Instead of just relying on job-killing interest rate hikes, policymakers should directly address the problem of price gouging.
As proposals for universal basic income gain prominence, it’s worth asking if the benefits outweigh the costs to alleviate extreme poverty.
As much of the developed world struggles to address the growth of income inequality, there has been emerging consideration of a guaranteed basic income. There are a number of variations, but the basic idea is that government would eliminate the various forms of social welfare that are currently in place, and would instead send each citizen an annual amount sufficient to cover basic living expenses.
Most of us understand that without economic freedom, guarantees of personal, political and religious freedom aren’t worth much. If your day-to-day existence is consumed with the struggle for survival, the fact that you have freedom of speech is small comfort.
A practical argument for a guaranteed income is efficiency: There would no longer be a need for the massive bureaucratic apparatus currently required to administer social welfare programs, no need to determine eligibility under the various standards in place for different programs. (Many years ago, conservative economist Milton Friedman proposed something similar: a “negative income tax” that would require payment from those earning above a certain amount, and send remittances to those below that threshold.)
Social science scholars see other benefits. As automation steadily displaces what were once middle-class jobs, receipt of a stipend sufficient to cover basic living expenses would allow people to go back to school, or to train for alternative employment, or work part-time. It would give new mothers—or fathers—the option to take time off to care for newborns; it would similarly facilitate caretaking for gravely ill spouses or parents.[pullquote]We also might expect that with a lessening of abject poverty, a number of the social ills that accompany privation would improve.[/pullquote]
We also might expect that with a lessening of abject poverty, a number of the social ills that accompany privation would improve.
As beneficial as all that sounds, however, there are reasons why proposals for a guaranteed income have fared badly. In Switzerland last year, a basic income proposal on the ballot was overwhelmingly defeated; in 2013 ,the German Parliament debated a similar proposal and rejected it.
The first—and most obvious—negative is cost. Although economists argue about the actual net cost, after savings from eliminating our current expensive patchwork of social programs—such an approach would clearly require tax increases. In the United States, where taxes have become a dirty word even when they are earmarked to support basic services, this fact alone probably presents a politically insurmountable barrier.
Economists and others also question whether receipt of a guaranteed income, no matter how modest, would reduce the incentive to work. There is very little empirical data on that issue; however, there was an interesting experiment in Manitoba, Canada during the 1970s, called Mincome. It was intended to assess the social impact of a guaranteed annual income, including whether it would cause such disincentives, and if so, to what degree. Apparently, only new mothers and teenagers worked substantially less.
Mothers with newborns stopped working because they wanted to stay home longer with their babies, and teenagers worked less because they weren’t under as much pressure to support their families, which resulted in more teenagers graduating. But participants knew the project was not permanent, and it is impossible to know whether — and how — that knowledge affected the results.
There are a number of other legitimate concerns about so drastic a shift in the way we discharge our obligations to our fellow-citizens.
Given American cultural attitudes that valorize work and demean those who rely on assistance, it’s safe to say that the United States is unlikely to institute a guaranteed income program. This certainly won’t happen in my lifetime. But what is worth considering is what it should mean to be a member of a political community. What are the reciprocal obligations of the citizen and the state?
What do we owe the nation, and what do we owe each other?
Sheila Suess Kennedy teaches law and public policy in the School of Public and Environmental Affairs at Indiana University Purdue University at Indianapolis. Her scholarly publications include eight books and numerous law review and journal articles. Kennedy, a frequent lecturer, public speaker, and contributor to popular periodicals, also writes a column for the Indianapolis Business Journal. She blogs at www.sheilakennedy.net.