Basic Income Guarantee: A disastrous policy that’s gaining traction worldwide

As soon as you turn 18 years of age, you will be given a basic income for the rest of your life just for breathing. That’s the premise behind the latest push to install a basic income guarantee.

In the last couple of years, policymakers, anti-poverty activists and socialists have been putting forward a concept of a basic income guarantee that would, in theory, replace all other forms of welfare (except it doesn’t). It would supposedly get rid of the bureaucratic mess in the welfare state and, supposedly, save the government money in the end. We should all be cautious.

Proponents of the program say it’s necessary because of worsening income inequality. One of the latest arguments, too, consists of the rise of the machine. They say that since robots are taking work away from human beings that a basic income guarantee has become essential to the survival of human beings. No matter a person’s working status they would be given around $10,000 to $20,000 per year for nothing. It’s a slippery slope we’re heading towards.

Jurisdictions Looking Into Basic Income Guarantee

Two jurisdictions made headline news this week regarding the minimum income guarantee: the province of Ontario and the country of New Zealand. The former is planning to run a series of pilot projects and the latter is debating the pros and cons of implementing such a system.

Ostensibly, Ontario Premier Kathleen Wynne slipped the initiative into a paragraph deep into the budget. When it was discovered by the media, Finance Minister Charles Sousa explained that the province has to look at ways to alleviating poverty. He noted that something should begin to happen in autumn. What should be made clear is that many benefits, like “free” dental plans, provided by the government would not be eliminated. Basic income would simply complement the status quo. So how exactly will it save the deeply indebted Ontario government any money at all?

Meanwhile, New Zealand’s Labor Party leader, Andrew Little, confirmed that the merits of the measure will be discussed at the Future of Work conference later this month.

“The question is whether you have an income support system that means every time you stop work you have to go through the palaver of stand-down periods, more bureaucracy, more form filling at the same time as you’re trying to get into your next job,” he told Stuff.

A handful of other nations have already gotten the wheels in motion.

It was reported late last year that Finland is likely to eliminate its welfare state and replace it with a basic income of $10,000 per year for its entire population; the rich and the poor. The monthly benefit would be about $900 per month, and would come with a total price-tag of $54 billion.

Over in the Netherlands, the government is working on testing out the project in various cities across the country. The monthly checks would come to a total of $1,000.

Switzerland debated the idea of giving every single citizen a guaranteed monthly income of $2,800 (SEE: Should U.S. adults be given a basic income just for being alive?). It failed.

Widespread Support From All Stripes

Despite the insanity of such a project, the initiative has gotten a lot of people on board, both conservatives and liberals alike. Support for it from the right stems from the fact that if it simplifies the social security system and saves taxpayers money then why shouldn’t the government go ahead with it? The left says it’ll help the impecunious in our society.

Matt Zwolinski of Bleeding Heart Libertarians published an op-ed on Libertarianism.org in favor of a basic income guarantee, citing simplification, reparations for past injustices (huh?) and a basic solution for the poor.

Veronique de Rugy, a senior research fellow at the Mercatus Center at George Mason University, published an article in early 2014 entitled “Time for a Guaranteed Income?” The opinion piece outlined the pros and cons of the policy.

Going even further back, world-renowned economists Milton Friedman and Friedrich Hayek have espoused the benefits of similar programs. Friedman often discussed the idea of a negative income tax, while Hayek was in favor of a minimum income floor.

The likes of Martin Luther King, Richard Nixon and George McGovern have been just some of the famous public figures who have been in support of the basic income guarantee of the last several decades.

But can the basic income guarantee come with nothing but sunshine and lollipops. Not likely.

Reasons Why the Basic Income Guarantee Will Fail

First, we have to look at the cost of the program. Perhaps if there was talk of replacing the entire welfare state with the basic income then there would be some validity to the discussion. But all preliminary reports suggest that it isn’t happening. Let’s say the United States adopts a basic income guarantee and all 300 million citizens were given $1,000 per month. That would cost $3 trillion a year, which is more than the $1 trillion a year in entitlement spending already. $3 trillion plus the current welfare spending would be astronomical.

Second, it removes the incentive to work harder or work at all. For instance, let’s say the government imposes a threshold on the basic income guarantee to ensure fairness. That threshold is $50,000. Someone would work very hard to avoid crossing that $50,000 mark, which then hurts overall productivity. Eventually, someone won’t want to work at all, except maybe a part-time job that comes with fewer than 10 hours a week.

Third, what would happen to immigration? Are governments going to give thousands of immigrants who are going to become citizens a monthly check, too? If that’s the case then you’re going to see a huge influx of people trying to become citizens. The immigration file would be too intricate if the basic income guarantee is ever full adopted.

Fourth, a government like the U.S. can’t afford such a venture. With $19 trillion in debt, $120 trillion in unfunded liabilities and expenditures and a welfare state with a lot of union interests, the U.S. couldn’t and wouldn’t present a basic income guarantee.

Fifth, in the U.S., where is the constitutional right for a minimum income guarantee?

Finally, it doesn’t solve the underlying issue at hand: poverty. If nothing else, the basic income guarantee will simply expand it. It will discourage people from breaking their shackles to the government. Welfare checks already have an effect on someone’s desire for employment. The best way to reduce poverty (poverty can never be ended) is sound money, an end to the minimum wage, an employable skill in demand and the stoppage of price inflation.

There are just so many other questions at play here.

What happens if the basic income is guaranteed to children? Will people just have kids for the sake of getting checks? How will money be introduced to the economy? What about market prices? Since getting rid of the welfare state won’t pay for the costs of basic income, how much will taxes rise? Who will have to pay for it? What about unattractive jobs that are needed? Will they go largely unfilled? Won’t the basic income guarantee distort the market?

Final Thoughts

Ash Navabi of the Mises Institute eloquently wrote in 2013 in response to Zwolinski:

“Why should the federal government be taking money by force from anyone, for any reason at all? There are many economic costs associated whenever the government purloins the public, of course; but there are also moral issues involved with theft. Just because a BIG may be less paternalistic and condescending to the poor than the current welfare paradigm, as Zwolinski suggests, does not mean that it just and ethical to do in the first place. Zwolinski provides no defense of why the state has either the right or the obligation to take from some to give to others.”

No matter what other benefit or consequence, policy or response is espoused, the one thing is clear: the government has no right to confiscate the wealth of the people to redistribute to others. This is the one primary premise in an argument against the basic income guarantee.

The basic income guarantee will come with a wave of unintended consequences. It will enhance nanny statism, the cradle-to-grave mentality embraced by all politicians. Dependency on government won’t be eliminated, but only increased by the state itself.

Government officials say a basic income guarantee will simplify social security, cut down on welfare costs and improve the welfare of the poor. Let’s be honest: when has the government ever been right in its assessment? When has it ever accomplished its chief objective?

The basic income guarantee is as foolish as a $1 trillion coin to solve the debt ceiling crisis, raising the minimum wage to $15 per hour (sometimes $20 per hour depending on whom you’re speaking to) and passing legislation to ask workers to voluntarily pay more taxes.

AM

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Comments

  1. Money is a way of measuring wealth but is not wealth in itself. A chest of gold coins or a fat wallet of bills is of no use whatsoever to a wrecked sailor alone on a raft. He needs real wealth, in the form of a fishing rod, a compass, an outboard motor with gas, and a female companion. But this ingrained and archaic confusion of money with wealth is now the main reason we are not going ahead full tilt with the development of our technological genius for the production of more than adequate food, clothing, housing, and utilities for every person on earth. It is not going to be at all easy to explain this to the world at large, because mankind has existed for perhaps one million years with relative material scarcity, and it is now roughly a mere one hundred years since the beginning of the industrial revolution. As it was once very difficult to persuade people that the earth is round and that it is in orbit around the sun, or to make it clear that the universe exists in a curved space-time continuum, it may be just as hard to get it through to “common sense” that the virtues of making and saving money are obsolete. It is an oversimplification to say that this is the result of business valuing profit rather than product, for no one should be expected to do business without the incentive of profit. The actual trouble is that profit is identified entirely with money, as distinct from the real profit of living with dignity and elegance in beautiful surroundings. To try to correct this irresponsibility by passing laws would be wide of the point, for most of the law has as little relation to life as money to wealth. On the contrary, problems of this kind are aggravated rather than solved by the paperwork of politics and law. What is necessary is at once simpler and more difficult: only that financiers, bankers, and stockholders must turn themselves into real people and ask themselves exactly what they want out of life — in the realization that this strictly practical and hard–nosed question might lead to far more delightful styles of living than those they now pursue. Quite simply and literally, they must come to their senses — for their own personal profit and pleasure.

  2. DTWB/BTWBS.

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