We should phase out means-tested social programs

and replace them with programs that promote Upward Mobility

I believe that the American welfare state is fundamentally flawed and has been so for the last 60 years. American social programs can be divided into two big categories:

1. Social insurance programs for retired people, such as Social Security and Medicare

2. Means-tested programs for the poor and near-poor, such as Medicaid, Food Stamps, CHIP, the ACA Health Insurance marketplace, public housing, etc.

This article only focuses on means-tested programs for the poor and near-poor. The general purpose of these means-tested programs is to make the poor and near-poor more comfortable by substituting for all the things that a typical working-class person gets from a job:

• an income in the form of TANF

• food in the form of food stamps

• housing in the form of public housing and

• health care in the form of Medicaid and CHIP.

For those on the Left who want to give everyone a basic standard of living for all, this seems like a fair thing to do. But this is based upon a fundamental misunderstanding of how someone achieves a better life. The American welfare state tries to insulate the poor and near-poor from the negative consequences of not making the right choice.

I believe the main goals of government policy should be to:

1. Promote long-term economic growth

2. Create a prosperous working class

3. Promote a clear pathway that enables youths from low-income families to enter the prosperous working class.

The welfare state should focus on the latter two goals, but it does not.

Pathway to Success

What the welfare state should be doing is encouraging the poor and near poor to make wise Life Choices while they are young that enable them to get even more of those things by interacting with the progress in the rest of American society. If we organize those Life Choices in chronological order so that youths encounter them in their own personal life, we can call them a Pathway to Success. By following the Pathway to Success, youths put themselves on a life trajectory that maximizes their chances of achieving a successful and happy life.

I believe that a Pathway to Success should consist of the following steps:

1. Graduate High School.

2. Complete post-secondary education/job training to learn practical skills that enhance your long-term earning power.

3. (if you live in an area with few opportunities) Move to a metro area with much greater opportunities.

4. Work full-time.

5. (If you have children) Get married and stay married.

6. Save and invest at least 10% of your income.

Our welfare state should be based on this Pathway to Success. We should establish programs that give youths from low-income families the incentives to follow the Pathway to Success, and we should abolish or radically reform programs that undermine incentives to follow the path. Unfortunately, most social programs for the poor and near-poor fall into the latter category.

In other words, we should offer positive incentives to those who do the right thing rather than negative incentives for those who do the wrong thing. I believe that a modernized welfare state that promotes Upward Mobility should be based on:

1. A Working Family Tax Credit

2. Upward Bound accounts based on the Pathway to Success that enable youths from low-income families to make wise Life Choices

3. Phasing out virtually all current means-tested programs over the next four years.

In this article, I will explain my plan for phasing out virtually all means-tested programs

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See more articles on Upward Mobility:

1. Why achieving Equality is an Impossible Dream

2. Why Progress and Upward Mobility should be the goal, not Equality

3. Why Equality of Opportunity is not enough

4. Why copying is essential to individual success

5. Upward Mobility in the USA (1947-1965)

6. Why Life Choices are key to Upward Mobility

7. The Traditional Pathway to Success

8. Constructing a modernized Pathway to Success

9. The Pathway to Success (first article in three-part series)

10. The case for Upward Bound accounts

11. The case for a Working Family Tax Credit

12. more

I also will be writing a significant number of excerpts from my forthcoming book: Upward Mobility: A Radical New Agenda to Uplift the Poor and Working Class. Most of these excerpts will only be available to paid subscribers.

Other books in my “From Poverty to Progress” book series:

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Transitioning from Old to New

The reform plan described in this series has the potential to dramatically increase the standard of living of the American working class. Just as important, the plan would create a clear and achievable pathway for youths of below-average income families to enter the prosperous working class.

Creating these new programs, however, is not enough. If we just add Upward Bound and the Working Family Tax Credit to our current welfare state, the positive changes in incentives will not be enough. We must also eliminate the negative incentives created by our current system of means-tested benefits.

With a few exceptions, we must eliminate means-tested programs for all people under age 65. Our current system creates so many negative incentives that cannot be overcome by modifying eligibility. At the same time, we need to free up funding by abolishing programs that do not work, so that we can fund programs that stand a real chance of working.

Undoubtedly, this will be very controversial on the left. I am sure that they will regard essentially abolishing means-tested benefits as inhumane. But look at the European social programs that they admire so much. None of them have anything like the means-tested programs that the United States has. If they can do it, why is it inhumane for the United States to do the same?

The reality is that there is no substitute for:

• full-time work,

• marriage,

• relocation to areas with greater opportunities, and

• skills acquisition.

No matter how much we expand benefits and eligibility within the current means-tested system, beneficiaries will be far worse off than if they just followed the Pathway to Success.

I believe that it is the continuation of our current means-tested that is inhumane. By constantly rewarding people for not making good choices, we are ruining people’s lives. I believe that most beneficiaries want to be able to support themselves and give themselves a sense of autonomy and pride that only having a job and a family provide.

The means-tested programs initiated in the 1960s and then rapidly expanded in both eligibility and funding were a noble failure. If I had been alive during that time, I might have supported them. But we must admit the obvious truth: they have not enabled poor people to lead happy and successful lives. Quite often, they have done the opposite. What is particularly sad is that they often encourage people to make choices that increase their chances of leading unhappy and unsuccessful lives.

Abolition is the only solution.

Four-year Transition Period

There is no doubt, however, that implementing these reforms will be a wrenching change for many lower-class people. For the most part, they would lose support from programs that have existed for decades. No matter how much the lower class benefits in the long run, it would be very unfair to abruptly end the old system.

We need a transition period that gradually phases out the old system of means-tested benefits in favor of the new system based upon Upward Bound and Working Class Tax Credits. During this transition period, the benefits coming from the current system will gradually phase out, while the benefits from my proposed system will start immediately. This transition period will cushion the blow for current beneficiaries while encouraging them to follow the same pathway to success that youths are encouraged to.

I believe that four years is the best duration for a transition period. This is a long enough period for people to adjust, while still being within one presidential term. A shorter transition period could cause too much unnecessary stress and political opposition. A longer transition period would be costly and make it too easy for political opponents to overturn the new system before it has had a real chance to work.

The Four-year Transition period should include the following:

1. No new beneficiaries will be accepted into current means-tested programs.

2. Close down the programs permanently.

3. Transform all benefits into their cash equivalents. This would particularly affect health care and housing.

4. Allow current beneficiaries to keep their benefits even if they find a job that makes them ineligible under the current system.

5. Each beneficiary would receive $5000 deposited into their Upward Bound account to pay for job training or relocation.

6. Gradually phase out those cash equivalents over four years.