Tuesday, March 28, 2006

Why Does Charles Murray Want a Universal Basic Income?

Henry and I (and here and here) tossed around the idea of a Universal Basic Income as a kind of pie in the sky idea. And yet here comes Charles Murray (yes, this Charles Murray) proposing...

Murray: We start with a country that is the richest country in the world, with most of its people having lots of money (compared to any historical standard), ample money to provide for their own retirements, medical care, and the rest of it. On top of this national wealth, we then add more than $1 trillion to help people provide for comfortable retirement and medical care, and so forth. And guess what? We still have millions of people without comfortable retirements, without adequate medical care. And only a government can spend that much money that ineffectually.

The alternative I suggest is give every adult American, age 21 and older, $10,000 a year. And let them run with it.

Borders: So $10,000 for every single American? As soon as you turn 21 you start getting this money?

Murray: That's right. And there are a couple of key points to be made here because some folks will be thinking of past attempts at negative income taxes which provided a floor under income and certain experimental programs. And this is different. This is not a floor. This is not a case of, "if you make less than $10,000 a year we will top up your income to $10,000." This is $10,000 period. And so if you're making $10,000 a year, your net is $20,000. If you're making $20,000 a year, your net is $30,000.

There are some complications down the road, but they aren't very important. I'll just mention them real quickly.

At $25,000 of earned income you start to pay a surtax on the grant, and that reaches a maximum of half the grant. So at $50,000 you only have a net of $5,000 from the grant. The reason for that is pretty simple--that you want to give upper income people something for all the money they're putting into taxes right now to provide for their own medical care and retirement, and they get that net of $5,000. And I argue it's a better deal than what they're getting now.

But the other main point is that the surtax doesn't kick in until $25,000 of earned income. So the negative work incentives are pretty small.

Borders: Do you know of any other countries that have tried anything like this? Or is this entirely new?

Murray: The idea is a direct descendant of Milton Friedman's proposal for negative income tax. George Stigler sometimes gets the credit for that. But George Stigler himself says it was suggested to him by Milton Friedman back in the early 1940's. So it's a direct descendent of that idea, considerably revised, but on a much bigger scale and doing much more. I'm not using this just to cure poverty. I'm using this money to take the place of Social Security and Medicare and Medicaid and all the rest of those kinds of things.

Borders: I take it that your system, to get the $10,000 per year, we would have essentially to abolish all other entitlements and transfers.

Murray: That's absolutely essential. It's not on top of an existing system of payments; it is instead of.

Odd, no? The convergence of the egalitarian left and the libertarian right? Though the motivation here is mainly to reduce government waste, rather than to actually help people. But, hey, you take what you can get.

2 Comments:

Blogger henry said...

It's not really that odd; he thinks that people can spend their money better than can the government, which is a standard libertarian position. If you are a libertarian and you are constrained to have the government spend billions on social programs, then you want those social programs to take the form of a lump-sum transfer.

Here is his interview with KJ Lopez, he is remarkably naive about bureaucracy:

The bureaucratic requirements for distributing the money is a computer with decent software and a lot of capacity, with a couple of minders to dust it occasionally. All right, a few more people than that, but not many. The significant personnel requirement is for a fraud detection and prevention division. But that division is given a pretty easy job: being a citizen of the U.S. is a yes-no proposition with simple definitions.

I wonder what the effect on immigration would be?

11:34 PM  
Anonymous Anonymous said...

Migration effects have long been considered by basic income advocates as a key problem. A good discussion is an article by Michael Howard in Basic Income Studies (sample for free at http://www.bepress.com/bis/vol1/iss1/art4/)

As for Murray's views on bureaucracy, yes they are remarkably naive. Anyone familiar with last year's child care payment debacle in the UK? After the computers messed up loads of poor families are now expected to pay back huge sums ...

10:57 AM  

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