A couple of months ago Spellchek posted on a proposal for a universal basic income in Switzerland – http://spellchek.wordpress.com/2014/09/11/has-the-time-come-for-a-universal-basic-income/
ZeroHedge reports that the idea still has legs and may be on the ballot by late 2016 – http://www.zerohedge.com/news/2014-11-19/next-qe-switzerland-prepares-living-wage-2600-every-citizen
With Japan planning a few trillion Yen stimulus plan of airdropping “gift cards” directly to the poor to spur spending (and the virtuous awesomeness of economic utopia), it appears Switzerland is about to go one step further. As Motherboard reports, Switzerland could soon be the world’s first national case study in basic income. Instead of providing a traditional social net – unemployment payments, food stamps, or housing credits – the government would pay every citizen a fixed stipend. The proposed plan would guarantee a monthly income of CHF 2,500, or about $2,600 as of November 2014; meaning every Swiss family can expect an unconditional yearly income of $62,400 without having to work, with no strings attached. What could go wrong?
Well, according to a Swiss Federal Council, it will cost plenty.
The Swiss Federal Council has rejected proposals for an “unconditional basic income” and warned that taxes would have to be dramatically increased to fund any such measure. The scheme would oblige the federal Government to introduce an unconditional basic income that would enable all Swiss residents to lead a dignified life. A basic monthly income of CHF2,500 (USD2,728) for adults and CHF625 for minors had been recommended. The Federal Council says that it would cost CHF208bn (USD227bn) to fund the project. This would necessitate CHF153bn in additional taxes, and CHF55bn would need to be transferred from the existing social security budget. The Council estimates that taxes on labor would need to equate to CHF128bn of the CHF153bn total. An 8 percent hike in value-added tax (VAT) would generate in the region of CHF25bn. It also cautioned that employment would fall, further impacting tax revenues. – See more at: http://www.tax-news.com/news/Swiss_Federal_Council_Rejects_Basic_Income_Proposals____65688.html#sthash.CRycCgUe.dpuf
Not everyone agrees. In fact, a case study was completed that shows it would be virtually free.
So ultimately, the introduction of a Universal Basic Income of this order in Switzerland would require only added revenue of 1% of GDP. This is hardly unthinkable nor unworkable. For instance, a hike in the value added tax from 8% to 12% would by itself cover this amount (remember that much of the EU already works with 20-25% VAT). Read more – http://my.firedoglake.com/obey/2013/12/13/82/
So we arrive at the point where we always do when it comes to socialism. If ‘free’ money results in stimulating the economy, why stop at $2600? The progressives decree that a multiplier effect exists when it comes to redistribution. If $2600 provides a basic income, why not two or three times that amount? After all, won’t these people spend it and it will weave its way right back through the economy? If a multiplier of 1.5 is true, this would be an economic boon.
Proponents will also point to the economist Milton Friedman who supported a negative income tax – http://youtu.be/xtpgkX588nM
However, Friedman had a different goal. He didn’t wish to implement a disincentive to work and he had hoped to eliminate multiple layers of bureaucracy within the current multitude of welfare programs as a cost saving measure. He also realized there was no multiplier effect.
One may ask why even bother with all the semantics and the middleman? Why not just make direct payments to cover one’s housing, food, medical, transportation, etc.? Why give out $2600 a month when the recipient may spend it unwisely thus defeating the purpose of eliminating poverty when their costs of living may be provided for in the background? Seamlessly. Transparently. In fact, the poor would have no need for money as their needs would be provided for. They would never even know where it comes from.
There we have the key point. Government must fill the role of provider. In order for the basic income recipients to keep on voting for more of the same and thus keeping those providers in power, dependency is a must. Incentivizing people to lift themselves beyond a basic income level would be counter-productive.
The cost of the program and its sustainability is irrelevant, at least in the eyes of the providers. The cost shift to the wealthy among us is simply a cost of doing business. As long as the elected officials continue providing the structure in which the wealthy keep their wealth, they will stay in power.
You can see the merits of the Friedman proposal. We’re already handing out welfare dollars to the poor. Why not become more efficient and productive at it to lessen the bureaucratic waste government entails? The same answer applies. Government efficiency and streamlining is counter-productive.
The bottom line is that programs like these will never end poverty and will merely succeed in growing government and inhibiting the growth potential of a country. Providing a safety net for the truly needy will always be a requirement. Providing one without a massive bureaucracy as a benefactor and elected officials as the overseers is the true challenge.