Universal Basic Income already exists for the 1%
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The analogy to UBI completely fails. Honestly this is probably one of the most transparently dumb UBI articles I've seen posted on HN. (Disclaimer: I support the idea of UBI pending research outcomes.)
That is, your family is going to spend some x% of your wealth every year. Then you only need to return x% on the fund (approximately) on a yearly basis. There is very little real risk associated with this strategy, if you're rich and needing to earn a small percent of your total assets, say 3%. Now, if your family isn't rich, you're probably going to need to spend much more than 3% in income, and your probability of shortfall increases dramatically.
This is similar to how college endowments work - do you think Harvard's endowment has a high chance of going dry anytime soon? Tangentially, their tax-free status is tied to spending 5% of the assets each year, which actually makes their job a lot harder, and is why they need to still raise money.
Once you get to inter-generational wealth there is catastrophic risk that is almost uninsurable; managing that risk is extremely difficult. It is not as simple as "buy bonds", you have to deal with things like confiscatory tax rates, hyperinflation, default, being targeted by the government as a juicy source of funds, fall of a government you had previously been associated with, a dumb heir coming into control of the fortune and getting swindled...
If being rich was easy everyone would do it.
Because for the ultra-rich, I dont believe there is any evidence of this. Do they lose money some of the time? Sure But nearly any prudent investor could manage a portfolio that would be able to keep them wealthy in perpetuity.
Were you in a coma from 2007-2010 ?
Ok, let's stipulate that you were. You were in a coma. Fine.
How about twentieth century world history from high school ? Great family dynasties all over the western world were ruined in the aftermath of WWI.
How exactly would you hedge against the leninists arresting you and killing your entire extended family ? Remember, WWI is going on in the background so you can't just jet off to St. Barts...
Moving on to WW2, how would a "prudent investor" manage their portfolio of businesses and contacts and resources in their family base of Dresden ? Or Hiroshima ?
Your scope of thought on this issue is ... limited.
Of course there are going to be major hurdles during total war and extreme regime change. That would be obvious to anyone who wasn't being disingenuous or thick-headed, or both.
Those circumstances have nothing to do with this discussion as its not a realistic threat for billionaires of today, especially in America.
The 2007-2010 crisis did not impact the billionaires. They are still billionaires.
The parent claimed that "the rich" have foolproof recipes to stay rich forever - they just need smart portfolio management.
So yes, my criticism is that that is false.
If he had said "the average person in the top 10% receives a UBI equal to 75% of the average income in the country" or "the average American receives a UBI equal to 10% of the median income in the country" it would be equally true, yet make quite a different impression.
I'm not a fan of this article however. While we are reasoning by analogy, It's fairly well documented that most capital wealth does not survive past an initial generation or two. There's something about creating the wealth/passive income that creates a different behavior than being given it.
This article does nothing to discuss that. The analogy included feels like it's just there to support a punchy headline.
This is why I'm more excited to see some real tests and results in various countries and communities.
My completely uninformed opinion is that this is largely due to one of the following:
1. Kids who grow up with so much passive income that they never need to work even for luxuries. UBI won't produce this, because anyone who wants luxuries will still have to work to afford them.
2. Passive income isn't automatically self-sustaining, so if kids aren't as good as their parents at actually managing their assets and/or business, then they may simply end up spending more than they make (especially if they're trying to maintain the same lifestyle their parents had even though they can't maintain all of the income). I think this ties back into #1 as well. The article said 30% of the income is capital assets, but if kids aren't good at business (or don't want to work at all), then they're relying on capital income for nearly all of their income instead of just a portion of it, which generally isn't self-sustaining without a change in lifestyle.
Let us know how it works out.
An interesting model to look at is that of the Rothschild family. If you can cut past the conspiracy theories, they run the family wealth as a family bank. Family members can borrow from the bank, but they must attend an annual meeting and share their learnings with the rest of the family (at least that's my old memory of something I read).
It's interesting how different folks approach it. The Vanderbilt family largely lost it all, the Rockefellers kept it (even after large charity).
Personally, I'd put myself in the Buffett camp. Leave your children enough that they can do anything, but not so much that they can do nothing.
> 1 in 10 dollars of income produced in this country is paid out to the richest 1% without them having to work for it.
is misleading. I think this type of attitude makes it more difficult to find common ground. Yes, that income is not produced through recent work, but it is produced as a bi-product of previous work.
The issue is that once a person accumulates enough wealth, the difficulty to generate value falls while the opportunities to do so rise.
People get rich by not consuming everything as soon as they get it. This is a great thing for everybody.
And it's not just rich that accumulate. A person making minimum wage and just saving the same amount withheld by the US social security tax would have hundreds of thousands of dollars accumulated if they kept it in the stock market for their entire working career.
I was curious about this a few years ago and put together this spreadsheet, using this tax rate, rate of return and minimum wage over a 40 year period.
https://docs.google.com/spreadsheets/d/1RlSfkW-DKXAXtXKvZJR5...
The author is confusing income from dividends (either of the stock or bond variety) and interest income with income simply for existing. He chooses to use Alaska, an oil rich and low population state, as a model for the rest of the country. He states that the government would somehow build up a "big wealth fund" that would deliver "returns" without specifying where those returns would come from or the amount of those returns. A fund of the size required can't easily generate large returns since that amount of money is enough to distort markets.
Simple back of the napkin math is that based on the 2013 census, we have 242,470,820 adults living in the US. If we pay each of them $12,000 per year, that's $2,909,649,840,000 in additional mandatory spending every single year. That's more than Medicare and Social security combined, and that has no cost of living adjustments built in. The basic math shows that this idea is simply unrealistic as far as I can tell.
Setting the annual benefit to an average of $7,000 and phasing out other safety net services get's the basic math a lot closer, while theoretically helping more people than the current system.
I'm not saying Basic Income is a definite win, but back of the envelope assumptions are usually too simple to dismiss or validate an idea.
The allure of UBI is interesting but I've never figured out how the math works out without making sizable reductions in quality of life for significant chunks of the population. The money has to come from somewhere... I think UBI works out to be worse than zero sum economically.
Anyway I've always been a firm believer that if you can't come up with a compelling and largely accurate back of the envelope justification for your story, you're not going to get many adherents.
Setting that fact aside, why should my work not directly benefit my children? Providing for ones offspring is a universal motivation.
[1] http://www.investopedia.com/financial-edge/0810/7-millionair...
http://www.cleveland.com/business/index.ssf/2016/03/us_milli...
"More than 10 million U.S. households have a net worth of $1 million or more, a record high representing nearly 9 percent of all households in the country. That may sound like a small percentage, but it's one in 11 households. Instead of leading an extravagant life filled with luxuries and indulgences, a millionaire could be in your neighborhood."
To be in the top 1%, you need to have a net worth somewhere between $5M - $25M (1.2 million households out of 124 million in the US)
Also known as nationalizing all investments.
I think the author may not quite have a grip on capitalism.
> The US federal government would employ various strategies (mandatory share issuances, wealth taxes, counter-cyclical asset purchases, etc.) to build up a big wealth fund that owns capital assets.
Sure, wealth taxes does mean effectively redirecting some of the capital income earned by other people, but that's basically what all taxes do anyway. And I'm not sure what "mandatory share issuances" or "counter-cyclical asset purchases" mean. But the end result is they're suggesting that the government should own a set of capital assets rather than just relying on taking money from citizens that own capital assets.
To provide a UBI of say 12k for every adult in the country (as opposed to just a few hundred or thousand), such a fund would need to own a large part of all the corporations and housing stock in the country. Didn't work well for the countries that tried it in the past.
I'm all in favor of Universal Basic Income, but what happens when everyone who currently invests their money to produce this passive income decides to simply spend it instead since they wouldn't get to use any return from their investments?
There's also be no capital accumulating for innovation. No annoying technology to enable people to make high salaries. And none of the annoying tax revenues collected from them.
And people always try to escape it. And its eventually abandoned.
Pick one. Those are literal opposites.
We would then experience true economic recovery, where everyone can access the inventory of dollars, as opposed to the current "asset based" recovery we are now experiencing. Which is basically economic recovery for those who own hard assets.
I think very few are against the idea of free money for everybody because of the fear of moral decay if people aren't working. I think the opponents are worried about where that money to fund UBI will come from.
Taking away people's assets to be redistributed is obviously kind of a touchy subject.
Minimum social infrastructure elevates the bottom for everyone. If people can rise from that bottom further, maybe we can work towards elevating the bottom further and further as time passes.
I don't know if this would hold for a universal social services infrastructure.
My personal analysis is that I would tend towards decentralization via cash payments, so as to enable choice, and not have the state takeover the potential economic activities enabled by such cash payments. Nobody wants to be given food from a government kitchen or government food box, but most people, I would think, would not mind getting $X per week/month/year to supplement their other income from the government.
But in context of democratic, developed states and cities; UBI/welfare is not a good solution. Minimum social infrastructure is what we should strive towards. So, when people fall from safety nets; that fall can be contained. With passage of time; we can work towards elevating that net further.
Poor people on the other hand are much quicker to bring their income back into circulation. If you want a lot of money to be spent domestically, you need to redistribute the money to the poor.