A Basic Income Should Be the Next Big Thing
Now and then a worthy economic proposal comes along that seems as politically unattainable as it is sensible. Then, on closer inspection, you see that it's more than a policy-wonk's fantasy. And you wonder whether it could actually prevail.
This may be happening with the concept of a universal basic income. The notion that government should guarantee every citizen an annual stipend of, say, $10,000 -- no strings attached, no questions asked -- is being studied by politicians, economists and policy experts worldwide.
Think of it as Social Security for all. In the social democracies of Europe, Canada and South America, experiments are planned or underway. In the U.S., it's still little more than a concept -- one that appears to have more conservative backers than liberal ones.
Bernie Sanders says he's "sympathetic" to the theory behind a universal basic income but stops well short of advocating it. Hillary Clinton seems even less enthusiastic. By contrast, conservative economists, politicians and think-tank scholars are not as hesitant. Marco Rubio, for example, proposed the beginnings of a basic income in his 2015 tax plan.
The rest of the world is taking the lead.
Switzerland will hold a June 5 referendum on whether to give every adult citizen 2,500 Swiss francs (about $2,600) a month. Ontario, Canada, will conduct an experiment with a basic income later this year. The city of Utrecht in the Netherlands is conducting a pilot program, and Finland is planning a two-year trial. A British proposal is gathering interest. In May, a nonprofit group will start giving 6,000 Kenyans a guaranteed income for at least a decade and follow the results.
Some progressives see it as the ultimate expression of what a developed economy can achieve: a way to lessen poverty and inequality, and ease the pain of job loss and economic stagnation. But in the U.S., many liberals see it as naive and a distraction from more practical priorities, such as a $15 minimum wage and paid family leave.
With no eligibility criteria or enforcement needed, administrative costs would be bare-bones. Waste, fraud and abuse would be greatly reduced, the argument goes, if not close to zero.
In the 1960s, a basic income was part of the mainstream political discussion. President Richard Nixon even proposed an income floor, based on ideas developed by Daniel Patrick Moynihan, then a domestic-policy adviser. The proposal died in part because of liberal opposition to a work requirement and obstruction by a well-organized welfare lobby, Moynihan would later write.
The earned-income tax credit, a form of basic income, took its place, but only to supplement the earnings of the working poor. The tax credit was first proposed in 1962 by conservative economist Milton Friedman. One of his aims was to end the "earnings cliff," in which government aid disappears once income exceeds a cap. Such a limit discourages recipients from working, a consequence that keeps them poor and dependent.
The tax credit is still around and widely considered an effective anti-poverty program, but the earnings-cliff issue has only gotten worse: The U.S. now has 80-plus low-income programs, each with its own eligibility rules and earnings caps.
The idea of a universal basic income is enjoying a renaissance today, not only in Washington think tanks but in Silicon Valley, as my Bloomberg View colleague, Justin Fox, has written. Y Combinator, a venture-capital firm, is launching a five-year research project, for example. The goal is to give a randomly selected group of people a monthly check to see if they sit around and play video games or create economic value.
Why does Silicon Valley care? It can see the role of technology in accelerating job losses in the U.S. Two Oxford University professors wrote recently that about 47 percent of U.S. jobs are at risk of being replaced by automation. If that happens, the economy would shrink, and fewer and fewer people would be able to buy the goods that Silicon Valley creates.
The fear that people with a guaranteed basic income would become slackers may be unfounded. One economist who studied trials conducted in the 1970s in Canada found the opposite: Recipients were healthier and finished high school at higher rates. Adults with full-time jobs worked the same number of hours with one exception: Women took off more time after having a baby, an utterly reasonable outcome.
Yes, the costs of guaranteeing 322 million Americans $10,000 a year would be prohibitive -- a whopping $3.2 trillion a year.
But by excluding 45 million retirees who already receive a basic income through Social Security, the cost falls to $2.7 trillion. And if the benefit is phased out for households earning more than $100,000 (that would be 20 percent of the U.S.'s 115 million households, or about 70 million people, assuming three to a household), the cost declines to about $2 trillion. You could confine the program to adults and shrink the price tag even more, possibly to as low as $1.5 trillion.
Now we're getting close to the $1 trillion cost of all those unemployment checks, tax credits, food stamps, housing vouchers and a myriad other means-tested benefits that a basic income could supplant.
Here is where liberals start to get queasy. They don't like that a basic income would replace the safety net, even when assured that some programs, including education, job training and entitlements like Medicare, would be maintained. They worry that the civil servants who now run programs would be laid off. And they fear that a basic income would, in the end, be less than what many people get when all the federal government's cash and social-service programs are combined.
Those are valid concerns. But as other countries test the idea and seek improvements in their social-welfare systems, will it make sense for the U.S. to maintain an expensive crazy-quilt of programs, many of which have not lifted people out of poverty and dependence? A Social-Security-for-all approach might not seem like such a fantasy after all.
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
To contact the author of this story:
Paula Dwyer at firstname.lastname@example.org
To contact the editor responsible for this story:
Katy Roberts at email@example.com