Economist Veronique de Rugy On Switzerland's Possible Guaranteed Income
Switzerland is about to hold a nationwide referendum on granting a guaranteed, unconditional minimum monthly income of $2,800 to every Swiss adult.
I previously blogged a video of de Rugy discussing this. Here's her reason article on the subject, laying out the pros and cons, and noting that there are and have been a number of libertarians in favor of a guaranteed income -- including "such laissez-faire luminaries as Milton Friedman, Friedrich Hayek, and Charles Murray":
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 $10,000 annual cash payment to all adult Americans, coupled with a repeal of all other welfare transfer programs.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.
According to Cato Institute analyst Michael Tanner, the federal government spends close to $1 trillion each year at the federal, state, and local levels on anti-poverty programs-everything from Medicaid to job training to food stamps. After adding in the bureaucracy that attends to applying for food stamps, rent subsidies, and everything else, it isn't hard to imagine how moving to a cash transfer system would make the entire process far less time-consuming and humiliating for the poor. In addition, getting rid of the bureaucrats who administer these programs would save between 10 and 15 cents on every welfare dollar, a significant amount.
But she also notes that the idea may be problematic in reality:
Pointing to a series of 30 welfare experiments conducted in the 1990s, National Review's Jim Manzi argued in 2011 that of all the policy options tested, only welfare policies that included work requirements pushed people off welfare and back to self-sufficiency. Manzi concluded that taxpayers' moral aversion to subsidizing sloth will ultimately undermine any move to a guaranteed income or negative income tax scheme that lacks work requirements. People, he demurs, seem to prefer the paternalism.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 Richard Nixon's NIT-inspired Family Assistance Plan precisely because it would not displace the preexisting welfare state.
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.
UPDATE: De Rugy at NRO on how the government wastes $100 billion a year -- yes, that's billion -- in improper welfare payments.
Anything can be put on the ballot in Switzerland, you just need to collect signatures.
This won't pass. At least I hope not. I'd hate to see the inflation that would happen by giving people cash. Not to mention I don't believe that the bureaucracy would go away. I'm thinking I'd be paying higher taxes to maintain the offices AND give money to people.
NicoleK at February 19, 2014 7:40 AM
1. It would have to be coupled with a full repeal of the welfare state. No chance.
2. You can't fix stupid. About five minutes after this went into effect, the press would be running sob stories about how someone can't feed their kids because they spent all of their money on scratch tickets.
3. You can't fix the bleeding-heart liberal rhetoric and their media enablers. When the first story comes out about someone running out of cash, it'll be framed as "Are you heartless Republicans going to STARVE CHILDREN?" So even if we've successfully repealed the welfare state, there will immediately be calls to put it back in place gradually.
Show me a Constitutional Amendment that outlaws all other welfare programs and transfer payments, and I'd consider thinking about considering it.
Short of that, and it's just an interesting theory.
AB at February 19, 2014 8:34 AM
As NicoleK says: you can put anything on the ballot here in Switzerland. This will go down in flames. Subsidize sloth and you will get more of it, and the Swiss (especially the German speaking majority) are serious believers in hard work.
bradley13 at February 19, 2014 9:08 AM
"Manzi concluded that taxpayers' moral aversion to subsidizing sloth will ultimately undermine any move to a guaranteed income or negative income tax scheme that lacks work requirements. People, he demurs, seem to prefer the paternalism."
More extreme nonsense.
It is not "moral aversion", idiot – it is the plain fact that such a scheme rewards people for not working at all.
THAT is the primary failure of modern American welfare programs, followed closely by the principle that "more people on the program" equals "success", and making more of it won't solve the problem.
Radwaste at February 19, 2014 9:15 AM
"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..."
Forget about the poor for a minute, and think about the legions of people who earn a lot more than the guaranteed minimum income administering this bloated welfare state. Does Ms de Rugy think they will all go gentle into that good night?
Martin at February 19, 2014 9:28 AM
"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."
Yes, this exactly, it would just become another program wasting tax dollars.
Charles at February 19, 2014 9:40 AM
The problem with this is they are trying to guarantee the equality of the outcome not equality of the opportunity.
So I decide that I don't want to live in a subsistence state and go find a job. I buy a house, car, all the conveniences. Then the masses say "He has a car and we have to use the bus. That's just wrong." So then the government mandates everyone has to have a car. And so on and so forth. But who is going to pay for it all?
The credit card with China is pretty much maxed out. Quantitative Easing is just printing paper. At some point the dollar bill in your pocket is going to buy a single bubble gum on the counter at the convenience store.
Jim P. at February 19, 2014 9:42 AM
Let's play the economists' game and assume you could replace the entire welfare state with a guaranteed payment.
The cost would be a fraction of what we spend now. Assume 50 million Americans qualify for this (i.e., that's the number currently in poverty). That's 50 million x $10,000, or $500 billion.
We spend $2 trillion on social security/medicare/medicaid/welfare, etc. So we'd be cutting entitlement spending by 75%. (And this is $10k for everyone, not just adults.)
There'd be more marriage (or at least more cohabitation); more price-consciousness from a larger section of the population (they'd be forced to budget their money better); the price-consciousness would lead to lower prices for everyone on just about everything; there would be much more money churning around in the economy, both on the supply side and the demand side.
There would be more people who choose to go about their lives essentially not working. BUT (and I think I've heard Murray make this point), there are a lot of people who are already doing nothing and if you set the number right (at, say, $10k per adult), almost everyone will be forced to augment their meager income by doing at least a part-time job, which would be an improvement.
AB at February 19, 2014 9:48 AM
2,800 btw does not get you very far in Switzerland. If people have kids you would still need welfare.
NicoleK at February 19, 2014 11:02 AM
That means that there would still be some sort of welfare system.
And let's look at the way they are implementing the [un]ACA. Those that are under $50k(?) are getting a subsidy. But why didn't they have insurance already? Because they thought the 50" TV was more important than the $125/month catastrophic health insurance payment?
And if you think the underground economy is bad now, just imagine what it would look like when the person is going to get less than Joe Blow next door that isn't working?
Jim P. at February 19, 2014 11:19 AM
If I understand what she is saying, it provides less than our current system (a "mere" $12K per year, but for example, no medicare/medicaid) and it costs more.
I think it is important to recognize that low wage labor may be going the way of the dodo because of our robotic future, but I am not sure this plan is such a good purchase.
jerry at February 19, 2014 11:47 AM
I agree with her the current system is often too bureaucratic and too restrictive, but there is a case to be made that housing assistance only being spent on housing is better for society (and its kids and its streets) than housing assistance injected up a vein.
jerry at February 19, 2014 11:49 AM
Because politicians are in charge of overseeing the program and bureaucrats with implementing it, this would fail in a New York minute.
Where's the "social justice" in someone with children getting the same amount as someone without children? So, there's an adjustment to be made ... after the requisite bureaucracy and paperwork.
Where's the "social justice" in the non-custodial parent being able to keep the entire amount without sending some (or all) to the custodial parent "for the children" ... after the requisite bureaucracy and paperwork.
Where's the "social justice" in the neighborhood Donald Trump getting the same amount from the government as the neighborhood crack addict? Needs-based cases should get more, right ... after the requisite bureaucracy and paperwork.
The bureaucracy that was spawned with 126 ineffective welfare and poverty abatement programs will live on.
To buy votes, politicians will promise higher payments. And the lazy will vote for it. And idiots who think they're getting something for nothing when the government returns part of the money it took from them will vote for it. And the rest of us will work for it.
Conan the Grammarian at February 19, 2014 4:43 PM
There is another, largely invisible poison being administered to the working public by welfare programs:
Those who do not work for their income cannot appreciate the value that others have for either work or their possessions.
"Why not steal from others? They didn't earn it." Even the President of the United States says "you didn't earn that".
Radwaste at February 20, 2014 3:33 AM
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