Unlike other welfare programs which encourage or require recipients to consume certain specific kinds of good – such as medical care, housing, or food – a BIG simply gives people cash, and leaves them free to spend it, or save it, in whatever way they choose.
He lists four main advantages of this over the current approach: less bureaucracy; lower cost; less rent-seeking; and less paternalistic.
The “lower cost” is a bit of a swindle. He cites Ed Dolan’s suggestion that we cut middle-class entitlements while reforming programs for the poor, and counting those cuts the cost is indeed lower.
There is a significant contrast with Paul Ryan’s block grant proposal, which we have been discussing. Ryan’s vision is unapologetically paternalistic, and we have seen arguments that it would actually increase bureaucracy.
My proposal for a flexible benefit is somewhat paternalistic, since funds could only be used for “merit goods.” Compared to a BIG, my proposal would require more bureaucracy, in order to qualify the providers of merit goods. That in turn could lead to some rent-seeking, as businesses on the margins claim to be providing health care or education. However, there would be less bureaucracy than the current system.
Would you consider savings a merit good?
More specifically, would you support or oppose allowing the recipients of flexible benefits to put the funds received in some sort of savings account? What about higher risk forms of savings?
1. If the BIG doesn’t stop when retire, then the average person does not need to skim it for extra savings.
2. If it looks like a substantial number of people are using their grant to save, then many taxpayers will consider the grants to be overly generous, since they are supposed to be just enough to guarantee the survival and basic comfort level of a normal adult. So in equilibrium, savings will always be negligible.
3. You don’t want it to be too easy to take money from a merit-goods-restricted grant and convert it into non-merit goods, either immediately or in the future. Savings accounts would have to be locked up somehow, or redeemable only for more merit goods.
1 – I’m actually thinking more about the kind of savings that allow a person to do things like purchase a modest vehicle without relying on credit, start a small side business, or cope with an unexpected spike in expenses i.e. <$15k, not retirement savings.
2. – The people who use grants to save are the people most likely to be only temporarily dependent on public assistance anyway. One of the most detrimental effects of the current wealth system is the degree to which it punishes savings. That means that people who attempt to leave public assistance cannot take any level of cushion with them, and must immediately fall back on public assistance when they encounter any setback. A safety net that makes it hard to get back up again (eg. SSDI) is worse than no safety net at all.
3. – That shouldn't be hard. Start by offering quarterly compounding interest on unspent money on EBT cards, at something modest but not unreasonably low, like half a percent. Honestly, paying interest is probably secondary to simply not wiping out any un-consumed benefits.
Jim Manzi’s response points out that MZ’s purity only comes from not being subject to legislative and political processes and realities.
http://www.cato-unbound.org/2014/08/08/jim-manzi/when-basic-income-guarantee-meets-political-process
Kling’s and Ryan’s proposals seem immediately more politically palatable. Not that this is a desirable feature per se, but perhaps a more realistic or fair comparison to the status quo.
One person’s paternalism is another’s accountability.