Creeping conservatism: the guaranteed minimum income

Yes, Nixon, Hayek, and Milton Friedman were for it. Some version of it is still a good idea.

What’s supposedly progressive Dylan Matthews at the supposedly progressive Vox doing pushing an idea favored by Hayek, Milton Friedman, and Richard Nixon?

Of course, the devil is in the details. It matters a lot how minimal the income really is, how fast it phases out, and (crucially) how much of the rest of the income-maintenance and social-services structure it replaces. It’s an idea with the defects of its virtues: Insofar as it displaces direct services, it saves overhead expense and avoids subjecting recipients to bureaucratic meddling in their lives. That’s good or bad depending on how great the expense is, how much fraud results, and how much meddling turns out to be useful. It gives recipients maximum flexibility in how and when to spend their money, which is good or bad depending on the recipients’ capacities for foresight and self-command. At the level of political economy, the question is whether the superior performance of the system would give redistributive policies a political edge sufficient to compensate for the loss of support from provider interests.

For those – including progressives – who think the virtues obviously trump the defects, here’s the thought-experiment: Would you replace public education with unrestricted cash payments to families with school-aged children?

But if you think, as I do, that most of what’s wrong with poor people is that they don’t have enough money, and that many of what look from the outside like behavioral pathologies are actually the predictable consequences of scarcity and insecurity, and despair, as I do, of the prospects for changing the distribution of market incomes enough to manage rising inequality, then the guaranteed-income idea looks very, very attractive. The problem then is to get as large a base and as gentle a phase-down as possible, and – this is the hard part – to discern what specific services need to be delivered alongside the cash. Seems pretty clear to me that housing, home heating, and food mostly shouldn’t get specific subsidies or direct provision, while education and health care should. But there’s lots of crucial detail to be worked out: even with a relatively generous income guarantee, I suspect there would be a need for direct housing provision to people who otherwise would be homeless victims of severe mental illness or substance use disorder. (Day care is an interesting liminal case; so is disability insurance, which could be replaced by a cash income not conditional on disability – likely to lead to substantially improved health outcomes – plus direct services or subsidies to help people deal with the consequences of disability other than difficulty in earning a living.)

The other key progressive goal should be keeping the income-support system national, to protect the poor people of, e.g., Mississippi from the hostility of state governments doing the bidding of bigoted majorities and exploitative employers whose business model is based on employees with no alternative to poorly-paid work but starvation or theft. That would have the side-effect of reducing one perverse impact of the current system, which ties poor people to high-cost-of-living areas where the social safety net tends to be less frayed. A family barely scraping by in Section 8 housing in the Bronx could live rather comfortably in Arkansas if it could cash out the value of that housing subsidy as part of a national income guarantee.

I have no idea whether Matthews is right that a guaranteed income is poised to become a mainstream political issue. But it’s a nice possibility to think about.

Author: Mark Kleiman

Professor of Public Policy at the NYU Marron Institute for Urban Management and editor of the Journal of Drug Policy Analysis. Teaches about the methods of policy analysis about drug abuse control and crime control policy, working out the implications of two principles: that swift and certain sanctions don't have to be severe to be effective, and that well-designed threats usually don't have to be carried out. Books: Drugs and Drug Policy: What Everyone Needs to Know (with Jonathan Caulkins and Angela Hawken) When Brute Force Fails: How to Have Less Crime and Less Punishment (Princeton, 2009; named one of the "books of the year" by The Economist Against Excess: Drug Policy for Results (Basic, 1993) Marijuana: Costs of Abuse, Costs of Control (Greenwood, 1989) UCLA Homepage Curriculum Vitae Contact:

11 thoughts on “Creeping conservatism: the guaranteed minimum income”

  1. I have to admit-I'm getting a little tired of hearing the line "conservatives support the minimum income." Nixon and Friedman's support came from their belief it was the best worst option. It the early to mid 70s, there was a general belief the left was on the rise. Proposals to strengthen labor unions and add more regulatory agencies to the economy were part of the Democratic mainstream. It appeared there was little conservatives could do to stop the left wing trend, so they supported policies they felt would be the least intrusive to the economy and still keep them politically relevant. For example, while most liberals support Obamacare, most of them would gladly get rid of private exchanges in favor of single payer. Pragmatism does not equal whole hearted endorsement. Given the fact that the debate has shifted so far to the right, while we are (probably) moving in a left wing direction, we are hardly at the point where conservatives would feel the need to endorse UBI as a means of holding off a Democratic Party that is calling for an end to Right to Work and a much higher tax rate for the wealthy…

  2. I think it's important to distinguish between a "Basic Income" and a "Negative Income Tax", because the former is usually proposed as a pay-out to everyone in society regardless of income – think everybody getting $10,000 a year. Whereas a Negative Income Tax is really more like a more generous EITC with no restrictions aside from income, complete with phase-outs.

    I tend to prefer the former. It's more expensive, but it also has a broader political base (making it more politically stable) and it's easier to enforce than the income reporting requirements of an NIT.

    For those – including progressives – who think the virtues obviously trump the defects, here’s the thought-experiment: Would you replace public education with unrestricted cash payments to families with school-aged children?

    I think you could have a system where that worked, but the transition to it would be incredibly difficult. You'd have to start by switching the public schools over to a tuition-payment model (like public colleges) while also rolling out the cash payment system. And of course you'd face a mountain of opposition from people invested in the current public system, particularly teachers and the teachers union.

    More generally, I'd probably separate the single-payer health care system from the Basic Income, along with certain disability assistance programs and stuff like housing grants to local and state agency housing programs (such as the one my home state of Utah is running to help deal with long-term homelessness to good success).

    1. The reason for the difference in education and health care is that those are things that are not an ongoing necessity of life but that we insist that people get. The rationale for why we insist that people get them are different in each case but the implication are the same: either we need to provide them separate from the guaranteed income or we need a mechanism that forces people to buy them with their guaranteed income.

  3. Thanks for covering and discussing this issue – but your central point here is way off base:

    “For those – including progressives – who think the virtues obviously trump the defects, here’s the thought-experiment: Would you replace public education with unrestricted cash payments to families with school-aged children?”

    Compulsory public education is essential because children are… children! 99.9% of us need years of education as youth in order to assist with our maturation and become functional members of society.

    This “thought experiment” recapitulates a long and dishonorable history of middle-class and wealth thinkers and policymakers treating the poor as if they were children. People of all classes have social pathologies. If you feel the social need is greater to control the pathologies of the poor, then say so. Otherwise, your school analogy says nothing about the effectiveness of a national minimum income on reducing poverty (and the problems that go with it).

    1. The poor aren't children. But if you can't trust them to send their own children to school with the money (the point of the thought experiment), why would you trust them to do anything else beneficial with it

      The issue isn't that they are children – its that when given money, people often waste it. Poor, middle class, rich. But the rich and middle class can survive waste and the poor can't.

      So the question is I guess – would unrestricted spending, which will mostly be spent on consumer goods be such a boon to the economy that it would create jobs for the poor (which ultimately is the way out of poverty – right?)

  4. Unconditional or lightly conditional cash grants are getting a growing hearing in development circles. Middle-class Brazilian grumble about the Bolsa Familia as a vote-buying subsidy for large families among the poor, but outsiders find it works pretty well – especially on the conditions, like vaccination and sending children to school. Also charities like Give Directly claim good results for no-strings cash.

    1. My understanding is that programs similar to Bolsa have also worked in other Latin countries. However, those programs are fundamentally different than a guaranteed income because they provide money when people do something (keep their kids in school) versus when they do not do something (generate income).

  5. In the current culture of the US, I am deeply wary of the idea of cashing out benefits (like housing) that are crucial to health and safety. There is a huge industry in this country whose profits come entirely from preying on the poor and relatively unsophisticated, and cash benefits for things like housing would be a direct gift to that industry (much as the idea of cashing out currently government-administered pension contributions). Think payday lenders, or take a look at Pro Publica's recent piece on companies that fleece members of the armed forces for household goods.

    I think a good rule of thumb for this make-or-buy choice is whether, if the client ends up not getting the thing they were supposed to spend the money on, the government is going to have to supply it anyway. For education, housing, healthcare and to some extent food, the answer is yes.

  6. My suggested version an a rough cost estimate; I'm a proponent of a basic income (paid to everyone unconditionally).

    My suggested version:

    1) 15% of per capita GDP -about 30% of individual median income-$8000/year.
    2) Individual benefit, adult citizens only.
    3) Replaces other cash or cash-like benefits dollar-for-dollar (so if you get SSDI, your benefit stays the same).

    From the Social Security site, about 50 million people get SS benefits. Assuming each of them gets at least $8000/yr, this would cost less than 10% of GDP (I haven't looked at other cash-like benefits-I expect the final number to be around 8%.) A 10% VAT would certainly be enough to fund the incremental cost, as would a $20/ton carbon dioxide tax (which is only $0.02 kWh–substantially lower than the cost difference between coal and renewables.).

    This benefit amount gets a two-person household up to the poverty line, and is enough to live on in a low cost-of-living area, but not enough to be a large disincentive to work.

  7. Before I begin, I have a quibble regarding terminology. Guaranteed minimum income (the term used in the title) is generally understood to be different from basic income (what Dylan Matthews's article talks about). Guaranteed minimum income is generally understood to mean that, if you don't earn enough money, the state will top it off. Basic income is income that you get unconditionally, regardless of how much or how little you earn (a negative income tax can be mathematically equivalent). Your earnings are added to that basic income; they don't diminish it.

    Guaranteed minimum income is fairly well understood. It is implemented in one form or another in a number of countries, especially the European social democracies, where it typically comprises housing benefits, free or heavily subsidized health care, and a cash allowance for a person's or household's remaining needs, means-tested against one's income and provided on the condition of making yourself available for the labor market (unless one is too young, too old, disabled, etc., in which case it's only means-tested). The advantages (such as combating poverty) and disadvantages (such as market distortions [1] and a big and often inhumane welfare bureaucracy) are pretty well understood at this point.

    Basic income is a different story in that we have next to no experience with it in the developed world (outside of local experiments, such as the Canadian Mincome project and the examples in Dylan's articles). Also, when you remove basic subsistence from the list of incentives for employment, that creates a completely different set of incentives. For example, there may be more interest in part-time work (until your income is high enough to live comfortably); and "dirty" minimum wage jobs would likely command a higher salary because otherwise nobody would do them. Again, this is highly speculative because we don't have any real world experience with such a scheme.

    Progressives like basic income because it would reduce poverty; libertarians (and conservatives that lean that way) like it because it downsizes the welfare state. I think both overestimate the effect of how well it would do one or the other. A basic income cannot be too high, because otherwise you would do destroy all incentive to work, but it has to be high enough so that you can actually live off it, even if frugally. (This is a property that it shares with a guaranteed minimum income.)

    These constraints make some things difficult to include as part of a basic income. For example, practically every social democracy in Europe provides housing benefits separately, and based on local rents, rather than as a flat amount. Cost of housing can vary greatly by area; cities like London or Munich are much more expensive than the rest of their countries (see New York City or San Francisco for American examples, a.k.a. "the rent is too damn high"). If you provide only a fixed amount, then you force the poor into poor areas, leading to ghetto formation and gentrification. Housing costs can also vary by household type and size (single vs. couple, children vs. no children).

    Home heating is a related problem. The UK is a country that doesn't provide heating as a separate benefit. To an extent, that makes sense: Winters in the UK tend to be mild, with temperatures rarely falling below the freezing point. But sometimes winters are cold and then the poor have to make their choice: food or heating (and yes, I've seen that happen while we were living there)? Neither choice is good for your health.

    Obviously, you could adjust a basic income accordingly, but then you may actually make the bureaucracy bigger: If everybody is entitled to these benefits as part of a basic income, then you need to calculate them for everybody rather than only those who need them. Progressives might be fine with that, but you'd lose libertarians and conservatives.

    As mentioned, a basic income doesn't make much sense for either healthcare or education: the poor get priced out of the respective markets too easily.

    Day care is a different problem: It may or may not be doable without subsidies depending on whether children get a basic income, too, and how much they'd get. Not subsidizing day care but providing child benefits can create incentives for a parent to stay at home. This may be a good or bad thing in general (good for young children, bad for the GDP), but it's worth remembering that if you create incentives for a parent to stay at home, it will almost always be the mother (>90%), based on experience with Norway, Sweden, Finland, and Germany, which will almost certainly worsen the gender gap in the workplace.

  8. [continued]

    Concerning Keith's two questions in the other post about a guaranteed minimum income (not a basic income):

    For the first one, it'll probably not have much of an effect. We have some experience in countries with a guaranteed minimum income but not very stringent welfare-to-work requirements (i.e. ones that are easily evaded). In the end, when the minimum income isn't much about the subsistence level, even a $100 extra per month translates into a measurable quality of life improvement (assuming it's not a garbage job that you hate). Some people will be okay with living on a minimum income, but there's considerable doubt how much you get out of forcing them to work [3]. You can also increase the incentive for seeking work by creating additional transfers for low-income people.

    For the second one (inflation): Probably no effect at all. A minimum income would be set below the minimum wage or it becomes the minimum wage (which is why some countries with a guaranteed minimum income do not have a statutory minimum wage). Germany has had a guaranteed minimum income since forever and has one of the lowest levels of inflation anywhere.

    [1] For example, without an effective lower bound on wages (whether through a statutory minimum wage or strong unions), there is a risk of a race to the bottom, where businesses pay substandard wages and let the government pay the rest, essentially having the taxpayer subsidize questionable labor conditions and poor business practices. This is part of why Germany recently found it necessary to introduce a statutory minimum wage [2]: among other things, employers were circumventing collective bargaining agreements through labor leasing on a fairly large scale. This is something that Greg Mankiw doesn't seem to realize.
    [2] The Nordic countries don't have or need a statutory minimum wage largely because effective collective bargaining in combination with a guaranteed minimum income serves the same purpose. Until recently, the same held for Germany.
    [3] The actual cost of "living on the dole" permanently can be what it teaches children whose parents never go to work; but that's probably not worse than the effects of them living in persistent absolute poverty.

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