April 13, 2017


How to ensure everyone a guaranteed basic income   (Steven Pearlstein March 24, 2017, Washington Post)

Guaranteed-income schemes can take various forms, but in its simplest the government sends every citizen an annual check in an amount sufficient to keep the wolf from the door when misfortune strikes but not large enough to satisfy anyone's idea of a good life. Paying for it would require raising taxes in some fashion that would have the effect of clawing some or all of the money back from most households while hitting up the wealthy for even more. [...]

With the growing affluence generated by the Industrial Revolution, however, came the gradual rise of the welfare state, a safety net woven from myriad programs offering cash and services to anyone who was poor, disabled or involuntarily unemployed. Enforcing such conditionality not only required a large and expensive bureaucracy, but created a perverse incentive for beneficiaries to remain poor and unemployed so as not to lose their benefits. It was the desire to free the poor from this "welfare trap" and eliminate the bureaucratic middlemen that revived interest in a universal guaranteed income in the 1960s and attracted support from across the ideological spectrum.

As free-market champion Friedrich Hayek saw it, guaranteeing everyone a subsistence income was the moral precondition for opposing broader socialist schemes to equalize incomes. For Milton Friedman, it was an opportunity to eliminate expensive layers of government bureaucracy. [...]

Although their goal is utopian, Van Parijs and Vanderborght aim to infuse it with economic and political realism.

They are strongest when framing the guaranteed income as an economic dividend to which all citizens are entitled. In any country, they argue, only a small portion of the income earned in any year is a result of individual work effort, ingenuity and risk-taking. The rest is explained by the natural resources with which that country is endowed, the physical infrastructure, the collective know-how of fellow citizens, the quality of public and private institutions, and the degree of trust that greases the wheels of commerce, politics and everyday life. This "social capital," as the economist Herbert Simon once called it, was developed by many people over many generations and provides a collective inheritance that is now unequally and unfairly apportioned by markets in setting wages and salaries.

"What a basic income does is ensure that everyone receives a fair share of what none of us today did anything for," Van Parijs and Vanderborght write.

Giving some a fairer share, of course, means taking a share away from others, and these Belgian academics certainly don't shy away from the redistributionist nature of their project. In their ideal setup, every adult would get the equivalent of an annual unconditional allowance from the government equal to one-quarter of the country's average personal income (in the United States, that would be about $12,000). Exactly who would win and lose, and by how much, would be depend on the structure of the tax regime used to finance it.

While this give-with-one-hand, take-away-with-the-other quality strikes some as inefficient, it is that structure that allows guaranteed-income plans to avoid the "welfare trap" caused by today's "conditional" welfare programs. But it also makes them a tough sell politically. The sums involved would be enormous. And the ripple effects -- on wages, labor participation and the fate of other social benefits -- make it difficult for many people to imagine how it would all turn out.

The claw back comes in the form of consumption taxes.
Posted by at April 13, 2017 6:49 AM