One of the problems with means-testing such programs is that it harkens back to the archaic notion of being deserving of what essentially amounts to charity. When social services are targetted and only the most needy are able to recieve benefits, it not only stigmatises but, as Hawthorne suggested, actively discourages economic incentive through poverty-trapping.
In this situation at least, applying a universal coverage seems sensible.
Regarding prescription drugs for the elderly, just WHAT economic disincentives are created? They’re retired, after all.
And it sounds like what you’re saying is that you’d rather give hundreds of billions of dollars to people who can afford their own drugs, paid for mostly by the working middle class, just so you can avoid the ‘stigma’ of having to go down to a government office and ask for free drugs, rather than getting them automatically as a result of turning a magic age?
I just don’t find the whole stigma argument to be even remotely compelling.
Hawthorne is right. But so is Sam. It can be argued that the Austrians were the first to spot the problems with means testing, but the problems are intrinsic to the social programs themselves. The only solution is to eliminate the social programs.
Ah yes. I mentioned three alternatives above (means tested or universal benefits and negative income tax). Having no programme is another possibility. I don’t know whether the Austrians were first to talk about this, but the association of poverty traps with means testing is a classic example of the unintended consequences that are a major theme of Austrian thought.
Hawthorne
Wow. A modern economist who not only is familiar with Mises, et al, but who manages to speak of the Austrians without so much as a hint of ingratiating condescension. I’m impressed. The value of your opinion in my mind has increased considerably.
Like in Afghanistan or …Haiti?
Why do you say dropping the social programs is the only solution to the ills of means testing? Why not just drop the means testing ?
Except that this has no bearing on reality, depending on the nature of the tax. If it’s a flat $100 a year that everyone pays in, sure. But what if it’s a percentage?
Johnny Middle Class may pay $100 a year into the program, and will eventually get, say, $90 a year of benefits.
Jimmy the Poor will only pay $30 a year into it, but gets the same $90 a year in benefits.
James McRich pays his $200 a year, and will get the same $90 as everybody else.
Now who is subsidizing who here? It sure looks to me like the wealthy are paying for the poor, and the middle class are approximately breaking even.
Obviously these are made up numbers picked at random, and the poor may be less able to afford $30 than the rich can $200, but the point remains: just because everybody is receiving benefits does not in any way mean that the less well-off are subsidizing the wealthy, which is just a gross simplification that doesn’t have much to do with anything. The implementation is very important.