Italy’s 5-Star Movement, nominal winners of the latest Italian national elections, wants to provide one. 5-Star Movement (M5S) Senator Nunzia Catalfo has proposed legislation giving every Italian whose existing income falls below the nation’s defined poverty level a Guaranteed Basic Income of up to €780 ($960) per month, with the actual amount presumably varying in relation to how much the person’s existing income falls below that poverty line.
We want to grant a decent life to those millions who are unemployed or whose wages and income are below the poverty line[.]
So do we all (using “grant” very loosely), and to MS5’s credit, Catalfo’s bill does require proof of efforts to get work or better paying work, but a GBI isn’t the way to help anyone.
On the one hand, employers will lose considerable incentive, if not outright interest, in raising pay—indeed, they’ll be incentivized to reduce pay (mostly by not giving raises or bonuses)—because Government will make up the difference. This will result in no net increase in income for those already working, except possibly to the extent the government holds off on taxing the GBI as ordinary income.
On the other hand, a GBI is unavoidably inflationary. Prosperity increases only to the extent productivity increases faster than the labor force, which at full employment can grow only as fast as the population grows through birth rate and net immigration. Thus, prices will increase to absorb the GBI available to pay them. The buying power of tomorrow’s GBI recipient will be the same as today’s person without a GBI.
There will be no net increase in economic wellbeing from a GBI.
There will, however, be a net decrease in national economic wellbeing with a GBI: taxes will have to committed to paying the GBI. Whether those taxes are obtained by increased borrowing, increased taxation, or simply diversion of existing tax revenues to the GBI (or any combination of those three), there will be fewer resources available to government to do things like support a defense establishment or maintain/improve national infrastructure, the latter which especially would lower the cost of doing business.
There also will be fewer resources left to the citizen—those taxes, that borrowing, that inflation—with which he can see to his own needs and wants: less spending (at least relative to what he might have done), and so less demand for any company’s goods or services, and so reduced production of those goods and services, and so lowered hiring—and so, on top of that net lowered economic activity, reduced opportunity for GBI recipients to succeed in their required job search, leaving them trapped in a government welfare cage.