Economic policy experts debate universal basic income instead of welfare programs
Posted September 29, 2016
What if each American adult was given a chunk of money — a universal basic income of around $10,000 in disposable cash — and welfare programs were eliminated?
It's a concept that got a firm "no way" in 2006 when political scientist and author Charles Murray wrote a book about the idea. But it's now being experimented with in some European countries: Sweden just held a national referendum on providing basic income in lieu of welfare programs and Finland is trying it out on a limited, experimental basis as a demonstration project.
In America, the concept is gaining more attention and is being discussed as a potential alternative to the existing social safety net of welfare and other "money transfer" programs.
At the American Enterprise Institute in Washington, D.C., earlier this month, Murray and his frequent sparring partner Jared Bernstein, senior fellow at the Center for Budget and Policy Priorities, argued good-naturedly whether abandoning the country's safety net programs in favor of universal basic income (UBI) would be a great thing or a disaster.
Murray, author of books like "In Our Hands: A Plan to Replace the Welfare State" and "Coming Apart: The State of White America, 1960-2010," believes safety net upheaval is inevitable, due to huge shifts in the job market and the rising cost of Social Security, Medicare and other programs. Safety net upheaval using a universal basic income is also a good idea, though, said Murray, who is one of the institute's scholars.
His UBI proposal would include getting rid of all money-transfer programs, including programs like Social security and Medicare, in favor of a roughly $13,000 annual payment, divided into monthly electronic deposits for adults. In his plan, about $3,000 of it would be used to buy health insurance, leaving roughly $10,000 disposable income. Murray is quick to note it's unlikely his suggestions would be implemented without some changes being made to it.
While $13,000 isn't enough for an unemployed person to live on, Murray said, adults who are willing to live together, cooperate and pool their resources could easily make it stretch. But the idea isn't that the UBI would be the sole income for an individual or family. It would supplement earnings and if someone worked, it about guarantees they won't be impoverished. Some of that disposable income could also be invested in the stock market, he suggested.
Help or hinder
Murray asserts that UBI would solve involuntary poverty, encourage work, boost the likelihood of retiring comfortably and avoid breaking the national bank, which programs like Social Security and Medicare will do.
And he counters the notion that such a "handout" would make people lazy and unproductive, proposing that when anyone who receives a UBI earns somewhere between $30,000-60,000 a year, they'd pay a small graduated tax, but until then, they'd get to keep the entire amount, so there's no disincentive to work. He predicts it would "lure people into working until they can't afford to quit."
Wealthier Americans would get the same UBI as poorer ones, because it's intended to make up in part for the fact that UBI would replace not only welfare programs, but Social Security and Medicare coverage, which wealthier people also use.
Bernstein, senior fellow at the Center for Budget and Policy Priorities, is a critic of Murray's proposal. Social Security, Medicaid, Medicare and the Affordable Care Act all work well, delivering their "intended effects very efficiently," he said. Social Security has moved the poverty rate for the elderly from about 44 percent to roughly 9 percent and its administrative costs have fallen from 2 percent when it was implemented to 0.5 percent today.
Bernstein said Medicare and Social Security are "deeply beloved programs" that are "also highly efficient." Medicare's costs, he said, grow slower than healthcare costs of the private sector.
After "ticking up, the uninsured rate dropped off a cliff" from 16 percent in 2010 to about 9 percent today under the Affordable Care Act, Bernstein said, adding that effective antipoverty tools like the Earned Income Tax Credit have decreased federal poverty rates from 26 percent a half century ago to 14.5 percent today.
Bernstein, who previously was chief economist and an advisor to Vice President Joe Biden as well as executive director of the White House Task Force on the Middle Class, also believes that taking a system of money transfers intended to benefit the poor and using the money to benefit everyone, regardless of their income bracket, means it's "going to dilute its equality-inducing" effects. "It is simple math," he said.
When it comes to a universal basic income, America has neither a comparable income boost or a current proposal to put one in place. That's not true in the United Kingdom, where Parliament members are being pitched a UBI.
The Alaska Permanent Fund Dividend may be the closest "universal" income boost in the United States and it's a far cry from such a proposal. The fund was established by Alaskan lawmakers who wanted to see that the state's residents got some personal benefit from the Trans-Alaskan Pipeline System, which moves crude oil to the refinery process. Since the fund was established in 1982, annual payments to residents who have lived there the full year have ranged from the low $300s to over $2,000 a year, fluctuating quite a bit. There are also certain requirements, such as not having been incarcerated during the year. But with certain requirements met, citizens benefit equally.
Boosting basic income is not the only benefit of a UBI, according to Murray, who said it offers a chance to "revitalize American civil society." He expects loved ones will be better able to force those in personal crisis — he used the example of someone who just "drinks up money before the end of the month" — into getting help and taking responsibility.
While the mass entry of women into the workforce was a good thing, Murray said, it had the unintended consequence of taking them away from being deeply engaged in their communities, to the detriment of those communities. Murray said he'd never suggest women should leave the workforce if they want to stay, but those who'd rather be home would have more ability to make that choice with a UBI, he said.
The power to make choices is one benefit Bernstein hailed, too. He said he did like that a "UBI of some sort" would provide some bargaining power so people would not "have to take really lousy jobs they don't want."
Instead of a guaranteed universal basic income, Bernstein questioned whether a more helpful approach would be to "create a guaranteed jobs program."
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