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I love simple solutions; magic bullets that make problems go away. I really do. Complex government programs make us poorer and less free. So I really want to believe in the Guaranteed Annual Income (GAI) idea, which has been mentioned by a lot of commenters (and Milton Friedman.) But I just don’t see how the numbers add up. (For similar reasons, I’d like a single tax, but think that given our level of government spending we need a progressive payroll, property, carbon and VAT tax system.)

Here’s what I don’t get. Imagine a single mom living in the South Bronx with two kids. A typical poor American family. How much do we give them? If we give every single person the same amount, there will be too much incentive to produce large families. Think about the amount an individual in the Bronx would need to rise above poverty, and them multiply times 5. It seems like a much better deal than for one person, especially if you assume the marginal cost of raising an extra kid is less than the cost of a single adult.

That can be fixed by giving less for kids than adults. But how much would the family need to not be considered poor by the standard of NYC progressives? Here I have to plead ignorance, I don’t really know. But let’s say it’s $27,000 a year, perhaps $15,000 for the mom and $6000 for each kid. (I assume the government still has free public education and Medicaid, all other welfare goes away.)

Here’s another problem—is this amount the same in every part of the country? I suppose it could be adjusted to make it proportional to the cost of living in each city. Let’s assume you were somehow able to get 60 votes in the Senate for a massive welfare scheme that favored blue areas with a high cost of living. What then?

Basically every single homeless person in America would be better off moving to a place with a mild climate year around and a high cost of living. After all, they are homeless, what do they care about real estate prices? Some portion of that population may be drug users. Is that a problem? It might be viewed that way by the city with a nice climate year around and a high cost of living. Did I mention that I hope to retire in West LA?

OK, so we’ll just go with the simple plan that most people are proposing, the same payment for every adult, regardless of where they live. But here’s another problem. The amount the family of three needs in the Bronx looks much better to a family of immigrants in South Texas. For instance, add a dad and assume 4 family members, making $42,000. With that guaranteed income would you want to work in the hot sun picking vegetables and cleaning hotel bathrooms in South Texas or Georgia? I wouldn’t.

I know what you are thinking: “No problem. We’ll have illegals do all the low paid jobs, and the American poor can relax with their GAI. The illegals don’t qualify for the benefits, so the tomatoes won’t rot in the fields.”

But wait, I thought the left wanted to legalize the illegals. And even if we don’t legalize them, is the following the “Great Society” the left has been clamoring for since the 1960s:

1. An underclass of illegals doing the hard stuff, and living in shantytowns.

2. Tens of millions of poor Americans watching TV, and giving zero incentive to their kids to study hard in school, because they’ve got the GAI awaiting them too.

3. The upper class, in their gated communities.

I’m not sure that’s what development economists mean when they talk about “getting to Denmark.” Denmark doesn’t have a GAI.

Again, I really want to believe the GAI can work. It’s the type of solution I like. Please convince me I am wrong. It’s easier to administer than my wage subsidy idea. But I just don’t see how the numbers add up. At best you could do a GAI that is so small that it does not eliminate poverty. Not enough to live on. That might help at the margin, but it would not end poverty.

The problem with simple solutions is that poor people are just like everyone else–they’re complicated. And they have complicated problems.

PS. I suppose there are some hidden stereotypes in this post. That’s not my intention. I grew up in the 1960s and 1970s and knew plenty of young white people who would love to live what was then called the “hippie” lifestyle if someone else would pay for it.

PPS. I also doubt our tax system could raise enough revenue. The figures I quoted would cost about $4 trillion in gross tax revenue. Yes, the net cost would be far less due to middle class people paying taxes to themselves, but it’s still a lot of money, and would probably mean significantly higher MTRs, perhaps reducing our work effort to European levels.

PPPS. Note to young pundits—there was a reason that Bill Clinton did welfare reform.

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This entry was posted on September 27th, 2014 and is filed under Misc.. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response or Trackback from your own site.



