Pandemic speeds largest test yet of universal basic income
nature.com
nature.com
Beyond that this is unprecedented times/circumstances so it's really difficult to make general conclusions about this "experiment."
[0] People love to dismiss economics as a field and disregard it's consensus, and that's their choice, but it's weird to then believe the few economists who promote UBI are right without any proof.
Yeah, I received "relief income" from the government, i.e. my own tax dollars, even though I'm not unemployed, and am actually saving money by not having to commute.
If this is "universal income", I fail to see how creating a massive government bureaucracy to take my money and then give it straight back to me is beneficial to anyone except bureaucrat middlemen performing glorified ditch-digging jobs.
Huh? This whole program was put together and executed in a matter of days, and mostly via the bureaucracy of the IRS as I understand it.
The point of a UBI is in part that it is explicitly not means tested to avoid "welfare trap" incentives, and it's tremendously cheap to implement relative to, say, food stamps or what's left of cash welfare in the US.
"Means-testing"—as in welfare programs—specifically refers to payouts that have cliffs, that create bad incentives like people choosing to not get jobs because they'd lose access to the welfare payment, and end up with less money than they get with no job.
Progressive taxation has no cliffs; there is never† a tax-related reason to refuse to take a higher-paying job. You'll always be able to keep some of the additional pay. Thus, it's not "means-tested."
† Unless there's a 100% tax bracket. But I don't think there's any country that bothers with these, because of the clearly-wonky disincentives.
means-testing doesn't imply cliffs, only checking (e.g., 'means' of otherwise survival) before providing.
progressive application is simply the continuous form of means-testing, rather than discontinuous cliffs (which are conceptually simpler, but create adverse incentives).
frankly, every fiscal program should phase in/out with income/wealth over the whole range (i.e., be universally progressive), rather than discontinously and/or regressively (e.g., payroll taxes).
in this regard, UBI simply says that instead of just being continuous, let's also make the payout function a constant.
This is usually true but not always.
Where I live, if you as a self-employed contractor make revenue over the VAT threshold you must start charging VAT.
If the clients are VAT registered business, they won't mind, they can reclaim it. But if they are not VAT registered, or if they are regular people not businesses, your price will effectively increase by 20% for them.
To avoid losing business with the people who cannot reclaim the VAT, you may decide to lower the prices you charge to compensate.
That's a cliff. You can be better off turning down a higher-paying job (such as a 3 month contract) that would put you over the VAT threshold, if you are close to it and would have to lower prices to everyone else to compensate, depending on your line of business.
In the US, sales tax is a bit like VAT in the EU.
As with VAT, there's a registration threshold, and if you reach it you may need to lower your prices to end customers.
The sales tax registration threshold rules are called "nexus", and are a lot more complicated than VAT!
It is for a definition of UBI that is broader than yours (whatever that may be). Welfare is a UBI for a segment of the population. If the solutions are always the same, with a varying bar of minimum means, the people of the US have already agreed to it. What's left is to argue about degree. The emergency stimulus checks are concrete proof of that.
By giving everyone enough to live and not starve, you can do that. Without needing bureaucracy. It goes together with other great ideas like a minimum livable wage[0], pensions, public education and public healthcare.
If we are the rich west, why can't we just take care of everyone? we'll still be plenty productive. And if you want more go work, go study, go for competitive jobs.
That points at an alternative way to conceptualize a basic income: at the end of the day, it's the net transfer that matters. Ie all the money and welfare services you get from the government minus all the taxes you pay.
On average over all of society that net transfer has to be zero. (Modulo complications to do with souvereign wealth funds and government debt.)
Now, most people around the world want rich people to pay and poorer people to receive on net.
The usual way to achieve that is via means testing in both the welfare and the tax system.
Basic income can be seen as a way to simplify government bureaucracies by shifting all the means testing out of the welfare system and into the tax system.
> By giving everyone enough to live and not starve, you can do that. Without needing bureaucracy. It goes together with other great ideas like a minimum livable wage[0], pensions, public education and public healthcare.
These other things don't sound like good ideas to me. Especially outlawing poor people's jobs seems cruel and a bad case of 'Copenhagen Interpretation of Ethics' to me. See https://blog.jaibot.com/the-copenhagen-interpretation-of-eth...
However, one thing that no one ever talks about or thinks through is that a lot of that "waste" is someone else's job and pension. If you cut 90% of the staff at all welfare and other programs offices, those people need other jobs or have to go on the same programs. Additionally, it is the universal part of UBI that people struggle with. If everyone gets it, do prices just rise to meet that reality and soak up the "free" money. We'll need regulations (and people to enforce them) to make sure housing prices stay reasonable for lower income people. This is why government housing exists today, the cost can be locked. All said, I think UBI doesn't work because it can't be universal, but we should be helping more people and the well off can afford to pay 1% more of their largess to do so.
Think about this another way: if it is true that the prices are going to rise because of UBI, i.e. because everyone can afford the "basics"(the B of UBI), then it means that the lower prices of today require that some people do without these basics.
Framed another way, we've freed up more people for more beneficial jobs. If those don't exist (and broad classes of jobs are eliminated all the time with practitioners finding alternative employment, so I'm skeptical they wouldn't) then your argument boils down to the ideal form of welfare for those people being make-work exactly matching their current situation. That may be the case, but it doesn't seem blindingly obviously true for any reason I can see.
> If everyone gets it, do prices just rise to meet that reality and soak up the "free" money.
Maybe, but you'd probably expect the opposite effect in most markets (and indeed, for similar policies like a higher minimum wage we typically observe small increases or small decreases in prices as a result). As a low-order approximation, the demand curve would have a (nonuniform) rightward shift where for any given item/price an equal or greater quantity are demanded because people are better able to afford things. Assuming a monotonically decreasing supply curve, that would move the equilibrium to more things being sold at a lower price.
That of course fails if any of the assumptions are violated (and ignores any other effects like increased taxation) -- e.g. at any price building new housing in the Bay is capped for all intents and purposes, so ignoring any other effects one might expect housing prices to continue to increase here. Housing in most places would probably eventually have a small dip/slowdown in price though, and commodities almost certainly would.
> We'll need regulations (and people to enforce them) to make sure housing prices stay reasonable for lower income people.
Arguably yes (though price fixing might not be the best solution to that problem), but that seems independent of the UBI question.
> but we should be helping more people and the well off can afford to pay 1% more of their largess to do so.
We should help more people, but I think it's more expensive than you're imagining. The top 1% of families make $400B (give or take $100B). 1% of that is an extra $500 per family below the poverty line, or $50 per bottom-99% family. It's not nothing, but $300/yr barely covers a single person's worth of beans and rice if they have the means to find a cheap bulk source, if power/water/time for cooking are free, if they're on the smaller side and not doing strenuous labor, and if they eat no vegetables or anything to offset that nutrient deficiency.
What does it mean to "take care of everyone"? That their "basic needs" are met? What do you define as basic needs? I will assume that this will include at least food, housing, and clothing. Is it acceptable to provide everyone with rice? Potatoes? Do we have to provide them meat? Is it acceptable to offer them housing somewhere in the country or does it have to be near where they currently are? If the latter then how do you determine who gets displaced further away?
Now the answer is likely going to be "we give them money, so they can decide". The problem with this answer is that life doesn't cost the same everywhere in the US. $1,000 a month is enough to live on in some areas, whereas others $1,000 will barely get you a living space and nothing else. Obviously you can't give people in more expensive areas more money, because then everyone would want to be in the expensive areas.
So, how much should we give people?
When answering that question keep in mind that there are 330 million people living in the US. If you give everyone $1,000 a month it will cost you $4 trillion. US tax revenues in 2019 amounted to $3.5 trillion.[0]
To put this into perspective: US mandatory spending in 2019 was $2.7 trillion.[1] This is stuff like Social Security, Medicare, Medicaid, veterans programs etc. You can't just renege on all of these obligations, because the government gave people guarantees on them - that's what they paid taxes for. It's unlikely people would accept less money than what they were promised. Not to mention that you probably couldn't cut Medicare and Medicaid anyway. That's already a trillion gone from the budget.
You probably also can't cut much from discretionary spending. You'd be cutting the military and basically every other non-social service the government does. Stuff like NASA and environmental research etc.
Ultimately, just $1,000 a month per person would require an enormous budget increase to the tune of >$2 trillion a year. Keep in mind that the US budget deficit is already at $1 trillion a year. You'd have a deficit of $3 trillion or require an enormous tax increase (almost doubling tax revenue). And it still hinges on there being no reduction in productivity.
If you then want public healthcare too, then it gets even more expensive. Medicaid covers 64.1 million people[2] at the cost of $409 billion.[1] Getting rid of Medicare and Medicaid and replacing it with healthcare for everyone would add up to an extra cost of ~$1.3 trillion, assuming that the healthcare costs for everyone else is about the same per person as it is for people on Medicaid.
"A trillion here, a trillion there, pretty soon you're talking real money."
[0] https://www.cbo.gov/publication/56324
[1] https://www.cbo.gov/publication/56325
[2] https://www.medicaid.gov/medicaid/program-information/medica...
I don’t see how the cost of furlough is an argument against higher spending. No one thought it would be anything other than mad spending with little immediate gratification. The payoff comes from, well, not plunging masses into poverty for not foreseeing the greatest economic disruption since 1939.
In terms of how much to give, the idea is to eliminate poverty. Children should not grow up hungry and fearful nor in shame of their parents. That is the fundamental goal. Our current welfare programs do not address this (see Tyranny of Kindness from 1993 for an in-depth personal account of the system then -- it has not improved though it has changed).
So go with the poverty threshhold numbers and see how it goes. I think $1000 a month sounds perfectly reasonable.
Also, various programs are income related and so without changing them at all, they can become less needed.
As for healthcare, while I am dubious about government run healthcare, from what I've read, the government pays for over half of the healthcare costs in this country already. The US also spends twice as much in terms of GDP on healthcare as most other countries. So if we were to reduce the healthcare costs to the level of other countries, then our government could cover universal healthcare without paying more for that. And since premiums would disappear, it could even tax a lot more without changing the ultimate take home pay after taxes + premiums.
In theory, that is how it could go. I don't believe it would turn out well, but that's because I don't believe the government would handle healthcare well. It is not because of the cost of it. And given our current system, I could probably be persuaded to try it.
Isn't that redundant with UBI? If UBI is already providing a minimum standard of living, then it's mathematically impossible for any wage combined with UBI to be below that standard.
Also, UBI provides a minimum standard of living, but I believe the idea there is that you'd have to make several potentially-drastic changes in your life to truly be living the sort of "minimum" life that it pays for. For example, I believe that UBI isn't supposed to pay out more for people who live in areas of a country with higher costs of living; so part of "living minimally" would be moving to the lowest cost-of-living part of the country.
Remember, UBI is usually spoken of as a federal program; whereas "minimum livable wage" is usually modelled by state or even by city. So it'd make sense to talk about needing a certain level of wages, above-and-beyond your UBI, to survive in a high cost-of-living area.
(What would happen if UBI was based on regional cost-of-living? Well, for one thing, we'd see a lot of people who either don't "live where they live", but instead consistently renew their IDs within the highest cost-of-living areas; or, if the controls are tighter, we'd see people migrating to high cost-of-living areas to live out of their cars in the middle of them, to save up the most money.)
IMO those would be exploited infrequently enough that it would be worth it to base it on regional cost-of-living and tighten the controls until exploitation falls below an acceptable level.
You'd also get the same sort of wealth-transfer effect that you get when people move from poor countries to rich countries to gain access to rich clients who pay more for the same service; or, for that matter, when people move from the rest of the US to SV (but with the government, in this case, taking the place of FAANG.) Namely, that most of the goods that people want aren't inelastic-demand goods priced in "percentage of income relative to the norm for this market" terms; but rather are priced in absolute, static dollars.
This means that in a low cost-of-living area, saving 10% of your UBI could buy you crappy clothes and a crappy car. While, in a high cost-of-living area, saving 10% of your UBI could buy you nice clothes and a nice car, and maybe a boat and a new phone every year, too. Who, then, wouldn't want to live in a high cost-of-living area? You don't have to do any more work, or have any more skills; you just have to choose to live in a "basic" big-city apartment instead of a "basic" small-town detached house.
Which, of course, means that everybody would move to these places, and their housing markets would halt and catch fire from the overburden of all these people trying to cram into them. It'd change an equilibrium of regional housing prices into a rich-get-richer one-directional reaction. And probably cause hyperinflation besides, as the government would have to print money to pay everyone's rent, as the rents in high-cost-of-living cities would rise exponentially as infinite demand meets finite capacity.
Basic income can be distilled to notion that, if student loans are bad for humanity, then it is reasonable to suggest that this intrinsic debt might also be bad.
Unless UBI comes with a massive overhaul of zoning restrictions and a shift of the housing supply, I don't see how this doesn't end up as an indirect way of increasing income inequality by routing the UBI from poorer tenants to wealthier landlords.
There's a reason why it costs a king's ransom to rent a hovel in a city: finite space. Nothing you do -- not density, not UBI, not anything -- can create unlimited space out of thin air. Fortunately, we've got plenty of space, just not in urban centers.
We need to learn how to use space rather than let it use us.
City space is finite. We ration it for a reason. We could ration it differently, but we'd still have to ration it. Increasing density doesn't make it affordable to pack everyone in a single place (see: NY). Pretending the problem doesn't exist and throwing money at housing projects doesn't make it affordable to pack everyone in a single place (see: SF). The only way to make progress on the actual problem is to figure out how to deal better with being spread out.
Look at Asia to see how to tackle these problems better. Eg Singapore.
It would probably have been better to use Land Value Taxes instead of relying on limited leases.
I'd support efforts to build vertically in a heartbeat, I just don't have high hopes for them.
My expectation is that if I receive $12k / year in UBI, my tax burden will likely also increase by about $12k / year - maybe less, probably more. I don't think UBI would have any significant effect on me unless I lose by job (or decide to quit, which is an advantage of UBI).
I think the scenario you describe might affect poorer people, though. It really depends on how much the other social programs are walked back under UBI. If a poor family gains $1k in UBI but also loses $1k in other welfare programs, then landlords will likely not be able to raise rent without also losing tenants.
UBI is generally trickle-up economics, and I think that's a good thing. That extra money is most important to the least wealthy people, and they will naturally spend it in their communities.
For instance: affordable housing. If there were fewer zoning restrictions on micro-studios, housing developers might be able to pack more units in to get the same amount of profit per sq-ft. Instead zoning means that you get the most $ per sq-ft building luxury apartments.
One thing UBI has over housing vouchers is if it's not tied to location people can live where it's cheaper.
An optimist would predict that some people will spend the extra $$$ on a car and a move to the suburbs; others will choose not to work at all, moving to cheap areas to live frugally; and others will find house building much more profitable as rents rise, motivating them to build more.
A pragmatist would say you're completely right, based on my country's many failed attempts to lower house prices by handing out money to house buyers.
Collectively? Anti-trust law. Individually? Competition among landlords. Also, for some tenants in many places, rent control.
> If everyone suddenly has an extra $1000/month,
Everyone doesn’t, unless the government is just printing money for UBI and also not replacing other programs. If it's borrowing, that money came form somewhere. If it's taxing, it came from somewhere, too. And UBI proposals tend to involve replacing, either in part (for some transitional models) or entirely means-tested welfare, which also means a bunch of money came from somewhere (from recipients and, and this is a major motivation for UBI, from the administrative infrastructure that means-tested programs have.) Compared to before the policy, the result is nothing like “everyone has +$UBI/month”.
The only way to implement it is by stopping the runaway rent inflation by implementing a counter-force to rent price increases. One such technique is battle tested Land Value Tax which was responsible for massive successes of Asian Tiger economies such as Singapore.
This problem has been understood more than 100 years ago by then popular economics movement following economist Henry George who almost made it to mayor of New York and whose book (Progress and Poverty) coined the term Progressives (in the original anti-trust meaning).
They realized that after you curb the ever inflating rent prices, people can finally be freed up of all excess income being eaten away by land monopoly (city landlords) and other monopoly businesses of that era.
Once you have the money necessary to fund UBI through Land Value Tax for example (which is able to raise more than current tax system with ZERO negative impact to the economy), you then realize that the main problem you were designing UBI for (massive rents eating away your paycheck) went away. So as a government you then reinvest the so to be UBI money into eg. infrastructure, such as city development, roads and networks so that private business can thrive on top of that. Congrats you've now become the economy #1 in the world (this is how asian tigers got so successful).
The only country successfully implementing this at scale today seems to be China, although more so for their expansion in Africa than domestically (eg. acquiring prime city land by helping constructing subway systems in key metro areas).
A large part of it is the lack of financial resources that the residents have. The lack of financial resources is directly related to redlining and the fact that Baltimore is a majority black city. But whatever the reason, money is what is required.
At $1000 a month, someone could take that UBI and spend half of it on a loan of $100k (30 years). That's a lot of capital and it could provide an individual with a home in Baltimore. A family would have even more capital to work with. This gives a great deal of flexibility and a lot of resources in neighborhoods without any. Further development would take place, giving these neighborhoods the kinds of businesses that wealthy white neighborhoods take for granted (such as grocery stores and banks).
What the UBI does is not just provide some financial amount right now, but a guarantee of future payments regardless. The risk of default would be far, far less and the promise of sustained financial reward for investment in these areas, without booting out the current residents, would be far greater.
If one also couples the UBI payments with a more aggressive tax on the wealthy, particularly on the ownership of multiple residential properties, then one could really damp down prices. From what I have read, several cities with massive housing price increases such as Vancouver and NYC have vast amounts of essentially vacant places because wealth has flowed into these places as wealth investment instead of living investment. But that policy is a separate one to consider, to be sure.
This country has plenty of resources. If we give people a minimum amount of money, those resources can start to be divided up much more equitably (peacefully, profitably) without the overt (and corrupting) hand of government deciding who gets exactly what.
1) Realistically, you're going to have to raise taxes to fund it, not just deepen deficits
2) You're going to have to cut many social programs as well that overlap with basic income. For some people this isn't really a good trade-off. I saw one blog-post proposing a long list of social programs such as disability support and wheelchair funds, and a local activist parent of a severely disabled child pointed out that this would devastate his family financially.
I get the appeal of an anti-bureaucratic one-size fits all solution to the social safety net, but I'm skeptical.
I mean, the core idea of the article is that direct cash benefits reduces poverty directly, in a quantifiable way (there are some numbers already!). That takes a sword directly to the Gordian knot of the policymaking kerfufflery, and that evidence and its attendent simplicity is far more (FAR more) important to achieving a solution than "getting the right solution".
Better vs. Perfect, basically.
So lets see what bigger & better gets us.
1)stock market back to precovid levels... even though job and economic losses are widespread. That is not normal, but it is logical given the cash flooding all assets now.
2) sticky unemployment largely affecting minorities and the youngest.
3) the conversation has shifted from... where can we reduce the govt footprint?. To, should this new thing be done?
In effect - Leaders today are leaving a legacy of destruction and misery that will be reaped by our grandchildren.
Our leaders are perpetrating the largest ever robbery of future generations. Its inmoral and it is not "better"
Fair, but UBI advocates very often do things like bundle up all existing social payments, divide the total dollar value by the population size, and say "look how efficient it would be if we just gave this money away rather than having a complicated set of bureaucracies charged with disbursing it fairly!"
If the argument for how affordable UBI is hangs on this kind of logic, then yeah, it is pretty relevant to take an upfront look at what proportion of existing program funding (and associated bureaucracy) are actually candidates for being replaced like this. Some are obvious exclusions, like anything to do with mental or physical disabilities, and some are fairly clearly covered under UBI, like unemployment insurance. But a huge pool of them are pretty murky— think especially of things like child/family benefits, or anything to do with education or job retraining.
Which is EXACTLY why the kind of data we're deriving now, based on real world policymaking, and as described in the linked article, is so important. It's impossible to refute with more funny numbers.
> If the argument for how affordable UBI is hangs on this kind of logic
It doesn't! That's the amazing thing. You guys need an entirely new kind of spin, now.
What I don't want, is to see a bunch of half-baked policies rushed out the door, only to be shuttered a few years later and tossed onto the pile of "lol communism always fails" just-so stories, with the door to change closed for another generation.
Going into these kinds of major efforts with a "better vs perfect" attitude has a high risk of alienating those for whom it may well not be "better", especially if they are members of a vulnerable group that has a high reliance on the present system.
No, you don't need to worry about hyperinflation, the big bugaboo of Chicago/Austrian economists. Hyperinflation is associated with economic collapses like wars or industry failures, where suddenly goods are in short supply. What you get out of this is ordinary inflation, not hyperinflation. If you print 1% of your economy in new money, then you get 1% inflation. Hyperinflation is a different problem.
Ordinary inflation can be dealt with in a number of ways. Taxes are one of them: you don't pay down the debt but just burn the money. You don't need a separate account book for government debt: outstanding currency is government debt.
Not all economists buy this theory. It's not mainstream, but neither is it exactly fringe. I bring it up only because the notion of a separate government account book that has to be balanced is worth reconsidering. Ditch it, and there are tradeoffs that might be worth it -- including simplifying how you handle basic income.
Btw inflation is intentionally underreported because the only way to repay government debts (under democracy) is by debasing currency and thus value od debts through inflation. It's just a hidden tax.
Asset bubbles, misallocation of capital, and mortgaging the future to support the present are the pressing concerns with easy money that should be addressed.
Also, this works both ways — if we can MMT unlimited money to fund spending, why pay taxes at all? We should, in theory, be able to cut taxes to 0 (or as close to 0 limited by real scarcity) and MMT the entire budget.
[1] http://www.igmchicago.org/surveys/modern-monetary-theory/
Now skip the extra step, and have bondholders just get paid back directly by the money printer.
Forget about actually cutting taxes directly, MMT holds that we can in theory institute a regressive UBI program that gives cash to people == to their effective income tax (thereby zeroing it out). The only limit, per MMT, is real resource scarcity.
In this implementation, the bonds are still being paid back via taxes, but those taxes are coming from the Fed's printing of money.
Would be interested to hear if anyone has a ideas or a framework to think about this.
It maybe doesn't always work out great in practice, but at least in theory, municipal governments do have tools for addressing these problems in a deeper, longer-view way than the market and private developers can. Left to its own devices, "the market" will just abandon those food desserts and bad school districts and you end up with the same hollowed-out inner city that was such an issue in the late 20th century.
Anyway, whether you bring poor people to a rich neighbourhood (with subsidies, density bonusing), or you bring rich people to a poor neighbourhood (revitalization, gentrification), there are going to be issues, but housing policy is something that requires long term, active stewardship, I think.
And then rents will augment by that exact amount, screwing up those who don’t get the check and nullifying its benefit for those who do. I know from experience as this is implemented in France (it’s called the APL). Lot of rents are higher than they should for students under the pretext this social aid exists.
Trains - Worse, terrible in fact
Housing - Went from 300k houses p/y being built by councils, to 30k by their privatized replacement. Now severe housing shortage 30 years later
Medicine - Terrible, caused deaths in covid crisis, privately managed PPE stocks were a disaster
Water - Terrible, all profits have been used to pay shareholders, taken on huge debt. little investment in infrastructure, ticking time bomb before bailout needed
Energy - Crazy price increases
Prices go up, services worsen, and debts pile up. Tell me again why you think they should be privatized?
All that happens is a bunch of privileged shareholders get to mooch off the public purse.
I certainly agree that a lot of privatisations were messed up, but but in the late 1970s the UK's nationalised industry literally only managed to produce enough electricity to keep the lights on three days a week.
It was pretty easy for Thatcher and Blair to sell the concept of privatisation when that was in widespread living memory.
Does that look like a failing of the public sector or a oil crisis that targeted the UK specifically?
Singapore has a pretty good quasi-public-but-transparent-and-subsidized healthcare system: https://www.vox.com/policy-and-politics/2017/4/25/15356118/s...
I think the jury's still out on if privatization is the primary factor for success or failure or if other complex factors determine the success/failure of these programs (I would guess the later).
1. infrastructure and platforms (justice, roads, utilites, networks) - where privatisation results in disaster 99% of times
2. "typical businesses" - privatisation generally good idea
3. things inbetween (schools, healthcare) - neither fully privatized or centralized system works well. Usually a combination of both performs much better.
Eg. hybrid healthcare system deals with runaway costs by having a baseline health service provided by government and prevents soviet-style wasting, theft of material by employees, black markets and long lines forming by having a parallel market health system alongside.
Both can keep each other in check. One has to wonder why countries always deploy it in one of the pure forms.
Real estate is just a hidden land value price. Look at Japan where the price od buildings are close to zero or even below zero (cost od destruction for new project) after about 30 years even when the total price (building+land) is astronomical.
The way to curb it is through Land Value Covenants or Land Value Tax or Hong-Kong style 99year leases or something to that effect.
Then the people receieving this loan have to pay back this new money. In this way governments do basic income for all 5k corporate banks in the USA and it's likely very similar in other nations with fractional reserve banking.
It would not be very hard at all to simply remove this functionality from banks and evenly distribute the creation of new money supply.
Do we? Some people might believe it but there doesn't seem to a lot of evidence for it yet. If anything it seems that it might behave like other seasonal viruses such as the flu and especially like other coronaviruses such as the common cold. That is it might mutate so rapidly that immunity will not last.
So we might have to live with it or something like it for ever.
Personally I favor a UBI but I think it needs an intellectual basis, i.e. I am not for "stealing from the rich". Perhaps part of this intellectual basis could consist of an appreciation that natural resources are not distributed equally.
If you just took all the existing taxes and welfare programmes, carefully noted what net payment people are getting at various income levels, and then replaced it with a simpler system of a fixed UBI payment and a tax system to roughly replicated the same net payments; I don't see how that would be any less sustainable than what we currently have?
And current systems have been muddling through in most countries for quite a while so far.
However, if by UBI you mean that everyone is supposed to get some extra magic money out of nowhere, yes, that wouldn't really work.
The thing about UBI is that it in no way, shape or form, prevents people from doing whatever is needed or profitable.
There are a number of people which have sufficient funds to live off $1000 a month and they continue to work. Heck, even the bloggers who talk up such schemes are still producing something of value to the society.
Humans like to work, just not necessarily for a boss. A UBI removes any disincentive from working and allows you to keep what you make except for the tax rate unlike welfare which taxes income at 100% . It allows you to be creative. Right now, we are ignoring the contributions of millions, if not billions of people because they are kept at the edge of survival. Imagine if we created a world that allowed all the billions of the world to contribute imaginatively, cooperatively, and productively. That is what UBI promises, but it does require faith and trust in humanity (read Rutger Bregman's Humankind book for a primer as to how to shed the lies we've been told about human nature).
As for hard maintenance of systems, that will probably cost more to pay people to do it, but it seems very reasonable to reward essential hard work more than we do now.
One final thought. What do you expect you or others you know would do if you had $1000 a month per person in your family given? Maybe some would want to sit around for decades doing nothing, but that personally sounds like an awful life to me and I suspect most would agree.
[1] https://fr.wikipedia.org/wiki/Revenu_de_solidarité_activ
Consider CDI contracts at universities. It has become a sort of UBI. People show up once every few weeks. Never publish papers; never teach properly; never go to any conference; etc. Totally detached from academic life. And they can't be fired. You know what they do with the UBI?
-- Become members of unions. Unions were supposed to protect workers in 80s. Now the least productive members of the institutions join unions to protect themselves. They kill reform policies and maintain status quo.
-- Work is associated dignity. You can't have two classes: workers and suckers. So UBI recipients, holding into administrative roles and unable to do meaningful work, try to fail non-UBI takers.
-- Fail those who actually do their jobs. Otherwise, the gap is going to be problematic.
At the end of the day, UBI would only shift the baseline. The same problems it tries to address exist after the administration of UBI.
You would be surprised if I go over details. America's left does not understand what it's getting into. France's system has really been an eye opening experience for me. I highly recommend people spending time in Europe.
UBI is untethered to any conditions on people. So there are no bad incentives created by the system (no good ones created either, of course) nor is anyone part of some group that they try to homogenize into something unproductive.
One of the big advantages for UBI over all the needs-based systems is that it's flat and for everyone, so you aren't punished for working harder.
Think more like Alaska's APF than welfare.
Negative income tax has a couple advantages, namely:
* It benefits those who actually need the help the most * Shortfall checks will come from tax agencies. People who need real help can save their dignity, they're just getting a tax refund.
The whole point of UBI is that it's universal. What Friedman is describing is essentially a social safety net, i.e., one that only those below a certain level of income receive.
"'If you can only qualify if your income is below this threshold, it creates a very strong disincentive for anybody to earn above that threshold because they would be losing their benefits,” she says. 'We call it a poverty trap.'"
Yes, and that's a major reason why poor Americans, perhaps especially the black community, is stuck in the poverty trap. Marriage rates among blacks were higher than rates among whites in the 1940s and we know that children with a father in the home tend to grow up to be better adjusted and less likely to engage in crime or remain/land in poverty. Twenty years later, government programs coupled with the social upheaval of the sexual revolution destroyed the black family. Now three quarters of black children are born out of wedlock (we see something similar among poor whites, but poverty afflicts blacks more than whites). Poor black women are discouraged from marrying because doing so could or would cause them to lose whatever benefits they receive.
Negative income tax is exactly equivalent to a UBI plus regular income tax.
See eg https://en.wikipedia.org/wiki/Negative_income_tax for an explanation.
UBI seems more simple to administer and being universal would likely make it more resilient to cuts (as we know from other universal services).
You are probably familiar with income tax brackets. So for example in the US, your first $0 – $9,525 of income per year are taxed at 10%, the next $9,526 – $38,700 are taxed at 12%. And so on.
That applies to billionaires just as much as it applies to dishwashers. The low brackets never get phased out. The billionaire just has most of her income fall into the higher taxed brackets. So her average tax rate is higher than the dishwasher's tax rate, but their first dollars are taxed exactly the same.
A (refundable) negative income tax is just another somewhat special tax bracket placed in front of the normal progression. It never gets phased out. It just nets out at higher incomes.
And because nothing is ever simple in taxes, here's a weird real life example to the contrary:
The British have a weird system where they DO phase out their lowest tax bracket, called the 'Personal Allowance' at higher income. I don't know why they do that, instead of just raising the marginal rates.
> On 22 April 2009, the then Chancellor Alistair Darling announced in the 2009 Budget statement that starting in April 2010, those with annual incomes over £100,000 would see their Personal allowance reduced by £1 for every £2 earned over £100,000, until the Personal allowance was reduced to zero, which (in 2010-11) would occur at an income of £112,950. This had the effect of creating an anomalous effective 60% marginal tax rate in the income band between £100,000 and £112,950, with the marginal tax rate returning to 40% above £112,950. As the Personal allowance has grown over the years, this has resulted in a corresponding increase in the size of the effective marginal 60% tax band. As of 2019-20, the effective 60% marginal tax rate now arises for incomes between £100,000 and £125,000.
https://en.wikipedia.org/wiki/Personal_allowance#Personal_al...
http://gregmankiw.blogspot.com/2016/07/a-quick-note-on-unive...
For something like an income tax, you can basically always describe any phase-ins and phase-outs equivalently in terms of marginal rates on different brackets without any phase-ins or outs. No matter whether you talk about EITC or negative income taxes.
Even the British example I cited can be re-contextualised as just a 60% marginal rate for people with around 120k GBP of income, that then slides down again to a 45% marginal rate at a higher income. (Or something like that. You do the arithmetic.) Even though the law as written is formulated in terms of a phase-out.
The blog post you linked talks about exactly that reframing.
Many economists find it useful to talk in terms of the marginal rates instead of phase-in and phase-out. Mostly because the former lends itself more to a net perspective over all taxes and welfare programs.
When those net marginal rates approach 100% or even go over for some people, you can immediately see that earning an extra dollar from work would make people worse off after taxes.
That's less obvious in the other formulation.
Both mentioned in this short clip [3:33 mins] "Milton Friedman talks about property taxes".
You keep using that word, I do not think it means what you think it means.
It's just a test.
Everyone doesn't have more money with UBI unless it is funded by printing money. If it's funded by taxes, or borrowing, or a combination, there is equal money being extracted as being injected.
Plenty of consumer crap would be consumed too. Magic cards, Funko Pop figurines, Alco-pops and Big Macs.
What I don't see happening is the cost of housing skyrocketing. That assumes we have a limited supply, we do not we have a excess. We could house every person in the US today... well tomorrow with realistic travel times.
Sure, any redistribution of income increases prices of things demanded more by the recipients than the sources of the redistribution. This doesn't, ever, fully offset the effects of redistribution, it just means the effects of any redistribution will be somewhat smaller (both on the recipients and the sources) than they would be expected to be based on a naive projection from pre-redistribution prices.
Yup, guess which demographics are most likely to own a luxury vehicle in America...
Unless you get foreigners to pay for your UBI programme, it's always going to be funded by raising taxes, shifting existence welfare around, or something equivalent.
But a big part of some people's understanding of UBI is that you want to move all means testing into the tax system, and out of the welfare system.
The tax people already keep track of how much money everyone makes. So we don't need to duplicate that bureaucracy.
i.e. I have a well-paid job but stop working halfway through the year. On a full-year tax basis, I'm not in the bottom X% of tax payers based on my earnings to date.
Do I get a UBI check or not for the rest of the year?
Since virtually all tax matters are based on averaging income over some long time period (usually a year), it's not a good mechanism to deal with changes in income, and those changes in income (planned or not) are precisely the things which UBI is supposed to help with.
It seems to me that given UBI people will spend their time championing their causes at the expense of those who are working (blocking areas with protests is just that). Seems a very unstable dynamic as I'd imagine both conservatives and liberals would escalate until mass violence breaks out.
None of these places are doing that.
The entire argument is that you can get rid of administration and people can spend money on what they need.
That said, after seeing how many people listen to Dave Ramsey's Snowball method + anti vaxxers, I'm personally convinced UBI will not work. The people that need it the most cannot make rational decisions.
With UBI, everybody's using cash.
Rare, but it happens. The people who think this is more than a rare occurrence are not well educated on the needs of the poor.
Which countries use those, apart from the US obviously?
I think it's pretty hard to argue against cash... if anything you do have to be a bit more economically knowledgable to disagree with the idea. But then at the extreme end you have economists at the top of their fields in favor with the approach.
Edit: He repeated this line in a documentary about him: https://www.youtube.com/watch?v=YZGvQcxoAPg
Let's go crazy though, and say price controls will work. How universal is universal? Is it $600 for every person alive, including children? How is that going to incentivize people's behavior? If it's not for children, how is that going to incentivize people's behavior?
Are you expected to pay housing costs out of this amount, or is that granted separately? Would a family of 5 splitting a single family residence be building wealth faster than a someone living in an apartment?
If you want to wreck the economy, UBI is the best way to do it.