Sunday, December 8, 2013

Time for a Basic Living Stipend?

Can we afford to guarantee an income for all citizens? (Photo: SPIRAL)

In her seminal science-fiction novel Beggars in Spain (William Morrow & Co., 1993), Nancy Kress describes a futuristic American welfare state wherein 80 percent of the population survives comfortably, if somewhat squalidly “on the Dole,” rather than engaging in productive employment. This largess is financed by patent royalties from an energy-production breakthrough, but the actual United States of the early 21st century A.D. is a fantastically wealthy country and already provides extensive public benefits to its poorest citizens. However, these benefits are delivered through hundreds of different programs that are administered under a variety of political conceits, making the American welfare system both inefficient and condescending.

According to the Cato Institute, federal, state, and local governments spent over $950 billion on welfare benefits in 2012. That’s over $20,000 per poor person or nearly twice the federal poverty threshold. Of course, a significant portion of these funds are lost to bureaucratic overhead. Therefore, as bleeding-heart libertarian Matt Zwolinski asks, wouldn’t it be better to put the money directly into the hands of poor people rather than passing it through layers of government administrators and social workers?

That’s where a basic living stipend comes into the picture. While fictional, Nancy Kress’s version of universal welfare is broadly similar to historical proposals such as the basic income guarantee or the negative income tax. Under such proposals, governments would provide all their citizens with a certain minimum income, either as an outright grant or as a variable tax credit, in order to keep them above the poverty threshold. In theory, minimum-income schemes would replace inefficient, paternalistic welfare states with streamlined transfer-payment systems, maximizing benefits to recipients and minimizing costs to taxpayers.

A “heartless libertarian communist” myself, I am generally skeptical of welfare schemes, both social and corporate, but before I indulge that skepticism here, I should note that, as Dr. Zwolinski points out, the idea of income guarantees also has origins and support in modern libertarian thought. He offers three reasonably compelling arguments in support of such proposals. These include the aforementioned efficiency improvements, approximate reparations for historical injustices, and necessary requirements for democratic legitimacy.

I find the last argument, advanced previously by none other than free-market economist Friedrich Hayek, to be the most morally compelling. Though I would advocate for the voluntary society, the fact remains—and may always remain—that all human beings live under the rule of coercive states. Since it is the political tendency of both left and right authoritarian regimes to institutionalize relative poverty, it becomes morally imperative for governments, in order to maintain their own legitimacy, to ensure that their citizens do not fall into absolute poverty.

Moving as that argument may be, I remain highly skeptical of income guarantees for two reasons. First, I doubt that they would reduce relative poverty at all. There would still be plenty of comparatively poor people, but they would all have food, clothing, housing, and entertainment. Their numbers would also seem likely to expand due to the free-rider problem, though this could be mitigated to some extent if the system were implemented correctly.

The second reason follows from the first and is significantly more disconcerting. If free riders or economic disincentives lead to an expansion of relative poverty, how much of an increase in income transfers (and concomitant decrease in productivity) can the general economy absorb before collapsing? Assuming that the threat of such a collapse is considerable, the risk will increase with the sensitivity of income guarantees to normal political processes. This latter concern is why Dr. Zwolinski rightly suggests that income guarantees should be enacted only at the constitutional level, though the controlling economic indices would no doubt still be subject to political manipulation.

Nevertheless, I’ve begun to think that it’s a risk worth taking. One reason that the byzantine welfare state is so pernicious is because it effectively conceals the diseased portions of the political organism, allowing otherwise good people to support programs that while ostensibly intended to help the poor actually perpetuate their relative poverty. Though income guarantees would probably do no better at reducing poverty, they would cast off the veil, exposing both the free riders, who would no longer have anything to hide, and bringing greater transparency to the political kinesthesis that institutionalizes poverty. Presumably, once these problems were open to ready observation, rational political actors would move to address them.

On a more optimistic note, public stipends should sweep away paternalistic welfare schemes by treating recipients as adults responsible for their own financial decisions. This would also be a step toward the moral courage required to accept individual failure as a natural and occasionally healthy part of human development. Furthermore, though this may mostly be Marxist wishful thinking, it is possible that even free riders might contribute some unexpected dividend to justify the productive members of society carrying their general slack. In fact, savvy free riders who were wise with their public stipends could eventually save enough money to channel into private investment, profiting for themselves while financing real economic growth. Finally, since guaranteed incomes would effectively remove low-end workers from the labor pool, competition in the labor market should become more robust, leading to increased wages and salaries for those who remain in the workforce. Both of these would be examples of Keynesian economic policies properly applied.

Welfare reform remains the key to unlocking and resolving many social problems, and as counterintuitive as it may seem, basic income guarantees might just be the kind of reform we need. In the end, I find myself swayed by the argument that we have a moral duty to the beggars in Spain, not out of guilty compassion for their relative destitution but because our coercive states are largely responsible both presently and historically for creating them. When that is done, perhaps we can continue the journey away from the coercive state and toward the voluntary society with greater alacrity.

Wednesday, December 4, 2013

Spending Fallacies

Seemingly profligate, the yachting industry contributes billions of dollars to the global economy. (Photo: Canadian Business)

It’s no secret that people spend their money in different ways, depending on whether they are comparatively rich or poor. The poor will usually spend a larger portion on basic necessities, while the rich will typically spend more on luxuries. The latter never fails to cause consternation and concern among many observers.

Naturally, “liberals” are quick to condemn the “excesses” of the rich, but even self-styled free-market “conservatives” will express dismay at how the affluent use their wealth. Both political factions seem to think there are better, more beneficial ways to spend all this money. That betrays their fundamental misunderstandings about economics … or at least shows that their own emotional responses can blind them to economic realities.

For example, the lavish wedding of a wealthy heiress will employ caterers, florists, photographers, and the other creative and service professionals whom “liberals” supposedly want to help while also feeding the free market that most “conservatives” claim to support. Would these funds be better spent on charity? Or should they simply be taxed and redistributed as welfare payments? Then the recipients would know well enough to elect Democrats, I suppose.