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Why Basic Income Makes No Sense

After having read my last post, a friend mentioned that basic income’s purpose had never before been clearly articulated to him. This is hardly surprising. People are confused about basic income. They’re confused about what it is and what it’s for.

It bears repeating that basic income is a regular income unconditionally paid to every person. Basic income solves the problem of how to get spending money to consumers. It’s pretty straightforward. So why do we have so much trouble making sense of it?

It certainly doesn’t help that most of the experts are confused too. In 2017, Intelligence Squared hosted a debate about basic income with the resolution, “The Universal Basic Income Is The Safety Net Of The Future.”

Arguing for the motion are Andy Stern and Charles Murray. Stern is the former president of the Service Employees International Union and author of Raising the Floor: How a Universal Basic Income Can Renew Our Economy and Rebuild the American Dream Murray is a Libertarian Political scientist at the American Enterprise Instituate and the author of In Our Hands: A Plan to Replace the Welfare State

Arguing against the motion are Jason Furman and Jared Bernstein. Furman was the chairman of the Council for Economic Advisors under President Obama. Bernstein was the chief economist to Vice President Joe Biden.

Right away, we have a problem: Basic income is not a safety net. To frame basic income in this way is to miss the point, which is to provide spending money to consumers. Rather than a form of assistance for people who have failed to thrive in the economy, basic income is a fundamental piece of economic infrastructure.

The debate explores the prospect of job losses due to advances in AI and automation. But neither side questions the assumption that it was ever reasonable for us to expect consumers to get their spending money through jobs.

12:55
JASON FURMAN: Much of the premise for universal basic income is the notion that robots will take all of our jobs and that if we can’t be employed, that we’ll need something else–some money from the government–to take care of us.”

He’s not wrong. Basic income proponents, including Andy Stern, love the technological unemployment angle. But basic income is important regardless of jobs.

In the end, the anti-basic-income side handily wins the debate. And they win it by reminding the audience of something obvious.

15:01
JASON FURMAN: It’s really quite simple: If you give someone a dollar, that dollar has to come from somewhere. It has to come from benefits that someone is getting, or raising taxes on someone.

This is obvious. It’s also false. As I said a few weeks ago, tax revenue is meaningless. A correct basic income has no tax associated with it. It is independent from other government spending programs. Nobody need lose their benefits.

Andy Stern and Charles Murray lost the debate before it even started. They lost when they chose a basic income plan that paid a specific pre-determined amount. They lost when they decided to fund that plan through taxes and spending cuts. They lost when they conceded, without even knowing knowing it, that every dollar has to come from somewhere.

44:51
ANDY STERN: $12,000 a year ends poverty in America forever.

JASON FURMAN: And $50,000 a year would be even better.

Yes. It would. And if the economy could sustain $50,000 of basic income per person per year, then it would be irresponsible for us not to provide that. Nobody is for poverty. And I think we can all agree that it would be a good thing if we could make everyone rich without damaging the economy or the environment.

The Andy Stern/Charles Murray plan is actually less of a basic income than they lead us to believe. By taxing back the money from people who don’t need it, it achieves roughly the same effect as a targeted direct cash transfer that goes only to the poor. Perhaps, the two sides agree with each other more than they think. Sadly, both sides are wrong.

Back in May, our basic income discussion group talked about this debate.

The Intelligence Squared debate is, of course, only one example of the confusion surrounding basic income. If you’d like to wade deeper into the quagmire, take a look at the Kialo online debate platform’s basic income discussion or browse through the r/BasicIncome subreddit. You’ve been warned.

Basic income makes no sense because, by and large, the people talking about it don’t understand it. Basic income tends to be mixed up with other tangentially related issues such as inequality and technological unemployment. But we can untangle this mess. And it starts with getting the economics right.

People sometimes ask me how we can help economists better understand basic income. The first step is to understand basic income ourselves. After that, all we have to do is become economists. If that sounds like a lot of work, that’s because it is. Basic income is worth the effort.

If there’s one thing that basic income advocates universally understand, it’s that we have the resources to provide a better standard of living for humanity. Starting with ourselves, let’s help the world make sense of basic income.