Basic income objections

Since the Swiss referendum proposal for the state to provide every adult with a flat, universal monthly payment of up to CHF 2,500 (roughly a little over $A 3,000) became a reality, the ‘basic income’ concept, and varieties thereof, has received growing interest amongst academics, in the media and within policy circles.

For those interested, some notable news and opinion pieces discussing the idea can be found here, here, and here.

Much of the recent discussion about basic income has been driven by socialists of varied hues. In various ways, they describe how a basic income, paid by general taxpayers without reference to individual circumstances, would equip every individual with a given level of income that would somehow end poverty, and enable people to live in ‘dignity,’ however defined.

In the past, the Australian Greens Party have supported a ‘guaranteed adequate income scheme’ or ‘universal minimum income’ Its 2007 federal election policy platform, for example, stated that ‘a socially just, democratic and sustainable society rests on the provision of a guaranteed adequate income for all its citizens.’

It may come as a surprise to some readers, however, to discover that several important figures in twentieth century classical liberalism also supported variants of the basic income idea.

Milton Friedman advocated a ‘negative income tax’ providing subsidies for individuals below a certain income threshold. Friedrich Hayek occasionally argued for a guaranteed minimum income floor, whereas James Buchanan insisted that a equal per capita ‘demogrant’ subsidy (with a proportional or flat income tax) was necessary to ensure generality in fiscal treatment by the government.

Recently, several people from amongst the group of liberals and libertarians labelling themselves as ‘bleeding heart libertarians,’ or at least those with BHL sympathies, have expressed support for the basic income.

As one example, up‑and‑coming Irish libertarian Sam Bowman refers to the basic income as an ‘ideal welfare system.’ Encapsulating the key argument behind support by prominent liberals for a basic income regime, Bowman states:

A basic income system … would be at least as clear as the PAYE income tax system is, and substantially clearer than the current benefits system. The dog’s breakfast of welfare schemes that currently exist – all to address the symptoms of poverty, rather than the root – would be abolished, and with it the jumble of unanticipated and often undiscernable interactions between schemes that lead to perverse outcomes.

Anyone who follows up on my writings and statements appreciates I am certainly not a friend of the governmental welfare state, and of those many vested interests dedicated to its expansion. But is the basic income the appropriate response to the many problems posed by the redistributive state, such as disincentives for labour supply and entrepreneurship, the emaciation of charitable and philanthrophic conduct, and impediments to discovering new ways to care for the vulnerable?

In today’s edition of Online Opinion, I have a piece contending that basic income is unlikely to represent a robust solution to the admittedly many problems posed by the existing welfare system. A few choice paragraphs are in order:

Over a century of experience across the Western world consistently illustrates that the fiscal size and scope of the welfare state has grown enormously, as rival politicians seek to outbid each other for votes by partitioning the general electorate into new constituencies.

This process, coupled by the incessant demands of interest groups for policy favouritism, has inevitably led to a proliferation of different welfare programs for different groups, such as the unemployed, families, people with disabilities, war widows, and so on.

Introducing a basic income would not quell or override these practical, yet endemic, features of modern political life.

It is unlikely that the concentrated beneficiaries of existing welfare subsidies would support the abolition of their favoured programs, and even if a basic income scheme was successfully implemented the interest groups would quickly seek to undermine the generic application of the basic income.

For example, there would be immense pressure placed upon politicians to apply differential subsidy loadings on top of the basic income level, assisting those groups deemed to be needier than others.

Those interested in delving further into this line of argument, inspired by the emerging ‘robust political economy’ literature, are encouraged to read an excellent paper by Peter Boettke and Adam Martin, which appeared in the Basic Income Studies journal of 2012 (gated; abstract here).

The Boettke‑Martin paper deals with several potential vulnerabilities of the basic income system more comprehensively than I could do in a mere 870‑odd word piece. Nevertheless, the questions raised by these researchers should be taken seriously, and addressed, before one would even seriously contemplate advocating an extension in the governmental welfare state, in the guise of a basic income model.

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50 Responses to Basic income objections

  1. Andrew

    For every dole bludging couple $A72k pa? What could go wrong?

  2. sparky

    Is Freidrich Hayek any relation to that Latino hottie Selma Hayek?

  3. Driftforge

    Seems very similar something John Humphries put forward a few years back – IIRC his proposal was a $9000 annual gift with 30% taxation on everything earned.

    It’s also got a fair bit in common with the Georgian idea of land rent that is collected and then distributed in equal share to all.

    I don’t know that the argument that the clamour for parasitic returns would not diminish is entirely relevant; that exists independently of whatever situation. See for instance the GST.

    If anything, the introduction of does provide an argument to be used against it, and a line that can be held at least for a period.

    I’ll flag one advantage of the Georgian system though – because land taxation moves up and down with the economy, the payment to each person moves with the market as it were. That flexibility, that capacity to automatically adjust not to need but to capacity to pay is something missing from current proposed arrangements.

  4. Robert Blair

    For example, there would be immense pressure placed upon politicians to apply differential subsidy loadings on top of the basic income level, assisting those groups deemed to be needier than others

    Quite so.

    Should a basic income be introduced, after a few years pretty much the same population of people would present as homeless, malnourished, in poor health and severely affected by substance abuse and mental health issues.
    The parlous state these people find themselves in has very little to do with income, and cannot be resolved by supplying more income.

    The whole idea may actually be an instance of Reynolds Law (“Subsidizing the markers of status doesn’t produce the character traits that result in that status; it undermines them.”) See here:

  5. Robert Blair

    Well, see it here then: Reynolds law

    I just failed anchor tags 101 …

  6. sparky

    just re-read mine – should have proof read before posting.Apologies for poor spelling.

  7. Token

    As this will offset the responsibility of society. Like everything else the left does, they will agree to the concept & block any attempt to repeal the existing measures.

    Once irrational people have spent their allowance and not fed, clothed or paid for the education their children they will be back and the fruitbat left will condemned conservatives for being heartless.

  8. Infidel Tiger

    Remember how all our grandparents starved to death before welfare? Me neither.

  9. A Lurker

    First, where would the money come from to fund such a scheme?
    Secondly, we would have the entire third-world beating a path to our door if such a scheme were to happen – we would need to lock down our borders, prevent further family reunion, and really toughen up all migration to Australia (including from NZ) otherwise it would quickly become unsustainable.

  10. There is merit in the negative income tax idea. The Liberal Democrats adopted it as part of its initial tax policy, based on John Humphreys’ 30/30 plan. It’s simple, easy to understand and explain, and removes disincentives to earn additional income.

    However, we have now dropped it, mostly due to the anticipated increase in people who would qualify for negative income tax payments relative to current welfare recipients. There are actually quite a lot of people on low incomes who do not currently qualify for welfare (mostly in dual income households) who would be brought into the payment system with negative income tax.

    Julie’s point, that a basic welfare payment would inevitably be open to political manipulation, is valid but was not a factor in our thinking.

    I note that the Swiss are voting on whether to make this payment to citizens. That’s an important point, which we endorse. Welfare payments, whatever the approach taken, should not be available to non-citizens. Many of our illegal immigration problems would be solved if we took a leaf out of the Swiss book on this.

  11. H B Bear

    I apply a basic test to such matters, if the Greens are or were in favour of something then I am opposed to it.

    It has served me well.

  12. A Lurker

    I note that the Swiss are voting on whether to make this payment to citizens. That’s an important point, which we endorse. Welfare payments, whatever the approach taken, should not be available to non-citizens. Many of our illegal immigration problems would be solved if we took a leaf out of the Swiss book on this.

    Yes, but there needs to be far more ‘giving’ in respect to gaining citizenship than what currently is demanded, otherwise there would be only ‘taking’ by those who come here only to gain citizenship and so qualify for this money.

    I would prefer adult citizenship to be provisional only on completion of certain criteria – such as attaining conversational English, plus completion of 100 hours of community service, plus relocation for a year or two to a regional area, plus having and keeping a clean slate (no criminal charges). Ideally I’d put some kind of work (casual/part-time or full-time) as part of the criteria, however given that our own people are finding it difficult getting jobs, then employment may be a step too far.

    My personal choice would be to not give this money out at all except to retirees/pensioners who have all their life contributed to Australia – not only via their taxation, but in other ways as well. They’ve done the hard yards, they ought to be thanked and an increase to the pension is how I’d go about it.

  13. An idea I had regarding this was to make the gift a deduction from land rent on Flowhold title land. It means that no one gains something tradable for nothing – just access to the resource required to do so.

  14. eb

    Would everybody below a certain income get the same? The single mum with two kids would get the same as the 21yr old living at home with his parents?

    The unemployable bum with his de-facto and three brat kids in a government housing would get the same as the dad who just lost his job as the only breadwinner in the household with a large mortgage and a wife and two little kids?

    Lots of different circumstances that need to be addressed; are we happy with a one size fits all approach?

  15. mareeS

    The spouse and I have a basic annual income of $100k plus a bit. It comes from superannuation that we prudently put aside, not from taxpayers like our children, or other people here at the Cat. How has it come to the point where individuals think they can demand a living rather than working and saving for it?

    I’m age 58, not yet elderly, so I don’t think I’m antediluvian in my belief that people should provide for themselves unless circumstances prevent them from doing so. Laziness and rent-seeking aren’t excuses.

  16. Would everybody below a certain income get the same?

    No, the basic income is applied to everyone, regardless of income.

    The beauty of the situation is that the results of the ‘trial’ in Switzerland can be observed over time. There’s no rush.

  17. tgs

    I note that the Swiss are voting on whether to make this payment to citizens. That’s an important point, which we endorse. Welfare payments, whatever the approach taken, should not be available to non-citizens. Many of our illegal immigration problems would be solved if we took a leaf out of the Swiss book on this.

    Agreed.

  18. Rodney

    Kep Enderby once said that everyone should have at least the average income.

    A truely Green welfare system would penalise people who produce anything as they inevitably cause polution in doing so.

  19. mareeS

    A Lurker @1o.05am,

    I’m not in favour of increasing the age pension. There are plenty of bludgers who have lived off the State (you and me as taxpayers), who have never saved or bought a home, paid for their families’ health care and education and their older age, and now expect younger taxpayers to cough up for their costs on the nation.

    The only payments I have ever had from the taxpayer were a couple of years of child endowment payments at $25 per month while our children were babies and we were establishing our business that eventually employed 65 people and put many millions of dollars into the salary/tax mix over 30 years

  20. struth

    This would never work in Australia at the moment.

    “For example, there would be immense pressure placed upon politicians to apply differential subsidy loadings on top of the basic income level, assisting those groups deemed to be needier than others”

    In Australia the mass of welfare and special interest bureaucracies, the very great burden on Australia, would only allow this payment plus the status quo we now have.
    Bureaucracies first and foremost responsibility is to it’s own legitimacy and existence.
    Australia’s are way too powerful, and on way too much of a good thing, due to a politically apathetic and brainwashed population and our PM can’t even repremand public servants who jeopardise Australia’s security to even worry about this.
    In short , the taxpayer funded welfare industry would be killed off, you’re not just dealing with the recipients.
    Whole towns like Alice Springs would cease to exist.
    Bringing these bureaucracies under control and simplifying the system is the key to Australia’s success, and then maybe you can talk of payments like these.

  21. Abraham

    I don’t think I’m antediluvian in my belief that people should provide for themselves unless circumstances prevent them from doing so. Laziness and rent-seeking aren’t excuses.

    I work at one of Australia’s major airports. What I find enraging is the number of individuals, surfboard over the shoulder en route to Bali, who travels on public transport to the airport on Centrelink DPS cards. This idea of supplying such indolent welfare leeches with a basic income provided for by those prepared to ‘suffer’ the indignity of actually labouring for their subsistence fills me with unrepentant resentment.

    Any person who is able-bodied and compos mentis, who wilfully refuses to toil with the rest of us plebs, could for all I care starve. Not one moral principle compels me to care for those who are slothful.

    So mareeS, I’m with you on this one.

  22. James B

    We don’t need basic income, we need to remove all welfare with no replacements.

  23. Mr Rusty

    Lots of different circumstances that need to be addressed; are we happy with a one size fits all approach?

    One size fits all would have some merits. The current system has introduced the Victim Value Index where people are ranked according to their circumstances and paid according to how high their rank on the VVI – to each according to his need as that stupid Kraut said.
    It has created a race to the bottom, rewarded sloth, irresponsibility and reprehensible behaviour and punishes those who have tried hard but genuinely fallen on hard times. An alcoholic, drug using, slum dwelling grub with a “bad back” and 5 kids by 5 different bogan losers will rake in the cash. Blue collar Bob who is retrenched after 30 years in the same company, paid taxes and a mortgage all his life and struggles for months to find a new job because of his age receives nothing because he has savings and assets.
    If they were getting the same it still wouldn’t be fair but a hell of an improvement on the current shambles.

  24. Noddy

    ‘Basic income’, an interesting proposition!
    Our politicians will not support the idea when they MUST have dis-harmony in a community so they can alter something in exchange for votes. Do they ever get it right?
    How can you ‘buy votes’ from people who are financially independent?
    Good luck to the Swiss!

  25. Uber

    Wtf is an ‘up‑and‑coming Irish libertarian ‘?

    You academics sure don’t mind having a few tickets on yourselves. Apparently now you also possess the only genuine social attitudes. Clearly only a patted-on-the-back academic can be considered a libertarian. Forget about all those insignificant no-hopers who have died for the cause of liberty.

    Perhaps you made a spelling error and meant to write ‘librarian’.

  26. Grumbles

    The foolishness here is that they are looking to the government to be generous with their money. Demand all the money you earn be given to you and then YOU be generous with it. If you believe in the benefits of being generous then be generous, but don’t steal from others against their will to give to others and then somehow feel good about it. We are being robbed of the joyous life helping your fellow man gives you because its all done by the government, and pretty poorly I might add. Look after yourself and care for others, it’s the libertarian way.

  27. Megan

    Perhaps you made a spelling error and meant to write ‘librarian’.

    I resemble that remark.

  28. tgs

    Wtf is an ‘up‑and‑coming Irish libertarian ‘?

    Which part of that phrase is confusing to you, ‘up-and-coming’, ‘Irish’, or ‘libertarian’?

    Because none are particularly difficult to understand…

    You academics sure don’t mind having a few tickets on yourselves. Apparently now you also possess the only genuine social attitudes.

    Julie was describing a chap whose article she linked to… nothing more, nothing less. She did not appear to be claiming that she nor anyone else possesses the ‘only genuine social attitudes’.

    Get a grip, mate.

    Clearly only a patted-on-the-back academic can be considered a libertarian. Forget about all those insignificant no-hopers who have died for the cause of liberty.

    How on earth did you get this from her post?

    I hope you’re just having a bad day and that your reading comprehension isn’t normally this impaired by misguided anger.

  29. Rococo Liberal

    Irish libertarian? Is that like a Welsh claret?

  30. Rococo Liberal

    But seriously, I seem to remember peoplle who know a lot more about these things saying that the First Home Owners’ grant made houses more expensive by the size of the grant, because the market knew the grant was vailable and adjusted accordingly.

    I now ask this: if we had a guaranteed income would the prices of everything go up under the same principle?

  31. Noddy

    Rococo Liberal
    >#1096276, posted on December 3, 2013 at 3:43 pm
    But seriously, I seem to remember peoplle who know a lot more about these things saying that the First Home Owners’ grant made houses more expensive by the size of the grant, because the market knew the grant was vailable and adjusted accordingly.
    I now ask this: if we had a guaranteed income would the prices of everything go up under the same principle?<

    Rococo, it would have to be an orthodox economist… one of those who did not see the GFC coming. Retired politicians receive a guaranteed income 'indexed' to inflation so why not every retired taxpayer entitled to the same benefits?
    Is it, AGAIN, 'all animals are equal but some more equal than others'?

  32. Rococo Liberal

    You don’t answer my question. A small numberof MPs getting guranteed income won’t have any impact acrioss the whole econoomy like the receipt of a huge income by OAPs woulod.

    Personally I would be in favour of raising the Old Age Pension to a large sum and cutting out welfare for those under 35. Those buggers should be working in shit jobs to support the oldies.

  33. James B

    This is absolute bullshit, this proposal. It has nothing to do with libertarianism, but instead, hard-core statism.

    Yes, it’s more efficient than the current cluster-fuck of welfare bullshit. That doesn’t mean it’s a good thing. And Friedman eventually recanted his bullshit regarding negative income taxes and basic incomes.

    Nobody has a right to anybody else’s stuff.

  34. This idea of ‘basic’ income is fundamentally problematic on many grounds:
    a) No one owes anyone anything. Let people earn their own keep in life.
    b) The idea ‘income’ implies it is an entitlement. That is a communist idea (to each according to his ‘need’). There is no entitlement to anyone else’s charity.

    The idea of Milton Friedman (commonly mixed up in such discussions) is entirely different.

    a) It is NOT an income. It is not an entitlement. It is part of the social minimum – a really frugal level just needed to survive, no more.

    2) It is a top-up. Say, the social minimum (really frugal) is $5,000 per year per capita in Australia today. Let’s say that a person works very hard and earns $4,800. Then the system would top up with $200, as part of social insurance.

    We should thoroughly and vigorously oppose this communist nonsense of “basic income”. Let people work as hard as they can, and if they fail to achieve a FRUGAL social minimum, let them be given a top up. Anything beyond that is the responsibility of charities.

  35. Percy

    Friedman’s original idea had more of a sliding scale I believe. (correct me if I’m confusing this with someone else)

    If there was a predetermined threshold of say $20K, for every dollar you earn’t under that you would recieve say 50c in reverse income tax. So someone that earn’t nothing would receive $10k, and someone earning $10k would recieve another $5k.

    As Sanjeev said, it was meant to be frugal and also had the added benefits of providing an incentive/reward for work done and of doing away with all other welfare bureaucracies, everything being handled by the tax office.

  36. Percy

    Now, as for the universal income of $750/week for the Swiss. Who wants to run a book on how long before the first bailout request?

  37. johanna

    I don’t think there’s much chance of the Swiss basic income proposal getting up.

    On November 24, a referendum to limit CEO salaries to 12 times that of the lowest paid worker was thrashed by a 2:1 majority:

    http://www.bloomberg.com/news/2013-11-24/swiss-voters-reject-strictest-executive-pay-limits.html

    “We’ve lost” for now, Young Socialist party leader David Roth, one of the initiators of the proposal, told SRF. “But we’ll continue to fight long term.”

    Among the group’s initiatives is one for a national minimum wage. A date for the vote hasn’t been set. ”
    ————————————————
    The basic income proposal is sponsored by the same leftie groups as those who sponsored the failed executive pay referendum. If Swiss citizens are that chary about how other people’s money is spent, I suspect that they will be even more protective of their own.

    It only takes 100,000 signatures on a petition to get one of these referenda up.

  38. Nobody has a right to anybody else’s stuff.

    Truth. So rent must be collected so that monopolists don’t collect others stuff systemically, and that rent may as well be distributed on an equal share basis.

    Market limited redistribution, based upon the capacity of society to pay, not based upon the unlimited ‘need’ of the needy.

  39. Julie Novak

    Hi Sanjeev and Percy, I did mention in my original piece (and I trust that I made it plain enough in this post, but perhaps not) that there are variations of the “basic income” theme, each with varying operational mechanics, so to speak. Many people do incorporate Friedman’s negative income tax as a variant of the basic income idea, and I have repeated the dose, but you are right to outline the subtle differences (including sliding scale ‘negative tax’ subsidy).

  40. Percy

    Hi Julie,

    Apologies if my post came across as some sort of criticism of your piece, that wasn’t my intent at all.

  41. WadeJ

    I’m a bit late to this but in reply to Infidel Tiger’s comment about starving grandparents. Social security had a clear effect on reducing poverty of the elderly.
    http://www.cbpp.org/cms/index.cfm?fa=view&id=1863

    On the point of a basic income, the benefit would be clarity and fairness. All other programs would need to be abolished, and the basic income should apply to all citizens. The problem of course is that it would eliminate the goodies that politicos like to hand out at election time, child tax credits, laptop payments, new home buyer subsidies etc… But choosing between the current hodge-podge of payments and programs and simply mailing cheques/auto deposits once per month the cash at least has the attraction of a low cost to administer.

    Who knows what it would do to worker incentive, but I would suggest that it would not be anymore detrimental than the current programs, and again would have the advantage of efficiency, clarity and fairness.

  42. Andrew

    I work at one of Australia’s major airports. What I find enraging is the number of individuals, surfboard over the shoulder en route to Bali, who travels on public transport to the airport on Centrelink DPS cards.

    *cough*Perth!*cough*

  43. .

    The basic income and a consumption tax is superior to almost any NIT plan (which the 30/30 plan is probably not workable with inflation and the like, the new policy of the LDP with a 20k TFT and 20% flat tax is better) but it needs a lot of amendment and refinement not to end up being a very generous welfare scheme.

  44. That’s $40K TFT plus 20% flat tax, Dot.

  45. Grumbles

    David, why is the LDP lukewarm on libertarian-ism? Income tax is not only theft, it is a claim that the government knows how to take better care of my fellow man than i do.

  46. .

    Sorry David

    The LDP policy is even better than I remembered!

  47. .

    Grumbles

    All taxes in excess of funding justifiable spending may as well be theft.

    Income tax is bad, stamp duties, tariffs, excise and payroll taxes are worse.

    Given the LDP tax policy has been updated, I don’t think it is a lukewarm position anymore. Moderate, but still very much in the right direction now.

  48. Grumbles

    I just had a look at the website and it has indeed been updated since I last read, I cannot endorse the policy position but I 100% endorse the guiding principle “The LDP believes that taxing income is perverse…”. Despite car licencing being exorbitantly high it is probably the most useful tax we collect.

  49. When you get down to it, the only good taxes are rents.

  50. .

    Ultimately we ough to aim for only royalties, Georgist land value taxes and a VAT/GST.

    At a low enough rate none are paticularly distortionary and the GST acts as a broad based, non distortionary tax on all resource costs.

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