By Richard E Walrath and Patricia L Johnson

There are numerous types of inequality in this country. We have ‘economic’ inequality which generally refers to ‘income’ inequality, “opportunity” inequality, and inequality of “rights”. No matter what you call it, it all seems to boil down to one word “money”. If you have money, you generally have a place to live, food on the table, education choices and work choices.

When you are poor and do not have a sufficient amount of money, you may end up homeless, uneducated and without a future. All too many of our fellow citizens are currently in this position and something has to be done to change the path they’re following.

In 1943 Psychological Review published Abraham H Maslow’s “A theory of Human Motivation” which set up a hierarchy of human needs.

Basic needs such as air, water, food, sleep, clothing and shelter must be met before the person could move on to safety needs, which included personal security, emotional security, and financial security. Once these needs were met, the individual could then move up the ladder to psychological needs, self-fulfillment needs, etc.

As long as we continue to have a ‘poor’ population and fellow Americans out of work, basic needs of US citizens are not being met.. As long as we have individuals that are homeless, do not have health insurance and are living hand to mouth, US citizens needs are not being met.

What is the answer?

The 1976 Nobel Memorial Prize in Economics winner, Milton Friedman had the answer a long time ago and he was a Republican. Guaranteed annual income. Not out of the goodness of his heart. He saw that the economy needed more spending. The poor spend all they have and it is not enough. The rich have five or six of everything they will every need and don’t have room for anything more.

You may read the pros and cons of Milton Friedman’s “Negative Income Tax” theory (explained beginning on page 5) of the June 2003 paper prepared by our National Bureau of Economic Research.

Friedman’s theory was based on a simple premise that the solution to the poor was to give the poor more money. The following is taken from a New York Times article “The Other Milton Friedman: A Conservative With a Social Welfare Program” written a week after Mr. Friedman’s death in 2006.

His proposal, which he called the negative income tax, was to replace the multiplicity of existing welfare programs with a single cash transfer — say, $6,000 — to every citizen. A family of four with no market income would thus receive an annual payment from the I.R.S. of $24,000. For each dollar the family then earned, this payment would be reduced by some fraction — perhaps 50 percent. A family of four earning $12,000 a year, for example, would receive a net supplement of $18,000 (the initial $24,000 less the $6,000 tax on its earnings).

Mr. Friedman’s proposal was undoubtedly motivated in part by his concern for the welfare of the least fortunate. But he was above all a pragmatist, and he emphasized the superiority of the negative income tax over conventional welfare programs on purely practical grounds. If the main problem of the poor is that they have too little money, he reasoned, the simplest and cheapest solution is to give them some more. He saw no advantage in hiring armies of bureaucrats to dispense food stamps, energy stamps, day care stamps and rent subsidies.

As always, Mr. Friedman’s policy prescriptions were shaped by his desire to minimize adverse economic incentives, a feature that architects of earlier welfare programs had largely ignored. Those programs, each administered by a separate bureaucracy, typically reduced a family’s benefits by some fraction of each increment in earned income. Rates of 50 percent were common, so a family participating in four separate programs might see its total benefits fall by $2 for each extra dollar it earned. Under the circumstances, no formal training in economics was necessary to see that working didn’t pay. In contrast, someone who worked additional hours under Mr. Friedman’s plan would always take home additional after-tax income.”

Why is a plan that contains so much common sense not being utilized in this country?

© 2021 Richard E Walrath and Patricia L Johnson

Richard E. Walrath  is a former Budget Analyst for Ohio State University, residing in Central Ohio with his family.  Patricia L Johnson is a former special assignment writer/photographer residing in Northeastern Il.