Why Not Have Paternalism for Factor Income?
Pundits who oppose generous cash transfer incomes often appeal to the need for paternalism. You can't just provide people cash incomes because they could spend it wrongly or badly. Michael Strain had a version of this argument recently over at the Washington Post:
At the risk of sounding unfashionable, one reason that I can’t support UBI — despite its many attractive and seductive features — is that we need a little paternalism. It is right and just that we have a social safety net — in a nation as wealthy as ours, no one should be able to fall too far. But UBI money doesn’t come from the Money Tree, and that reality needs to be respected. If we take money from John to give to Matthew, who would starve without it, then we owe it to John to make sure that his money is appropriately spent on Matthew’s food and shelter, not on Matthew’s alcohol and gambling. And surely there are a lot of Matthews out there who, if given the chance, would spend John’s money on alcohol and gambling. In addition, we can be confident that under UBI, at least some people will be taken advantage of, losing their benefit money. The children of recipients who spend their UBI unwisely also stand to lose quite a bit, and society needs to keep those children at the forefront of mind when evaluating safety-net programs.
I like Strain's formulation because, unlike most others, it explicitly turns upon a baffling distinction between transfer income (i.e. welfare income) and factor income (i.e. income paid out to owners of capital or laborers). I call this distinction baffling, not for the usual reason that there is no meaningful difference between transfer and factor income, but rather because for the purposes of paternalism, it doesn't seem like it should matter what the source of the income is.
If blowing your money on alcohol and gambling is bad (e.g. because it hurts children, the alcoholic/gambler, or society more generally), surely it's bad regardless of whether your money comes from transfer income or factor income. Does a kid hunger less because the money dad lost at the track was from a paycheck instead of a disability check? Obviously not.
Since the harms from wrongful spending obtain regardless of the source of the money for the spending, then it should be the case that paternalism is applied across the board. Ban gambling. Ban alcohol. Or, if you don't want to go that far, have the state intervene to stop "excessive" gambling or alcohol consumption for everyone. All families and kids and individuals matter, not just those who receive transfer income, right? Drinking yourself into oblivion hurts you and everyone around you just as bad when you bought the liquor with a dividend check as it does when you bought it with a Social Security check, right?
I bring this up not to be cute, but because I seriously do not understand this argument. In a given society, there is a certain percentage of people who develop problematic consumption habits, whether that's excessive consumption of harmful substances, excessive consumption of superfluous goods, gambling, or something else. Let's call those people the Bad Spenders. Some of the Bad Spenders live on transfer income. Some of the Bad Spenders live on factor income. And I can't understand why you'd only help the Bad Spenders on transfer income while allowing the factor-income Bad Spenders to ruin their lives and destroy their families. But that's oddly what Michael Strain's argument says you should do
It's worse than that though. Strain doesn't say that we should paternalistically intervene in the lives of transfer income recipients only if they are Bad Spenders. Instead, he says we should paternalistically intervene in the lives of all transfer income recipients because some of them are Bad Spenders. So his proposal is simultaneously under-inclusive (it refuses to paternalize over Bad Spenders receiving factor income) and over-inclusive (because it paternalizes over the lives of many people who are not Bad Spenders). The Strain proposal is thus completely detached from the supposed evil it's meant to be remedying. This whole brand of argument is shockingly incoherent.
To be coherent on paternalism, it seems like you have two possible options. The first is to paternalize over everyone's life, regardless of whether they are on factor or transfer income and regardless of whether they have been shown to be Bad Spenders. The second is to only paternalize over the lives of Bad Spenders, regardless of whether they are on factor or transfer income. The second one is obviously the best conceptual option, but there may be practical reasons for going with the first one (including that it's hard to identify the Bad Spenders).
But there is no reason to do what Strain proposes and paternalize over everyone on transfer income regardless of whether they are Bad Spenders while ignoring everyone on factor income, even if they are Bad Spenders. That's completely indefensible on every level.
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