Larry DeWitt: Review of Charles Murray's In Our Hands

In his highly provocative 1984 book, Losing Ground, (1) Charles Murray made a clever, because oblique, assault on American social welfare policy over the course of the previous three decades. Murray's aim then was the same one announced so triumphantly in his newest book: to dismantle the American welfare state. In Losing Ground, his purposes were somewhat disguised. In his In Our Hands, (2) his long pursued agenda has finally arrived at its openly stated destination.

Murray wants to abandon the entire American welfare state which has evolved over the course of America's history. Not just welfare programs--which have long been in his gun-sights--but the entire system of governmental programs designed to protect even the middle class from what in the economic sphere Franklin Roosevelt called "the hazards and vicissitudes of life." FDR had in mind such hazards and vicissitudes as poverty, unemployment, illness, and old age. And all of this, in Murray's world, is none of government's business.

Murray's proposal is impressive for its simplicity, and breathtaking in its audacity. He wants to abolish all government programs which might have as their aspiration the relief of economic insecurity. In place of this system, Murray offers an annual $10,000 grant to every American citizen age 21 and older (who is not in prison), with which they are expected to purchase in the marketplace their own health insurance, social security, unemployment insurance, disability insurance, and anything else they think they might need to stave off those "hazards and vicissitudes of life." In short, economic security will become each individual's job, and government will no longer have any role of this type in our political economy. How did Murray manage to arrive at such an extreme "plan?" In the immortal words of the Grateful Dead song: what a long, strange trip it's been.

It Was Never About Race: Charles Murray and the Assault on the American Welfare State

Losing Ground was a seminal book--produced at a ripe historical moment during the heady early rise of the Reagan Revolution. It was an instant favorite among Reagan conservatives and Murray was even briefly touted for a major policy job in the Administration--although someone thought better of it at the last minute. The book was heavily promoted by the conservative Manhattan Institute, which had commissioned the book based on a pamphlet Murray had written for the Heritage Foundation. With the Manhattan Institute's aggressive marketing campaign--including spending $125,000 promoting the book and sending free copies to everyone from academics and editorial writers to Margaret Thatcher's cabinet--Losing Ground became an instantly influential book. Even those who vehemently disagreed with Murray were forced to address his work. His book was virtually obligatory reading within the policy circles of the Reagan Administration. The Office of Management and Budget's Counsel, Michael Horowitz, publicly praised the book in ads for the publisher, saying "Nothing more important than Charles Murray's work has come along in recent years, and his role as a morally credible spokesman for the conservative side of the debate has opened up the dialogue." (3) The Office of Personnel Management held an Executive Forum where Murray spoke to an assembly of top Reagan Administration officials, each of whom was given a free copy of his book. (4)

The heart of Losing Ground was an especially clever attack on the liberal consensus on social welfare policy, by questioning the impact of this policy on a core liberal constituency. A central premise of the liberal consensus is the expectation that governments should work to alleviate social inequality for black Americans. One might say that poor black Americans are a core constituency of liberals. Murray's book thus attempted to hit the liberals where they live.

Murray argued that if one tracks the rise of social welfare programs, and compares the growth in these programs to various indices of social inequality, that the paradoxical result is seen that increased social welfare spending leads to increased social inequality. This was demonstrated by Murray in a series of comparisons between blacks and whites on various social indices. Displaying trendlines using these indices, Murray purported to show that social welfare spending was correlated with a worsening of the relative position of blacks compared to whites. In other words, Murray's core argument was that the very programs that liberals had deployed to help poor blacks, had in fact made their situation worse. (5)

We should note that Murray's analysis was not an end in itself, but was the premise of an argument. His full thesis in Losing Ground was: the programs designed by liberals to help poor black people in fact do more harm than good; therefore, government programs aimed at improving social welfare should be abandoned. One obvious retort here is to observe that even if the premise is true, all that follows is that these particular programs--designed in these particular ways--have the alleged effect. One sanguine alternative is to fix the programs or design better ones. But Murray wanted the full conclusion to go unchallenged because his real agenda--already in Losing Ground--was to attack the American welfare state and urge its abandonment.

After this book--arguing that liberals were doing harm in their efforts to do good--Murray and a co-author, Richard Herrnstein, tried an even more blatant blow to the liberal solar plexus. In their infamous, The Bell Curve, (6) Murray and Herrnstein were attempting to construct an alternative premise, linked to the same conclusion as before. In this work Murray and Herrnstein argued that the basis of social inequality is differences in innate abilities, in particular, in intelligence. These differences, moreover, are genetically based, and hence cannot be altered by social interventions--except perhaps marginally.  

Murray and Herrnstein once again focused on race and black/white comparisons. This time, their aim was to demonstrate the claim that, to put it plainly, blacks are intellectually inferior to whites and that is the reason that they suffer such disparate circumstances in life.

Here again, this argument about race was not about race at all. Race was being used as a tool in a larger agenda. It was again the attack on the American welfare state. The entire argument about genetics, race and intelligence was a mere premise in a larger argument. That larger argument was: social welfare programs cannot work because the differences they seek to ameliorate are genetic in nature, therefore, we should abandon the programs of the welfare state.

Where in Losing Ground Murray was arguing that social welfare programs paradoxically do more harm than good, in The Bell Curve he argued that such programs cannot work. In both cases, the same conclusion was being sponsored: abandon the American welfare state.

Unfortunately, almost the entire liberal response to The Bell Curve missed the point. It centered on charges of racism against Murray and Herrnstein, and became trapped in obsessive focus on the idea of innate black inferiority. Like skilled magicians, Murray and Herrnstein were waving the issue of racial differences in the air to capture the audience's attention, while the hand doing the trick was involved in something else altogether: a steady undermining of the liberal consensus on the welfare state.

All of this--the loss of faith in the liberal consensus on social welfare policy, the conservative attack on Great Society programs, the dismissal of race as a controlling factor in social inequality--was teeing it up for Murray's new book. And now in the new book, he is swinging for the fences.

The Plan in the Other Hand

This much is certain," Murray tells us in the opening line of the article-length version of his Plan, "the welfare state as we know it cannot survive." (7) He gets to this "certain" conclusion by extrapolating recent growth rates in entitlement spending to the year 2050, and thereby shows that America will be spending 28 percent of its GDP on such spending by that year. This is the future he is certain cannot arrive.

This kind of statistic is always dubious in that it makes extrapolations from trends that are unlikely to continue, even in the context of a fully functioning welfare state. Policies and programs can and are changed all the time, and adjustments in future cost factors can be made. Indeed, making ongoing judgments about the proper level of social expenditures is a central function of a modern democratic society. In place of Murray's fanciful statistic, we would do better to bear in mind the old observation by economist Herb Stein: "If a trend is not sustainable, it tends to stop."

But Murray must depict the welfare state as a kind of mindless automaton which rolls relentlessly onward and upward. Without the assumption of an endless increase in the cost of the welfare state he cannot make the case for his alternative scheme. The pecuniary among us might not be willing to fund Murray's scheme if it will forever cost taxpayers more than the current welfare state (which Murray admits it will at the outset). In order to get the benefits of his scheme high enough to be attractive, Murray has to raise more in taxes than the welfare state currently demands. The devil's bargain is that in the future the welfare state will theoretically cost so much that Murray's expensive alternative will seem a bargain by comparison. In other words: pay more today for the promise of a smaller bill years from now. Economists and actuaries may be comfortable with such bargains, but it is not so obvious that taxpayers feel the same way. (The opposite idea: get more tax cuts today with the possibility of higher tax bills in the by-and-by, is of course looked on with much more favor by taxpayers, and it has become an essential political gambit of the modern Republican Party.)

So the simple idea that we can adjust programmatic policies if we decide that social programs have become too costly, is a simple idea which must be bypassed by Murray in order to start his engine. But having made this presumption, Murray can now move directly to the claim that something must be done. But what?  

No problem could be easier to solve, it turns out. "Instead of sending taxes to Washington, straining them through bureaucracies, and converting what remains into a muddle of services, subsidies, in-kind support, and cash hedged with restrictions and exceptions, just collect the taxes, divide them up, and send the money back in cash grants to all American adults. Make the grant large enough so that the poor won't be poor, everyone will have enough for a comfortable retirement, and everyone will be able to afford health care." (8) The book as well opens with what Murray labels A Short Statement of the Argument: "America's population is wealthier than any in history. Every year, the American government redistributes more than a trillion dollars of that wealth to provide for retirement, health care, and the alleviation of poverty. We still have millions of people without comfortable retirements, without adequate health care, and living in poverty. Only a government can spend so much money so ineffectually. The solution is to give the money to the people." (p. 1)

So, there you have it. The reason we have poverty in America; the reason that 46 million people lack health care coverage; the reason not everyone is able to enjoy a comfortable retirement; the reason there is an underclass and so much social inequality, is all because governments skim off so much wealth from tax revenues that not enough is left to produce this happy world of prosperity for all. (An alternative interpretation--say that the huge concentration of wealth in the hands of the richest Americans might be one factor preventing everyone from having sufficient prosperity--is a concept so far outside Murray's political paradigm that he does not even mention such a possibility.)

Lest any comfortably middle-class citizen think what Murray has in mind here is the typical conservative disdain for welfare and its clients, let me disabuse you of that happy thought right away. Murray's list of targets-for-elimination is impressive if nothing else:

• Social Security, Medicare and  Medicaid  
• Railroad Retirement   
• Unemployment insurance and workers  compensation  
• Veterans medical care and veterans  pensions based on need  
• All welfare programs (state and  federal)  
• Food stamps (state and  federal)  
• All agricultural and housing  subsidies  
• Most government support of  education (state and federal)  
• Job training programs (state and  federal)  
• Energy assistance programs (state  and federal)  
• Most of the Army Corp of  Engineers  
• The Bureaus of Reclamation and  Indian Affairs  
• The Corporation for Public  Broadcasting  
• The Ex-Im Bank  
• Amtrak subsides   
• The Small Business  Administration  
• All forms of "corporate welfare" .  . .

Well, you get the idea. In all, Murray's Appendix A lists 108 federal programs/agencies he wishes to see abolished. (9) Murray's Plan involves the elimination of every function of government that economists would classify as transfer payments, and he allows the government to provide only what economists call "public goods," which are such things as national defense, a clean environment, and police protection. (10) This is a traditional libertarian policy goal, and Murray is trying to take us there through a new route.

By Murray's accounting, all levels of government spent about $1.4 trillion for transfer payments in a recent year. (11) Just to be clear about it, Murray's proposal is not that we abolish these functions of government and thereby avoid $1.4 trillion each year in taxation. Rather, he wants to continue the existing taxation, (12) he just wants the revenues from this taxation to flow not to these government programs, but back to the taxpayers in the form of universal cash grants. (13)

Indeed, the realization that Murray's real agenda here is one involving income redistribution and not tax burdens comes from his insistence, early on in the book, that his Plan be enshrined in the Constitution! (p. 10) Here is the opening phrase of his proposed Constitutional amendment: "Henceforth, federal, state, and local governments shall make no law nor establish any program that provides benefits to some citizens but not to others." In other words, Murray objects philosophically--as a good Libertarian soldier--to the whole idea of government granting differential benefits to anyone--whether that be to the poor, to veterans, to businesses, etc. Although Murray makes no acknowledgment of it in his book, this Constitutional amendment would also prohibit all special interest tax breaks in the tax code. Not only will the home mortgage interest deduction go away, so will lots of corporate tax loopholes--a fact he seems not anxious to bring to the attention of the business community, since he fails to note it.

In Praise of Non-Governance

So that is Murray's book in a nutshell: Abolish all the programs of the welfare state and give the gross tax revenues directly to citizens in the form of cash grants. By cutting out the "middle-man" (i.e., government and its manifold programs) all the problems government is trying to ameliorate through the programs of the welfare state will simply disappear. Indeed, Murray is a deeply committed believer in the power of non-governance. Many wonderful and marvelous social improvements would appear, Murray assures us, if it were not for government preventing the natural blessings of Adam Smith's invisible hand.

Murray tells us, for example, that under his Plan teenage pregnancy will decline and births to married women will increase. Here is how Murray demonstrates that this little aspect of heaven would reign on earth were it not for the presence of so much government mucking up the works: "The Plan radically increases the economic penalty of having a baby for a single woman under twenty-one . . . She no longer gets any government assistance--no cash payment, no food stamps, no Medicaid, no housing subsidies, no subsidies for day care." (p. 62) In other words, if we change the economic incentives, teenagers will stop having unprotected sex. The idea that teenagers are first and foremost utility-maximizing economists seems fanciful, to say the least. As John Kenneth Galbraith liked to observe, "There are some mistakes you need a Ph.D. to be able to make."

Oozing Charm from Every Pore . . .

This book has a disarming charm. Somewhat surprisingly, Murray writes with a light touch, which makes the medicine go down more easily than expected. Indeed, Murray says the most outrageous things in pleasingly short and eminently sensible-sounding sentences, which allow their implications to go smoothly sailing by, almost without noticing the cargo they are carrying. Here, for example, is how he disposes of the whole problem of economic inequality:

People are unequal in the abilities that lead to economic success in life. To the extent that inequality of wealth is grounded in the way people freely choose to conduct their lives, I do not find it troubling. . . . Some people pursue happiness in ways that tend to be accompanied by large incomes, others in ways that tend to be accompanied by lower incomes. . . . Income inequality is accordingly large. So what? Inequality of wealth grounded in unequal abilities is different. . . . the luck of the draw cuts several ways--one person is not handsome, but is smart; another is not as smart, but is industrious; still another is not as industrious, but is charming. This kind of inequality of human capital is enriching, making life more interesting for everyone. But some portion of the population gets the short end of the stick on several dimensions. As the number of dimensions grows, so does the punishment for being unlucky. When a society tries to redistribute the goods of life to compensate the most unlucky, its heart is in the right place, however badly the thing has worked out in practice. (p. 4-5)

Let me translate this: some people are poor because they choose to be; others are poor because of the bad breaks of their genetic endowments; nobody is poor because of the distribution of political power in society; and there is nothing government can effectively do about any of this anyway. Does it still go down so easily?

Historical Amnesia

One troubling aspect of Murray's book is that the work is profoundly ahistorical. It is as if Murray awoke into the early 21st century and assumes that nothing came before the moment he sees around himself. Nowhere in his book will we find any acknowledgment that the programs of the welfare state evolved because vast social inequalities and huge unmet social needs were only too evident and too persistent in our history prior to the development of the modern welfare state. One wonders how poverty, social inequality, old-age dependency, and other social afflictions ever achieved a foothold in the first place, in the era before the rise of the modern welfare state, if the welfare state is itself the cause of these social maladies.

Murray escapes this troubling inconsistency by imagining that the pre-New Deal world was a lovely place, with no underclass, no problem of teen pregnancy or divorce, and abundant mutual concern which prevented widespread poverty. He fondly recalls a world in which churches, charities and fraternal organizations provided a sense of community, and he implies that with these institutions we could easily care for one another without the aid of government (the fact that we did not actually do so when we had the chance escapes notice in Murray's fanciful version of history). One wonders: is he unaware that some of those fraternal organizations were among the groups pushing for the programs of the welfare state? The Fraternal Order of Eagles, for example, was a major lobbying force agitating for old-age pensions--which is why one of the signing pens from the Social Security Act of 1935 was given to the Eagles. Does he know that charities and maternal social organizations were behind the push for Mothers Pensions?

Murray offers the most embarrassingly simplistic kind of history, when he bothers to appeal to history at all. He says, for example, that the underclass is a phenomenon that did not exist prior to the last half of the twentieth century, and that its appearance was caused by the programs of the welfare state. (p. 3) The chronic poor and socially disadvantaged have been a constant feature of the industrial world, although, granted, the name "underclass" did not come into vogue until after 1950.

Take, as another example of Murray's tone-deafness to history, the Medicare program. As Murray blithely puts it in the opening lines of his chapter on Health Care (p. 37): "Under the Plan, people will be responsible for their own health care, as they were from the founding of the republic until 1965 . . ." So how well did that work out?

Medicare was created in 1965 because seniors could not purchase adequate health care coverage on the open market. Nothing has changed in that regard. If there were no Medicare program it is frightfully likely that millions of seniors would return to the predicament of the pre-Medicare world. Indeed, the "medigap" policies that are the only existing market-based solutions for the elderly, exist only because Medicare exists, because Medicare is the first payer, bearing the brunt of the costs of providing health care to the elderly--freeing these private concerns to offer boutique coverage with little financial risk.

Or to take another obvious example, one of the programs Murray is anxious to target for abolition is Social Security. Prior to Social Security, retirement was not a widely available option for America's workers. The investigatory study by President Roosevelt's Committee on Economic Security concluded that a majority of the elderly lived in economic dependency at the time that Social Security was adopted. (14) Indeed, in addition to adding a new phase to the expected lifecycle (retirement) the Social Security program eliminated one concept and one institution. The concept was "superannuation," which was the phenomenon of older workers being "retired on the job" because they could not afford to retire in fact. The institution was the poorhouse, thousands of which dotted the American landscape. The poorhouse as a strategy for economic security for the impoverished elderly was with us right up until the Social Security Act of 1935. (15)

The plight of the elderly in America before Social Security also had nothing to do with the economy of the Depression. Social Security long antedated the Depression of the 1930s. It arose in Europe in the 19th century, as a serious societal response to the social, economic and cultural changes induced by the Industrial Revolution. The shift from an agricultural to an urban society; the replacement of self-employed craftsmen and laborers by wage-earning job holders; the appearance of the nuclear family; the explosion in life expectancy, all were phenomena of the Industrial Revolution--well in place before America created its welfare state. The acute economic plight of the Depression is not the reason for Social Security. The connection between the Depression and Social Security in America is that the Depression was the triggering event that finally persuaded America to adopt social insurance programs.

All of this actual history is never mentioned by Murray. He is content with his bucolic visions of an America which never existed, and which is unlikely to magically appear once government stops all its efforts to protect our economic security. He seems particularly oblivious to the possibility of a selfish and callous society arising in the vacuum left by the absence of governmental programs. As if the Gilded Age was a term referring to an architectural style. As if the dimes handed out by John D. Rockefeller were an effective substitute for old-age pensions for his workers.

Murray the Moralist

Murray's vision is impressively far-reaching. In Part III of his book he puts aside the standard libertarian and conservative economic and social policy arguments and reflects on such big-picture topics as the meaning of life, and how his amazing Plan supports our spiritual fulfillment as well as our economic prosperity. The argument in this section of the book is basically that modern western societies (especially as exemplified in western European welfare states) have become soulless materialists concerned only to while away their lives in the maximum of material comfort, in "a culture of self absorption." What he calls "The Europe Syndrome." And the Welfare State--that Satan among us--is responsible for allowing them to do this. Thus if we eliminate the welfare state we will all be better people for it.

According to Murray, declining marriage rates, declining fertility among white Europeans, and a declining belief in God are all caused by the welfare state! God gets displaced in one of two ways, he reports: either one believes there is no God, hence material security becomes one's only interest; or one believes there is a God, but material security distracts one from paying attention to Him. Apparently--thanks to the welfare state--we are damned if we do and damned if we don't. And apparently, Murray shares the medieval value system by which suffering and deprivation are thought to be felicitous because they turn one's mind to God. It is also curious, one might think, that in Part III of his book Murray expends so much moral energy inveighing against material prosperity, while in the rest of the book he reassures us that his Plan will produce more of it than the welfare state ever can.

There is more. "The same absorption in whiling away life as pleasantly as possible explains why Western Europe has become a continent with neither dreams of greatness nor the means to reacquire greatness," he reports. "Even Europe's popular culture is largely borrowed from America . . . it has no contemporary high culture worthy of the name. All of Europe combined has neither the military force nor the political will to defend itself." (p. 86) This news may come as a bit of surprise to the 800 million Europeans, not to mention to all those Americans who travel to Europe in search of some of that apparently derivative culture. I suppose Murray imagines that Paris, Arkansas is the cultural superior to Paris, France.

There is more, much more, along these same lines, including some fairly plausible musings on the nature of happiness; and a fairly interesting discussion of the effects of the Plan on marriage and divorce; as well as some insightful thoughts about the nature of fulfilling work. The general theme of these discussions is that more personal responsibility would yield a better society. I find these discussions to be generally more persuasive than the rest of the book.

However, the flip side of this analysis is the attack on the welfare state, on the grounds that it undermines personal responsibility. This is the anti-government, anti-social welfare, face of the libertarian Janus. Some of us who might be inclined toward conservative takes on social values questions, find the attack on the welfare state to be misplaced. It amounts to a kind of sink-or-swim morality by which we remove the economic safety nets from society in the hope that the resulting challenges will build our character.  

Granted, it would be socially desirable if marriages were more stable; if child-bearing occurred only by mature married women; if we all took more personal responsibility for our lives and our pursuit of meaningful work; if we had a stronger, more expansive, sense of community. But eliminating government from our lives in the hopeful expectation that all this will happen is to gamble our security on Murray's ideology.

One aspect of Murray's moral musings, however, has to be singled out for special treatment. His discussion of "community" is positively giddy. He imagines an idyllic pre-welfare state world in which fraternal organizations and various other forms of voluntary association distinguished the American landscape. He even begins by wistfully quoting Tocqueville on the subject. His basic vision of the future is that in the absence of government, voluntary associations will emerge like mushrooms after a Spring rain, and all our social needs will be met through voluntary mechanisms.

He argues two specific claims in this regard: giving through charities allows moral suasion to replace the moral neutrality of the bureaucrat; and private giving by its very nature inculcates virtue in the process. The idea here seems to be that charities can withhold their charity if, say, the recipient is not a good, moral Christian. He takes this to be a good thing, as it will (of course) make us all good, moral Christians. "In a society where the responsibility for coping with human needs is consigned to bureaucracies, the development of virtue in the next generation is impeded. In a society where that responsibility remains with ordinary citizens, the development of virtue in the next generation is invigorated." (p. 122)

This is positively historically dumbfounding. America never was a nation in which voluntary associations provided for the core socio-economic needs of its citizens. At best, these organizations ameliorated many of the harsher aspects of industrial capitalism. As to the cultivation of virtue: has Murray forgotten that prior to the New Deal, child labor was one major form by which "ordinary citizens" developed virtue in the next generation? When Murray learned that Progressive Era journalists felt compelled to become muckrakers to combat the corruption and social injustices of their era, did he think a muckraker was someone one hired to do the gardening? There never were any "good old days" in Murray's wistful sense.

Moreover, government is a form of community--it is preeminently the community acting in the collective. The difference, of course, is that voluntary associations are voluntary and government programs generally are not. And Murray wants what every spoiled adolescent wants: to be free to support only those undertakings of which he directly approves, and not those that society deems desirable. This is what libertarianism is always about at its core. This has nothing to do with community in any meaningful and honorable sense. On this point, Murray is simply confused.

The Devilish Details

As I said, there are lots of devils in Murray's details, and it will be instructive to mention a few of them.

Murray avoids any concern for the problem of lack of access to health care coverage by a disingenuous analysis that is breathtaking in its audacity. He argues that if everyone were to buy a health insurance policy at age 22, then nobody will ever have to face the problem of acquiring health care coverage in old age. So under his plan, everyone is assumed to spend $3,000 of their annual grant on the purchase of health insurance. (16) And he implicitly invites us to imagine this same rate into perpetuity. But of course in the real world insurers will constantly adjust rates upwards as the insured person ages, and by the time the young worker reaches old age the marketplace purchase of health coverage is likely to be prohibitive (just as it was before Medicare arrived on the scene).

Moreover, existing health care coverage exists in a marketplace in which Medicare is a major economic factor. The Medicare program does not just pay the direct and obvious costs of the health care bills of its beneficiaries. It is also a major source of funding for research and teaching hospitals; it subsidizes care in rural communities which markets are unwilling to serve; it is even a main source of the indirect subsidies which make free emergency room care possible. Removing this program from the matrix of the health care system will thus cause ripples of price adjustment and resource re-allocations throughout the health care system. It is simple-minded to assume that health care will continue to be available in the way it is now and purchasable at something like present rates, if Medicare is not part of the health care equation.

Consider Medicaid as yet another complication. The poorest of the poor currently have the benefit of essentially free health care. Under Murray's scheme, we give a poor person $10,000 and we require that he/she spend $3,000 of their grant purchasing private health insurance. But not all health insurance is created equal. Most insurers will not insure certain high-cost forms of care, like long-term care (certainly not at any rate remotely close to $3,000 per year). Medicaid is a provider of long-term care benefits for the very poor, whose residence in nursing and other long-term care facilities is funded by Medicaid. Without this program it is far from clear that this population will be able to purchase anything like the same care in the private markets. Is it too much to worry about the spectacle of sick and poor nursing home residents being on the streets because their source of funding has been eliminated by Murray's scheme? Certainly, Murray's book shows no evidence that he has ever worried about this possibility.

Another little glitch--which Murray may or may not care about--concerns lawfully admitted immigrants. Certain of these immigrants (if they are poor, and after a 5-year waiting period) can qualify for the Supplemental Security Income (SSI) program, and for Medicaid. SSI is a federal welfare program for the needy aged, blind and disabled. The eligible population consists of poor resident citizens and poor immigrants lawfully admitted for permanent residence. Since Murray's Plan only pays grants to U.S. citizens and not to any of the 7 million lawfully admitted immigrants, when he eliminates the SSI program (and Medicaid) he kicks all the immigrant recipients out in the cold, with no compensating grant to make the deal an appealing one for them. As I say, he may not care; but some of us might.

Another related point: When Murray kicks those lawfully admitted aliens off SSI and Medicaid they will likely start showing up in emergency rooms to obtain their health care (as the uninsured without governmental benefits do now). But since Murray also wants to eliminate Medicare, the major source of funding for this subsidized care will be eliminated as well. Just another of the many complex policy interactions that Murray manages to overlook.

There is a serious methodological flaw in Murray's work, one which may well matter to erstwhile supporters of libertarian policies. Murray fails to factor-in the secondary consequences on tax policy from the programmatic eliminations he proposes.

Lots of rich and influential corporations and individuals have managed over the years to litter the tax code with thousands of special-interest tax breaks, breaks which are often tied to specific government programs. The Small Business Administration, to mention just one example, provides numerous opportunities for businesses to claim various special tax exemptions. So do many other government programs--from the work of the Army Corp of Engineers to the activities of the Export-Import Bank. When these programs are eliminated, the associated tax breaks go with them. Thus, many highly influential interests will suddenly find their own personal tax bills soaring--quite apart from the general increase in the total tax bill which will be distributed among all taxpayers. It is not just a question of the size of the total tax bill--incidence rates matter too. Who pays is every bit as important as how much gets paid. And many powerful interests will find much to dislike hidden in Murray's scheme. (17)

Yet another conceptual flaw occurs right in Murray's initial assumption underlying his entire analysis. His argument is that America has enough wealth to afford prosperity for all, but that too much of this wealth is somehow skimmed-off by the activities of government. Thus, he can suggest that if all the waste from government is avoided, somehow a vast sum of money is freed to circulate in the economy, making us all happy and prosperous.

But government does not collect tax revenues for the purpose of burning the cash in large incinerators. Governments spend the tax revenues they collect (often by paying it to private sector contractors). Money is promiscuously fungible and it pays no mind to whether the person through whose hands it is passing is a bureaucrat or a corporate plutocrat. Government spending and investment is a source of wealth creation in exactly the same way as spending in the private economy. It makes no difference to the total level of income in the economy whether the $1.4 trillion in expenditures that concern Murray are expenditures by governments or by individuals. Simply shifting money from the public sector to the private sector does not by itself create new wealth. So we do not save anything from eliminating government programs. But we do powerfully alter the distribution of what wealth we do possess--which is, after all, Murray's real agenda.

Some Little Cheats

There are lots of little cheats in Murray's book. A simple example will illustrate the point.

In a discussion of eliminating the Social Security program (p. 26) Murray wants to argue that a low-paid worker would be better off if he had his payroll taxes to invest in the markets rather than giving them to the government. So he takes the case of a young worker whose salary is always $20,000 a year for 45 years. He tells us that his eventual Social Security retirement annuity will be $916 per month, in current dollars. Then he slyly reports that this worker pays $2,480 per year in Social Security payroll taxes. Next he tells us that if this worker were allowed to put $2,480 per year into a mutual fund with interest compounded at 4% per year that his private sector annuity after 45 years would be $2,029 per month.

The rub is, this young worker does not in fact pay payroll taxes of $2,480 per year--he only pays $1,240 per year. The doubling of his available investment capital is achieved because Murray counts as available to the worker the employer's share of the payroll tax--a fact he mentions in a brief footnote on page 182. This is a standard ploy in conservative critiques of Social Security, to be sure. But it is always fundamentally dishonest. To see why, imagine the Social Security program were abolished tomorrow and the payroll tax that funds it. Our young worker would immediately get a $1,240 net increase in his paycheck, and the employer would get a $1,240 reduction in his annual tax bill. IF the employer decided to use his refund to increase his employee's paycheck by another $1,240, THEN Murray's analysis would be valid. But the employer is perfectly free to spend his windfall on new plant and equipment, on a bonus for his favorite employee, or on a golfing vacation in Florida. Counting the employer's share of the payroll tax as if it belonged to the employee--as Murray does--is a deliberate cheat, designed to make the advantages of his scheme look much bigger than they really are.

Another way Murray cheats is by simply assuming that government programs he likes will work, while those that he doesn't like cannot. Thus, he argues, "If constructed with great care, it is possible to have a government that administers a competent army, competent police, and competent courts. . . . Every step beyond these simplest, most basic tasks is fraught with increasing difficulty. By the time the government begins trying to administer to complex human needs, it is far out of its depth."(p. 127) But on what grounds are we allowed to conclude that, say, the corpus of criminal and civil law is somehow easier to administer than a welfare payment? On the grounds that Murray constructs the argument by starting with these programs and then asks us to imagine that each additional task makes the job more difficult. No doubt this tautology is wholly true. As is the equally tautological argument that could be constructed by starting first with a list of welfare programs and then observing "Every step beyond these simplest, most basic tasks is fraught with increasing difficulty."

Yet another form of dishonesty by assumption comes when Murray gets to claim that government programs must necessarily always grow in cost and inefficiency, because, well, as good conservatives, we all know that is the nature of government. "Bureaucracies are also inferior to private philanthropy because a bureaucracy's highest interest cannot help being its own welfare. . . . In the business sector, that means growing by gaining new customers and being profitable. For a government bureaucracy, it means growing by increasing its budget and staff."(p. 119)

The fact is that government agencies are often motivated by the ambition to cut budgets and staff, and all large organizations in whatever sector are prone to the same kinds of stifling inefficiencies. Moreover, the ability to make a profit bears only the most tenuous of relationships to organizational performance. Marketing in the absence of real product value, stock price manipulation, questionable accounting techniques, and a whole host of dubious business practices, are now commonplace in corporate America. The ability to make a profit has about as much connection to moral merit as cost/benefit equations have to the problem of teen pregnancy.

Not only that, but one could plausibly contend that governments are in general much better run organizations than most private sector companies because government organizations are subjected to levels of oversight which are unimaginable to a private sector firm.

In any case, Murray has to assume this conservative article of faith in order to grease the skids for his cost-curves to slide past one another--in order to prove by assumption that the costs of the welfare state will always and only rise while the costs of private undertakings will tend always to decline.

There is one other little detail about a flaw in the plan. It is not a cheat exactly, since Murray admits it, although the admission is stuffed away in Appendix D (perhaps on the advice of the axiom: "If there is something you do not wish to have read, be sure to put it in an appendix").

In any case, Murray admits that the Plan will in fact involve significant transition costs. These are the costs of maintaining a dual system for some period of time while the older people in the society are gradually phased out as the younger cohorts grow up under the Plan. In other words, persons already in middle age (or indeed, who are already collecting Social Security benefits, for example) will have to be continued on these programs, as they are heavily invested in them--it is too late for them to grow up under the Plan. Alternatively, we will have to buy-out the current value of their future benefits.

Either way, transition costs are a serious issue. This is one of the reasons, for example, that President Bush was unable to get much traction with his proposal to partially privatize the Social Security system--because the $2 trillion transition cost was a price policymakers were unwilling to swallow. Murray, to his credit, acknowledges that these costs exist in his scheme, but less admirably, makes no real effort to estimate them.

This is potentially a rather serious flaw in the Plan. For an honest accounting, the transition costs of this scheme have to be added to the costs of the grants. Doing so will shift the cost curves and delay the point at which the Plan becomes less costly than the existing welfare state. Since Murray offers no estimate of these costs, we must be highly skeptical about his Plan. The way Murray deals with this shortcoming, is to wave it away: "I am not trivializing the problem of transition, but . . . If we wanted to switch to the Plan badly enough, we could do it. . . . Nothing in this perspective denies that the transition costs would be large and problematic. But neither should we stop considering the Plan because the prospective transition costs are obviously unmanageable."(p. 165-173) One hardly knows what to say.

One Other Not So Little Problem

In addition to these troubling details, there is one other problem, which hardly qualifies as a detail one might think, and which I have already briefly mentioned.

The basic libertarian intuition as to fiscal policy is that by drastically scaling-back the role of government in the political economy, taxpayers can dramatically reduce their obligations to society. You might say the whole point of libertarian fiscal policy is to reduce one's taxes. But, as Murray rather blithely admits, his scheme will initially cost taxpayers $355 billion more per year than the total bill for the existing welfare state. That is, in the current year, Murray's scheme would result in a $355 billion increase in federal taxes! This is what it will cost to give $10,000 each year to every adult American.

Murray's apparently-clever move in his new book is not to promise the elimination of costs to the taxpayers--only a shift in the resulting revenues from the public to the private sector. In other words, Murray's plan will continue to tax American taxpayers at present levels, with a new surtax to fund his grants added on top of all existing taxation. It is just that rather than giving this money to the government and letting it allocate these resources in socially desirable ways, the money will be returned to the citizens to allocate as they see fit. That's the new wrinkle Murray is offering enemies of modern government. He is urging his fellow libertarians to stop fighting against taxation, and to focus their attention instead on who gets the money which results.

Now there is, to be fair, another claim Murray is making. He assures any avaricious libertarians that eventually, as the cost of the welfare state continues on its present upward path (by assumption), the cost curves will cross and by 2020 the Murray Plan will cost $549 billion per year less than the existing system. Taxpayers will still be paying approximately $2 trillion in federal taxes in that year for the grants in place of the now-vanished social programs, but they can be pleased as punch to contemplate the theoretical savings they are enjoying from the realization that without Murray's scheme they surely would be paying $549 billion more. This "happy outcome" (as he calls it) is based on two assumptions: the cost of the welfare state will continue to rise, and the cost of his Plan will hardly rise at all because everyone will be getting so much richer that a larger portion of the grants will be taxed-back. Given all the problems with Murray’s analysis, this “happy outcome” seems far from likely.

The Magician's Other Hand

The appeal of Murray's argument is his claim that eventually this system will cost less to America's taxpayers than the welfare state, and moreover, it will maximize individual freedom and minimize government intrusion in social and economic affairs. This is the libertarian viewpoint on social inequality stripped to its naked essence. Radical individualism replaces all forms of communal responsibility mediated by government. In such a world, we truly have no one to blame but ourselves. As Murray helpfully summarizes his Plan for us: "Here's the money. Use it as you see fit. Your life is in your hands." (p. 14)

In his newest book Charles Murray at last shows us what the magician has had in his other hand all along. There are no longer any coy attempts to play blacks and whites off against each other so as to disguise his real agenda. In his In Our Hands Murray finally puts it all on the table. His argument now is that the American welfare state is, always was, and always will be, an abject failure. No longer does he bother to focus on welfare programs. Rather, he urges the wholesale abandonment of the entire structure of the American welfare state. Every citizen thus becomes empowered to provide their own economic security. No American will any longer have a claim on government benefits. Nor will welfare be an issue one way or the other, as welfare will vanish from the land. All remaining social inequalities will then be obviously and utterly the responsibility of the individuals involved. Society will be freed of any obligation to ameliorate poverty or economic inequality.

This would all, no doubt, be highly liberating. If one no longer has any obligation of concern for the social welfare of one's fellow citizens, a great many burdens are instantly lifted. The rich, powerful and privileged will be freed to enjoy their wealth, power and privilege, unburdened by any trace of a guilty conscience. If some have grown weary of race-awareness, we can now be free to be truly indifferent to the ways race shapes the phenomenon of social inequality. The poor may always be with us, but they will no longer be our problem. We will no longer have to argue over just how many millions of Americans have no health insurance, because it will no longer be any of our business. We won't even have to keep the statistics anymore. How marvelously liberating!

This is the magical America Charles Murray summons to our imaginations. Faced with the specter of Murray's brave new world, some of us might still prefer a little less freedom and a little more old-fashioned economic security.

NOTES

1. Charles Murray, Losing Ground: American Social Policy 1950-1980, (New York: Basic Books, 1984).

2. Charles Murray, In Our Hands: A Plan to Replace the Welfare State, (Washington, D. C., The AEI Press, 2006).

3. Advertisement in the National Review, December 31, 1987: 7.

4. Memorandum from Jim Van Dien, Course Director, Government Executive Institute, to Participants in the Feb. 21, 1986 Program featuring Charles Murray's Losing Ground, February 1986. Copy in the Social Security Administration History Archives.

5. There were major flaws in Murray's analysis, despite its avalanche of statistics, as was pointed out at the time by Robert Greenstein (Robert Greenstein, "Losing Faith in 'Losing Ground,'" New Republic, Vol. 25, March 1985: 12-17).

6. Charles Murray and Richard Herrnstein, The Bell Curve: Intelligence and Class Structure in American Life, (New York: Free Press, 1994).

7. Charles Murray, "A Plan to Replace the Welfare State," American Enterprise Institute, 2006. Available online at: http://www.aei.org/publications/filter.all,pubID.24231/pub_detail.asp (accessed 9/29/06).   

8. Ibid.

9. Technically, these appear to be budget functions, some of which are programs and some of which are the budgets allocated to specific government agencies.

10. Economists define a "public good" as one equally available to everyone and the consumption of which by one person does not diminish the value of the good for another. That is, public goods are "non-rivalrous" and "non-excludable."

11. Murray mixes figures from 2001 and 2002 to produce this total.  

12. Murray's tax would be somewhat progressive. Recipients would be taxed for a portion of their grant starting at incomes of $25,000 per year. At an income of $50,000 or more, one-half of the grant would be taxed back. The balance ($5,000) would apparently be paid regardless of income.

13. This generic idea of universal grants in lieu of some social welfare programs is not entirely without historical precedent. In the early 1960s University of Chicago economist Milton Friedman proposed what he called the Negative Income Tax as a replacement for the government's income transfer payments. The Nixon Administration briefly toyed with (and ultimately rejected) a plan by Daniel Patrick Moynihan to replace most welfare programs with a guaranteed annual income in the form of a flat monetary grant. But as far as I know, no seemingly serious scholar has previously proposed eliminating essentially every social program of government and replacing them all with one annual flat-rate grant to every adult citizen.

14. Social Security in America: The Factual Background of the Social Security Act as Summarized from Staff Reports to the Committee on Economic Security, (Washington, D. C., U. S. Government Printing Office, 1937): 137-155.

15. The poorhouses first came under pressure from the 1920s movement for state old-age pensions. After the passage of the Social Security Act (which introduced partial federal funding of state old-age pensions) the poorhouses began an accelerated disappearance.

16. Murray feigns indifference as to whether this investment in health insurance will be optional or mandatory. He clearly prefers optional--which raises other sorts of problems, which Murray sidesteps by the device of professing his indifference. In other words, he suggests that if readers are worried about these other problems, then they can assume the Plan is mandatory. This a clever way to avoid having to do one's homework.

This $3,000 figure also assumes a set of health care "reforms" that Murray is advocating (p. 43-50). Absent his "reforms" this figure may rise. But since Murray pronounces himself prepared to pay whatever it costs, this is not a flaw in his Plan--except to the extent that costs substantially above $3,000 might necessitate a grant substantially larger than $10,000, which would in turn make his comparisons between his Plan and the existing welfare state that much more unattractive.

17. Murray's book does have an appendix (Appendix C) in which he discusses the tax policy implications of his plan. But the entire discussion consists simply of sample comparisons of before and after tax rates for typical taxpayers, in the context of the general surtax assessed against every taxpayer to fund his grants. The potential for Murray's Plan to affect tax loopholes, and hence incidence rates for particular taxpayers, is a topic to which he seems utterly oblivious.