February 6, 2017

Why Should a Libertarian Take Universal Basic Income Seriously?

Edwin G. Dolan is an economist and educator whose writings regularly appear at EconoMonitor. The Niskanen Center is excited to welcome him as a new Poverty and Welfare adjunct focusing on Universal Basic Income research.

In a recent post on EconLog, Bryan Caplan writes, “I’m baffled that anyone with libertarian sympathies takes the UBI [universal basic income] seriously.” I love a challenge. Let me try to un-baffle you, Bryan, and the many others who might be as puzzled as you are. Here are three kinds of libertarians who might take a UBI very seriously indeed.

Libertarian pragmatists

Philosophical issues aside, what galls many libertarians most about government is the failure of many policies to produce their intended results. Poverty policy is Exhibit A. By some calculations, the government already spends enough on poverty programs to raise all low-income families to the official poverty level, even though the poverty rate barely budges from year to year. Wouldn’t it be better to spend that money in a way that helps poor people more effectively?

A UBI would help by ending the way benefit reductions and “welfare cliffs” in current programs undermine work incentives. When you add  together the effects of SNAP, TANF, CHIP, EITC and the rest of the alphabet soup, and account for work-related expenses like transportation and child care, a worker from a poor household can end up taking home nothing, even from a full-time job. A UBI has no benefit reductions. You get it whether you work or not, so you keep every added dollar you earn (income and payroll taxes excepted, and these are low for the poor).

But, wait, you might say. Why would I work at all if you gave me a UBI? That might be a problem if you got your UBI on top of existing programs, but if it replaced those programs, work incentives would be strengthened, not weakened. In which situation would you be more likely to take a job: one where you get $800 a month as a UBI plus a chance to earn another $800 from a job, all of which you can keep, or one where your get $800 a month in food stamps and housing vouchers, and anything extra you earn is taken away in benefit reductions?

Or, you might say, a UBI might be fine for the poor, but wouldn’t it be unaffordable to give it to the middle class and the rich as well? Yes, if you added it on top of all the middle-class welfare and tax loopholes for the rich that we have now. No, if the UBI replaced existing tax preferences and other programs that we now lavish on middle- and upper-income households. Done properly, a UBI would streamline the entire system of federal taxes and transfers without any aggregate impact on the federal budget.

Classical liberals

Not all of those with libertarian sympathies are anarcho-capitalist purists. Many classical liberals, even those whom purist libertarians lionize in other contexts, are more open to the idea of a social safety net as a legitimate function of a limited government.

In his book Law, Legislation, and Liberty, classical liberal Friedrich Hayek  wrote,

The assurance of a certain minimum income for everyone, or a sort of floor below which nobody need fall even when he is unable to provide for himself, appears not only to be a wholly legitimate protection against a risk common to all, but a necessary part of the Great Society.

Philosophically, classical liberals see “social insurance” of this kind as something to which they would willingly assent if they considered it behind a “veil of ignorance,” where they did not know if they themselves would be born rich or poor. Once the philosophical hurdle is overcome, the practical advantages of a UBI become highly attractive. In terms of administrative efficiency and work incentives, a UBI wins hands down over the current welfare system, and beats even the negative income tax famously championed by Milton Friedman, another classical liberal,.

Lifestyle libertarians

The libertarian sympathies of still others arise from the conviction that all people should be able to live their lives according to their own values, so long as they don’t interfere with the right of others to do likewise. These lifestyle libertarians are drawn to a UBI because of its contrast with the nanny state mentality that characterizes current policies. Why should social programs treat married couples differently from people living in unconventional communal arrangements? Why should welfare recipients have to undergo intrusive drug testing? Why should food stamps let you buy hamburger and feed it to your dog, but not buy dog food?

Writing for Reason.com, Matthew Feeney urges libertarians to stop arguing in principle against the redistribution of wealth. Instead, he says, “scrap the welfare state and give people free money.” Feeney sees a UBI as an alternative that “promotes personal responsibility, reduces the humiliations associated with the current system, and reduces administrative waste in government.”

So there you are. A UBI is a policy for pragmatic critics of well-intentioned but ineffective government, for classical liberals, and for advocates of personal freedom. No wonder so many libertarians take the idea seriously.