Scott Sumner is one of my favorite econ bloggers, but there are a couple issues we don’t agree on. One of them is basic income. I’m for it. Sumner claims “I really want to believe in” the idea, but doesn’t see how the numbers add up:
Here’s what I don’t get. Imagine a single mom living in the South Bronx with two kids. A typical poor American family. How much do we give them? If we give every single person the same amount, there will be too much incentive to produce large families. Think about the amount an individual in the Bronx would need to rise above poverty, and them multiply times 5. It seems like a much better deal than for one person, especially if you assume the marginal cost of raising an extra kid is less than the cost of a single adult.
That can be fixed by giving less for kids than adults. But how much would the family need to not be considered poor by the standard of NYC progressives? Here I have to plead ignorance, I don’t really know. But let’s say it’s $27,000 a year, perhaps $15,000 for the mom and $6000 for each kid. (I assume the government still has free public education and Medicaid, all other welfare goes away.)
So far, not bad. Giving more to adults than children makes sense.
Here’s another problem—is this amount the same in every part of the country? I suppose it could be adjusted to make it proportional to the cost of living in each city. Let’s assume you were somehow able to get 60 votes in the Senate for a massive welfare scheme that favored blue areas with a high cost of living. What then?
Basically every single homeless person in America would be better off moving to a place with a mild climate year around and a high cost of living. After all, they are homeless, what do they care about real estate prices? Some portion of that population may be drug users. Is that a problem? It might be viewed that way by the city with a nice climate year around and a high cost of living. Did I mention that I hope to retire in West LA?
Bafflingly, for a libertarian, Sumner neglects to comment on the fact that the high cost of living in major US cities is entirely artificial. Abolish height limits, parking minimums, and so on, and housing costs will fall until they reflect construction costs.
This makes moving to a basic income from the current US status quo more complicated–you’d probably have to pair it with some system of bribes to local governments to loosen their zoning codes–but it’s not inherent to the basic income idea.
OK, so we’ll just go with the simple plan that most people are proposing, the same payment for every adult, regardless of where they live. But here’s another problem. The amount the family of three needs in the Bronx looks much better to a family of immigrants in South Texas. For instance, add a dad and assume 4 family members, making $42,000. With that guaranteed income would you want to work in the hot sun picking vegetables and cleaning hotel bathrooms in South Texas or Georgia? I wouldn’t.
I know what you are thinking: “No problem. We’ll have illegals do all the low paid jobs, and the American poor can relax with their GAI. The illegals don’t qualify for the benefits, so the tomatoes won’t rot in the fields.”
But wait, I thought the left wanted to legalize the illegals. And even if we don’t legalize them, is the following the “Great Society” the left has been clamoring for since the 1960s:
1. An underclass of illegals doing the hard stuff, and living in shantytowns.
2. Tens of millions of poor Americans watching TV, and giving zero incentive to their kids to study hard in school, because they’ve got the GAI awaiting them too.
3. The upper class, in their gated communities.
I’m not sure that’s what development economists mean when they talk about “getting to Denmark.” Denmark doesn’t have a GAI.
I suppose I’m unusual in being willing to bite this bullet, but Sumner’s three-point scenario doesn’t sound too bad for me. Watching TV all day may not be a great life, but is it worse than working long hours at a crappy job?
Actually, I doubt non-workers would just watch TV all day. Many would try to find more fulfilling ways to spend their time. Some would try to make it as creative types–and yes, 90% of what those people produced would be crap, but some of it would be great!
Similarly, immigrants wouldn’t come here to pick fruit if their options back in their home countries weren’t worse. Though of course, I’d prefer to make it all legal with guest worker visas.
(Even with guest worker visas, it’s not my ideal system, but I think it’s better than both the current system and Sumner’s preferred wage subsidies, which is enough to rebut his objection. I’ll save explaining my ideal system for another blog post.)
Honestly, Sumner’s main objection to a basic income seems to be visceral horror at the thought of people not working. In another post, Sumner quotes an Economist article on Native American tribes where people use distributions of casino income to avoid working. He seems to think the article is a point against basic income, but I’m not so sure:
ON A rainy weekday afternoon, Mike Justice pushes his two-year-old son in a pram up a hill on the Siletz Reservation, a desolate, wooded area along the coast of Oregon. Although there are jobs at the nearby casino, Mr Justice, a member of the nearly 5,000-strong Siletz tribe, is unemployed. He and his girlfriend Jamie, a recovering drug addict, live off her welfare payments of a few hundred dollars a month, plus the roughly $1,200 he receives annually in “per capita payments”, cash the tribe distributes each year from its casino profits. That puts the family of three below the poverty line.
It is not ideal, Mr Justice admits, but he says it is better than pouring hours into a casino job that pays minimum wage and barely covers the cost of commuting. Some 13% of Mr Justice’s tribe work at the Chinook Winds Casino, including his mother, but it does not appeal to him. The casino lies an hour away down a long, windy road. He has no car, and the shuttle bus runs only a few times a day. “Once you get off your shift, you may have to wait three hours for the shuttle, and then spend another hour on the road,” he says. “For me, it’s just not worth it.”
To me, enabling people to avoid working long hours at crappy jobs that just barely pay the costs of their long, crappy commute sounds like a great thing! Does Scott Sumner disagree?