McGovern ran on a far-left platform that included a proposal that at the time was deemed risible - the "demogrant." The demogrant program was simple: the federal government would write a check for $1,000 to every American … But the demogrant has returned! Today, Hillary Clinton unveiled her own demogrant proposal: every newborn American baby will get a birthday present from the federal government in the form of a $5,000 check … It occurred to Scott that Hillary's proposal is basically a demogrant, adjusted for inflation. Out of curiosity, he went here and did the math. The result was striking. McGovern's $1,000 in 1972 was worth, in 2006 dollars, $4808.90. Add a few bucks for 2007, and Hillary's baby present is a dead ringer for the demogrant proposal that was laughed off the stage in 1972!
Guess which conservative economist gave this idea some support?
Greg Mankiw directs us to a paper by Jon Gruber and Emmanuel Saez entitled The Elasticity Of Taxable Income: Evidence And Implications. Greg emphasized this portion of their paper:
the optimal system for most redistributional preferences consists of a large demogrant that is rapidly taxed away for low income taxpayers, with lower marginal rates at higher income levels.
If I were a redistributionist, here is what I might propose: A large fixed payment to every citizen, paid at the beginning of every month, financed by a proportional tax on consumption, such as a value-added tax.
When Senator Clinton floated her demogrant, Greg wrote:
The big problem with U.S. fiscal policy is that, over the years, politicians of both parties have voted for unfunded entitlements for the elderly, which will (unless scaled back) result in substantially higher taxes on future generations … How might this be funded? There are only three groups that could be asked to pay for the new entitlement with higher taxes (or lower benefits): the current elderly, those currently of working age, or the same future generations who are getting the new benefit and are slated to pay for existing unfunded entitlements. Which group do you think Senator Clinton has in mind?
It’s a fair question – but it does seem, the demogrant is not such a crazy idea if it is done in a fiscally neutral way. Of course, fiscal neutrality never stopped the GOP candidates for President from advocating tax cuts.