Veronique de Rugy, a senior research fellow at the Mercatus Center at George Mason University, recently penned an article expressing skepticism towards the universal basic income policies that are becoming popular across the world.
She highlighted the recent case of Spain’s UBI experiment in response to the Wuhan virus pandemic. There has been considerable debate within conservative and libertarian circles about how to transition from the current welfare state model into one that is more market-friendly.
De Rugy admitted in her piece that she never came “around to endorsing the concept, which suffers from very serious flaws.”
She added that “Unfortunately, the proposed Spanish program would suffer from these same flaws and add a few others to the mix.”
On previous occasions, scholars such as Charles Murray of the American Enterprise Institute have called “for an unconditional $10,000 annual cash payment from the government to all adult Americans, coupled with the repeal of all other welfare transfer programs.” The Mercatus scholar called attention to how “libertarian giants such as Milton Friedman, Friedrich Hayek, and even Nobel laureate James Buchanan have praised one form or another of a UBI.”
She does concede that “the notion of direct cash payments has some appeal due to its relative simplicity and fairness.”
However, there are other things to consider:
The appeal of a UBI isn’t really about shrinking the size of government. The program cost would be quite large if the monthly payment is around $1,000 and universal, even though the number of public employees required to administer a true UBI system would be smaller than the army of bureaucrats that taxpayers currently employ to administer the welfare system.
De Rugy also showed how UBIs create incentives to not work:
As George Mason University economist Bryan Caplan has noted, a system that taxes everyone in order to redistribute to everyone is nonsensical in and of itself. Then there is the fact that in places where it has actually been tried, UBI has created some disincentives to work. But that’s hardly a surprise since most welfare programs, including the earned income tax credit, also have this downside. The real question is whether UBI is worse than the current system as a whole. One thing is for sure, as a two-year experiment in Finland demonstrated: We know that UBI doesn’t compel people to work.
Although the UBI is marketed as a replacement for the welfare state, the latter’s popularity is so strong that it will never come into fruition. In other words, UBIs would be placed on top of the current welfare state.
This dynamic makes people like de Rugy uncomfortable and rightfully so. She raised the following concerns:
But there are additional concerns surrounding UBI, which are deal breakers for me. Without a strong guarantee that all anti-poverty measures would be terminated—and that they will not be brought back to life later—UBI is a terrible idea. Under such circumstances, UBI won’t live up to one of its chief selling points, namely, to serve as a more efficient substitute for the highly inefficient welter of existing welfare programs and to do it in a simple and uniform manner.
One issue with the UBI being proposed in Spain and other countries is that they’re not universal, which defeats the straightforward purposes of these programs. In effect, they’ll be existing alongside the current welfare state. De Rugy explains:
For starters, it’s not universal. It’s means-tested, which is to say that the UBI recipients must demonstrate they lack a certain level of wealth or income. This defeats the universal and simple aspects of the system. In addition, Spain’s UBI program would be added on top of existing welfare programs, so it only makes existing programs more complicated, more bureaucratic and more expensive.
If Western countries are serious about tackling poverty, they need to be become skeptics of central banking and mass migration, in addition to gutting the regulatory state, which shackles the creation of small business and other economic arrangements that allows for people to get out of poverty.
Such alternatives would do more to eradicate multi-generational poverty than another government handout.