I still have no understanding on how this sort of thing would be paid for. Presumably, it's via some form of income, consumption, and corporation taxes. However, the marginal income tax rate would have to be huge (as you need to recover the entire amount paid to the earner in "basic income" before you get a cent to spend on someone else), the consumption taxes would negate the value of the basic income, and punitive corporation taxes would just ensure no-one actually sets up a company there.
Until we have Star Trek style technology for these free ham sandwiches, I don't see how Star Trek style economics will actually work.
Affordability of a basic income proposal is a function of the social/government services it replaces, any tax increases, and the less tangible positive effects on spending and tax receipts associated with wealth redistribution towards the poor, and any social savings as a result of less crime, or fewer incarcerable offenses.
Specific, though informal, measurements were made by Pascal J. for Canada.[123] A 2004 taxable basic income benefit of $7800 per adult could be afforded without any tax increases by replacing welfare, unemployment, and core Old age services. (Canada has supplemental poverty old age programs and pension system). The number excludes any intangible benefits of tax revenue increases due to higher spending and lower personal savings, and any expenditure savings on criminal enforcement.
But unless the welfare bill has an astronomical amount of waste (which I don't deny may be the case), surely this redistributes welfare from those who need it to those who don't? At the moment, for example, I receive no welfare payments. Thus my "share" of welfare is actually going to people who require it. In the basic income universe, suddenly I get a share of this money, which must come from those who currently get it, thus reducing their share. Moreover, this is ignoring all the inflationary pressures that a basic income would induce.
No you don't. The basic income is set off against your income tax liability, in fact, it's also been referred to as "negative income tax".
One of the nice aspects of the negative income tax is that it reduces the marginal tax rate at the bottom, which can often approach or even exceed 100% (you lose close to or even more benefits compared to the income from a low-paying job). Instead it's all just one smooth scale.
Another aspect of this is that it is one way of distributing the "automation dividend" that technology has given to society more equitably: "if robots and algorithms replace us in the labour market, they should also substitute us as taxpayers."
> Another aspect of this is that it is one way of distributing the "automation dividend" that technology has given to society more equitably: "if robots and algorithms replace us in the labour market, they should also substitute us as taxpayers."
As an IT professional who spends his days writing code to automate people away, I'm completely okay with this.
Just to be clear, basic income is not the same as negative income tax. Guaranteed income is the same as negative income tax; it has the benefit that it should cost less overall since it only goes to people who need it but it has the cost of trying to catch all the people cheating on it.
There's no reason a basic income would be inflationary. Sure, if it's funded by debt or printing money. But you can't simultaneously worry about it being costly to fund and it being inflationary.
Beyond that: yes, you could in theory make things cheaper by only giving the basic income to people who need it. But that's a fool's errand: although that course would reduce average tax rates as a first order effect, it would drastically raise marginal tax rates, which are much more relevant for predicting behavior. On top of that you instantly add a whole lot of administrative costs and interest group jockeying about determining who deserves it and who doesn't.
You get a huge amount of value out of an unconditional grant, and it distorts the market far less than any other structure of welfare scheme.
This isn't really true. Inflation is defined as the cost of purchasing necessities (for a specific set of necessities designed by the BLS - basically housing, food, medicine, etc).
If a BI shifted spending from investment/savings to consumption, demand for necessities would increase, driving up the cost. I.e., inflation.
Also, there is another structure which distorts the market even less than Basic Income. It's called the Basic Job. You get a Basic Income, but you need to show up and do work to receive it. It solves all the same problems as Basic Income, but with far lower disincentive for work, and at far lower cost.
> It solves all the same problems as Basic Income, but with far lower disincentive for work, and at far lower cost.
There is a basic assumption people make that a basic income would result in masses of people lazing about doing nothing just because they can. Canada experimented with a minimum income in the 1970s in a Manitoba town, and here's what happened: http://disinfo.com/2013/02/the-forgotten-history-of-a-canadi...
"Only two segments of Dauphin’s labor force worked less as a result of Mincome—new mothers and teenagers. Mothers with newborns stopped working because they wanted to stay at home longer with their babies. And teenagers worked less because they weren’t under as much pressure to support their families."
I hear about Dauphin occasionally, but it would be great to see actual data rather than breathless reporters fawning over it. Unfortunately that's all wikipedia links to. I really want to see good data on this, since it seems useful. Do you have any?
Also, wikipedia's secondary sources don't agree with each other. Some do list small disincentive effects, and suggest they would have been larger if mincome wasn't a short term thing (i.e., "don't quit your job, mincome is going away").
The fact that the quote is pulled from a site named "disinformation" aside, I find it hard to believe that anyone worth reading would make claims as to why those two groups' workforce participation (?) rates declined in such certain terms.
Basic job is dumbest idea ever. It was implemented in eastern block european countries and failed horribly. It was good against poverty but it barred all of the population from any individual effort and formed the connotation thay you go to work to get money and you don't need to do any actual work there. Imagine ou have a job that you know is unnecessary, you don't do much there but they pay fairy well so you keep your head down, take the money home and wait till the company or you division drops dead. Sort of like huge fraction of corporate and goverment nowadays but extened to whole population. Increadibly soul devasating.
Eastern block countries had nothing but a basic job, i.e. no private sector. I'm not advocating this.
I also don't don't propose that the basic job should pay well at all - the pay should be well below market so you always have an incentive to get a real job.
> Eastern block countries had nothing but a basic job, i.e. no private sector.
From what I remember from my childhood there was some very limited private sector. Trust me, much damage on the psyche was done not by not allowing people to start companies but by bringing all to places where they couldn't do much and giving them money for just sitting there (and usually drinking copiously).
1) Good point, but it's not clear to me demand for necessities would actually increase. Bear with me: virtually no one in the United States actually starves, and only a very small number lack a roof over their head or other "necessities." I might even be tempted to defined a necessity as something a person will consume regardless of income. What people do do instead is externalize the cost of their purchase, through shifting it onto their social networks, relying on public funds either implicitly (nonprofits, churches) or explicitly, or by debt. Debt acts funny, though, because it either shifts costs to their future selves (reducing future consumption of non-necessities) or to creditors (who'll eat some of the cost and pass the rest on to borrowers in general). We can theorize all day about what the actual effects would be--it seems a bit opaque to me, and I'd like a small sized country to play with a reasonably sized basic income to give us some real data.
2) I'm not too familiar with the Basic Job idea, and it's not very google-able. But I expect my general response would be two-pronged: firstly, I reject the idea that there's a huge disincentive to work with Basic Income. No one is materially satisfied at the basic income level, which my gut says should be $10k-$12k. Most working age Americans make more than that, and most are happy to take on more work when it means more money. (At some point most people do value time over money, but that's well above the minimum income level.)
But more fundamentally I reject the idea that a government has the capability to designate what're jobs that involve real, economically valuable work and what're not.
Should a person who dispenses psychoactive consumables be considered a worker? Yes, but try getting that through Congress. Should an NSA snoop? No, but same deal. What about an artist? An entrepreneur exploring a new market? An unpaid intern building up social and knowledge capital? A family caretaker?
Even if I trusted bureaucrats in DC not to be subject to special interests and regulatory capture, it's a matter of capability. They just don't have the knowledge to make these judgments, and investing enough money into providing that knowledge would be a huge waste if not impossible. On-the-ground individuals have far more knowledge about their particular circumstances and the needs of their communities than anyone else. Building the ability for dispersed economic activity to leverage dispersed knowledge has to be a cornerstone of policymaking, because those knowledge costs are increasingly the costs that define our modern economy.
Bear with me: virtually no one in the United States actually starves, and only a very small number lack a roof over their head or other "necessities."
Your definition of necessities is, I believe, narrower than the BLS. Consumer goods is probably a better term in retrospect. When you redistribute wealth from savers to spenders (as a BI is purported to do), you are increasing demand for consumer goods.
No one is materially satisfied at the basic income level, which my gut says should be $10k-$12k...No one is materially satisfied at the basic income level...(At some point most people do value time over money, but that's well above the minimum income level.)
This is simply incorrect. Most Americans below the poverty line already choose time over money.
I don't propose that basic jobs necessarily involve real, economically valuable work. I expect basic jobs to cost the government money.
The point is that it's cheaper than a BI, for two reasons. First, only a small subset of the population will even take the basic job - perhaps 10-50 million people. The rest will find jobs in the market economy paying more than $7.25/hour. Second, you gain some economic output from them - a low skill worker might be worth only $3/hour, and you pay him $7.25, so the loss is $4.25/hour rather than $7.25/hour. This would actually save the government money in some cases if the basic job worker replaces a unionized government worker making $20/hour.
Incidentally, the Basic Job program has been tried. FDR did it. We got a national park system out of it, among other benefits.
Present-day welfare systems have tremendous amounts of overhead to run. In a basic income system, most of that overhead goes away - you don't need an Office of Unemployment Benefits, or a Food for Underprivileged Children program - because everybody gets a check.
Do the savings completely offset the cost? I have no idea. But, it seems reasonable that they could offset a substantial portion. Of course, getting a government to willingly reduce it's size is a whole other problem.
Eliminating administrative overhead would be a saving, but it's unrealistic to expect those savings to fund a substantial part of a basic income by themselves.
Social Security and Medicare comprise a large majority of social spending in the USA. SS-OASI has overhead costs of 0.5%, and Medicare has around 1%. That's owing to them being unconditional, outside of age. Even their less efficient brethren aren't that bad: SS-DI is around 2%.
Medicaid is much higher (~6% I think) because it is so targeted and is really administered by 50 different agencies on top of the feds. But after that you get to programs that might be super inefficient but just aren't big enough to generate the huge kinds of savings we might want.
> Social Security and Medicare comprise a large majority of social spending in the USA. SS-OASI has overhead costs of 0.5%, and Medicare has around 1%. That's owing to them being unconditional, outside of age.
Social Security is not unconditional; both whether you are eligible at all and the benefits for which you are eligible are based on your history of qualifying contributions, not merely your age.
The Social Security Administration considers interest on its special treasury bonds as pure free money (negative overhead). That's plainly ridiculous, as it's just tax money that came from the general fund.
> Medicaid is much higher (~6% I think) because it is so targeted and is really administered by 50 different agencies on top of the feds.
And because, while Medicare is usually a primary payer, Medicaid is the payer of last resort, so Medicaid has a lot more expense in verifying that there isn't another payer with an obligation to pay (including Medicare -- there is a substantial population eligible for both programs) that should pay before Medicaid, or reimburse Medicaid.
Since money is of diminishing returns, you'll notice your share to the extent that it's useful to you. That's better than coming up with some arbitrary threshold.
Whether or not it would cause inflation is unclear, because wages may decrease correspondingly.
Welfare politics are driven by resentment, and offense that "My tax dollars are paying for lazy welfare queens to drive Cadillacs!" Because of this, there's a tremendous amount of overhead built into fraud prevention and making sure no one who isn't utterly desperate gets it.
With GMI, there's no justification for class resentment - you get the same benefit as everyone else.
Guaranteed Minimum Income is the idea that if your own income is insufficient, the state will step in and provide one for you. The conditionality in that definition, however, means that it would be a means-tested programme with all the attendant implications for marginal tax rates, poverty traps, class resentment, etc.
A Universal/Unconditional Basic Income is different -- it's provided to everyone with no means testing whatsoever. I think that's what you meant, based on how you're using it. But just be aware that GMI/UBI are actually quite different things.
You also get rid of the administrative overhead required to ensure the people who need it gets it while the people who doesn't don't. That's a non-trivial expense.
> But unless the welfare bill has an astronomical amount of waste (which I don't deny may be the case), surely this redistributes welfare from those who need it to those who don't?
For replacing poverty-targetted programs, this effect is limited if its used in a system which already has an appropriate progressive income tax system, further, it makes "needing it" less durable, as it doesn't prevent gains in personal earning potential from being negated by cutbacks in benefits that create a disincentives (because the costs to realize the gains + the cutbacks do to receiving the gains mean that gaining income-before-benefits actually reduces effective income-after-benefits.)
It's also possible the money comes from eliminating the welfare administration system. All the paper and offices and maintenance must
cost a ton of money. (I don't count salaries because if you fired all those government workers their salaries would get replaced with
the basic income.
I wonder how much money is wasted in the US in government bureaucracy between making sure people who claim social security benefits are due social security, that medicaid claimants are not medicare claimants, that food stamps physically go out to those in need, and that the foods stamps themselves are just spent on food, etc. Probably much more than checking how many people over 18 live in each address.
Also, the whole economy benefits by simply giving out money that people can choose to spend as they wish, instead of in limited categories (like food stamps).
Finally, people who work (legally) already pay taxes and are managed by the IRS, so taking this basic income back from them in taxes wouldn't be that much overhead.
The SSA's budget is like $12 billion to oversee over $750 billion in social security payments (1.6%). Medicaid's administrative overhead is about $16.5 billion to oversee $288 billion in payments (5.7%). See page 69 of this PDF: http://www.hhs.gov/budget/fy2014/fy-2014-budget-in-brief.pdf.
Yes, but that comes from it being available to everyone (of a certain age), which is the same advantage a basic income has.
Unfortunately Medicare runs headlong into the other point the comment above was making: Medicare forces you to spend a very large income grant on a very particular category of consumer good. And that effectively forces huge spending on healthcare when society would be better off if they could spend it on other things.
Suppose the money was spent on better nutrition, exercise, good heating/insulation for seniors, instead of on curative medical care after something goes wrong?
Not that health economics is my area of expertise so feel free to contradict me, but I believe the US per-capita healthcare spending on Medicare, Medicaid et al is actually higher than comparable nations with universal healthcare. The rationing, measuring and paying is really very expensive to administer.
>the US per-capita healthcare spending on Medicare, Medicaid et al is actually higher than comparable nations with universal healthcare.
This is true.
>The rationing, measuring and paying is really very expensive to administer.
This is not.
We have written legislation that prevents us from negotiating for healthcare goods and services; we protect US doctors from foreign competition and allow the profession to artificially constrain the supply. We also prevent Americans from importing drugs, or buying into other countries' health care systems - also shielding the domestic market from competition. Also, patents and reformulations.
Administration is actually a very small overhead. Rent-seeking is the problem.
Yeah, one of these is not like the others. Medicare at least acts a bit like a single-payer, and drives other efficiencies in health care. Too bad there isn't a medicare-for-all option in Obamacare.
The medicare-for-all is the end game of what's happening now. All the key architects of ACA have voiced their support for single-payer as the ultimate goal.
I've been confused for years as to why that wasn't the proposed solution. We already have medicare and medicaid in place, and they are working (how well... up for debate).
"We have 17 million uninsured americans in this country!" (or whatever the number was. Well... just expand medicaid eligibility (or even allow people to pay for medicaid coverage on their own, regardless of pre-existing conditions). Problem solved (or solved a lot more broadly than this force-everyone-to-buy-private-insurance-and-make-the-insurance-companies-change-their-underwriting-practices).
> I've been confused for years as to why that wasn't the proposed solution.
It wasn't because a political concern was to get something that could pass without beign scuttled by pushback from the industry and resistance Congressional Republicans and even from conservative Democrats that met and scuttled Clinton's reform efforts (why Clinton didn't seek a simple single-payer solution is another question), and so pretty much all the proposals from the major Democratic candidates in 2008 were variations on the mandatory/subsidized insurance purchase idea that had been being pushed by the insurance industry since, IIRC, the early 00's, and had been frequently floated in Republican circles -- including being a signature accomplish for Mitt Romney in Massachussettes.)
> Medicare at least acts a bit like a single-payer
Well, several decades ago it did, before the shift to encourage purchase of private managed care plans with government subsidies through what (after several name changes) is now called "Medicare Advantage".
Medicare now is more like the ACA model plus a public option than it is like single-payer.
Enforcement costs can easily outstrip the revenue collected.
One example might be public transit where the cost of printing tickets, tokens and passes, plus paying fare collectors and maintaining the equipment to prevent people from jumping gates is way more expensive than just letting people on for free.
The existing taxes, in most countries, nowadays, are a very significant part of the GNP. Check:
http://en.wikipedia.org/wiki/List_of_countries_by_tax_revenu...
and this covers only the taxes from the central state, there are also local taxes, and social security. In France, that makes it over 67% from only 44% of national taxes.
The point of such a citizen basic income, is that it would eliminate the need for plethoric armies of "civil servants", at all levels. Instead of paying them to bother and harass the public, we pay they to do nothing, and the money that was wasted on their useless activity (beside their salaries converted into citizen basic income), is used to pay this citizen basic income to the other citizen.
http://www.technologyreview.com/view/519241/report-suggests-...
In other words, YOU are already paying for it!
As for the free ham sandwiches, what is required for that to work is:
- material resources: the universe is big. Even the Earth is big! (but we need energy to dig deep down).
- energetic resources: the sun is big too! And there's uranium, thorium, and perhaps soon hydrogen fusion.
- to put this energy to work moving mater into a ham sandwich, what else is needed is information, the command and control systems, which any programmer will be delighted to implement, if you give him the chance to do it.
Robots and 3D printers are already doing a lot of work, we just need to automatize more. Why aren't google cars already driving on the roads everywhere?
Why are we still making buildings with man power, when the can be made in automatic factories or by big 3D printers?
Also once you stop forcing people to do useless jobs just because it's considered good these days to "protect jobs" and just give them money (preferably enough to survive/look around for a bit but not too much to kill all the incentive to work) maybe they will start doing something actually useful like trying to meet all the increased demand for basic services/items created by shifting more wealth to the poor.
i agree. I imagine it works like this - a brick layer might have "hidden" knowledge about the building process that could mean improvement to efficiency. And yet, he would not be able to put it into practice, because the investigation/research will take resources that he does not have, and his employer is not going to pay for this because they don't believe in him (ala, he is a "labourer").
If there was a basic income, he could become someone who could advise how to build better, and thus make use of a higher order knowledge process where as labouring is done by automated means. The end result is a house gets build faster, and cheaper.
About free ham sandwiches, in USA actually the underlying industry is already heavy subsidized, thus - paid by pretty much everyone. The sandwich to be free (as available for free, not necessarily produced on negligible cost) is not dependent on technology here.
Actually, one of the major effects of basic income is that it would decrease marginal income tax rates (although it would undoubtedly raise taxes overall). This is counter-intuitive, so let me explain.
Marginal tax rates are the taxes that you pay on additional income. Eg., if I make (rounding numbers recklessly) £9k per year, I am taxed nothing. However every pound I make over £9k is taxed at 15% -- that's my marginal tax rate at the £10k income level -- then there is another step at £20k-something, etc.
For the poor, however, effective marginal tax rate include not only escalations in progressive tax rates, but the withdrawal of social support. Eg., let's say I am unemployed and receiving £700/month worth of benefits. Then I get a job which pays me £800/month. The first £750 is tax free, and I'll have to pay £8 of income tax on the remaining £50, so my total take-home pay is £792. Fair enough, so far...
Except now that I'm earning an income, all my benefits are withdrawn. This means that although I'm now doing £800 per month worth of work that I wasn't doing previously, at the end of the day I'm only receiving (£792 - £700 = ) £92 pounds of additional income. Hence my effective marginal tax rate on the extra income is a whopping 88.5%.
I'd have to think very hard about whether I wanted to keep that job, or stay on benefits. In fact, this is a fairly generous example: many benefits programmes are structured in such a way that they impose an effective marginal tax rate of more than 100% upon people who increase their incomes -- in other words, you can end up with less money by getting a job than by staying on benefits.
This is the mechanism which turns benefits programmes into poverty traps -- by de-incentivising people to work via astronomical marginal tax rates. Unfortunately, people have a very difficult time understanding this mechanism, and their intuitive reaction is often to "fix" benefits programs by increasing conditionalities and means-testing. The problem is that the more conditionalities and means-testing you impose, the more you increase the marginal tax rates for people trying to get out of poverty -- so such programmes are inevitably counter-productive.
A Unconditional Basic Income, however, is never withdrawn. This means that it imposes no penalties for increasing your earnings -- meaning that it actually minimises the effective marginal tax rates.
In fact a very fair basic income could be funded via a flat tax: tax every income at 50%, and then redistribute the earnings as a flat Universal Basic Income. Mean income earners, in this scenario, would pay exactly as much taxes as they receive back from the UBI -- so their tax rate would be zero. Non-income earners would earn 50% of the mean (which is roughly the level that Switzerland is proposing). Billionaires would see their income reduced by nearly 50%. However the marginal tax rate would be identical at every level of income. No matter what your standing in the economy, you would always receive the same UBI, and you would always pay the same rate of tax. It would seem almost fair.
I would be happy to give up half my income if I knew it was being used to support students trying to learn engineering or new technology, or help a small family through a rough time, or pay for some fresh grad to get a broken bone set--especially if I knew that that safety net existed for me as well.
It's time to start embracing the fact that as a civilization we've come beyond the point where we're scrabbling like mad to shake loose the resources for existence, and instead we can now start actually trying to make people, everyone, safer and happier and more actualized.
What if it were used to support students trying to learn intersectional gender theory, or help a small family replace their year-old phones, or pay for some fresh grad to sit on their couch and play videogames?
I'm not trying to be provocative, it's just that you're thinking about this in the wrong way. You can't associate it with any uses that you may think beneficial or worthwhile. You need to accept that it's no-strings-attached money, otherwise you're just going to be disappointed.
If they want to learn intersectional gender theory, more power to them--after a time, I imagine they'll tire and move onto other, more useful pursuits. Ditto videogames and phone replacement...you can only be a consumer whore for so long before you start to feel that there's something else out there.
I don't mind that it's no-strings-attached money, because I might myself want to blow my allotment on a fleeting pleasure someday.
We need to give up this "keeping up with the Joneses nonsense".
I've met plenty of people who have been happily sitting around, smoking weed and playing video games all the time, and showing no sign of stopping as they barrel into their 40s.
Ok, so let's go with your assessment, that life-long slackers are indeed quite few. What happens when being a life-long slacker becomes acceptable in the culture (or as it might start out, in some subculture)? If slacking makes its way into culture, and becomes more accessible, isn't that potentially quite a big threat to the prosperity of future generations?
Legal and funded does not mean acceptable in the culture. It's legal to go about naked in many places, but it's not often done, because it's not acceptable in the culture.
Welfare already exists and while the lazy scrounger stereotype definitely exists, I feel it's worth that overhead to take care of vulnerable people and those in hard times.
Why would it be a threat? We've multiplied individual worker productivity by fantastical amounts. I think it's vastly more likely that we will have more people who want to work than meaningful jobs in which to employ them.
And why shouldn't they be able to do so? With a guaranteed income they would still be actively participating in the economy and whatever work niche they had inhabited before would be freed up for more motivated individuals to perform.
Win win.
Most assuredly some will, that's to be expected. If given a similar option I'd mothball my career over the course of six months and spend $n years engaging in unprofitable creative pursuits and maybe travel.
But they wouldn't actually be participating, they'd just be a middle man that takes a small cut to support their own life without providing anything useful in return (aka a parasite)...
The good part is that it looks like most people wouldn't just do nothing all day long, they would contribute in one way or another...
Until we have an easy/efficient way of identifying such folk though (those who are truly capable vs those who are disabled/incapable) the most efficient solution is probably something like a minimum basic income.
Is there a lot of demand at the registrar's office for intersectional gender theory courses? I haven't heard of strong demand in that subject, but I normally avoid administration buildings.
So why don't you give up half of your income to a family or group of students who are struggling?
Do you feel more confident that a government entity would do a better job at picking a family or students? Or would you only want to do it if everyone at your income bracket was also doing it?
The genius of the minimum guaranteed income, and the reason that it could possibly appeal to both liberals and libertarians is because in this case it does precisely the opposite of what you're afraid of: the government doesn't pick anything.
They give it to everybody. If you think that the government does a poor job of allocating the absolutely colossal amounts of money currently spent by social programs, or you recognize that trying to "do a good job" and prevent fraud, and all the other social engineering requires a vast, wasteful bureaucracy, then this is an interesting option.
This is a program that eliminates extreme poverty, but requires almost no infrastructure. You'd only need to verify that recipients are citizens and that they file their taxes. Since you can abolish Social Security, a stripped down social security bureaucracy, which already prevents people who haven't paid into social security from receiving benefits, could take over that task.
It could allow one of the largest and most sweeping reductions in the size of government in our lifetimes.
And if you believe in freedom, but also want to live in a country where people don't have to beg for food, then this is your best bet. You trust people to make their own decisions about what benefits them and their family. You don't discourage work or enterprise.
I think it's a political long shot of epic proportions, but also a great idea.
Agreed, and it could effectively counter the increasing concentration of wealth that increasing automation in a pure capitalistic society would inevitably bring.
The fact is, our .gov is doing a pretty shitty job as far as social contracts go, and the incentives for playing nice only exist once you've bought into the thing wholesale and are doing quite well for yourself.
Given the way we treat felons, the poor, and the ill I'm rather surprised things aren't boiling over sooner.
The linked article mentions cuts in other social welfare programs as one of the risks of a guaranteed basic income. Many who promote guaranteed basic income do not think it should replace our existing programs.
> Many who promote guaranteed basic income do not think it should replace our existing programs.
I have never seen anyone advocate for UBI who expressed any position other than support for using it to replace, at a minimum, means-tested poverty support programs, and generally they want it to replace many other targeted social benefit programs that currently provide services, direct subsidies for selected purchases of goods and services, or indirect subsidies through tax credits and deductions for purchases.
The usual argument for UBI is that it eliminates the most of the administrative overhead and duplication of function in the multiple programs it would replace, as well as replacing the perverse incentives that occur with means-testing.
Can you cite any BI proponents who explicitly say that it shouldn't replace existing benefits programmes? Speaking for myself -- and every other BI activist I've ever read or heard of -- I certainly think that it should replace the vast majority of existing benefits, as well as minimum wage.
If there is no safety net, I can't really give away my money, because I'm worried about what will happen in the future if for some reason I'm unable to work. Or if my brother is unable to work, or if my parents have severe problems. If I pay taxes in a social market economy, on the other hand, I can be confident that I'm also covered, and so are they, like everyone else is. Therefore there is no need to hoard piles of money for yourself and family (modest savings are still prudent).
And in any case, I don't think a handful of people donating to charity is a serious systemic solution to inequality and poverty. For one thing, it fails to give a guarantee of a safety net, which is what's needed to give people a believable backstop. For another thing, there's a bit of an adverse selection problem: people who get rich retroactively decide they have no need for the existence of a safety net, and don't want to pay for one, because poorer people are lazy/stupid/etc.
I did move from California to Denmark, which is in a way putting my money towards what I'd like to see more of (due to visas/citizenship/etc. this is not equally easy for everyone). I now pay more taxes, and in return I am part of a more social-democratic system.
>I did move from California to Denmark, which is in a way putting my money towards what I'd like to see more of (due to visas/citizenship/etc. this is not equally easy for everyone). I now pay more taxes, and in return I am part of a more social-democratic system.
And, IIRC, Denmark rates much, much higher on social mobility than the US.
Presumably, he is interested in a solution to the class of problems, not to an individual instance of the problem. Giving up half your income in taxes in his method is a proposed solution to the class of problems. Giving up half your income when no one else is is a proposed solution to a single instance of the problem.
And with universal basic income, recall that there is no 'picking' performed.
To me the first-order effect is much less valuable than the second-order effect of living in a society where everyone knows a safety net exists (e.g. reduced crime).
If your going to talk about a socialist country you may have a point. But unfortunately I think your going to find you dont have as much evidence as you thought you did, should you do some research.
The most productive level of intellectual growth in the history of mankind has consistently come out of groups of people who have been 'freed' from the burden of worrying about their 'next meal' so to speak. From renaissance era patronage through to the modern trends you see with the flow of capital in California.
Socialized != Socialist.
A centrally planed socialist economy has no place for entrepreneurship at all, ergo it will be suppressed and not flourish. A socialized economy is one where all citizens are invested into the social fabric of society, for instance I have a level of free health care here in Australia, but I choose to work and pay for a higher level of medical care and I am free to do so. This is a socialized system, a socialist one would deny my right to chose a higher standard via some logical argument about the higher standard I want to pay for being excess capacity that should be redistributed to all.
I hope this brief illustration helps clarify some things to anyone else that might be having trouble seeing a clear difference between socialist and socialized.
> Or would you only want to do it if everyone at your income bracket was also doing it?
I think this is general answer to this question (at lest it's mine). It's similar to prisoner dillema: I am happy to agree to rules forcing cooperation but in absence of those I won't cooperate that happily (reasons I think are easy to imagine and I've just seen that one poster did great job explaining those).
It's not "I want to give away half my money", it's, "I want to live in a society where all people give away half of their money, and of course I am willing to be subject to that rule myself."
The purpose of government, if it can be said to have a purpose at all, is to cover those items where we're better off doing them but they wouldn't happen on their own due to various game theory considerations or just plain transaction costs.
> I would be happy to give up half my income if I knew it was being used to support students trying to learn engineering or new technology, or help a small family through a rough time, or pay for some fresh grad to get a broken bone set--especially if I knew that that safety net existed for me as well.
You can do this right now, without having to set up any controversial and potentially corruptible political programs, and have a greater certainty that the funds you supply are actually going to the purposes you support.
I don't understand the mindset that these goals should only be pursued through coercive politics.
In addition to those effects, there is more spending, which indirectly boosts the economy.
At first glance one might think, the recipient now has more to spend, but that amount is taken from others, so it's a break-even. But in fact, the "others" are higher income people, and would spend the money differently.
The poor people relying on the assured income boost total demand for things like food and clothes, while the richer taxpayer would have more likely spent it on either luxuries or investments. A transfer of spending from luxuries to basic items corrects a social balance, and increase of aggregate demand has better outcomes than feeding the supply side.
Now... Why do you say that spending boosts the economy?
Yeah, I know I'm questioning something quite basic. Do you (not just you, ds9, but anybody) have any justification for that that isn't a direct quote of Keynes? Because investing boosts the economy (by increasing productivity - Keynes never modeled that, go figure), and spending reduces the potential for investiments, so the picture is at least more complex than that.
> Why do you say that spending boosts the economy?
Because the economy is the whole set of exchanges of goods and services, and spending is economic activity.
> investing boosts the economy (by increasing productivity - Keynes never modeled that, go figure),
Actually Keynes directly considered not only that investment produced future gains in output, but how those gains changed with additional investement in the same area. [1]
> and spending reduces the potential for investiments
How? If spending by A to acquire a good from B decreases A's funds available for potential investment, it does so only by increasing B's funds available for potential investment by the same amount.
[1] See, particularly Book IV (commencing with Chapter 11) of The General Theory of Employment, Interest and Money (1936).
Because, demonstrably, it does. A lot of folks hate the very idea of social spending, but one thing that my dad noticed over time is that when he talked to a fast food restaurant owner in Orange, SC (fairly poor area) they said that their business would not survive without the social assistance provided to the area.
It’s fair to question whether Orange, SC should be kept alive as a going concern, but this franchise owner was able to employ ~20 people because of the social assistance funds provided to the community. His employees would be able to spend their paycheques, too.
Investments in infrastructure provide much the same value (as in the TVA, which did more for pulling Tennessee out of its deep poverty than anything else). Investments without spending associated with those investments are dead money. While savings should be encouraged so as to reduce individuals’ emergency needs for money, they don't keep an economy going as much as spending does.
(And yes, that pains me to say as someone who doesn’t like our consumer culture even as I participate in it because it’s what we have. I don't have a rightful solution to that dichotomy.)
The terms here are muddled, but what the hell, I'll go ahead and try and answer. For what it's worth, the parent comment isn't particularly well defined either.
First, if we define "the economy" as GDP [1] (a generally poor approximation, but still better defined than a vague "the economy" entity), spending tautologically boosts "the economy". It either falls under the "private consumption" or "gross investment" part of the equation.
Now, I'll try and respond to your analysis point by point.
> Because investing boosts the economy
Again, we're on solid ground here if we're considering "the economy" to mean "GDP"
> and spending reduces the potential for investiments
Woah, hold on there. This assertion doesn't make sense from several perspectives. First, the economy isn't some zero-sum game where players must choose between spending and "investiments". Spending by one party can be converted into productive investments by another. e.g. if people start buying a ton of G.I. Joe action figures, the maker of G.I. Joe Figurines can convert that capital inflow into a factory.
In addition, many forms of consumer spending are investments from their perspective. A new washing machine frees productive time that can then be spent e.g. learning a trade. A new car might enable them to find new jobs or reduce their maintenance expenses on their current car.
> so the picture is at least more complex than that.
Right, but generally when parties are producing things other people want to spend money on, the economy is "working". The corollary is that when nobody is willing or able to spend money on new goods, the economy is probably not healthy.
A transfer from luxuries might correct a social imbalance, but a transfer from investments to basic goods and services might have a negative impact on the overall health of the economy.
Also, many 'luxuries' are things that eventually become things we need (Tesla Motors?).
Having said that, I Am Not An Economist, so it's possible I Know Nothing.
Increased demand for basic goods and services increases the expected yield of investments in areas related to producing and selling those goods, and therefore would be expected to increase investment in that area.
One concern I've always had with the idea that the rich "re-invest" in the economy is how much they actually invest in American businesses vs sit on the money or invest abroad. A minimum basic income will assuredly increase spending on basic necessities in American businesses.
Thanks for this very clear explanation. I think maybe you just blew my mind.
Also, a question occurs to me. Would this scheme still function at a rate other than 50%? If the billionaires would only allow the scheme with the rate set at 45%, it would change the "zero" point, but maybe not much else?
That's exactly correct. At 45%, the top earners would pay a bit less, the bottom earners would receive a bit less, and the break-even point would move to the 45th percentile rather than the 50th percentile. So more people would actually pay net taxes, but the average taxation would be lower.
I'm not convinced that a 50% tax would actually be enough to afford a basic income for the entire population. It would also have to cover all other government expenses, and many countries already end up with taxes that approach or exceed 50%.
Consider also that the proportion of people who actually earn an income in many countries is falling already due to ageing of the population. Plus once this guaranteed income is available, it's only going to encourage more to give up working. Personally, I have already given up, even though my available income is substantially lower than the $2800 in the Swiss proposal, and really only covers my basic living expenses. Nevertheless, I value my free time highly enough that I prefer it this way.
> many countries already end up with taxes that approach or exceed 50%.
I doubt they're that many. Can you give any examples? And in the cases they do, most will be for an exceedingly small number of people.
Even countries people like to consider high tax, like Norway, does not get to 50% other than in extreme outlier examples (if you're an extreme high earner with a shitty tax accountant, has no debts or other means of getting deductions, and spends vast amounts of your money purchasing highly taxed items like alcohol and luxury cars).
If you mean marginal tax rates, then it's a different matter.
But I'd be pretty much nobody has an overall tax bill that approaches the marginal tax rate on their gross income. Norway, for example, has a marginal income tax rate that's 40%, but that only kicks inn on income greater than ~$135,000. Someone who makes $200,000 (about 3 times the national average) still only ends up paying 33% income tax total before deductions. Let's say said person spends $50k/year on stuff that's VAT rated at the full 25% rate (which is frankly unrealistic, and that only adds about 6.25 percentage points to their tax rate, bringing our example person close to 40%.
But if said person pays substantial debt interest (say on a mortgage), they'll also have massive deductions - it'd be fairly unlikely for a person at that kind of income level to end up paying more than about 35% between income tax, VAT and other taxes.
The rates reach 45% in Australia, and I suspect much of Europe is something similar. France was proposing 75% recently. It's true that these are marginal rates.
But consider how much taxes would need to rise to pay for the basic income. Let's say 50% of people who are eligible for basic income actually work. Then you'd need to collect two times the basic income from each of those people, on average. Surely this would push marginal, and probably overall, tax rates over 50%. Tax rates this high are only going to encourage even more people to give up working. I suspect such an economy would simply collapse.
It's possible that invention of Star Trek replicators would change things. If people could have all material things they wanted with minimal effort, then I imagine that the remaining work could move to a volunteer model.
One purpose of a lump sum distribution such as the monthly "basic income" is to counteract the regressive nature of consumption tax.
For example, suppose we want to provide free mass transit. We then get terrible rush hour traffic and the system is overburdened. So we must charge for transit access. Even better would be charging more for rush hour than off-hours, more for long-distance, etc. But this is regressive! Relatively cheap for the wealthy for rare events, expensive for the poor who need it for everyday commuting. The solution is to provide a lump sum grant to all citizens equal to the amount a person would pay for everyday transit commuting. Thus the poor get "free" transit and the wealthy get a few bucks and the positive externalities of transit.
If you have congestion pricing, and the money is paid in cash, people who value the money more than the convenience will use the transit system earlier or later when it's less crowded, and pocket the difference.
But then what amount is the lump sum grant based on? Is it based on the rush hour price with congestion pricing included? Then you've made the transit at rush hour look cheaper than it actually is, so you'll still have crowding even when the effect you describe is factored in.
Or is the lump sum grant based on something like the average price per ticket over both rush and non-rush hours? Then you can solve the crowding problem (by averaging appropriately to adjust the apparent cost of rush-hour transit), but you haven't solved the equality problem, because poor people won't be subsidized enough to take the transit during rush hour.
This is becoming my biggest concern about these Basic Income plans, too.
Giving this amount of money to every person in Switzerland would total almost half of the country's GDP.
Even if you exclude children and get the total amount down around 30% of GDP, you're still right around the total amount of money that the Swiss government takes in in a year.
So to get this basic income with no new taxes, the Swiss government would have to abandon all its other obligations. Or, put another way, to fund this and still function at the same level, the Swiss government would have to double its tax income.
Remember that everyone above median income is going to end up paying what they receive right back to the government in taxes. Only half the adult population will actually see this money as a check and not just a tax break.
Regarding those free ham sandwiches... The US government currently pays farmers enormous sums to NOT grow food. (This is not a simple issue - global economics - I just think it's an interesting data point.)
I was wondering, if the government shutdown continues, will they stop receiving those payments, and then overproduce food before going out of business?
The department of Agriculture's share of the discretionary spending in the budget is on par with Homeland Security and the NSA. Paying Farmers has a year long latency so not likely to change anything.
Switzerland has its own currency and its own central bank. It doesn't use the Euro. So the money doesn't need to 'paid for'. The government can just create the money and hand it out.
Of course this might devalue the currency as a whole, but the central bank had to institute an exchange rate floor because Francs were becoming too expensive relative to the Euro. So they probably wouldn't even consider a minor devaluation a bad thing.
The cost wouldn't be that bad, the unemployment isn't that high, the taxes for upper incomes are high (as they should be), and the guaranteed income isn't really that high either. Unemployment is 3%, workforce is 4.9 million, the guaranteed wage was, afair, 2500CHF, that gives us 367 million francs, which is a bit over a promile of the state revenue (less than I expected, I'm suspicious of my calcylation). Which is, by the way, less than the surplus they have, and doesn't take into account already existing and complex social support schemes, of which at least some would be effectively obsoleted (social housing has an invaluable stabilizing effect, but food shouldn't really be a problem).
But, (from my point of view unfortunately), this proposal has no chance of passing. Like many articles about what Swiss do, this forgets about the (awesome) nature of Swiss direct democracy, which sometimes ends up in voting on completely off-the-wall ideas (which sometimes even pass, but this won't be the case).
I guess your numbers are wrong. Yes, unemployment is only 3% of 4.9m workforce, but Switzerland has 8.1m inhabitants. So a lot more than 150k (the number of unemployed) would receive more than now - housewives, slackers...
Effectively, 8.1m * 2500 * 12 = 240b CHF would have to be redistributed every year. With the CHF at $0.9 that's roughly $218b - the Swiss GNP is $636b.
Now I don't know how much of this is additional instead of replacing traditional unemployment benefits, disability welfare etc - but still it seems a lot.
We are already buying tens of billions of dollars in "free ham sandwiches" in the form of Social Security Disability fraud every year. That's a LOT of ham sandwiches - similar in cost to running a war on the far side of the planet. Extreme poverty as a result of a post-labor economy also means very high public and private costs for police, prisons, and security.
Wait a minute, are you complaining that too much money is spend on ham sandwiches? Your counterexample suggests that this money should be better spent on another war on the far side on the planet?
I'm saying that between existing welfare, existing SS fraud, and other transfer payment programs we are already spending enough that trading that for a mincome program might cost less than you think. On top of that, if the removal of disincentives to make incremental income above the mincome level are removed actually works, the net cost will be even smaller.
Actually, I suspect we've had the capital and productive technology to build the "free ham sandwich" kind of existence for a while, a couple of decades, maybe longer? It's that our economic technology is derived from a system based in historic scarcity, and is run in a society of people with human frailties. Ultimately, it's currently too inefficient to put the right resources into the right hands such that the entire world is fed.
I can't imagine an entirely different economic system that would be more efficient, but just as a thought experiment, suppose you were the supreme world dictator and other than the command logistics, you could somehow redistribute all the capital in the world anywhere and direct the work of everyone. Would you have the technology to feed, shelter, and clothe everyone in the world? How many busy hours would it really take?
if i were the supreme dictator of the world, i would replace currency as a form of exchange, and use Joules as a form of exchange, and then mandate that all energy production be distributed equally to every single living human. E.g., lets assume 30 petawatthours of energy per year(approx 108 000 peta joules), divided by 6 billion people, is approx 18000000000 joules per year, or approx 50 million joules per day for each person.
To pay for food, you "pay" the amount of joules it takes to fuel the robots that create your food. Ditto with any automatable production (clothing, houseing), and any land has a tax equivalent of the amount of solar energy extractable from the land.
You could attempt to save your joule allocation, but i suspect it will become too difficult. You cannot borrow joules the way you can borrow money (that is, the "bank" cannot be a fractional reserve system). But you would be encouraged to invest your joule allocation into useful endeavours, such as scientific research, which is always made available to all to use.
You can get richer by investing in improvements, and get richer by growing the size of the pie. There would be no way to get richer at the expense of making someone else's allocation lower.
Energy as currency is interesting, but still has problems where cheap energy such as oil and coal has side effects which do affect others.
And are you constantly "rebaselining" the division of energy production or to you let the accumulation ride? If you let it ride, you'll have the same slow redistribution of a wealth gap between those who are capable/lucky enough to get a little bit of a headstart and continue to leverage it to more and more wealth. (or do you think you need some hybrid between the two, some something else entirely?)
I see basic income being implemented by giving tax refunds divided over two week payments instead of as a single annual lump sum. Then we set an amount where you may get a larger refund than you actually paid in taxes.
Until we have Star Trek style technology for these free ham sandwiches, I don't see how Star Trek style economics will actually work.