No, it wouldn't. Because if you give an upper middle-class American $10000 and you raise their tax bill by $12000, you neither actually spent $10k on them, nor did you actually increase his effective tax rate by that much.
The idea that an UBI would literally cost the $10k for each person is to not understand basic accounting. Or to be dishonest, I guess.
That said there are much stronger arguments against UBI. There's a strong argument that UBI combined with current housing and spending policies... would simply end up in the hands of landlords. The article doesn't even mention "rent" but have no doubt landlords and banks are always waiting in the wings to capture virtually any surplus income. In practice UBI would have to be accompanied by government housing... and down that path lies ruin.
(Note the price of food and other necessities would likely not be inflated under UBI. Suppliers in these markets would -- unless they illegally collude -- end up trying to undercut one another to gain market share. In fact there's reason to believe UBI done right would drive down prices as the market as a whole becomes more dynamic. More money, more consumers, more competition, etc. But housing suppliers know that the banks are always ready to provide mortgages no matter how much they raise prices.)
A Job Guarantee [1] would be much more effective than UBI in virtually every way. Most importantly landlords couldn't consistently capture the additional income. There's, really, no reason to simply give the money away when there's plenty of work to be done.
[1] https://www.vox.com/policy-and-politics/2017/9/6/16036942/jo...
Edit for the down voters: See velocity of money and savings rates of the poor.
It's not trivial, but I'd agree that the line was at best sloppy accounting, and at worst a dishonest criticism.
For "doubling the personal income tax", I originally interpreted that to mean that, to raise the $3T, we would need to double the personal income tax revenues. The federal government appears to pull in ~3$T/year in revenue, from various sources. If we presume the burden of paying for UBI to be spread proportionally among the current sources of revenue, this would indeed imply doubling the personal income tax. (That $3T would need to become $6T; if we proportionally increase each revenue source, the amount of revenue collected in the form of personal taxes must thus double. This is honestly quite an assumption; if anything, I would worry that personal income taxes would need to pull in more than its proportion, as I presume some revenue sources will be fixed, or undesirable to increase, such as borrowing.)
Your example can literally hold true, even with all of the above, AFAICT. Yes, we may charge a hypothetical person $12k, and give him back $10k, for a net of $2k. But there will also be others, presumably poorer, that are paying much less in taxes than they're getting in UBI, and that must come from somewhere…
[1]: https://www.census.gov/quickfacts/fact/table/US/PST045216
The issue is the premise.
In theory you can have a basic income with a phase out, which pursuant to this dubious accounting would be much less expensive. But in practice it's exactly the same thing.
The reason phase outs are a bad idea -- and this is an issue with a great deal of the existing assistance programs -- is that benefits phase outs and taxes are equivalent, so they should be evaluated together to avoid silly results.
Suppose you have a system for housing vouchers (or any other assistance program) where you get $5000/year at $0 in income with a 20% phase out rate as income increases. Meanwhile there is an income tax with a 15% rate from $0-$50000 and 25% thereafter. Then what you really have is a 35% rate from $0-$25000, followed by a 15% rate from $25000-$50000, followed by a 25% rate above $50000. Which makes no sense, isn't what was intended, and shouldn't have happened. And it only gets worse and harder to reason about as you add multiple programs which each have their own phase out conditions.
The way to resolve this is to eliminate the phase outs entirely and have the government recover the money through normal taxes, e.g. by setting a single uniform rate. That nominally makes the tax rate higher for some people, but in practice it's the same thing and makes it a lot easier to avoid accidentally creating a ridiculous tax rate schedule.
> Your example can literally hold true, even with all of the above, AFAICT. Yes, we may charge a hypothetical person $12k, and give him back $10k, for a net of $2k. But there will also be others, presumably poorer, that are paying much less in taxes than they're getting in UBI, and that must come from somewhere...
Of course, and it would come from taxpayers with above average incomes. That's the entire point of the system.
But even someone who comes out ahead, because they e.g. receive $10,000 and only pay $6000 in taxes, is still giving back $6000. Only the remaining $4000 has to be covered by someone else, not the entire amount. Accounting for this drastically reduces the net amount other taxpayers actually have to cover -- half the recipients would be covering their own UBI entirely and even the other half will on average cover 50% of it, making the actual cost only a quarter of the amount quoted. Which is in line with the cost of the existing assistance programs it would be replacing.
This article says higher income would be better off. But no, they would be worse off as over some magical amount you'd be paying out more than you'd get via the UBI.
However paying for UBI can also be done via a wealth tax. This would be ( theoretically ) the nicest way to evenly tax the wealth distribution of a nation then smooth it over the the entire population until you pull everyone up over a certain poverty line.
But a wealth tax would not be popular, and could be hard to implement effectively.
I am much more interested in UBI as a substitute for both welfare and monetary policy, than for welfare alone. The gross anatomy of most western economies would be radically changed though, rendering most scale comparisons moot and also making it difficult to imagine how to get there from here - incumbent beneficiaries would fight it tooth and nail.
Can you show your math? Curious what tax rates are assumed.
UBI is not a long term solution, but I appreciate it being innovative and trying at least. One of the reasons we didn’t get any financial reform in 2008 was that their simply was no other economic system/theory to turn too. Right now, before the next recession, we are developing the theories that will be chosen from once neo-Kynesian economics is shown the door in the years to come.
Perhaps UBI on its own is not sufficient to give hope for a better future, but combined with affordable education maybe it would be?
I imagine if one could take some time off without fear of starvation (or going massively into debt) to raise one's skills, then upward mobility would be much more accessible. I don't know if UBI is the only solution but I can see how it would at least solve part of the problem.
I'm too young to have experienced it myself but my understanding is that there was a time when people could actually survive off jobs which didn't require a college degree. I don't think this is possible in most places anymore and given that college tuition has only increased, it seems like upward mobility has decreased.
I realize that college isn't necessarily the right path to upward mobility but I think you can generalize the argument to most forms of education and it would still apply.
The arts are valuable and I'd love to have a country which could patronize the arts and artists. But we don't have that kind of money. Even if we did, there are other priorities for things we should be paying people to do.
In any case, the one argument for UBI I found somewhat convincing was that it could be cheaper than social security, unemployment, etc all combined, because there'd be less administrative cost.
I appreciate that some governments were willing to experiment.
Change can be good, but tests ought to be tried before large , even well-intentioned changes to massive systems.
Improving upward mobility out of poverty is a big part of the motivation for replacing means-tested aid with UBI, so while that's probably true, using it as an argument against UBI ignores what it is replacing; it's not money replacing not-money, it's money with conditions that actively fight moving up with money with terms which complement moving up.
> UBI is not a long term solution
Yes, it is. It's not a complete solution, but it is a long-term one.
Other? I would have thought (I am no economist so I apologize if this is daft) that the sensible response would be to permit all of the banks who engaged in gambling to actually lose their bets and suffer the consequences of their own actions. Those which extended loans which could not be repaid should have entered insolvency, with the debts owed to them eliminated. Likewise, the fraudulent practices conducted should have resulted in hundreds or more of banking executives and other employees sent to prison.
It would seem to me that the solution we settled upon - giving them titanic amounts of money, assisting their consolidation, and playing pretend as if the fraudulent loans issued were still owed by those who they were foisted upon, foreclosing on homes, and significantly derailing, if not destroying, the lives of hundreds of thousands of families - was the 'other economic system' here. It certainly was not the one laid out in black and white on paper and followed for a century or so. Under that one, when you extend credit to someone out of funds you do not have, then place bets on repayment while lying about the odds, you crash rather than luxuriate in the spoils of a looting of the masses.
When they throw the term 'too big too fail' around, they mean it in the literal sense: That the banks losing these bets would literally bring down the American -> World economy.
What _is_ missing is that no one was punished, no laws were changed (or have recently been relaxed even further?), no structured breakup of the bad actors. It means theres no incentive to _not_ risk global economic collapse, even though the words global economic collapse should be incentive enough.
There should be lots of regulatory effort to reduce interdependence and make it easier to unwind bad banks though.
The misery seems to come not from curbing worst-case outcomes for everyone in society (by UBI), but from the threat of material insufficiency due to structural unemployment (which motivates UBI).
Besides, even if we get strong AI and abundant energy to obsolete the vast majority of jobs, presumably it will take a long time to eliminate the long tail. One may always hope the next great genius/virtuoso will be among one's offspring.
As computer programmers, I think the one thing it teaches is that nothing is a/the solution. I remember when the default version of rails was going to require like 7 technologies to be able to do the things people wanted.
Programming also teaches that solutions come in tiny elements, that aggregate to a solution, which is usually held together by the flimsiest of margins. I remember a talk where at one point YouTube's big trouble was exporting video thumbnails, which had I think hit the iNode limit.
Programming also teaches that solutions need to address actual problems, and usually only the directly immediate problems. We have all seen the posts of someone who thinks they can write code and just let it scale, and how that never works.
My point to this long preamble is there is that the concept of a solution to nebulous, undefined "problems" is impossible by definition.
My biggest issue (and I have several) with UBI - which full disclosure I am both a fan of and a donator to the UBI test here: https://www.givedirectly.org/basic-income - is that the only way it has a chance of working in the first world is to replace all existing welfare, up and down the government hierarchy (i.e. at ALL levels). The chances of that happening are... what's less likely than a snow flake in hell?
However, UBI as a tool of aid is fascinating. Currently, most aid is poorly measured, and not really that effective. If we could introduce a tool with lower overhead, and help the poorest of the poor for a mere fraction of what it costs in the 1st world, the results could be world changing for the 1-2 billion people with the absolute least. If that proves applicable in more expensive countries, more's the better, but even if it doesn't, and proves to be of value in specific situations, it could still be an unbelievable tool for human progress at the margins.
This reminds me of the town hall meetings in NYC, where conservatives show up and try to convince everyone that if their rent $500 a month cheaper then it would be bad for them because they'd likely take up smoking crack and spend the extra money on drugs.
The problematic markets are the ones where competition is already deficient. Housing is often mentioned, but I actually don't think it'd be such a problem - if you get an UBI, you're actually much more free to move to cheaper places, rather than pushing up prices in places with jobs.
I'm not from the US, but if I was, I'd fear the cost of healthcare. Then again, that's probably unsustainable with or without UBI.
Besides, it's insane to assume that the price of a -single item- will jump to eat the entire cost of a payment such as UBI, because if that happens for every item, no one will be able to buy anything.
The $1001 candybar is just an analogy. I am _wondering_ if prices in general would adjust in a way that negates the UBI in part or whole. If 1000 is the new 0, then would pricing just adjust? I'd love to see data one way or the other on this, but am concerned that small-scale or regional studies might not be able to see this sort of effect.
Easy, right? Give people more money and money velocity will skyrocket.
Nope - in modern American society the acts of earning money and spending money are no longer coupled. (Which is partially why we didn't see massive consumer spending increases when the price of oil fell precipitously a few years back.)
Through credit cards and HELOCs American consumers can accumulate debt on their own schedule (and they frequently do https://www.cnbc.com/2018/02/13/total-us-household-debt-soar...) and wind it down when new cash shows up on the horizon.
Which makes money velocity unpredictable, subject to consumers' general sentiment about the economy.
https://www.lucidchart.com/documents/view/87d3102c-5b89-4001...
That's not really an argument against UBI.
You essentially said that if someone wants to live above poverty, they would need to make £5,000 a year.
That's $7000, roughly. 2000 working hours in a year. So call it $3.50 an hour. Not really sure exactly when and how taxes come in, but you get the rough idea.
Seems entirely do-able to me. Everything above $3.50 an hour is increasing their luxury out of the poverty threshold.
Do I need to follow the rest of your flow-chart, or have I gone far enough?
First, you seem overly concerned about semantics. "Universal basic income that is not universal is not Universal" is a tautology. There's no reason you assume you couldn't have UBI plus other government programs of some kind. The "universal" is that everyone gets it, universally, not that it's all you ever get for any reason.
Second, you bring up arguments against UBI that equally apply against current systems. "People are starving" and "10k isn't enough" might be true, that doesn't mean UBI isn't an improvement over the current situation.
Third - you bring up disabled people and children as if this couldn't possibly be addressed within UBI. Two ideas off the top of my head: include children in UBI (maybe at reduced rate?), and support disabled people with socialized medicine and other care (home care aids, whatever). You again seem to be assuming that UBI would be the only thing government would give to citizens.
Fourth - taxes/money. One thing is the cost savings may be greater than they seem, if UBI ends up reducing poverty and associated crime. We'll table that for now though. Corporate and VAT are hardly the only taxes you can tweak. Income tax is key, and yes, the "average" taxpayer will have to pay more, similar to the amount of UBI he receives. Maybe his tax rate will be 44%, or 40%, or 50% (I'm not going to check all your math, also you'd probably bump up corporate and VAT at the same time). Whether that is demotivating or not is a valid question, it's worth testing to see what the impact would be. As for "a hard working person will have barely more than a freeloader" - as long as you use marginal tax rates (and maybe you'd improve this with a continuous rather than discrete function), higher gross income always means higher net income. Will someone making 25k be really angry that someone lying at home makes 10k? Maybe. But in tests that have been done so far, there don't seem to be that many freeloaders. The people that worked less than they did before were new parents, people in school, and disabled people.
A lot of your arguments seem to be "UBI wouldn't be perfect" and I don't think that's a great argument against something. If you're against UBI, argue why UBI is worse than what we have currently.
UBI is a wealth/income transfer. Is that really what your objecting to ?
Leads to
"People are starving." -> "Your version of UBI is dumb."
Excuse me? People currently get $0, which is also less than people need to cover basic needs. If that kind of UBI is dumb, your status quo is dumb.
Your chart only looks at immediate benefits and costs, and then declares UBI dumb if it either requires any increase in spending at all, or it isn't a utopian system. It also seems to assume UBI encourages everyone stop being employed.
Your flowchart is the very height of false dichotomy.
Which immediately makes them prey to being exploited by inflation of costs, prices, to match the UBI guaranteed income.
TL;DR what stops a landlord and local shopkeeper increasing prices until the UBI is drained?
Competition typically keeps pricing in check, and as long as there isn't a monopoly or constrained supply/demand, prices are not able to rise too high.
I don't really see how/why this would be magically different.
For example, while rents in SV are sky high, that's a reflection of constrained supply. An apple in SV costs roughly the same as an apple in Bakersfield, despite avg income being multiples higher.
I don't really see how rentals in low income areas would become a constrained supply after the availability of UBI. And the groceries point is just crazy sauce.
I'm aware of very few goods outside of monopolies where the price is determined by the spending power of the purchaser and not the cost of the goods.
you might as well ask why loan sharking exists.
Rentiers do not normally want to rent to people on state benefits. When they do, they maximise the rent to the amount the state will pay, plus a small increment. Competition keeps that increment small? sure. But if you increase the benefit, suddenly, rents go up "everywhere" as a non-collusive event (non-collusive? hah)
We see this in Australia in the cost of childcare, and the cost of any service where the government gives a your-choice voucher to the client: the service fees go up beyond the voucher.
Price/Cost disjoin is a thing. Rental is not a "goods" in that sense, its a location-dependent (non) monopoly. So, rent, which was one of my primary concerns, is one of the things which absent rent controls does this. And, if you don't have a car, then if you live in a housing estate a long way from supermarkets you are caught behind the effort to shop cheaper, rather than pay the premium to the small number of local stores who will sell you goods you can carry home.
its not a monopoly, until it is.
The housing itself costs more in the Bay area.
Rentals/housing in the Bay area (or other desirable locales) are supply constrained.
The only class of goods I can think of that are not based on underlying costs are monopolies.
And yes - it's unlikely that low income rentals will suddenly become supply constrained after UBI.
Rent control for the first, competition (or a high enough UBI that they can travel far enough) for the second.
"travel far enough" is the whole point: if you live in a marginalized situation, UBI is unlikely to pay the cost of transport to save money on shopping, and mechanistically, since you don't have a car and cannot pay delivery, you are stuck behind higher unit pricing exploitation.
Unbelievably high numbers of people in the UK now depend on food handouts organised informally. Food stamps and Gated cards for welfare have their own problems. France recently passed laws requiring supermarkets to supply charity food from unsellable ugly fruit and vegetables, and near-dated produce.
Why do you think this is? Why do you think the state is trying to force independent, semi regulated economic entities to perform a social welfare outcome? Now put UBI into the equation. You think this is axiomatically going to fix the systemic underlying problem?
UBI in greece would demand the entire last 15 years historic debt be wiped out. Otherwise, its going to be grabbed by the asset-rich who have been avoiding the consequences of forcing defaults on the non-working poor.
1) UBI is a replacement for the wasteful fragmented welfare programs. The "efficiency" gains by consolidating into UBI will pay for most of it and maybe a modest tax increase to round it out. Whatever _that_ amount is, that's what we call UBI. This would be less than $14k a year. It would be just enough for food, living with roommates, and riding public transportation if the recipient didn't share a car.
or
2) UBI is a minimal and comfortable standard of living (home+car+food) so people don't have to work. The release from the stresses of earning a living will unleash a flurry of productivity in art, science, self-improvement. Society would flourish. This type of UBI is much more expensive... maybe about ~$30k.
Which form of UBI dominates the discussion? If it's the 2nd one, I'd argue that's mathematically impossible to provide.
Maybe 1 is feasible under that situation but to not kill social security it would require about 30% tax hike and be an increasingly negative program for anyone making over $46k which is 30% of the population. In my opinion that is idiotic. Logistically it would be a nightmare as congress would have to simultaneously remove a boatload of spending then add a boatload more which would be battled forever. I also have doubts about the capability of many people to responsibly handle the money themselves leading to calls for more entitlement programs to be reinstated or formed.
2 is next level moronic. The increase in average income would likely drive inflation to increasing levels ultimately creating the same effective levels of wealth and poverty as before. That $30k will pay for a car/house maybe in the first year but not really in the third, fourth etc.
Even if not, most support is send conditionally and only to certain people, this requires more checking than sending everyone an unconditional amount.
Furthermore, any conceivable implementation of 2) would have to go through 1) first.
One argument that isn't contradicted by its proponent in the article is that of Smetters, who says the evidence is that automation replaces some particular jobs, but does not reduce the aggregate labor opportunities for the great majority of people. I don't share this optimism but I can see why those who do would be uninterested in even posing the question of feasibility for a sweeping change such as UBI.
Intuitively I had thought of the UBI and NIT as very similar except that the UBI seeks to be large enough to be a workable living income, whereas a NIT can be any positive amount (or negative, depending on which way you look at it). So conversely the tax change required to fund it need not be large -- it just depends on how ambitious you want to be.
Q. The tax rate would be too high.
A. Not if UBI is small.
Q. Small amounts won’t make a difference.
A. That’s why it needs to be enough to live on.
Q. Then the tax rate...
Either can be large or small; that's not part of the definition.
No one really knows wether UBI will be a succes or a failure. But then no one knows wether any policy will be a success or a failure, and there will always be supporters and fetractors on either side.
Ultimately though, all that really matters is that government takes action that it believes will make society better. That’s it’s purpose. And if government believes UBI would be a net good, it should do it.
Economically, the current system has flaws but is self-sustaining. UBI at even low levels like $10k isn’t possible unless you somehow double tax revenue. For example 330M in the US = 3.3T. In 2017, the total revenues were 3.4T [1]. So just for basic levels, revenue would have to increase and that would really hose the economy and you would be able to raise 6.7T for very long.
[1] https://www.thebalance.com/u-s-federal-budget-breakdown-3305...
Sigh. From the point of view of an economist, not economists generally. Most are open-minded about it, but want to see more evidence and experimentation.
It'd be nice for Wharton to list an author of this article, if merely for the purpose of knowing their qualifications. Why do I get the impression it's some undergrad in journalism who just walked down the hall to the only economist they know?
In my figures I simply pegged the UBI to a part-time (20hrs) minimum wage job. When you subtract all the welfare programs that will be made unnecessary, the remaining cost is well within reach of relatively minor tax increases. (I am particularly partial to a usury tax).
One of the big problems that economists are overlooking with relation to automation of the job market is that excessive government regulation, along with antitrust-worthy corporate practice, has created a huge administrative/bureaucratic burden, and it is from this that most new jobs are being created. In other words, BS work.
Just look at how many administrative employees a doctors' office now has -- and we have to go to more and more specialists too. Meanwhile our actual quality of care has gone down, not up.
Another good example, which I recently learned about, it is against the law for a computer program to generate a medical diagnosis. Heaven forbid that we might not need as many doctors one day.
And the best example of all. The IRS is about to make it mandatory that you get your taxes done by a service provider (personal or by software). So what motivation does the government have tp simplify tax laws after that? None. Just keep making them more complex (so big companies can loophole) and in so doing create more BS jobs.
Here's a counterexample:
https://www.fda.gov/NewsEvents/Newsroom/PressAnnouncements/u...
Alternative idea, a universal job guarantee: https://dsa-lsc.org/2017/09/30/why-socialist-job-guarantees-...
I'm still learning about this other take as UBI seems prima facie a good thing, but there are a number of severe flaws in the idea.
The first says UBI is not necessarily that great, because it might not free people from working, whereas the second says it's not great, because people will no longer work!
These two passages are particularly striking:
Jacobin: "The kind of freedom from work (...) that an LBI envisions is, in all likelihood, not compatible with capitalism’s requirements of profitability."
DSA-LSC: "With UBI (...) one's status (...) as a worker is tentative and subject to elimination."
That's assuming you provide UBI on top of Social Security. You can reduce the real cost to about $2.1 trillion by making people pick one or the other. And you can raise $2.1 trillion by raising U.S. taxes as percentage of GDP to roughly the level of the Netherlands. Even if you assume GDP will contract somewhat, you can probably do it without raising taxes above that of France.
It is my belief that legislative solutions will always be eventually undermined whereas solutions that bring us productivity cannot later be taken away by legislative bargaining. I also believe than any UBI implemented would always be half hearted in implementation just as minimum wage isn’t actually enough for many people to thrive on.
What do you all think about the way I pose this? Where I claim that open source productive machinery is a viable alternative to UBI as a means of more broadly distributing the wealth of increased productivity?
This is almost guaranteed not to be the case. For this to be true, the marginal propensity to consume of rich people would have to be higher than the MPC of poor people.
>"The evidence is that robotics is a labor complement and is increasing skilled wages. While robotics are replacing some lower-skilled jobs, the most efficient response is to not kill the golden goose but to make sure we have job training programs that are effective in increasing skills."
Again, this assumes that UBI "kills the golden goose", which is exactly what neoliberals don't want to do.
>“I find it very hard to envision political support in this country for that kind of radical increase in taxation.”
This is an argument about whether UBI is a realistic proposal, not about whether it's a "good idea" (the article's stated title).
>"Instead of a UBI to help the poor, Feldstein recommends the “negative income tax” plan"
How functionally different is a NIT from UBI? It seems like the author is trying to equate Feldstein's and Smetter's positions when they're actually very different.
>Benjamin Lockwood (sic) favors the idea of offering a guaranteed basic income, which he says is a better term than UBI.
Huh. So now your argument is just against the name UBI, not the policy itself.
One problem facing such a system would be sybil attacks. POS systems avoid this by weighting in regards to coin ownership, but in a UBI chain you would not want this since the whole point is to give to people equally.
While this is somewhat true - there is a subset of the population that would prefer not working, UBI would also unlock the economic potential of another subset of the population who, due to debt, poor living, lack of opportunities, cannot afford to invest in themselves even though they desire to do so.
Revisiting communism as seen in its historical implementation, what communism did was replace opportunity with equality. UBI appears to have no such fantasies, and just give everyone more money. People who have the desire to make a lot of money, utilize their skills to make an impact, get good at things, contribute, and grow, will not have any of that taken away from them, but will get a larger platform for them to do so.
In this generation, investment is becoming the standard track for improvement, similar to college in the previous generation. It's seen as the way to grow your income, value, assets, and lifestyle. While investment is traditionally seen as stocks and asset collection, it's amazing what slight amounts of money can do to free up time. For instance, investing in laundry services, if you use your time well, can be a great investment (although, if you invest in laundry services and then use the time to play video games, you're probably the other subset of the population).
Tracing back to my original point, there's definitely a tradeoff argument to make. Is unlocking the potential of some worth it, knowing that the money will be wasted by others? At what ratio is this acceptable?
“Thoughtful liberals and conservatives trained in economics are almost universally against the idea.” –Kent Smetters
Another article makes a different claim:
"Top Economists Endorse Universal Basic Income"
https://www.forbes.com/sites/francescoppola/2017/08/31/top-e...
So is Kent Smetters wrong, or is Forbes citing people who are not actually "top economists", or maybe not even "trained in economics"?
