Leading experts weigh in on current policy issues and challenges

Guaranteed annual incomes

It seems like a pretty radical notion to do away with some or all of our safety net and instead guarantee every single American adult an annual income just for…being alive. But the idea is gaining popularity across the ideological spectrum. Does it have any real merit?

This conversation originally appeared on Branch on November 15, 2013. 

The Urban Institute is talking with...
Donald Marron Donald Marron
Margery Turner Margery Turner
Austin Nichols Austin Nichols
Urban Institute
Moderated by:
Urban Institute
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A guaranteed income offers many benefits. For starters, people would be able to use the money as they think best, whether paying for food and shelter, saving for a rainy day, doing extra for their kids, etc. Many traditional programs, like food stamps and housing vouchers, don't offer that flexibility. (For a nice study on this point, from Kenya, see: web.mit.edu) A universal benefit would also eliminate the stress, stigma, and administrative burden of enforcing eligibility requirements. It would reach essentially everybody, unlike most programs. 
Those benefits must be weighed against significant costs, of course. But there's a reason people as diverse as Milton Friedman and George McGovern have endorsed versions of this idea.

I share Donald's enthusiasm for the potential of this approach - if it could be funded at a level sufficient for a decent quality of life (food, shelter, healthcare...). Along with choice, this idea offers the possibility of greater income stability for people at the bottom of the skills/employment ladder. I've just been listening to scholars, practitioners, and policymakers discuss the lasting damage instability/turbulence inflicts on children's development & long-term outcomes.

The US has moved the other way (away from income guarantees, toward worker benefits) for 30 years because we worry that people won't work if they have an income floor, but that particular social cost has likely been overstated. NIT experiments around 1970 found people worked about 3 fewer weeks per year with guaranteed income at the poverty line. With partial taxation of an income floor, the effect on work would be smaller.

MLK: "the solution to poverty is to abolish it directly by a now widely discussed measure: the guaranteed income." (<em>Where do we go from here: Chaos or community?</em> published 1967, page 162)

About how big would an effective income need to be? In the meantime, what would we preserve -- if anything -- from our current safety net?

$500 a month could eliminate deep poverty. Offset by eliminating Personal Exemption and Standard Deduction ($10K for single) and reducing food assistance (yet again). Housing and medical assistance are harder to adjust. We need to preserve temporary assistance, but could move money from TANF to subsidized jobs and temporary disability.

We should also acknowledge the necessity of retaining many elements of anti-poverty policy that don't involve income transfers. Some families who are stuck at the bottom need more than just dollars to achieve stability -- let alone self-sufficiency.

A truly universal guaranteed income would be expensive. There are 240 million adults in the United States today (quickfacts.census.gov). Austin's $500 per month would equal $6,000 per person per year. That works out to $1.4 trillion annually or about 35% of existing federal spending. It's hard to see how you could pay for that just by rolling back existing safety net programs and related tax breaks. Policymakers would thus have to consider other funding sources (e.g., higher taxes) or making the program less universal (e.g., providing less to folks who also get Social Security or cutting the benefit above some income level).

To set the income level high enough to lower poverty dramatically would no doubt be expensive - but is it realistic to think of it as an investment? That is, might it be expensive for a generation and then begin to pay off as healthier, better educated and happier people produced more with less government financial support?

Agreed a guaranteed income of $6K/yr would be expensive, but if taxable, the net outlay is lower, perhaps $1.1 trillion a year to cover all adult citizens. Eliminating the zero bracket (exemption/deduction) would not cover that, just offset the cost, so higher taxes would be necessary (or cuts to tax expenditures). I wonder if a nationally recognized tax policy center could calculate the required increase in rates?

I think a family benefit or child benefit or an income floor for families with children can be viewed as an investment; less true for a universal guaranteed income. Pro: guaranteed income has broader constituency to support it; Con: less targeted--> lower bang for the buck. A child benefit would be cheaper, as well. We can end child poverty. Or, at least, do more.

Thank you very much for the fascinating contributions. We welcome any other thoughts or comments where we've posted this conversation to our blog.