I’ve said that the Universal Basic Income (UBI) proposal should be read not as a proposal, but as a critique of the really-existing U.S. welfare state. My contention is that it is not a well-founded critique.
Dylan Matthews of Vox responds. He acknowledges the political unlikelihood of a UBI but suggests that a small UBI could be fashioned from the existing Federal income tax benefits, specifically the standard deduction and personal exemption. This is a good place to look, which is why I wrote about how to do that, about 15 years ago. An archive is here.
A proposal I cooked up with my friend Professor Bob Cherry of Brooklyn College made it into two different bills — one from Dennis Kucinich, the other from Rahm Emanuel. You can imagine why they didn’t join together on a single proposal. (Dennis had the better bill, naturally.)
The big difference between what I was up to and a UBI is that the existing individual income tax already provides a vehicle for crafting this pseudo-UBI as a refundable tax credit. This is one example where UBI discourse could be more mindful of the existing system, which already provides a slew of income guarantees, albeit not always well-designed ones.
DM next takes on housing benefits, which he says are screwed up. I quite agree. I talked about them yesterday. You cannot, however, dump these funds into any sort of all-purpose UBI without severely harming current beneficiaries. See the previous paragraph, last sentence. So that’s off the table.
Next DM excoriates in-kind benefits (food stamps, housing, etc.) as paternalistic. Cash is better. I suggest that for all practical purposes, these benefits are no different than cash. The reason is that they are inadequate: the benefits are less than what beneficiaries usually would spend on these same goods and services. So on the margin, if you’ll forgive the expression, there is no obstacle to the choices of beneficiaries–they’re spending their own money at that point. There is overhead with SNAP and housing, but there is as well with cash transfers. There would be with a UBI–perhaps more, since the incentives to claim fraudulently could be greater.
Most means-tested transfers are already provided in cash or near-cash. The big exception is Medicaid. But you don’t want people trying to buy health insurance in an individual market with a voucher. The other exception is Temporary Assistance for Needy Families (TANF), formerly Aid to Families with Dependent Children (AFDC), or just “the welfare.”
I’ve been trying to point UBI folks at TANF, the most dubious part of the safety net. Federal TANF funds that used to be provided as cash in the AFDC program are now spent by state governments for services aimed at getting clients into work. (Note, lots of AFDC recipients worked.) That means high overhead and lots of in-kind benefits (remedial education, vocational education, child care, transportation subsidies, etc.), not necessarily superior to cash.
Nobody rants about subjecting TANF to cost-benefit analysis, nobody inquires as to its “waste, fraud, and abuse.” The reason is that it has been neutered into a block grant. Its value adjusted for inflation since 1997 has fallen by 28 percent. The number of beneficiaries has fallen from by more than half. Since 2000, the poverty rate has gone from 11.3 to 15% (Table 2). It is now higher than in 1996, the year of the glorious enactment of welfare reform. Problem solved! Not the problem of poverty, the problem of poor people getting cash from the Federal government, also known as “dependency.”
The case for a different sort of TANF precedes the UBI by half a century. It used to be called a family allowance. It’s worth considering, though arithmetic will still be a problem.