Rethinking the basic minimum income

Milton Friedman talked about the concept of a basic minimum income years ago.  Replace the welfare state with some level of guaranteed income.  I have always had an issue with it because I felt that the basic minimum would never be enough in the minds of the left and because I oppose the concept of a welfare state at all.  This seemed to me to just be another iteration of the same flawed model, pay people for not working.

I might be starting to come around, however.  Consider.

The welfare state costs about a trillion ($1,000,000,000,000) a year in the United States.  According to Wikipedia this is about $21,000 per person below the poverty line.  I wonder what percentage of this is eaten up in management costs.  We have to pay people to administer the programs, evaluate the programs (not that they ever actually get evaluated in any meaningful sense), file the paperwork, interview the applicants, maintain the welfare offices, etc.  If the money used to administer these programs could be freed up for other purposes either we'd have more money for actual assistance or we would spend less money.  Win/win.

The welfare state undermines peoples self sufficiency and ability to make decisions.  Setting aside the fact that giving people free stuff doesn't actually make them more able to provide for themselves but rather erodes their ability and willingness, the welfare programs currently in existence may help the people on a day to day basis but in the long run generally don't do much to lift people out of poverty by helping them become more self sufficient.  Note the word generally.  If you are planning on commenting about some friend of yours who just needed a hand and who is now a neurosurgeon thanks to her welfare payment, skip it.  We get it.  NAPPALT.

The welfare state actively discourages becoming self sufficient.  The system is set up so that minimum levels of actual income, the kind where you go to a job every day, developing good work habits and an employment history which will allow you to then get a better job, reduces your ability to claim benefits to the point where you are better off, absent significant job market skills already, staying on welfare.

So how would a basic minimum guaranteed income do better?  Well, for one it introduces a level of self sufficiency into daily life by providing an income but requiring that the actual financial decisions be made by the individual.  Budgeting, making rational choices, not overspending, all things that most people do as a part of their daily lives become necessary to the person who can not support themselves for whatever reason, be it lack of skills or lack of opportunity.  Instead of food stamps that provide a certain budget for food, the person takes a portion of their income and buys food.  Instead of low income housing paid for by the government, again, they have to use a portion of their income to pay rent.

You might argue that many of these people do not have the skills necessary to achieve an appropriate level of self governance, or they would not be on welfare.  Noted.  However, this is also an argument against traditional welfare programs.  An acknowledgment that some of these people will be on public assistance for the rest of their lives. Shouldn't a government program be designed to help them become productive if at all possible?

In response I would propose that some of the money saved by shutting down the trillion dollar welfare industry be directed towards the basic financial education that these people should have received in high school  Budgeting, shopping, balancing a checkbook (who has those anymore?), etc.  Deferred gratification on high cost items like big screen TVs by teaching the actual costs of financing versus saving.  I would be fine with a government program to teach them if it helps to transition the majority to a more productive life, a life that is better for them and better for society in the long run.  I'd even set up call centers where they can call for financial advice when they are struggling.  Show them investment options through mutual funds and the kind of opportunities that working class people have to prepare for retirement.

You might argue that many of the poor will spend their money unwisely early in each month, leaving nothing for the last few days of each month.  They might drink, drug, or gamble it all away, and have no food for the last week or two.  OK.  Under a basic minimum income system everyone will know that they had money at one point and made poor choices. Their friends might loan them a bit this month to tide them over, but after a few months of this will realize that the problem is the individual's choices, not a lack of income.  Eventually that person will need to either make better life choices or reconcile themselves to being hungry for a few days each month.

You might further argue that the level of the basic minimum income will never be enough, that the left will always argue to raise it higher.  You are right, they probably will, but how would that be different from what happens now.  The left is constantly arguing that our current welfare programs need more money, or that non-skilled workers need to be paid more.  Nothing will change that.  What can change, however, is the benefit that the programs provide to the individual and to society.  If we can train a new generation of the poor in financial responsibility, the need for the programs should decline as those who have made those choices with their new knowledge are able to move out of the cycle of poverty.

Will it work?  I don't know.  The current system has been in place for over forty years, however, since the "Great Society" programs of LBJ and they don't seem to have accomplished much other than having created a giant underclass of generations of welfare dependent citizens with no prospects of ever getting out.  Maybe it is time to try something completely different and see how it works.  It certainly couldn't be much more futile than what we are doing now.