A surprising constellation of voices are starting to coalesce around a truly BIG idea: replacing our patchwork social safety net with a Basic Income Guarantee. (More)
Basic Income Guarantee, Part I: A BIG Idea Finds a Growing Consensus
This week Morning Feature explores the Basic Income Guarantee. Today we see a growing consensus for this BIG idea, in both the U.S. and Europe, and evidence that trial programs have worked in Canada and Namibia. Tomorrow we’ll address criticisms that a Basic Income Guarantee would cost too much and, more importantly, discourage work and diminish productivity. Saturday we’ll conclude with how progressives should reach out to conservatives and libertarians to build support for BIG change.
“Not ‘just another welfare program'”
A Basic Income Guarantee is a BIG idea in more than the acronymic sense. It would not only eliminate poverty, but restructure our society in surprising ways. Yet the idea itself is simple, as Rich Smith explained in October at Daily Finance:
First, everyone gets $11,500, tax-free – from the unemployed kid just out of high school to the multibillionaire Jeff Bezos tinkering on his rocketship out in the desert between boardroom meetings at Amazon.com.
Second, anyone who needs more than $11,500 is welcome to get a job and work for it. Everyone pays a flat 35 percent income tax on their wages, so that, for example:
- If you have no job, you can just scrape by on $11,500 a year.
- If you earn $50,000 a year, you end up with (65% x $50,000 = $32,500) + $11,500 = $44,000. (The mathematically inclined will notice that that’s an effective 12 percent tax rate for the average American earner.)
- And Mr. Bezos, who took home a $1.68 million paycheck last year, gets to keep $1,092,000 of that, plus his BIG payment of $11,500 – so $1.1 million and change.
Third – there is no third. While the system could be tweaked by cutting spending here, adding national health insurance or free education there, or raising the taxes somewhere else, the basic idea of BIG is elegant in its simplicity.
Smith emphasizes that BIG is not “just another welfare program.” In fact, the idea as proposed by Allan Sheahen in Basic Income Guarantee: Your Right to Economic Security is to replace our existing social safety net programs – Social Security, SNAP, TANF, housing subsidies, etc. – with a no-strings-attached payment to every adult, every month.
“Why not just give them cash?”
The simplicity of BIG has attracted a surprising consensus, as Bruce Bartlett wrote on Tuesday in the New York Times:
The recent debate was kicked off in an April 30, 2012 post, by Jessica M. Flanigan of the University of Richmond, who said all libertarians should support a universal basic income on the grounds of social justice. Professor Flanigan, a self-described anarchist, opposes a system of property rights “that causes innocent people to starve.”
She cited a paper by the philosopher Matt Zwolinski of the University of San Diego in the December 2011 issue of the journal Basic Income Studies, which also contained other papers by libertarians supporting the basic income concept. While acknowledging that most libertarians would reject explicit redistribution of income, he pointed to several libertarians, including the economists F.A. Hayek and Milton Friedman, who favored the idea of a basic universal income.
In 2006, the conservative scholar Charles Murray published “In Our Hands: A Plan to Replace the Welfare State,” which advocated a universal grant of $10,000 per year in lieu of the existing welfare system, including Social Security and Medicare.
Most recently, Matthew Feeney of Reason, the libertarian magazine, wrote favorably about the Swiss proposal in a Nov. 26 post. As a complete replacement for the existing welfare system, he thought it had merit and might even save money. He was especially critical of the paternalism of the current welfare system and the denial of autonomy to those living in poverty.
“Instead of treating those who, often through no fault of their own, have fallen on hard times, like children who are incapable of making the right choices about the food they eat or the drugs they may or may not choose to take, why not just give them cash?” Mr. Feeney asked.
That sounds astonishingly … progressive. And it is.
“Plans with excellent coverage”
Indeed the American Enterprise Institute’s Charles Murray would also replace Medicare, Medicaid, and indeed the Affordable Care Act with BIG:
[BIG] requires that every recipient of the grant, beginning at age twenty-one, spends $3000 of the $10,000 grant on a health care insurance package that includes coverage for high-cost single events such as surgery and for catastrophic long-term illnesses or disability. [BIG] also requires that insurance companies treat the entire population as a single risk pool. Given that environment, health insurance companies can offer plans with excellent coverage for somewhere around $3000. They can be so inexpensive for the same reason that life insurance companies can sell generous life insurance cheaply if people buy it when they are young.
Murray explains that he is not wedded to those specific amounts, and other BIG plans propose different incomes. I would also retain the ACA’s guarantee of full coverage of preventive care – including contraception – as such this will reduce long-term health care costs. And I would index the BIG income to inflation, so it continues to function as intended as our economy grows.
“BIG ignited hope”
This year the Swiss will vote on a BIG of 2500 Swiss francs (about $2800) per month for every adult. A citizens initiative for BIG is also underway throughout Europe. If passed, it won’t be the first such experiment. Canada sponsored a pilot project in Dauphin, Manitoba back in the 1970s, and a recent review of that research found substantial increases in the residents’ health, with fewer hospitalizations, lower incidence of depression and other mental illnesses, higher birth rates, and higher school graduation levels.
The African nation of Namibia also ran a pilot BIG project, and their results were remarkable:
Before the introduction of the BIG, Otjivero-Omitara was characterised by unemployment, hunger and poverty. Most residents had settled there because they had nowhere else to go, their lives were shaped by deprivation and they had little hope for the future.
The introduction of the BIG ignited hope and the community responded by establishing its own 18-member committee to mobilise the community and to advise residents on how to spend the BIG money wisely. This suggests that the introduction of a BIG can effectively assist with community mobilisation and empowerment.
The BIG resulted in a huge reduction of child malnutrition. Using a WHO measurement technique, the data shows that children’s weight-for-age has improved significantly in just six months from 42% of underweight children in November 2007 to 17% in June 2008 and 10% in November 2008.
Since the introduction of the BIG, household poverty has dropped significantly. Using the food poverty line, 76% of residents fell below this line in November 2007. This was reduced to 37% within one year of the BIG. Amongst households that were not affected by in-migration, the rate dropped to 16%. This shows that a national BIG would have a dramatic impact on poverty levels in Namibia.
The introduction of the BIG has led to an increase in economic activity. The rate of those engaged in income-generating activities (above the age of 15) increased from 44% to 55%. Thus the BIG enabled recipients to increase their work both for pay, profit or family gain as well as self-employment. The grant enabled recipients to increase their productive income earned, particularly through starting their own small business, including brick-making, baking of bread and dress-making. The BIG contributed to the creation of a local market by increasing households’ buying power. This finding contradicts critics’ claims that the BIG would lead to laziness and dependency.
“Make work somehow appealing enough”
And as Slate’s Matthew Yglesias wrote in February, BIG would change our expectations of work:
[BIG] helps people by giving them money, obviously. It also serves as a kind of de facto minimum wage, since if people can earn money doing nothing, in practice you’re going to need to offer them higher pay to get them to work. But it’s much more flexible than a minimum wage. In a BIG world, an employer has to make work somehow appealing enough to get employees even though everyone’s guaranteed a basic minimum whether they work or not. But that “appealing” factor could be high wages, could be valuable skills and training, could just be a pleasant work atmosphere, or could be some combination of the three. Current minimum wage policies sort of try to achieve these goals by having exemptions for educationally rewarding internships or vocational programs. But these exemptions manage to be simultaneously too prone to abuse and too inflexible to capture the full range of possible scenarios that arise in human life.
Autocratic bosses would find it difficult to hire employees who could knew they could survive without a job. BIG would also supplant the minimum wage, allowing U.S. employers and budding entrepreneurs to be more cost-competitive. BIG might also change the relative value of some career fields. An employer might have to pay janitors more, because no one would have to mop floors and scrub toilets just to avoid starving. That higher pay would encourage a long overdue respect for their work. And BIG would solve the problem of unpaid internships for college graduates, so those opportunities are not limited to children of privilege.
The Basic Income Guarantee is a truly BIG idea … and tomorrow we’ll see that it has some big critics.