The Free Banquet

The Case for Universal Basic Income
Stefan Bohrer
Swiss activists organised a performance where eight million Swiss 5-cent coins (one per inhabitant) were dumped on the Bundesplatz. Their federal popular initiative forced the government to hold a referendum on whether or not to incorporate the concept of basic income in the Swiss Federal Constitution. In 2016, the referendum resulted in 76.9% of votes against the introduction of a basic income.

From St. Paul’s venerable saying, “if a man does not work, neither shall he eat,” to the always-contemporary saw, “there’s no such thing as a free lunch,” the common sense of humankind has always seemed dead against a universal, unconditional basic income. Charity, of course, is no less a tradition: for widows, orphans, and the infirm in all periods, and in the modern period also as social insurance for the elderly and the involuntarily unemployed.

But aid for the deserving poor has at times, and especially in modern times, entailed the expensive and humiliating burden of proving to the satisfaction of donors that the recipient is indeed both deserving and poor. And even in the most generous and enlightened societies, such aid has sometimes had perverse effects. The most common is the “poverty trap.” When aid is means-tested, every dollar of earned income above the qualifying level results in a corresponding reduction of aid. This is a disincentive to accept the generally low-income, training-poor jobs available to welfare recipients. The same disincentive functions as a “household trap,” keeping women—the usual caregivers—with small children at home until the children are grown, insuring that when those women do eventually enter the labor market, they are at a severe disadvantage. In the United States, the Clinton administration resolved this dilemma by the simple, harsh step of eliminating long-term assistance to poor households, forcing even parents of small children into the labor force—a boon to low-wage employers. Unemployment insurance, meanwhile, is conditional on recipients’ producing evidence of a minimum number of job applications per week—a requirement that, as often as not, proves either burdensome or farcical.

We do not, obviously, take very good care of our poor and unemployed. And we will soon have even more of them: the elimination of jobs by automation has barely begun. Without a radical new approach to economic security, we are headed either for an even worse bureaucratic morass or for a Blade Runner, devil-take-the-hindmost world.

Basic Income: A Radical Proposal for a Free Society and a Sane Economy (Harvard University Press, $29.95, 400 pp.) by economist Philippe van Parijs and political scientist Yannick Vanderborght proposes a radical idea that will be new to many readers although, as they conscientiously point out, it has a rich history. Like most good political ideas, the right to a basic income originated in the Enlightenment, though proposals for the relief of the poor are of course much older. St. Ambrose waxed eloquently indignant on the subject of economic inequality. Luther admonished the German nobility that “it would be easy to make a law, if only we had the courage…that every city should provide for its own poor.” The narrator of More’s Utopia railed against England’s savage punishment of crimes against property: “It would be far more to the point to provide everyone with some means of livelihood, so that no one is under the frightful necessity of becoming first a thief, then a corpse.”

The philosophes radicalized and universalized this impulse. According to Montesquieu, the state “owes all its citizens a secure subsistence”; Rousseau posited that “every man has naturally a right to everything he needs”; Condorcet wrote that “society is obliged to secure the subsistence of all its citizens.” Thomas Paine even proposed the first universal basic income, combining an endowment at age twenty-one and a retirement income at fifty. The subsequent history of experiments with income-security schemes in modern Europe and the United States, from Bismarck to Milton Friedman, from the Poor Laws to the current experiments in Switzerland, is a secondary but fascinating theme of Van Parijs and Vanderborght’s book.

 

There are three defining elements in Van Parijs and Vanderborght’s proposal. First, basic income is individual, paid to each citizen rather than to a family or household. Second, it is universal, paid without regard to other income or assets. Third, it is obligation-free, a matter of right, and not tied to any work requirement. Other aspects of their plan—income levels, funding mechanisms, pace of adoption—are less fundamental.

The chief reason for individual rather than household payments is that marriage and cohabitation are complicated enough without introducing economic incentives into a relationship. Public-assistance programs usually take account of the economies of scale in consumption that living together entails, reducing benefits accordingly. But basic income is not a poverty-reduction program; it is a freedom-maximization program. Its purpose is to increase options for everyone, in both work life and intimate life.

Why universality? In the first place, because means-testing is an administrative nightmare. But even more important, because it frees recipients to work. At present, earned income reduces public assistance dollar for dollar, and a full-time job is likely to result in termination of benefits. But far too many of the jobs available to most recipients of public assistance are insecure dead-ends. If the jobs disappear or prove intolerable, the resulting interval until benefits resume can plunge a family into a debt spiral. With a secure basic income, taking whatever job is available entails no such risk, and recipients are freer to take a low-paying job that provides valuable training or experience, hence perhaps a way out of the low-wage ghetto. They are also freer to create their own jobs, and even to become entrepreneurs, on however humble a scale.

It is the obligation-free part that sticks in many people’s craw—who, after all, is not incensed by the spectacle of the idle poor? Forcing recipients of public assistance to prove that they are involuntarily unemployed serves several unworthy social purposes: it gratifies popular sadism; it keeps the number of recipients down; and it swells the reserve army of the unemployed, thereby subsidizing low-wage employers. Van Parijs and Vanderborght quote a sociologist’s scathing description of the effects of obligation-to-work regulations: by “allowing the authorities to force someone into a job, however rotten or badly paid,” they “assure that the meanest employer, paying the worst wages for the filthiest jobs, is not kept out of a worker while there is one able-bodied unemployed man available.” And of course, like means-testing, obligation-to-work regulations require a large, expensive, and intrusive bureaucracy.

Historically, the two main grounds for criticizing unbridled competitive individualism have been efficiency and justice: it wastes the talents of the losers and deprives them of chances for a decent life. These are also the moral underpinnings of a universal basic income. Van Parijs and Vanderborght repeatedly stress that their proposal is not a species of poor relief; it provides a floor, not a safety net. It is not only, or even primarily, intended to keep people from starving or sleeping in the streets. Shelters and soup kitchens might achieve that goal equally well, but the goal itself is too modest. A basic income aims at allowing people to design their lives, on the principle that while creativity in some form is a universal biological endowment, chronically insecure, degraded, and exploited people cannot be creative, and society will be worse off for the loss.

The argument from justice may, as in Rousseau, appeal to every individual’s natural right to realize her powers, rather than, as in the argument from efficiency, to society’s interest in her doing so. This argument is perfectly adequate, provided rights are derived from contingent moral intuitions—Smith’s and Hume’s “sympathy,” for example—rather than from supposedly immutable (but unfortunately nonexistent) metaphysical principles. But there is another, even firmer ground for treating basic income as a right: the social nature of wealth creation. Markets do not allocate rewards fairly; no one deserves to be filthy rich. Van Parijs and Vanderborght illustrate by quoting the economist and computer scientist Herbert Simon, one of the twentieth century’s biggest brains:

When we compare average incomes in rich nations with those in Third World countries, we find enormous differences that are surely not due simply to differences in motivations to earn [or natural resources, but to] differences in social capital that takes primarily the form of stored knowledge (e.g., technology, and especially organizational and governmental skills). Exactly the same claim can be made about the differences in income within any given society.... It is hard to conclude that social capital can produce less than about 90 percent of income in wealthy societies like those of the U.S. or Northwestern Europe.... [A flat tax of 70 percent] would generously leave the original recipients of the income with about three times what, according to my rough guess, they had earned.... In the U.S., a flat tax of 70 percent would support all governmental programs…and allow payment, with the remainder, of a patrimony of about $8000 per annum per inhabitant, or $25,000 for a family of three.... Of course, I am not so naïve as to believe that my 70 percent tax is politically viable in the U.S. at present [i.e., 1998], but looking toward the future, it is none too soon to find answers to the arguments of those who think they have a solid moral right to retain all the wealth they “earn.”

It is, indeed, never too soon to disturb the ineffable confidence of overpaid blockheads in their perfect entitlement to a disproportionate share of the common wealth. There most certainly is such a thing as a free lunch. There is, in fact, a free banquet, of which every rich person daily partakes. It is long past time they invited the rest of us.

 

We will soon have more poor and unemployed: the elimination of jobs by automation has barely begun

Much of Basic Income is devoted to practical matters: in particular, to comparing Van Parijs and Vanderborght’s proposal with likely alternatives. Traditional guaranteed-minimum-income schemes involve means-testing, clawback (the reduction of assistance dollar for dollar of earned income), and proof that the recipient is actively seeking employment, with the undesirable effects already noted. Those disadvantages have been widely enough recognized that both liberals and enlightened conservatives generally prefer a different income-maintenance approach, either a negative income tax or an earned-income tax credit.

The best-known proponent of a negative income tax was Milton Friedman. As with a basic income, a minimum income level is set for all individuals or households, and those with incomes lower than the minimum receive an amount equal to the difference. By means of a somewhat technical but always clear discussion, Van Parijs and Vanderborght show that, given certain common features (payment to individuals, no work requirement, and similar funding mechanisms and tax rates), a negative income tax and a universal basic income are equivalent in every respect but one. That respect is, however, crucial. A basic income is paid upfront: weekly, monthly, or quarterly. A negative income tax is paid out at the end of the tax year; and as Van Parijs and Vanderborght dryly observe, “poor people cannot wait until the end of the tax year before receiving the transfer that will enable them not to starve.”

An earned income tax credit (EITC), a variant of the negative income tax, first introduced in 1975, is now the largest poverty program in the United States. Its defining feature is that benefits are paid only to the employed. If a means-tested program is also in place, the EITC would approximate the effects of a negative income tax, though again without the ability to cushion families through periods of income deprivation. Without a minimum-income program, an EITC functions as a subsidy to low-wage employers, which doubtless explains its popularity in the United States.

Milton Friedman / Wikimedia Commons

Van Parijs and Vanderborght also discuss a range of other possibilities: wage subsidies, a reduction of the work week, the government as employer of last resort, and a close cousin of universal basic income, a universal lump-sum endowment at age eighteen or twenty-one. They argue, plausibly I think, that in all cases a universal basic income offers more freedom and security for the money. They also discuss whether and how other kinds of government assistance—for housing, education, health care, etc., as well as social-contribution programs like Social Security—might be combined with a basic income.

Is it feasible? Even if America were a functioning democracy rather than a dysfunctional plutocracy, would there be enough money? Van Parijs and Vanderborght propose, for illustrative purposes, a funding level of 25 percent of average GDP—around $1,200 per month in the United States. On one side of the ledger, this would replace the public-assistance portion of the government’s current social-welfare spending—a considerable saving. But on the other side, if financed solely by a flat tax on labor income, and without taking into account likely improvements in productivity and human capital that would eventually result from a basic income, this funding level would entail marginal tax rates somewhere between 60 and 80 percent.

Is that the end of the story, the graveyard of our noble hope? Not quite. There are several other possible—indeed socially beneficial—ways of raising revenue besides taxing labor income. Before even mentioning them, though, one should note an elementary fact about taxes. As a famous social parasite once remarked (a sentiment echoed by another social parasite during a recent presidential campaign debate): “Only the little people pay taxes.” Tax evasion—primarily by those who can afford to hire expensive tax lawyers—costs hundreds of billions of dollars in lost tax revenues each year, and an estimated $20 trillion is held offshore for purposes of tax evasion. In a rational world, the costly and destructive Global War on Terror would be replaced by a Global War on Tax Evasion.

Even before that happy day, much progress can be made simply by holding President Trump to his campaign promise to eliminate the carried-interest deduction, a $250 billion-a-year gift to hedge-fund managers, and more generally by taxing capital income at the same rate as labor income. Since the top 0.1 percent of American households receive half of all capital gains, there can be no reason for taxing them at a substantially lower rate than the median wage earner, except a fanatical devotion to increasing the income of the fabulously wealthy, a compulsion one might call Republicans’ Disease.

Other possible sources of revenue discussed by Van Parijs and Vanderborght include user fees on scarce resources like land, the atmosphere, and the broadcast spectrum; a “Tobin tax” on financial transactions; and consumption and value-added taxes. They mention only in passing possible reductions in military expenditures, but there are large savings to be looked for from closing some of our nearly one thousand foreign military bases and canceling unnecessary weapons programs, above all the mind-bogglingly expensive F-35 Joint Strike Fighter.

 

Convalescence from large-scale social pathologies like plutocracy is bound to be gradual. Barring a miraculously rapid disappearance of Republicans’ Disease, a universal basic income will have to be approached by stages. Essentially this means compromising on funding levels, funding range, or obligation to work. After further technical but, again, lucid discussion, Van Parijs and Vanderborght settle on two options: in societies where the obstacles to a basic income are mainly political, a negative income tax, which appears to base assistance on virtuous behavior (i.e., participation in the labor market); and in societies where the chief obstacles are economic, a partial universal income, starting low and perhaps increasing along with average productivity.

We can, of course, start anywhere—“if only we had the courage,” as Luther put it. It hardly matters where or how. What matters—what will lift the heart of every reader of Basic Income—is that Van Parijs and Vanderborght have enlisted the rigor and scruple of first-rate social science in the service of a generous social vision that is at least as old as Saint Ambrose and as up-to-date as Pope Francis. Our sensible and humane descendants—they are bound to be sensible and humane, since humanity would otherwise have long since succumbed to nuclear or environmental catastrophe—will doubtless wonder, with the easy impatience of posterity, what we were waiting for. They may, in fairness to us, decide that we were waiting for books like this.

Published in the May 5, 2017 issue: 

George Scialabba is the author of What Are Intellectuals Good For?  and For the Republic.

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