The Pragmatic Libertarian Case for a Basic Income Guarantee
cato-unbound.org
cato-unbound.org
What I don't believe is that the problem is tenable in the United States. At least, I can't see it happening today. For starters there is a whole portion of the population that will see this as people free loading. This a sizable part of the population that believes all "hand-outs" are bad even if it ends up saving us money in the long run.
Second, the government being the largest employer (second largest I believe if we elude the military.) I have a hard time seeing this happen due to political pressure since a sizable number of jobs would be cut... since they are no longer needed to administer these complex programs. That's not a winning election proposition. Next, take into account local impact of places where government is close to the only employer. Look how much people fight to prevent military base closing in their district; doesn't matter where on the political/fiscal ideology they stand. Finally, there's the impact to the private sector which has cropped up to administer, provide or execute some of these programs.
In a perfect world states would be better able to deal some of the local welfare issues. That brings an interesting opportunity for the federal government to vastly simplify welfare programs in something along the lines of BIG (and it self in the process). And then leaving local issues to the states. Poverty can look very different in NYC compared to Tennessee. Other types of welfare issues only are a major concern in some states and not others. It's could be a very... American solution to the problem.
The downside is that some states can't be counted on doing the right thing (simple example: Civil Rights).
Side node: I am not a libertarian, or anything official for that matter.
"Social Security for All" has a nice ring to it.
Something like a more wood behind fewer arrows ... applied to government.
I'd like to see somebody else run the numbers on the "overhead" like a group of independent economist (eg. not me).
I suspect another problem is that a significant portion of welfare recipients get way more than a feasible basic income system would provide. I bet this wouldn't get much traction for progressives or conservatives.
Attempting to do that would be political suicide. "You're taking money from the poor and giving it to the rich!" The only realistic way something like a GBI would be implemented were if there were means testing involved.
I think the assumption is that the money you save by reducing the complexity of the welfare bureaucracy would be passed into the income itself. But I was assuming that the basic income system would give the same amount of total money to people currently receiving welfare benefits. My point was that among people currently receiving benefits, some portion of them would receive a lot less on basic income, even though the money received would be the same on average.
I would also expect it's possible to design a system that doesn't substantially reduce the income of existing welfare recipients. Most government programs seem to exclude people from other programs and it's a very complicated game to even know how to sign up for things.
In fact, this is why my mother became a social worker, because she found it so difficult to get things like AFDC (replacement child support for families with deadbeat parents) and food stamps, even though we had a lot of advantages over other people who likely needed those things even more than we did.
And sure, those jobs will disappear but in fact the turnover in a lot of these programs is very high, it's very tough to do this type of work for very long, few people spend an entire life working for a social service program, and those who do are often committing fraud - not to say there aren't certainly _some_ who do who work very hard and are honest.
Agreed, but there are currently many more people who aren't currently receiving benefits than those who are. Expecting to save multiples of the current expenditure by decreasing the bureaucracy is obviously unrealistic.
> But I was assuming that the basic income system would give the same amount of total money to people currently receiving welfare benefits.
Fair enough, I was trying to point out that achieving that would require either restricting those who receive the basic income or increasing taxes in order to keep the change revenue neutral.
> My point was that among people currently receiving benefits, some portion of them would receive a lot less on basic income, even though the money received would be the same on average.
Again, I agree, though I don't see that as a problem. Politically, I don't think there would be enough of those people to be a problem. And socially, they probably shouldn't be receiving that much more than the average anyway.
I guess I wasn't so much arguing with you as using your comment to go off on a tangent :)
Really? Do you know anyone that receives government benefits? Sure, you could design a basic income system that fails to compete with any existing welfare, but I think a key goal is to target the low-end of cost of living, track inflation, and keep everyone from having to fight over nitpicky government programs that are, in fact, widely abused by people who don't need them and nearly impossible to enroll in for people who do.
Did you know that if you receive disability and live with someone who earns minimum wage, your disability will be docked because the person you live with - and you _have_ to share housing with someone at sub-$1k income - is expected to take care of all your needs, even if they are just a housemate looking for help on their rent.
I also think it is hopelessly naive. You are talking about a change that would dismantle numerous massive government programs and completely restructure social and economic life in this country. Not only, as you pointed out, is that going to be very hard to push through both to the populace and within the parties themselves, but it is way too hand wavy.
Every grand political idea has promised, "just do this and it will fix everything". But there's always unintended consequences, and in a policy this far-reaching, those possible consequences are wide-ranging.
It just isn't going to happen without some massive shift in political opinion in the next few decades.
This point of view, unfortunately, leads all conversations about changing the government down the road that nothing can be done.
"It just isn't going to happen without some massive shift in political opinion in the next few decades."
That's already underway as the American Democratic Party is becoming the marginalized moderate middle.
There's always somewhere to start!
> Second, the government being the largest employer (second largest I believe if we elude the military.)
I can imagine this making sense if we exclude the military, but I certainly hope we're not currently living in some dystopia where it is necessary for upperwardly mobile citizens, such as ourselves, to hide from our government's armed forces.
That's my quick assumption anyway.
Are large per-person medical expenses a significant portion of total US welfare spending? Do you have a link to that data?
Does that mean they would deserve a greater financial allowance? That is for the person designing the policy to decide; the article suggests no. I offer no opinion on this.
My main question is ... having read the article, I don't actually see the libertarian argument here at all. It seems to say it is simply "more libertarian" than what we currently have (with supporting arguments like "smaller government", "cheaper overhead", etc.) - but ultimately, the spirit of this proposal doesn't seem to be in line with these values at all.
How is making something more libertarian not in line with libertarian values? Basically half the article seemed dedicated to explaining why this is a change in the direction libertarians would want.
One expensive procedure, a few days stay in a hospital or some expensive drugs and you are way past the average yearly expenditure.
It is only that expensive right now because of the way credit, loans, and debt work and are tied together with guarantees provided by the government (same reason why college tuition goes up when the government guarantees student loans).
Removing an appendix does not inherently cost $33k. Competition is there to lower prices, but when the government provides ulterior incentives, then it trips up the normal flow of the market.
> Are large per-person medical expenses a significant portion of total US welfare spending?
> I don't have the data, but I would be quite surprised if it were not the case. Having your appendix taken out cost on average $33,000 (and up to $180,000) in California.
And then I said:
We can't say "10k wouldn't cover costs for the 5% of people that will incur huge medical bills" because those huge medical bills only happen today, in a time where the government has the health system set up in such a way as to make all their proceedings exceedingly expensive.
In a free market, goods are cheaper than in a heavily regulated market.
So what I am refuting is the anachronism of considering the current costs of health care in a future where health care would operate in a free market. And I'm refuting it by saying, it's expensive now because of regulation that wouldn't exist in a free market.
'We can't say "10k wouldn't cover costs for the 5% of people that will incur huge medical bills" because those huge medical bills only happen today, in a time where the government has the health system set up in such a way as to make all their proceedings exceedingly expensive.'
But now that I know what you are talking about it seems reasonable that removing government subsidies might reduce the total cost of health care. I am however, not as optimistic as you are. We have a free, but regulated market and in that market things are extremely expensive even when government money is not involved. It seems unrealistic that prices would drop by a factor of 2 simply by removing government payments and even a factor of 2 would not fix the problem that we are talking about.
I think a lot of people who would benefit from basic income and who may leverage it to get themselves into a stronger earning position would disagree with you.
Basic income is not just 'better welfare', it's a system in which people do not have to rely on employment to satisfy maslow's hierarchy.
Of course we should also have universal health care.
That, by itself, is a huge step forward and a rare place where both libertarians and keynesians can find common ground.
On the other hand, it goes right at the heart of both the banking system and centralized political power. Which is why, sadly, it will never happen.
I think you make some good points, but I would have to think about this for a while before I could come to a firm opinion (because this is the first time I have heard your very interesting reasoning).
The best test I could imagine (to compare existing programs to the basic income,) would be for the federal government to grant waivers for all social welfare programs to some states, give them the equivalent amount of money, and have them each implement their own basic income program (at a level they see fit, with the state paying for any cost difference).
Alaska was fortunate in having a government (at least at that time) that actually planned for the future.
http://www.apfc.org/home/Content/aboutFund/aboutPermFund.cfm
Even if a B.I. is implemented in every country on the planet, we'll still be the last holdout.
"From each according to his abilities, to each according to a simple flat per capita rate"
I believe that is an explicit part of the definition of "basic income." One proposal I've read is that it must be applied for or opted into somehow, so wealthier people can simply refrain from accepting if they choose.
It'll be quite a feeding frenzy for both the legal and illegal crooks for a little while.
(edited to add I think you'll also on the other side need some level of bankruptcy reform... lets say the cost to me of doing business while in bankruptcy is less than $10K annually... so you'd have to be an idiot to give me a mortgage loan because I could structure things quite carefully to get it for free. Or if not normal expenses like that, the usual medical industrial complex scam of huge bills for things not covered (entirely) by insurance.)
this seems like something people could already do, and which is already protected against.
300M * 10k = 3 Trillion Dollars
This is greater than the total revenue of the Federal government in 2013.
The Fairtax proposal at http://www.fairtax.org has long advocated a lesser sort of BIG (called the 'prebate,' which would give everyone a check for their standard deduction each month to avoid people paying taxes on essential goods). After that, all would pay a flat sales tax on goods. Prices of goods would only increase minimally, given the absence of tax compliance costs for businesses. One could conceivably expand this type of BIG and do away with the welfare programs altogether.
But without doing away with the IRS, the system remains corrupt.
Sadly, neither of these proposals will ever happen, because both would require the federal government give up its ability to pick and choose to which constituents and special interests they dole out favors.
Taxes = PreTaxIncome * (1-(Ratio^((PreTaxIncome - BasicIncome) / BasicIncome)))
* subtract basic living income from total * an otherwise equally applied curve where you /always/ take home more for making more (irrespective of how you made it) BUT the more you make the higher the percentage becomes tax.
You're taking home disproportionately more of a society therefore your obligations to the society that allows you to make that much are also larger.
If you're waiting for some background task and want to experiment use a spreadsheet program and the following:
B1 = Ratio
A2 = MinimumIncome
A3+ = HigherIncomes
B2+ = =(1-POWER($B$1,(A2-$A$2)/$A$2))*A2
C2+ = =B2/A2
D2+ = =(A2-B2)/$A$2
I'm not super happy about this particular curve as it's been too long since taking math courses for me to remember how to build in controls that make it easier to shape based on more meaningful numbers.
If the program involves no strings attached grants, and it is meant to replace existing welfare systems, what happens to people who blow their money on nonessentials? Is there a secondary net for them, or are they allowed to starve? What about bad parents who take the cash without providing for their children?
I understand that these questions are just as valid with our current system, but is there a way to address them within this new framework?
(I'm in the submitting too fast punishment pen. Source for my claim is having worked retail supermarket as a starving student, and having friends / coworkers / neighbors doing just this. You are correct that it is hyperbole that everyone who can't stomach 3 cans per week of juicy-juice blueberry corn syrup flavor psuedo-juice per week is a crack addict, lots of poor people just trying to get by.)
The first one is tough. How do you help people who basically don't want it, and how far do you go in trying? Stuff like food stamps is still easy to work around, by simply selling the goods for cash. Time to go back to "government cheese" for the hard cases? Or treat "you get enough money from the government to keep yourself fed, but you still can't keep yourself fed" as a mental illness?
Can't save everyone, but we should at least be able to say with a clear conscience that we gave everyone the chance.
This is, of course, the huge problem with this plan. Not that this isn't the right thing to do; but because the media and public will seize on the few morons who do stupid things and therefore malign a program that would actually help most.
Just imagine the headlines: Addicts Caught Buying Crack With Your Money.
It doesn't matter which party pushes it. If the Democrats pass it, the Republicans will scream about this; if the Republicans do, then the Democrats will scream how this justifies government as a warden.
I do have concerns about disabilities in particular and medical costs more generally. Someone with a real disability (instead of the fake disabilities rampant now) has extremely high costs that far exceed any reasonable amount provided by the BI. Are they just screwed? Condemned to private charity? What about cancer patients, or even just old people as a class?
And I suspect these very expensive tail-end cases make up the majority of the costs of existent programs. Banning age-discrimination in health insurance and an individual health insurance mandate for catastrophic coverage might account for the medical aspects, but that doesn't address the disability portion.
Not sure of the answer, here.
Simple tweaks can help make it harder to fall through the net. For example, rather than cutting a BI check once a year, you cut 52 checks once a week (or once per pay period for those getting it as part of their paycheck.) Blow through your check and you starve for a few days rather than the rest of the year.
It may be paternalistic, but it removes a lot of the need for additional safety nets.
If there is no second safety net they will very quickly learn to be more responsible. Provided the person has no mental illness there is no reason an adult can't figure out they need to use the money wisely.
>> "What about bad parents who take the cash without providing for their children?"
Aren't there already laws in place to take care of that? If you don't care for your children they will be taken away from you.
Maybe one way to fix it is daily direct deposit. That would keep the paper shufflers quite busy and cut back on scams and foolishness.
I would be moderately amused at an idea of modification of the IRS tax code WRT gifts and being able to delegate my income. I am doing really well financially right now, so just give my $10K to my mom as a tax free gift. If you don't make it tax free lets be realistic I'll just avoid tax codes anyway. $10K would mean a heck of a lot more to her than to me. I suspect when my kids enter college if the whole scam hasn't collapsed by then, they'd find my share plus my wife's share plus maybe auntie's share to be quite handy. Currently you could run into IRS issues WRT taxable income if many family members start gifting one college student.
(edited to add, I just thought of one problem with delegation: What boils down to extortion, and probably blackmail. You'll know everyone will be vulnerable.)
I think that would help make the idea compelling to libertarians. And it should address some of the concerns of a big causing less employment.
Freedom of choice allows consumers to select the services and packages which would most benefit them, and single payer healthcare does not allow this.
Customer feedback (through selection of providers of goods and services) is critical, as it allows bad firms to fail, and good ones to continue. The basic income does not interfere with this type of signal, but the single payer system completely destroys it.
The problem is that medical problems are financially bimodal: they tend to be pretty cheap (take some antibiotics) or incredibly expensive (you need dialysis or you have a brain tumour).
So unless you have some sort of useful insurance plan that covers people and minor dependents for less than what you're getting in basic income you'll end up with the problem of people who are unable to get serious medical conditions treated. And making medical treatments universally accessible is part of the point of most single-payer healthcare systems.
The vast majority of consumers are incapable of making those determinations. The few exceptional people that take the lead in their own diagnosis and treatment and become more informed than the medical professionals they interact with are dwarfed by the vastly greater number of people that just want to be told which pills to take at what intervals. There's a massive Dunning-Krueger effect when it comes to self-administration of healthcare. I've met a lot of people who proclaim themselves wiser than doctors but who, when pressed, are unable to properly articulate even the symptomology of their condition.
Customer feedback (through selection of providers of goods and services) is critical, as it allows bad firms to fail, and good ones to continue. The basic income does not interfere with this type of signal, but the single payer system completely destroys it.
Incompetent or unethical mdeical professionals often cling to their positions for years in the private sector, just like they sometimes do in the public sector. Likewise, the public sector is capable of firing or barring such from practice. If you ever live in a country with socialized healthcare for any length of time, then you'll also notice that hospitals and clinics get shut down for lack of efficiency, eg tiny rural hospitals left behind by demographic shifts.
Fully free markets depend on participants being fully informed about market product and services, and upon the ability to defer, invest, or divest whenever it is most economically advantageous to do so. Neither of these conditions obtain where healthcare is concerned. The first I have mentioned above; as for the second, you can manage your risk to some degree, but your ability to predict your medical care requirements is pretty poor - strokes, heart attacks,a nd other less common medical conditions often strike without warning and while they can be insured against (in similar fashion to a derivative) most people are no better at being actuaries than they are being doctors. Don't even get me started on people's inability to choose their own genetic makeup.
I think it's economically inefficient to expect people to develop the huge amount of expertise they need to be better predictors of their own healthcare needs than a doctor or insurer of median competence.
As it includes Medicaid spending as federal benefit spending (and likely PPACA subsidies -- but I haven't gotten that far in the footnotes) the $10k would seemingly amount to just covering every American household's private-market insurance premiums (with no regard to whether they needed them covered and further handing 'free money' to healthy young childless households whose premiums would be much lower).
And without being structured as Medicaid, it would abandon the other (cost-controlling/bureaucracy-reducing/waste-reducing) financial benefits of a single payer health system -- benefits over the private market that Medicaid actually delivers (according to numerous studies).
So the end result is that poor people would see their net benefits ruthlessly slashed, (good luck buying food and shelter after you use that 10k for market-rate insurance) all so that middle-class people can receive a stipend that they don't need and a decrease in federal-dollar-per-hypothetical-unit-of-healthcare efficiency.
The most-charitable read of this proposal, is that it's the result of a naive person doing "black box math" where they seek some mathematical ideal in the re-arrangement of government payments -- without any regard to the benefits being provided, the cost-effectiveness of those benefits and whether the rearrangement is a practical improvement.
I mean, if we're spending $20k per poor person, and children are still going hungry, under what logic would redistributing it as 10k to every single person see any sort of improvement in the ultimate goals of things like keeping children from going hungry?
To not see the massive benefit cut to these people that we've currently defined as needing help, we'd have to assume that for every dollar in tangible benefits received by the poor, there's a dollar in bureaucratic overhead.
And why on earth would we accept such an implicit assumption, when the ultimate source of all these numbers -- the CBO -- has regularly assessed such administrative costs and never finds such waste? [1]
[1] e.g. SNAP, pointed to regularly in the CATO document source, has administrative overhead of less than 4.5% of total federal cost. So if the average SNAP-receiving household is getting $287/mo, the overhead is $13/mo. Under this proposal, food money going to the currently-snap-receiving household would drop to $143/mo, with $15/mo going to 9 households that don't need SNAP. In the name of "saving" that $13/mo. Most of us would look at the infeasibility of a household feeding itself for $143/mo and see their own $15/mo as a more egregious waste than the original $13. Which, cynically speaking, is likely to be a feature. Following such a programs initiation, it would be trivial to get voters behind the proposal to cut their own taxes by $15/mo, to save them the overhead of having the government take the money only to give it back as a stipend they don't need. The end result would be the massive benefit cut and the reduced taxes.
http://www.fns.usda.gov/pd/supplemental-nutrition-assistance...
(EDIT: fleshed out SNAP example)
Personally, the most compelling reasons for Basic Income are getting rid of incentives not to work (since you don't lose any benefits when you get a job) and getting rid of "wrong" ways to be poor (two people with the same income and need can get vastly different benefits simply because of why they're poor).
However, I have zero quantitative analysis to back up the worth of those things, it's just what look good to me.
Sure, at some point, a program can become so complex that the desire to do a greenfield rewrite is very strong. But Second System Syndrome is a real thing. And people taking advantage of a rewrite to move goal-posts and shift focus for personal political/pet-goal reasons, to the detriment of the new system to achieve the existing goals, is a real thing.
I would very much like to refactor the every living hell out of government assistance programs. But I'm extremely wary of people who want to do a fundamental rewrite. Particularly when those people have no historical interest in the program's success. Doubly so, when those people demonstrate they have put no priority on representing, understanding or achieving the original system's goals.
I'd like it to go hand-in-hand with other sanity measures, like eliminating the gov't agency habit of foolishly spending their "leftover" money at the end of the fiscal year to avoid budget reductions the next year. It's a clear demonstration that the money isn't needed, and I'd rather see an ordinary citizen get to decide how that money is spent, because the gov't is just throwing it to well-heeled contractors who don't really need it.