Worst of Both Worlds
Richard A. Epstein
8 Anne Alstott has proposed the creation of a caretaker resource account
that would give a $5,000 annual grant to one parent of each child
under the age of 13 for child care, parental eduction, or parental
retirement benefits. This proposal, which she estimates will come
at a cost of $100 billion per year, follows on the heels of her
earlier proposal with Bruce Ackerman to give every American an
unconditional grant of $80,000 when he or she turns 21. Measured
against that baseline, it shows vast restraint in the expenditure
of public resources. But by any other standard, it is both an
intellectual and a political nonstarter.
The politics are easy to understand.
We are now in a period of record deficit spending brought on by a
profligate president and a compliant Congress. (No, it is not the tax
cut but the spending that causes problems.) The estimated cost of the
latest prescription-drug caper, the recent Medicare bill, was a
modest $400 billion in 2003, only to increase by about 50 percent by
early 2004 after the bill was passed. There is simply no money in the
till to fund rickety new programs that will quickly outgrow their
ostensible resource base.
The intellectual case against this
program is, if anything, stronger. In making her argument for these
caretaker accounts, Alstott claims, falsely, that the principle of
autonomy guarantees all individuals a resource base sufficient to
lead a meaningful life when all it requires is that individuals be
allowed to make choices for themselves using the resources they have
available. Then she reminds us of the enormous sacrifices and burdens
that parents, especially mothers, have to make for their children.
These parents should not be put between a rock and a hard place.
Finally, she hits defenseless libertarians over the head for taking
the heartless position that so long as parents know the long-term
commitments that they make when they choose to have their children,
then they have to abide by the consequences of their choices.
There are many cases in which this
assumption-of-risk argument should carry the day, but this is not one
of them. The great danger of the argument in this context is that it
assumes prospective parents have to make do with any social
arrangement no matter how unjust. The notice that hard times are
ahead surely counts, because it allows prospective parents, like
everyone else, to mitigate the damages of unjust social arrangements.
But notice of these conditions does not give any hint one way or the
other about which kinds of social arrangements are just. No
libertarian should rest their arguments on such flimsy grounds in
opposing yet another transfer system.
The source of our opposition is
systematic and structural. Alstott makes the common mistake of so
many statists. Once she has established to her satisfaction the
injustice of the status quo, and once she hears the special pleas of
her favored constituency, she leaves all other social
arrangements in place and adds on her preferred subsidy. This is a poor Band-Aid
fix. At no point does she ask whether the proper way to handle the
plight of many parents is to remove the burdens that they are asked
to bear in order to supply costly subsidies to others.
A start to this second approach is no
further than a pay stub away. All parents of young children have to
pay into the Medicare kitty for senior citizens, many of whom have
wealth far beyond their own: after all, everyone knows that old
people with declining skills face challenges that younger people do
not have to cope with. And they must pay income tax to fund schools,
including teachers' unions, and comply with a set of dizzying
mandates, including the Bush administration's meddlesome No Child
Left Behind Act, which does nothing to alleviate the fundamentally
monopolistic structure of public education that these strapped
parents are forced to support even if they send their children to
private school. Add into this stew the huge set of farm subsidies and
protective tariffs that mark, and mar, the political programs of both
major parties. Let these programs be dismantled and the real income
of all families, with and without children, will rise to achieve the
objective that Alstott wants. She has forgotten the first principle
of welfare economics: you cannot bring about social improvements by
shrinking the size of the overall pie with another round of transfer
payments. All you get is rent-seeking on the one side and diminished
incentives to create wealth on the other.
In this case, moreover, the proposed
form of the subsidy is entirely otiose. Alstott is rightly worried
that selfish parents would just take a $5,000 check and spend it at
the local pub. In order to forestall this unhappy eventuality, she
proposes restricting the use of the money to child care, education
for the parent, or retirement benefits for the parent. These
ostensible restrictions will only create administrative headaches.
But they will not transform family behavior any more than an
unrestricted grant of $5,000 would. All dollars are perfectly
fungible. The key question is whether the ordinary family of four
with $50,000 in family income would choose voluntarily to spend
$5,000 on the list of permitted activities. It is the rare family
that would not. The net effect is that this grant will be applied to
these purposes, freeing up income from other sources for ordinary
consumption. All the program amounts to in practice is a wealth
transfer made more palatable by a bit of old-fashioned guilt.
This proposal thus represents the
worst of both worlds. It uses ineffective means to achieve undesirable
goals. It won't fly. <
Richard A. Epstein is the
James Parker Hall Distinguished Service Professor at the University
of Chicago and the Peter and Kirsten Bedford Senior Fellow at
the Hoover Institution.
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We Owe to Parents.
Originally published in the April/May
2004 issue of Boston Review.