One and one-half cheers for a basic-income guarantee: we could do worse, and already have.

• Author: Munger, Michael
• Position: Report

P.J. O'Rourke is a humorist, but he makes an interesting claim, a brief but compelling knockdown argument, for a basic-income guarantee (BIG):

The elites who denounce poverty despise the poor. Their every high-minded, right-thinking "poverty program" proves this detestation--from the bulldozing of vibrant tenement communities to the drug law policing policies that send poor kids to prison and rich kids to rehab to the humiliation of food stamps and free school lunches to the loathsome inner-city public schools where those free lunches are slopped onto cafeteria trays. The federal government has some 50 different "poverty programs." Nearly half a trillion dollars is spent on them each year. That's about $11,000 per man, woman, and child under the poverty line, enough to lift each and every one of them out of poverty. (U.S. Department of Health and Human Services 2011 poverty guideline for a family of three: $18,530.) We call them "poverty programs" for a reason. If ordinary people with down-to-earth common sense were spending that half trillion, we'd call them "modest prosperity programs." (2012) There are two parts to the argument, each important. First, our society is already spending enough money to solve the problem of poverty and make all the poor "moderately prosperous," even accepting a standard of "poverty" that would be upper middle class in most of the world. Second, separate from the issue of wasting the cash, some "antipoverty" programs are aggressive, life-arranging, paternalistic, Big Brotheresque, police-state efforts at control rather than aid.

All too often the "other side"--my side--loses this debate because we say that doing nothing is better than having a welfare state. Then we get told we must hate the poor. The irony is exquisite, as O'Rourke points out: the folks who advocate for programs to aid the poor because they want to do something are the ones who say they care about the poor, but their programs actually hurt the poor. Reminds me of the old country song, "Let's do something, baby, even if it's wrong."

It's fine to argue, on the merits, that doing nothing is better than the programs we have established. But developed nations around the world have chosen to provide a "social safety net" to the least well off. This is a political decision, with all the difficulties that the term political suggests for explanation and analysis. My approach in this paper starts from the old "Chicago school" premise: accept as given that the United States has already decided to create a social safety net, so the economic analyst's role is simply to make recommendations about how to accomplish that goal with the largest benefits and the fewest distortions.

As the title of this essay suggests, I have concluded that a BIG satisfies those criteria. The delivery of benefits is maximal, and the distortions caused by the program are minimal. My BIG program proposal is an exchange:

(a) The state and federal governments will scrap a long list of existing programs (purportedly) designed to equalize income or to provide a safety net for the least well off. One of these scrapped programs would be the minimum wage, which would no longer be necessary.

(b) In exchange and in a once-and-for-all replacement, a comprehensive BIG would be implemented as a single cash-payment replacement.

There are two obvious objections that I do not address in the body of the paper, so I consider them first. One is feasibility: "That could never actually happen." The second is liberty: "Choice? You think we want to give people choices? They can't handle choices!"

Feasibility: The BIG proposal can't be blamed just because it wouldn't be implemented. I recognize that it will be difficult to give up the whole dog's breakfast of different programs that elites and political officials now use to claim credit and buy votes. My argument is a claim about efficient and freedom-enhancing policy; political feasibility is a consideration that rests on whether people can be persuaded. It may be true that a BIG would be placed on top of the pile of existing transfers rather than replace them, but then that's not the proposal I am considering here. Making the argument that politicians won't implement the proposal is the sort of thing you might hear in high school debate class: you can't win on the merits, so you change the question.

Liberty: The objection that people can't be trusted to make their own choices is simply inconsistent with democracy. It may be true that if we give people choices, some will make bad ones. But increasing poor people's capacity will mean that they have choices to make, and some of them--perhaps many--will recognize that for the first time they are being entrusted with responsibility.

It's an old problem: Should we give poor people an in-kind transfer (say, food) or an amount of money equal to the cost of that transfer? Given the fungibility of money and with subjective autonomy granted to citizens, the recipients of the cash have to be at least as well off as the recipients of the food because the first group can buy the food if that is what is best for them. But they can also buy something else if that is what is better for them. It may not be objectively better, and the life arrangers who want to impose their own values on the poor will squeal at this grant of dignity and autonomy to people they scorn. It is much more expensive to try to force people to buy what we want them to want than to let them make their own choices. Not surprisingly, food stamps and other in-kind vouchers are then often sold on the black market at a substantial discount, reducing the benefit actually received.

James Buchanan objects to the whole objectivist approach: "There are obviously many reasons why the [individual] may not evaluate alternative [payments] in the same way that the applied welfare economist evaluates them" (1979, 54). Richard Wagner argues in the same vein...