Citi's Chief Economist Recommends a Universal Basic Income
futurism.com
futurism.com
Lefties hate the NSA spying and love a universal basic income because the spying tilts the power away from the people, and the income tilts toward the people.
Righties (well, go far right enough) hate the NSA spying and love a universal income because of government overreach in the first case, and the ability to drastically simplify government welfare--cutting out a ton of means-tested programs and their agencies, and replacing it all with a check each month.
Gotta love it!
As someone that leans left, this is one of the big arguments I make in favor of UBI.
Frankly, I'm tired of arguing over the minutia of welfare, unemployment benefits, the minimum wage, social security, etc.
Fine. Scrap most of our social assistance programs outside of healthcare and replace them with a UBI.
The progressive in me likes it because it gives everyone a minimum safety net and the capitalist in me likes it because it opens up entrepreneurism and the ability to pursue potentially innovative businesses -- especially in an economy increasingly geared toward service and information work -- to huge portions of the population that are otherwise locked out. Active, small businesses are good for everyone.
People will either do the job or you have to pay a reasonable amount for it - one key principle of the UBI - more people get a choice how they use / sell their time and are not prey like today in many regions / countries to the few who dictate how much they will receive for their time.
£1,500 ~= $2,274
$2,274/person/mo * 12 mo/yr * 300,000,000 people = $8,186,400,000,000/yr. $8 trillion a year to provide that level of UBI to all 300,000,000ish Americans.
Not an inconsequential amount of money!
When assessing the amount being redistributed, much of what's paid in UBI should be netted against what's collected to pay the UBI.
That is, if I am receiving $27k/yr in UBI, but paying $30k/yr in increased taxes toward the UBI, really only $3k/yr is being "redistributed" from me.
This is still going to be a substantial sum, but quite a bit less than "people * UBI amount".
Please don't take this as my asserting that I think $27k/yr would be sustainable in the US - for the record, I don't.
How will willingly pay $5 trillion of taxes after all the hard work only to watch everybody else living of their work for free?
The person receiving $y is actually getting it from the very taxes they pay. So essentially what you are giving them is a tax discount. Except in cases where a person makes $0, for which you have social security anyway.
So this is basically a tax discount? You could simply say based on their income some a% of tax discount will be offered every year.
It's one of the reasons I mentioned scrapping the minimum wage when implementing UBI.
The job market becomes much more of a market where work is paid for what it's worth because it's an actual market and employers don't have the undue leverage of simple survival over employees.
(Not that there isn't a good case for eliminating federal waste; but the reality I never hear uttered in the conservative bubble is that the largest government expense is federal employees and subcontractors.)
(Not that there isn't a good case for improving federal social programs; but the reality I never hear uttered in the progressive bubble is that the largest government expenses are social programs like social security, medicare, and medicaid.)
[1] http://eml.berkeley.edu/~dromer/papers/RomerandRomerAERJune2...
[2] http://www.newyorkfed.org/research/staff_reports/sr646.pdf
[3] http://time.com/9009/unemployment-is-worse-than-death/ (the point is made more thoroughly in the author's book)
You phase it in by starting it at a low level without replacing/reducing existing programs, and then as you ramp it up you start eliminating other programs.
Allowing people to make those important transitions without completely losing financial stability will help everyone.
In many countries the government negotiates medicine prices as one entity for the entire country. This gives it a lot of leverage and the ability to provide medicine for all its citizens at a price far lower than what they would each individually be able to buy it at.
Now if everybody had basic income the governments might start getting pressured to stop acting as an intermediate negotiator.
Government programs have huge constituencies and embedded supporters within and without government who will fight tooth and nail to keep them. There is no way you will actually cut down on them as suggested.
While they're figuring out what to do next with their lives, they won't be left in the lurch, they'll get that sweet, sweet (well, minimal) UBI check just like everyone else.
http://www.nakedcapitalism.com/2015/01/the-failure-of-a-past...
"The idea of a basic income guarantee is very popular with readers, more so that the notion of a job guarantee. Yet as we have mentioned in passing, this very sort of program was put in place on a large-scale basis in the past. Initially, it was very popular. However, in the long run it proved to be destructive to the recipients while tremendously beneficial to employers, who used the income support to further lower wages, thus increasing costs to the state and further reducing incentives to work. And when the system was dismantled, it was arguably the working poor, as opposed to the ones who had quit working altogether, who were hurt the most."
I've yet to hear a good explanation for why basic income is superior to a job guarantee. We do not live a techno-futurist utopia where robots do all of our work. We do not want to be welfare queens; work gives us dignity. We do not even have world class infrastructure, we have infrastructure that is falling to pieces and direly needs work.
The last time we were in this situation, FDR created jobs. Jobs that built stuff like schools, hospitals... the lincoln tunnel.
You want a way in which the Universal Basic Income would be superior to a Job Guarantee? Administration. With a job guarantee, you will need a massive administration. While I agree wholeheartedly that meaningful work supports dignity. Creating jobs and Universal Basic Income are not opposed to each other.
They built a ton of stuff we still use today.
That prospect differs from a "job guarantee" precisely where that stuff is not sufficiently useful. In the margin there, I object to paying people to take time and effort away from places they may find more value, to do things that are of minimal value, in the name of "dignity." In fact, I think paying for useless work is destructive of precisely that dignity (along with a pile of economic value).
So you are saying, in essence, that people's art projects, poetry and one person startups and time spent watching daytime TV are, on average, more useful than projects like the lincoln tunnel, schools, hospitals and bridges and you object to resources being taken from one to build the other?
Bourgeois moralist crap. If working gives you dignity, by all means, work. But being forced to work to survive is not dignity, and the result is the bullshit jobs we see everywhere. If people who have free time feel the need for better infrastructure, they'll build it.
"Ne travaillez jamais!"
[1] http://www.jil.go.jp/english/JLR/documents/2012/JLR34_ohtake...
[2] http://wol.iza.org/articles/unemployment-and-happiness.pdf
[3] http://onlinelibrary.wiley.com/doi/10.1111/jmcb.12154/abstra...
In my second sentence, I implicitly agreed that some people might feel more dignified by working. The bourgeois moralism comes from using that to justify forcing everyone to work, as if dignity had to be imposed on people, those brutish sinful beings who have to be saved by those who know better.
And by the way, this moralist view is probably one of the great culprits for the effect shown in your links - like those people in the Philippines flogging themselves until their flesh is raw and bloody, we can do terrible things to ourselves when we've been convinced that we're lesser human beings.
A) Nobody much really wants voluntary unemployment. Not for extended periods, anyway.
B) Involuntary unemployment still exists with UBI meaning you still get most of that unhappiness.
C) It's not like we're short on useful work even if we are flooded with bullshit jobs and unemployment. We just have a really wasteful allocation of labor.
>The bourgeois moralism comes from using that to justify forcing everyone to work, as if dignity had to be imposed on people
A job guarantee isn't forcing anybody to do anything and it isn't imposed on anybody. It's an offer of a job to anybody who wants one.
>And by the way, this moralist view is probably one of the great culprits for the effect shown in your links - like those people in the Philippines flogging themselves until their flesh is raw and bloody, we can do terrible things to ourselves when we've been convinced that we're lesser human beings.
Economic policies that enforce idleness are only going to contribute to that.
Funny thing to say on a site where so many people chose a more challenging life exactly because they didn't want to be employees.
Few people want to be idle. That doesn't in any way imply they all want to be employed. There are many ways in which people enjoy living besides being employed - volunteering, studying, researching, exploring, creating art, developing a non-commercially-viable craft or skill, traveling, founding startups and other organizations, the list is endless.
B) Involuntary unemployment still exists with UBI meaning you still get most of that unhappiness.
When you don't need to pay anything to offer a job, there's absolutely no reason for most businesses not to accept anyone. Only unpleasant jobs that few people want to do will still have to be well remunerated - as it should be.
It's not like we're short on useful work even if we are flooded with bullshit jobs and unemployment. We just have a really wasteful allocation of labor.
Which is a great practical point in my favor. The State is one of the greatest sources of bullshit jobs; there's no reason to assume the new guaranteed jobs would be better allocated.
A job guarantee isn't forcing anybody to do anything and it isn't imposed on anybody. It's an offer of a job to anybody who wants one.
If people can't survived without a job, they are forced to get one. If society can easily avoid that but chooses not to for BS moralist reasons, the people advocating for that are forcing others to have jobs.
Economic policies that enforce idleness are only going to contribute to that.
The idea that there is only a choice between idleness and employment is one of the BS parts of the moralism I was referring to.
Because if they didn't, nobody would do that work.
This or, since budgets remain same. You will employ lesser people to do same job. Because that is the all budget you have to pay people.
Nope. Shareholders. Minimum wage hikes eat into profits before affecting prices or employment. This is why businesses hate them with such a seething passion.
To look at a more concrete example, compare the minimum wage in Australia vs. the US and the cost of big mac in both countries.
Involuntary unemployment is more efficient is it?
Let's say your wage is 30K per year. On Jan 1 a UBI of 12K per year is to be instated. What would happen to your wage in a year? Personally, given that most all businesses want us to be loyal to them with no loyalty returned to us, my guess would be that you are let go and someone would be hired to do your job for 20K per year.
The difference between a UBI and an income guarantee like the Speenhamland system is that the latter is a means-tested program that eliminates the marginal benefit of additional work and requires more administration, while the former, because it is unconditional, providing a fixed benefit regardless of outside income, has less administration and preserves the marginal benefit of additional work.
> Let's say your wage is 30K per year. On Jan 1 a UBI of 12K per year is to be instated. What would happen to your wage in a year? Personally, given that most all businesses want us to be loyal to them with no loyalty returned to us, my guess would be that you are let go and someone would be hired to do your job for 20K per year.
If they could get someone to provide the value you do for $20K now, they would. If you think UBI makes that more possible, you have to believe that it also makes it just as much more possible that you'd be able to get someone else's former 30K job for 20K of job income, which, with a 12K UBI, gives you a 6.67% increase in total income.
With BI, for each extra dollar your employer pays you, you get an extra dollar.
With income guarantee, for each extra dollar your employer pays you, you get nothing.
A similar observation is the "horseshoe theory": "The horseshoe theory in political science asserts that rather than the far left and the far right being at opposite and opposing ends of a linear political continuum, they in fact closely resemble one another, much like the ends of a horseshoe."[1]
See https://en.wikipedia.org/wiki/Political_spectrum#Other_multi...
In the 1930s the global far left and far right agreed on authoritarianism. While I personally think UBI is a great idea, I think that invoking a principal of that the points on which the far right and far left half similar views are likely to be correct to promote it is probably a substantially less great idea.
They are all concerned that this will ultimately end up as just another dole and the mother of all doles. They ask questions I don't have good answers to like:
1. This includes healthcare?
2. This includes disability?
When I say...well, I don't know about healthcare, its curtains.
Where the appeal comes for the right is that a UBI would let you eliminate our patchwork of other social assistance programs and all the headache, cost, and inefficiency of their associated bureaucracy.
The basic pitch isn't actually all that different from the flat tax ideas that are popular in conservative circles with the distinction that a UBI would disproportionately affect the wealthy rather than the poor.
Everyone pays, directly or indirectly, sales and property taxes. Every employed person ,that isn't paid under the table, pays payroll (ok, a few legal exceptions to this) and income taxes (if they make enough money). Those who don't make enough money to pay income tax are still involved with the IRS because they need to file for refunds or other programs they may qualify for.
Social Security, because eligibility is contribution based, effects people (from a tracking perspective) from the time they start working in a Social Security covered job (pretty much all legal jobs other than the subset of non-federal public sector jobs that don't participate in social security.)
The SSA is currently handling some 64 million beneficiaries.
I'm not contending that it'd be easy, but it's a scaling problem at this point. Systems exist to handle it already.
It was one of the reasons advocate by Milton Friedman.
Milton Friedman is now "far right"?
Assume we give each of the 80 Mio germans 10000 Euro per year. That's an expense of 800 Billion per year. Contrast this with a total tax income of ca 600 Billion per year [1]. It's not gonna fly...
[1] https://de.wikipedia.org/wiki/Steueraufkommen_(Deutschland)
To be clear I'm not saying that it's viable, I'm just saying that your calculation is not the one proponents of the idea are using.
It's not easy.
First, you start with non-institutionalized adult citizens that brings you down to a payee base of ~210M (this part will be unpopular as parents will want to get more than other adults). Next you set the basic income at the poverty level for a single person, $11,700. That gives you a total nominal cost of $2.47T. You do not exempt the basic income from the normal taxation rules. That means you get some of it back in taxes. If you figure 20% that gives you a net cost of $1.97T. You then take a buzz saw to all social spending aimed at US citizens, including all parts of social security (this would be very unpopular among the elderly, near elderly and disabled). With all parts of social security adding to more than $800B/year It's fairly easy to find a $1T in savings there. That brings the total to under a trillion dollars. You take a buzz saw to tax expenditures, e.g. exclusion of fringe benefits, preferential rates for capital gains and dividends, mortgage interest deduction, state and local tax deduction, etc. (this is also going to be very unpopular). If you add it up, that's good for another $550B.
That leaves you with another $420B in new non-offset spending. I'm certainly not going to to claim that's a small number, but it seems achievable. It's about 2.3% of GDP. Maybe you can get states to kick in (or force them to through reduced grants in aid) given that some of their social programs can also be largely reduced or eliminated.
* The hit it will mean to many seniors standard of living due to social security cuts.
* The massive tax increases this will be on the middle class (primarily due to changes in tax deductions)
* The massive tax increase this will be on the upper middle class to rich (primarily due to changes on taxation of capital gains and dividends. Changes, by the way, that most economists oppose.)
* The additional massive tax increase that will come from somewhere to close the 2-3% GDP gap you mention.
I can see how some people might be in favor of this plan. I myself am not.
I think the non-elderly middle class net effect will be close to if not a wash. They'll lose various tax deductions, but they'll get $11,700 x num_adults_in_household x (1 - marginal_tax_rate). And tax deductions only kick in when they are larger than the standard deduction to begin with. You need to be closer to the "upper middle" side of things to get there or have an unusually large deductions.
I don't think you need to get the gap amount wholly out of new taxes, as I said I think you can get some of it out of reduced aid to states, and/or as suggested by the poster below, military spending cuts.
As to your overall point, I concede that it is a tough sell.
* The massive tax increases this will be on the middle class (primarily due to changes in tax deductions)
* The massive tax increase this will be on the upper middle class to rich (primarily due to changes on taxation of capital gains and dividends. Changes, by the way, that most economists oppose.)
May as well clip out a few of the DOJ agencies like the DEA while you're at it. If you want to get get really crazy, cut foreign aid. Maybe even increase taxes on non-UBI income. Close a few corporate/personal tax loopholes...
I think it's physically possible. Politically, probably not.
These amounts are both very very small rounding errors in the context of this discussion.
This assumes GDP doesn't plunge because of disincentives to work and/or skyrocketing hiring costs for low-wage (now medium-to-high wage) workers. We don't have solid evidence of that not happening since no country has instituted basic income on the scale of 300 million citizens.
Your math model shares a common theme I see with many of these back-of-the-envelope calculations: they all assume a static economy where all the other variables that are affected by UBI -- which in turn also feed back into paying for UBI -- are unchanged. I've commented on this aspect elsewhere: https://news.ycombinator.com/item?id=10172421
Incidentally, from the linked comment:
The level of "afford" I'm thinking of is a scenario where the USA suffers zero productivity loss and the middle & upper class do not see a decline in the standard of living.
This seems an unreasonable standard to apply to anything. Hardly any policy is a Pareto improvement. Applying such a tough standard amounts to very strong status quo bias.
Sorry I wasn't clear. I wasn't making that statement as a "justification" for not implementing UBI. It was about how it's being "sold" politically.
Personally, if I were to push for UBI, I'd tell people that the only realistic way we can afford it is if we all agree to take a hit in standard-of-living. I don't have irrefutable proof but that's what I think will have to happen. However, it doesn't necessarily we shouldn't do it. With the mass effects of citizens avoiding low-wage jobs, maybe it's better for society that Walmart is open 6 days a week 9am to 7pm instead of 24/7 and for Amazon-Prime to scale back to 1-week delivery instead of 2-day, etc, etc. Or Amazon-Prime costs $199/year instead of $99.
If sophisticated dynamic equations show that middle & upper class will have to "suffer" a bit to provide the entire country a UBI... fine. But sell it that way to them and let everyone have open eyes going into it. I'm skeptical that we can fund UBI just by renaming existing govt assistance programs so that it ends up being virtually "free" to taxpayers.
UBI doesn't create a disincentive to work, UBI replacing means-tested programs eliminates a disincentive to work.
> and/or hiring costs for low-wage (now medium-to-high wage) to skyrocket.
Why would hiring costs skyrocket? The elimination of the perverse incentives of means-tested programs should drive down low-end hiring costs.
UBI has complicated secondary effects. Some of them can be contradictory. One who gets welfare would have disincentive to work because of the loss of benefits in today's govt programs. UBI may spur some (not all) of them to join the workforce. However, another scenario is the mass populations of part-time workers earning mininum wage ($7.25) that total less than $11k a year. That's ~1500 hours of lost labor hours for those who are perfectly fine with not making more than UBI's $11k.
It's definitely not as simple as saying, "UBI only creates incentives to work and never any disincentives, and GDP can only go up or stay the same instead of down."
The bigger problem is that the economy might not yet be able to sustain a level at which UBI isn't substantially worse for the neediest populations than existing support programs -- increasing capacity through automation will get us there eventually, but its far from clear we're there now.
Which is why, while I think UBI is a great idea to adopt and phase in, I don't think a big-bang short-term conversion is a good idea.
[0] unless it is pegged to inflation, then if its set initially in a bad place, its stuck there. So, if you are going to index it rather than manually adjust it, don't index it to inflation, index it to output/revenue measures, not price levels.
Also, "lost labor hours" in what fields..? Reduced labor hours would not necessarily suggest reduced economic output, or a reduction in construction projects, or small business experiments.
I have a really hard time understanding the logic here... "Let's give everyone 11 dollars, then spend a bunch of money (enforcement does cost) to make sure all those people give 1 dollar back to us before the year is up." What am I missing?
Current tax rates on UBI-only levels of income is basically zero.
It's essentially a way to get higher income people to pay more for UBI without having what is easy to interpret as a tax increase.
I'm occasionally asked where the money would come from, but it's not like we don't already just print it anyways. Although a gov. sponsored blockchain type distribution of the universal minimum income would be kinda neat.
Disability/SS is a straight-up income replacement. They go off one program and onto another.
People under the age of 18 are much cheaper to support and would get somewhere between "much less" and zero dollars.
Full-time employees basically get an accounting trick - on average, taxes go up by roughly the amount they receive in benefits.
This makes up a combined ~80% of the population, meaning there's a new benefit for roughly 20% of the population. This is about the same size as the current social security program. Difficulty of going from our current regime to UBI is roughly as difficult as setting up social security in the first place, so it's roughly the size of the New Deal. Difficult, but not impossible - something that you'd expect politicians to accomplish once every generation or three.
Reading the original questioners other replies, they assume everyone would get the money on top of current wages, tax-free. I'm not sure why they think that though.
Right now in the United States, 95%+ of people get their basic necessities covered, one way or another. The additional goods produced and services utilized will only require a "relatively" small reallocation of capital resources to their production.
The way I conceptualize UBI is partially an accounting trick, since a large portion of the revenues and outlays would be just changing money that people currently spend directly on goods and services to money that first gets taxed and then goes straight back to people who then spend it on the same goods and services. It's partially changing the incidence of social costs--hospitals that once had to eat the costs of the required treatment of poor people would then not be punished, and instead (depending on how the funding taxes are structured) the holders of income/wealth in society would eat those costs. Some of it is renaming existing programs and more efficiently administrating them (instead of food stamps with complicated bureaucracies, people just get a check). And for the few people actually starving or freezing to death because of lack of funds in the USA, yes, that's genuinely a new cost we'd have to bear, but that's a rarity and I don't feel too bad about new taxes if it's genuinely saving lives.
There are second order incentive effects in both directions that are certainly worthy of consideration, but a naive consideration of the facts on the ground suggests it's not at all impossible or even requiring any real magic, given the political will.
GDP of USA: 1.5 * 10^13
Basic level of sustenance for a person in USA: 10^4
Number of people we can economically sustain: 1.5 * 10^9
3 * 10^8 < 1.5 * 10^9
QED, math proves the UBI is perfect!
You're using arithmetic to model your scenario. I contend it requires differential equations.
For example, Mark Zuckerberg owns ~500 million shares of Facebook. If you only use arithmetic (multiplication) of share price, you get ~$40 billion. That's a theoretical number that journalists can calculate but it's not an accurate model of reality. If he was to really liquidate all those shares to 0%, his final sum would be much less than $40 billion. When he sells the first 10 million shares, the market will see that as a "signal" and react which sends the shares down in price. The final 10 million shares could be $1 each if the market was sufficiently spooked about his selloff. To model that requires a differential equation instead of arithmetic.
So to apply that logic to your example:
GDP of USA: 1.5 * 10^13
Basic level of sustenance for a person in USA: 10^4
Lastly, I do think the USA has enough "wealth" to provide some type of basic income. The question is what the USA can "afford" and that word can have several interpretations.
The level of "afford" I'm thinking of is a scenario where the USA suffers zero productivity loss and the middle & upper class do not see a decline in the standard of living. I'm not convinced that the USA can provide a dignified level of basic income without affecting the goods & services the middle class' enjoy today (points back to claims of a constant GDP instead of a declining one.)
Show some Diffy Qs, explain the assumptions behind each of the variables, and throw them into a Google spreadsheet.
I'm not the one trying to quantitatively prove whether it will work or not work. I thought you were. So far, your mathematics model and your assumptions behind it are unconvincing.
And yes, you do in fact need to discus what something might cost when making a good argument that the expense is worth it. When choosing what sort of home to live in I'm certainly you inquired about the cost. Unless you still live with your mother? You don't live in your parent's basement do you?
You are over-estimating the value of the income. People won't be "livin' large" on the basic income. The intention is to keep people out of abject poverty. I'd even argue it would be easier to find people willing to work part-time at places like grocery stores to supplement their income.
Not at first.
I'll tell you one of my big fears about UBI, though: The first vote that comes in Congress about whether to raise it. What happens then? Obviously, you are an asshole of the highest order if you so much as fail to support raising it, let alone arguing that it perhaps needs to be reduced for some reason. It becomes a "race to the top" to compete as to who can promise the biggest increases.
If you don't agree, well, let me get this straight, today's politicians are reckless and stupid for not implementing UBI and having all these separate wasteful programs, but the instant they pass it, they suddenly become responsible caretakers of the common good?
Also: Suppose we become unable to support the UBI for some reason and have to reduce it. How many cities burn as a result? Or do we just not reduce it until society keels?
It makes socio-economic failure states go from "bad" to "catastrophic to the body politic".
(As for observations that the same is true of many social programs today... yes, I fear that too. The only thing that prevents cities from burning when we must inevitably cut SS benefits is that the affected will be too elderly to go out there and burn things. But it's still less of a problem, because the separation of concerns makes it hard for systematic calls to raise benefits to really get going, except maybe SS. Unifying them into one easy phrase changes that.)
I want to see this work at a smaller scale before I would even remotely support recklessly experimenting with the largest economy in the world with such a fundamental change. Yes, I am familiar with the much too small semi-studies that have been done, most of which have bad caveats and ran for nowhere near long enough to matter. Let's at least see a county or something run this for 5 or 10 years, and through at least one reduction.
Not ever unless the economy gets incredibly more productive.
> Also: Suppose we become unable to support the UBI for some reason and have to reduce it. How many cities burn as a result? Or do we just not reduce it until society keels?
If we can't support it, it will reduce itself -- not in nominal terms, of course, but the fact that we can't support it means that it will will drive inflation, which will reduce the real value of the set level of basic income.
As long as UBI isn't pegged to inflation, setting the level too high is self-limiting.
> I want to see this work at a smaller scale before I would even remotely support recklessly experimenting with the largest economy in the world with such a fundamental change.
The smaller the scale the less well its going to work; it makes more sense to try it at a lower level displacing fewer existing programs than to do it at a smaller scale.
Yeah, to my mind it should grow just above targeted inflation. Pegging to measured or expected inflation replaces a stabilizing negative-feedback loop with a potentially explosive positive-feedback loop.
Pegging the UBI to the consumer price index could possibly help as well. Or segregating luxury items outside of UBI credits. Or just taxing luxury goods and services.
Don't do this! If we set the UBI unsustainably high, that will probably be reflected in a rise in prices. In that case, we want the real value of the UBI to fall, reducing that pressure.
"Or segregating luxury items outside of UBI credits."
Also don't do this. If there are fewer things competing for my UBI-tagged dollars, then we'll be needlessly driving up the prices of acceptable things.
What does that mean? Prohibiting using UBI funds on luxury items? So, instead of unconditional basic income, it becomes a prescribed-use benefit like food stamps, but with slightly different prescriptions?
One of the sources of administrative inefficiencies UBI is proposed to eliminate (as well as those associated with means testing) are those associated with managing and enforcing use limitations.
> Or just taxing luxury goods and services.
You could do that, or you could just use a progressive income tax.
What happens for those who were already earning a (barely) decent living? How will their spending habits change? Maybe some of them will choose to contribute to society in non-traditional ways. Would that be good? Will any of them stop contributing to society?
We don't know if its a zero-sum change. Its unclear if the pie will get bigger, smaller, or stay the same; if the rich will get richer, poorer, or around the same; if the money we would get from taxation will sustain a UBI in the steady state.
The studies on minimum wage increase is the closest we have, but that is unrelated enough that it misses many of the complexities (and advantages) that a UBI could have.
But as a first order approximation why not just assume that we remain in a steady state? See how far that gets you.
Wikipedia estimates the total net worth of US households and non-profits at $55 trillion in 2009. Assuming a 1% annual wealth tax on all assets (Norway currently has a 1.1% annual wealth tax, albeit only on fortunes greater than $120,000), we get annual proceeds of $550 billion. Social Security pays out $813 billion in total annual benefits.
Kill off Social Security entirely and institute the tax. Divided by USA's 320 million population, we end up with ~$4250 per citizen per year. So with an annual minimum wage of $15,000, on average no more than every third citizen would have to depend entirely on the basic income. Also, tax revenues or net worth would also not have to decrease once the program was started.
You can tweak the assumptions, add other possible sources of income to the system, approximate the economic surplus of the people who are now supported by UBI, question the viability of living on minimum wage, estimate the economic surplus of getting rid of means-tested welfare programs etc. Plenty of room for discussion!
Sources:
https://en.wikipedia.org/wiki/Wealth_in_the_United_States
http://poverty.ucdavis.edu/faq/what-are-annual-earnings-full...
http://www.heritage.org/research/reports/2014/12/federal-spe...
If the net worth of the nation doubles twice more, though, it's a different question. It's far from impossible that this, or a similar situation which would benefit greatly from an UBI, occurs over the next 50 years.
We're on the right order of magnitude, which is as close as I feel confident estimating things without detailed knowledge of the tax system and social programs of the US. I could make a better guess for Norway, but even there it's sketchy because a lot of the non-social support programs that would become cheaper with basic income (e.g. student loans, support for artists) aren't part of the official social security numbers. There's also a lot of "number massaging" you can do to greatly increase the number, not least of which being to pay support only for adults.
The median household income is also around $50,000.
The mean household income is around $70,000.
There's enough on one side of the distribution to fill in the other, if we decided as a society that that was the plan.
~225M Americans 20+ years of age * $12,000 = ~2.7T.
As a point of reference that's around 15-16% of GDP. It's also about 90% of current US gov't income or 80% of US gov't expenditures.
In other words it's really fucking expensive! I'm not saying the math is impossible but the conspicuous absence of details from most people saying it's a good idea is pretty telling.
Right now, I pay close to 50% in taxes living in SF in one of the top tax brackets. I imagine state taxes would go down as a result of UBI too. I despise the fact that 90+% of my taxes go to things I don't believe it. That said,I'd be glad to pay the 50-60% taxes if I knew it went to a basic income. And if I knew that it insured that if I ever lost everything, I'd have enough to survive with some dignity.
This is wrong (unless your definition of social services is broad enough to include things like schools and I doubt you want to dismantle the public education system).
> A large percentage of that is inefficient and wasted.
This is also wrong. Social Security is a direct cash transfer and Medicare and Medicaid are among the most efficient insurance programs in the world.
> I imagine state taxes would go down as a result of UBI too.
Sometimes I like to imagine a world of dragons and unicorns. But then I wake up and resume living in the real world.
Do the math.
But that's not how the economy works. The rich can provide "dollars", but we can't raid them for man-hours of child-care, or care for the elderly, nor can they provide professional health care. They've got the same 168 hours a week the rest of us do.
This doesn't say that "BI can't work"... it does say you can't model the economy statically, use the prices and valuations of today, and assume that rewiring the fundamental economic fabric of society will result in no changes. You can't do that at this scale.
99% of people agree with you on that, but 75% of those people have no idea they're considered rich.
That how all populist ideas work. Take from the few to give to the many. Then, come to find out, there are too few to take from and too many to give to. So, in the end it becomes take from the many and give to the few.
I make a low six figure income and live in a one bedroom apartment. I don't drive a luxury car, or take vacations, or have many indulgences except eating out one or two nights a week. I also don't have much money left over to save or invest. I don't see home ownership in my future, or much improvement in my standard of living. I'm getting older, but the idea of paying for a wedding, or the cost of raising a child, or the cost of sending them to college scares the hell out of me.
This is probably due, mostly, to living in an area with a high cost of living. There are perks to living in a nice city -- my girlfriend shudders at the thought of moving to the suburbs -- but the city bleeds us dry. It's exciting to live in a technology hub, but the higher salary seems to be mostly an illusion.
My point being, I wonder how quickly everything will adjust to swallow up that basic income? Then again, I guess it's not really aimed at present-day me, but rather at someone with a lower income for whom its utility will be much greater.
This sentence is absolute FUD. Every technical revolution over the past 300 years has been made with automation and productivity, and yet people are still employed in new jobs in sectors that did not exist before. Employing people to do menial obsolete jobs serves no purpose other than to delay the next evolution of ideas and products.
With this thinking we would still be handwriting books and riding horses. In the future when driverless cars are prominent, people will ask in astonishment "So you used to DRIVE your own car to work?"
Honestly though, if we are go with UBI, can we ask ourselves what is really necessary in life?
Currently large sections of the population engage in secondary and post-secondary education for the purpose of gainful employment -- to have a job brings social and financial stability.
That will no longer be necessary, so what does that means? Will tuition rates go down? Will universities no longer be in such demand globally?
How will this affect population growth and movement? Large sections of the population across the world utilize visas whose conditions are tied to education or employment, and now they will not have such opportunities.
Does anyone know what the term for that technology is? I'm referring to a term that's similar to how "responsive HTML" is a term for a website that changes based on view port.
I guess it would be "infinite scroll of articles where the URL reflects the content" but that still seems like a mouth full. There should be a better term for that.
Just as a note, I'm pretty libertarian leaning, but that idea is, I think, the best compromise between pure libertarianism and the bureaucracy mess we currently have in the world.
And this will take a long while.
The result is that only the educated and the owners can work and be included in the economy, and unless higher education can include everyone, well you will always have uneducated people who will have no other opportunity jobs than fast food and cleaning houses, which is a problem, in my opinion, for a nation.
The UBI is just a minimum people will get no matter what, so if they get a job it's an added income. Depending on its amount, it's a compromise between inflation and stimulating the economy without having parts of the US not develop. Consumer spending always has been the basis of a healthy capitalism, and the UBI follows that logic.
That works out as follows:
Household Size | Annual UBI | 2014 Poverty
---------------+------------+-------------
1 | $10,400 | $11,670
2 | $14,300 | $15,730
3 | $18,200 | $19,790
4 | $22,100 | $23,850
5 | $26,000 | $27,910
6 | $29,900 | $31,970
7 | $33,800 | $36,030
8 | $37,700 | $40,090
There are 123M households in the US, for a population of 319M, so the total cost would be $200 * 123M + $75 * ( 319M - 123M ) per week, which is $39.3G, or $2.1 trillion per year.
The U.S. had official income of $3 trillion in 2014, so UBI would cost about 68% of the federal budget.
IMHO we're getting there, and when the (very likely) big wave of automation hits it will be time. The true automation wave has not happened yet, and when it hits it will make the outsourcing wave look like a minor disruption to the employment market. I fully expect that by the year 2100 most non-skilled labor will be obsolete.
--
Edit:
There's one more "elephant in the living room" that I'd like to bring up in this thread before I'm outta here. I'll leave it here at the root since it's part of the core point I was making. Few bring up this fact since it leads to areas that many consider non-PC or impolite to discuss.
The average IQ is 100, and intelligence and other abilities are normally distributed within the population.
This is pretty much fixed on short-term human timescales unless we can widely deploy genetic engineering and brain-augmentation. Not only are these things massively hard -- probably harder than any of the crazy automation anyone is predicting -- but they're also going to face intense opposition on both religious and secular-ideological grounds. If you think the furor over GMO foods is excessive and irrational, imagine the furor over GMO humans.
It's also likely that those with the strongest opposition to genetic enhancement (on largely superstitious grounds) would be precisely those for whom it would be most beneficial. Conversely, those most enthusiastic to adopt it would be those who don't need it. As a result it would probably accelerate the trend I'm discussing here.
This means that if automation and other factors are constantly conspiring to increase the median skill level requirements of labor, eventually significant portions of humanity are simply going to fall off a cliff where the economic value of their labor becomes zero. From a purely economic point of view these are now worthless human beings. It doesn't matter if labor supply exceeds demand if the labor available to fill that demand can't do the work.
As automation gets better, this cliff will move up the bell curve. As it does, then due to the shape of a bell curve the number of people thus affected will increase exponentially. This is a recipe for blood in the streets -- and for totalitarianism as a response.
So we have a choice.
Option #1: consign those who fall off the edge to poverty and wall them off in ghettoes, and implement a totalitarian political regime with total surveillance of the entire population to deal with the perpetual undercurrent of crime and terrorism that this will create. The result basically looks like a B-grade cyberpunk film.
Option #2: admit to ourselves that we are entering a post-capitalist early-post-scarcity phase of development and implement some level of basic income.
I'd go with option #2. Not only is it better for humanity at large, it's also better for me as I don't fancy living world #1 even if I did get to live in one of the posh totalitarian enclaves.
Additionally, I think if you spend much time around the working classes, even today, you'll find that they're living in a world that's leaving them behind in a way that simply wasn't true even 30 years ago.
* http://www.forbes.com/sites/toddganos/2012/11/03/what-is-rea...
You can play around with the data here:
My working hypothesis is that software-defined Turing-complete automation is qualitatively different from special-case automation. It permits the rapid reconfiguration of general purpose machines with software, which is cheap and fast to produce in comparison with pretty much any physical system. Combined with simulation it allows for very rapid iteration.
You can in many cases effectively design something and then just hit 'print.' Some human intervention and assembly and some custom work is usually required, but the quantity is far lower and the skill level far higher than in the past. In the end you need a small number of highly skilled employees, not a large number of low-skill ones. The conventional 'worker' is obsolete.
Compare one-off factory tooling set for stamping out one part with a 3d printer, for example. The 3d printer is what the future looks like.
The alternative to a universal basic income here would be something like the world depicted in The Hunger Games series -- tiny super-rich walled totalitarian city-states presiding over a majority that has regressed to 19th century or prior standards of living. I'd personally consider this to be a new dark age.
I'm just saying I'd be surprised.
¯\_(ツ)_/¯
At the moment there are many industries with great potential for applying machine learning and various other automation techniques.
And considering that many leading AI scientists are expecting smarter-than-human AI within this century (or the start of the next one), I certainly fail to see your point.
Anyway, there is still a lot of room for exponential growth of human knowledge, in a lot of fields.
We would need a semi-permanent 16%+ U6 unemployment before its likely tho. As long as ~90% of the people who want full time jobs can find full time jobs, there simply isn't going to be enough momentum for it.
When automation cuts out the bottom 10% or so of the employment market is when it'd happen.
90+% of law involves things like contract law and analysis of legal documents. All of that can be replaced by natural language processing, machine learning, etc. I envision "contract compilers" that produce contracts based on compact specs and other things in the near term (5-10 years out) followed by total replacement of most lower-level legal work with AI/ML in the 15-30 year time frame.
In the end you will still have lawyers, but only to appear in courtrooms and do very high skill specialized legal analysis that involves a lot of conceptual thought. That will be a much smaller number of people than are employed in law today.
That's a lot of well-paying jobs that are going to vaporize.
No it will be late. Now is a good time.