Response to Barbara Bergmann

Response to Barbara Bergmann

Barbara Bergmann makes a good case for the priority of certain “merit goods” over cash grants—a position I think most basic income supporters would agree with—but her argument breaks down when she attempts to prove, through the example of Sweden, that merit goods and a basic income are mutually exclusive. The flaw in her calculations is that she simply tacks on the cost of a basic income to the existing social expenditures of the Swedish state for both merit goods and cash grants. She assumes that these cash grants would remain undiminished under a basic income regime. Yet no one is seriously proposing that a basic income simply be added to unemployment or welfare benefits. On the contrary, many cash benefits could be replaced by a basic income.

To be sure, additional grants would still be needed by, for instance, parents or the disabled. But much of the 19 percent of gross domestic product that Bergmann says flows from government to household consumption could likely be replaced by a basic income. Say, for argument’s sake, that the full 15 percent of GDP needed to fund a basic income could be withdrawn from this 19 percent. That would still leave 4 percent of GDP for the state to augment the basic income of anyone in “special circumstances,” and the 32 percent of GDP from earned income (and therefore work incentives) would remain unchanged. Throughout all this, the many merit goods provided by Stockholm remain untouched. This might be too rosy a picture, but Bergmann paints a disingenuously bleak financial picture when costing a basic income.

This model I use for costing a basic income is in fact the same one used by my fellow Canadians S. Lerner, C.M.A. Clark, and W. R. Needham in their book Basic Income: Economic Security for All Canadians, which I cited in my article. Taking data from the 1999–2000 fiscal year, they determined that, out of total federal spending of $153.7 billion, $36.9 billion went as transfer payments to individuals. Assuming that this nearly $37 billion is wholly replaced by a basic income that costs $198.6 billion, new federal spending would equal $315.4 billion, which could be paid for by a flat tax of 41 percent on personal income.*

Such an intentionally simplistic model misses many details, but makes it clear that a basic income is still affordable to a country like Canada, which does not have as developed a welfare state as Sweden, but which nevertheless provides universal health care, decent assistance to post-secondary students, paid parental leave, and other merit goods. The provision of at least this level of merit goods is compatible with a basic income.

Because of space limitations, I’ll limit my answers to Bergmann’s other objections to a basic income grant:

Objection No. 1: Work disincentive will eat into BI revenues. I agree that this is a concern. Because many basic income supporters justify a BI by arguing that jobs are becoming a thin...