How a basic income in the U.S. could increase global poverty

BY Megan McArdle  April 18, 2014 at 11:39 AM EST
Instituting a basic income in the United States, Megan McArdle says, would require closing off immigration to the U.S. from low-skilled countries. Photo by Flickr user BBC World Service

Making a basic income politically viable in the United States would require closing off immigration to the U.S. from low-skilled countries, says Megan McArdle. Photo by Flickr user BBC World Service.

Editor’s Note: The guaranteed basic income, as we’ve explored, is not a neat ideological issue. Its proponents include Occupy activist David Graeber and libertarian economist Charles Murray. They want to see a lump sum income replace a bureaucratically administered federal welfare system. As conservative Mercatus Center economist Veronique de Rugy told us, “The minimum income assumes that [the recipients], better than anyone else in Washington, know what they need.”

But liberal economist Barbara Bergmann is against the basic income because she thinks people need those specific federal programs. And today’s interviewee, conservative blogger Megan McArdle, agrees: a lump sum wouldn’t be enough to help a family with a child with special needs, for example.

In reality, McArdle argues, the basic income couldn’t replace the existing social welfare system, as some of her fellow conservatives suggest; instead, she says it would end up doubling the federal budget. And at the same time, because the U.S. would have to halt immigration from poorer countries, she fears it would increase global poverty.

McArdle appears in our Making Sen$e segment about the basic income, below, and our edited conversation with her follows.

Why are you opposed to the guaranteed income?

Well, you’ve got a couple of problems with the guaranteed minimum income.
The first is just fiscal. If you look at how much income would be required to actually give anyone what even we consider a very basic standard of living, you’re talking about probably $15,000 for every man, woman and child in the United States. So you think about for a family of two adults — that’s $30,000 a year. That’s probably enough to live on, but what’s the fiscal impact of that? It’s about 200 million people you would have to be sending those checks to — a little over, actually. So you’re talking about in the region of $6 trillion a year, which is much larger than our current budget.

At the same time, you know, often it’s argued: Well, you could do that and you would zero out all the poverty programs. But a lot of the poverty programs are things that I don’t think we would be comfortable zeroing out. So for example, $30,000 a year is probably not enough to pay for a special needs child who has a lot of wheel chairs and special training and so forth that they need, so that program is going to stay. It’s possibly not enough to cushion various financial shocks; those sorts of programs are going to stay. And so what you would end with is an add-on that’s sort of conservatively doubling the size of the federal budget.

If you think about the debate, I don’t think there’s anyone in America who wants their taxes doubled.

And how would a basic income affect work?

The other problem of course is that some people are going to drop out of the labor force. If you can live without working, some people will choose to. We don’t know how many there are; no one’s ever tried this experiment, but what is the end result? The tax base is going to be shrinking at the same time that the number of payouts has to go up.

Part of this is a bit moralistic. Everyone should be contributing. Having half of the population, or any significant fraction of the population, say that my job is just to take, and other people go out and make that money, I think that is morally problematic. Not, obviously, for people who really can’t work, for people who are unable to, for one reason or another, are unable to support themselves. But for people who can and choose not to.

But even beyond that, what we know from looking at studies of people who are out of work is that being out of work makes you unhappy; it makes you less healthy. All sorts of socio-economic indicators say it decreases your wellbeing. Even though this can be a rational short-term decision, right: I don’t like my boss right now. I don’t like my job right now so I’m going to step back and stay out of the labor force. One place we do see this now is with stay at home mums — not to in any way criticize their decision, but ones who then want to go back to the workforce have a really hard time getting back in.

And so the short-term decision to not work because you don’t like what you’re doing right now can turn into a long-term decision to never get onto that employment ladder that leads to better jobs in the future. What we see in studies of people who are home, even if they’re financially covered, even if they’re on disability or long-term unemployment, those people are not happy and they aren’t happy until they get back to work.

Charles Murray and David Graeber want to gut the federal bureaucracy and replace it with a basic income. Do you support keeping these federal programs the way they are?

Well, again I go back to what programs are we talking about? For example, are we talking about public schools? Are we not going to guarantee that every child gets educated? That’s a big expense, but that is a big expense for the government. In some sense, it’s a redistribution program because wealthy people don’t get nearly as much out of the system as they pay into it. Are we going to take that out and turn that into a voucher? It’s not that I wouldn’t necessarily support that, but you still need an infrastructure to make sure… There are some parents who wouldn’t send their kids to school if you made it a cash free grant.

Are you going to take away health care benefits for people who are too sick to buy insurance on $30,000 a year? I’m skeptical and I’m not sure that I would support, say, taking someone who is severely disabled and telling them: Well, here’s $10,000 a year, just like that healthy 20-year-old down the street, and you get the same as he does. I’m not sure that I would support getting rid of all of the government transfer programs and replacing them with a check that goes the same to everyone.

There is a question in society of some people having greater needs, and we’ve decided to make sure that those needs get met.

Switzerland is weighing a ballot referendum that would give a basic income of 34,000 Francs to all its citizens. Why couldn’t that work here?

The greatest poverty reduction program that the world has ever seen has been the United States of America. We have, for decades, over a century, been moving people who are extremely poor in the countries where they are, to a country where, just by being here, their wages can double or triple or quadruple. That would not in any way be compatible with a guaranteed minimum income, just politically. If you come here and become a citizen, that entitles you to a check for $15,000 a year for the rest of your life from the U.S. government?

A lot of immigrants are low-wage workers. They’re not skilled, a lot of them. They don’t have as much education as most Americans and so they never do get up to the point where they would ever pay enough in taxes to make back that check. Even if you just limited it to their children, the political support for importing people whose children will then be entitled to the same $15,000 a year as your children — I don’t think that would ever be politically viable.

So if you want to have a guaranteed minimum income, you need to shut down, pretty much effectively, shut down immigration, or at least immigration from lower skilled countries, which on net would do a lot more to increase global poverty than it would to decrease poverty in the United States.

So will we ever have a guaranteed minimum income?

I think it’s very unlikely that the United States will ever pass a guaranteed minimum income. For a few reasons: First of all, part of what makes a welfare system work is trust, and having a very homogenous culture where you trust that people you’re giving welfare to aren’t abusing the benefits, and they trust that the benefits are going to be given out in their best interests.

And America doesn’t score very high on that. We’re a very pluralistic society. We’re not culturally homogenous. We live in communities that are often very separate, and so it’s pretty politically difficult to persuade people that we should give 220 million Americans, give each of them – I’m excluding the children – give each of them a check that’s got no strings on it at all, and to which they’re entitled for the rest of their life. I’m just very skeptical that we’ll ever pass anything like that.

I think it’s going to be a really tough pass in Switzerland. And in Switzerland, essentially, what they’re doing is taking money from the immigrants, almost all of whom are wealthy, and are bidding up the price of real estate, to give to Swiss citizens. The dynamic in the United States would be the opposite and I just don’t see that happening.