The first post in this series compared a UBI to other income support policies in terms of effectiveness in reducing poverty, work incentives, targeting, and administrative efficiency. The second post argued that a UBI with a per person grant approaching current official poverty thresholds would be affordable without increasing the federal budget deficit, raising marginal tax rates, or radically raiding the fortunes of the rich. This third post looks at the varying perspectives of conservatives, progressives, and libertarians, explaining why there are both supporters and opponents of a UBI in each camp.
“UBI and” or “UBI instead”?
The first divisive issue is whether a universal basic income should be a substitute for existing social programs or an addition to them. John Schmitt, a senior economist at the progressive Center for Economic and Policy Research, expresses guarded support for a UBI in an interview with Salon. As he makes clear in this passage, his support is limited to the “UBI and” variant:
On the one hand, it [a UBI] is a very generous way to provide support for people who desperately need it. On the other hand, it threatens the existence of the existing social welfare systems . . . My fear is that it’s possible for a coalition of completely well-intentioned and idealistic — with no negative connotation to that — people on the left to support what would be a very generous basic guaranteed income, in a coalition with significant elements on the right, including the libertarian right, that has basically the motivation that this will undermine existing social welfare institutions.
Conservatives, in contrast, come down firmly in favor of “UBI instead.” Charles Murray, for one, makes that intention clear in the title of his book In Our Hands: A Plan to Replace the Welfare State. His publisher, the American Enterprise Institute, summarizes Murray’s argument this way:
America’s population is wealthier than any in history. Every year, the American government redistributes more than a trillion dollars of that wealth to provide for retirement, health care, and the alleviation of poverty. We still have millions of people without comfortable retirements, without adequate health care, and living in poverty. Only a government can spend so much money so ineffectually. The solution is to give the money to the people. This is the Plan, a radical new approach to social policy that defies any partisan label. Murray suggests eliminating all welfare transfer programs at the federal, state, and local levels and substituting an annual $10,000 cash grant to everyone age twenty-one or older.
Two considerations seem to be at play here. The first is a difference regarding how much aid the government should provide to the poor. Many conservatives think that the current level of support is already more than adequate. The problem, they say, is that too much of the trillion-odd dollars that the government now spends never gets to the poor. All that is needed is to cash it out and hand it over. If that were done, and if poor families spent the money wisely, they would have quite enough to live on.
Progressives, in contrast, see current government programs as far too tight-fisted. They help, but not enough. The government should continue current programs that provide for the basic needs of the poor—food stamps, public housing, Medicaid and the like, but these alone still leave many families in poverty. Adding a UBI on top of the others might finally get the job done.
The second consideration that drives the debate over “UBI and” vs. “UBI instead” is a difference in the confidence that conservatives and progressives place in the ability of government to do its job. In the view of conservatives like Murray, “Only a government can spend so much money so ineffectually.” Even if welfare officials were well intentioned, they say, government bureaucracies are inherently wasteful. Not all conservatives are even willing to grant the “well intentioned” part. Their favorite laugh line is Ronald Reagan’s quip, “The nine most terrifying words in the English language are ‘I’m from the government, and I’m here to help.’ ”
For progressives, the threat is not bureaucracy but privatization. Schmitt, elsewhere in the interview quoted above, sees a risk in entering a coalition with conservatives to promote a UBI:
[A] lot of the services — health, education, housing — might become much more marketized and privatized. . . . You can imagine that if this proposal in Switzerland passes and everyone gets $2,800, that the right can say, “Well, why should we provide healthcare — why don’t we let people use the money that we’re giving them? Why should we provide public schools — we should let people use the money that we’re giving them to buy education for their kids in the marketplace.”
In this regard, the progressive and conservative views are almost mirror images. Just as conservatives worry that an inefficient bureaucracy takes a huge cut from welfare spending before any of it reaches the intended beneficiaries, progressives fear that profiteering corporations, overcharging privatized services, would skim off too much of the cream if poor people were given cash and told to fend for themselves.
In my view, there is some truth on both sides. The idea of replacing multiple means-tested programs with cash grants appeals to me on the grounds of administrative efficiency and freedom of choice. However, I am uneasy about conservative proposals to cash out all existing programs cold turkey. It is fine to say, “let the market take care of it,” but there are key areas where, without major policy changes, markets are not ready to do the job.
As I argued in the second part of this series, health care is the biggest problem area. It is an understatement to say that the market for health care in the United States is not fully functional. If we cashed out all means-tested transfers and distributed the money to the poor in the form of a UBI or some other kind of grant, without Medicaid, CHIP, or the premium subsidies of the ACA, many households with disposable incomes at or above the poverty level would still not be able to buy health insurance or meet out-of-pocket payments. Mental health and substance abuse also pose special problems for any system based on cash grants plus privatization.
The market for educational services is in somewhat better shape than that for health care. Still, I think a lot of work remains before we would be ready to scrap public schools in favor of vouchers for all. Education for children with special needs and for children of parents with mental health and substance abuse issues are even farther from being ready for full privatization.
In short, although I see a UBI as capable of replacing much of our present system of income support—food stamps, TANF, EITC, as well as parts of unemployment insurance, Social Security, and disability coverage—it is unrealistic to think a UBI would represent a complete social safety net in itself. Private charities might help fill some of the gaps, but it is far from clear that they could fill them all.
Would a UBI produce a nation of layabouts?
One of the most commonly heard objections to a universal basic income is that it would produce a nation of layabouts. The fear is that if people did not face homelessness or starvation, they would withdraw from the labor force into a life of idleness. This fear is most often voiced by conservatives, but some progressives also dislike the idea that able-bodied people could receive government aid without requiring them to seek a job.
UBI advocates think the fear of a layabout society is unfounded. For purely economic reasons, they say, a UBI is more likely to increase than to decrease labor force participation.
They begin by noting that the labor market response to a change in economic incentives consists of two distinct parts. One, called the substitution effect, causes people to work more when their after-tax hourly earnings increase because substituting one hour of work for one hour of leisure now brings in more money than it did before. The other, called the income effect, causes people to work less when their wealth increases because they can now afford to take more time off work for other purposes. The net effect on work effort depends on which is stronger, the income effect or the substitution effect.
How can we find out which effect is stronger? One way is to look at pure financial windfalls like inheritances and lottery winnings. Such windfalls do not change the amount a person earns from an added hour of work, so they have an income effect but no substitution effect. Studies of windfalls suggest that income effects do exist, but they are weak. For example, this paper, based on a study of Massachusetts lottery winners, concluded that each one dollar of lottery winnings caused people to reduce earned income by about 11 cents. Similarly, this paper concluded that inheritances have only a small tendency to reduce labor supply.
A UBI that was disbursed without any change to existing welfare or tax policies—the “UBI and” approach—would be a pure windfall. As such, it would have only an income effect. Like other windfalls, it would tend to decrease work effort, although that would not always mean dropping out of the labor force altogether. Some people would respond by reducing weekly hours worked or taking longer vacations; some might switch from higher-paid but unloved work to lower-paid work with more intrinsic reward; and some might quit paid jobs to try their hand as entrepreneurs.
In contrast, a UBI that replaced large parts of our current welfare policies—the “UBI instead” approach—would have a strong substitution effect and a smaller income effect. As explained in the first post in this series, current welfare policies typically reduce benefits for each added dollar of earned income. In other cases, they set income “cliffs” beyond which they cut off benefits altogether. As a result, poor and near-poor households often face effective marginal tax rates of 50 percent, 70 percent, or even higher.
Replacing means-tested welfare with a UBI would greatly reduce the effective marginal tax rate and, therefore, greatly increase the share of each added dollar of earnings that workers retained. That would produce a strong substitution effect that would increase work effort and labor force participation. At the same time, a UBI would have only a small income effect. The reason is that a person’s monthly income would not increase by the full amount of the UBI grant, but only by the difference between the UBI and the value of the food stamps, housing vouchers, or whatever that it replaced. On balance, then, a UBI that replaced current means-tested welfare programs would be likely to have a large positive effect on work effort for able-bodied people who are now living at or near the poverty line.
True, even if a UBI increased labor force participation in the aggregate, some individuals might well choose to withdraw from the labor force and live on the their monthly grant alone, or retire early and live on their monthly grant plus savings. For various reasons, that possibility does not greatly trouble advocates of a UBI. Some of them think that, especially in the United States, people already work too much and enjoy too little leisure. After all, leisure has value, even if it is not included in GDP. Others think that a trend toward automation of low-skilled jobs makes it both necessary and desirable to move toward an economy with lower labor-force participation rates. Still others see increased freedom for each person to find the best balance between work and leisure as one of the principal benefits of a UBI—a viewpoint that brings us to our next topic.
Libertarian support for a UBI
So far, we have focused mainly on conservative and progressive support for a UBI, but many libertarians also favor such a policy. That might seem surprising. It is almost an axiom of libertarianism that for Peter freely to give money to Paul is charity, but for John to point a gun at Peter and force him to give to Paul is theft of Peter’s property. Libertarians who support a UBI must begin by rebutting the presumption against forced giving. Without going into every variant, here are three broad lines of argument advanced by libertarian supporters of a UBI.
The first libertarian defense of a UBI is purely pragmatic. The idea is that while some ideal free society might get along without any coercive redistribution of income, a UBI would at least be superior to what we have now. Writing for Reason.com, Matthew Feeney puts it this way:
[L]ibertarians in the U.S. and elsewhere should support the idea of a basic income as a replacement for the current welfare systems on offer. The welfare system in the U.S. is an ineffective and expensive mess, but it is unlikely that the majority of the American public are going to be persuaded to support the outright abolition of the welfare state any time soon. Rather than make the principled argument against the redistribution of wealth, libertarians would do better if they were to argue for a welfare system that promotes personal responsibility, reduces the humiliations associated with the current system, and reduces administrative waste in government.
This libertarian argument overlaps that of conservatives in that it castigates the current system as wasteful and ineffective, but it goes beyond that. Libertarians also object to the paternalistic micromanagement of the lives of the poor that is a hallmark of today’s antipoverty policies. Perhaps conservatives see nothing wrong with requiring welfare recipients to submit to drug tests, or with rules that allow food stamp beneficiaries to buy hamburger to feed their dogs but not dog food; vitamin-enriched bottled water but not vitamin pills; and cold roast chicken but not hot roast chicken. Libertarians find such provisions offensive. As Feeney puts it,
one of the tragedies of the current welfare system is that it strips welfare recipients of their dignity while treating many of them like children, and functions on the underlying assumption that somehow being poor means you are incapable of making good decisions.”
A second Libertarian argument defends a UBI as a counterweight to the injustices of private property as it now exists. In principle, of course, libertarians are ardent defenders of private property, but some of them see serious flaws in the way the system now works. One flaw is that some people have acquired their property not through honest competition in a free market, but rather, by acts of government that subsidize their products, restrict the actions of their competitors, or subsidize the products they make or grow—all the venal devices that economists lump together under the term rent seeking. Rent seeking is so pervasive that it is impossible to untangle the particular victims and beneficiaries of each law, but a moderate tax on all forms of income and property, distributed evenhandedly to everyone as a universal basic income, might provide a rough remedy. Others argue that the whole idea of using government police and courts to protect property rights is itself a sort of subsidy to property owners. Accepting that subsidy gives government the implicit right to tax the property it protects. Jessica Flanigan details several variations of the property rights argument in a post on the imaginatively named blog Bleeding Heart Libertarians.
Less doctrinaire libertarians, many of whom prefer to call themselves “classical liberals,” suggest a third reason to support a UBI. As Matt Zwolinski puts it in an essay on the subject, classical liberals adhere to “the principle that a society’s legal rules and/or moral principles must be justified to each and every individual who is subject to them, and that such justification requires demonstrating that those rules or principles are ones that each individual has reason to support.” Many classical liberals think that, given the choice, freedom-loving individuals would prefer to live in a system where the minimal state, in addition to protecting people and their property from criminals and foreign enemies, had some mechanism for providing everyone with a minimum income to fall back on in case of misfortune.
Zwolinski finds support for one form or another of a basic income among both historical classical liberals, such as Adam Smith and John Stuart Mill, and more recent thinkers, such as Friedrich Hayek and Milton Friedman. Hayek, for example, wrote this passage in his book Law, Legislation, and Liberty:
The assurance of a certain minimum income for everyone, or a sort of floor below which nobody need fall even when he is unable to provide for himself, appears not only to be a wholly legitimate protection against a risk common to all, but a necessary part of the Great Society in which the individual no longer has specific claims on the members of the particular small group into which he was born.
I should note that not all of the writers listed by Zwolinski supported a UBI in the sense of a grant that all citizens receive regardless of their particular circumstances. Milton Friedman, for one, supported a negative income tax—a policy that resembles a UBI for people with zero or very low earned incomes, but tapers benefits as income rises. Hayek, as Don Arthur argues here, very likely had in mind not a UBI, but some kind of means-tested minimum income for people who were altogether incapable of working. Also, it is only fair to note that many modern libertarians, as Milton Friedman’s son David explains here, reject any form of government income redistribution. A UBI remains controversial in the libertarian community, although support seems to be growing.
The bottom line
The bottom line is that a UBI is not a perfect policy. In every form, it represents a compromise among conflicting objectives. Probably that is exactly why it draws support from a wide range of conservative, progressive, and libertarian thinkers who agree on little else, as well as from people who see themselves as pragmatists bound to no particular ideology.
In Part 1 of this series, which reviewed the economics of income support policy, I explained that a UBI is a compromise among the mutually incompatible criteria of effectiveness in reducing poverty, maintenance of work incentives, administrative efficiency, and targeting of aid to the neediest. A UBI scores high on the first three criteria only by abandoning the fourth altogether. Opponents of a UBI see its untargeted nature as a flaw; supporters see it as the key feature that makes it attractive.
Part 2 of this series asked whether we could afford a UBI. My answer was yes, it would be possible to design a UBI for the United States that came close to conventional poverty thresholds without raising marginal tax rates, busting the deficit, or brutally raiding the incomes of the rich. Doing so would require more compromises, however. The biggest compromise would be that middle- and upper-income families would not be able to double-dip. In order for them to receive a UBI, they would have to relinquish some of the benefits the government now lavishes on them in the form of tax loopholes that favor home ownership, retirement saving, not-for-profit giving, and so on.
This third post in the series has shown that it is possible to design a UBI that appeals to people of widely differing ideological persuasions, but again, not without compromise. Conservatives will find that a well-designed UBI would require more than just cashing out the trillion-odd dollars now spent on means-tested welfare. Progressives will find that they can’t have a UBI without giving up some other elements of the social safety net they have fought hard to achieve. Libertarians will have to compromise on their ideal of a society entirely free of government in order to achieve the pragmatic improvements in personal freedom and autonomy that would come from replacing the current welfare mess with a UBI
I find it encouraging that the liveliest debates over a UBI today are taking place within, rather than between, the main ideological camps. At a time when macroeconomic forces seem to be bringing ever more inequality, perhaps a coalition will emerge that can move us forward toward a better social policy.
Part 3 of a series. Follow the links for Part 1, “The Economic Case for a Universal Basic Income,” and Part 2, “Could We Afford a Universal Basic Income?”