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The Welfare State: There’s a Better Way

May 15, 2014

by J. Andrew Zalucky

cash-in-hand

The prescription for a welfare state in critical condition: simplification through equality.

There’s a lot of chatter going on through libertarian circles now about a guaranteed minimum income (GMI) plan and its superiority over current welfare schemes. If you haven’t heard of the concept before, it goes a little something like this: rather than use money to fund income-targeted plans like welfare or commodity-centered programs like food stamps, the government would just give an equal sum of money to every adult citizen, thus providing that essential tenet of all social safety-net programs a floor under which no one can sink.

For me, the strengths of this concept rest on a few crucial points. First, it tackles the old problem of eliminating poverty championed by the left, while putting the responsibility for spending wisely back on the individual. Second, instead of relying on our clunky, outdated and debt-ridden structure of social programs, it simplifies things by providing an equal sum to everyone who needs it. But it also gives it to those who don’t, eliminating the conservative complaint about welfare taking money from some and giving it to others without benefiting those who pay. Finally, instead of blending government and private business through the endless cycle of subsidies and regulatory capture, it fulfills the purpose that the welfare state should actually serve in modern capitalism: to alleviate the adverse effects of market forces such as recessions and layoffs.

A Libertarian Idea?

Now I know what some people may think: “why would libertarians ever support such an idea? Doesn’t that fly in the face of their anti-government position? And remember, libertarians are meeeeeean and hate poor people!!!”

Before we go on with our discussion of GMIs, let’s clear up a few of these misconceptions. Libertarianism itself does not necessitate the complete abolition of the state, and therefore does not necessitate the complete dismantling of the social safety-net. Yes, the goal should be to give the coercive mechanism of the state as little power as possible. But as for what that minimal power should include, there is no need for libertarians to create their own straightjacket of orthodoxy here. There is no reason, at least in principle, that liberty and social justice must be mutually exclusive.

And it’s true that some libertarians (but mostly conservatives) enjoy referring to poor people and the economically misplaced as “takers” and “moochers” who drag down the “Real Americans” out there who create jobs (presumably while listening to talk radio). Such a repugnant and class-oriented view has nothing to do with being a libertarian in principle. Sure, an admiration for the virtues of self-reliance could give one a negative attitude toward those on the government dole but only when poisoned by the mixture of ignorance and self-righteousness. But it doesn’t have to be this way. Being a libertarian doesn’t mean being angry at people on food stamps, it means being angry that people have to recourse to subsidized charity in the first place, especially when that charity is loaded with complexity and bureaucracy. The main point of the GMI-based welfare state is this: instead of bank-rolling corporate interests and using dependency as a way of sustaining political support…why not just give people money?

And though they are rightly known for their love of individual liberty, private property and free markets libertarian thinkers have actually supported the idea of a GMI for a long time. Thinkers from F.A. Hayek to Milton Friedman (he referred to it as a Negative Income Tax) to Charles Murray have in one form or another, lent credence to the idea of a minimum income for all citizens (well, except for those in prison). Even Thomas Paine addressed the issue in his often forgotten essay, Agrarian Justice.

In his 2012 Presidential campaign, libertarian candidate Gary Johnson actually suggested one form of the basic income. Since his proposal to eliminate all taxes EXCEPT for a national consumption tax (VAT) would be rather regressive in respect to the poor, he worked around this by providing for tax-free “pre-bate” checks sent to every adult citizen that would provide for the basic goods that the poor spends a disproportionate share of their income on (Oh, and no- I still don’t regret voting for him).

A Grand Opportunity

Over the past couple years, there have been several issues that have blurred the traditional lines that divide left-liberals from their seemingly distant libertarian cousins. Whether it be the issue of predator drones used against American citizens without charge, military intervention in Syria, or the revelations about the NSA via Edward Snowden – there is a growing possibility for a grand coalition by both the champions of personal liberty and those who place the dignity of our fellow citizens above all else. Why not expand this nascent alliance to the realm of economics as well?

After all, I think both Libertarians and the Left are infuriated by the cronyism of the 2008 TARP program, oil and farm subsidies, regulatory capture and a myriad of other issues. So with that in mind, why not find a way to agree on solutions as well as the problems in our current economic system?

Indeed, in his excellent paper titled Guaranteed Income as a Replacement for the Welfare State, Charles Murray explains that

for the Left, it represents larger government in that it constitutes a state-driven redistribution of wealth, while for the Right, it offers smaller government in terms of the state’s power to control people’s lives.

I highly recommend reading the paper in its entirety, even if I don’t agree with every point he makes. Importantly, his requirement that health insurance companies treat the US population as a single risk pool and that each person use $3000 of his or her allotted $10,000  on health insurance premiums could open up a hornets nest of complicated exceptions and bylaws, something the GMI is meant to dispose of. One way to dodge this of course would be to institute a European-style healthcare system, but that’s a discussion for another time.

The obvious question of course is: “But if everyone received a minimum income, wouldn’t people just stop working?” Murray and others have addressed this point saying that while working hours may drop marginally in some areas, the real effect on the workforce is almost negligible.

The other question would be, can we afford it? We can, but only if we scrap our current system, as Veronique de Rugy states in a Reason article earlier this year (though she ups the ante to $12,000 a year and is more critical of the idea than her peers):

Giving $12,000 a year to the 237 million adults in the U.S. above the age of 18 would cost $2.8 trillion a year. If we add this amount to the other big-ticket budget items, such as the $550 billion we spend on the Pentagon and the $200 billion devoted to misguided corporate welfare and other wasteful programs, this plan would break even with the current system, if and only if we get rid of all other anti-poverty programs and tax breaks, unemployment insurance, Obamacare subsidies, Social Security, Medicare, Medicaid, and so on.

Another thing that people forget is that, as time goes on – more and more low-skilled jobs will become automated, making human labor unnecessary. This won’t happen overnight, but as the recent news about Panera Bread shows, it has started. So what we’ll end up with is a growth in the wealth created by fast-food companies, but with fewer people benefiting from it. As the slow recovery from the 2008 financial crisis shows, the United States is struggling to fashion the relations of production in a way that allows the average citizen to find meaningful employment (no temping as a “client-support facilitator” at some soul-destroying call-center is not meaningful employment).

It’s certainly possible that we will find a way out of the predicament of late-capitalism. But shouldn’t we institute a leaner, more sensible system of social insurance in the meantime?

PS- I’d also recommend Matt Zwolinski’s article, The Libertarian Case for a Basic Income

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7 Comments leave one →
  1. PJK permalink
    June 14, 2014 5:41 pm

    There’s something a bit weird in hearing that libertarians are seriously discussing government hand-outs as a way of addressing the “income question”. In effect they are arguing that everyone would work for the government (say again?). And even though it was blessed by his holiness Ronald Reagan, a negative income tax would seem to run against the contrary to the reactionary strains of libertarianism (there is no other kind in the US, pretenses to the contrary notwithstanding): you can’t take my stuff, but I can take your stuff.

    It is perhaps a testimony to the bankruptcy of their ideas in the face of the ongoing global “Great Recession”, the a new “normal” had set it, the much vaunted American middle class was a historical anomaly whose time is passed that libertarian theorists are dumping core principals.

    Any discussion of “wage, price, and profit” hinges on the question of what it is that the employer (viz. capitalist). Adam Smith (yes, THAT Adam Smith) understood- it is a labor power.

    Any discussion of how to deal with the “wages questions” has to start there.

    • June 14, 2014 6:13 pm

      But if what I describe here runs counter to the reactionary strain in libertarianism, then doesn’t that mean a non-reactionary strain indeed does exist in the United States?

      Also, I’m not sure I agree with your premise that “In effect they are arguing that everyone would work for the government”- though the relation between government and citizen may look that way in terms of the GMI, but I think its more of a matter of citizenship in this case then “no matter who I am, I’m a government employee”

  2. June 19, 2014 9:23 am

    Money does not bring prosperity or end poverty. Productive work does.

    If you are serious about your first stated goal, “ending poverty,” full employment would be a much better policy than guaranteed income.

    As for your second stated goal, “it simplifies and replaces clunky, outdated and debt-ridden social programs,” I think you’d find under the replacement guaranteed income regime plenty of people who through a wide range of reasons –disability, health, misfortune, psychology, inadequate opportunity, bad choices, etc– poverty would remain and now you’d have eliminated the targeted and necessary programs designed to meet those needs.

    Regarding your final goal, “ending the blending of government and private business through the endless cycle of subsidies and regulatory capture,” you pursue an abstract and ideological goal that has no roots in history or in the practices of competing nations. If you look around at other countries where economic growth and prosperity are found, there is nothing like the American mythology of laissez-faire. Governments in economic powers like Germany, Japan or China all have very effective partnerships between industry and government, each with their own version of “Industrial Policy” that consciously pursues strategic national economic goals with a comprehensive approach to trade, regulation, public investments, nurturing strategic industries, state-private cooperation in R&D and bringing basic science all the way to the production floor in exportable goods.

    In other words, the mercantilism of our trading partners is beating our Free Trade ass.

    • June 19, 2014 10:25 am

      Though I value your comments and am always motivated to learn more about trade and economic practices as a result, I don’t see how your argument for private/public partnerships destroys my case for a guaranteed minimum income. Note that I’m not advocating for an income that would come even close to replacing the income that productive work would bring in.

      You are right to bring up “disability, health, misfortune, psychology, inadequate opportunity, bad choices, etc”

      But eliminating the clunky welfare state we have now and replacing it with a guaranteed minimum income and perhaps a universal healthcare system (like those in places like Germany, Switzerland, or Singapore) would not necessarily leave all of those people in the lurch. My views on healthcare are complicated and would not fit in this comment box. The fact that you care about them shows that it doesn’t take state action to generate empathy for the less fortunate.

      However I have to disagree with you on the centralization and state-run pursuit of economic goals, as this can easily get out of control and lead to inefficiency, stagnation and economic backwardness. As the examples of Great Britain during the Winter of Discontent and the Warsaw Pact countries show, this can lead to a lot of problems. The example of Japan is a very curious one, as their own “lost decade” and propping up of “zombie firms” should show the problems when a central government partners with private firms to keep them afloat. China is another curious example, as they have a two-tiered system that embraces capitalism in major coastal and eastern zones of their country, while maintaining state-enforced collectivist backwardness in much of the rest. All of this maintained by state repression of civil liberties, right to assembly and a number of other rights too.

      I’m not calling you a communist of course, but I just tend to disagree with the idea that the movement of capital must be based on the competition of nation states. Rather, if capital is free to move, then so should labor be. For example, if things are awful economically in Maryland, you should be able to move to Colorado if things are better there. Likewise, if things aren’t so great in Greece, then pack up and move to Germany- which you point out as a good example of economic governance. This doesn’t mean I’m not a patriot, but it’s worth noting that the world’s economic growth and output in the 19th century accelerated dramatically as compared to the previous 1000 years, not because of the endurance of mercantilism, but because of its decline.

      Germany is where you have the best case, but again, this comment need not be another article.

      Till next time, thank you for your devoted reading and commenting!

    • June 19, 2014 10:26 am

      Though I get the idea sometimes that I could write an article about how much I like cats and you’d somehow bring it back to NAFTA and Free Trade! lol

Trackbacks

  1. 2014: A Year of Conflict and Convulsions | FTSA
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