It isn't as if this is just some big, obvious & uncontroversial policy mistake that everyone would see if they only visit reason.org that politicians have just overlooked.

Well, all I can say is this. I've spent too much of my time in life studying politics. I've worked in multiple levels of government ( U.S. Congress, city government, state senate), worked in non-profits trying to help the homeless, tutoring inner city kids, etc. I used to browse my college's social library for fun to read journal articles, and on almost every single issue I've read the top books and articles.

My conclusion is that, actually, yes, there is almost always a much, much better, solution, that would make most people much better off, that the political system has simply overlooked.

Note, I do not feel this way about things outside of politics and government. At the company I work at, I think the management generally makes the very reasonable decisions given the trade offs involved. But when I worked in government, I thought the process was insane.

For a few examples:

On the healthcare issue, see my blog post: http://intellectual-detox.com/2009/09/10/the-perfect-healthc...

Or consider Iraq/Afghanistan. If you believe that the U.S. should just get out, then you probably already believe that our current policy is insane. If you believe that the U.S. should stay in and build a workable government/economy, our policy is also insane. For comparison, Britain once ruled Egypt, which at the time had 1/3rd of Iraq's population, with a mere 5,000 soldiers, ruled it so well that Cairo was a notable international destination, and actually turned a profit. The tactics the British used are well documented, and in the end resulted in far, far less bloodshed and collateral damage than our current tactics. Yet we ignore them, and everyone loses. Iraq and Afghanistan remain in chaos and both the Iraqi civilians and the American taxpayer bleed red. Again, insanity.

Or consider education: http://steve-olson.com/how-the-public-school-system-crushes-... and http://www.paulgraham.com/nerds.html Again sheer insanity. And again, if you actually study the history and politics of the educational system, you'll find that the system is not the result of balancing hard tradeoffs. It's the result of an insanely dysfunctional political system.

And don't even get me started on economics and the financial crisis.

Again, I spent a lot of time in the political world and it only slowly grew on me just how insane the system was. I basically went from believing the mainstream academia/NYTimes view ( ie. the American system is flaws, but generally arrives at a workable solution given the constraints) to being legitimately scared at how badly everything is being run.

First, the same criticism of perverse incentives applies. It takes more compensation to motivate a person take a job if he already has $10k + $6h/hr.

There is still a bit of a disincentive, but it's much, much, much better than a 110% marginal tax rate.

Second, you'd have a lot of people in guaranteed 'make work jobs' that are probably more expensive to run then just giving away money.

$6 an hour is still a lower wage than ~98% of the jobs out there, so people would still have the incentive to switch to a higher paying, not-make work job.