I have supported the basic income guarantee (BIG) before. Recently, when researching for an article I wanted to write, I came to doubt whether BIG is really the “second best” welfare program many libertarians, and others, make it out to be. Now, I prefer to label myself as an agnostic, because I haven’t done the math.
In any case, Steve Horwitz, in his Reddit Ask Me Anything, writes,
If nothing else, [BIG] has far less overhead cost to taxpayers and gets rid of many of the perverse incentives of the current welfare system, especially with respect to marriage and families.
He’s talking about two sources of benefits,
- Less direct cost to the taxpayer;
- Efficiency gains from removing perverse incentives created by other welfare programs (which would, ideally, be removed).
Is (1) right? Here’s Danny Vinik, at Business Insider,
In 2012, there were 179 million Americans between the ages of 21 and 65 (when Social Security would kick in). The poverty line was $11,945. Thus, giving each working-age American a basic income equal to the poverty line would cost $2.14 trillion. For some comparison, U.S. GDP was almost $16 trillion in 2012 and the defense budget was $700 billion.
According to the same article, the Federal government currently spends about $750 billion/yr. on welfare payments to low-income Americans. Even if we offered them only half of a poverty-line income, we’re still talking about over one trillion dollars per year. That is still a net increase in the direct costs of BIG to the taxpayer.
Now, we can make the case that part, or maybe all, of the difference (between the cost of BIG and current welfare costs) would be made up by an efficiency gain. But, that’s an empirical claim. Has anyone tried to look into it?