6 ms·

I still see some big issues with universal basic income, and would appreciate one of its supporters responding to some of them: Cost. $3.8 trillion by many est

by mises 8y ago

I still see some big issues with universal basic income, and would appreciate one of its supporters responding to some of them: Cost. $3.8 trillion by many estimates. That's nearly 20% of America's GDP. How is it possible to pull this much money out of the American economy without crashing it? Scope. I am of the opinion that one of the beauties of federalism is that policies can be tested first at the state level before we commit our entire nation. Why would a national government do this? Necessity. I don't think we need to be paying anyone who makes over 50k (maybe not the right number, but there should be a cutoff). That just takes money away from those who need it. If a supporter of UBI can respond, I'd like to discuss possible concerns and benefits.

bryanlarsen 8y ago
Cost: The money isn't going into a black hole, it's being given to those who tend to spend their money more quickly and more locally (aka the poor). So I would expect it to increase the velocity of money rather than decreasing it, giving the economy a nice boost. Necessity: Any sane UBI system is revenue neutral. So anybody with above average income is going to pay more in increased taxes than they receive in benefits. That's easier and fairer than a claw-back.
mactrey 8y ago
> How is it possible to pull this much money out of the American economy without crashing it? The money isn't pulled out, though. It is redistributed to people, many of whom will immediately spend it, and others will invest it in various (hopefully efficient) ways. > Why would a national government do this? The problem of entry and exit. Say one state like Massachusetts implemented a UBI. Then we could expect many people to move to MA from surrounding states, or do whatever they can to have a legal address there. However I think there are possible solutions to this and a state-by-state implementation is actually possible. For example, Alaska has their dividend program and I think the results from that have been quite good. > I don't think we need to be paying anyone who makes over 50k I think I agree which is why I'm more in favor of a negative income tax or other means-tested system than true UBI. But if I were to argue in favor of an "everyone gets the same" program I'd say something like, implementation is somewhat less complicated, or it's easier to explain to the public.
- jeffbax 8y ago
  Yup, a negative income tax is a much better policy avenue to deal with this. It's much better to subsidize people doing things of varying degrees of productivity in an otherwise open employment market, than to discourage work entirely. Work is how you learn and often have some kind of basic dignity and meaning, not to mention how you eventually move up to better positions. This is essentially what the Earned Income Tax Credit is, and what should be expanded rather than something that would dis-incentivize working at all.
  - mises 8y ago
    I would be more inclined to agree with you. Inciting hard work is a much better idea then giving everyone money regardless.
mikhailt 8y ago
Do you have a source of these estimates for me to learn? A lot of people kept saying it is very expensive but they did not factor in that UBI replaces all current social welfare programs we have with a single program. When you compare both, it is not that expensive. For an example, Social Security alone is ~5% of current GDP and ~4% for Medicare. [1] > Expressed as a share of GDP, program costs equaled 4.9 percent of GDP in 2017, and the Trustees project these costs will increase to 6.1 percent of GDP by 2038, decline to 5.9 percent of GDP by 2052, and thereafter rise slowly, reaching 6.1 percent by 2092. > Social Security’s annual cost as a percentage of GDP is projected to increase from 4.9 percent in 2018 to about 6.1 percent by 2038, then decline to 5.9 percent by 2052 before generally rising to 6.1 percent of GDP by 2092. Under the intermediate assumptions, Medicare cost rises from 3.7 percent of GDP in 2018 to 5.6 percent of GDP by 2035 due mainly to the growth in the number of beneficiaries, and then increases further to 6.2 percent by 2092. [1]:https://www.ssa.gov/OACT/TRSUM/index.html https://www.ssa.gov/OACT/TRSUM/index.html That's just two walfare programs alone; there are others like SNAP, unemployment, etc.
- _rpd 8y ago
  > UBI replaces all current social welfare programs we have with a single program This is the conservative argument for UBI - liquidate social security and distribute the proceeds; do more good with the same money because we don't have to pay means testing overhead; smaller, less intrusive government as a bonus. The reality though is that every single social security program has been put in place as the result of a tough political fight. That politics isn't going to go away with the introduction of UBI. There will be demands to keep or reintroduce each and every social security program that currently exists. Funding can't realistically come from this source.
  - mises 8y ago
    > liquidate social security That's not a just action for the government to take. The original premise of social security was pay in money as you work, get it out when you're old. Though FDR started paying out immediately from the younger generation, so it started a generation in the hole. However, it was supposed to be basically forced federal savings, with some sort of safety net component as well. Not fair to tell those who paid in they'll never get anything out because someone wants it for policy goals.
msluyter 8y ago
To your list of issues I'd add extraction by rentiers. My (perhaps naive) understanding is that rents tend to rise to a market equilibrium. Infuse the the aggregate market in an area with X dollars, and rents will rise to consume X. I'd be curious to hear counterarguments to that point.
- _rpd 8y ago
  I think this is a key concern. I don't think that there is a good counterargument, but the best that I've heard is that UBI will enable mass migration to rural areas or remote exburbs (including corporate sponsored - welcome to your new Google Home!). Of course some are happy to introduce rent controls or spark an inflationary death spiral with 'cost of living' adjustments.
  - mises 8y ago
    You're saying I should go live in the countryside, away from everyone? Yeah, teleconferencing is possible, but I don't know that most people would want to. It's also impractical to build public transportation that far out (you have to build increasingly more for each mile you expand from the nearest city center; distance between angles grows as you move outward), meaning that people would be driving a LOT more (higher gas prices). Or, if you by some miracle built all that transportation, it would be expensive. And people still need to "go to town" for many supplies, so just staying there isn't practical (let alone realistic for most).
    - _rpd 8y ago
      It's less 'should' than that UBI enables the possibility of reversal of the long term rural -> urban migration trend, since this trend is driven by job seekers. I don't think it will occur (the lower your income, the more you rely on geographically-based support networks) but if it doesn't, then UBI increases will be largely captured by rentiers. If it does, then urban rentiers will have to compete with non-urban rentiers, and UBI will have a chance to have the economic effect intended by proponents.
- dragonwriter 8y ago
alekseypo 8y ago
There are a few interesting ideas about how it could financially function mentioned here: https://worldaftercapital.gitbooks.io/worldaftercapital/content/part-three/Economic.html https://worldaftercapital.gitbooks.io/worldaftercapital/cont...
simonsarris 8y ago
Never-mind the money, I fear that even if we can implement it and pay for it, there will still be a host of social problems that UBI advocates do not want to grapple with. There's still no answer to questions like "what if it starts to entrench a permanent underclass and make inter-generational wealth worse, as people who stop working bear a generation of people who have never worked, and they bear children, etc". https://medium.com/s/free-money/after-universal-basic-income-the-flood-217db9889c07 https://medium.com/s/free-money/after-universal-basic-income...
- dragonwriter 8y ago
  > There's still no answer to questions like "what if it starts to entrench a permanent underclass and make inter-generational wealth worse, as people who stop working bear a generation of people who have never worked, and they bear children, etc". Why would reducing disincentives to work, as compared to means-tested welfare, rationally be expected to have anything like that effect?
  - cheeseomlit 8y ago
    The main incentive to work is that you need to work to make a living. If the government hands you everything you need without working that is a massive disincentive to work
    - dragonwriter 8y ago
      > The main incentive to work is that you need to work to make a living. With means-tested social benefits, that is not the case, and, in fact, you lose some (or in some particularly perverse, but unfortunately not all that uncommon cases when multiple means-tested programs are involved, more than all) of the additional money gained by adding work to reduced benefits. That is the disincentive UBI removes (or, more accurately, reduces and/or pushes to a higher income level, because you run into it—though not the more perverse form unless marginal tax rates are above 100%—in the taxes to pay for benefits.)
    - manicdee 8y ago
dragonwriter 8y ago
> Cost. $3.8 trillion by many estimates. $3.8 trillion would be about right if you set the benefit level equal to the poverty line for a single-person household, and then gave it to every many, woman, and child in the country, starting at birth, irrespective of citizenship or immigration status, while... > That's nearly 20% of America's GDP. ...nearly 20% of GDP would be accurate for the benefit level you suggested, if you instituted it at that level today. Anything phased in over time would be lower even when fully phased in, because GDP growth per capita over the long term is more rapid than inflation. If instead you took the poverty line for the median household size, divided by the median household size, and assigned that as the per person benefit (and still had no citizenship/immigration status test, and no phase in period, you'd drop the cost to about $2.2 trillion, or about double existing combined state/federal welfare spending.) Any reasonable UBI will also be restricted to those legally present (and quite likely only LPRs, citizens, and nationals of the United States; maybe only citizens and nationals) and not initially start at a full poverty support level (meaning other programs will phase out rather than be big-bang eliminated.) > Scope. I am of the opinion that one of the beauties of federalism is that policies can be tested first at the state level before we commit our entire nation. Why would a national government do this? Because without authority for immigration controls, migration for benefits is a problem. > Necessity. I don't think we need to be paying anyone who makes over 50k (maybe not the right number, but there should be a cutoff). That just takes money away from those who need it. Means testing is additional bureaucratic cost to serve the same function that can instead be served by tax allocation, and you already need income-verification bureaucracy and income sensitive formulae on the income tax side, so the choice is between two bureaucracies duplicating function and one serving the function. The latter is clearly more efficient. There's going to be an income level beyond which, considering taxes which fund UBI, people get no net UBI payment; you don't need a cutoff in direct UBI benefits to acheive that.
- mises 8y ago
  > GDP growth per capita over the long term is more rapid than inflation At this point, we're down to conjecture. It will doubtless require higher taxes, which will quite possibly counter or outweigh any benefit of more money to spend. It's a big risk to take with the entire country. > migration for benefits is a problem. You don't have to have immigration controls, just establish residency requirements with a certain amount of time, holding down a job for however long, etc. > Means testing is additional bureaucratic cost Still doesn't make sense to send money to Jeff Bezos.
manicdee 8y ago
> How is it possible to pull this much money out of the American economy without crashing it? UBI actually injects money into the economy. Accompanying UBI would be reducing minimum wage to zero, managing inflation by increasing income taxes in higher brackets, and removing deductibles so that more tax is collected. By reducing minimum wages you encourage people to start up new companies — with no salaries to pay, you reduce startup costs significantly (there are still costs such as insurance, legal filings). The whole point of UBI is to pay everyone the same guaranteed amount. If you start scaling back as income rises, what you are actually doing is a different scheme called Negative Income Tax. UBI basically pushes any wages into the taxable brackets immediately. A national government would institute a UBI to encourage a mobile workforce, since reducing the cost of switching towns reduces the friction of moving to find better work. A UBI also reduces the level of exploitation of workers, so there would be less workplace induced chronic injury which is a net drain on the country. There will also be improved mental health as people aren't forced to work in dead end jobs just to make ends meet. For the USA specifically, UBI would need to be accompanied by reformation of the health care system, basically completing the implementation of the Affordable Care Act so that health insurance is actually affordable, and not bound to employment. The USA will also need to implement similar systems of regulation of the cost of health care services and products.
- dragonwriter 8y ago
  > UBI actually injects money into the economy. Not if it is tax funded (EDIT: But, even then, it doesn't pull money out of the economy); it may, however, increase the domestic velocity of money, which has a similar effect to injecting money. > Accompanying UBI would be reducing minimum wage to zero Maybe, maybe not. I think it would be more sensible to reduce minimum wage to it's non-UBI target minus (annual UBI/2000hrs); with a $8000 UBI (about right for poverty support given median household size) and a $15 non-UBI minimum wage target, that would be an $11 minimum wage (with the current $7.25 minimum wage as target, it would be a $3.25 minimum wage.) > managing inflation by increasing income taxes in higher brackets, Using fiscal policy to manage inflation is probably not a great idea; let the Fed do that with monetary policy, and if you raise taxes (whether by raising rates in higher brackets or by taxing capital gains the same as labor income or both), do it for revenue not inflation control.
jostylr 8y ago
Re: Cost. Here is one attempt to describe how to pay for it without raising any income taxes: https://medium.com/economicsecproj/how-to-reform-welfare-and-taxes-to-provide-every-american-citizen-with-a-basic-income-bc67d3f4c2b8 https://medium.com/economicsecproj/how-to-reform-welfare-and... My personal preference, very different from the above article, would be for a wealth tax that helps keep capital flowing, sort of like a company's dividend going back to investors. We the people are the investors in the wealthy's endeavors that led to that wealth. They keep the bulk, but they pay back some to all of us. If they don't make productive use of the wealth, something that benefits others, then their wealth slowly falls until they are like the rest of us. By some measures of the wealth of the US, we have 100 trillion dollars in wealth and so 4% wealth tax would fund a 13k per person (including children) UBI.

by mises 8y ago

bryanlarsen 8y ago

Cost: The money isn't going into a black hole, it's being given to those who tend to spend their money more quickly and more locally (aka the poor). So I would expect it to increase the velocity of money rather than decreasing it, giving the economy a nice boost. Necessity: Any sane UBI system is revenue neutral. So anybody with above average income is going to pay more in increased taxes than they receive in benefits. That's easier and fairer than a claw-back.

mactrey 8y ago

> How is it possible to pull this much money out of the American economy without crashing it? The money isn't pulled out, though. It is redistributed to people, many of whom will immediately spend it, and others will invest it in various (hopefully efficient) ways. > Why would a national government do this? The problem of entry and exit. Say one state like Massachusetts implemented a UBI. Then we could expect many people to move to MA from surrounding states, or do whatever they can to have a legal address there. However I think there are possible solutions to this and a state-by-state implementation is actually possible. For example, Alaska has their dividend program and I think the results from that have been quite good. > I don't think we need to be paying anyone who makes over 50k I think I agree which is why I'm more in favor of a negative income tax or other means-tested system than true UBI. But if I were to argue in favor of an "everyone gets the same" program I'd say something like, implementation is somewhat less complicated, or it's easier to explain to the public.

jeffbax 8y ago
Yup, a negative income tax is a much better policy avenue to deal with this. It's much better to subsidize people doing things of varying degrees of productivity in an otherwise open employment market, than to discourage work entirely. Work is how you learn and often have some kind of basic dignity and meaning, not to mention how you eventually move up to better positions. This is essentially what the Earned Income Tax Credit is, and what should be expanded rather than something that would dis-incentivize working at all.
- mises 8y ago
  I would be more inclined to agree with you. Inciting hard work is a much better idea then giving everyone money regardless.

mikhailt 8y ago

Do you have a source of these estimates for me to learn? A lot of people kept saying it is very expensive but they did not factor in that UBI replaces all current social welfare programs we have with a single program. When you compare both, it is not that expensive. For an example, Social Security alone is ~5% of current GDP and ~4% for Medicare. [1] > Expressed as a share of GDP, program costs equaled 4.9 percent of GDP in 2017, and the Trustees project these costs will increase to 6.1 percent of GDP by 2038, decline to 5.9 percent of GDP by 2052, and thereafter rise slowly, reaching 6.1 percent by 2092. > Social Security’s annual cost as a percentage of GDP is projected to increase from 4.9 percent in 2018 to about 6.1 percent by 2038, then decline to 5.9 percent by 2052 before generally rising to 6.1 percent of GDP by 2092. Under the intermediate assumptions, Medicare cost rises from 3.7 percent of GDP in 2018 to 5.6 percent of GDP by 2035 due mainly to the growth in the number of beneficiaries, and then increases further to 6.2 percent by 2092. [1]:https://www.ssa.gov/OACT/TRSUM/index.html https://www.ssa.gov/OACT/TRSUM/index.html That's just two walfare programs alone; there are others like SNAP, unemployment, etc.

_rpd 8y ago
> UBI replaces all current social welfare programs we have with a single program This is the conservative argument for UBI - liquidate social security and distribute the proceeds; do more good with the same money because we don't have to pay means testing overhead; smaller, less intrusive government as a bonus. The reality though is that every single social security program has been put in place as the result of a tough political fight. That politics isn't going to go away with the introduction of UBI. There will be demands to keep or reintroduce each and every social security program that currently exists. Funding can't realistically come from this source.
- mises 8y ago
  > liquidate social security That's not a just action for the government to take. The original premise of social security was pay in money as you work, get it out when you're old. Though FDR started paying out immediately from the younger generation, so it started a generation in the hole. However, it was supposed to be basically forced federal savings, with some sort of safety net component as well. Not fair to tell those who paid in they'll never get anything out because someone wants it for policy goals.

msluyter 8y ago

To your list of issues I'd add extraction by rentiers. My (perhaps naive) understanding is that rents tend to rise to a market equilibrium. Infuse the the aggregate market in an area with X dollars, and rents will rise to consume X. I'd be curious to hear counterarguments to that point.

_rpd 8y ago
I think this is a key concern. I don't think that there is a good counterargument, but the best that I've heard is that UBI will enable mass migration to rural areas or remote exburbs (including corporate sponsored - welcome to your new Google Home!). Of course some are happy to introduce rent controls or spark an inflationary death spiral with 'cost of living' adjustments.
- mises 8y ago
  You're saying I should go live in the countryside, away from everyone? Yeah, teleconferencing is possible, but I don't know that most people would want to. It's also impractical to build public transportation that far out (you have to build increasingly more for each mile you expand from the nearest city center; distance between angles grows as you move outward), meaning that people would be driving a LOT more (higher gas prices). Or, if you by some miracle built all that transportation, it would be expensive. And people still need to "go to town" for many supplies, so just staying there isn't practical (let alone realistic for most).
  - _rpd 8y ago
    It's less 'should' than that UBI enables the possibility of reversal of the long term rural -> urban migration trend, since this trend is driven by job seekers. I don't think it will occur (the lower your income, the more you rely on geographically-based support networks) but if it doesn't, then UBI increases will be largely captured by rentiers. If it does, then urban rentiers will have to compete with non-urban rentiers, and UBI will have a chance to have the economic effect intended by proponents.
dragonwriter 8y ago

alekseypo 8y ago

There are a few interesting ideas about how it could financially function mentioned here: https://worldaftercapital.gitbooks.io/worldaftercapital/content/part-three/Economic.html https://worldaftercapital.gitbooks.io/worldaftercapital/cont...

simonsarris 8y ago

Never-mind the money, I fear that even if we can implement it and pay for it, there will still be a host of social problems that UBI advocates do not want to grapple with. There's still no answer to questions like "what if it starts to entrench a permanent underclass and make inter-generational wealth worse, as people who stop working bear a generation of people who have never worked, and they bear children, etc". https://medium.com/s/free-money/after-universal-basic-income-the-flood-217db9889c07 https://medium.com/s/free-money/after-universal-basic-income...

dragonwriter 8y ago
> There's still no answer to questions like "what if it starts to entrench a permanent underclass and make inter-generational wealth worse, as people who stop working bear a generation of people who have never worked, and they bear children, etc". Why would reducing disincentives to work, as compared to means-tested welfare, rationally be expected to have anything like that effect?
- cheeseomlit 8y ago
  The main incentive to work is that you need to work to make a living. If the government hands you everything you need without working that is a massive disincentive to work
  - dragonwriter 8y ago
    > The main incentive to work is that you need to work to make a living. With means-tested social benefits, that is not the case, and, in fact, you lose some (or in some particularly perverse, but unfortunately not all that uncommon cases when multiple means-tested programs are involved, more than all) of the additional money gained by adding work to reduced benefits. That is the disincentive UBI removes (or, more accurately, reduces and/or pushes to a higher income level, because you run into it—though not the more perverse form unless marginal tax rates are above 100%—in the taxes to pay for benefits.)
  - manicdee 8y ago

dragonwriter 8y ago

> Cost. $3.8 trillion by many estimates. $3.8 trillion would be about right if you set the benefit level equal to the poverty line for a single-person household, and then gave it to every many, woman, and child in the country, starting at birth, irrespective of citizenship or immigration status, while... > That's nearly 20% of America's GDP. ...nearly 20% of GDP would be accurate for the benefit level you suggested, if you instituted it at that level today. Anything phased in over time would be lower even when fully phased in, because GDP growth per capita over the long term is more rapid than inflation. If instead you took the poverty line for the median household size, divided by the median household size, and assigned that as the per person benefit (and still had no citizenship/immigration status test, and no phase in period, you'd drop the cost to about $2.2 trillion, or about double existing combined state/federal welfare spending.) Any reasonable UBI will also be restricted to those legally present (and quite likely only LPRs, citizens, and nationals of the United States; maybe only citizens and nationals) and not initially start at a full poverty support level (meaning other programs will phase out rather than be big-bang eliminated.) > Scope. I am of the opinion that one of the beauties of federalism is that policies can be tested first at the state level before we commit our entire nation. Why would a national government do this? Because without authority for immigration controls, migration for benefits is a problem. > Necessity. I don't think we need to be paying anyone who makes over 50k (maybe not the right number, but there should be a cutoff). That just takes money away from those who need it. Means testing is additional bureaucratic cost to serve the same function that can instead be served by tax allocation, and you already need income-verification bureaucracy and income sensitive formulae on the income tax side, so the choice is between two bureaucracies duplicating function and one serving the function. The latter is clearly more efficient. There's going to be an income level beyond which, considering taxes which fund UBI, people get no net UBI payment; you don't need a cutoff in direct UBI benefits to acheive that.

mises 8y ago
> GDP growth per capita over the long term is more rapid than inflation At this point, we're down to conjecture. It will doubtless require higher taxes, which will quite possibly counter or outweigh any benefit of more money to spend. It's a big risk to take with the entire country. > migration for benefits is a problem. You don't have to have immigration controls, just establish residency requirements with a certain amount of time, holding down a job for however long, etc. > Means testing is additional bureaucratic cost Still doesn't make sense to send money to Jeff Bezos.

manicdee 8y ago

> How is it possible to pull this much money out of the American economy without crashing it? UBI actually injects money into the economy. Accompanying UBI would be reducing minimum wage to zero, managing inflation by increasing income taxes in higher brackets, and removing deductibles so that more tax is collected. By reducing minimum wages you encourage people to start up new companies — with no salaries to pay, you reduce startup costs significantly (there are still costs such as insurance, legal filings). The whole point of UBI is to pay everyone the same guaranteed amount. If you start scaling back as income rises, what you are actually doing is a different scheme called Negative Income Tax. UBI basically pushes any wages into the taxable brackets immediately. A national government would institute a UBI to encourage a mobile workforce, since reducing the cost of switching towns reduces the friction of moving to find better work. A UBI also reduces the level of exploitation of workers, so there would be less workplace induced chronic injury which is a net drain on the country. There will also be improved mental health as people aren't forced to work in dead end jobs just to make ends meet. For the USA specifically, UBI would need to be accompanied by reformation of the health care system, basically completing the implementation of the Affordable Care Act so that health insurance is actually affordable, and not bound to employment. The USA will also need to implement similar systems of regulation of the cost of health care services and products.

dragonwriter 8y ago
> UBI actually injects money into the economy. Not if it is tax funded (EDIT: But, even then, it doesn't pull money out of the economy); it may, however, increase the domestic velocity of money, which has a similar effect to injecting money. > Accompanying UBI would be reducing minimum wage to zero Maybe, maybe not. I think it would be more sensible to reduce minimum wage to it's non-UBI target minus (annual UBI/2000hrs); with a $8000 UBI (about right for poverty support given median household size) and a $15 non-UBI minimum wage target, that would be an $11 minimum wage (with the current $7.25 minimum wage as target, it would be a $3.25 minimum wage.) > managing inflation by increasing income taxes in higher brackets, Using fiscal policy to manage inflation is probably not a great idea; let the Fed do that with monetary policy, and if you raise taxes (whether by raising rates in higher brackets or by taxing capital gains the same as labor income or both), do it for revenue not inflation control.

jostylr 8y ago

Re: Cost. Here is one attempt to describe how to pay for it without raising any income taxes: https://medium.com/economicsecproj/how-to-reform-welfare-and-taxes-to-provide-every-american-citizen-with-a-basic-income-bc67d3f4c2b8 https://medium.com/economicsecproj/how-to-reform-welfare-and... My personal preference, very different from the above article, would be for a wealth tax that helps keep capital flowing, sort of like a company's dividend going back to investors. We the people are the investors in the wealthy's endeavors that led to that wealth. They keep the bulk, but they pay back some to all of us. If they don't make productive use of the wealth, something that benefits others, then their wealth slowly falls until they are like the rest of us. By some measures of the wealth of the US, we have 100 trillion dollars in wealth and so 4% wealth tax would fund a 13k per person (including children) UBI.