David R. Henderson  

Yay, Switzerland!

Uber Is Even More Valuable Abr... Regret and the Status Quo...
Swiss voters have overwhelmingly rejected a proposal to give the entire population of the country enough money to live on, according to exit polls.

A projection provided to the public broadcaster RTS said 78% had voted against all Swiss citizens, along with foreigners who have been residents in Switzerland for at least five years, being given a universal basic income, or UBI.

This is from "Swiss voters reject proposal to give basic income to every adult and child," The Guardian, June 5, 2016.

More detail about the proposal, from the same news story:

The amount to be paid was not determined, but the non-political group behind the initiative had suggested paying CHF2,500 (£1,765) a month to each adult, and CHF625 (£445) for each child.

Authorities have estimated an additional CHF25bn (£17.6bn) would be needed annually to cover the costs, requiring deep spending cuts or significant tax increases.

One CHF is 1.02 U.S. dollars. So the spending increase would be over $3,000 per Swiss resident annually. I would have thought the added spending would be much more per person annually, given that the amount of the subsidy for adults is over $30,000 a year and the amount for children is over $7,000 a year. Maybe there's an income cutoff for receipt of the welfare payment.

I estimated in "A Philosophical Economist's Case against a Government-Guaranteed Basic Income" that a much more modest basic income guarantee ($10,000 for every adult citizen) for the United States that replaced all 126 anti-poverty programs would increase federal spending by 38 percent and federal taxes by 46 percent.

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COMMENTS (9 to date)
WRD writes:

I agree that less government tends to be best but I also wonder why government spending is such a powerful way of measuring intervention. For example, things like minimum wages, zoning codes, and other (non-monetary) laws seem to be much more direct interventions than tax/spend programs.

Any place to look that can walk through why the direct spending metrics take so much oxygen?

Tony writes:

Should $3,000 be $30,000 in the first full paragraph? Happy to see UBI being voted down. Seems to be another success for the Swiss direct democracy model.

David R. Henderson writes:

Should $3,000 be $30,000 in the first full paragraph?
No. $25 billion divided by 8 million people is just over $3,000 CHF, which makes it about $3,100. But, like you, I was surprised at how low it is. 8 million people times an average of about $20K is $160 billion.

Russ Hooper writes:

In Saturday's WSJ Review essay about the UBI, Charles Murray says that giving every American over 21 $13,000 annually would be $200B cheaper than the current system. I wonder how he came up with that? Even with the elimination of agricultural subsidies (which he includes but you don't), it's still short.

JayT writes:

Could this bill have possibly included getting rid of existing welfare programs? Is it possible that the Swiss are already spending ~$27,000 on each citizen?

M. Flood writes:

FYI, Charles Murray's plan:

In my version, every American citizen age 21 and older would get a $13,000 annual grant deposited electronically into a bank account in monthly installments. Three thousand dollars must be used for health insurance (a complicated provision I won’t try to explain here), leaving every adult with $10,000 in disposable annual income for the rest of their lives.

People can make up to $30,000 in earned income without losing a penny of the grant. After $30,000, a graduated surtax reimburses part of the grant, which would drop to $6,500 (but no lower) when an individual reaches $60,000 of earned income. Why should people making good incomes retain any part of the UBI? Because they will be losing Social Security and Medicare, and they need to be compensated.

The UBI is to be financed by getting rid of Social Security, Medicare, Medicaid, food stamps, Supplemental Security Income, housing subsidies, welfare for single women and every other kind of welfare and social-services program, as well as agricultural subsidies and corporate welfare. As of 2014, the annual cost of a UBI would have been about $200 billion cheaper than the current system. By 2020, it would be nearly a trillion dollars cheaper.


Scott Sumner writes:

David, I saw that article too. I am pretty confident that there is an error in the claim that the proposal would only cost an additional CFH25 billion.

The total cost of the plan is well over CFH200 billion, something on the order of 30% of GDP. I don't know how much the Swiss currently spend on poverty programs (which could be replaced by this plan) but it seems likely to be far less than 30% of GDP. Something doesn't add up. Total government spending in Switzerland is only slightly above 30% of GDP---which includes military, roads, education and lots of other spending. This plan would inevitably raise taxes sharply.

David R. Henderson writes:

Thanks, Scott. I’m glad we have the same numerate sense that caused us to question this.

Michael Byrnes writes:

It looks to me like the authors assumed a monthly figure (CHF 2,500) was an annual one.

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