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10 June 06
In Our Hands 

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New Zealand is a country where there should be no poverty. With cradle to the grave welfare assistance, a vast supply of available jobs, and a temperate climate where families can grow enough food to be relatively self-sufficient, not only should there be no poverty, but there should be no intergenerational welfare and no underclass either.

But the fact that these problems do exist in spite of the massive amounts of money that have been poured into the welfare system demonstrates that the cause is not a lack of money, but the system itself.

Everyone knows that the welfare system is a disaster: plagued with fraud and abuse, at best welfare provides a helping hand for those in need, but at its worst it corrodes self respect, destroys the work ethic, and undermines the family.

One of its most damaging consequences has been the creation of the underclass. These people - consisting mainly of chronic criminals, never married women with children, and young men who have no intention of finding work - exist on the margins of society. It is from this group that the majority of our intransigent social problems of child abuse, drug addiction, violence and crime, emanate.

Addressing these issues and removing the incentives that have created this dysfunction are at the heart of genuine welfare reform proposals, but given the entrenched nature of the dependency problems and the massive industry that supports it, the task of bringing about change is a complex and difficult one.

That is why it is so interesting to read the new book “In Our Hands”, by the policy analyst and author Dr Charles Murray, which outlines an innovative welfare reform proposal that he is promoting for discussion. Dr Murray, a Bradley Fellow at the American Enterprise Institute, has developed a proposition that is so stunningly simple in its concept that not only is it worth examining in some detail, but could be worth considering for New Zealand .

In looking at the massive amounts of money spent on the poor in the US over the decades, and the stubbornly high rates of poverty and social dysfunction, Murray concluded that it is “within our power” to not only end poverty, but to also provide for a comfortable retirement and medical care, by thinking outside the square.

His proposition, which he calls “The Plan”, is based on the idea of replacing the whole income transfer system - and the industry that surrounds it - with a cash grant to every citizen of 21 years or older of around $10,000 a year. While some of the grant would be earmarked for a universal health insurance policy - and a retirement savings scheme may be recommended - the rest is up to the recipient to use as they see fit.

However, Murray considers that individuals earning more than $25,000 would need less and so he has proposed a surtax: the result would be that anyone earning less than $25,000 would receive the full $10,000 grant, those earning $50,000 or more would receive $5,000 a year, and those in between receive an amount diminishing from $10,000 to $5,000.

The Plan will require only minimal administration and will eliminate the massive welfare bureaucracy. There would also be significant flow-on reductions in the bureaucracy in the health sector, as the system is re-arranged along a health insurance model.

Murray believes that the long-term effect of this down sizing of the public service would be very positive as people moved out of jobs which are a net drain on society into jobs, which are productive and would help the country to move ahead.

He also proposes that his Plan would replace the present pension system as people saved a part of their grant into a personal superannuation plan that would, over the years, provide a retirement annuity far in excess of the level of today’s pension.

In outlining the benefits of his Plan, Murray believes it will significantly reduce the social dysfunction created by the welfare system and lead to the eventual elimination of the underclass: it would strongly discourage casual teenage parenthood and unmarried motherhood, and it would create a strong motivation for able-bodied young men who are outside of the labour force, to get jobs.

One of the broadest effects of the Plan would be to restore the vitality of marriage, making it economically easier for low-income couples to marry, and providing far greater choices for parents over whether to stay at home to raise their children. 

Murray outlines how the Plan will replace the welfare safety net and restore civil society: “People who know that a net is below them do reckless things they wouldn’t do otherwise. Under the current system that net is there regardless of how people behave. Under the Plan, people have ample raw materials for a net, but they must weave it for themselves”. He further explains how voluntary groups acting privately are far better equipped to administer to complex human needs than government bureaucracies, which by their very nature are driven by an underlying need to increase their budgets and their staff.

He concludes that while it is politically impossible today for the Plan to become a reality, he believes that it is inevitable, as the electorate eventually realises that a lack of money cannot be the reason for having poverty, lack of medical coverage or an underclass: “The problem is that we are spending the money badly”. Ultimately he sees the Plan as being a powerful force in progressing the dream of any free and prosperous society: “taking our lives back into our own hands – ours as individuals, ours as families and ours as communities”. 

When I look at Charles Murray’s proposition, I see so many parallels between the problems he is attempting to solve and the problems that we face here, that I would like to see us having a serious discussion about whether such a proposition (my quick calculations show the numbers are feasible) would make sense for New Zealand.

Surely it is time that we took some steps that will get this country back onto a common sense track that will lead to a better standard of living and a happier life for everyone. That means eliminating the underclass, reducing teenage parenthood, encouraging marriage, and restoring civil society, and if Charles Murray’s Plan gives us a guide as to how that could be achieved, then surely we should be open-minded enough to want to look into it.

The poll this week asks, Do you think Charles Murray’s Plan for replacing welfare is a concept worth exploring for New Zealand ?

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