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Comment by WalterSear | Hacker News Reader

You are missing the point: everyone gets basic income, regardless of income. So people with nothing have enough to eat and live and people with jobs don't feel like they are being freeloaded - they are getting the same amount of money on top of their salary.

People, justifiably, ask how we could possibly pay for all this, but the current US welfare system costs a comparable amount. Moreover, the US financial system is currently set up to allow money inflows to be controlled and to benefit the central banks. A much more sensible and effective method for controlling the velocity of the economy would be to put place monetary inflows into everyone's individual bank accounts, but obviously the people in control aren't going to give up the gravy.

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So we take what we're currently spending and spread it out to everyone instead of just people who need it?

Doesn't that mean that the people who need it the most will just get less than they're getting now?

In other words, are people who are relying on current US welfare systems often using more than (say) 10k/year in total benefits, and giving them 10k in cash instead would actually reduce their total compensation? And if not, then how can the cost of our current welfare systems be comparable to UBI?

You'd adjust the tax system to compensate for most of that.

The idea is that it reduces administration costs, eliminates poverty traps, and reduces the stigma of unemployment.

Reducing administration costs and adjusting the tax system isn't going to help a disabled veteran who needs more than $10,000 to afford a wheelchair-adapted vehicle, or a quadriplegic who needs more than $10,000 to pay for a carer to visit them at work to help them use the toilet twice a day.

I'm no expert in politics, but I think if their benefits were cut they would probably protest, and the protesters would look very sympathetic.

And if we say "OK, we'll have some extra funding for legitimate expenses for the legitimately disabled" you're not going to be able to do away with administration costs.

I don't disagree. I'm not as cavalier about replacing all social support with basic income, and disability should probably remain separate. You won't completely eliminate administration costs, but not having to administer unemployment and pensions will help a lot. (And personally I see the other benefits as more important to society.)

This is a strawman. Basic income isn't some libertarian pipe dream of replacing the government with an ATM. Obviously there are many services that can't be replaced or eliminated.

There is more problem with means testing than with needs testing. The government can subsidies wheelchair-adapted vehicles to cost as much as a normal vehicle.

Why someone that doesn't need a special vehicle would use the subsidy? The normal car fit their needs for the same price! And it's not even accounting the more probable situation in which the subsidy doesn't cover all the cost difference.

And allows you to eliminate minimum wage, so if a mom-and-pop shop wants someone stocking shelves at $2.50/hour and someone is willing to do that to supplement their (sufficient) minimum income, they can agree to that.

Private donations can help those who need it the most.

They'll have much less work anyway now that nobody is starving or homeless by lack of money, might as well focus.

The current US welfare system is such a complicated clusterfuck of fragmented programs that anything would be an improvement. The most insidious aspect is that it has all of these income cliffs where actually working and earning over a certain level means that you lose benefits, so that earning one dollar more may cost you thousands in lost benefits.

That's a problem with government taxation and spending in general--it's what happens when you map one number to another using discontinuous lookup tables instead of continuous functions.

In what way is that a general problem with government taxation? There's no reason you can't make the tax function continuous, the US just doesn't.

I think most of practical basic income systems proposed don't actually go that far. I mean, theoretically the goal is to replace all welfare spending, maybe, but as said below, it may be hard to do practically, so most current proposals replace only portion of it, while leaving many targeted benefits intact. I don't feel currently informed enough to form opinion about whether this can work or not, so I'd be very curious about somebody trying it - preferably in some place where it won't hurt me if it fails in some unexpected way, like many social engineering projects had. Like in Japan :) Sorry, Japanese people, I know it's selfish from my side to want that. OTOH, if it works, you get a big win.

>> So we take what we're currently spending and spread it out to everyone instead of just people who need it?

You would presumably couple it with a heavily progressive income tax, with the result that people higher up on the scale end up paying way more into the system than the basic income check they receive, and people at the bottom pay no tax at all. So the effective amount of welfare is directly linked to one's income or lack thereof.

Also, UBI can replace most welfare, but not all. In particular, your example with the wheelchair - that sort of thing really ought to be covered by health insurance (which should be managed entirely by the government, or at least price-controlled).

> You would presumably couple it with a heavily progressive income tax, with the result that people higher up on the scale end up paying way more into the system than the basic income check they receive, and people at the bottom pay no tax at all. So the effective amount of welfare is directly linked to one's income or lack thereof.

This is one of the primary gripes that I have with UBI. You've just described means testing! "So the effective amount of welfare is directly linked to one's income or lack thereof."

We've moved the means testing around a little bit, but it's still there, and it's still open to politicization. The right demands that the threshold between welfare givers / takers be lowered, the left argues it be raised, and we're right back where we started.

> This is one of the primary gripes that I have with UBI. You've just described means testing!

There's no way to avoid means testing - the money has to come from somewhere, and this inherently means that some people pay more money into the system than they receive from it.

The point of UBI is to make this whole setup as transparent and low-overhead as possible.

The nice thing about it is that, in theory, because the redistribution is basically regulated by just two knobs (size of the UBI check, and how progressive the taxes are), adjusting them is politically easy, and adjustment range is pretty much unlimited. I'm hopeful that it would result in fewer situations like the ongoing ACA "debate", where right wing just wants to sink it altogether and replace it with something else entirely, because they can't get where they want by tuning it. If we can get this to work, UBI would always be there, but more left-leaning or more right-leaning governments would simply adjust the knobs more or less gradually depending on how much "freeloading" they're okay with.

And smooth adjustments are easier to adapt to, and cause less social upheaval (think of the shock to the society and the economy if Republicans somehow manage to repeal ACA, say, tomorrow...)

It may have the same result in monetary terms, but the framing and implementation still matter.

Basic income means everyone gets the money they need to survive without having to go through a humiliating application process, and they only have to care about taxes when they start earning money.

Moreover it means the remaining administration is focused on tax fraud, and can prioritise its resources appropriately on the worst offenders, rather than having an agency dedicated to chasing poor people for relatively trivial amounts of money (likely at greater cost than the fraud itself).

In terms of the politics, I think the peace of mind benefits of welfare will be more obvious to the middle class when it's automatic, rather than it being something they could maybe apply for if they get really desperate.

Can you explain to me, because I've never understood fully, how if we give everyone some lump sum amount (which I agree is the desirable vs. means testing etc.), how it won't result in inflation of prices whereby it will be the equivalent of dropping money out of a helicopter, everyone gets equal cut.... prices rise correspondingly, and real purchasing power does not change at all?

More demand does not always result in higher prices. Price depends on the elasticity of supply for all of the different goods as well. Some might increase, while others wouldn't.

Probably the most significant cost for most people is housing and that does seem to have an in-elastic supply. My guess is this is where the money will go.

We have seen an element of this in the UK where housing benefit largely ended up in the laps of landlords.

If you don't need a job, you don't have to live in the city with everyone else. There's plenty of cheap empty land you could live on.

There are other reasons to live in a city besides a job. I imagine that as we move toward a "jobless" future cultural and scientific output will increase, and you'll still want to be around the people who are doing the "cool stuff."

You'll want to, but you won't be able to afford it. In a future with UBI the city will be for employed people only.

But you will have the choice. Also, I imagine that a jobless future will be heavily automated. Cheap autonomous transportation might expand the housing area with sustainable commute. Even more so if you can work remotely part-time and shorter hours.

But when you're not spending 40+ hours a week working, an hour long journey to do cool stuff isn't as big a deal.

And besides, I think a most of the other people doing cool stuff will want cheaper accommodation as well, and over time particular kinds of cool stuff will congregate in different smaller towns.

Elizabeth Warren of all people has focused on this as a problem in the US also.

The move from single-income to double-income families produced far less than a doubled standard of living, but it drove housing prices sky high. It's an interesting natural experiment for what we might see with UBI programs (which act a lot like adding a 'free' wage-earner to each household).

Let's for a moment make a thought experiment.

Everyone just magically has enough money to buy 'the basics', but can't use the money for anything else, in fact they never see the total.

What happens the the price of 'the basics' then? What happens when everyone can afford to not be wanting?

There are probably 'better' basics, for example penthouse apartments, but those will are all already above basic, so buying caviar or high end steak might be off the table.

What would happen if demand is just met?

The money would need to be spent anyway, these are basics. Not having spent it would result in what? More crime, more jail time, worse medical outcomes? All of that sounds like expense to the population at large, in the form of emergencies that use social safety nets.

I think the argument for UBI / BIG is that it identifies the root cause of the expenses and attempts to just fix the problem (by, for example, having a basic minimum of housing, or in the case of areas where housing costs too much; causing more housing to be built).

I think the other poster's argument is that the price of the basics will be artificially inflated as those sellers know that low income/basic income people have additional money to spend on required items. The price of a penthouse apartment will not increase, but a slumlord that knows the government will be mailing checks to everyone would certainly have no qualms with raising the rent by a few hundred dollars to accommodate the extra income he knows his tenants have available.

EDIT: To add to this, it's worth pointing out that many corner stores in low income neighborhoods already take advantage of peoples' lack of access to easy transportation to charge unusually high prices for common convenience store items. It's already more expensive to be poor, and I think basic income would just increase the predatory practices that are already happening.

I agree that it's hard to say what would happen with regards to rent seekers, but corner stores aren't in the same situation. Their increased costs are either due to the rents being increased by the person who owns the building, or the simple fact that they do not have economies of scale so they end up with higher prices on the items that don't expire quickly in order to make a profit as they won't make much off of gasoline or milk, for example.

There are plenty of discount stores that are working their way in, e.g. Dollar General, Family Dollar, but they don't have control over the rents either and in alot of larger cities they also are facing opposition from the small businesses that would be out of business since they would have no chance of competing on price at that point.

Whether having every small bodega or other small retail shop replaced by 7-11, Dollar General, Family Dollar, etc. and yet another avenue for access to the middle class shutdown is worth the affordable prices for everyone else is debatable. I can see both sides of this anyways.

Why would people stay in expensive slums when they can e.g. move to countryside and live there for a fraction of those money on basic income?

I think predatory practices will decrease because people will be voting with their feet, no longer constrained by where they live.

People are social animals. Not everybody will move even if they were personally better off by moving.

Also not everybody can afford to move.

> can afford to move

Basic income is precisely about "afford" part.

Those who won't move will benefit too because landlords will have to work on retention.

> Basic income is precisely about "afford" part.

This assumes that basic income either includes an allowance for moving or contains enough of a surplus over basic needs that savings can be accumulated.

I actually think that communities might sponsor your moving on their turf as this will mean you'll spend your BI there for prolonged time.

One of the most attractive aspects of basic income is exactly this. $10000 a year stretches a lot farther out in the boonies than it does in SF or NYC, and if you don't have to be there to work, that opens up a lot of degrees of freedom.

At the same time, it does create potential for severe clustering based on income, possibly resulting "basic income ghettos", with all the problems that entails.

I don't think this would be a problem. There's no reason for people moving out of cities to cluster anywhere in particular. Housing costs near jobs may remain out of reach for basic income alone, but they should still be much more reasonably aligned with wages, since if people start to get stretched, they can just quit and move away.

> There's no reason for people moving out of cities to cluster anywhere in particular.

Economy of scale. Given fixed size of the UBI check, you want to live where services are cheapest. And services will be cheapest in places where more people are serviced together, because that cuts down on distribution costs and other such overheads.

Also, areas where people who have more money than just UBI live, would have higher prices simply by virtue of there being more money in the local economy. This isn't really dissimilar from the existing arrangement, where rich areas are expensive to live in, and so there's natural geographic segregation. But UBI would boost this into high gear.

To clarify, I am a strong proponent of UBI personally. But I think we should be really careful with these kinds of unintended side effects, and try to anticipate and manage them before they cause a bigger mess than what we're trying to address.

Also, have a look at this: https://medium.com/migration-issues/should-a-universal-basic...

Economies of scale have failed. It's official.

Huge retailers today offer worse prices, lower quality and lousy service because they can get away with this, being the only game in town.

At the same time, rent in cities skyrocketed, making low-density and rural places much more affordable.

We now know that economy of scale peters off at some fixed scale.

That's about monopolies, not economies of scale. Yes, they often go together, but they don't necessarily have to.

a slumlord that knows the government will be mailing checks to everyone would certainly have no qualms with raising the rent by a few hundred dollars to accommodate the extra income he knows his tenants have available

He can try, but then he'd lose out to competing landlords who don't raise rents as much (or at all). It's like gas stations; owners know that people are willing to buy almost as much gas at $3/gallon as they are at $2. But when the price of oil falls, they can't just keep charging $3, because their competitors will charge less and take all their customers.

If prices rise in perfect proportion to the new income, that means there's something severely restricting supply, otherwise price competition would force them down again.

Or alternatively the stores could compete by offering better service, in which case people benefit from that.

The money doesn't come off the printing press out of thin air, it's a redistribution of wealth. That is, additional wealth (or currency which is an abstraction of wealth) isn't created, it is redistributed.

That wealth can be used to consume the same amount of goods/services that it could have before the redistribution, but now many users get to make those consumption choices instead of one or few.

Yes, this redistribution will have a massive impact on the _pricing_ of different goods and services within an overall market. However, total wealth (ability to consume in aggregate) will remain the same within that market.

Inflation has more to do with the amount of money in circulation. If you finance with taxes and not debt, the value would stay constant.

But a bit of inflation may not be the worst thing – the current almost-deflation is a lot worse and both private and public debts could finally be lowered. Unfortunately, it's a pretty imprecise mechanisms and there are some people that suffer disproportionally such as those around retirement age getting fixed pensions.

Honest question; what numbers are you using to say it's a comparable amount? My quick search shows total 2016 expenditures of ~$3.9 Trillion. If you assume welfare is everything non-interest & defense related, that's about $3 Trillion; there's other non-welfare lumped in that number, but let's just use it anyway. That's $9,250 per person.

Almost every discussion about basic income comes to talking about it as a monetary black hole where you pour trillions in and your society has no reasonable expectation of return, much like military spending.

That is not at all how it works. A basic income within reason would almost always be an economic growth mechanism by transferring money from investment class to consumption class. The market for the guaranteed needs of an adopting nations population would be an incredibly large, incredibly stable business center for competition and innovation, and it would increase market participation by eliminating the barrier to entry that is currently made by gated welfare.

Of course we need long run, wide spread, UBI experiments. If all you are talking about is "what if" any reasonable scientist would balk at the conversation. But if you take historic evidence - that giving the poor money makes them, by overwhelming margins, and on average, spend it on their needs in predictable, immediate ways, you would be getting similar economic motivator returns on UBI taxes as you would on some forms of infrastructure.

And by comparison, infrastructure projects also considered a net positive policy because the money made by businesses using your infrastructure vastly eclipses the costs of building and maintaining it. UBI works the same way, by creating stable demand for the necessities of life, and providing the means for a similar force multiplier in people wanting to contribute optimally to the economy by their own judgment than by the will of money in the hands of others for those individuals profit. Because sometimes, making a major stakeholder in a company richer does not mean the greatest source of economic growth for the society as a whole compared to the entrepreneurial potential of every citizen presently bound to that model.

What about price inflation amongst these necessities resulting from immediate increase in money supply within poor population? I can't understand how this wouldn't be an issue... Would housing prices not rise accordingly, for example?

Competition. Most necessities of life have a lot of competition in the market.

Yes. If a modest amount of 9k would work, then giving everyone a million each would work as well. The Keynesian economist in Washington and Tokyo have already filled up the bathtub to no avail. This is the difference between money and currency.

You're thinking of monetary expansion, which in modern economies often doesn't work because the banks get the money first and do nothing but park it.

Housing prices today are going out of control because the supply of what people want housing for - jobs - is diminishing. As the job market shrinks and more and more people are dropped out of the economy due to automation, there is more and more demand to live where jobs are, which drives housing prices out of control in many places like NY or SF but almost every major metro area experiences it.

It is confounded by the growing wealth inequality, where the rich find it a valuable asset to buy up these valuable residential buildings that are in demand as a store of value, further diminishing the supply and further exacerbating the problem.

Under a UBI, the market for residential is restored to what it was decades ago when the towns now abandoned in the post-industrial US were populated. There are many times more houses than homeless in the US, but because those homes are located nowhere near a stable income nobody can live in them.

The same applies to food and electricity. We are not at any supply side bounding here, and a UBI makes these makes so incredibly stable and predictable it lets the margins of businesses operating in them get as close to break even as possible because of the certainty metrics now associated with them.

It's even better if UBI is funded by a nationwide land value tax, which would discourage both NIMBYism in low density, high value communities and using real estate as a store of wealth (instead of as a productive investment).

>transferring money from investment class to consumption class.

That's not nearly enough to cover it. The top 1% has 38% of the wealth. In 2009 total wealth of US was 55 trillion[1]. That leaves us 20.9T to spread around 315 remaining millions. That's about $66,300 per person from our anti-rich crusade. Not a bad bounty, but that's a one-time prize. How do you intend to fund UBI for anything longer than a trivial amount of time (<5 years) with such a small sum?

1. https://en.wikipedia.org/wiki/Wealth_in_the_United_States#/m...

I'm not convinced your math is accurate. I'm definitely not an expert, but I also don't think the money would just disappear into the void - presumably it would continue to cycle through the economy.

That's wealth, not income.

Capital owners will have increased costs due to taxation, but they'll also have increased demand for their goods and services.

I'm not sure these calculations on the back of an envelope are the correct way to understand the problem, but let's try.

US population: 322 millions US national income: 15.78 trillions $

To give a 10000$ UBI to every person in the US, you need to tax 20.41% of the national income.

"Redistribution" doesn't mean you take rich people's money in a one-off scheme. It means that you tax them higher. One particular opportunity there is capital gains tax, which has been much lower than sweat-of-the-brow income for a long time now. Equalize the rates (or better yet, jack capital gains up even higher - there's no reason to encourage economic rent over labor), and you've got a very nice monetary stream to direct elsewhere.

If you're under the impression that military spending has no expectation of return at all you aren't looking at things realistically.

Military spending resembles insurance to some extent--sure, the returns are normally terrible, but unexpected events that the spending covers are even more terrible.

Don't forget all the events that don't happen because of your military spending. A country with a weak military could be an attractive target.

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