Liberals react to times of conservative ascendancy in economic policy by deriding the “trickle-down economy”; even in times such as these which are far from that, you can see this derision lurking behind liberal critiques of the Wall Street rescue package. The irony of this is that, as Thomas Sowell has pointed out, the modern liberal approach to helping the poor is actually its own form of trickle-down economics—the only difference is that the substrate through which the money trickles is government rather than the private sector. This might seem like a minor difference, but it really isn’t. In the private sector, the people at the bottom are in the same system as the people in the middle levels; in the government sector, they aren’t. Thus, in the private sector, as the money trickles down to the folks in the lowest-paying jobs, it helps create new higher-paying jobs, opening up opportunities for those folks to move up the ladder and make more money. In the government sector, as the money trickles down to be paid out to clients, it also helps create new government jobs—which benefits people in government, but does not create opportunities for those on the bottom (in most cases, at least).Thus the key is that “trickle-down economy” is really a misnomer as applied to the private sector, because what really matters isn’t the movement downward but the opportunities it creates for movement upward as it opens cracks in the substrate. It is, however, an accurate descriptor of the government-assistance economy—and thus it’s here that we really hit the reality that expecting money to trickle down to those in need is a highly inefficient way to distribute it. As Michael Novak writes, citing Sowell, in the latest First Things (excerpted here—it’s not even up on the site yet),
if you add up all the money that Congress has designated for the relief of the poor, the total turns out to be more than would be required simply to give every poor family some $30,000 in cash per year. Another way to look at it: Most of the American poor already have significant income, if not quite enough to lift them above the poverty level. If one calculates the gap between the financial benefits they already enjoy and the full sum that would lift them above the poverty level, it turns out to be a much smaller amount than is currently designated to be spent for their benefit. As the economist Thomas Sowell writes, to try to feed the swallows by feeding the horses is an immensely inefficient way to get help to the swallows. The middlemen in poverty programs often fare far better than the poor. Direct cash grants might be far more efficient.
I think they would, especially since (as Barack Obama has already proposed, and George McGovern before him) the disbursement could be handled through the IRS; you’d want some sort of sliding scale at the top end so as not to provide people with a powerful incentive to remain officially poor, but a grant program like this that was funded by the complete abolition of the federal welfare bureaucracy would be, I suspect, both more efficient and more effective than the programs we have now. It would also have the advantage of transparency, and thus intellectual honesty, about what the government is really doing here: namely, taking money from some people to give to others. Doing both in terms of the tax code would provide much greater clarity about how much, and to whom, and on what basis. Given these advantages, I think this would be a proposal conservatives could gladly support.