If we can afford our current welfare system, we can afford basic income
medium.comGood overview. I think one thing that gets left out is how do you handle systemic sustainability: ie "if everyone quit their jobs and went on BI, there would be no one working to pay taxes to pay for the BI expenses".
This could just be solved by having a total BI payout pegged at a fixed % of overall tax revenues. As more people earn less and pay less taxes, BI payouts also decrease as they are split among more people so the burden on the remaining taxpayers doesn't overwhelm them.
Then we could adjust that % every year (or not) based on actual conditions, how generous / prosperous / stingy we as a society are feeling, plus it gives a mechanism by which automation productivity gains can get rolled back into a BI program to (warning: utopian thinking ahead) eventually fund fewer workers overall, plus workers who work fewer hours, but we still have economic/automation gains rolled (via ongoing taxation) back into the BI support.
This basically shores up the "moral hazard" counterargument to BI proposals (which is the first thing that comes up for me after the "how do you pay for it" thing Max solved).
Pegging BI to tax revenue or GDP seems like a good idea to me, though I'd prefer to start with something revenue-neutral like I lay out. As it eliminates welfare cliffs, it seems self-evident that it would not reduce employment. Many other studies on cash transfers have found that they don't reduce work incentives, except for specific populations like new mothers and teenagers, but more evidence with slowly-rolled-out programs would help address this.
Speaking of utopia, what I'd really prefer is for BI to be funded as 100% of land value tax and pollution/carbon taxes. But that could be for another article. Even if nobody's working and everything's automated, we'll still need natural resources to house people and build things, so this would be sustainable.
Yes, totally agreed (/probably poorly described) - start revenue neutral as you have, then the following year just use the % of GDP from this year as the initial "set point". Then you get both: revenue-neutral cold start plus a % pegged to GDP moving forward.
Good idea wrt land-value and pollution/sustainability taxes too, makes total sense.
My goal with this piece is to deconstruct basic income into parallelizable, redistribution-neutral pieces: 1) Replacing non-cash benefits with cash 2) Smoothing the payout curve to avoid welfare traps 3) Replacing means-tested negative income tax with universal basic income
I hope this makes the idea more palatable to conservatives, as opposed to proposing a particular level of basic income (e.g. $15k/year) and then figuring out how to finance the extra cost. If we want society to redistribute more, that's fine, but IMO should be addressed separately from basic income, which can be beneficially enacted within the current redistribution parameters. The framework also clarifies how small steps can lead to BI someday, for example expanding the EITC instead of food stamps.
How do you deal with the edge cases? Do you eliminate disability programs as well? A lot of Americans are on disability and have much higher income requirements than someone who isn't disabled.
Also, what do you do about the difference in cost of living across cities? Do you take the housing allowance, give them a basic income and tell them to move if it's not enough?
And what do you do with the small number of people with addiction issues who just blow through the basic income and are left homeless? I highly doubt we're going to tell them "tough, you get to live on the street".
Part of the reason I got into BI is because my brother is quadriplegic (spinal cord injury), so I saw firsthand how extreme the welfare cliffs are for the disabled: if he earns over ~$20k/year, he loses so many benefits (which he needs, such as attendant care), that it doesn't make sense unless he's earning ~$100k/year. So I believe disability programs would benefit the most from some of the proposals in the article.
That said, they certainly wouldn't have the same BI as everyone else, just as children wouldn't and the elderly probably wouldn't as well, since they have existing programs targeted to them. The idea is just to replace non-cash benefits within each group (those four are probably sufficient), and smooth out the payout curve and find the equivalent BI for that NIT.
CoL adjustments would result from this as well: the primary way this is currently done is via housing as you mention. Any housing assistance benefit can be valued like other programs, so that could then be disbursed as cash. In practice, this means layered basic incomes at the federal/state/local level, and if done gradually they could be designed to minimize evictions.
Those with addiction issues who would spend all their money tend to have mental illness, which hinders their ability to get benefits in the current system. I suggest retaining social workers for such circumstances:
> Some of these programs will likely be more effective than their cash value — especially those serving the physically disabled and mentally ill — and should remain intact.
The problem I see with that approach is you are solving some problems (the welfare cliff), but in order to accommodate the edge cases, you're creating a complex program to replace a complex program.
One of the huge benefits of BI is that it's simple, you just give everyone the same amount of money. The more your start layering on exceptions, the more bureaucracy you'll create and you're back to square one.
Separating (1) children (2) people with disabilities (3) retirees and (4) other adults, is I would say an upper bound on complexity.
The PwD piece falls more under healthcare (which I think should probably just be universal), so if their health-related benefits can be separated out, they would just get the standard basic income.
Retirees only need special consideration for political reasons, since social security may exceed basic income, but it could also be separated out into a supplemental amount to make basic income more universal. Ultimately they could converge to avoid special treatment.
And whether children get the same amount as adults is an open question among BI advocates; I don't have a preference either way and believe it should be studied empirically.
'PwD' is inherently complex. I have mild clinical depression - it's a disability, but I don't need any welfare for it. That's one end of the spectrum. The other end is the GP's quadriplegic brother.
There should simply not be a 'PwD' element to BI - that should be a separate item altogether, otherwise it's just the thin end of the wedge. Leave it in healthcare-based welfare where it belongs, where both complexity is expected and health issues are better understood.
Agreed, though I'd hope that some lessons from basic income could be used in the disability benefit sphere too. The welfare cliffs are devastating and produce severe underemployment among PwD.
Don't know about disability.
I would answer "yes" to your second paragraph, excepting possibly residents of Hawaii.
Regarding your third paragraph, we (society) already do tell a segment of the population "tough, you get to live on the street". Why is it so hard to believe society would suddenly find it unpalatable in this case? Basic income is nice, though, because it provides a path out of homelessness, and that's something that's often not present.
I don't think we tell people "tough" right now. Look at the money that SF spends on the homeless. It's over $100M/yr.
Sometimes the devil is in the details and if you this part
"To be revenue-neutral, some people will be worse off with a smooth curve (e.g. those earning $29k getting maximum benefits), and others will be better off (e.g. those who lose $6k of benefits after earning just over $29k). But every dollar earned will lead to improved livelihood."
can be finessed in a palatable way. Try to avoid too many you took money from grandma to give to the pot smoking college kid. You sold me on it. The only problem I see how do you convince the voter on disability complaining about the gorvn'ment and all it GD entitlements... and your also talking about the country that's about to elect the guy that wants to ban Muslims from the country.
The quote you selected concerns welfare cliffs, where smoothing out the payout curve may slightly reduce benefits of those near a cliff and increase benefits for those just past a cliff. This split should be independent of the "grandma/pot-smoking-college-kid" split. In general the proposal I lay out can be designed to split out benefits for retirees such that they get a different NIT/BI than others, so grandmas can sleep well.
I am curious what Trump might think of basic income. I tried to write this piece to appeal to conservatives who want to shrink the antipoverty bureaucracy, and I believe there's a lot to like about BI from both sides of the aisle.
Has anybody studied the outcomes on American Indian reservations from having basic income guaranteed for generations? I'm not an expert or well-read in this field, but I think anybody advocating basic income would be interested to visit a reservation and observe the lifestyles, dreams, goals, and successes found there.
This is a damning critique of having a basic income. Some of the saddest places I've been to are Indian reservations in the U.S. They were sadder than the poorest parts of Ecuador.
Yes but many are in pretty barren places to begin with. Being in a poor small town in the middle of nowhere with no possiblity of work beyond welfare, is different to being in a city with jobs available.
The effects of welfare on Australian aborigines are pretty sad too. A good proportion of the young sit around drinking all day. The aboriginal elders hate it but ironically it seems to continue because it could be considered racist to treat the aboriginals differently from laid off office workers in Sydney for welfare purposes.
It's not welfare that makes life suck for Aborigines. A lot of the problem is from being considered outsiders by the wider society they live in. Take away the welfare from the drunken troublemakers and they're not going to magically turn into middle-class professionals. The whole situation is incredibly difficult and complex, and to lay it at the feet of "welfare did this to them" is doing a disservice.
Very interesting suggestion. I'm also not too familiar with the field, but it seems that most benefits are non-cash (e.g. health and housing), and cash grants tend to be <$1k/year [1]. I would guess there are many other reasons for the issues they face, particularly lack of integration into the broader economy.
As a counterexample, the Alaska Permanent Fund [2] is very popular, and economists have found it keeps thousands out of poverty.
[1] http://www.slate.com/articles/news_and_politics/explainer/20... [2] https://en.wikipedia.org/wiki/Alaska_Permanent_Fund
One of the troubles with this kind of reasoning is it kind of assumes peoples behaviour will remain much the same so someone on a $50k salary will keep at it but maybe with some basic income added and some tax removed and similarly for someone on welfare.
And maybe that will be roughly true initially but people change their behaviour and maybe the guy who would have done the $50k job if you give him say $300/week no strings attached will say hey, why slave away when I can go to Bali and surf and smoke joints.
We had something like that when I was a kid - the somewhat socialist UK government brought in generous untested welfare and some people used it to hit the beach in Spain and then the remaining workers paying the bills objected.
Do you have sources for the Spain-beach-hitting? Several studies have found that cash transfers do not reduce work incentives, except in specific populations like new mothers and teenagers. Much more significant disincentives are those generated by current programs with welfare cliffs.
Not really on the sources. I remember it from news stories in the 60s/70s. It may have been hyped up by the tabloids rather than having been significant in reality.
One of the advantages of BI is that if you earn more money, you pocket more money. It eliminates some of the disincentives where you pocket less money by earning more.
I'm not sure that combining BI with a flat tax, especially as high as 50% would work out. People with minimum wage or low-paid jobs would have a disincentive to work -- working full time would net them nearly nothing versus staying home, unemployed.
Napkin math: 2000 hours (approx full time hours per year) * $7.25/hr (US min wage) * 50% = $7250. Cost of transportation, child care, and other things that wouldn't be required if unemployed could easily eat most of that, netting a wage of just a dollar or two per hour.
As stated in the article, 50% was chosen only because it's the rate where calculations are simplest, it's not the proposal (it'd generate way more than the current government tax receipts). Income tax rates under a revenue-neutral negative income tax could remain pretty similar for those about the threshold; it's really just replacing non-cash welfare-cliffed benefits with a smoothed cash transfer.
I reread your article, and maybe I was being too harsh. You gave an example of a 50% flat tax (which you admitted is too high), but I think what would be more interesting is to see what a progressive tax would look like to remain revenue neutral while providing a reasonable level of BI.
I dont think basic income is tenable in the US without raising taxes on high income earners, perhaps significantly.
Yes I'd like to do that. Net tax burden (taxes - BI) still shouldn't change under the revenue-neutral approach, since they'd be equal between NIT and BI.