A Universal Basic Income: Conservative, Progressive, and Libertarian Perspectives (Part 3 of a Series)
The idea of a universal basic income (UBI) has been getting a lot of attention recently, sparked in part by the Swiss decision to hold a referendum on the idea. A UBI differs from other income support policies in that it provides a cash grant, large enough to meet basic needs of living, to every member of society, regardless of other sources of income.
The first post in this series compared a UBI to other income support policies in terms of effectiveness in reducing poverty, work incentives, targeting, and administrative efficiency. The second post argued that a UBI with a per person grant approaching current official poverty thresholds would be affordable without increasing the federal budget deficit, raising marginal tax rates, or radically raiding the fortunes of the rich. This third post looks at the varying perspectives of conservatives, progressives, and libertarians, explaining why there are both supporters and opponents of a UBI in each camp.
“UBI and” or “UBI instead”?
The first divisive issue is whether a universal basic income should be a substitute for existing social programs or an addition to them. John Schmitt, a senior economist at the progressive Center for Economic and Policy Research, expresses guarded support for a UBI in an interview with Salon. As he makes clear in this passage, his support is limited to the “UBI and” variant:
On the one hand, it [a UBI] is a very generous way to provide support for people who desperately need it. On the other hand, it threatens the existence of the existing social welfare systems . . . My fear is that it’s possible for a coalition of completely well-intentioned and idealistic — with no negative connotation to that — people on the left to support what would be a very generous basic guaranteed income, in a coalition with significant elements on the right, including the libertarian right, that has basically the motivation that this will undermine existing social welfare institutions.
Conservatives, in contrast, come down firmly in favor of “UBI instead.” Charles Murray, for one, makes that intention clear in the title of his book In Our Hands: A Plan to Replace the Welfare State. His publisher, the American Enterprise Institute, summarizes Murray’s argument this way:
America’s population is wealthier than any in history. Every year, the American government redistributes more than a trillion dollars of that wealth to provide for retirement, health care, and the alleviation of poverty. We still have millions of people without comfortable retirements, without adequate health care, and living in poverty. Only a government can spend so much money so ineffectually. The solution is to give the money to the people. This is the Plan, a radical new approach to social policy that defies any partisan label. Murray suggests eliminating all welfare transfer programs at the federal, state, and local levels and substituting an annual $10,000 cash grant to everyone age twenty-one or older.
Two considerations seem to be at play here. The first is a difference regarding how much aid the government should provide to the poor. Many conservatives think that the current level of support is already more than adequate. The problem, they say, is that too much of the trillion-odd dollars that the government now spends never gets to the poor. All that is needed is to cash it out and hand it over. If that were done, and if poor families spent the money wisely, they would have quite enough to live on.
Progressives, in contrast, see current government programs as far too tight-fisted. They help, but not enough. The government should continue current programs that provide for the basic needs of the poor—food stamps, public housing, Medicaid and the like, but these alone still leave many families in poverty. Adding a UBI on top of the others might finally get the job done.
The second consideration that drives the debate over “UBI and” vs. “UBI instead” is a difference in the confidence that conservatives and progressives place in the ability of government to do its job. In the view of conservatives like Murray, “Only a government can spend so much money so ineffectually.” Even if welfare officials were well intentioned, they say, government bureaucracies are inherently wasteful. Not all conservatives are even willing to grant the “well intentioned” part. Their favorite laugh line is Ronald Reagan’s quip, “The nine most terrifying words in the English language are ‘I’m from the government, and I’m here to help.’ ”
For progressives, the threat is not bureaucracy but privatization. Schmitt, elsewhere in the interview quoted above, sees a risk in entering a coalition with conservatives to promote a UBI:
[A] lot of the services — health, education, housing — might become much more marketized and privatized. . . . You can imagine that if this proposal in Switzerland passes and everyone gets $2,800, that the right can say, “Well, why should we provide healthcare — why don’t we let people use the money that we’re giving them? Why should we provide public schools — we should let people use the money that we’re giving them to buy education for their kids in the marketplace.”
In this regard, the progressive and conservative views are almost mirror images. Just as conservatives worry that an inefficient bureaucracy takes a huge cut from welfare spending before any of it reaches the intended beneficiaries, progressives fear that profiteering corporations, overcharging privatized services, would skim off too much of the cream if poor people were given cash and told to fend for themselves.
In my view, there is some truth on both sides. The idea of replacing multiple means-tested programs with cash grants appeals to me on the grounds of administrative efficiency and freedom of choice. However, I am uneasy about conservative proposals to cash out all existing programs cold turkey. It is fine to say, “let the market take care of it,” but there are key areas where, without major policy changes, markets are not ready to do the job.
As I argued in the second part of this series, health care is the biggest problem area. It is an understatement to say that the market for health care in the United States is not fully functional. If we cashed out all means-tested transfers and distributed the money to the poor in the form of a UBI or some other kind of grant, without Medicaid, CHIP, or the premium subsidies of the ACA, many households with disposable incomes at or above the poverty level would still not be able to buy health insurance or meet out-of-pocket payments. Mental health and substance abuse also pose special problems for any system based on cash grants plus privatization.
The market for educational services is in somewhat better shape than that for health care. Still, I think a lot of work remains before we would be ready to scrap public schools in favor of vouchers for all. Education for children with special needs and for children of parents with mental health and substance abuse issues are even farther from being ready for full privatization.
In short, although I see a UBI as capable of replacing much of our present system of income support—food stamps, TANF, EITC, as well as parts of unemployment insurance, Social Security, and disability coverage—it is unrealistic to think a UBI would represent a complete social safety net in itself. Private charities might help fill some of the gaps, but it is far from clear that they could fill them all.
Would a UBI produce a nation of layabouts?
One of the most commonly heard objections to a universal basic income is that it would produce a nation of layabouts. The fear is that if people did not face homelessness or starvation, they would withdraw from the labor force into a life of idleness. This fear is most often voiced by conservatives, but some progressives also dislike the idea that able-bodied people could receive government aid without requiring them to seek a job.
UBI advocates think the fear of a layabout society is unfounded. For purely economic reasons, they say, a UBI is more likely to increase than to decrease labor force participation.
They begin by noting that the labor market response to a change in economic incentives consists of two distinct parts. One, called the substitution effect, causes people to work more when their after-tax hourly earnings increase because substituting one hour of work for one hour of leisure now brings in more money than it did before. The other, called the income effect, causes people to work less when their wealth increases because they can now afford to take more time off work for other purposes. The net effect on work effort depends on which is stronger, the income effect or the substitution effect.
How can we find out which effect is stronger? One way is to look at pure financial windfalls like inheritances and lottery winnings. Such windfalls do not change the amount a person earns from an added hour of work, so they have an income effect but no substitution effect. Studies of windfalls suggest that income effects do exist, but they are weak. For example, this paper, based on a study of Massachusetts lottery winners, concluded that each one dollar of lottery winnings caused people to reduce earned income by about 11 cents. Similarly, this paper concluded that inheritances have only a small tendency to reduce labor supply.
A UBI that was disbursed without any change to existing welfare or tax policies—the “UBI and” approach—would be a pure windfall. As such, it would have only an income effect. Like other windfalls, it would tend to decrease work effort, although that would not always mean dropping out of the labor force altogether. Some people would respond by reducing weekly hours worked or taking longer vacations; some might switch from higher-paid but unloved work to lower-paid work with more intrinsic reward; and some might quit paid jobs to try their hand as entrepreneurs.
In contrast, a UBI that replaced large parts of our current welfare policies—the “UBI instead” approach—would have a strong substitution effect and a smaller income effect. As explained in the first post in this series, current welfare policies typically reduce benefits for each added dollar of earned income. In other cases, they set income “cliffs” beyond which they cut off benefits altogether. As a result, poor and near-poor households often face effective marginal tax rates of 50 percent, 70 percent, or even higher.
Replacing means-tested welfare with a UBI would greatly reduce the effective marginal tax rate and, therefore, greatly increase the share of each added dollar of earnings that workers retained. That would produce a strong substitution effect that would increase work effort and labor force participation. At the same time, a UBI would have only a small income effect. The reason is that a person’s monthly income would not increase by the full amount of the UBI grant, but only by the difference between the UBI and the value of the food stamps, housing vouchers, or whatever that it replaced. On balance, then, a UBI that replaced current means-tested welfare programs would be likely to have a large positive effect on work effort for able-bodied people who are now living at or near the poverty line.
True, even if a UBI increased labor force participation in the aggregate, some individuals might well choose to withdraw from the labor force and live on the their monthly grant alone, or retire early and live on their monthly grant plus savings. For various reasons, that possibility does not greatly trouble advocates of a UBI. Some of them think that, especially in the United States, people already work too much and enjoy too little leisure. After all, leisure has value, even if it is not included in GDP. Others think that a trend toward automation of low-skilled jobs makes it both necessary and desirable to move toward an economy with lower labor-force participation rates. Still others see increased freedom for each person to find the best balance between work and leisure as one of the principal benefits of a UBI—a viewpoint that brings us to our next topic.
Libertarian support for a UBI
So far, we have focused mainly on conservative and progressive support for a UBI, but many libertarians also favor such a policy. That might seem surprising. It is almost an axiom of libertarianism that for Peter freely to give money to Paul is charity, but for John to point a gun at Peter and force him to give to Paul is theft of Peter’s property. Libertarians who support a UBI must begin by rebutting the presumption against forced giving. Without going into every variant, here are three broad lines of argument advanced by libertarian supporters of a UBI.
The first libertarian defense of a UBI is purely pragmatic. The idea is that while some ideal free society might get along without any coercive redistribution of income, a UBI would at least be superior to what we have now. Writing for Reason.com, Matthew Feeney puts it this way:
[L]ibertarians in the U.S. and elsewhere should support the idea of a basic income as a replacement for the current welfare systems on offer. The welfare system in the U.S. is an ineffective and expensive mess, but it is unlikely that the majority of the American public are going to be persuaded to support the outright abolition of the welfare state any time soon. Rather than make the principled argument against the redistribution of wealth, libertarians would do better if they were to argue for a welfare system that promotes personal responsibility, reduces the humiliations associated with the current system, and reduces administrative waste in government.
This libertarian argument overlaps that of conservatives in that it castigates the current system as wasteful and ineffective, but it goes beyond that. Libertarians also object to the paternalistic micromanagement of the lives of the poor that is a hallmark of today’s antipoverty policies. Perhaps conservatives see nothing wrong with requiring welfare recipients to submit to drug tests, or with rules that allow food stamp beneficiaries to buy hamburger to feed their dogs but not dog food; vitamin-enriched bottled water but not vitamin pills; and cold roast chicken but not hot roast chicken. Libertarians find such provisions offensive. As Feeney puts it,
one of the tragedies of the current welfare system is that it strips welfare recipients of their dignity while treating many of them like children, and functions on the underlying assumption that somehow being poor means you are incapable of making good decisions.”
A second Libertarian argument defends a UBI as a counterweight to the injustices of private property as it now exists. In principle, of course, libertarians are ardent defenders of private property, but some of them see serious flaws in the way the system now works. One flaw is that some people have acquired their property not through honest competition in a free market, but rather, by acts of government that subsidize their products, restrict the actions of their competitors, or subsidize the products they make or grow—all the venal devices that economists lump together under the term rent seeking. Rent seeking is so pervasive that it is impossible to untangle the particular victims and beneficiaries of each law, but a moderate tax on all forms of income and property, distributed evenhandedly to everyone as a universal basic income, might provide a rough remedy. Others argue that the whole idea of using government police and courts to protect property rights is itself a sort of subsidy to property owners. Accepting that subsidy gives government the implicit right to tax the property it protects. Jessica Flanigan details several variations of the property rights argument in a post on the imaginatively named blog Bleeding Heart Libertarians.
Less doctrinaire libertarians, many of whom prefer to call themselves “classical liberals,” suggest a third reason to support a UBI. As Matt Zwolinski puts it in an essay on the subject, classical liberals adhere to “the principle that a society’s legal rules and/or moral principles must be justified to each and every individual who is subject to them, and that such justification requires demonstrating that those rules or principles are ones that each individual has reason to support.” Many classical liberals think that, given the choice, freedom-loving individuals would prefer to live in a system where the minimal state, in addition to protecting people and their property from criminals and foreign enemies, had some mechanism for providing everyone with a minimum income to fall back on in case of misfortune.
Zwolinski finds support for one form or another of a basic income among both historical classical liberals, such as Adam Smith and John Stuart Mill, and more recent thinkers, such as Friedrich Hayek and Milton Friedman. Hayek, for example, wrote this passage in his book Law, Legislation, and Liberty:
The assurance of a certain minimum income for everyone, or a sort of floor below which nobody need fall even when he is unable to provide for himself, appears not only to be a wholly legitimate protection against a risk common to all, but a necessary part of the Great Society in which the individual no longer has specific claims on the members of the particular small group into which he was born.
I should note that not all of the writers listed by Zwolinski supported a UBI in the sense of a grant that all citizens receive regardless of their particular circumstances. Milton Friedman, for one, supported a negative income tax—a policy that resembles a UBI for people with zero or very low earned incomes, but tapers benefits as income rises. Hayek, as Don Arthur argues here, very likely had in mind not a UBI, but some kind of means-tested minimum income for people who were altogether incapable of working. Also, it is only fair to note that many modern libertarians, as Milton Friedman’s son David explains here, reject any form of government income redistribution. A UBI remains controversial in the libertarian community, although support seems to be growing.
The bottom line
The bottom line is that a UBI is not a perfect policy. In every form, it represents a compromise among conflicting objectives. Probably that is exactly why it draws support from a wide range of conservative, progressive, and libertarian thinkers who agree on little else, as well as from people who see themselves as pragmatists bound to no particular ideology.
In Part 1 of this series, which reviewed the economics of income support policy, I explained that a UBI is a compromise among the mutually incompatible criteria of effectiveness in reducing poverty, maintenance of work incentives, administrative efficiency, and targeting of aid to the neediest. A UBI scores high on the first three criteria only by abandoning the fourth altogether. Opponents of a UBI see its untargeted nature as a flaw; supporters see it as the key feature that makes it attractive.
Part 2 of this series asked whether we could afford a UBI. My answer was yes, it would be possible to design a UBI for the United States that came close to conventional poverty thresholds without raising marginal tax rates, busting the deficit, or brutally raiding the incomes of the rich. Doing so would require more compromises, however. The biggest compromise would be that middle- and upper-income families would not be able to double-dip. In order for them to receive a UBI, they would have to relinquish some of the benefits the government now lavishes on them in the form of tax loopholes that favor home ownership, retirement saving, not-for-profit giving, and so on.
This third post in the series has shown that it is possible to design a UBI that appeals to people of widely differing ideological persuasions, but again, not without compromise. Conservatives will find that a well-designed UBI would require more than just cashing out the trillion-odd dollars now spent on means-tested welfare. Progressives will find that they can’t have a UBI without giving up some other elements of the social safety net they have fought hard to achieve. Libertarians will have to compromise on their ideal of a society entirely free of government in order to achieve the pragmatic improvements in personal freedom and autonomy that would come from replacing the current welfare mess with a UBI
I find it encouraging that the liveliest debates over a UBI today are taking place within, rather than between, the main ideological camps. At a time when macroeconomic forces seem to be bringing ever more inequality, perhaps a coalition will emerge that can move us forward toward a better social policy.
20 Responses to “A Universal Basic Income: Conservative, Progressive, and Libertarian Perspectives (Part 3 of a Series)”
I can't believe how divorced from reality and human nature these ideas are.
Human nature has not changed in three thousand years, but you ignore all our accumulated wisdom and babble about 'universal basic income'?
Just more Utopian drivel.
I enjoyed the articles and hope you continue to develop a consensus that both liberals and libertarians can agree on. It opens the door for others to build upon and contribute new ideas. I hope American Politicians broach the subject soon w\o waiting for the public to do all the work and put the words in their mouth
Lost in this otherwise excellent series is the clear realization that economics tuned to maximum efficiency is not the be all and end all of public weal in the 21st century. A well tuned economy is a tool not an end. Economic growth has limits. At some point the application of additional capital and labor just churn resources without appreciably improving the human condition. Keynes forsaw this in (going from memory here) the '20s and Adam Smith much, much earlier. We have clearly entered this phase and we need to reconfigure our political and social structures to recognize the emerging realities.
There is certainly an importance to people contributing to society. But contributions need not all be economic ones. In this way the moral hazard arguments seem off-target or at least off-bullseye.
Thank you for your comment. I am sorry that this idea got "lost" in my series. Honestly, it was already getting longer than most posts I write, so I did short-change some aspects.
Personally, I agree with your views. I tried to pay at least brief lip-service to this line of thought when I wrote:
"True, even if a UBI increased labor force participation in the aggregate, some individuals might well choose to withdraw from the labor force and live on the their monthly grant alone, or retire early and live on their monthly grant plus savings. For various reasons, that possibility does not greatly trouble advocates of a UBI. Some of them think that, especially in the United States, people already work too much and enjoy too little leisure. After all, leisure has value, even if it is not included in GDP. Others think that a trend toward automation of low-skilled jobs makes it both necessary and desirable to move toward an economy with lower labor-force participation rates. Still others see increased freedom for each person to find the best balance between work and leisure as one of the principal benefits of a UBI "
Many thanks for you thoughtful reply. I hope that at some point in the future you might explore the notion of a steady state economy and the associated ideas of diminishing marginal utility as attempts are made to find directly economically productive labor. It seems to me that we have been headed in this direction since we transitioned to a disposable economy in the sixties and seventies and that we have exacerbated the problem with offshoring. We face a growing bifurcation of the economy as predicted in the closing chapters of Herrnstein and Murray's "The Bell Curve" and envisioned in any number of literary dystopias. That this is more than an idle concern is revealed in the inching up of the GINI coefficient over the last few decades.
You say, "if poor families spent the money wisely" In my personal experience with poverty; I had professional experience also working for a welfare department, but that is not addressed here, In my personal experience with poverty it is directly connected with poor choices by someone controlling the money; both instances involve mental illness; in one case a girl was coming to our school who was desperately poor; her father worked, but nearly everything went for liquor. That girl didn't make it; I met her years later when she was an adult; the terrible suffering had severely damaged her. The other instance involved a miser; his wife and children were in rags while he saved money; that too did little good; he did have a few years in a nice retirement community, but even his hoard ran out after about 5 years of nursing home care. Poor children will be in rags; actual rags. It is not general broadcast solutions that are needed but targeted solutions; which is the present system, inadequate as it is.
First of all, let me say that I agree that there are problems with giving cash to someone with clinically established substance abuse or mental health problems, and even more serious problems with giving such a person control over cash that is supposed to benefit not only themselves, but other members of their family. So we are on the same wavelength with regard to your particular examples.
More broadly, I share your instinctive temptation to be sure we can make better decisions than other people, including better decisions than people who are poorer than we are. For example, I was standing at the cash register the other day behind a woman who was paying for a cart-full of groceries with a SNAP debit card. The card had less money than she thought, so she had to put some stuff back. She chose to keep a bottle of flavored artificial coffee creamer and put back a half-gallon of orange juice. My "bad choice" buzzer immediately went off. But what did I really know? Maybe she is just low on OJ, not out, but out of creamer altogether. Maybe her husband is overweight and her doctor has recommended the low-fat creamer instead of real milk for his coffee.
As a boost to you humility, whenever you are sure you can make a better choice, keep in mind that opinion surveys routinely show that 90 percent of people think they are better than average drivers, a logical impossibility.
As I was a taxi driver for 15 years in a big city I definitely have opinions about driving. In Denver, by the way, never stop for a pedestrian trying to cross a street; you can get them killed by another car rushing by you if they are fool enough to venture out. SNAP, and food stamps before them, addressed the problem of all money going for alcohol. I think it probably works pretty well. Part of the problem is that a guaranteed minimum income will replace a bunch of politically well defended programs such as SNAP and replace it with one that is not defensible and thus will be the perpetual target of budget cutters.
>Part of the problem is that a guaranteed minimum income will replace a bunch of politically well defended programs such as SNAP and replace it with one that is not defensible and thus will be the perpetual target of budget cutters.
Interesting point. The farmers are behind SNAP; who would be behind UBI?
>SNAP, and food stamps before them, addressed the problem of all money going for alcohol.
Addressed it, but did it solve it? There are, as always, unintended consequences to the alcohol prohibition. Some people sell their SNAP benefits to a middleman who takes a cut and gives them cash worth a fraction of the SNAP card. The result is the person still gets the alcohol, but has even less food than if you gave the cash in the first place. It also takes a whole new bureaucracy to police resale of SNAP cards. -
11, 2009:I arrived from Los Angeles to Washington, DC to
windy 40 degree weather. Long tail key phrases are easy to integrate and they are easy to rank.
"In my personal experience with poverty it is directly connected with poor choices by someone controlling the money; both instances involve mental illness; in one case a girl was coming to our school who was desperately poor; her father worked, but nearly everything went for liquor. That girl didn't make it; I met her years later when she was an adult; the terrible suffering had severely damaged her."
This in my view could be solved with the "UBI and" scenario. Wherein, where it is found conclusive that mental illness is the cause of financial irresponsibility creating a problem for a person seeing to the well-being of themselves and those they care for, welfare agents (hired by the citizens) would be given licence to place that individual's money in trust and take over financial decisions for the individual and their charges while re-educating the individual. This will eliminate damage to others and give individuals the care they need to overcome the distorted thinking within their illness. Many addictions and other mental illnesses are as result of living in survival mode and the existing co-dependent, limited- choice-and-individual-freedoms-without-enough-money, environment. As things stand this function is not happening and the existing system does not support mental and emotional stability for those struggling near the poverty line let alone those squarely below. The assistance provided is ineffective. Once a 100% safety net is placed and mismanagement of money to the extent where physical harm is obvious is still found to be a problem, make it clear that a person needs mental support for their own good and the good of all others. Well fare works could be given licence to become trustees of such individuals until the individual proves to do no physical harm to themselves. The individual would receive full care but limited independence until wellness and right mindedness are proven. This is in my view what a real well fare system should provide, ensuring the well fare of people and supporting them to make healthy choices independently, not the policing of whether or not an individual should receive payments and the taking away of their children while leaving them to flounder that has been and is the process. What do you think?
"who would be behind UBI?"
All people in receipt of it, or who's loved ones are in receipt of it are people in a democratic society that will not allow their representative to remove it. It is my knowledge that some of these are farmers, union members etc. of the existing political power groups.
I agree that true mental illness has to be handled as a special case and is not necessarily solved by a UBI.
Under UBI, many systemic stress related behaviours that are not entrenched will stand a chance to be independently corrected. There will, however, still be those who's behaviour patterns have become habitually entrenched who will need help. A financial support system that gives 100% surety for all citizens will support the person providing assistance that needs to prove to the individual that they are guaranteed real and substantial care over time. One need not hoard, be hopeless (as to some aspects of life,) be without care as citizens have agreed we are all equally worth care through granting each other the UBI. UBI is in fact an inclusive citizens care program. As it stands, no psychologist can guarantee that certain of people's fears which sponsor unhelpful behaviours are baseless.
I'd like to see individuals stand a good chance of recovery. I see UBI as a movement toward the fostering of improved mental wellness as well as a movement toward diminishing the existing propensity for self harm or harm toward others. Under UBI true mental illness will become obvious to everyone, not just a few well trained and potentially unavailable practitioners who know how to take all into account. The important survival factors will be accounted for.
Thanks for such a clear discussion on UBI.
I am a counselor working with a social service agency that provides parenting and family support to poor urban families. I have witnessed first-hand the depth of the hole created by our current welfare system out of which these families need to climb. Despite their willingness and determination, it is a nearly impossible task given what is stacked against them. Something desperately needs to change and I am hopeful that the UBI or something like it will be implemented.
Most of the discussions I have read about the affordability of the UBI focus on the immediate financial realities of implementing the plan. It seems that there would be a number of societal and financial long-term benefits, as well, and I am wondering if you know of any discussions around these issues:
1)Do you know of any research on whether and/or by how much reducing the poverty rate is likely to decrease incarceration/recidivism rates? That, I think, would be a powerful argument since the cost of preventing it would likely be far less than paying for it later.
2)The long-term financial benefits in alleviating Toxic Stress in young children. Many organizations, including Harvard University and the Robert Wood Johnson Foundation are researching and educating about the social, healthcare, and economic costs of unresolved toxic stress in children.
From the Center on the Developing Child at Harvard:
1) Learning how to cope with adversity is an important part of healthy development. While moderate, short-lived stress responses in the body can promote growth, toxic stress is the strong, unrelieved activation of the body’s stress management system in the absence of protective adult support. Without caring adults to buffer children, the unrelenting stress caused by extreme poverty, neglect, abuse, or severe maternal depression can weaken the architecture of the developing brain, with long-term consequences for learning, behavior, and both physical and mental health. (http://developingchild.harvard.edu/resources/multimedia/videos/three_core_concepts/toxic_stress/)
2) Duncan et al. (2010) show that children’s eventual labor market success appears to be compromised much more by poverty experienced early, rather than later, in childhood. The study finds that a $3,000-per-year lower family income in early childhood is associated with 17% lower productivity in adulthood, whereas lower income later in childhood appears to have little bearing on later productivity. Ameliorating the impacts of poverty early in life can therefore have far-reaching effects on our national prosperity. (The Long Reach of Early Childhood Poverty: Pathways and Impacts)
3) The more adverse experiences in childhood, the greater the likelihood of developmental delays and later health problems, including heart disease, diabetes, substance abuse, and depression. (http://developingchild.harvard.edu/topics/science_of_early_childhood/toxic_stress_response/)
The issue of toxic stress is new, but I would love to see research be done about how reducing poverty rates could impact healthcare costs and social outcome measures down the road. Also a potentially powerful argument for UBI.
Well, I'm late to the game, haha. This is an absolutely fantastic three-part series! Part One in particular really lays things out beautifully.
I've been completely fascinated by "UBI instead" and have done a lot of research and drafting on it for my own therapeutic enjoyment. It was really interesting to see how you came to many of the same conclusions, but some key distinctions as well. I thought I'd lay the ones I noticed out for you in case you're interested.
The first one is a gimme. You reference 316 million "Americans" in part 2 and presumably use this figure in your calculations. But it's political fantasy, even for a UBI paper, to think that the UBI would go to non-citizens. It's a surprisingly hard stat to find, but there are actually 22 million non-citizen residents in the US. So already your eligible population is more accurately 294 million, and your UBI can increase by 7.5% to $4785.
You and Valerie really went at it! I took a fundamentally different approach. My eligible person was a US resident-citizen 18 or more years old. I have a dream when four year olds can vote and make contracts and have legal autonomy and have consensual sex (for the record, I did not have a dream to that effect), but tis merely a dream. Children do not enjoy full rights by any stretch, your UBI would be a costly exception to that rule.
The benefit of disregarding children for purposes of the UBI is kind of stunning–there are 75 million US citizens under 18. Discounting them leaves you with "just" 212 million eligible residents (citizen, over 18) as opposed to 316 million or so for you. The result is 35% more UBI for those who get it. Your UBI would be $6,010 instead of $4,452, a big difference.
Of course, there are downsides to excluding children. Families with lots of children lose out, even under Valerie's proposal. But the point of the UBI is not to make sure no one "loses out," but to alleviate poverty for as many people as possible. A system in which children receive identical benefits, even if heavily regulated (*groan*), is fabulous. But it comes at the opportunity cost of more money for single adults and thus more individuals out of poverty. Also, I'm pretty sure the math works out (see below) so that the overwhelming majority of parents are better off.
Boy is this a doozy. Healthcare, as you note, is humongous! Not just Medicare and Medicaid, but the employer insurance exemption. You make a fantastic point that the UBI would have to be significantly higher than the poverty line in order to make up for lost government-provided health insurance. But this is only examining one side of the equation! It is the classic question–would you rather $5 or I buy you a beer? Wait…that's not a classic question at all! Everyone wants $5 (social conventions aside). One need only look at the "gift card" industry to be reminded that people like to buy things and "in kind" services (or presents!) are not preferred if of the same value.
Here, we are saying "eliminate the health insurance, gotsta be all straight cash." But it is of the exact same value. The only diminution, which you express concern about, stems from now giving UNIVERSALLY (well almost, see above, haha), instead of to only the OLD and POOR. Otherwise it is exactly same value, but now cash instead of in-kind.
And of course the superiority of universal cash versus targeted in-kind benefits strikes at the fundamental moral underpinnings of the UBI itself! So the very logic that leads to the UBI being awesome, leads to the conclusion that the health insurance schemes currently in place should be included. All that's left after that is paternalistic reasons for in-kind benefits, and I address those below.
Adding Medicare + Medicaid is an extra $4,396! (assuming 212m eligible) Adding that to the $6,010 from above, we're talking a $10,406 UBI! Of course, the honest question is not whether $10,406 is awesome (it is), the question is whether it is better than $6,010 + Medicaid (probably), $6,010 + nothing (definitely), and $6,010 + Medicare (probably not). That's a policy question. I personally would much rather $10,406 and I defer to my reasoning above.
4) Social Security Trust Fund
Another interesting issue is that you, like me, dabble in the forbidden fruit of "middle class welfare," but simply replace the UBI via gradual voluntary phase-out. That was a really intriguing part of the paper, partly because I handled it very differently. There's no "right" answer, and sadly the judge is Congress, but I was not so tolerant of patient change as you.
My proposal instituted UBI immediately for every eligible person, including those receiving Social Security. How, do you ask, can I transfer the money going to SS to the UBI while simultaneously paying for SS? Why, through the Social Security Trust Fund of course! We all know and love that trust fund, which has most certainly definitely absolutely not been spent I swear, and from a rhetorical point of view, it ably reflects the total amount paid in by past generations. Thus individuals continue to "get their money back," a big concern with social security reforms.
Impressively, the trust fund is able to fund SS for over three years. So for that time, SS recipients would receive SS and the UBI for a grand total of…a lot of money (average SS recipient got $15,528 in 2013, my proposal would give an extra $18,178, for a jaw dropping total of $33,706 for the average recipient during this time). This, I reckon, would certainly soften the transition away from Medicare!! JEBUS! I've never wanted to be so old in my life.
You do a great deal of wonderful analysis on the UBI's effect on marginal income, particularly when considered with the tax code. Probably the best single source out there and probably my favorite part of your series. But I think you shied away from examining (let alone proposing!) some of the ways the UBI could fundamentally change how we do taxes.
The single biggest observation I made in my study of the UBI is that we take a stunning (and shameful) amount of money away from low-income earners. This is done mostly through the payroll tax, a whopping 15.3% of their income, but also through the income tax. It is downright counter-intuitive for the good state to GIVE money to low-income individuals and then for the good state to taketh away from those who actually go earn it. I felt that it was not only intellectually consistent, but morally required (!), for us to eliminate taxation on income for low-income earners.
As such, I eliminated the payroll tax altogether. I then argued that the income tax should only apply to the wealthy, which I defined as earning over $100,000. I then insisted on (and the numbers worked out) a cap of 20% and a flat tax. So I have a 20% tax on income with a $100,000 deduction. The percent can be higher, the deduction can be higher, but that's what I settled on and think most prudent all things (including revenue) considered.
The bulk of tax revenue would then come from a federal sales tax, like in the “Fair Tax” proposal. Only instead of a 30% sales tax with a $2,643 prebate (though it could theoretically get over $9,000 with seven or more kids), my plan is a 20% sales tax with an $18,178 “prebate.”
6) How much?
You rightly note that there are many figures that one could come to in deciding the best UBI and you very reasonably just check and see what would happen if we liquidated what we currently have and distributed it. We came to different figures because of what we liquidated and who we distributed to but your approach makes a lot of sense for the kind of paper you wrote.
After I did the same thing as you though, I asked what would I aim for from a policy perspective? I settled on providing 1.5 times the Poverty level (to eliminate poverty and provide for healthcare). The amount given would be tied directly to 1.5 times the US Census Bureau’s “poverty guideline,” automatically updated each year. So in 2013 that would have been $18,178.50 per eligible person.
In a sense the number is arbitrary, but from a rhetorical point it’s absolutely gorgeous. First of all, the poverty rate drops perilously close to 0% (non-citizens and single moms with a lot of kids could still technically be in poverty). So the rhetorical argument is not, “wouldn’t you like money instead of our current welfare state,” it’s “wouldn’t you like to end poverty?”
7) Poor, stupid people
In explaining my ideas to my friends, I’ve had no issue dealing with the “but what if they spend it on alcohol/drugs” issue. The overwhelming implication of what they’re saying is that these people should not be out of poverty. That they can’t handle money, so giving it to them would actually make them or their family worse off. Once framed in that light, which I think is an honest appraisal, people tend to change their tune.
The real danger, in my approximation, is not that they will spend their money not wisely, but too well! If I give a man $18,000 to make it through the year, people have an overwhelming tendency to blow through it. My solution to that was simple—give it to them weekly. So I gave each individual $349.59 every week (in 2013), simple as that.
There is a really serious policy issue with invalids or the mentally ill. Does it go to their care-taker? What if their caretaker’s a state? Does it just go to them and, assuming someone has power over their resources, it gets distributed by this person? The latter appealed to me the most. The mentally ill and invalids have people who manage their estates. Give the money to the invalid and it will be handled just like the rest of their resources. This, of course, creates really troubling incentives for abuse. But such is the nature of mental illness and, with a source of income as public as the UBI would be, honest citizens would of course shun abusing the mentally ill for financial gain (I hope!). This is an estranged cousin of the "they shouldn't be out of poverty" argument. Things are more complicated when the mentally ill have resources. They are more open to abuse. It is again the equivalent of saying they shouldn't have those resources. Regardless, it is a really complex issue that a comprehensive explanation of the UBI needs to address.
10) State welfare
The issue of whether to “replace” the welfare state with the UBI is actually really misleading. As you note, every plan replaces the FEDERAL welfare state. But the states account for 25% of all welfare spending! So really the question is whether we eliminate 75% of the welfare state in exchange for $18k to each person. This has done me wonders in assuaging concerns about those individuals who are significantly worse off, such as those receiving SS disability (though they receive less on average than retirees) or those currently in government housing. State welfare funds would simply focus on those people.
Of course, without the federal matching system, many states would reduce their coverage and there could be a “race to the bottom.” However, this would take at least quite a few years, and by then the success or failure of the UBI should be abundantly clear and can inform the next step on state and federal levels.
It’s all well and good to say “universal” basic income, but this is probably not going to be the case. Considering the “extremes” leads to some very reasonable limitations that I dwell on a good deal. The biggest one is those who are currently in jail. Sadly, that’s over a million citizens. Should you receive the UBI if you are in jail? No, I said. So I exempted prisoners (I said only prisoners serving sentences longer than a month, but for administrative reasons that could be a higher minimum). You receive the UBI if you are not in jail. Once you’re out, you start receiving it again. Nothing else rose to the level of disqualification in my eyes, but there is a lesser step than disqualification…
It makes a full-throated defender of the UBI cringe to hear all this talk of exempting certain groups, temporarily disqualifying them and what have you, but the idea of “garnishing” the UBI has fascinating implications. Surely no one should be garnished from money they are entitled to, but what if they are NOT entitled to that money?
For example, an identity theft steals $10,000 from someone. They are caught and put on probation or in jail, but they plead poverty and are not required to pay reparations. Surely with the UBI in place, they cannot plead poverty anymore! But why, again, are we leaving it to the victims to bring an enforcement action? Why not have an administrative court (*groan*) handle specific cases where the UBI can be directly garnished by the state—the criminal will receive, say, $2500 less for the next four years, and the victims will receive $2500 more.
Or take the example of child support. Some parents dare the other to collect the child support owed them. Why not simply have the administrative court facilitate it through garnishing the UBI? In short, the UBI serves as a revolution in handling small-ish claims for key issues. Heavily regulated, of course (*groan*).
That’s all I can think of in stream of consciousness. To recap though, the plan I had come to was:
-Eliminate the tax code (including corporate income tax but except excise taxes), and eliminate welfare (including Medicaid), Medicare, and Social Security.
-Give every 18+ US resident-citizen (not in jail) 1.5 times the poverty line ($18,178 in 2013) in weekly installments.
-Institute a 20% federal sales tax.
-Institute a 20% federal income tax with a $100,000 standard deduction (and no other deductions) (UBI counts as income).
Federal spending minus eliminated programs (not including UBI): $1.54 trillion
Cost of the UBI ($18,178 * 212 million): $3.85 trillion
Total: $5.39 trillion
20% Sales Tax: $2.71 trillion
20% tax on Income over $100,000: $1.53 trillion
Excise Taxes + Fed Bonds: $262 billion
Deficit: $888 billion (that’s less than the 2012 deficit, but more than 2013/2014, there are ways to cut it, such as by keeping the corporate tax……………..I’d rather the deficit but it’s not my call).
I should finish with a brief little look at the tax implications that I did in one of my papers:
Take, for example, a family of four earning, say, $118,415. Under the current system, if the couple filed jointly and understood which credits and deductions they were entitled to and had the best possible distribution of wealth between earners for payroll tax purposes, they would pay $8,415 in payroll tax and between $0 and $10,408 in income tax depending on what they qualify for. Thus, they would be left with between $99,592 and $110,000 after taxes. Because they are not in poverty and not over 65, they would receive no government benefits.
Under your plan, they would pay the same taxes, but would receive an additional $4,452 per person, for an additional total of $17,808. I assume that it counts as income, so they would pay an additional $4,986 in taxes (though in theory their deductions could eliminate this income, although it’s hard to imagine). Even if it counts as a tax credit and not as income, they would have between $112,414 to $127,808 after taxes. Much better!
Under my plan, they would receive an additional $36,356 (two adults) for a total income of $154,771! A family with that income typically consumes just under $72,871. On every purchase they would pay a 20% tax, so their tax liability would be 20% of $72,871, or $14,574. They also pay a 20% tax on income greater than $100,000, which is a 20% on $54,771 for them, or $10,954. Their tax liability therefore would be a grand total of $25,528. Therefore they would have approximately $129,243 after taxes!
That’s $29,651 more than under the current system (assuming no deductions) IN JUST ONE YEAR. Even if they had total deductions and paid $0 income tax (nice!), they still make $19,243 more in just one year. Even if America woke up and adopted your plan, they make between $1,435 (if they pay no income tax) and $16,829 more in a single year under my plan. And that’s just an upper middle-class family with two children! Fewer children or less income and the benefits are even more stark, my system only falters in single-parent households with multiple children (as mentioned above).
Take the extreme: a single parent with two children earning $10,000 per year (the near-optimal benefits amount under the current system). Under the current system they pay $765 in payroll tax and $0 in income tax, for a post-tax income of $9,235. They then receive approximately $15,000 in benefits (these are coming from eyeballing your chart in part 1, but they give a good rough estimate), for a total income of $24,235 under the current system. Under your system, they would pay the same tax but would receive $13,356 in benefits PLUS Medicaid, worth roughly $6,000, for total benefits of roughly $19,356. So they have $28,591 in cash + benefits under your system after taxes, a $4,356 improvement! Under my system, they have $28,158 in total income. Assuming they spend it all, a reasonable assumption, they pay 20% in sales tax (and nothing in income tax), for a tax liability of $5,632. They receive no benefits beyond the UBI, so their total after-tax income is $22,526. That’s $1,709 less than under the current system and $6,065 less than under your system. But that’s the worst-case scenario.
Notably, if the same family had the same income but added a second parental figure, the numbers are drastically changed. They get an additional Medicaid recipient, for an extra $6,000 in benefits, under the current system. And $4,452 on top of that under your system ($10,452 total). But they receive an additional $18,158 under my system (though they pay 20% tax on it probably). Thus, looking at the grand totals, they ultimately get $6,817 more under my system than under the current system and just $1,991 less under my system than yours. And, again, that’s assuming the optimal situation for both the current system and yours (barring the small percentage of households with more than two children).
Alright, that’s the tax analysis for ya. I would love to hear your thoughts, and again, your three-part series was really fantastic.
Wow! I never got a comment like that before! Thanks!
A few VERY brief notes:
1. Thanks for the heads up on citizens. Never occurred to me that citizens and population are not the same.
2. Healthcare: I agree that in theory the UBI could encompass healthcare, but there would have to be a universally available insurance program with a flat premium for everyone–true universal community rating, something much broader than Obamacare
3. Jail: Mixed feelings. I am wondering if there might be some way to make sure UBI accrued while in prison would be available for rehabilitation and re-entry to life outside. And what about UBI accrued by people with life sentences?It is not an easy problem.
4. Garnishing and invalids–I agree, they need thought for a full treatment.
5. Taxes: A agree, the best would be to combine a UBI with FULL tax reform (flat tax, consumption tax, etc.) rather than just the partial changes I suggested.