Free money for all — Not!

kw: book reviews, nonfiction, socialism, welfare

It was reported in passing in a National Geographic article that people in some Third World country were being paid an ordinary daily wage for working to clear the way for a road. The work was being funded privately, and the on-site managers decided to "do their bit" to improve the lot of the local people. They raised their daily pay by 35%. Four days later hardly anyone showed up to work. It took a lot of questioning to find out the reason: The workers had been very pleased and surprised to get about another third of a day's pay every day. At the end of three days, they had the money they used to earn in four days. Their daily needs had not changed, so they took the day off! The few who had showed up to work were mostly the local drunks who had used their extra cash to go an a roaring bender and needed the ready money.

This story came to mind the minute I saw the title of Basic Income: A Radical Proposal for a Free Society and a Sane Economy, by Philippe Van Parijs and Yannick Vanderborght. In a book of 247 pages plus an enormous number of notes (another 74 pages), they seek to convince a primarily American audience of the necessity for, efficacy of, and liberty to result from implementation of an unconditional national income, to be distributed by dividing around one quarter of a country's GDP amongst all the citizens and legal residents of this country. It would be paid for by eliminating nearly all social welfare programs, which it would replace.

Here's the nuts and bolts for Americans. U.S. GDP per capita in 2016 was about $52,200, so a quarter of that is $13,050 or a little under $1,100 monthly, to be paid to everyone from babies to billionaires. The total U.S. GDP was $18.7 Trillion that year. Non-"entitlement" social programs cost about $1 Trillion (both Federal and state spending); Social Security was slightly less, nearly $900 Billion; and Medicare spending is pushing $750 Billion. These total more than $2.6 Trillion, or 14% of GDP. On the face of it, if all three segments of the U.S. "social safety net" were replaced by a basic income program, the total cost would be $4.6 Trillion, and we'd need an increase in taxes sufficient to generate another 9% of the GDP.

The math gets a little trickier at this point, because the basic income would not be taxed. If that is all you received, you would pay no income taxes. But all earned income anyone received would need to be taxed at about 12% above whatever is needed to fund other programs such as the military, infrastructure projects, the running of government itself, and so forth. Some savings would be realized because of one huge fact: There would be no means test. That is, everyone would get a check for about $1,100 monthly, from the homeless woman sleeping under the bridge to Warren Buffet, tax free. Then, whoever earned "their own money" above that would pay taxes on it. Perhaps some progressive taxation method would be used, but to be clear, some kind of tax would be needed to gather the required $4.7 Trillion. But—here is the savings item—there would be no need to employ some large number of people to check if people are working, or are looking for work, and to run all the other intrusive mechanisms needed to run programs such as Unemployment Insurance or AFDC. I wonder how many officers they'll need to employ to make sure people don't keep getting checks after they die! The authors hardly mention the impact of fraud, nor how to make a person's basic income unstealable.

The authors do their best to tout the added freedom experienced by someone who has a guaranteed, if modest, stipend. Someone working a dead-end job could afford to find more congenial work, even if it pays less. Many other examples are described. But here is the question to ask yourself: Would you keep working if you could afford to "live the leisure life"? How many would prefer to spend their days fishing, surfing, hunting, beach combing, painting, sculpting, composing, and other pastimes that many wage earners dream of doing full time if they could? Would enough people desire to work, at jobs sufficiently well compensated, to support all the "preferentially unemployed"?

Were such a program initiated tomorrow, I suspect that people now in the early-to-middle years of a career, who are used to working and who have developed a kind of identification with their work, would tend to keep working because that is what they know how to do. What would their children do? The story in the first paragraph is my guess. It is not without reason that one passage in the Bible exhorts, "If anyone is unwilling to work, let him not eat." We are not as "good" as we'd like to think we are.

I don't remember the author, nor an exact quote, but I recall reading that once a large segment of the population figures out how to extract largesse from the public purse, the downfall of the republic is unavoidable. In the U.S.A., that point was probably reached during the Johnson administration with the "War on Poverty", and for 50 years the downhill slide has continued almost unabated. The authors of Basic Income have a European viewpoint, and are accustomed to a lot more Socialism than U.S. citizens in general. I think we ought to just sit back and wait for some country or group of nations actually implements a basic income program, then give it a generation and see in what form the collapse comes…but be sure, collapse is certain.