Should We Guarantee a Minimum Income?

March 4, 2014

Replacing U.S. welfare programs with a guaranteed income is unlikely to save the federal government money, says Veronique de Rugy, a senior fellow at the Mercatus Center.

Federal welfare in the United States involves 126 separate, and often redundant, programs. There are seven different federal programs, for example, that deal with housing. And the system is not just confusing, it is ineffective. Government spending on antipoverty programs at all levels totals almost $1 trillion annually ($668 billion at the federal level), and every program involves massive amounts of paperwork and bureaucracy.

As such, some have called for these programs to be replaced with a fixed income. Charles Murray wrote in 2006 that welfare transfer programs should be repealed entirely and replaced with a $10,000 payment to all Americans, and even economist Friedrich von Hayek defended the idea of a minimum income floor. Some libertarians prefer the idea of guaranteed -- and unconditional -- income because it allows individuals to make their own decisions.

But even the "best" guaranteed income plan is unlikely to save much money.

  • A $12,000 yearly subsidy to all adults would cost $2.8 trillion. To break even with today's system, it would require the dismantling of all other antipoverty programs, tax breaks, unemployment insurance, ObamaCare subsidies, Social Security, Medicare and Medicaid.
  • If those transfers were instead only made to the 106 million under 200 percent of the federal poverty level (those who currently qualify for welfare, at $23,440 per year), the cost would be $1.3 trillion.
  • Transferring cash to adults at the poverty line ($11,720 per year) would cost $600 billion annually.

Moreover, what about government dependency? Jim Manzi of National Review looked at 30 welfare experiments of the 1990s and found that only the policy options that include work requirements actually pushed people out of the welfare system.

The best of government intentions rarely produce the intended effects, and guaranteeing a minimum income is no guarantee that it will completely -- or even partially -- replace existing welfare. A new layer of government spending is not a solution.

Source: Veronique de Rugy, "Time for a Guaranteed Income?" Reason Magazine, March 2014.

 

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