[Quick Overview - This book introduces a new economic system that aims to eliminate all of the poverty, inequality, hunger, slums and so on found on Earth today. This new system is introduced as a thought experiment within the context of the million-person Mars colony recently announced by Elon Musk. This new system will radically improve the quality of life for the vast majority of humans living on planet Earth today.]
[Feedback and suggestions on any part of this book are greatly appreciated. Contact information is here.]
Can the economic system proposed for the Mars colony significantly improve the welfare situation in the United States?
In this chapter we are going to build off Chapter 20 and explore this question: Can the economic system proposed for the Mars colony significantly improve the Welfare situation in the United States? Can we revamp the way Welfare works in the United States to reach a much better outcome for the money spent on Welfare? The reason why this may be possible is because, in Chapter 20, we saw the potential for significantly lowering the cost of living. In theory, we should be able to lower the costs of helping Welfare recipients while at the same time dramatically improving their experience.
But as we dive into Welfare, we need to acknowledge something important: The topic of Welfare can be a very thorny issue in the United States. There is no question about this thorniness, so it is important to recognize both sides.
On the one hand, Welfare provides a "safety net" that many feel is important/essential in any civilized society. The idea is that if people stumble and fall economically, the safety net will catch them and prevent a catastrophe. This kind of stumbling is inevitable in any dynamic economy. If a factory closes and 1,000 people lose their jobs, some of those people will not be able to immediately find replacement jobs. Since about half of all Americans live paycheck-to-paycheck [ref], this factory closure creates an existential threat – in a week or two, the people who lose their jobs can no longer pay rent, buy food, make car payments, buy gasoline, cover their health care insurance premiums, etc. This situation is obvious and inevitable – factories close, companies declare bankrupcy, stores have "going out of business" sales, restaurants go belly up, industries evaporate, companies downsize, people get laid off, businesses move, industries decide to relocate factories overseas, computers and robots automate jobs out of existence on a regular basis in America. It happens all the time. And don't forget recessions, economic downturns, seasonal cycles, etc. that can cause the whole economy to shrink and lay off millions.
The safety net ideally catches people who find themselves in these situations, so they don't end up losing everything and then living in squalor on the streets. This safety net is especially important for children caught up in these situations, and it is easy to understand why: the image of "innocent children lying in the gutter" or "innocent children starving in poverty" in a modern, developed nation is repulsive to many. How can any wealthy nation allow children living in poverty to starve, to have no access to medical care, to have no roof over their heads, etc.? It feels oxymoronic, like an affront to ethics and morality. If the economy were rock solid steady each day, it would be one thing. But the economy in America is nothing like that – it is dynamic, it changes all the time, and innocent people can and do get caught in the crossfire every day. The people who get caught should not have their lives ruined, and they should not get thrown out on the street with their children, just because some factory closes.
On the other hand... many people see Welfare as a "free handout" that creates two big insults to common sense:
When an able-bodied person receives Welfare money, that money comes by taxing people who are working to earn their living. For many working people, the idea of having their money taken and then given to another able-bodied person who is not working is repulsive. "Why should my hard-earned money be taken from me and given to some lazy person? Let them go out and get a job and start working like I do!" is a common sentiment. "They should save up some money so they aren't living paycheck-to-paycheck!" is another comment frequently heard.
Once people start receiving Welfare money, there is a perception that Welfare then discourages these people from working. "Why should people on Welfare ever decide to work when they can get Welfare money for free?" is the sentiment.
Martin Gilens, a political scientist at Princeton University, puts it this way:
Let’s first define what we mean by “Welfare.” The way I use it in my work corresponds with how the public would use it — it refers to cash assistance, or something very close to cash assistance, that’s given to people who are working age and unemployed...
Welfare is unique in that it provides a substitute for work. It provides cash assistance for able-bodied working-age adults, and that leads to the perception that it’s easily abused and that large numbers of people who are receiving Welfare don’t really need it. And that is what I found to be the fundamental basis for the public’s cynicism and objection...
There has always been a certain degree of cynicism and concern about Welfare benefits — about government programs — especially those that provide cash to the poor. Even in the 1930s, when FDR was initiating the first federal relief and assistance programs, he characterized Welfare as a narcotic and a subtle destroyer of the human spirit. [ref]
Welfare becomes even more uncomfortable for many people when the benefits stack up to create a sizable free "paycheck" for Welfare recipients. This article provides one perspective on how high a stack Welfare benefits can get:
In this article, Michael D. Tanner, a senior fellow at the Cato Institute, puts it this way:
While poor people are not lazy, they are not stupid either. If you pay people more not to work than they can earn at a job, many won't work...
Most reports on Welfare focus on only a single program, the cash benefit program: Temporary Assistance for Needy Families. This focus leaves the misimpression that Welfare benefits are quite low, providing a bare, subsistence-level income. In reality, the federal government funds 126 separate programs for low-income people, 72 of which provide either cash or in-kind benefits to individuals...
In Washington, D.C., and 10 particularly generous states — Hawaii, Vermont, Connecticut, Massachusetts, New York, New Jersey, Rhode Island, Maryland, New Hampshire and California — these seven programs [TANF + SNAP (food stamps) + WIC + utilities assistance + housing assistance + TEAFP + Medicaid] provide a mother with two young children an annual benefit worth more than $35,000 a year. The value of the package in a medium-level Welfare state is $28,500. That may sound low, but it's important to remember that Welfare benefits are not taxed, whereas wages are...
We came to the inescapable conclusion that Welfare pays very well. In fact, in 33 states and the District of Columbia, Welfare pays more than an $8-an-hour job [see chart]. In 12 states, including California, as well as the District of Columbia, the Welfare package is more generous than a $15-an-hour job. In Hawaii, Massachusetts, Connecticut, New York, New Jersey, Rhode Island, Vermont and Washington, D.C., Welfare pays more than a $20-an-hour job, or more than 2.75 times the minimum wage. [ref]
Tanner's article puts forward numbers that seem generous, considering that an able-bodied person is receiving the money. Even so, the numbers in the report are confirmed by the Washington Post's fact checker division in an article entitled: Do ‘Welfare’ recipients get $35,000 in benefits a year? They believe that the $35,000 number is incorrect for Wisconsin, but it would be correct in 10 other states (the correct number for Wisconsin would be $21,500). This article also points out:
Experts, even some single-parent advocates, agree there will always be some level of abuse of government assistance. Taking a job, or a higher-paying job, could disqualify single parents from receiving assistance. Getting married yields similar results and increases marginal tax rates.
“One thing we have learned in public finance is that taxes have significant effects on portfolio behavior, even if there is less certain effect on work and saving. Not getting married is the major tax shelter for low- and moderate-income households with children. In many low-income communities around the nation, marriage is now the exception rather than the rule,” according to congressional testimony by economist Eugene Steuerle from the Urban Institute.
Anticipating such criticism, Cato did another calculation, looking only at the Welfare, food stamp and Medicaid programs that, they said, nearly all poor people would be eligible for. Cato found that the value of just those benefits was equivalent to being paid $17,347 a year, or $8.34 an hour.
That's a far cry from $20.83 an hour.
On the other hand, $8.34 an hour is still only 66 cents below the current Rhode Island minimum wage, with no need to punch a time clock, find child care, or arrange for transportation to and from a job.
Given all of this information, we can understand several things about the Welfare system in the United States:
Millions of people in the United States are receiving Welfare, and to many taxpayers it feels like these people are getting a "free ride" in the sense that they are able-bodied people getting free money.
There is a large "buffet" of Welfare programs to choose from (more than 100), and Welfare recipients can stack many different individual programs into a generous package
The "free ride" can easily be worth tens of thousands of dollars per year in value
In many cases, the value of Welfare benefits pays the same as or better than a minimum wage job. In some cases Welfare pays 2.5X minimum wage – it depends on the state
Welfare recipients can receive benefits for years [ref]
Welfare benefits can have a tendency to discourage people from working and from getting married, because jobs or marriage can cut off the benefits
Welfare can create an incentive for having children, because it is much easier for a single mother with children to receive Welfare, and younger children make programs like WIC available
What are the common perceptions of the Welfare system, and are they true?
For these reasons, many Americans, particularly the working Americans who end up funding Welfare through their taxes, can find the Welfare system to be uncomfortable. Some Americans are disgusted by the Welfare system, and are therefore quite vocal. Some of this angst is caused by misconceptions and exagerations. So let's look under the hood at common perceptions of the U.S. Welfare system as it stands today, and understand the truth or fallacy behind them.
Here are common perceptions of the U.S. Welfare system:F
There is the perception that the Welfare system takes money earned from working people and gives it to able-bodied people who are not working. This perception is true. The only place for money in the Welfare system to come from is from the people who pay taxes. And the people who receive Welfare are able-bodied, working-age adults [ref].
There is the perception that Welfare is taking a lot of money from working people. This perception is true, although there is some conversation around what "is" and "is not" actually "Welfare", as seen in this article in the Washington Post. Some claim that federal and state governments in the U.S. are spending more than a trillion dollars per year on Welfare. The article claims it is only $212 billion in cash payments to Welfare recipients, and then another $228 billion in Medicaid (health care for non-elderly poor people in the United States).
There is the perception that a very large number of people in the United States receives Welfare. Some claim that it is half of all able-bodied, working-age people in the U.S. This number is considered too high (Example: "Jeffrey said that in 2013, there were 109,631,000 Americans "on Welfare," outnumbering the "105,862,000 full-time year-round workers in the United States." While the claim is based on real numbers, it’s a fundamentally flawed, apples-and-oranges comparison. The number of "Welfare" recipients -- unlike the number of workers -- is enlarged by the inclusion of children and senior citizens. The comparison also ignores that many "Welfare" recipients actually work, so trying to separate the two categories creates a false dichotomy. We rate the claim False." [ref]). The U.S. Census Bureau puts the number at 21.3 percent of the U.S. population in this article: 21.3 Percent of U.S. Population Participates in Government Assistance Programs Each Month. That's approximately 50 million people. This number is skewed high as well, because it counts people even if they are only receiving benefits from a single program like SNAP (food stamps). However, this article does not include Medicaid, which has 70+ million participants and which can be the most expensive piece. The number of Welfare recipients is clearly large, in the tens of millions, no matter how you slice it.
There is the perception that the majority of people receiving Welfare fall into the "people of color" category. This perception is true, again according to the U.S. Census bureau: "at 41.6 percent, blacks were more likely to participate in government assistance programs in an average month. The black participation rate was followed by Hispanics at 36.4 percent, Asians or Pacific Islanders at 17.8 percent, and non-Hispanic whites at 13.2 percent. [ref]
There is the perception that Welfare programs tend to lead to single-parent families, and tend to cut fathers out of the picture. This is true, as explained here:
There is the perception that Welfare recipients can receive benefits for years. This can be true, as about half of all Welfare recipients receive benefits for more than two years. [ref]
There is the perception that poor people create damaged children, or low-quality children, to use a phrase from Chapter 19. This perception can be true, but clearly is not always true. For example, there is strong evidence that poverty itself damages children's brains. [ref], [ref], [ref]. There is also strong evidence that the habits of poor parents cause problems for their children. Poor parents are less likely to talk to their children, play with their children, interact with their children, read to their children, etc. As described in Chapter 19, these habits can have significant and permanent negative effects on child development: "By age three, it is believed that children growing up in poor neighborhoods or from lower-income families may hear up to 30 million fewer words than their more privileged counterparts.... The two factors that most explain the income-related gaps in school readiness are parenting styles and home learning environments". [ref]
There is a perception that people on Welfare have a higher-than-normal tendency to use alcohol, cigarettes, drugs, etc. Popular shows like The Wire on HBO tend to reinforce this belief, as the whole show (watched by millions of people on HBO, and now on Netflix to be seen by millions more) is focused on drug crimes in "the projects". For cigarettes, this perception is true, as described here: "In a 2008 Gallup poll of over 75,000 Americans, the rate of smoking among people making less than $24,000 a year was more than double that of those making $90,000 or more." But for drugs, this perception is false, as described here: "According to state data gathered by ThinkProgress, the seven states with existing programs — Arizona, Kansas, Mississippi, Missouri, Oklahoma, Tennessee, and Utah — are spending hundreds of thousands of dollars to ferret out very few drug users. The statistics show that applicants actually test positive at a lower rate than the drug use of the general population. The national drug use rate is 9.4 percent. In these states, however, the rate of positive drug tests to total Welfare applicants ranges from 0.002 percent to 8.3 percent, but all except one have a rate below 1 percent."
There is the perception that people on Welfare are lazy. This might be true for some Welfare recipients, because laziness is a real thing (see Chapter 11 for more info on laziness). But even a place like the Cato institute does not think that laziness is a root problem: "Contrary to stereotypes, there is no evidence that people on Welfare are lazy. Indeed, surveys of Welfare recipients consistently show their desire for a job. But there is also evidence that many are reluctant to accept available employment opportunities." [ref]
There is the perception that inner cities in America, where many Welfare recipients live, are not good environments for raising children [ref], [ref], [ref]. This is true. The combination of crime, murders, gang activity and poor schools can create an untenable situation for families [ref]. Removing Welfare recipients from cities may therefore be a good course of action.
There is the perception that many Welfare recipients abuse the system, spending the money that they receive irresponsibly. For example, a classic complaint is the notion of Welfare recipients buying steak and soda (instead of more basic and healthier foods) with Welfare dollars. This does happen, sometimes on a rather grand scale, as shown here:
The presumption is that if you need Welfare, you should not have enough money to make it to Hawaii or Las Vegas. Or here, where welfare dollars are used to purchase weed:
This is a form of fraud...
There is the perception that fraud occurs in the Welfare system, causing people who do not deserve benefits to receive free money. There is no question that this is true because it is possible to find many examples. Simply open Google News to see the latest examples. The question is, how much fraud occurs? This article lays out the different rates of erroneous payments and fraud. See also these recent examples:
There is the perception that, once on Welfare, Welfare recipients have a tendency to have more children in order to increase the amount of money that they receive from the government. There is no question that this happens to some extent, but overall it appears that this perception is untrue. In this PBS broadcast from two decades ago, a Welfare mother puts it this way: ""'Cause the more children you have the more your check goes up. And there are young girls out there who will brag about it. They'll say 'I have four kids, so I get this, this, this amount money. I get this, this, this amount of foodstamps.' There is a certain amount of people who do that. " It does not take very many anecdotes like that to create a strong perception. Meanwhile, this article from the New York Times of the same era indicates that capping Welfare benefits does not necessarily have much if any of an effect on the number of children: "But researchers who have studied the New Jersey experience, and most of the several dozen recipients interviewed for this article, say they are not at all convinced that the state policy [of capping Welfare payments regardless of the number of children] keeps women from having babies. Some raised questions about whether the state can -- or indeed should -- regulate complicated sexual and reproductive decisions."This article, again from the same era, states, "Repeated studies show no correlation between benefit levels and women’s choice to have children. States providing relatively higher benefits do not show higher birth rates among recipients... The average family receiving AFDC has 1.9 children — about the same as the national average.". What these articles show, if nothing else, is that concerns about Welfare have been festering for decades.
The situation in the following video is now famous, and feeds into the perception that welfare mothers have too many children:
Videos like these can be good for ratings because viewers do react to them, but it is important to recognize that the Welfare recipients featured in these videos are outliers. A TV station is unlikely to get much traction by featuring a calm, rational Welfare mother with one child.
At the same time, there is the perception that young women have children for the sole purpose of starting to receive Welfare payments, and can then they stay on Welfare for long periods of time. This can be true and does happen, although exact statistics are hard to come by. There is no question that it is more difficult for a single person without any children to get Welfare coverage, compared to a single parent with a child. This article in Time Magazine paints the picture: "When I ran into a friend who grew up in the same low-income housing development as I did, she said there was an easier way than to struggle through college. “You should get pregnant,” she told me. “Girl, the government will take care of you, trust me.”
I didn’t think much of her idea. But she was right about one thing: In my community, there are many resources for young parents, and barely any for college students. Just on my own block, I recently counted a total of five programs for mothers my age or younger."
Welfare can create a huge dilemma:
On the one hand, it is uncomfortable to give an able-bodied, working-age woman "free money" from Welfare so that she can live off the benefits. On the other hand, it is uncomfortable if her children suffer from lack of food, lack of housing, lack of healthcare, and so on, through no fault of their own. It is especially uncomfortable when we know that their suffering in childhood can negatively affect them throughout the rest of their lives.
On the one hand, it would be helpful if young women would not have children who they cannot afford to support. On the other hand, the children do exist, and society seems unwilling or unable to prevent their conception, or to take the children away from the biological mother. If society were to require an application and licensing process for new parents (see Chapter 19 for details), these Welfare mothers would by and large be rejected as unfit until they had a high school diploma, a lot of training, and the ability to independently support themselves.
This dilemma creates a problem that is unlikely to be solved anytime soon, and therefore the controversy and gnashing of teeth around Welfare will be with us for decades to come unless we come up with a new solution.
Given all of these perceptions and the overarching dilemma, it is clear that there is a great deal of room for improvement in the U.S. Welfare system. If we can address these problems in a positive way, everyone would feel better about Welfare, both the recipients and the taxpayers. So we can ask: How can we tangibly improve the Welfare system in the United States?
Can we make Welfare in the United States significantly better for everyone, by using the Mars economy described in this book?
Welfare as we know it has been around since the 1960s. President Lyndon Johnson officially launched the War on Poverty in his State of the Union address to Congress in 1964:
Welfare has grown and morphed significantly over the last 50 years into the many-faceted system (some might say hodgepodge) that we see today. What could we do to significantly improve today's Welfare system, both for recipients and those who pay for it? Let's first state our goals, based on what we have learned in the previous sections:
The first thing to address – the thing that seems to drive many taxpayers crazy – is the idea that people on Welfare receive something for nothing. If they are going to get paid, they should have to work for the money, and there should be accountability: "If they are getting money, they should have to wake up in the morning and go to work, just like all the vast majority of working, taxpaying people in America do," distills a common sentiment. Any alternative is unacceptable to this crowd.
But if you are a single mother on Welfare, item #1 creates a huge problem: what do you do with young children while working? There is no way to afford childcare on a low-wage job. There needs to be a solution to this problem.
For a mother with children, even if she were to somehow receive free childcare, there is no way that an entry-level job can provide enough money for the mother to independently cover food, clothing, housing, health care, utilities, transportation, etc. for her and her children in today's U.S. economy. It is mathematically impossible to cover all of these expenses on minimum wage. So the solution to Welfare needs to somehow transcend this pay gap that exists in the economy. But if $15/hour or $20/hour jobs were to somehow appear in the U.S. economy, the competition for them would be fierce. There are tens of millions of working people in America who would lunge at jobs like these.
Generally speaking, it seems like "the average Welfare mother" is the wrong person to be parenting children. She probably is young, probably did not-so-great in school (and may have dropped out of school), perhaps was raised in a bad situation herself and therefore has a skewed view of the world, may be smoking/drinking/using drugs, has no training whatsoever, has not ever really thought about what "being a good parent" might mean, and so on. The best case scenario given all these problems would be to turn this situation around as best we can: get the mother a high school education, and college education if possible, train her in parenting best practices, teach her how to beneficially engage and interact with her children, how to discipline her children, and so on.
There must be a solution to the fraud problem in Welfare programs, including: a) the fraud that occurs when recipients of Welfare spend the money inappropriately (e.g. flying to Hawaii, buying drugs, buying steaks, etc. seen above), b) the fraud that occurs when Welfare recipients launder their food stamps into cash to buy non-food items, especially items like alcohol, drugs, etc., c) the fraud that occurs when people who do not deserve Welfare somehow get it (the NJ case above being a classic example), d) the fraud that occurs when Welfare recipients or others game the system. Simply giving people money seems to encourage fraud, and to encourage bad behavior, by some Welfare recipients. Eliminating all of this fraud would make everyone happier.
The incentive (and perhaps even the ability) to have additional children while on Welfare must be eliminated. The idea that a women who cannot support herself (and therefore needs Welfare) is having even more children seems ridiculous/nonsensical to many.
The children who are born into poor households must be protected. The reality is that children born into poverty often receive poor parenting, a poor education, live in bad and unsafe surroundings, and are damaged by their childhood experiences. A good Welfare solution must therefore mitigate or eliminate this damage. If society is going to provide financial support in an attempt to protect these children, then society can go one step further and prevent psychological damage to these children as well.
The amount of money spent on Welfare should be reduced as much as possible.
The people needing Welfare need to somehow be transported to healthier environments, both for the mental health of the parents and their children. This might be done by literally transporting them, or it might be done by transforming an inner-city ghetto into a great place to live. Having people living in inner-city ghettos riddled with poverty and drugs, or gang-controlled inner-city "war zones", is absurd and unacceptable. People – all people – in America should be able to live in safe places that are psychologically and physically healthy.
Any solution to the problems of Welfare must take legitimate steps to get people off Welfare. Helping people on Welfare to educate themselves, develop self-discipline, develop a strong work ethic, etc. would go a long way. Alternatively, the cost of Welfare must be reduced to the point where carrying millions of Welfare recipients is not such a burden to everyone else. Or both.
A real solution to the single-parent/illegitimate-child problem would be great. A huge negative for the current U.S. Welfare program is the appearance that it encourages single-parent families, to the detriment of everyone involved. Two parents working together could much more easily support the family, and two parents are definitely better for the children (assuming that both parents are solid citizens, not abusive, not violent, engaged with the children, trained in parenting best practices, etc.)
When a person "gets into" the Welfare system, we prefer for them to also "get out" of it if possible. And as they get out, we want their lives (and the lives of their children) to be greatly improved by the experience of being "on Welfare". We want parents and children who get "on Welfare" to become better educated, better equipped to handle the real world. If not, they are just going to end up back in the Welfare system.
If we can accomplish all of these goals, it would transform the U.S. Welfare system into something much better, a system to be proud of as a nation.
What is the economy of the Mars colony all about, as described in this book?
As described in this book, the Mars economy is all about creating happiness, prosperity and fulfillment for everyone living in the Mars colony. What do people need?
Everyone needs high quality, healthy food
Everyone needs high quality, safe, secure housing, with furniture and appliances to match
Everyone needs high quality health care, and improving treatments for sickness, injury and disease.
Everyone needs high quality clothing
Everyone needs access to high quality education
Everyone needs access to high quality transportation
Everyone needs clean water and sanitation services
Everyone needs 24x7 electricity and Internet access
Everyone needs a computer and a smart phone to access the Internet
And so on...
Plus, everyone needs these things in a way that is sustainable, so that we do not destroy the planet we live on.
Everyone needs all of these things – this is completely obvious.
The way that the Mars economy delivers all of these products and services to the Mars colonists is by looking at all of the tasks necessary for delivery, and then distributing those tasks to the colonists. People need to perform the tasks to cook and serve all of the colony's food, so the task allocation system hands those tasks to individual colonists. People need to perform the tasks to build and maintain the housing, so the task allocation system hands those tasks to individual colonists. And so on.
If an economy existed that could deliver all of these things to every citizen, then Welfare would become irrelevant. If the economy and the society automatically provided all of these things to every citizen, then no one needs Welfare.
We are unlikely to get to an economy like this in one gigantic, instantaneous leap. We will need to get there in steps, through research, experiments, test cities, etc. as described in this book. One place where we can try out these test cities is with Welfare recipients. The current Welfare system is so bad, and is making so many people unhappy/angry, that it is almost like we have nothing to lose. Almost anything we do will be better.
Redesigning the Welfare system, step by step
The important thing to recognize about the current Welfare system is this: there is already massive amounts of money flowing into the system. Hundreds of billions of dollars are pouring into Welfare, and still everyone is angry. Welfare recipients believe they are receiving not nearly enough money (and in truth they probably are not, given the real costs of living a decent life in America). Meanwhile, the people funding the Welfare system (taxpayers) believe that way too much money is being spent, and the money is delivering woefully inadequate results.
Let's therefore explore a solution based on the new Mars economy. We use the money pouring into Welfare differently, more effectively, and achieve much better outcomes with the money we spend. We create a Mars colony on Earth to the maximum extent possible today, and let 1,000 Welfare recipients and their children live in this colony.
Step #1 would be to eliminate cash flowing directly to Welfare recipients. No more cash food stamps in the form of EBT cards. No more TANF debit cards. No direct cash payments to Welfare recipients. This would take a huge bite out of the many different forms of fraud that we currently see in the Welfare system. It would also make it much harder for people on the fringes to game the system, to steal from and exploit Welfare recipients, etc.
Step #2 will be to make Welfare recipients work for the benefits they receive. They wake up every morning on time like the rest of America, report to work on time, work their 40 hours a week like everyone else, and so on. They are not working for a paycheck however. They are working for the benefits they receive: food, housing, education, etc. in the Welfare colony. If they do not like it, they are free to leave whenever they wish. In addition, residents will be expected to devote 10 hours to training/education every week. No longer are Welfare recipients getting a "free ride." They are working for what they receive, just like everyone else. Welfare recipients living in this colony are learning how to work hard, and work well. They are being molded into disciplined "hard-working Americans" by the process.
Step #3 would be to create an environment to deliver everything that Welfare recipients (and their children) need to live comfortable, safe, healthy lives, in return for the work that they perform. Eliminate the idea of "living in poverty" and "living in dangerous inner-city ghettos". Welfare recipients receive:
Healthy food in abundance
Safe, secure, healthy housing
Education for adults and children
Childcare for working mothers
Utilities like water, sewer, electricity, internet
Adequate, easy-to-access health care services
And so on...
Step #4 requires that we define the population of the colony that we are building. Let's assume that we will take in 1,000 Welfare mothers, along with their approximately 2,000 children. These mothers will have one to three children each. This means that the colony will have approximately 3,000 residents.
Step #5 is to set up a stellar, high-quality, highly disciplined, no-nonsense, high-achievement school system (P-12) for the 2,000 children in the colony. Set the bar high, so that every child in the colony heads to college. This is not necessarily easy, but it is certainly achievable because there are multiple examples in the United States:
Building a modern school facility to handle 2,000 children is a big deal. When you add up things like classroom space, library space, gym space, cafeteria space, restrooms, offices, hallways, corridors, etc., total space per child in a modern school heads toward 100 square feet per child [ref]. If that space costs $50 per square foot to construct and equip, and if there are 2,000 children attending the school, this is a $10 million facility. If the space costs $100 per square foot, it is a $20 million facility. Add in things like a football field, soccer field, performing arts center, etc. and let's set it at $30 million. The cost is amortized across tens of thousands of students over several decades, but it is still a big lump sum at the beginning. There are two ways to deal with it:
Use mobile classrooms and lease them. This is the approach taken by Trinity Academy in Raleigh, NC:
Step #6 is to look at the jobs needed inside this colony, now that we know the population. We know that we will need:
Approximately 200 people working in the colony's education system
Approximately 200 people working in the restaurant that feeds the colony
Approximately 100 people working on the colony's child care system (infants, toddlers, etc.)
Approximately 100 people working on the colony's police force
Approximately 50 people working in the infirmary
Approximately 50 people working in the software and IT department
Approximately 25 people working in the greenhouse
Approximately 25 people working in the wash and fold
Approximately 25 people working in the colony office
Approximately 50 people floating on random assignments
All remaining people working in the colony's industries (clothing manufacturing, shoe manufacturing, etc.)
Every adult in the colony is going to have one of these jobs. They are going to wake up in the morning, show up on time, and do the work of a full-time job. In addition they will be attending training in things like self-discipline, work ethic, job skills, etc. No one in this Welfare colony is getting a "free ride".
Step #7 is to create high-quality training programs for the adults living in the colony. These training programs will focus both on soft skills like self-discipline, work ethic, leadership, effective communication, etc., as well as specific job skills. Looking at the jobs listed in the previous section, there are many specialties needed by the colony, including teaching, health care, software development, food prep, management, public safety, etc. People living inside the colony can train for these positions on the job and in the classroom, with professionals providing the training and guidance they need. For example, to run the school we will need certified teachers, but we also need office workers, teaching assistants, etc. Adults living in the colony can train to become teaching assistants, and then advance to become teachers. In the infirmary, there will need to be certified nurses and nurse practitioners on staff, and colony residents can train to become CNAs (Certified Nursing Assistants) and then advance to registered nurses. The residents working in the restaurant can receive on-the-job training for their roles. The people working on the police force can train to become public safety professionals. And so on. Assume that the colony will spend $1,000,000 per month bringing in 150 to 200 paid outside professionals to: a) fill roles in the colony that require certified professionals, and b) work with and train colony residents.
Step #8 is to account for construction of the other buildings as needed by the colony. This colony will need a large restaurant, an infirmary, a child care facility, a police station, a wash and fold facility, office space, a retail store, greenhouse space, a pool, a gym, etc. It is similar to the needs of the colonists described in Chapter 20, but with the addition of the 2,000 children. Several of these facilities can be shared with the colony's school. The Middle Creek Community Center is a perfect example – it is attached to Middle Creek High School, so the community center and the high school are able to share the gymnasium space and other facilities. Assume that these additional buildings cost $10 million, which means $72,000 per month on a 6% 20-year loan.
Step #9 is to account for housing. As described in Chapter 20, there is a wide variety of housing options available. Let's assume we choose the manufactured housing option, and units look like this:
Rooms can grow or shrink depending on cost and comfort concerns - this is simply an example
In this model, every family receives two bedrooms and a private restroom. Each room has a private entrance. The thicker walls in the middle represent sound-proofing and fire-proofing.
Using this approach, housing for each family costs approximately $14,000 per family, furnished and installed. Housing therefore costs $14 million, or $100,000 per month.
Step #10 is to think about transportation. It costs about $7,000 per year ($580/month) to own, operate, fuel, maintain, and insure an automobile [ref]. Residents will have an occasional need to use cars for transportation. Assume that the colony has a pool of 50 cars for use by residents. This will cost $29,000 per month.
Step #11 is to think about consumables. As in Chapter 20, there will be costs for things like food, water, electricity, etc. We can use the numbers from Chapter 20 here as well.
Step #12 is to think about health care. But here this is easy, because everyone in the colony will already be on Medicaid. The infirmary can act as a first stop, and anything more serious can be dealt with using the normal health care system in the community.
This sounds like a gigantic amount of money, doesn't it? But there are four things to keep in mind:
This Welfare colony has a purpose – to completely transform the lives of the adults and children living here. And there is a parallel purpose: to make much better use of taxpayer dollars.
We are building a complete small town here to house 3,000 people, self-contained. The colony has its own school system; the colony cooks and serves all of its own food; the colony provides its own police force and infirmary; and so on. It is not unexpected that this will cost something.
The people living in this town are already receiving money – lots of money, from the existing Welfare system. We are simply diverting the already-allocated money to a new paradigm with the hope that: a) we can reduce the amount of money spent, b) we can achieve significantly better outcomes for the adults, children and taxpayers involved in this experiment, and c) once we can demonstrate success, we can duplicate the model to help millions of people.
If this experiment does not work, in 20 years we can blow the whole thing up and it is essentially a wash. However, there is a very high probability that it will work.
Let's add this all up and look at the cost of this experimental Welfare colony...
How much does this experiment really cost?
What are the expected expenses for running this colony each month and each year, given the estimates above? We can form a rough estimate of costs, assuming the project is funded through existing Welfare dollars (all monthly costs for capital expenses assume a 20 year amortized loan at 6%):
Land: 200 acres at $25,000 per acre: $5 million, or $36,000 per month
Fencing+lighting: 12,000 feet at $15 per foot: $180,000, or $1,300 per month
Infrastructure costs for roads, electricity, water, sewer, etc: $2,000 per family or $2,000,000 total, or $15,000 per month
Housing: described above: $14 million, or $100,000 per month
School: described above: $30 million, or $215,000 per month
Additional buildings: $10 million, or $72,000 per month
Professionals: Teachers, nurses, trainers, etc.: $1,000,000 per month
Food, some of which will be grown on site but most of which will be purchased at wholesale prices and brought in for preparation and serving: 3,000 colonists * $3.50/day * 31 days = $325,500 per month (see Chapter 20 for details)
Electricity: 20 Kwh per resident per day and 10 cents per Kwh: $2 * 3,000 residents * 31 days/month = $186,000 per month
Water: 100 gallons per person per day, at 1 cent per gallon: $1 * 3,000 residents * 31 days/month = $93,000 per month
Internet service and equipment. Assume $50 per family per month: $50,000 per month
Gym, community center: already accounted for
Wash and fold: already accounted for
Police force: already accounted for
Greenhouses: already accounted for
Infirmary: already accounted for
Office Space: already accounted for
Car share program: described above: $29,000 per month
Incidentals: Things like soap, shampoo, TP. Assume a stipend of $100 per family (issued as credits only useful on-site) per month for the on-site retail store: $100,000 per month
Health care: Covered by Medicaid: $0 per month
A first approximation of the monthly cost of this 3,000 person Welfare colony:
Fencing and outdoor lighting: $1,300
Additional buildings: $72,000
Outside professionals: $1,000,000
Car share: $29,000
The total cost to operate this experimental Welfare colony is therefore $2,222,300 per month, or $2,222 per 3-person family (mother plus an average of two children) per month. Per year, each family is costing us $26,667. The total colony cost per year is $26,667,600.
This $26,667 per year per family seems reasonable. This is probably about the same amount of money that these families are receiving from a typical Welfare "stack", as described at the top of the chapter. However, there are two things to recognize about this number:
The money is being spent to achieve much better outcomes: the food is much better, the housing is much better, the overall environment is much better, the education for both children and parents is much better, and so on.
It turns out that this number is inaccurate, because it hides several things that lower the actual real costs.
The most glaring hidden factor is the colony's school for the 2,000 children who live in the colony. In any city in the United States, money is being spent on schools, teachers, school buses, etc. In the state of North Carolina, this cost comes out to about $6,115 per student per year:
State per pupil spending was $6,716 for 2008-09; 9 years later it’s only $6,115!
North Carolina’s per pupil expenditure is all of the money the state spends on K-12 public schools divided by the number of students in the entire public school system. The number of students is based on those included in average daily membership (ADM) by the NC Department of Public Instruction (NCDPI). According to NCDPI, North Carolina’s per pupil expenditures pay for salary and benefits for administrators and teachers, textbooks, transportation, classroom services, driver’s education, lunches, and other non-instructional support services.
NC Justice Center’s Education & Law Project calculates that, adjusted for inflation, NC’s total state per pupil spending declined from a high of $6,716 in 2008-09. This is largely due to cuts enacted during the recession, specifically a reduction of $840 million in state appropriations for education in 2009-10. Meanwhile, the student population has increased by almost 67,000 since then, or 4 percent. In concrete terms, the decline in per pupil expenditure means that there were 30,002 teaching assistants in North Carolina classrooms in 2008-09, and now, with many more students attending our public schools, there are 21,628. [ref]
This $6,115 number does not include the cost of the school building itself. The school buildings in North Carolina are paid for with school bonds, and that is a different budget. If we add it in, along with a few other expenses, the per student cost approaches $8,300 per pupil per year in North Carolina [ref].
So if the colony is educating its own children, and if there are 2,000 students in the colony, then the state of North Carolina no longer has to educate them. The state is saving $8,300 * 2000 children, which is $16,600,000 million per year. In other words, if this colony runs its own school as described, the savings to the state's education budget reduces the net cost of this colony to about $10 million. Each family is actually costing only $10,000 per year, or $833 per month. We have reduced Welfare costs for people living in this colony significantly using this math.
To put it another way, when we calculate what the Welfare benefits for a women with two children costs the government, none of those calculations include the $8,300 per child cost of the public education system. The reason is because all children in the United States are eligible for this benefit. When the colony offloads the education of its students from the state, it is a $16.6 million windfall for the state, and that amount negates more than half of the cost of operating this colony.
Or we could put it another way. Say we ask the state to build and staff a normal taxpayer-funded 2,000 student school inside the colony. Then all of the costs for the school listed above (like the $30 million school building and the teacher salaries) can be subtracted from the cost of the colony, and suddenly it costs a lot less to operate the colony.
Or here is another way to think about it. Say that the school inside the colony is considered to be a private school focused on educational excellence for all of the children in the colony. The colony could then apply to the state of North Carolina and receive approximately $4,000 per child in the form of vouchers, free and clear [ref], [ref]. This is real money, and it is not Welfare. With 2,000 children in the school, this would be $8 million in "revenue" to the colony. This cuts the cost of the colony per family significantly. Cost of the colony is a total of $26,667,600 per year, and subtracting $8 million brings it down to $18,667,600 total per year, or $18,667 per family per year, or $1,555 per family per month.
If we were to repeat this same kind of thinking, looking for example at the reduction to the city police force by taking 3,000 people out of the city, looking at the reduction in Medicaid costs by having the infirmary on site as the first stop, etc., the total real cost of this Welfare colony drops again. Meanwhile, the outcomes are much better, and the people in the colony are living safer, richer, healthier, happier lives.
Can we also help the fathers?
Our calculations so far have completely ignored an important part of this puzzle: the fathers of the children. There are a number of social factors that have caused the separation of fathers from Welfare families, including:
The troubles facing young black men in many American cities are bound up into such a complex knot that it's hard to imagine where to begin unraveling it. Inner-city schools frequently fail them. As do the high-crime neighborhoods where they grow up, and the police and justice systems embedded there. The changing shape of urban economies — which offer few of the firm blue-collar jobs their fathers and grandfathers counted on — has hurt them, too. So, too, has the discrimination that indisputably lingers in the job market.
As a result, the unemployment rate for black men in America ages 20 to 24 has remained more than twice that of their white peers. Among 15- to 24-year-olds, the homicide rate has been about 18 times higher for black than white men. Black men of all ages are six times as likely as whites to be incarcerated. And between incarceration and premature death, some 1.5 million black men in America are effectively missing from their communities. [ref]
Nonetheless, there are a number of advantages we might gain by re-establishing familes:
Strong male role models for the children.
We know that two-parent families are better for children than one parent families (see Chapter 19).
It would be great if full families exited the system. A mother/father team has a better chance of surviving in the real world and providing a stable home for the children than a single mother.
Anything done to lower the recidivism rate is a win for society.
The father can be trained and educated like the mother: high school diploma, parenting best practices, self-discipline, work ethic, job skills, etc.
There is a lot of goodness in this package. On the other hand, there are legitimate points of concern:
Does gang culture enter the colony with the men? (the large majority of gang members are male, so this is not an unreasonable fear [ref]). And along with gang culture things like drugs, fighting, guns, etc.
Does a criminal element enter the colony?
What do we do about men with criminal records?
Do domestic violence problems enter the colony with the men?
Does the pregnancy rate jump?
These are significant negatives if they manifest themselves.
One way to address these negatives is with vetting. Another way to address them is with training. Another way is with the signing, training and enforcement associated with the social contract. Another way is to look at existing rehabilitation models that work, for example Delancey Street. It is possible to imagine training experiences to create new ways for men in the colony to think about the world, about their families, about their children.
The advantages significantly outweigh the disadvantages if we can make this work. In addition, adding 1,000 men to the colony can be done at nearly zero cost. It does not change the cost of any of the big things: Housing costs, school costs, infrastructure costs, etc. all remain the same. The food costs go up by $108,000 per month. The electricity and water costs go up a little. The size of the colony's restaurant needs to be bigger. Things like that. The point is that adding in 1,000 men might increase the cost per family per month by $200 to $300. It is a small amount of money to spend if it allows the rescue of 1,000 more people.
In addition, we now have 1,000 extra workers in the colony, who could power a significant amount of industrial capacity. The interesting point of comparison here comes by looking at a company like Mondragon corporation in Spain. There are plenty of things that the colony can make for internal consumption, and then sell to the public. Any money generated comes back into the colony to further reduce the ogoing costs of operating the colony. In the ideal case, the colony can make enough money to sustain itself with no taxpayer dollars.
Adding it all up
The idea presented here is simple: Take money that is already being spent on Welfare and re-deploy it to achieve significantly better results for everyone: The mothers, fathers and children living in the colony, as well as the taxpayers, and society as a whole. Everyone will be better off if we can make an improved system like this work.
The key is to use the principles of the Mars colony as described in this book as the foundation of this new system. We have seen above that Mars colony principles give us two big advantages: 1) Costs are reduced because the colonists are doing much of the work needed to sustain the colony, and 2) We achieve much better results for everyone.
There is a lot of goodness here. It would be fascinating to try this Welfare experiment in real life.