Libertarianism and the Pragmatic Case for a Universal Basic Income

This series on the libertarian case (or lack of one) for a basic income has been very useful. I have commented at length on several of the individual contributions. Let me try to sum up my reactions without repeating myself too much.

(1) As Zwolinkski and Huemer seem to agree, the libertarian case for a basic income is largely a pragmatic one. It falls into the same category as marijuana legalization. If we ask, “Does the state have the moral authority to decide whether I can use/grow/sell marijuana?” then the answer is, obviously, “no.” But when Washington, the state where I live, held a referendum on marijuana legalization, that is not the question I asked. I asked, “Will this proposal, flawed though it is, make things better or worse than they are now?” The answer was yes, so I cast my vote in favor.

(2) We need to be careful with terminology. Zwolinski uses the term Basic Income Guarantee (BIG) to refer to any policy that guarantees a minimum income level to everyone, regardless of family structure or labor force participation. The term is a useful but a broad one. It is important to recognize that it covers a wide variety of different policies, including a negative income tax (NIT) and its many variants, as well as the policy I call a universal basic income (UBI). The key difference between the NIT and UBI versions of BIG is that an NIT reduces the basic grant by a set percentage as the beneficiary’s income rises, whereas a UBI applies no benefit reductions. Under a UBI, everyone gets the full grant regardless of their income or wealth.

More formally, let B be the benefits a given person receives, G be the amount of the minimum income guarantee, Y be a person’s income from other sources, and t be the benefit reduction rate (or effective marginal tax rate) that applies as income rises. For all forms of BIG, B=G-tY. For an NIT, t is a positive number greater than 0 and less than 1. For a UBI, t=0.

Another way to put it is that a negative income tax is means tested, as are most existing U.S. welfare policies, such as TANF, SNAP, and Medicaid. A UBI, as I use the term, is not means tested.

(3) Jim Manzi’s response essay shows why it is important to distinguish between NIT and UBI variants of a BIG. Manzi, like many basic income critics, is concerned about work incentives. He argues that “it is fairly extraordinary to claim that the government could guarantee every adult in America an income even if they did zero work of any kind, and that somehow this would not reduce work effort.” In support of this contention, he cites the results of a set of income maintenance experiments conducted in the 1970s and 1980s. Those experiments, he says, “consistently found that the tested programs reduce the number of hours worked versus the existing welfare system.”

Work incentives are an important issue. Prompted by Manzi’s concerns, I have recently posted a long two-part response on my own blog covering theory and evidence related to BIGs and work incentives.

My conclusion is that Manzi is right, on grounds of both theory and evidence, about the work incentive effects of an NIT. However, he is wrong, on both theory and evidence, to say that replacing our current welfare system with a UBI would reduce work incentives. On the contrary, I think there is every reason to believe that replacing TANF, SNAP, and other programs with a UBI would significantly increase both average hours worked and average labor force participation, with the increases concentrated among households that are just below or just above the poverty line.

(4) Robert Frank raises three important issues in his response essay on basic income and public work.

First, he correctly notes that one of main sources of resistance to a UBI/BIG is the fear that people would take the money and use it to finance lives devoted to folk music and nude volleyball. Part of my response, as argued in the two-part post linked earlier, is even though some individuals would no doubt increase their consumption of leisure, there are strong theoretical and empirical reasons to believe that those would be exceptions, and that the average response to a UBI, especially among low-income households, would be toward more work, not less.

I would add that the worry that people might choose to spend their lives in idleness if they could afford to do so is more conservative than libertarian. Libertarians do not subscribe to the “gospel of work,” as Zwolinski calls it. They subscribe to the gospel of freedom of choice. Freeing people from the micromanagement of bureaucrats who are sure they know what everyone should choose is a feature, not a bug, of a basic income policy.

The second issue Frank raises is that of how large the “G” parameter of a BIG/UBI should be. He points out that “a basic income grant sufficient to lift urban families from poverty probably could not win political support initially, but even if it somehow did, fierce opposition to it would surely erupt quickly.” My own view is that to be effective, a UBI need not be sufficient by itself to lift everyone out of poverty. Instead, I view a UBI as a minimal but dependable platform on which people can build a better life for themselves, if they choose to do so.

Third, Frank advocates financing a BIG/UBI “simply by taxing activities that do more harm than good.” I agree that if we are going to tax, it is better to tax “bads” than “goods,” but I don’t think we have to resort to new taxes of any kind in this case. Instead, it makes more sense to finance a basic income by cutting things from the federal budget as it now stands. First, we should eliminate most existing means-tested income support programs—TANF, SNAP, etc. Second, we should scrap “middle-class welfare” in the form of tax loopholes like the mortgage interest deduction and other tax expenditures. Third, we should integrate a UBI/BIG with existing policies toward disability, unemployment insurance, and retirement in a way that eliminates the possibility of double dipping. For example, retirees and disabled persons should be able to choose between Social Security benefits or the UBI, but not both.