There’s One Important Reason why Basic Income won’t Work

Yesterday I came across an argument in the New Statesman for a “basic income scheme. As welfare programs go, I find the idea strangely attractive.

That’s not an expresion of support, necessarily. It’s certainly not an expression of unconditional support. It IS an admission of interest: given the many economic and moral problems with current welfare states, if we must have social assistance (and I’m not necessarily hostile to the idea), we should spend a lot more time than we do trying to make the systems effective. Basic income offers some solutions to problems that I have with welfare as it stands.

So what is basic income? As the name implies, it’s a simple handout designed to meet all of a citizen’s “basic needs.” The idea is that the government would give everyone – just for being a citizen – a lump payment. This would not be means tested – except to possibly verify that the recipient had reached the age of majority (call it 18 for the purposes of discussion). The sum would, in theory, be enough to live on for a year – though one would hope “live on,” means “scrape by,” not “turn on, tune in, and drop out.” So, to pull a number right out of my ass, maybe $12k. Enough to get an apartment with a roomie, get clothes at a thrift store, cover all your eating expenses and transportation costs, and save a bit here and there for accidents and such. So, not enough to live comfortably on or completely replace the incentive to work, but more than enough to prevent social catastrophes even if you choose not to work.

I can see a number of advantages to this kind of system.

(1) Eliminates social engineering – since it’s a sum paid to all citizens of the age of majority, the government loses the ability to affect the population in any but the crudest of ways. No drug testing for receipt of government aid, no perverse incentive to reproduce, etc. The population would cease to be the government’s pet science project.

(2) Eliminates deadweight loss – it’s the simplest system in the world to administer. Uncle Sam hands your office money, your office maintains a list of bank accounts and deposits money in those accounts at regular intervals. Contrast this with the ludicrous amount of legal- and paper-work currently involved in enforcing all the labrythine conditions of eligibility in our current system. All the costs associated with that administration and enforcement could be eliminated.

(3) Reduction in perverse incentives – Since a basic income system is not trying to manipulate anyone into fitting one of the government’s arbitrary demographic categories, and since the system is dead simple, the potential for unforseen consequences is greatly reduced. It will be fairly argued (and I have this concern myself) that people will choose not to work. But my guess is that effect would be relatively small. Motivated people who don’t want to work now can usually find enough money from the government one way or another to get out of it. Also, if the amount were truly low enough to only cover basic needs – the $12k-ish that I suggested earlier – the incentive would still be there, thought it might eliminate some full-time work. But then, since that seems to be the trend anyway, this would probably merely augment the situation. Of course, it’s folly to say that basic income would eliminate all perverse incentives – no amount of wealth redistribution that massive can fail to have ripple effects! – just that it would bring us down from our current ridiculous level of them.

(4) Less rent seeking – Since the government would not be telling people how to spend their money, instead just handing it to them, it would no longer be effectively subsidizing food and housing and whatever else. Getting your invention qualified for government benefits would no longer be a lazy path to prosperity – you’d have to sell your product to people like everyone else.

(5) Honesty – It would be nice to be able to call welfare what it is: a redistribution scheme. It does a lot of damage to policy debate that people can’t just admit that – but it is, of course, obvious to everyone that that’s the primary purpose of social assistance given the amounts involved. A lot of the problems with government programs stem from the fact that they’re often disguising one purpose behind another and so aren’t flexible enough to deal with such problems with meeting their (real) goals as arise. If we could cut through the bullshit and say “hey, this is a form of mild wealth redistribution,” we could save a lot of time arguing about side issues and focus on the one that’s actually relevant to the program – namely whether the payments at the current time are too low or too high. Done!

I said $12k. It’s worth putting into perspective how much money that is. $12,000 times the 300million American citizens is $3.6trillion. Which is fucking huge. Which is, to put a fine point on it, about as much as the current federal budget of $3.8 trillion – and that’s a budget that collects close to a trillion less than it plans to spend! Now, of course it’s not actually $3.6trillion, since lots of those 300million citizens I just counted are children who don’t qualify. Also, maybe my figure of $12k is too generous. Even so, eliminate the 25% or so of the population under the age of 18, and reduce the payout to, say, $9000, and you still get $2trillion and change. The point is that no matter how you slice it, it’s equal to or more than national revenue, and so it’s not a feasible program.

All of this has ignored the ethical arguments against it, namely that it’s simply wrong to hand people money for free – especially when you’re forcibly taking it from someone else to do so. Just being a citizen is hardly a qualification for receiving a check! So, to reiterate, this is not something I support in any absolute sense – I’m just saying it has some relative advantages.

It’s also COMPLETELY OFF THE TABLE if it’s going to account for the entire US Federal budget!

2 thoughts on “There’s One Important Reason why Basic Income won’t Work

  1. In regards to your last paragraph, is there any circumstance, in your opinion, that giving people money for free is okay?

  2. I guess there’s no way I can answer that without committing myself to a pretty nasty version of Objectivism, so why don’t I just take it back? Sorry. :-) People can do with their own money what they like, and I shouldn’t really comment on that. In general, I think it’s not a good idea to give people substantial amounts of money for free. I can think of some cases where it’s not harmful, but for the most part I think it’s better if people do something useful in exchange for the money they get. That said, I understand the concerns of the article – which is that we may well be entering an age where technology is so awesome that unless you got in on the ground floor, there’s just no way to compete. If people in general have nothing to trade – i.e. have no opportunity to be useful – then the world will have changed substantially enough that I’d be more amendable to a general bread and circuses system. However, I think even in the event that the world has become that kind of place, it’s hard to imagine that people will have nothing to trade. It’s more likely that things will just be so cheap that they need trade very little to get what they need. Keynes thought – back in the early 1930s – that we were on the cusp of a world where people would only need to work 9 hours a week to provide for themselves. Obviously he was more than a little wrong about that – but the point is that even envisioning the kind of giant expansion in human wealth that he imagined, he didn’t think that people would have nothing to contribute – just that they would need to contribute very little to get what they needed. I think that’s more likely to be true than that people simply won’t be able to contribute anything! But OK, for the sake of argument, if we had an entirely robot-driven manufacturing base so that little to no human input were required, then sure, it might be not only justified but the Right Thing to Do to just hand out equal shares in such a system to everyone, regardless of how useful they were.

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