David Friedman thinks the idea still has currency because, as he recently told the urban-policy magazine City Journal, "many welfare recipients already know how to transform in-kind welfare like food stamps into cash."
The term "food stamp" is a holdover from a bygone paper era. Electronic Benefit Transfer (EBT) cards took the place of paper in 2004, and share many of the same features as debit cards. They came with the promise of less fraud and abuse, and simpler, streamlined administration.
But like the food stamp coupons they replaced, EBT cards are being sold for cash too, often at a deep discount. From Memphis to Los Angeles to Seattle, cards have been abused in ways that program administrators never intended. These misuses -- often illegal -- lead to calls for reform and, at worst, to program budget cuts that hurt the honest users in need.
But is this issue really so black and white? Some individual welfare recipients may be selling their monthly food-only benefits for cash on street corners or Craigslist, but is it possible they are acting out of desperation?
When it comes to feeding and sheltering a family, 50 cents today may be more valuable than a full dollar at the end of the month. A good day is a day you make your bills. One way to preserve programs is to introduce reforms such as caps and cuts in the name of tighter fiscal controls, as has been proposed in Washington state and elsewhere.
But what if cash conversions were not only legalized, but also made unnecessary by replacing welfare programs with direct cash grants to the poor through the tax system? Government would be involved at the front end, but decisions on how to spend it would ultimately rest with the individual. That was free-market economist Milton Friedman’s idea more than three decades ago.
The idea would maintain a social safety net, but instead of administering myriad welfare programs, we’d simply be moving money around -- requiring a much smaller bureaucracy. It would be a hard swallow for both the left and right, but may hint at a potential compromise at a time when policymakers are confronting just how much -- and what kind -- of government we can afford.
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