How does the largest welfare program imaginable have libertarian supporters?
- The idea for a universal basic income, or UBI, is increasingly popular.
- While it seems like a left-wing handout, many prominent right wing thinkers have endorsed the idea.
- The libertarian version of UBI does have a few key differences from the more standard version.
We've all heard of it: basic income, the freedom dividend, the income guarantee, or any of the other names for the program that would give everybody a payment as a right of citizenship. Such plans have been discussed by American thinkers for at least two hundred years and have gained increasing attention and popularity in the modern age.
On the face of it, it seems like a rather left-wing concept. The idea of sending everybody a check each month for existing seems as Marxist as it gets. It also doesn't help that many of the best-known supporters of the idea are on the left. However, the idea's popularity isn't limited to red book clubs. There are right-wing supporters of the concept as well, among them was famous economist Milton Friedman.
The libertarian case for the basic income
For those who don't know, Milton Friedman was an economist working out of the University of Chicago during the middle part of the 20th century. A leading thinker behind monetarism, he favored tinkering with the economy through controlling the size of the money supply rather than through fiscal policy. Even people on the American center-left acknowledge his brilliance as they criticize his mistakes.
When it came to the problem of poverty, Friedman supported letting the free market and private charity have a chance to solve it first. However, he understood that dealing with it effectively at the large scale likely required at least some state intervention. As he explains in Capitalism and Freedom, its the free-rider problem that causes this:
It can be argued that private charity is insufficient because the benefits from it accrue to people other than those who make the gifts [...] I am distressed by the sight of poverty; I am benefited by its alleviation; but I am benefited equally whether I or someone else pays for its alleviation; the benefits of other people's charity therefore partly accrue to me. To put it differently, we might all of us be willing to contribute to the relief of poverty, provided everyone else did. We might not be willing to contribute the same amount without such assurance. In small communities, public pressure can suffice to realize the proviso even with private charity. In the large impersonal communities that are increasingly coming to dominate our society, it is much more difficult for it to do so.
He argued that this justified having the state take steps to reduce poverty, as it is harder to skip out on paying money to reduce poverty when that is tax fraud rather then miserliness. This didn't mean Friedman supported the welfare state though; he argued instead for a much simpler solution in the form of the negative income tax, or NIT.
In our current welfare system, there are a myriad of programs that each deal with a different aspect of life for the poor. One program provides food aid, another deals with housing, yet another provides low-cost utilities, and another one deals with income security for the elderly. A large number of regulations, such as minimum wage laws, exist to help hold wages high enough to keep other working people off the welfare rolls.
Friedman viewed this multitude of agencies as wasteful and suggested that a single program would do the same job with a smaller government by just giving cash to people who needed it. As a libertarian who placed a high value on the freedom of choice, he also suggested it was a much more dignified way of helping the poor than telling them what they could and could not do with the money we give them as is currently the case with things like food stamps.
How would it work?
The mechanism is relatively simple. Dr. Friedman explains it above in his interview on Firing Line.
For those who didn't watch the clip, it is easily explained. The income tax system is changed a bit to include an exemption based on family size. Only earned income above that point is taxed. If you make less than the exemption amount, you instead receive a subsidy.
The size of the subsidy would change based on how much you make and would also be subject to a subsidy rate. This means that if a person makes $1000 less than the exemption point, they would only get a certain percentage of that difference back as a subsidy. Friedman argued that the subsidy rate shouldn't any higher than 50 percent, as it would discourage work if it were raised past that point.
As an example, suppose we lived in a society where with an NIT where the exemption for me is $10,000, and the subsidy rate is 50 percent. If I were to only make $8000, I would pay no taxes and get back half of the $2000 difference between what I made and the exemption point, or $1000.
If I made exactly $10,000, I would neither pay taxes nor receive a subsidy. If I made more than that, I would start to pay income taxes on the income above that point. If I made absolutely nothing, I would get the largest subsidy possible under this system, $5000, which would be the "guaranteed" income under this arrangement.
Such a program would also have the advantage of not having a "welfare trap," the point where making more money at work causes welfare payments to go down by a larger amount and leaves the recipient worse off. The trap is a well-known problem and is bashed by many economists as a significant flaw that discourages people from trying to improve their situation.
The numbers used above were just for discussion; the exact numbers used in a working system would reflect economic realities. It should be said that Friedman intended to keep the guaranteed rate low enough to encourage people to still work while at the same time being high enough to correct for the failures of private charity.
Has it ever been tried?
Yes, it has, and it worked.
Several experiments in the 1970s in the United States and Canada showed that the negative income tax could work as intended. The guaranteed income was set as equal to the poverty threshold and, as predicted, the labor supply fell because of this.
This fall was not as significant as experts feared, however. The simultaneous rise in high school graduation rates suggests that at least part of this fall in labor supply was caused people having the economic security to stop working and finish their education. Claims that the program resulted in an increased divorce rate were initially reported but are now known to be the result of a statistical error.
What do others think of the NIT?
Criticism of the idea comes from two directions.
On the right, critics often object on a fundamental level to any redistribution or an income tax of any kind. Some who do support the NIT see it merely as the best version of a bad deal.
On the left, criticism tends to focus on either the mechanism of the NIT or on the details of Friedman's plan. Josh Martin, an executive committee member at the US Basic Income Guarantee Network, explained his objections this way:
A negative income tax and a universal basic income seek to achieve the same goal — to ensure an income floor for everyone. But, given the choice between the two, a UBI is preferable as it solidifies this income floor as a universal benefit, while an NIT would only provide the income floor to those who need it. This conditionality makes it easier for politicians and for people who don't receive the NIT to justify cutting the program as they don't receive the benefit personally.
This concern that a purely redistributive program will be subject to political difficulties later is a common one. It is part of the reason why regressive taxes on the poor fund Social Security — you can't attack it in the way Mr. Martin describes. A system of basic income that pays everybody a set amount each month is similarly protected; it's hard to cut a program everybody gets direct benefits from.
Universal basic income is an increasingly popular idea that will likely exist in some form someday. It enjoys support from every part of the political spectrum for various reasons. While the far left and the far right might disagree on why a universal basic income program is needed or what form it should take, the fact that they agree on the need for such a program is surprising enough to almost count as an endorsement in itself.
Bret Weinstein says that we're at the end of a massive technological and geographic boom, and that we should prepare for the next step in our societal evolution. Yet the future may not be optimistic for all. A cultural backlash to change, he says, is inevitable.
In this wide-ranging talk, controversial professor Bret Weinstein covers several topics: politics, technology, and tribalism, just to name a few. But ultimately the former Biology professor at Evergreen College talks with us about why this particular decade is so interesting. Given the explosive growth of the 20th century, he argues that we've come to the end of that particular boom and have just started searching frantically to keep the pace that we've come to expect. When that change doesn't come, Weinstein posits that we search for scapegoats, turn inwards, and start to attack ourselves. And that's paraphrasing just some of the half-hour talk we have for you.
Who will live on the this brand-new floating nation in the South Pacific—and how?
Seasteading began as a thought experiment: imagine a sovereign Libertarian utopia in international waters, far from the reach of any government. Over the last decade, this dream has inched closer and closer to reality. But establishing a completely independent floating city in the ocean isn't simple--or cheap. The Seasteading Institute compromised a little on its independence and instead sought a partnership with an established nation that could support their project while having a very light hand on regulations. The idea grew out of and caused a stir in Silicon Valley, was widely reported in the media, and Marc Collins, a former government minister in French Polynesia, saw an opportunity for symbiosis. The Seasteading Institute needs internet connectivity, energy solutions, food, and government permission to establish themselves in the South Pacific Ocean, while Polynesians are very interested in the technology needed to build floating cities—a concern at the front of their minds as sea levels rise—and in economic growth. And so Collins co-founded Blue Frontiers, a world-first company that builds societies on the sea. But who will live on this brand-new floating nation in the South Pacific—and how? Marc Collins explains the feats of engineering that are making this vision a reality.
There's one whopper out there that people rarely acknowledge, but self-confessed "cynical libertarian" Dave Barry isn't shying away.
If you think lies are funny, you might be a cynic. If you’re a cynical libertarian, you might be Dave Barry. As a humorist at the Miami Herald for more than 20 years, Barry kept a close watch on state and national politics. What he saw, and continues to see, is a great lie perpetrated on the voting public: that politicians actually care about you (they don’t). But much like the lie of professional sports — that it truly matters which team wins (it doesn’t) — we depend on the lie so that we feel good about participating, whether in politics or in sports. Hilarious, right? Dave Barry is the co-author of For This We Left Egypt?.
With President Trump appointing officials who want to abolish the departments they hope to lead, one might ask, "What is the rationale for this?". Milton Friedman offers us an answer.
The Trump administration has officially taken shape. Among the cabinet positions is Rick Perry as the Secretary of Energy. A position which he previously promised to eliminate if elected president. In a similar vein, Betsy DeVos is managing the Department of Education, a department which Trump has expressed interest in abolishing.
While the populist opposition to these departments is well known, one might ask if there is any intellectual backing to the idea of dramatically cutting down the size and scope of the Federal Government, especially these two important departments.
There is, and some of it comes from the mind of the Nobel Prize Laureate economist Milton Friedman. Friedman was a Chicago School economist, who supported a series of libertarian policies ranging from an all volunteer military, to school choice, to a form of the guaranteed basic income.
Friedman thought that a myriad of social problems can be blamed on the management of the issue by the government. His objection was not to the use of the state per se, though he remained a committed libertarian, it was rather to the influence of special interests who were able to use non-democratic systems to exert undue power and keep the system working for them rather than the many.
To quote him directly:
“I believe our present predicament exists because we have gradually developed governmental institutions in which the people effectively have no voice.”
He uses the example of the number of taxi cabs in New York City in the early nineties to illustrate his point:
“I have long been interested in the problem of regulation of taxicabs, so I asked (about) the market price of a medallion to drive a taxicab. As you know, the number of taxicabs is limited by government fiat. The medallion signifying permission to operate a taxicab is transferable and traded in a relatively free market. Its current price is apparently now somewhere between $100,000 and $125,000. If the limitation on the number of taxis were removed, the benefits would greatly exceed the losses. Consumers would benefit by having a wider range of alternatives. The number of cabs would go up and so would the demand for drivers. To attract more drivers, the earnings of drivers would have to rise. In economic jargon, the supply curve of drivers is positively sloped. Why does the limitation of the number of cabs persist? The answer is obvious: the people who now own those medallions would lose and they know it. Although they are few, they would make a lot of noise at city hall.”
The Harbingers of Oligarchy?
To Friedman, even decent government goals, such as the enforcement of law, can suffer from this problem of runaway interests. Until, eventually, the situation becomes rather dissatisfying for the average individual. He does suggest two solutions. The first is to remove government from places where he thinks it doesn’t belong; such as education, housing, healthcare licensing, and banking. Therefore allowing it to do what it should do to our satisfaction.
But secondly, he felt strongly that our system had morphed into one where most officials that were doing a poor job, or had a vested interest in not being subject to performance review, were truly in control with their oversized influence; as seen above in the taxi cab example. He suggested several solutions to this too, such as term limits for congress, and a review of the merits of the spoils system.
Trump’s plan to eliminate the Department of Education fits well into Milton Friedman’s notion of “government is the problem”. By abolishing the Department of Education, Friedman would argue that local communities, which are in theory more democratic, could exert control over their money and education systems. Perhaps even instituting more school choice, which he saw as the key to improving education. If this is true or not is another issue.
Milton Friedman was a Chicago school economist who thought that government was the problem in most cases. While his policies were radical, his principles were often not. His concern for the power of special interests in a large state is one that has lead us to our current situation. His preference for a system where democratic control could be better used against politicians and bureaucrats who fail us is certainly a popular one.
While his policy solutions have begun to fall out of favor to a renewed Keynesianism in international policy circles, his ideas still give us reason to stop and ask, “What exactly is the problem?” and “Should the state be fixing it?”.