'Guaranteed Income' Is a Comically Awful Poverty Solution

Story Stream
recent articles

New York Magazine's Annie Lowrey excitedly writes "that there's a welfare-policy idea that is very in vogue. That idea is just giving everybody enough money to live on, rich or poor, old or young, working or not working. It is called a universal basic income." She adds that the idea has captured the imagination of Silicon Valley technologists, European socialists, U.S. policymakers on the left and right, and seemingly everyone in between.

And while Lowrey is hedging herself as to whether a universal basic income or guaranteed income will succeed, it doesn't take much casual analysis to see that what has those very deep in thought starry eyed is actually quite silly. In addition to being silly, it would quickly fail as a poverty cure. 

One reason the notion of guaranteed income appeals to certain members of the right is that it would allegedly reduce government bloat. Rather than the feds hatching all manner of wasteful programs meant to reduce want, why not have the government cut a check each year to everyone regardless of income? Yet right there the idea quickly dies of its many contradictions.

While a guaranteed income would theoretically reduce governmental waste, a very basic understanding of public choice theory reminds us that "giving everybody enough money to live on" would very much be a moving dollar target.  Indeed, it would be a target put in play by politicians driven every bit as much by self-interest as their "greedy" benefactors in the private sector. Soon enough ambitious politicians allocating the wealth of others would compete for votes by virtue of dangling more income in front of voters. It's also folly to assume an income guarantee would cause other anti-poverty programs in government to sunset themselves. Lots of luck there.  Again, government workers are driven by self-interest every bit as much the profit-motivated are in the real world. 

All of which brings us to the morality of this confused idea. While it's apparently no longer acceptable to point out that there's no government guarantee of anything without the fleecing of the proverbial forgotten man, can we at least question the morality of giving citizens the right to vote themselves higher income on the backs of their fellow man?

And then there's the economics of it. Somewhere lost in this supposedly high-minded idea is the notion of reducing poverty. Lowrey and others might disagree, but economic growth has the best track record of all when it comes to freeing people from lives of misery. In that case the obvious problem with a guaranteed income is that there's no production (as in economic growth) to speak of. As the word "guaranteed" indicates fairly clearly, income will be a sure thing whether we work twelve hours a day, or spend the daylight hours asleep. What this truth about the guaranteed income reveals rather plainly is that subsidized indolence would show up in slower growth. How much slower is hard to tell.

To the above more than a few guaranteed income advocates will reply that the word "guaranteed" actually ensures abundant economic dynamism. Strongly of the belief that consumption represents actual economic growth, they'll remind we shallow skeptics that guaranteed income means much more spending, and by extension higher rates of growth.  Sorry, but production is always and everywhere the source of real economic advance.  As a rule, production must take place first so that consumption can follow.

Applied to this monumentally silly idea, alleged mass consumption wrought by an income guarantee will only take place insofar as those who produce a little or a lot are able to consume less. There will be no increase in consumption thanks to income guarantees, but there once again will be a decline in production thanks to people once again being paid whether they're working or not.  Unless the supporters of this laughably bad idea truly believe guaranteed income won't drive some or many workers to the sidelines, there will be a decline in economic output, and by extension a decline in consumption.  By definition.   

Taking the absurdity of the consumption argument to its logically dim conclusion, why don't we leave the governmental middle man out altogether and legalize theft? If so, even the unproductive will have more money to spend on the way to supposedly reduced poverty. Of course, if we go this route those who support what is comedy would have to admit that taxation at least has similarities to theft. Guaranteed income religionists don't want the latter given their desire to make everyone dignified and equal through an income guarantee. Apparently it's dignified to take from others so long as government is the entity separating us from our hard-earned wealth.

To all this the proponents of guaranteed income might respond that absent this faux anti-poverty program, those who have means might hoard their income? In reply, those who are even mildly sentient will offer a one word response: exactly. Too easily forgotten by the guaranteed income flock is that no act of saving ever subtracts from demand. Unless those who are productive literally stuff their wealth under a mattress, their savings will immediately flow to borrowers, entrepreneurs and businesses eager to pay for the right to access the economic resources (we borrow money for what it will procure) necessary to fulfill their consumptive and commercial needs. In short, money not taken away from the enterprising will logically flow toward economically stimulative ideas most likely to create work opportunities for those eager to escape economically desperate conditions.

Importantly, the banking of money further explains why guaranteed income is such a comically foolish idea. Unless the advocates of this alleged poverty fix are eager to police the recipients of guaranteed income, odds are many will choose to have their guaranteed money deposited in their U.S. bank accounts only to access it in countries not the U.S. So while it may render the U.S. economy better off if some of the free-riders depart altogether, this consumption of wealth outside the U.S. will further weaken an already backwards argument about government income guarantees fueling a consumption boom.

All of which brings us to the main reason a guaranteed national income not only won't work, but also isn't necessary in the United States. As coarse as it may sound to those immersed in high-minded thought, the simple truth is that the United States doesn't have a poverty problem. Evidence supporting the previous claim is the happy annual reality of intensely poor immigrants risking everything (including their lives) in order to get to the United States. The world's poorest aren't coming to the U.S. because poverty is impossible to overcome; rather they migrate here because the U.S. is where poverty is regularly cured.

Painful as all this may sound to the advocates of coerced charity, poverty in a country as abundant as the United States is not about a lack of money. If it were, it would have long ago been fixed thanks to the trillions spent by government in attempts to eradicate it. Sorry, but in a country such as this in which the world's poorest would give anything for the chance to simply work here, the driver of poverty is plainly something other than a lack of money. Some individuals disabled of the body and mind surely can't help themselves, but for the rest poverty is a lot more of a choice - or a series of bad choices - than most would care to admit.

Lowrey concludes that "in a few years, we will know a whole lot more about whether [a guaranteed income] is the right" solution to poverty. It's a nice hedge by a surely well-meaning Lowrey, but wholly unnecessary. The alleged solution won't work simply because poverty in the U.S. once again has nothing to do with a lack of money. What a shame that America's forgotten men and women will have to pay for yet another solution crafted by the U.S.'s do-gooders so that those so eager to spend the money of others can perhaps come to understand (finally?) what is already so obvious.


John Tamny is editor of RealClearMarkets, Director of the Center for Economic Freedom at FreedomWorks, and a senior economic adviser to Toreador Research and Trading (www.trtadvisors.com). He's the author of Who Needs the Fed? (Encounter Books, 2016), along with Popular Economics (Regnery, 2015).  His next book, set for release in May of 2018, is titled The End of Work (Regnery).  It chronicles the exciting explosion of remunerative jobs that don't feel at all like work.  

Show commentsHide Comments

Related Articles