Friday, November 15, 2013

And they have that cheese....

They'll Pay You to Live in Switzerland! - Bloomberg: Megan McArdle examines the implications of the upcoming referendum in Switzerland to "pay" (her word, I think that "give" would be more correct in this case) every adult citizen $2,800 a month or $33,600 per year. The Swiss are richer than us so the annual payment would still be less than half the per capita income of $80,000 per year. She reckons in terms of bringing people up to the same level in terms of the proportion of per capita income the equivalent policy in the US would be mailing checks of about $2,000 a month.

The interesting thing about this proposal is that it has proponents on the right and the left.

The right would approve of the non-distorting effects of the payment. Since you don't have to do anything to qualify for the payment there would be no disincentive effects (technically no moral hazard) and thus no destruction of wealth caused by the payment itself (deadweight loss).

It would be expensive. In the US it would be $24,000 a year times the number of adult citizens (assuming we do not make the payments to non-citizens) which is about 230 million. It comes out to just under 6 trillion dollars. Since our entire GDP is about 16 trillion and our entire federal budget is about 3.7 trillion that would be a lot. On the other hand, if it were only a thousand, it might be doable and would by definition lift everyone out of poverty.

If it were to replace all other income supports and social income insurance programs it would not actually be that much more expensive than the current system.

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