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Transparency: sunlight is the best limitation
Posted by: Jon Henke on Tuesday, March 21, 2006

This Jane Galt commentary is good...
I am bewildered by those who profess to be idealists, interested in the public good, rather than power. If your conception of the public good is served by, for example, hiding the economic cost of your program from the majority of American voters by making it a (lousy, inefficient) tax credit, instead of paying for it out of tax revenue, then in what way is your idea of the public good compatible with a democratic vision?

She's commenting on this fascinating proposal by Will Wilkinson...
It is incredible to me how often this idea occurs to me, and how seldom it seems to occur to others: If there is a transfer from class A to class B, make it explicit. When you propose making an hidden transfer explicit, people often climb the wall with annoyance. Why? Because the whole point of many hidden transfers is that they are politically viable only because they are hidden. If you like the transfer, you’ll want to keep hiding it.

Hey! Maybe that’s my new favorite Constitutional amendment idea. The Explicit Transfer Amendment! Under the ETA, raising the minimum wage is unconstitutional. Levying extra taxes on business owners or consumers and transferring the money to low-income workers is not. The point is just that the transfer is obvious. If there is a political constituency that is hurt by it, they’ll be able to see that, and speak up for themselves in the political process.

I think this falls out of Rawlsian principles of public justification, for what that’s worth.
I'm all for it. Add an explicit (and non-utero-specific) Constitutional Ammendment to once-and-for-all establish whether we actually want a right to Privacy in the Constitution and let's get these things to the States!

On the other hand, some other libertarians are coming up with some rather bad ideas. Andrew Sullivan writes that he's "fascinated by Charles Murray's new proposal to abolish the entire welfare state and replace it with with cash grants to individuals", which just frightens me to death.

Consider what Murray proposes...
Charles Murray offers a plan that would eliminate all income transfer programs at the federal, state, and local levels—including Social Security, Medicare, Medicaid, welfare, and corporate subsidies—and would substitute an annual cash grant of $10,000 for life, beginning at age twenty-one.
I doubt that even President Bush's Medicare Prescription Drug Bill was less fiscally conservative than this. Even if it reduced our overall income transfer expenditures, what do you suppose the effect would be of providing every 21+ person in America with a $10,000/yr subsidy for merely existing? I suspect that, while it might do wonders for sales of XBox, it would mainly cause quite a lot more people to...merely exist.

There's much to be said for transparency, and more of it (e.g., Wilkinson's Explicit Transfer Amendment) would be beneficial. But there's also a lot to be said for incentives, which is something that some libertarians — "the ambitious social programs of the Great Society designed to help the poor and disadvantaged often made things worse" — once understood.
 
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Milton Friedman proposed what would be considered a significant improvement to the Murray proposal - the negative income tax. He proposed a 50% tax rate for those below a certain threshhold - say, for example, $20,000. Thus, an adult with no earnings would get Murray’s $10,000, while an adult earning $7,500 would get his or her $7,500, plus a direct transfer from the government of $6,250 (=50% * (20k - 7.5k))- for a total compensation of $13,750.
Transparent? check
Social safety net? check
Incentive to work? check
Broaden the base of those who demand spending restraint by giving them an interest in tax rates (even if they’re negative)? check
 
Written By: M. Jed
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