It Seems Like Such a Good Idea

For every complex problem there is an answer that is clear, simple, and wrong. H. L. Mencken

What is it about folks with newfound wealth (e.g. some millennial scores big when he sells his startup) that makes them think that they can now opine with confidence on complex policy issues?  So it is with concerns about automation and robots and their anticipated effects on the economy; how many times have you ready a pronouncement in the tech media about the need to provide a Basic Income Guarantee (BIG) recently?  Basically, provide folks with an income “Floor” so that, when their industry is disrupted, they don’t end up on the street.

And not just millennials – Bill Gates was quoted recently musing about the need for a “…tax on robots…” to fund social programs needed to mitigate the dislocations those machines will cause.  (He didn’t back a “…tax on spreadsheet software..” to fund social disruptions it cause when his company was taking off a couple of decades ago.  How strange.).

One of the arguments for a BIG is simplicity: deposit a fixed sum in folks’ bank accounts every month, radically simplifying current processes.  This has some appeal:  our current welfare system is a complex web of programs and bureaucracies.  A Cato Institute paper from a couple of years ago notes that:

The federal government currently funds 126 separate anti-poverty programs, at least 72 of which provide either cash or in-kind benefits to individuals. For example, there are 33 housing programs, run by four different cabinet departments, including bizarrely the Department of Energy. There are currently 21 different programs providing food or food purchasing assistance. These programs are administered by three different federal departments and one independent agency.  There are eight different health care programs, administered by five separate agencies within the Department of Health and Human Services. And six cabinet departments and five independent agencies oversee 27 cash or general assistance programs. All together, seven different cabinet agencies and six independent agencies administer at least one anti-poverty program.

Another argument in favor of the BGI is effectiveness: we’ve spent about $19 TN since Lyndon Johnson initiated his “War on Poverty” in 1965 and, while we have kept folks from absolute destitution, we have failed at raising that population out of poverty.  A third argument in favor of the BGI is liberty: treat recipients like adults and let them do what they want with the money.

A final argument – one made by Bill Gates and his millennial fellow travelers – is that the changes that technology will bring in coming years will be highly disruptive, so we need to do something to help the average joe through this period of rapid change.

If only it were that simple.  First, there is the question about how disruptive this next disruption will be (This OECD paper notes that the middle class is doing quite well and that, if it has a threat, it is the high cost of housing, a decidly low tech issue.); while there is general angst about changes technology will wreak on the economy it is too early to tell what is actually going to happen.  Second, a BIG would be insanely expensive: the CATO paper I reference above puts the cost at well north of $2 TN.  We spend about $1 TN on current welfare programs and, even if we could roll social security and mortgage interest deductibility into the program (Good luck with that!), we would still come up short.  Higher taxes anyone?

Finally, the attraction of simplicity – something that appeals to libertarians like Cato – is likely a chimera.  Those 126 poverty programs noted above are the product of a messy, complicated, venal political system that isn’t likely to change anytime soon.  Just ask Steve Forbes how far he has gotten with his flat tax idea.

So, the next time some recently wealthy millennial (Or Bill Gates) opines on our need to plan for and fund a BIG, you might want to take their comments with a grain of salt.