Shades of Milton Friedman

Switzerland is evidently considering implementing a “minimum income” program that would require the Swiss government to send a check to every citizen every month.

Proposals for similar approaches here have been kicking around since Milton Friedman advocated a negative income tax. Given current Congressional hostility to anyone who isn’t a plutocrat, the prospects for the U.S. adopting such an approach hover somewhere between nil and minus a million, but there is a strong case to made for replacing our patchwork safety net with a minimal income guarantee. According to Business Insider,

In 2012, there were 179 million Americans between the ages of 21 and 65 (when Social Security would kick in). The poverty line was $11,945. Thus, giving each working-age American a basic income equal to the poverty line would cost $2.14 trillion. For some comparison, U.S. GDP was almost $16 trillion in 2012 and the defense budget was $700 billion.

But a minimum income would also allow us to eliminate every government benefit as well. Get rid of SNAP, TANF, housing vouchers, the Earned Income tax credit and many others. Get rid of them all. A 2012 Congressional Research Service report found that the federal government spends approximately $750 billion each year on benefits for low-income Americans and that rises to a clean trillion when you factor in state programs. Eliminate all of those and the net figure comes out to $1.2 trillion needed to pay for a universal basic income, still a hefty sum.

Of course, that price tag assumes a check going to every American, rich or poor. As I recall, Friedman’s proposal was more modest: send checks to folks under the poverty line, tax those over it. The Swiss approach would send money to all citizens, regardless of income, and that does have the appeal of simplicity–no income verification bureaucracy, no game-playing.

A guaranteed minimal income would have some interesting consequences: for starters, no American would live below the poverty line. Despite a 50-year War on Poverty, nearly 50 million Americans remain below that line.

A guaranteed minimum income would give American workers the security to demand higher wages and better working conditions. Families could allow one parent to take time off to raise the kids. Best of all, eliminating the numerous different government welfare programs would simplify government and lead to private-sector efficiencies, as adults would simply receive their check in the mail (or via electronic transfer) and not have to waste time filling out paperwork and visiting numerous government offices.

The major argument against a guaranteed income is that it would be a disincentive to work–or, looked at another way, an incentive to idleness. Research suggests those fears are overblown, especially since a guarantee of poverty-level income doesn’t exactly provide trust-fund luxury. And of course, the same argument is routinely made against existing programs. 

If the Swiss follow through, I guess we’ll get to see who’s right.

 

One thought on “Shades of Milton Friedman

  1. My husband sent me that ‘news’ in an email titled Utopia.

    I had my doubts until you wrote about it.

Comments are closed.