Why it’s worth stomping on Universal Basic Income

article-body

Via our friends at Club Troppo, David Walker has been exploring the arguments and merits of universal basic income amid the Greens proposal. He argues it’s not enough to merely dismiss the idea, rather it must be stomped on early.

In my latest column for The CEO Magazine I take aim at the idea of universal basic income (UBI). The column uses the insights of the always terrific Peter Whiteford, of the ANU’s Crawford School, and Troppo’s own Don Arthur, who has written a terrific backgrounder on the issue for the Parliamentary Library.

Bottom line: the UBI idea has terrible bang for buck. It is, in H.L. Mencken’s words, “neat, plausible and wrong”.

Now, it’s generally way too easy to stomp on a dodgy idea. I try to spend many of my columns on what I reckon are good ideas, like independent fiscal councils, or new research, like this work on pay equity, or even just pointing out that good things are happening in the world.

But there’s a particular type of dubious idea that gets seized on by impassioned partisans as the One Right Way To Do Things. This can be a problem for anyone who believes in incremental improvements to the system. An example of this was the carbon price debate of 2008-2010, where the Greens’ misguided purity ensured that we have had neither emission trading scheme nor carbon tax for most of the past decade.

It’s quite possible to imagine a future where the Greens decide that a future government’s legislation for welfare improvements isn’t going to be passed because a UBI is the One Right Way To Do Welfare.

So there are times when a bad idea, like a cane toad, should be stomped on before it does any more damage.

Stomping seems particularly advisable if the existing alternative is actually good. 

And that’s the case here: Australia has a mostly well-targeted tax and transfer system that we have been building since the Hawke years, and it is in many ways the exact opposite of a UBI. The success of this system continues to be underplayed, despite the efforts of Peter Whiteford and others. But we’d be far better off refining this existing system, which people broadly accept. And we could raise Newstart payments, for instance, at a tiny fraction of the price of a UBI.

As well as being bad policy and ill-matched to the Australian context, a UBI is also politically dumb. The median voter requires a lot of convincing about tax rises of less than one per cent. Any useful UBI would require pushing up voters’ marginal tax rates by 10 per cent or more. Good luck with that.

(In an article for Fairfax, Per Capita’s Emma Dawson raises another important objection; it would rob too many people of agency. This also seems a pretty good objection, though Emma has been copping an impressive amount of condescending Twitter criticism for it.)

The UBI notion is, however, smart politics for the Greens, who simply need to rally those on the far left who would otherwise vote for the ALP. As the Greens tilt at seats like Northcote, “Labor won’t promise enough” becomes a vitally important element in their marketing.

The UBI has one special benefit: in a welfare system which is genuinely complicated, it promises to make everything simple. If you haven’t been following the tax and transfer debate – and particularly if you don’t understand the merits of our existing system – this is likely to be a powerful message. For the casual left-winger, it has the same appeal that a flat tax has for the casual right-winger. Like Mencken said: simple, plausible, and wrong.