wealth redistribution — numbers

In a previous post, I talked about a replacement for our current welfare system:

Tax everyone an equal percentage, then redistribute that wealth as an equal dollar amount paid to everyone.

Here are a few numbers to get a perspective on how this might stack up against the current system.

I should start with a wee disclaimer: I don’t actually have any idea what I’m talking about, I just scoured the web (particularly wikipedia and census.gov) for some basic income, spending, and population numbers.

Federal spending on medicare, 2007 $400 billion
Federal spending on medicaid, 2007 $275 billion
Federal spending on other unemployment and welfare programs, 2007 $367 billion
Federal spending on social security, 2007 $586 billion
total welfare-related budget, 2007 $1.6 trillion

Estimated US population (current): 300 million, or 100 million households

If we do the very simple thing of divvying up that $1.6 trillion amongst everyone equally, we get:

$1.6 trillion / 300 million individuals = $5500 per person per year

or

$1.6 trillion / 100 million households = $16000 per household per year

In 2004, the mean household income was about $60,000 and the median was about $44,000. If I’ve done my math right, after handing out the $16,000 per year, the mean becomes $76,000 and the median becomes $60,000. The difference between the mean and median in percentage terms goes down–which makes sense because the whole point is to flatten out the distribution.

To some of us, an extra $5500 or $16000 doesn’t mean that much. To the poor, it probably means a lot. And for many middle-class folk, just knowing that it’s there could make for a feeling of security–they know if they lose their job they won’t be completely stranded. Which is of course the whole idea of a safety net.

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