Basic Income and the something for nothing objection

by Michael Lewis | Aug 24, 2018 | Opinion

Michael A. Lewis

Silberman School of Social Work at Hunter College

One of the main criticisms of basic income is that if the government gave us money we did not have to sell our labor for, we would work less. Perhaps not all of us would reduce our labor supply but enough of us would render the policy unsustainable for example, if you are in a lawsuit you won’t be able to sustain your financial status since you would be struggling, therefore lawsuit loans would be able to help you and prevent you from drowning under financial stress. This is an important criticism and much of the basic income debate is centered around it. What I want to do in this post, however, is address another related criticism. I will call it the “something for nothing” (SFN) objection to basic income.

The SFN objection goes something like this. Even if giving people money they didn’t have to work for didn’t result in a significant decrease in labor supply, we still shouldn’t enact such a policy. The reason is that it’s simply wrong to give able-bodied people money without requiring something in return. I realize there’re those who’d object to the word “nothing” in the SFN objection. Many who received a basic income would work part-time, go to school, take care of others, or engage in a host of other activities we might not think should be characterized as nothing. Although I agree with this sentiment, for the sake of this post I’ll put it to one side. That’s because I want to address the SFN objection head on and believe the best way to do so is by conceding, for the sake of argument, that recipients of a basic income would do nothing.

The wrongness of giving people something for nothing is often couched in paternalistic terms. Here’s an example from economist Isabel V. Sawhill:

“Liberals have been less willing to openly acknowledge that a little paternalism in social policy may not be such a bad thing. In fact, progressives and libertarians alike are loath to admit that many of the poor and jobless are lacking more than just cash…. A humane and wealthy society should provide the disadvantaged with adequate services and support. But there is nothing wrong with making assistance conditional on individuals fulfilling some obligation whether it is work, training, getting treatment, or living in a supportive but supervised environment.”

But, as pointed out by economist Guy Standing in his book Basic Income: A Guide for the Open-Minded, many seem perfectly fine with people receiving something for nothing under other circumstances.

Take the cases of inheritance and gifts. Wealthy parents, grandparents, etc. are allowed, upon their deaths, to transfer vast sums of money or wealth to their heirs. And while alive, they’re able to make such transfers as gifts. Yet recipients of such bequests and gifts are under no obligation to work, receive training or treatment, or live in supportive environments. It’s rare to hear basic income opponents criticize this form of something for nothing. There’re several possible reasons for this absence.

Perhaps basic income critics opposed to such transfers among the wealthy do not say much about them because they are thought to be beyond the reach of public policy. That is, perhaps these critics believe it’s wrong for the kids, grandkids, etc. of the wealthy to receive something for nothing but feel such immorality must be tolerated because there isn’t much public policy can do to stop it. But this underestimates the reach of public policy, at least from a technical point of view.

Bequests and gifts are regulated by estate and gift taxes. So, technically, we could change tax laws to make it very difficult or impossible to transfer money or wealth to one’s descendants or heirs. Alternatively, we could allow such transfers to take place but require recipients of them to provide evidence that they’re working, or receiving job training, or in school, or have graduated from school, are receiving drug treatment if necessary, etc. To my knowledge, we currently do none of these things.

Another reason for lack of criticism of SFN transfers among the wealthy might be the view that we shouldn’t tell wealthy people what to do with their money and assets. If they want to leave a million dollars or a couple of homes to their kids, who are we to tell them not to? This raises a complicated economic and moral question: how much of the money and wealth we possess is ours? This may seem like a strange question to ask because the answer seems so obvious: all the money and wealth we possess is ours. But now consider the following autobiographical story.

I am currently a professor at a public university in New York City. I worked very hard to get where I am, having spent almost 25 years in school, culminating in a PhD. I’m not exactly wealthy but neither am I poor. I’m currently living, as many say, “comfortably,” as a result of making a “decent” salary. And I own (well co-own with a spouse) a home. Now here’s a question: what supports did I require to get to this point?

First, I was raised within a family. People don’t get to become professors, or anything else for that matter, without being socialized by a caring family of some kind, whether biological or not. Second, I spent 13 years in K-12 educational institutions. I, of course, did not teach myself but was taught to be a dedicated teacher. This continued throughout college and graduate school. Third, not only was I taught by teachers, but I took part in a number of group study sessions. This resulted in me learning a great deal from my classmates, as well as from teachers. Fourth, the things I learned were, in most cases, neither invented/discovered by my teachers nor my classmates. None of my teachers or classmates were Isaac Newton, Albert Einstein, Emile Durkeim, Adam Smith, Marie Curie, Shirley Ann Jackson, Rosalind Franklin, Ada Lovelace, etc. That is, a host of people no longer with us played an indirect role in helping me get to where I am today.

I could go on but suspect I’ve made my point: any income or wealth I currently possess is not an individual accomplishment. On the contrary, it is a collective one in which many others, dead and alive, played a role. And it’s very difficult to quantify how much of what I have now is due to what I did and how much a result of what others did. That is because what I have been able to do is so intertwined with what others helped make it possible for me to do. This doesn’t just apply to me; it applies to all of us, no matter how wealthy or successful.

To be clear, I am not saying people should have no say in how they allocate the money or wealth they possess. Perhaps they should have more say in deciding this than anyone else. That is, the point of my autobiography was not to support the assertion that the government can just confiscate people’s money/wealth for whatever purposes it sees fit. But it was intended to support the conclusion that government may have more of a claim on “our money” than many of us typically think. That is because government plays a big role in creating the legal/cultural environment which allows for the various collective accomplishments I spoke of earlier. It helps to define and enforce property rights, “nurtures” markets, and helps to curtail acts of violence and aggression, acts which could be quite destabilizing for any socioeconomic system. Thus, basic income opponents who worry about something for nothing transfers among the wealthy may have more room to maneuver than they think.

A third possible reason for reticence when it comes to criticizing SFN transfers among the wealthy may be their voluntary nature. When wealthy folks make transfers to heirs, this is something they’ve chosen to do. Current social welfare benefits (and this is likely to be true of any enacted basic income) are financed by taxes. If people do not pay taxes, they can be fined, jailed, or both. That is, social welfare SFN transfers are involuntarily financed. Perhaps this gives taxpayers the right to demand something in return from social welfare beneficiaries, a right they do not have when it comes heirs of the wealthy.

This is a fair point. But I think it implicitly takes us back to the question of whose money and assets wealthy people are transferring to their heirs. That is, implicit in the voluntary transfers argument is the notion that wealthy people can transfer any money or assets they want to their heirs because it’s their money and assets to do with what they please. But if what I said earlier about how achievements are collective, as well as individual, achievements facilitated in part by the government, perhaps the rest of us do have some say in what children of the privileged have to do in return for gifts and bequests from their rich friends and relatives.

There’s another point to raise about this voluntary transfers argument. The U.S. federal government currently has in place a number of tax expenditures. These are policies where the government allows people to reduce their taxable incomes or, in some cases, their actual tax bills. Those which allow people to reduce their taxable incomes are called deductions. Those which allow taxpayers to reduce their tax bills, that is, the amounts they owe in taxes, are called tax credits. I can make the point I want to make here by focusing on deductions, one in particular.

Under certain conditions, people who borrow money to buy a house can deduct the interest they pay on the loan used to finance that purchase. That is, when it comes to calculating their income which is subject to taxation, taxpayers in this situation can subtract the amounts they paid in interest before determining their taxable incomes. This could put them in a lower tax bracket and cost the government, that is, taxpayers lots of money in forgone revenue. The policy is arguably a kind of housing subsidy. Yet people do not have to work, take part in job training, prove they are staying off drugs, etc. to receive it. That is, this looks a lot like a “subsidy for nothing” policy. Why allow this one, as well as others like it, but not a basic income?

For the sake of discussion, let us put aside some of the things I have been saying in the past few paragraphs. That is, let’s assume any money or wealth people have is solely theirs to do whatever they please, and government has no claim whatsoever on these resources. Where does that leave us? Well it might leave us in the following situation.

The wealthy could continue transferring something for nothing to their kids because we would have no right to shape public policy to stop it. We could, by enacting a basic income, create a more equal playing field by allowing all of us the opportunity for a similar transfer. Yet if we could not tax people (wealthy or not) who did not want to be taxed, we might not be able to obtain enough revenue to enact a basic income. In fact, we might even be able to obtain enough revenue to enact the kind of conditional system Sawhill advocates. That is, if people had the right to decide what they wanted to do with their money/wealth and government had no claim on these resources, we might not be able to finance a social welfare system at all. That’s because folks might not want any of their money and wealth taken to finance such a system. So, the something for nothing objection to basic income, if taken seriously, could lead to the “free market Libertarian’s” first-best paradise. I wonder if something for nothing objectors to basic income have thought about this possibility.

Acknowledgements: I’d like to thank Michael D. Tanner and Eri Noguchi for their helpful comments on this piece. In contrast to what I said in the essay about accomplishments, I take full responsibility for any errors that remain.