The Surprising Virtues of a Guaranteed Minimum Income

by Will on November 12, 2010

When Nixon was president, his advisor Daniel Patrick Moynihan put forth a proposal that would have given every American a yearly payment of the same flat amount. It was a move that Nixon tolerated only for show; his heart was not in it and he made no effort to get the legislation passed.

When I first read that this had happened, I thought: “What an insane idea.” I imagine that’s the most common reaction.

But as I’ve let it linger in my mind, I’ve seen more and more benefits to taking this approach as opposed to the status quo. In fact, I’d go further, and say that the public in this country has always had an implicit Guaranteed Minimum Income of one sort or another. The Guaranteed Minimum Income merely can replace the public assistance, poor houses, homeless shelters, food stamps, soup kitchens, unemployment insurance, Disability, and Earned Income Credit of old: this would represent a huge increase in the administrative efficiency of aid to the poor.

Moreover, people who weren’t poor would really like getting this check in the mail every month or year, whatever they might say they thought of “big government” or “socialism” or whatever. They’d come to count on it and to feel that in some way they deserved it. So, unlike aid to poor people as currently set up, the GMI would be politically untouchable, like the yearly stipend that Alaska pays its residents.

Classical economics counsels against such a policy, on the grounds that it would discourage the idle from seeking work. The same theory counsels against a minimum wage, but is proven empirically wrong every time a minimum wage increase is written into law. Similarly, in countries that have an effective GMI in place, there seems to be only a minimal effect on unemployment rates relative to here. And classical theory also counsels against the hodgepodge of relief programs we already have in place as a social safety net. And crucially, classical theory would see the GMI as discouraging job hunting to a smaller degree than the current means-tested programs. So I think that on net, scrapping most of the existing anti-poverty programs and putting a flat-rate GMI in place instead would probably get us better outcomes.

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