- - Monday, August 6, 2018

ANALYSIS/OPINION:

Last week the government of Ontario, Canada, announced it was ending a pilot program to guarantee residents a universal basic income (UBI). The program, scheduled to run three years, had lasted just 15 months.

The concept of UBI is pretty simple. The government gives everyone money, with no strings attached. How much money? Enough to be meaningful, but not enough to discourage work.

The Ontario experiment was a particularly generous version of a UBI. Eligible individuals could receive $17,000 (Canadian; about 13,000 U.S. dollars today) minus half of any earned income. A couple could receive $24,000. And people with disabilities could get as much as $23,000.

For the Ontario pilot, only low-income folks participated, and their benefits replaced unemployment insurance, the state pension and disability payments.

The government cited the program’s high cost when announcing the termination. This shouldn’t be a surprise. A similar program in the United States with a 50 percent marginal tax on earned income would cost about $250 billion per year if operating nationwide (assuming no adverse consequences of taxation). Get rid of the tax, and it would cost just shy of $1 trillion per year.

There are some benefits to a basic income, especially when used to replace the current welfare system. For instance, a UBI leaves recipients free to decide how to spend their benefits. Many existing welfare programs use incentives, “nudges,” and other requirements to micromanage how the poor use their benefits. The assumption is that poor people lack certain virtues or fall victim to vices to which the rest of us are immune, and the expert managers of the welfare system know better.

I’m with the economist Lionel Robbins, who called this assumption, as applied to political calculations, “morally revolting.”

However, a UBI also entails significant costs beyond the potential increase in federal spending.

For example, a UBI might create a mindset that income is rightly derived from someone else’s productivity. This would likely result in people using the political process to vote themselves higher incomes rather than work to improve their own standard of living by creating a better world for others to live.

The current welfare state builds on a mindset of generosity. There’s significant value in retaining the connection between welfare and generosity rather than generating a new notion of entitlement. However, one strength of the American system is that, through the freedom of association, we have the ability to test different ideas for generosity against one another.

One way to think about accomplishing such a market for generosity is by having more welfare benefits locally administered through private institutions. This might involve some form of cash payments, but a UBI isn’t the way to go.

A UBI-focused welfare state is based on the assumption that generosity is just about giving people cash. Or at least giving out cash in a way that will make its tech-titan proponents feel better about making money themselves. However, the world is much more complex than policies of redistribution make it out to be.

Through all of the discussion over the UBI, it’s important to remember that one of the best things we can do to improve outcomes for disadvantaged folks is by stopping institutions, and in particular the government, from getting in the way of people recognizing their potential.

We can reform occupational licensing laws. We can promote policy that makes sure everyone has access to a good education. We can celebrate ordinary people who get wealthy by providing other ordinary people with exceptional things that existed only in science fiction novels a century ago.

And we can do all of this by promoting civility and sympathy for one another. It’s impossible to improve other people’s lives — much less get rich in the process — unless you can first put yourself in their shoes.

Paul Winfree is the director of the Heritage Foundation’s Thomas A. Roe Institute for Economic Policy Studies.


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