The BIG picture

A Basic Income Guarantee is the natural policy for implementing an eg-lib (egalitarian-libertarian) political philosophy, if that appeals to you as it does to me. The idea is neither more nor less than what it sounds like: the government would guarantee each person a basic income, financed through taxation. BIG redistributes income no questions asked and lets you decide what to do with the money. Of course there are some details to work out: most importantly how much, and with what kind of taxation to fund it, but also whether the payment will go to individuals or families, etc.

Milton Friedman was famously an advocate for a version of BIG– which is known as the negative income tax (NIT) to economists– on sound libertarian grounds: if you must redistribute income, do so in a way that minimizes market distortions and paternalistic meddling.

Uncle Milty notwithstanding, BIG generally has received more support from the left than the right in the United States. Take a glance at the U.S. BIG network's advisory board and you find such lefty stalwarts as Fred Block, Nancy Folbre, and Frances Fox Piven (her first name misspelled!). But BIG has apparently made a comeback among some of the free-market crowd, as indicated by this recent CATO essay by Matt Zwolinski. Zwolinski sees BIG as a "pragmatic" replacement for most of the modern welfare state, one which could accomplish the redistributive goals of the welfare state at a much lower economic cost.

At an abstract level, Zwolinski's claim relates to an idea from economic theory known as the second fundamental theorem of welfare economics: the efficiency of the free market system can be consistent with income redistribution, so long as you redistribute resources "lump sum" and then leave prices and quantities free to adjust. This compatibility between leveling and the market led Amartya Sen to suggest that the second theorem "belongs to the revolutionists' handbook."

In the real world, the second theorem could never be fully operationalized, because any form of redistribution that pays attention to people's position in the income distribution is not "lump sum," and therefore creates inefficient incentives. In the real world, furthermore, the conditions for the market to achieve efficient outcomes are generally violated by a variety of market failures, such as externalities (e.g. pollution).

So, in the real world, we must decide between complex and imperfect alternative arrangements for redistribution and government regulation. Benefits and costs must be estimated and compared, and political feasibility and stability considered. Regarding the net benefits from replacing the welfare state with BIG, Mike Konczal has a pretty convincing take-down of Zwolinski's claims for BIG savings. Basically, the U.S. welfare state doesn't have all that much fat, so there's just not much to be gained. The EITC (earned income tax credit) is already a variant of the NIT, with a work requirement added on. Programs like EITC, Medicaid, and SNAP (food stamps) operate effectively with admirably low overhead. Disincentive effects are likely modest. Near-universal public social insurance programs such as Medicare and Social Security may, for reasons of scale and state compulsion, overcome some market imperfections that would likely afflict a fully privatized system of social insurance under BIG transfers. So we can't be confident that a BIG would make matters better rather than worse, even from a pure efficiency standpoint.

As a stand-alone substitute for the welfare state, BIG suffers from other criticisms that can be leveled against libertarianism. Some people are simply not capable of making good decisions for themselves: young children, addicts, people with severe emotional or developmental disabilities. Libertarians love to level the charge of paternalism against liberals, but nearly everyone agrees that (gender-neutral) paternalism may be called for in some cases. And not all children or dependents are blessed with a qualified or benevolent "pater" or "mater" to spend their BIG for them; who else is there, if not the state?

Political feasibility and stability are further concerns. Political support for Medicare and Social Security spring in considerable part from the view that people pay into the systems and are entitled to take benefits out. The sense of entitlement that follows from payroll contributions is a feature of Social Security by design, according to a well-known quote attributed to FDR:

“We put those pay roll contributions there so as to give the contributors a legal, moral, and political right to collect their pensions and their unemployment benefits. With those taxes in there, no damn politician can ever scrap my social security program. Those taxes aren’t a matter of economics, they’re straight politics.”

BIG, transparent dole that it is, may be politically vulnerable in the long run. (A partial exception would be a BIG based on shares of a commonly held resource, such as dividends on the Alaska Permanent Fund, directly linking the payment to property rights.)

Having acknowledged all these drawbacks of the BIG idea, I still can't help thinking it deserves a bigger place in our political landscape. Politically, it represents a potential source of common ground between the liberal left and libertarianism. Is that enough to reconfigure our heavily polarized political space? By itself, no... but throw in immigration reform, personal and civil liberties, and anti-militarism, and who knows?

Economically, I have read enough sci-fi and witnessed enough advances in computing and robotics to agree with those who are seriously concerned about a future in which capital, with its highly concentrated ownership, displaces much of the demand for labor. No, not technological unemployment... just technological immiseration. Making BIG part of the mainstream political agenda now is a way politically and institutionally to set the stage for decoupling income and private property. Friedman meets Marx... why not?