Tag Archives: negative income tax

Poverty Is A Policy Choice

Tumultuous times offer us an opportunity to revisit previous assumptions about the way the world works–and these are definitely tumultuous times. This blog has considered the discomfort most of us feel witnessing elements of our society that weren’t always so obvious: the increasing displays of racial animus, widespread visual evidence that the policeman may not always be our friend, the disregard for others displayed by the “in your face” mask and vaccine refusers… and of course, we’ve had to deal with the pandemic’s upending of so much of what we used to think of as our normal lives.

The economic realities as we emerge from that pandemic are also challenging some unthinking assumptions about wealth and poverty.

Once more, Ezra Klein gets to the crux of the issue.

The American economy runs on poverty, or at least the constant threat of it. Americans like their goods cheap and their services plentiful and the two of them, together, require a sprawling labor force willing to work tough jobs at crummy wages. On the right, the barest glimmer of worker power is treated as a policy emergency, and the whip of poverty, not the lure of higher wages, is the appropriate response.

Reports that low-wage employers were having trouble filling open jobs sent Republican policymakers into a tizzy and led at least 25 Republican governors — and one Democratic governor — to announce plans to cut off expanded unemployment benefits early. Chipotle said that it would increase prices by about 4 percent to cover the cost of higher wages, prompting the National Republican Congressional Committee to issue a blistering response: “Democrats’ socialist stimulus bill caused a labor shortage, and now burrito lovers everywhere are footing the bill.” The Trumpist outlet The Federalist complained, “Restaurants have had to bribe current and prospective workers with fatter paychecks to lure them off their backsides and back to work.”

Klein considers recent proposals to eliminate poverty via a “negative income tax”–very similar to the one proposed several years ago by none other than Milton Friedman. Unlike a guaranteed annual income, this subsidy would phase out as incomes rose, so it would be  less costly than a universal benefit. But as Klein observes, the problem isn’t really the cost.

The real political problem for a guaranteed income isn’t the costs, but the benefits. A policy like this would give workers the power to make real choices. They could say no to a job they didn’t want, or quit one that exploited them. They could, and would, demand better wages, or take time off to attend school or simply to rest. When we spoke, Hamilton tried to sell it to me as a truer form of capitalism. “People can’t reap the returns of their effort without some baseline level of resources,” he said. “If you lack basic necessities with regards to economic well-being, you have no agency. You’re dictated to by others or live in a miserable state.”

But those in the economy with the power to do the dictating profit from the desperation of low-wage workers. One man’s misery is another man’s quick and affordable at-home lunch delivery.

Klein reminds readers that America is full of hardworking people who are kept poor by very low wages and harsh circumstance–people who want a job but can’t find one, or who can only find jobs that are “cruel in ways that would appall anyone sitting comfortably behind a desk.”

We know the absence of child care and affordable housing and decent public transit makes work, to say nothing of advancement, impossible for many. We know people lose jobs they value because of mental illness or physical disability or other factors beyond their control. We are not so naïve as to believe near-poverty and joblessness to be a comfortable condition or an attractive choice.

Klein also reminds us that “following the money” tells us what our priorities really are–that we always find money to pay for the things we value.

What America spends its national wealth on doesn’t reflect well on those values. We’ve spent trillions of dollars on wars in the Middle East and on tax cuts for the wealthy, and billions subsidizing fossil fuel companies and factory farms.

As Klein says, it’s within our power to wipe out poverty. It simply isn’t among our priorities.


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.