August 2014

One common libertarian complaint about the welfare state as we know it is that it’s inefficient. If we want to help the poor, we can do much better by simplifying. Eliminate the dozens and dozens of means-tested programs that make up the American welfare state, and replace them all with a simple cash payment, with no strings attached — a basic income guarantee.

The benefits of such an approach would be numerous, and they can be inferred by observing what we have right now: As economists frequently point out, in-kind transfers like housing assistance and food stamps deliver less value than cash. They are also paternalistic. Means-testing can create perverse incentives and lock people into poverty rather than allowing them to integrate into the larger economy. Along the way, the federal government incurs substantial administrative costs. Welfare fraud is likewise a constant concern.

These problems were weighty enough that the great libertarian economist Milton Friedman came to endorse a version of the basic income. Yet at least two potential objections remain: First, a basic income may sap Americans’ work ethic, even if it doesn’t trap them in poverty. And second, libertarians will likely still view such a system as coercive, because it transfers money from those who have earned it to those who have done nothing.

This month we debate the ethics and public policy of the basic income. It is all but certain to be a divisive topic, but then again, Cato Unbound is a place for exactly these sorts of debates. Our lead essayist this month is UC San Diego professor and bleeding heart libertarian Matt Zwolinski. Responding to him will be Professor Michael Huemer of the University of Colorado at Boulder, the Manhattan Institute’s Jim Manzi, and Cornell University’s Robert H. Frank

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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.

Coming Up

Conversation to follow through the end of the month.

Related at Cato

Podcast: “Libertarians for a Guaranteed Minimum Income?” with Matt Zwolinski, December 5, 2013