This week, a proposal by the Finnish government to give its citizens a universal basic income (UBI) made headlines across the world. A UBI is exactly what it sounds like — a sum of money given by the government to every citizen regardless of wealth or need.
Finland seems to be getting pretty serious about this radical new approach to welfare. Not only do a majority of Finns approve of the concept, the government has commissioned a study into its plausibility and plans to experiment with it in 2017.
Considering European countries are Americans’ favorite to compare policies to, Finland’s proposal raises the question of whether such an idea would work in the U.S., considering the sad state of America’s welfare system.
Believe it or not, the argument has been made before in libertarian circles. Only last year, the Cato Institute held an online debate on the issue with a lead essay by University of San Diego professor Matt Zwolinski. From his article:
According to a report by the Cato Institute’s Michael Tanner, welfare programs at the federal level alone cost more than $668 billion annually, spread across at least 126 different programs. Add another $284 of welfare spending at the state and local level, and you’ve got almost $1 trillion dollars of government spending on welfare – over $20,000 for every poor person in the United States.
Not only does the U.S. welfare state spend a lot; it spends it badly. Poor Americans receiving assistance face a bewildering variety of phase-outs and benefit cliffs that combine to create extremely high effective marginal tax rates on their labor. As a result, poor families often find that working more (or having a second adult work) simply doesn’t pay. And still, despite massive expenditures by the welfare state, some 16% of Americans are left living in poverty.
Wouldn’t it be better just to scrap the whole system and write the poor a check?
Of course, political reality takes its toll. It seems implausible for a country like the U.S. that’s so allergic to the idea of welfare to enact a welfare program giving all of its citizens money. Nevertheless, the underlying premise of the government simply writing checks to poor people instead of providing (inefficient) services still holds strong appeal.
The American welfare system is a web of red tape. Poor people today have to wade through a sludge of bureaucracy for basic services that provide little flexibility and often no actual benefit. To give just one example, several studies have shown that Medicaid does nothing to improve the health of the poor.
So, instead of spending billions of dollars in overhead to fill the wallets of incompetent bureaucrats, why not just pay poor people directly? With greater freedom to spend their money, low-income people could access better quality health care, housing, and food than the government could ever provide. Plus, the elimination of all these bloated programs would save taxpayers billions, making UBI a win-win for bleeding hearts and fiscal conservatives alike.