Pope Francis is capturing international headlines for his advocacy of a guaranteed basic income. The world-renowned “economist” wrote in a letter to the World Meeting of Popular Movements, an organization representing global grassroots efforts, that now “may be the time to consider a universal basic wage” for every man and woman “to get you through this hard time.” Many proponents of the concept are patting themselves on the back right now, informing anyone who will listen that governments would not have to bleed red ink to shore up the economy if a monthly minimum payment was in place. Are the Pope and Andrew Yang correct? It is complicated.
Lawmakers on Capitol Hill are spending trillions of dollars, while policymakers inside the Federal Reserve are printing trillions more. To survive the Coronapocalypse, the smartest men and women in the room are churning out short-term relief packages that contribute to the bloated federal deficit and the astronomical balance sheet. Nobody knows how long this situation will last, but many do acknowledge that things have permanently changed – for better or for worse.
Spain is planning to roll out a basic income to repair the economic damage from COVID-19. Are we in the beginning stages of establishing a UBI for the rest of the global economy?
Many jurisdictions are handing out cash payments to households impacted by the pandemiconomy. Canada is issuing $500 a week to individuals, the United States is handing out $1,200 relief checks, Japan is giving nearly $3,000 a month to citizens who have lost their incomes, and the list keeps growing. It will be difficult to balance these governments’ budgets after breaking the bank just to survive a couple of months. From a Realpolitik perspective, this could justify the introduction of a UBI.
Before the bats triggered a pandemic, the U.S. government was spending more than $1 trillion annually on welfare programs; state and local jurisdictions also were doling out about $700 billion. Over the years, officials have pointed out the waste and fraud associated with many of the social-safety-net expenditures. A 2016 FiveThirtyEight study found that most welfare dollars do not even go to the people in need. Not to mention the bloated civil service that ensures payments and services are given to recipients.
In the last month, Washington has approved trillions more in new welfare spending for American workers and businesses. As a result, the Committee for a Responsible Federal Budget (CRFB) estimates that the public purse shortfall will hit a record $3.8 trillion this fiscal year; it had already jumped 8% in the first half of FY 2020 before the virus outbreak.
Would it not be simpler and more affordable to initiate some form of UBI instead of maintaining the present welfare state? Yes, but only if you adopt the original intent of a guaranteed income: dismantle the entire welfare system and replace it with a monthly cash payment to every American adult. There is no way the United States could afford adding a UBI on top of everything else. So, this would mean the end of food stamps, Social Security, Temporary Assistance for Needy Families, child care vouchers, and every other welfare program around.
Today, there are about 210 million American adults. If the government gave each person over 18 years of age $10,000 annually, the price tag would top $2 trillion. It would be a few hundred billion dollars more than what all three levels of government are spending. Still, the proposal would make it simple: weekly or direct monthly payments without any red tape, bureaucratic agency, or waste.
Plus, it would prevent the government from having to pass these astronomical deficit-financed spending bills that will be added to the national debt with interest.
Basic Income Drawbacks
From a libertarian stance, the entire welfare state should be abolished. The minarchist wing of libertarianism would advocate for a government that is responsible only for the justice system, the military, and police and fire. An anarcho-capitalist, or private property society (PPS) proponent, would say get the state out of everything. Unfortunately, this is an unrealistic way to look at society. The government will not transform into a libertarian utopia overnight or even in a century. Therefore, it is important to be pragmatic in these types of circumstances.
While a UBI replacing the entire welfare state would have its advantages, there are also drawbacks.
The one thing that immediately arises is the entitlement factor of politicians and recipients. Should the UBI be implemented tomorrow, it may begin with an arbitrary sum of $10,000 a year. Many Americans would welcome regular cash injections, and politicians would view themselves as munificent heroes. As time goes by, more Americans will say this amount is not enough and that it should be raised to $15,000 per year because it is now a human right to receive free money. Before you know it, there is talk of $30,000 and then $50,000 – there is no ceiling.
The labor market would be overhauled, with many of the low-wage and unskilled positions becoming automated. Since people would receive a UBI, they may not feel the necessity to work as a stockboy or a cashier, forcing employers to do one of two things: raise their compensation offer to attract workers or accelerate automation efforts. Indeed, UBI acolytes purport automation is the main reason to adopt a basic living stipend. But this proposal and other Swamp interventions are already causing the aggressive adoption of automation.
The final concern is that a UBI would eliminate independence, amplifying dependence on the state. Today, if you are in desperate need of $10,000, you will apply for a second job, clock in more hours at work, or sell your services in the gig economy. In the future, if you need $10,000, you will be lost without the government holding your hand because the next generation will think of work and sacrifice as foreign concepts or antiquated elements from a lost time.
Conservatives and libertarians need to realize it is inevitable that universal basic income will become a reality. The phrase “never let a crisis go to waste” has turned into a motto for the statists, and they are using the COVID-19 pandemic as the opportunity to experiment with their progressive pet projects. Therefore, it might be better to take a pragmatic approach to a UBI, highlighting the cost-benefits of eliminating the Leviathan’s largesse and substituting it with a direct monthly payment comparable to what is occurring now. Is this ideal? As eminent economist Milton Friedman once said, “If you are searching for a utopia, this isn’t it.” Washington approving multi-trillion-dollar stimulus measures is not idyllic either, but it has not stopped bipartisan politicos from endorsing insolvency.
Read more from Andrew Moran.
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