Swiss voters reject 'money for nothing' scheme to replace welfare

In an historic referendum, Swiss voters have soundly rejected a plan to give every Swiss citizen a universal basic income in lieu of transfer payments. The plan would have doled out about $2500 a month to every adult and $600 a month for every child.

Reuters:

Opponents, including the government, said it would cost too much and weaken the economy.

Projections by the GFS polling outfit for Swiss broadcaster SRF showed nearly four out of five voters opposed the bold social experiment launched by Basel cafe owner Daniel Haeni and allies in a vote under the Swiss system of direct democracy.

Haeni acknowledged defeat but claimed a moral victory.

"As a businessman I am a realist and had reckoned with 15 percent support, now it looks like more than 20 percent or maybe even 25 percent. I find that fabulous and sensational," he told SRF.

"When I see the media interest, from abroad as well, then I say we are setting a trend."

Conservative Switzerland is the first country to hold a national referendum on an unconditional basic income, but others including Finland are examining similar plans as societies ponder a world in which robots replace humans in the workforce.

The day is coming - much sooner than any of us realize - when smart machines will do the work being performed by tens of millions of us now. Even white collar jobs will vanish in the next decade. 

And that's the idea behind this basic income scheme. The UBI will act as a buffer in the transition to a robot workforce. By giving everyone a floor income, the theory is that economic disruptions will be minimized.

But what about the "moral hazard" of just giving everyone money? Proponents have no good answers which is why Switzerland - one of the most generous of the European welfare states - rejected the idea.

Not so fast says American Enterprise Institute fellow Charles Murray. Murray has been advocating for a UBI in America for a decade. And now that the contours of the robot revolution are coming into focus, Murray believes the time is now to implement the plan.

Wall Street Journal:

The great free-market economist Milton Friedman originated the idea of a guaranteed income just after World War II. An experiment using a bastardized version of his “negative income tax” was tried in the 1970s, with disappointing results. But as transfer payments continued to soar while the poverty rate remained stuck at more than 10% of the population, the appeal of a guaranteed income persisted: If you want to end poverty, just give people money. As of 2016, the UBI has become a live policy option. Finland is planning a pilot project for a UBI next year, and Switzerland is voting this weekend on a referendum to install a UBI.

The UBI has brought together odd bedfellows. Its advocates on the left see it as a move toward social justice; its libertarian supporters (like Friedman) see it as the least damaging way for the government to transfer wealth from some citizens to others. Either way, the UBI is an idea whose time has finally come, but it has to be done right.

First, my big caveat: A UBI will do the good things I claim only if it replaces all other transfer payments and the bureaucracies that oversee them. If the guaranteed income is an add-on to the existing system, it will be as destructive as its critics fear.

It is here that the radicalism of Murray's idea for a UBI becomes clear:

The UBI is to be financed by getting rid of Social Security, Medicare, Medicaid, food stamps, Supplemental Security Income, housing subsidies, welfare for single women and every other kind of welfare and social-services program, as well as agricultural subsidies and corporate welfare. As of 2014, the annual cost of a UBI would have been about $200 billion cheaper than the current system. By 2020, it would be nearly a trillion dollars cheaper.

The big reason why so much money would be saved is virtually eliminating the tens of billions in administrative costs siphoned off by government to run these programs. Fraud and waste would also be drastically reduced when everyone is eligible for the program.

But what about the "moral hazard" question? Murray says the real question is how much worse could it be compared to today with a a UBI?

Finally, an acknowledgment: Yes, some people will idle away their lives under my UBI plan. But that is already a problem. As of 2015, the Current Population Survey tells us that 18% of unmarried males and 23% of unmarried women ages 25 through 54—people of prime working age—weren’t even in the labor force. Just about all of them were already living off other people’s money. The question isn’t whether a UBI will discourage work, but whether it will make the existing problem significantly worse.

The amount Murray is proposing doesn't sound like much. But when you consider that you can earn up to $30K a year and maintain the level of UBI you receive, it begins to make sense.

In my version, every American citizen age 21 and older would get a $13,000 annual grant deposited electronically into a bank account in monthly installments. Three thousand dollars must be used for health insurance (a complicated provision I won’t try to explain here), leaving every adult with $10,000 in disposable annual income for the rest of their lives.

People can make up to $30,000 in earned income without losing a penny of the grant. After $30,000, a graduated surtax reimburses part of the grant, which would drop to $6,500 (but no lower) when an individual reaches $60,000 of earned income. Why should people making good incomes retain any part of the UBI? Because they will be losing Social Security and Medicare, and they need to be compensated.

What's not to like? A smaller, less intrusive  federal government, saving a trillion dollars a year, and reinvigorating the voluntary associations that is one of the big things that makes America an exceptional country?

As a political idea, it is totally, completely unworkable. The left has government's claws into tens of millions of Americans and is not likely to let them go as dependents. They are the source of their political power and no matter what the employment situation, will continue to find ways to bind more and more of us to dependence on the state for our survival.

The left's response to the robot revolution will almost certainly  be an effort to limit automation. This will make America uncompetitive with the rest of the world and our standard of living would take a nosedive. 

Unless some other transformational event occurs during the transition to a robot economy, Murray's ideas are unrealistic and political poison. But they also create a vision for a different way that people can govern themselves, even if it will never materialize.

Note:

An earlier version of this post contained the erroneous - and admittedly idiotic - claim that Switzerland was a "Scandanavian" country. To all Swiss Americans and the many commenters and readers who pointed out my error, I apologize. In the future, I promise not to move countries around the map.

 

In an historic referendum, Swiss voters have soundly rejected a plan to give every Swiss citizen a universal basic income in lieu of transfer payments. The plan would have doled out about $2500 a month to every adult and $600 a month for every child.

Reuters:

Opponents, including the government, said it would cost too much and weaken the economy.

Projections by the GFS polling outfit for Swiss broadcaster SRF showed nearly four out of five voters opposed the bold social experiment launched by Basel cafe owner Daniel Haeni and allies in a vote under the Swiss system of direct democracy.

Haeni acknowledged defeat but claimed a moral victory.

"As a businessman I am a realist and had reckoned with 15 percent support, now it looks like more than 20 percent or maybe even 25 percent. I find that fabulous and sensational," he told SRF.

"When I see the media interest, from abroad as well, then I say we are setting a trend."

Conservative Switzerland is the first country to hold a national referendum on an unconditional basic income, but others including Finland are examining similar plans as societies ponder a world in which robots replace humans in the workforce.

The day is coming - much sooner than any of us realize - when smart machines will do the work being performed by tens of millions of us now. Even white collar jobs will vanish in the next decade. 

And that's the idea behind this basic income scheme. The UBI will act as a buffer in the transition to a robot workforce. By giving everyone a floor income, the theory is that economic disruptions will be minimized.

But what about the "moral hazard" of just giving everyone money? Proponents have no good answers which is why Switzerland - one of the most generous of the European welfare states - rejected the idea.

Not so fast says American Enterprise Institute fellow Charles Murray. Murray has been advocating for a UBI in America for a decade. And now that the contours of the robot revolution are coming into focus, Murray believes the time is now to implement the plan.

Wall Street Journal:

The great free-market economist Milton Friedman originated the idea of a guaranteed income just after World War II. An experiment using a bastardized version of his “negative income tax” was tried in the 1970s, with disappointing results. But as transfer payments continued to soar while the poverty rate remained stuck at more than 10% of the population, the appeal of a guaranteed income persisted: If you want to end poverty, just give people money. As of 2016, the UBI has become a live policy option. Finland is planning a pilot project for a UBI next year, and Switzerland is voting this weekend on a referendum to install a UBI.

The UBI has brought together odd bedfellows. Its advocates on the left see it as a move toward social justice; its libertarian supporters (like Friedman) see it as the least damaging way for the government to transfer wealth from some citizens to others. Either way, the UBI is an idea whose time has finally come, but it has to be done right.

First, my big caveat: A UBI will do the good things I claim only if it replaces all other transfer payments and the bureaucracies that oversee them. If the guaranteed income is an add-on to the existing system, it will be as destructive as its critics fear.

It is here that the radicalism of Murray's idea for a UBI becomes clear:

The UBI is to be financed by getting rid of Social Security, Medicare, Medicaid, food stamps, Supplemental Security Income, housing subsidies, welfare for single women and every other kind of welfare and social-services program, as well as agricultural subsidies and corporate welfare. As of 2014, the annual cost of a UBI would have been about $200 billion cheaper than the current system. By 2020, it would be nearly a trillion dollars cheaper.

The big reason why so much money would be saved is virtually eliminating the tens of billions in administrative costs siphoned off by government to run these programs. Fraud and waste would also be drastically reduced when everyone is eligible for the program.

But what about the "moral hazard" question? Murray says the real question is how much worse could it be compared to today with a a UBI?

Finally, an acknowledgment: Yes, some people will idle away their lives under my UBI plan. But that is already a problem. As of 2015, the Current Population Survey tells us that 18% of unmarried males and 23% of unmarried women ages 25 through 54—people of prime working age—weren’t even in the labor force. Just about all of them were already living off other people’s money. The question isn’t whether a UBI will discourage work, but whether it will make the existing problem significantly worse.

The amount Murray is proposing doesn't sound like much. But when you consider that you can earn up to $30K a year and maintain the level of UBI you receive, it begins to make sense.

In my version, every American citizen age 21 and older would get a $13,000 annual grant deposited electronically into a bank account in monthly installments. Three thousand dollars must be used for health insurance (a complicated provision I won’t try to explain here), leaving every adult with $10,000 in disposable annual income for the rest of their lives.

People can make up to $30,000 in earned income without losing a penny of the grant. After $30,000, a graduated surtax reimburses part of the grant, which would drop to $6,500 (but no lower) when an individual reaches $60,000 of earned income. Why should people making good incomes retain any part of the UBI? Because they will be losing Social Security and Medicare, and they need to be compensated.

What's not to like? A smaller, less intrusive  federal government, saving a trillion dollars a year, and reinvigorating the voluntary associations that is one of the big things that makes America an exceptional country?

As a political idea, it is totally, completely unworkable. The left has government's claws into tens of millions of Americans and is not likely to let them go as dependents. They are the source of their political power and no matter what the employment situation, will continue to find ways to bind more and more of us to dependence on the state for our survival.

The left's response to the robot revolution will almost certainly  be an effort to limit automation. This will make America uncompetitive with the rest of the world and our standard of living would take a nosedive. 

Unless some other transformational event occurs during the transition to a robot economy, Murray's ideas are unrealistic and political poison. But they also create a vision for a different way that people can govern themselves, even if it will never materialize.

Note:

An earlier version of this post contained the erroneous - and admittedly idiotic - claim that Switzerland was a "Scandanavian" country. To all Swiss Americans and the many commenters and readers who pointed out my error, I apologize. In the future, I promise not to move countries around the map.