Please note: I'm not being sarcastic here. The "Fair" Taxers have been fairly cagey in describing their proposed "rebate" program. They don't want to be seen as welfare statists or wealth redistributionists, so they couch their ideas in "smaller government" and "increased efficiency" rhetoric. Dr. Milsted lays out his proposal as what it is, so that it can actually be discussed as what it is. Yes, he does address issues of efficiency, economies of scale and such, but he does so in a refreshingly open manner.
In criticizing Dr. Milsted's proposal, I'm not going to resort to libertarian principle. While I believe that the "citizen's dividend" would certainly fall afoul of most libertarian conceptions of legitimate state activity, I'm willing to concede in advance that it might be possible to construct a form of it that would not necessarily do so (this is especially true if one accepts a Georgist analysis of property in land and proposes that the government act as a property manager/rent collector for the populace).
Instead, I'm going to argue against Dr. Milsted's proposal on practical political grounds. I believe that, even if a "citizen's dividend" as envisioned by Dr. Milsted could be squared with libertarian principle, it would be a bad idea from a tactical and strategic standpoint.
Dr. Milsted's article is titled "A Versatile Solution." I find that title meaningful. A "solution" is "a homogeneous mixture composed of one or more substances, known as solutes, dissolved in another substance, known as a solvent."
Lip service to ideals of participatory democracy notwithstanding, I think that most Americans regard "the government" as an entity external to society; as a bunch of politicians in Washington who are, if not the enemy, at least not to be trusted too far. And I think that's a good thing. A "citizen's dividend" would go a long way toward making government a solute in the solvent of the population receiving the checks. It would more deeply embed the structure of the state in popular support, such that government could probably get away with just about anything it wanted as long as the checks kept coming.
This isn't speculation -- we've seen it with Social Security. Even now, as that system hurtles toward collapse, we're only beginning to discuss the possibility of making cosmetic changes to it. The reason for that is that millions of Americans get a check from the government every month (or expect to soon), and those Americans are not going to put up with any guff from anyone whose ideas can be in any way construed as threatening an end to the checks.
A "citizen's dividend" would be Social Security writ large. Its constituency would consist of every American, and the vast majority of that constituency would, once the program was in place, fight tooth and nail to keep it in place. The threat that it might in any way be compromised would then be held over America's head versus any suggestion that the people mailing the checks -- the bureaucrats -- didn't want entertained.
The obvious counter-argument to this -- and one that Dr. Milsted alludes to -- is that a "citizen's dividend" would encourage fiscal responsibility in government, since it would be more politically acceptable to cut just about any other program than to cut the dividend itself. Once again, however, we need only look at the history of entitlements to see that this is a vain hope. Politicians don't propose cutting Program X in order to "save Social Security." They propose increasing taxes and funding Program X, on the claim that if Program X is not adopted, the crisis it is intended to address will itself threaten the solvency of Social Security.
Let's jump ahead twenty years, after Dr. Milsted's "citizen's dividend" is in place.
Libertarian: We really, really need to cut this "war on drugs" shit out.
Politician: Yeah, right. If we legalize drugs, the next thing you know we'll have a whole bunch of people strung out on heroin and lying in the gutter. They'll lose their jobs, they'll stop paying their taxes, they'll just live on their citizen's dividend ... which, by the way, we'll not have the money to pay for, since everyone will be a goddamn unemployed junkie."
Voter who gets a check from the government every month: Errrrr ...
If every citizen gets a check from the government every month, most of those citizens are going to come to expect that check -- and they're going to dance to the tune of the check writers, not vice versa. The check writers will, as always, be bureaucrats and demagogues whose interest is in preserving and increasing their own power, not in reducing it.