Means-Testing Without Tears

(Recycled from my old blog, all of the content of which was eaten by my Internet host provider. I wrote this in 2020. This subject is coming round again regarding student debt relief.)

For some time now, people on the left have been trying to compare universal benefits favorably to means-tested programs. A new effort by Meagan Day is highly debatable on basic points.

Means-tested benefits are said to limit eligibility and leave many needy behind, unlike ‘universal benefits.’ Unfortunately, there is no really existing universal benefit that remedies this problem, so we are committing the basic fallacy of criticizing an existing program by comparison to an idealized alternative. There is no reason a benefit founded on a means-testing formula could not be provided to anyone you might like.

The real rationale for means-testing is not that it deprives the unworthy of assistance. That is a straw man often deployed by the less progressive among us. It is that for any sub-group of the population, a means-tested program will be cheaper, or for any given amount of money, it can provide more assistance than a universal one. Advocates for universal benefits must compete with equally righteous left advocates for other types of spending. In practice, public funds are limited. (Also true in an MMT world, by the way.)

Another knock on means-testing is that it is more politically vulnerable to cuts. But this isn’t quite right either. In the U.S., means-tested cash benefits have certainly been obliterated, but health care benefits have expanded significantly, if one cares to track the trends in spending under Medicare and Medicaid. The food stamp program is still cranking as well. Here again, the non-existent universal cash benefit is held up as a superior alternative.

Right now (Sept. 2020), the case for Medicare For All is stronger than ever, but there is no evident parallel opportunity when it comes to cash assistance. The so-called Universal Basic Income (which is neither universal, nor basic) has become a popular subject of discussion, but its cost renders it a non-starter in any realistic budget debate.

A temporary version of UBI along the lines of assistance already rendered this year is more plausible. But that takes us a good way from the abstract ideal of a permanent, universal cash benefit. From the standpoint of Federal budget constraints, the recent proposals for child tax credits are reasonable too.

Going forward, no UBI is going to provide an adequate or ‘basic’ income to all. It is worth focusing on reinstituting cash assistance. Darrick Hamilton and others have elaborated a version of a negative income tax (which could be called a ‘family allowance’). The UBI chatter detracts from more likely efforts to provide income guarantees. The UBI is not the only way to provide a guaranteed income, and as I have argued elsewhere, far from the best way.