|de Rugy, Veronique|
The pros and cons of a welfare idea championed by liberals and libertarians alike
Surprisingly to some, they were joined by many libertarians. The list of intellectuals who have made cases for a guaranteed minimum income over the years includes such laissezfaire luminaries as
Friedman favored a negative income tax (nit), in which taxpayers who earn less than the established minimum taxable income level would receive a subsidy equal to some fraction of that difference. (A watered-down version of this became the Earned Income Tax Credit.) Hayek defended a minimum income floor, in which the government provides a conditional income to each adult. Murray's 2006 book In Our Hands argued for an unconditional
Their proposals aim to fully replace the current welfare state with a less-bad alternative. In a world where government already redistributes income, with all of the inefficiency that comes with overlapping bureaucracies, the idea of direct cash payments has an intuitive appeal because of its comparative simplicity and fairness.
Any alternative might seem preferable to the welfare system we currently have. Federal welfare in the U.S. today consists of a highly complex maze of 126 separate anti-poverty programs, many of which are redundant. (There are, for instance, seven different housing programs.) While the system benefits the many government employees who manage these duplicative programs, it is neither easy for poor Americans to navigate nor is it an effective way to deliver anti-poverty services.
Welfare programs are demeaning by design, because they dictate to poor people what they must spend on food, housing, or health care, rather than letting them make those trade-offs themselves. The government even dictates what food poor people may or may not buy with food stamps. The libertarian interest in a guaranteed income scheme proceeds not simply-or even mostly-from the desire to make government smaller and more cost-efficient. It stems from a belief that all individuals have the capacity to promote their own interests, and in fact are better able to make decisions about their lives than anyone else.
However, the abstract idea loses some of its appeal when one starts looking at its realistic cost. The details vary from one version to another, but even in the best of possible worlds, none are likely to save much money, if any. Consider a plan to provide a
Another possibility would be to limit transfers to the estimated 106 million individuals who currently qualify for welfare programs by earning less than 200 percent of the federal poverty level (i.e.,
Even if we assume that all other anti-poverty programs will disappear (which is assuming a lot), it's conceivable that taxpayers would not save money compared to the status quo. Don't forget, they would still be on the hook for the military, for corporate welfare, and-if middle-class entitlements stay in place-for part of
A cash transfer program to adults at the poverty line level (
The appeal of a guaranteed income also diminishes when judged against its ability to move people away from government dependency. There is some evidence that a guaranteed minimum scheme would undermine incentives to seek employment. Four landmark experiments in the 1960s and '70s examined the Negative Income Tax's impact on labor supply. The recipients of NIT grants tended to work fewer hours compared to control groups that did not receive the grants.
Making the NIT more progressive in order to placate these disincentives to work, as
But my main objection to a guaranteed minimum income is rooted in the wisdom of public choice: The poor structure of government incentives ensures that good intentions and elegant theories rarely equal expected results in public policy. The biggest risk in implementing a guaranteed income is that it won't completely-or even partly-replace existing welfare programs, but instead simply add a new layer of spending on top of the old. Friedman learned this the hard way: After years of promoting the NIT, he wound up opposing
So what are libertarians to support? If nothing else, more research: We could use a new series of voluntary, dispersed trials aimed at finding ways to avoid work disincentives while delivering payouts more efficiently and tying the hands of special interests and politicians.
But more importantly, as economists
Contributing Editor Véronique
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