Why a guaranteed minimum income is a terrible idea

John Linder Former Congressman
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On Monday, CNN’s website made a big splash about income inequality. Being the day before Tax Day, I expected them to point out that the top 10 percent of the income earners pay 71 percent of all income taxes and the bottom 43 percent of the income earners pay none.

Well, they didn’t. They ran a piece by David Wheeler, a journalism professor from Asbury University in Lexington, Kentucky, that argued on behalf of an old and discredited idea, that nonetheless has experienced something of a resurgence lately, even on the right – a government-guaranteed annual income.

The introduction to the piece featured a picture of Cornelius Vanderbilt’s residence in New York City in 1908. That picture was followed by 23 more juxtaposing poverty and wealth. You get the idea. Some are more equal than others.

Wheeler breathlessly promised that something to relieve the “fear, stress and humiliation caused by unemployment (and underemployment) can be eliminated with a simple solution.”

His gauzy explanation of Brazil’s program “lifting many people out of poverty” and another pilot project “showing promising results so far” is faint praise for such a gigantic governmental offering.

The plan would provide every American with a monthly stipend such that “their basic economic needs are being met.” We are assured it would be “cheaper and much more effective than our current malfunctioning safety net, which costs nearly $1 trillion per year.”

As luck would have it, we can come to an actual number on his proposal. The federal government determines each year what a person would have to spend to pay for their basic essentials. For 2014 that number is $11,490. Multiply that by 317 million Americans and you have a simple straightforward program costing $3,642,330,000,000, or 97 percent of this year’s total budget.

Not everybody would be receiving full benefits, but it’s not “cheaper.” How might this scheme work? The Earned Income Tax Credit was designed to do for “the working poor” what Wheeler wants to do for all. Under the EITC low income tax payers receive a tax credit that exceeds the taxes they have paid. It costs taxpayers about $65 billion a year and approximately 25 percent of that is sent to people who are not eligible, but have learned how to game the system.

Medicare was designed to take care of the healthcare needs of seniors. Healthcare security was borne of the same noble sentiments as Mr. Wheeler’s income security. It is estimated that as much as $40 billion will be paid out due to fraud in 2014.

It is likely that the IRS would be the responsible agency to handle any “negative income tax” or other version of a guaranteed income. The IRS has proven to be totally corrupt, but they are not alone among government agencies. None are efficient. An error rate of just five percent in a program this size would waste $200 billion each year.

The only expert that Mr. Wheeler quoted directly was political economist Gar Alperovitz from the University of Maryland. Alperovitz has written a book entitled America Beyond Capitalism, and articles in the Nation like “Taking the Offense Against Wealth” — “Strategies that unite the vast majority against the elite are sure to win” — and “Tax the Plutocrats,” in which he writes, “Money is needed for social programs and the rich have more than their share.”

Professor Alperovitz assured Wheeler that a guaranteed annual income would open up the possibility of a reduction in the workweek.

“Once people have the freedom to elect to work less, their capacity to engage in the work of rebuilding community and democracy can increase far beyond what is possible in today’s precariously overworked society,” Alperovitz said. I do not know if he put a plug in here for art and poetry, but I’d bet that Nancy Pelosi would be thrilled with this idea.

We’ve seen this play before. European nations provide a generous safety net, such that many 50-year old men have never had a job. They are “taken care of” by a beneficent government. Indeed, government support is attractive enough to lure immigrants from across North Africa who never had it so good, which is beginning to tilt the political landscape toward even more benefits.

I believe I’ll take a pass.