Skeptical thoughts on a taxpayer-funded basic income guarantee.

AuthorWhaples, Robert
PositionReport

In this issue of The Independent Review, Matt Zwolinski and Michael Munger have collectively given a basic-income guarantee (BIG) four and a half cheers. I am less cheerful and more skeptical. This skepticism begins with David Henderson's (2015) point that the BIGs they propose are extraordinarily expensive and might undermine the already frail fiscal health of the U.S. government, which is currently staggering down the road toward default (Henderson and Hummel 2014). But I am also skeptical about the intellectual underpinning of the BIGs they have laid out in this symposium.

Zwolinski makes an original, thought-provoking argument that because private property itself is coercive--after all, it arises when individuals metaphorically fence off unowned land and threaten trespassers with bodily harm--owners of this land (and their heirs) owe everyone else a payment for the common property they have seized. This argument has considerable merit, and Zwolinski's defense of it is both serious and adroit. However, it doesn't fit well enough with the facts of our modern economy. The U.S. Federal Reserve estimates that in 2013 the households and nonprofit organizations in the United States owned assets worth $92.7 trillion, of which $22.3 trillion was real estate (Board of Governors 2014, 117). Karl Case estimates that in recent decades structures have made up about 70 to 80 percent of the value of real estate (2007, 128). Thus, the land itself is worth about $5.6 trillion, or roughly 6 percent of the value of all assets. If 6 percent of the value of goods and services annually produced in the country were meted out in the form of a BIG, this would amount to $1.04 trillion, which is only $3,300 per person (or $4,300 per adult) per year. This amount is well less than the amount favored by Zwolinski (about $10,000) and is far less than the $16,000 or $12,800 BIG level envisioned by Munger--and is not likely to lift many out of poverty. Land simply constitutes too small a proportion of wealth in our economy. It should also be noted that landowners already pay everyone else for their seizure of this asset in the form of property taxes. State and local property taxes in 2013 equaled $488 billion (U.S. Census Bureau 2014). If about 75 percent of this amount is a tax on improvements and the rest is on the underlying land, about $122 billion should be subtracted from any debt owed to everyone else.

In a modern economy in which human capital plays such a vital role, it might make much more sense to provide the safety net as a basic educational guarantee rather than a basic-income guarantee. And in a sense, this is exactly what we do. The National Center for Educational Statistics (2014) reports that expenditures per public-school student in the United States averaged $12,608 per student in 2010-11, which adds up to an astounding $163,800 over the thirteen years from kindergarten to twelfth grade. Granted that not everyone accesses this grant (e.g., homeschoolers and privately educated students, dropouts, and those immigrating later in life), and granted that this money is spent very inefficiently, so that it would probably make much more sense to provide parents with educational vouchers rather than to produce education through government-run monopoly schools, under the Lockean logic of a payment to all in compensation for past land seizures, it cannot be ignored that educational expenditures already fill this role to a fair degree.

Although the Lockean logic of payments for land seizures may (or may not) make sense when applied to the Old World, it is also not clear...

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