. Perhaps this would displace some downward pressure on college tuition as well.

Preserving Upward Mobility

The essence of the American dream is that Americans, regardless of how they started in life, can better themselves. As conservatives, we must support policies that promote this. Fortunately, we have two very potent ones: school choice and private Social Security accounts.

While I will not be going into the specifics of each concept, both ideas share the same principle. Who can best decide your retirement future and your children’s education — you or a bureaucrat who sees you as just a number? While we should have a safety net in place to provide a minimum education for all children and retirement security for all, we need to also let each family decide the best way for them to better their future. A personal retirement account can be passed down to your heirs, whereas your heirs get nothing from the current social security system.

Anybody can achieve the American dream. The government can assist where needed, but that assistance will work far better under a system where people are empowered to succeed.