Stockton residents got $500/month basic income, spent on food, clothing, bills
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These trials are just testing how individual people respond to unconditional direct cash transfers. We already know that people are better off if they have more money. Not super interesting. It's not changing the economy around them.
Not that they would, but even if everybody just spent their basic income on booze and drugs, it wouldn't really be evidence against the effectiveness of basic income.
The choices aren't UBI versus no UBI. The choices are UBI versus all the convoluted ways we currently try to push money to consumers through the labor market. To the extent that we're creating jobs to push money to workers, we're not creating those jobs because there's actually work that needs doing.
If we calibrate the amount of the basic income to the economy's productive capacity, then we can allow the labor market to be efficient. In an efficient labor market, jobs only exist because there's actually work that needs doing and the only purpose of wages is to provide an incentive for people to do that work.
What's the difference in theory and practice between UBI and changing the standard deduction/marginal rate? Like if we give out $6k a year to everyone through a $500 check, what is the difference in how that money is spent versus if we increased the standard deduction to where people would pay $6k less in taxes? (assuming that people are in fact paying at least $6k)
I get that this is partly an experiment to figure this out, but what does the current theory say?
That's the big difference. UBI most helps the people who are paying the least tax right now, such that a pure deduction wouldn't do anything for them. It's a "negative regressive" tax, whereas an increase in deductions/decrease in marginal rates—or a tax credit—is a "negative progressive" tax.
Avoiding trapping people in positions where they need a dead end job with no advancement potential which forecloses opportunities for self-improvement is, indeed, one of many arguments for UBI.
> I thought the fundamental macro issue was that as automation of one kind or another becomes an increasingly inherent part of new technologies, it will inevitably depress the human job market beyond its ability to employ enough people to maintain the economy.
That's less credible of an argument than that it will create a rate of change of needed skills which will leave people stuck who cannot afford to retrain.
Short of AGI or output levels so high that diminishing returns make greater output of minimal value, automation should multiply the value of human labor while shifting skills in demand.
> What's the difference in theory and practice between UBI and changing the standard deduction/marginal rate? Like if we give out $6k a year to everyone through a $500 check, what is the difference in how that money is spent versus if we increased the standard deduction to where people would pay $6k less in taxes? (assuming that people are in fact paying at least $6k)
You've partly answered your own question. One of the big differences is that people who wouldn't have paid at least $6k in taxes wouldn't get the full benefit. It's also true that the standard deduction is a deduction of your taxable income. Depending on your tax bracket, that's going to reduce the amount you owe by a different amount.
We could instead talk about doing it as a tax credit similar to the Earned Income Tax Credit, but giving it to everyone equally regardless of whether they're working. This would be more like a basic income. If we can pay people the tax credit at finer intervals instead of in one lump sum at the end of the year, that's even better.
The disadvantage is that people would still have to file tax returns. The people who need the money the most are also the ones who are least likely to be able to navigate the system. If it's exactly the same amount of money to everyone unconditionally, then we reduce the bureaucratic burden by not tying it to the tax system.
Here's a video where I answer the question of why basic income should go to rich people. I advocate keeping the complexity separate from the cash benefit system and putting all that complexity on the taxation side.
It's interesting that this question has two clear, opposed answers:
The answer from Economics: it's impossible to just give everyone money, because you just devalue your currency. In essence, given a fixed pool of "stuff" to buy and sell, the "buying power of the total pool of circulating currency" remains constant no matter what you do to your monetary policy. And, because certain things have elastic supply but inelastic demand (like housing), the owners of those goods (rentiers) can suck all benefits of wealth redistribution right back out of the economy.
The answer from Technology: it's certainly possible to just feed everyone for free, or to otherwise enable "free" increases in net global utility. An agrarian co-op covering just the current arable farmland of the United States, with all possible economies of scale due to centralization of resource processing, could probably feed the whole world using maybe 10,000 farmers. Eventually even those people could be replaced by robots (and the people producing the robots and doing the maintenance on the robots, too.) This rounds off to literally no human having to do work, for every human to be able to eat.
So, the disconnect: if we can (or could, in theory) increase net global utility with public-works projects, then why can't we increase net global utility with money? What's the economic difference between a world where robots grow all our food for us, and a world where we have the robots "grow" some free money instead (y'know, like by mining Bitcoin or something), and then use that money to pay the human farmers to grow the food? It seems like there's some part of market capitalism not working out for us here, if one world is possible and the other isn't.
But the reality is that inflation isn't about the amount of money "in the economy." It's about the rate at which money is flowing through the economy. That flow is the level of spending. To keep prices stable, we have to keep spending balanced with production.
The reason why we can make this distinction is because money doesn't just perpetually circulate through the economy. It flows through the economy like a river from consumers to producers to the financial sector. It's true that money in the financial sector gets "reinvested," but in order for that money to support consumer spending, you have to be able to connect the dots and tell a story about what mechanism is getting money into the hands of consumers.
Basic income is a possible mechanism for that. If we want to, we can continue to use taxes or create jobs to force "existing" money is flowing back into the hands of consumers, but what's the point? Why not just hand them new money instead?
I've written a blog post about this.
I was curious about this so I did some digging. Alaska effectively has a UBI, or at least a program that is quite close to it. When the program came what's interesting is how it reduced poverty. However, two decades later, inflation has caught up and now Alaska's poverty rate is 15th lowest in the nation at 11.1%. In comparison, right before their oil UBI took place their poverty rate was 10%. The program is still helping reduce poverty when compared to other states, two decades later, but not as much as I'd like to see.
I suspect if it was a country wide UBI, instead of an entire state, inflation would catch up at a quicker rate than we're seeing in Alaska, but it would still be at least a decade before it would balance. Likewise, I suspect that inflation will never come completely to the level of no UBI, but I don't have data to back that suspicion up.
>Is it even possible to give everyone free money?
If we absorbed the social security tax, merging everything into one large UBI program. Lets say we want to balance near min wage workers so they get as much as they give, but support people who are in poverty as one hypothetical UBI. In the US the poverty rate is 17.3%, so given people who work near min wage pay about as much taxes as they get from the UBI (which would help reduce inflation, and because we pay 6.2% of our income in social security up to 128k: 0.062*1.173 is 7.27%.
We'd pay almost exactly a 1% tax bump to pay for a UBI, plus the money the UBI gives (eg, if we got $400 a month we'd have $400 more in taxes + the 1%), to gives out the same amount as social security does. However, realistically the UBI would have to give a bit more than social security currently does, or the elderly might not like it, for psychological reasons, and a 1% tax raise on near minimum wage works isn't a good idea, so lets do some more math.
Lets say 50% of the country is paycheck to paycheck (some studies say it is as high as 78%, so ymmv on this stat). If it's a 1% tax bump across the working country, and 50% we don't want to be taxed higher than they already are, then it's a 2% middle class and upper class tax raise. Then given an increase for the reasons above, if it's a 1.5% tax this becomes a 3% tax bump for half of the country to pay for it. Then, of course, there is making tax brackets out of that as well.
So long story short, is it possible? Yes, yes it is.
Is it a good idea? I'll leave that up to you.
> Alaska's poverty rate is [...] 11.1%. In comparison, right before their oil UBI took place their poverty rate was 10%
That implies to me, at least, that their poverty level has gone _up_ not down.
Overall this is a cool idea, I'm glad that 125 people got the help they desperately (according to the article, anyway) needed, but I don't think this really indicates anything broader.
But long-term, surely the expected outcome would be for the change in wealth distribution to affect supply, such that our economy actually moves to produce fewer luxury goods and more basic goods and services.
https://www.vox.com/policy-and-politics/2017/9/20/16256240/m...
E.g. Say they sell rice at $3/lb, because of UBI they think they can sell it at $5/lb, gov't says 10% markup seems normal, but you've marked it up 200%, so you'll now pay 20% more taxes across the board --say the markup divided by 10.
Of course that takes a large amount effort behind the scenes...maybe an easier method would be say to Walmart: If you forbid sales of products where they raise prices in relation to GBI we'll give you a 10% discount in taxes.
Most small retailers and distributors do NOT want to lose good grace w/ walmart so they keep prices stable. Since walmart and other big retailers cover a lot of territory government only needs to make the deal with a few partners : Amazon, Walmart, Target, etc...
now a large part of why McDonald's can sell you a meal for $4 is that they can pay people through the whole supply chain very little money to do mostly undesirable work. if you start just giving these people money, they might be less willing to do these jobs for the same pay. so McDonald's would either have to pay them more or invest in more automation. either way, some of the cost increase gets passed on to the consumer. the works get paid more, which is cool, but they also probably see the cost of most goods and services rise as well, which is less cool.
to be clear, I'm not actually arguing this is what would happen. I'm just explaining the naive econ 101 perspective on why UBI would cause inflation. even if it did cause inflation, it would still probably decrease inequality more efficiently than the current byzantine web of welfare, as long as it was funded by some sort of progressive tax(es).
As a trivial example - imagine that the UBI is set at the McD's full time wage.
Some nonzero number of people will stop working there, forcing McD to increase wages to maintain staff levels.
For those that do continue to work there, even if the McD wage remains constant, more money will be sloshing about in the local economy because they're suddenly earning twice as much. Anything scarce will increase in price (e.g. rental housing), as a first order effect at least, because at the bottom end of the market pricing is basically about allocation of scarcity.
FWIW I think this is a _good thing_. A business that relies on forms of indirect indentured servitude (e.g. the entire class of jobs that people work in order to eat as opposed to actively choosing them in some form) should only exist for as long as we need it to. If we can make an economy work without it, let's do it.
Housing is another story.
With housing it's the opposite. Low teaser price to get you to sign a lease, and then you're guaranteed large rent increases until you move out because the landlord knows how much moving sucks.
We need to remember that we're talking about humans, and not some particle which can simply find a shorter path to wealth.
Edit: To be clear I'm not necessarily opposed to UBI, but I find this 'people are but cogs in the machine' view of economics especially appalling.
I resent your implication that I think people are just cogs in a economic machine.
People move location all the time for a variety of reasons. Sometimes economic, sometimes for lifestyle, sometimes for the weather.
I suggested UBI would give people more options, more choice, more power in their lives and you suggest I hold an appalling view and think people are nothing more than wealth seeking particles? Thanks very much.
Rice would also likely increase in price due to higher taxes needed to pay for the UBI.
Literally any policy that gives more money to the poor will increase demand for goods/services that low income people want (eg housing), and thus cause similar price pressure. Increasing purchasing demand from the poor is literally what redistribution is!
If you're opposed to UBI on this basis, you equally ought to give up on anything redistributive (or maybe you were just right wing all along).
The correct response to landlords sucking up money from the poor is to note:
- You can easily solve that via land taxes and wealth taxes more generally
- Even if the gains are swallowed up in aggregate, a UBI still has benefits in terms of equalizing demand (lowering housing inequality) and increasing income predictability.
I never said I was opposed to UBI.
I'm simply highlighting an aspect of the housing market that makes it behave less like the libertarian ideal of a perfectly efficient market with perfect mobility and perfect information flow. In my experience, the right wingers are the ones who want to continue pretending that an obviously tilted market is somehow still acceptably efficient when it clearly isn't.
Do you disagree with my assertion that moving is more difficult than buying rice from the next vendor over? That's really the only claim I made, and this is what leads me to believe that landlords are more powerful than rice vendors.
Lots of people proposing "if you're worried about landlords, then you can simply do X" in this thread... I don't think the fix for this problem is going to be simple.
> The difference would all go to landlords.
Trade is a thing, too. The local price of rice can't go up to $50/lb if you can import it for far less.
There's a lot of scary speculation going around about UBI right now. It does not seem likely that the sky will fall.
If they know they're being studied they're gonna tell the researchers they spend the money on "good" things. Wanting to please people who are helping you out is very much human nature.
I would go further to say that test subjects should report proof of all expenses for this experiment, because they could just offload the "good" stuff onto the debit card which leaves more room for "bad" stuff to be paid with your existing income, which isn't reported.
https://www.stocktondemonstration.org/wp-content/uploads/201...
One detail I found interesting:
> Participant recruitment began with a random sample of households within census tracts at or below Stockton’s household AMI of $46,033, providing a representative sample of Stockton residents within those census tracts.
It will cost us larger government apparatus, more tangled, deeper bureaucracy, black hole for taxes, and is definitely something I wouldn't wish upon us.
IMHO, UBI teaches dependency, and is extremely politicized. And very, very easy to sell by corrupt politicians for votes (power). Once they have that power, how certain are you they wont use your dependency and wield this power against you?
> your dependency and wield this power against you?
If there are conditions placed on the payment, it is not UBI.
It is also laughable to think that citizens of a large modern country are not already heavily dependent on the services supplied/organized by theri governments.
But almost every UBI/Negative income tax proposal that's serious wants to _replace_ existing disparate welfare programs with UBI.
The advantages of doing that replacement would be:
1. lower bureaucracy since we would just hand over checks to folks rather than doing all kinds of checks to see if they are eligible
2. every person would be treated the same way, we would get rid of welfare cliffs in benefits
The problem is that this version/proposition works only in "isolated system" (https://en.wikipedia.org/wiki/Isolated_system) i.e. "ideal theoretical environment", green field project, if you will.
Unfortunately, it can not happen in the real-world scenario. Existing welfare programs (80% of which, strictly in my personal opinion, is a politicized misgovernance), and dependency those have promoted are already deeply rooted in the brains of our population. 1000s of bureaucrats are employed with these programs that will not step down, people's minds and dynamics is a whole differen variable: In no way single Jessy with 5 children would agree to the same benefit as Susanne with only 2.
Also when Government was any good at anything? What we will end up with is a whole new governmental branch sucking on taxes with a set of newly emerged corrupted bureaucrats.
A similar critique of whether it's politically feasible could be made of any other proposal, including, say, a libertarian one where every existing welfare program is gutted.
> Also when Government was any good at anything?
Depends on who you ask, I guess.
Would this replace social security?
I'm not sure why you think there would be a deeper bureaucracy. UBI would be way easier to administer than the current mishmash of welfare programs since there's no need to determine who qualifies or to what extent - everyone gets the same thing.
The arguments I've heard against it always seem to suggest that the proponents don't actually want to give any of their income (only the "rich" should), or that it will only work if the government does it everywhere all-or-nothing style.
The government can easily print more money or have the FED do it for them. I'm sure there needs to be a balance in how much more vs taxes. Taxation is just a mechanism of control as is the current system. Wages in a lot of ways are slavery. You don't work you starve to death. You do work but don't work 2 jobs in some areas you starve to death.
You don't work on the plantation you starve to death or get beaten to death - it amounts to the same thing.
I for one would like to do away with taxes and the IRS as well. Instead we should have a VAT or sales tax system that would also ensure anyone visiting the country would pay. We could have an ID card so citizens get a lower tax -thus negating a lot of the anger/resentment about non-american's in the country.
Sales tax could adjust 1-2% each year based on balances and surpluses. Since all would pay the tax without deductions/etc more money would come back. The tax would ALSO apply to all spenditures i.e. hourly wages is taxed at the same 10% or whatever it is, investments taxed at 10% when placed, and the investee pays when paying back. If money exchanges hands there's a tax by the recipient of that money (not private exchange) but consumer-to-business, employer-to-employee, business-to-business. We also should up estate taxes, and land/property taxes in order to get the fair share from the wealthy.
With the sales tax though there's no filing except for businesses/employers for most things. People just don't think about it.
With UBI, sales tax, and universal healthcare combined we get rid of the following bloated bureactratic systems: IRS, Welfare facilities, Housing Assistance, VFA (give veterans a higher pay | universal healthcare), Medicare/Medicaid (Streamlined into one org at least), Insurance Companies Medical Billers Lawyers that deal with healthcare/insurance issues Local/State welfare and ancillary services Homeless Shelters (Make the only requirement for UBI be you have a place to live and are not homeless. Checks can be mailed to a physical address only).
I may be missing a few agencies...but I'm sure we could easily get rid of 5-10 million needless jobs. Lucky for them they all get basic income.
The biggest issue with UBI is mass unemployment. With ML threatening to take 40% of all jobs in the future it will be the perfect storm. It would create a massive, permanent, underclass. With no way to introduce capital into an economic system via labor, the only people able to make money will be landlords and business owners. It will be our current societal issues, only amplified to the next extreme. Landlords and business owners will see increasing UBI as dangerous, as buying land or creating a new company would be a threat. So they'll do their best to keep UBI at the level of being able to live, and not grow.
* The researchers call it "guaranteed income". That's somewhat accurate, because it's $500 extra payment, no questions asked. But it's not in any way "basic income", or "universal basic income" which is how it's being reported.
* It's paid for by an organization (SEED) which claims the thing it's seeking to prove. (That no-questions-asked welfare improves peoples moods.) The result is pre-determined.
* Just 120 low-income people are receiving an additional $500/month. This is far from Universal Basic Income: No income test, enough money to survive on, and no other gov support.
* SEED is making unsupported claims about how the money is getting spent (only on wholesome, necessary items). They can't assert that, however, because they're not tracking the _rest_ of the subjects' spending. They also did not track the subjects' spending before the intervention. Thus, they cannot rule out "lifestyle inflation".
* The study methods specifically allow for 25 subjects to be used for "political" purposes during the study, for interviews on TV, etc.
Sources:
1. seed | Stockton Economic Empowerment Demonstration https://www.stocktondemonstration.org/
2. SEED Pre-Analysis Plan https://www.stocktondemonstration.org/wp-content/uploads/201...
I suppose it’s a useful datapoint in itself that the recipients did choose to withdraw large portions as cash. They’re probably largely unbanked segments of the population.
UBI can be implemented in many different ways. In the end, people spend most of their income on rent, food and transportation. So it makes sense that UBI will be spent on that.
The main thing is that this experiment is not UBI.
UBI is for everyone. That avoids the poverty trap that exists in america right now: people getting government money due to poverty fearing doing things that might get them some temporary private money, but that would then make them ineligible to continue getting government support. Many poor families are very careful to stay within the income that allows them to keep getting assistance. And that's not bad of them. It's the logical conclusion if the potential to maybe continue to make better money means they are definitively going to stop getting that which allows them to survive.
I have $10s of thousands in the bank, and my wife and me have a combined > $200K income.
I feel so selfish cashing this check, seriously, there are so many services/things the state needs this money for to serve people that haven't been as fortunate as me. I've been so lucky to be born in this country to middle-class parents. I would carelessly spend $220 on silly things over a weekend I probably don't need
Just tax me more already!
I once made $25k and my boss made $50. I thought ve was rich and couldn’t even imagine what to do with all that money. I could have said “for him most likely the $220 is gone to sit in a bank or spent frivolously.” I would have been super wrong. Finances are private and unique. Talking out my ass about what other people should spend their money on is boring and useless.
If the default is not to help others, then most will not. That's the way the world works. That's why taxes work.
This is not an argument about morality or judging others.
That is not a correct statement. I think it’s much more likely to be spent on whatever that person deems valuable. Perhaps you think it’s frivolous, but that doesn’t make it frivolous. You don’t know the size of their family or the circumstances requiring expense.
That’s cool how you and your wife are so rich though and can afford more taxes and spend $220 on silly things.
There are way too many unintended consequences of starting at %500+ dollars.
It seems like you could deal with this via a Japanese-style de-zoning (which I like) or nationwide rent control (which I don't). But maybe I'm missing something—what do the UBI experts say?
[0] https://fredblog.stlouisfed.org/2019/04/the-climbing-cost-of...
UBI wouldn't be a problem in places where housing is not supply constrained, but everywhere else it would be. Until rent-seeking activity is addressed, I don't see how UBI is workable.
UBI might not even need to be discussed if we first addressed rent seeking activity that contributes to needing something like UBI in the first place. Politicians spend way too much effort on how much people earn and way too little time on how much people spend.
>But 40% of the money has been withdrawn as cash, making it harder for researchers to know how it was used. They fill in the gaps by asking people how they spent it.
I think that's fine, the money goes right back into the economy and creates jobs. Hopefully some percentage of people will forgo the lifestyle inflation and use their newfound freedom to start businesses. That's the really interesting untested hypothesis of UBI to me. It's what I would do with it personally.