Scrap the Welfare State and Give People Free Money

A guaranteed income would reduce the humiliations of the current welfare system while promoting individual responsibility.

The Swiss are set to vote on whether their country should introduce a basic national income of 2,500 Swiss Francs ($2,800) a month for every adult, regardless of their salary or net worth. A date for the vote has yet to be announced. 

Without the Swiss proposal being attached to drastic welfare reforms the plan is, I think, unfeasible. However, that the particular proposal in Switzerland is not ideal does not mean that libertarians should shy away from proposing something similar. Being morally comfortable with some degree of government wealth redistribution might be contrary to anarchism, but it is not contrary to libertarianism, and were libertarians to argue for replacing the current welfare system with a basic national income we would be better positioned to not only highlight the fact that libertarianism is not the heartless and selfish philosophy it is commonly portrayed as, it would allow for a more humane and effective way to deliver welfare than the current system on offer.

In discussions about welfare it is astonishing how often the current system is portrayed as humane, just, or charitable. However, one of the tragedies of the current welfare system is that it strips welfare recipients of their dignity while treating many of them like children, and functions on the underlying assumption that somehow being poor means you are incapable of making good decisions.

Many welfare recipients are required to undergo drug tests, despite the fact that many Americans take illegal drugs while still being good parents and holding down a job. If employed professionals are able to fulfil their duties at work while also maintaining a recreational drug habit, why should welfare recipients be treated differently? In fact, in the last year welfare recipients in Utah were found to test positive for illegal drugs at rates less than the national average, and in Arizona 87,000 screenings between 2009 and 2012 yielded one positive test result. 

Perhaps the best example of the demeaning nature of the current welfare system is the SNAP program, otherwise known as food stamps, which works by giving recipients a card that can only be used to buy a selection of government-approved goods. Alcohol, tobacco, pet food, and vitamins are only some of the products that those on food stamps cannot buy because the powers that be have determined that they know what is the best lifestyle for food stamp recipients.

Instead of treating those who, often through no fault of their own, have fallen on hard times like children who are incapable of making the right choices about the food they eat or the drugs they may or may not choose to take, why not just give them cash? Doing so would not only cut down on the huge administrative costs of America's welfare programs, it would also promote personal responsibility and abolish much of the humiliation and stripped dignity associated with the current welfare system.

Although a basic or guaranteed income would have to be financed through taxation it has been proposed by a number of classical liberals and libertarians.

One of the most prominent proponents of the negative income tax, which guarantees a basic income, was Milton Friedman, the nobel-prize winning economist and free-market advocate. Austrian economist Friedrich Hayek express support for a "minimum income for everyone" in the third volume of Law, Legislation, and Liberty. The American radical Thomas Paine proposed a national income in this pamphlet Agrarian Justice, and libertarian author Charles Murray has also argued in favor of a guaranteed income.

Of course libertarians, who are in favor of less government spending, may be concerned that were a basic income to be implemented that it would cost more than the current welfare system. However, it is worth considering that, as Peter Ferrara pointed out in Forbes, the Census Bureau estimates that our total welfare spending is four times the amount that would be needed to lift all Americans currently living in poverty above the poverty line by giving them cash.

In 2008, Charles Murray wrote that a guaranteed income for all American adults over the age of 21 who are not in prison of $10,000 a year that would replace all current welfare programs as well as agricultural subsidies and corporate welfare would be cheaper than maintaining the current welfare system in the coming decades.

It is important to point out that under Murray's proposal, which is outlined fully in his book In Our Hands: A Plan To Replace The Welfare State, after someone's total annual income reached $25,000 a 20 percent surtax tax would be imposed on "incremental earned income," capped at $5,000 once someone earns $50,000 a year. Murray's plans also requires that $3,000 of the $10,000 grant be spent on health insurance.

Of course giving every non-incarcerated American over the age of 21 $10,000 (or the current poverty line of $11,490) a year with Murray's surtax plan in place of all corporate welfare and the entirety of the welfare state (including Social Security, Medicaid, and Medicare) would not be cheap, but it would be more efficient, because it is a simple cash transfer, and would be easier to fund were other libertarian budget proposals considered, such as cuts to defense spending. 

Those who are not fans of Murray's guaranteed income may be more open to Milton Friedman's negative income tax, which would not guarantee a set income for every adult, but would provide payments to Americans based on how much below a certain threshold they earned. Like Murray's guaranteed income, Friedman's negative income tax would be financed through wealth redistribution.

Some libertarians may not be fans of a guaranteed or basic income because such a system would, they argue, disincentivize work. Murray believes that his surtax scheme would incentivize work after someone began earning over $25,000. Friedman wrote that the negative income tax "reduces the incentives of those helped to help themselves, but it does not eliminate that incentive entirely, as a system of supplementing incomes up to some fixed minimum would. An extra dollar earned always means more money available for expenditure."

It remains to be seen if the Swiss will vote for a guaranteed national income. Over the weekend, Swiss voters rejected another radical economic proposal, which would have capped pay at a company at 12 times the wage of the lowest paid employee.

Whatever the outcome of the Swiss referendum, libertarians in the U.S. and elsewhere should support the idea of a basic income  as a replacement for the current welfare systems on offer. The welfare system in the U.S. is an ineffective and expensive mess, but it is unlikely that the majority of the American public are going to be persuaded to support the outright abolition of the welfare state any time soon. Rather than make the principled argument against the redistribution of wealth, libertarians would do better if they were to argue for a welfare system that promotes personal responsibility, reduces the humiliations associated with the current system, and reduces administrative waste in government.