Economy: Do We Need An Universal Basic Income?

(Drivebycuriosity) - Facebook CEO Mark Zuckerberg calls for an universal basic income as a solution for inequality: "We should explore ideas like universal basic income to give everyone a cushion to try new things" he said recently during a speech @ Harvard University (fortune). The idea of an universal basic income—in which the government unconditionally pays all citizens a small amount of money to cover basic needs— isn`t new. In the 1960s Milton Friedman recommended a negative tax rate (nytimes). People who earn less than a certain amount should get money from the state, he proposed.

I find the idea very charming. I would be happy if the government would pay me a nice monthly income for doing nothing. It reminds me of the German fairy tale from the "Schlaraffenland", about a country where everything is for free and milk & honey flow in abundance. I think an universal income will make sense - and it will be realized - when the economy is (mostly) run by robots and there are not many jobs for humans. But we are still far away.

Today an universal income would cause too many problems. Some people might stay poor because they spend this money quickly for alcohol, drugs, gambling and other purposes. Some people may stop working because they don´t need that anymore. Economists call this a disincentive to work.

The biggest problem is the question, how to finance this generosity. In 2013 the Swiss had to decide about an universal basic income in a poll - and they rejected it. A group of political activists had proposed an income for everyone by the government (businessinsider). The organizers wanted that every citizen should get 2,500 Swiss francs (then $2,800) per month from the state. This would have made $33,600 per capita and year and would have cost the government in Bern around $270 billion per year, around a third of the whole Gross National Product (GNP). The activists suggested, that around 70 billion Swiss Franc could be taken out of the cash boxes of the social security (nzz). This would have been a gigantic theft, the largest robbery since the Russian revolution, because the extracted money would have reduced the benefits (health insurance, pensions) for the insured drastically who had trusted the social security system. The proposers recommended that the rest - about 130 billion Swiss Franc  - should be financed by raising consumer tax and other royalties. This would of have caused a price jump and damage the Swiss consumer industry, including retail. No wonder that the Swiss voters disapproved.

The US is less wealthy than Switzerland - the country has a per capita income of $56,115  (Switzerland $80,999  worldbank) - so the relative burden would be even greater. Sharply higher taxes and less incentives to work could cause a serve recession.

Billionaire Zuckerberg doesn´t need to care about such economic problems. His job is making Facebook great. Uttering popular claims is good marketing. And maybe some day he will want to run for President. 

PS For illustration I chose the painting "Das Schlaraffenland" by the medieval Dutch artist Pieter Bruegel der Ältere.