Let’s Try a Basic Income and Public Work

I agree wholeheartedly with Matt Zwolinski’s dim view of the current American social safety net. Its complex components are paternalistic, create powerful work disincentives, and are riddled with bureaucratic inefficiency. I also agree that his proposal to replace the entire edifice with a basic annual cash grant to every citizen would be an enormous improvement over the status quo.

But there are two deep flaws in his proposal. Most important, a basic income grant sufficient to lift urban families from poverty probably could not win political support initially, but even if it somehow did, fierce opposition to it would surely erupt quickly. The second flaw is that there is a much better way to reform the social safety net, one that would be both politically viable and deliver far more value per dollar. I’ll consider these points in turn.

The cornerstone of Zwolinski’s proposal would be a negative income tax along the lines proposed by Milton Friedman more than 60 years ago—basically, a cash grant that every man woman or child would get, irrespective of income or employment status. Friedman advocated a grant large enough to lift everyone above the poverty line, even those with no income from work or other sources. But a moment’s reflection reveals that a payment large enough to sustain an urban family of four at the official government poverty threshold (about $25,000 today) would quickly doom the program politically.

Imagine, for example, that a group of ten families formed a rural commune and supplemented their $250,000 in cash grants with the untaxed fruits of gardening and animal husbandry. If they located in Colorado or Washington, they could also grow marijuana, both for sale and for personal consumption. Their mornings would be free to drink coffee and engage in extended discussions of politics and the arts. They could hone their musical skills. They could read novels, write poetry, play nude volleyball.

Is it far-fetched to imagine that at least some groups would forsake paid employment in favor of leading lives like these at taxpayer expense? Once such groups formed, wouldn’t it be only a matter of time before journalists found them and created an eager audience for reports of their doings? And wouldn’t most voters react angrily once footage of the reveling commune members began running on the nightly news?

Of course they would, and who could blame them? An Indianapolis dentist with varicose veins rises at 6:00 each morning and drives through heavy traffic on a snow-covered freeway to spend the rest of his day treating patients with bad breath who take offense if they’re charged a fee for breaking an appointment without notice. How could such a person not be indignant at the sight of able-bodied people living it up on his tax dollars?

In short, it is a pipe dream to imagine that an income grant large enough to lift an urban family from poverty could win or sustain political support for long. Voters might support a cash grant if it were far too small to support comfortable living in groups. But the proposal would then fail by definition as an effective social safety net. 

A cash grant could still be an important component of the social safety net, but there would also have to some way to supplement it without undercutting the incentive to work. The most direct response to this concern would be to combine a cash grant that is far too small to lift an urban family from poverty with an open offer to pay sub-minimum wages to those willing to perform useful tasks in the public sphere. Such an offer would also address the strongest objection to the Earned Income Tax Credit, today’s leading income supplement program, which is that it is useless for those who cannot find employment.

Experiments have demonstrated the existence of many useful tasks that can be performed by unskilled workers with proper supervision. (Some examples: landscaping and maintenance in parks; transporting the elderly and handicapped; filling potholes in city streets; replacing burned out street lamps; transplanting seedlings in erosion control projects; removing graffiti from public places; painting government buildings; recycling newspapers and aluminum and glass containers; and staffing day care centers.) In combination, the basic income grant and the sub-minimum wage of the public sponsored job would be just enough to clear the poverty threshold. 

Libertarians might object that a public-sponsored jobs program would entail an undesirable expansion of government bureaucracy. But it wouldn’t be necessary for government to manage the program directly. That task could be bid out to the private sector.

Others might object that a program of low-wage public employment would be akin to forced servitude. Yet no one would be required to perform a public task. And to those who object that the public employment offer would not alleviate poverty for those who choose not to work, we could then say that poverty was truly a voluntary choice, not a condition created by the unavailability of jobs.

Still others might object that the offer of public jobs would lure people away from productive employment in the private sector. But pegging the wage for unskilled public employment significantly below the minimum wage would address this concern. Participants would have strong incentives to move into private employment or more skilled government employment as soon as they were able, and their experience in the public program would help them accomplish that transition.

Paying for the two-pronged solution I propose would require that libertarians rethink their oft-stated objection that taxation is theft. But that’s not an onerous requirement, since equating taxation and theft was not a compelling position in the first place. A country without the power to tax couldn’t field an army and would soon be overrun by a country that had one. Its residents would then have to pay taxes to that country.

For present purposes, the interesting questions are these: What activities should we undertake collectively and how should we raise the revenue to pay for them? People from all ends of the political spectrum agree that society should have an effective safety net. My claim is that even though the one I’ve proposed would not be cheap, it would get the job done at the lowest possible total cost.

Fortunately, there are many things we should be taxing, even if we didn’t need more revenue. We should be taxing vehicles by weight, for example, since those who buy heavier vehicles put others at greater risk of injury and death. We should be charging motorists for using roadways during congested hours, since usage at those times impedes others’ progress toward their destinations. And in light of the robust scientific consensus about the causes of climate change, we also should be taxing greenhouse gas emissions. Simply by taxing activities that do more harm than good, we could raise more than enough to pay for my proposal.

For the reasons that Matt Zwolinski has ably articulated, America now lacks an effective social safety net. His alternative would be an improvement, but there is virtually no chance that it could survive politically. The alternative I propose would be expensive, but much of its expense would be in exchange for valued tasks in the public sphere that the private sector has no incentive to attend to. And lest we forget: Our failure to maintain an adequate social safety net has also proved extremely costly.

Also from this issue

Lead Essay

  • Matt Zwolinski argues that a basic income guarantee (BIG) could very easily do better than our current welfare state by many different criteria. It would be far more efficient. It would be less subject to rent-seeking. It would be easily accessible by the poor, and its benefits would flow to them rather than to the middle class. Although there are many libertarian objections to a BIG, Zwolinski nonetheless argues that when faced with a choice between a BIG and the status quo, libertarians should be open to making the change.

Response Essays

  • Michael Huemer argues that while a basic income guarantee might be better than the status quo, this amounts to some rather faint praise. A basic income guarantee would necessarily violate some people’s rights, while a fully legitimate government must never violate anyone’s rights. The problem of political authority will likely remain a barrier to all similar proposals, even if we may happen to find this problem’s full implications troubling.

  • Jim Manzi doubts that a basic income guarantee would emerge from our political process while still bearing its purportedly beneficial features. Compromises would proliferate, as would paternalistic controls. The interests of the bureaucracy would assert themselves, and the temptation to make exceptions would prove overwhelming to the electorate. Moreover, when a basic income guarantee has been tried in practice, the result has consistently been a withdrawal of participants’ labor. Scaled to an entire society, the result of such a withdrawal may be dire.

  • Robert H. Frank agrees with Matt Zwolinski that a basic income guarantee would achieve the welfare state’s goals more effectively than our current patchwork of programs. But he argues that a basic income guarantee sufficient to end poverty would spawn massive taxpayer resentment. Incentives to work would be undermined both for recipients and for those whose tax dollars funded them. Frank recommends a combination program that would include a significantly smaller cash grant and a standing offer of public employment for any who desired it. Frank defends taxation against libertarian objections and offers several additional taxes that he believes should be implemented. He argues that these should help pay for the expensive programs here being considered.

Letters to the Editor

  • The Cato Institute’s Michael D. Tanner examines the Basic Income Guarantee and finds that its simplicity wouldn’t survive the political process. Difficulties abound, arising both from practical politics and from the realities of our current welfare expenditures. Tanner recommends consolidating our welfare system and simplifying it, but he does not endorse a Basic Income Guarantee.

  • Economist Ed Dolan shares some of his findings on the Basic Income Guarantee. He finds that work disincentives will indeed exist under a BIG, and yet these may be smaller than the work disincentives we already experience owing to the welfare state as it now exists. Libertarians should not be tempted by the so-called “gospel of work,” he says; libertarianism, rather, is about the gospel of freedom of choice.