A couple years ago, Megan McArdle summed up a debate she’d been a part of with a short post on the problems with a Basic Income Guarantee (BIG). Here, I’ll lay out responses to each of her four criticisms.
(NOTE: in the interest of space, I won’t quote her whole argument for each point, and instead I’ll pull what I think is representative or summary language from them. One useful response to this post would be to point out if I am misinterpreting her argument or responding to a straw version of it.)
First, I think this calculation is off. McArdle only considers spending on “income security”, but the programs that could be replaced with a BIG could be much broader. Social Security ($1.3 trillion), disability ($200 billion), agricultural subsidies ($20 billion), and likely many other large government programs could be eliminated or reduced and replaced by a BIG (that “or reduced” is important: any program whose justifications include the well-being of workers should be reduced commensurate to the degree that that justification supports the program; if the well-being of family farmers is part of the justification for agricultural subsidies, then agricultural subsidies will be less necessary if we have a BIG).
However, such calculations might not even be necessary: $3000 a year is not a trivial sum. Globally, $3,000 dollars a year is near the median individual income. Guaranteeing that every person in a country is above the median globally is an absurd achievement. Even in the US, for the median household it would be 6% raise, a not insignificant change. But perhaps the best way to look at it is this: every citizen would get enough money to eat a nutritious meal every day of the year.
Finally, to the point that it’s “less than what [a lot of poor people are] getting from the government right now”, it’s not a 1-to-1 comparison. McArdle treats $1 dollar of food stamps as $1 in value, but any first year econ student can tell you that their values aren’t equivalent. Giving people cash is more valuable than giving them vouchers or in-kind services, because cash can be used on whatever an individual values most. You can’t save up food stamps to start a business. You can’t buy stocks with services. You can’t invest in yourself to the same degree with vouchers and in-kind services. And you have to spend vouchers and in-kind services where you’re told, so that most of your spending goes right back out of poor communities. Cash lingers, and allows for trade and development within communities, which tends to break the cycle of poverty.
McArdle touches on the response to this when she considers “trust fund babies”, but I think she takes that point too literally. The better statement of the point is not “trust fund babies”, but “the average middle class American”, who has non-reciprocal benefits from their family and social network throughout their lives. A BIG just adds in the same safety net already provided to anyone who’s family makes median wage. Moreover, people who grow up in communities of people making median wage or better have plenty of non-reciprocated benefits: better schools, better services within closer distance, less crime, etc.
And while the focus of BIG is frequently on the individuals receiving the BIG, many of the benefits and justifications for it are in externalities. A wealth transfer from top to bottom is a net increase in the value of the currency, as people who might have bought a third car instead give money to someone who can then buy a first (and so contribute better to society). A BIG will decrease crime, it will stimulate the economies of the most depressed areas, it will bring into the economy through opportunity many people who would otherwise be excluded, increasing diversity and thus likely the speed of innovation and the richness of culture. Those are reciprocal benefits, not paid directly by BIG recipients, but nonetheless reaped by those funding it.
To immigration: first, I think the point is a dodge. It’s effectively arguing that McArdle isn’t convinced because not enough people are convinced, which is empty. As it stands, not enough people support a BIG to replace other government programs with it, that’s clear. What I take the goal of the argument to be at this stage is to convince the thought leaders, intellectuals, and influencers that it’s a good idea, so that they can convince the body politic.
And on immigration, a BIG has a lot going for it. First, recall again that we aren’t necessarily talking about “a thousand or two every month.” A $4000 BIG would be a significant improvement, could replace a lot of programs, and would be a much easier sell. Moreover, there are great security benefits to a BIG. Immigrants would have to make themselves known in order to be eligible for it, so it would encourage honest immigrants looking for a better life to come forward, increasing the presumption of guilt on anyone who remains undeclared.
Otherwise, the argument really boils down to ones stance on immigration. If you think that immigration is good for the country, good for the economy, or that immigration is a right, you will likely not have any problem allowing immigrants and come and participate fully in a society, however it is structured. If instead you see immigrants as a drain or as a threat to “natives”, you will likely oppose it regardless of how society is structured. Immigrants use the roads, no matter how much we spend to repair them. They are protected by police, no matter what those police are paid. If a BIG makes things better, there’s no reason to deny it to immigrants, and if immigrants add value, they will still add value through the use of their BIG to pursue their happiness.
In-kind services: With judicious elimination of in-kind programs, we can avoid many of these problems. First, many programs that support people who have made bad decisions in the past would be unnecessary: the BIG is not a one-off payment, it’s a continuing payments, and misspending last month’s check does not need to affect next month’s. Also, it should be noted that substance abuse is closely associated with economic hardship. Given a more fulfilling life, many who might otherwise waste away in a bottle would choose otherwise.
Other programs could be reduced without being eliminated. Some people with disability are merely subsidized, and such subsidies could be replaced by the BIG. Moreover, private services would develop to cater to people who might not otherwise be worth building a business around, because suddenly they have available resources to spend on what they value most.
And of course, some services would always remain. Services for those with severe disabilities; legal services; child welfare services. But criticizing BIG on the basis that it can’t replace every program is an absurd standard that no program can meet. If BIG can replace welfare and improve lives in the process, we should do it, even if it only means giving people $500 dollars a year and leaving every other program intact.
First, again, McArdle over-estimates the level of comfort that a properly calibrated BIG will provide. It is possible to live on $4000 a year, and some people live. But many more people will use that to supplement rather than replace their other income. And, they’ll use it to fill gaps in employment, so that they can transition to better and more fulfilling jobs, or to gain additional training to be able to contribute more and better.
In addition, an influx of money into economically depressed areas means more jobs available to those most likely to drop out otherwise. Shoveling steps and walkways door to door, babysitting, car washes, these are jobs frequently available in wealthier areas that are unavailable to those whose neighbors are all as poor and desperate as themselves. Or, consider a corner store in a poor neighborhood, surrounded by a populace that can’t afford to shop there. An influx of money into the area means more business, hiring someone to stock shelves or wash the floor. The commensurate reduction in crime means less spending on security, freeing up more capital to hire, to develop, to expand and innovate.
Of course, some people will check out. But few who do would have been long-term employed otherwise. The marginal person influenced to drop out by a modest BIG is a vanishingly small number, and to weigh that more heavily than the economic gains, especially in the area of work, is myopic.
To sum up, I’ve taken the easy route of criticizing someone else’s argument rather than make an argument of my own. But in doing so, I think I’ve provided several compelling arguments in favor of a BIG in some form and at some level.
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