Econ-Utopia: Economic Alternatives: Basic Income Guarantee

By Thomas Masterson, CPE Staff Economist

The Basic Income Guarantee (BIG) is just what it sounds like: a guaranteed basic level of income. Most proposals suggest that it be distributed to every adult citizen without regard to income or wealth. BIG would replace all of the social programs currently in place that attempt to reduce or eliminate poverty, such as welfare, unemployment insurance, and Medicaid, with a monthly payment sufficient to lift an individual out of poverty.

Interestingly, this proposal is drawing support from the right as well as the left (leftists have long supported versions of this proposal). Even Charles Murray (think “The Bell Curve”) likes it: he has written a book about it in which he seems to say that he thought it up, calling it “The Plan.” By eliminating the need to monitor for fraud and abuse of the system, BIG would actually be cheaper than our current system of multiple benefits and eligibility criteria. BIG would also get rid of the disincentive to work built into the welfare system–often working for pay leads to a decrease in benefits, making work a less attractive option. And, by allowing people to decide on their own what to use the money for (though Murray’s plan calls for $3,000 of his $10,000 annual grant to be spent for health insurance), BIG would increase efficiency. Lefties like it because it frees people from dependence on employers and gives them more bargaining power to demand good working conditions and better pay.

There is opposition to BIG. Opponents lament about the “Malibu surfer” problem: if you give everybody a basic level of income for nothing, some might choose to do nothing. BIG takes income from the rich and gives it to the poor (economists call this income redistribution), which some disapprove of. BIG might cause the wages of those doing menial but necessary work to rise, which opponents say will be bad for the economy.

As far as “Malibu surfers” are concerned, if BIG is less costly to implement than our current system, who cares? Everybody pays less and those who want to dedicate their lives to gnarly waves are happier than they would be otherwise: nobody loses out in this scenario. If, on the other hand, you don’t like income redistribution, you won’t like BIG any better than our current system. But redistributing income may be quite good for the economy: the poor tend to spend a large fraction of their income, so giving them more to spend increases the demand for goods and services. This argument should also dispel the notion that “menial” work deserves menial pay, and leads one to wonder why higher wages for those who are currently the working poor is bad for the economy.

The state of Alaska currently has a quite popular minimal version of BIG: the Alaska Permanent Fund, a system under which every citizen gets an equal share of oil revenues from the pipeline (last year it was $845.76). Brazil has begun a program that will eventually become a BIG: the Program of Guaranteed Minimum Income. Currently it is aimed at the poorest segments of Brazilian society and will build from there. With such wide-ranging support, BIG may be coming soon to a country near you. Surf’s up!

Sources and resources:

Guaranteed minimum income” Wikipedia, the free encyclopedia.
Charles Murray. “A Plan to Replace the Welfare State.” Sunday, March 26, 2006 12:01 a.m. EST.
U.S. Basic Income Guarantee Network. “What is the Basic Income Guarantee?
State of Alaska, Department of Revenue, Permanent Fund Dividend Division. “Dividend Amounts.

© 2006 Center for Popular Economics

Econ-Atrocities are a periodic publication of the Center for Popular Economics. They are the work of their authors and reflect their author’s opinions and analyses. CPE does not necessarily endorse any particular idea expressed in these articles.