In case you've been living under a rock and have totally missed the universal basic income discussions that have sprung up over the last few years, it's an idea where everybody in a particular place gets a guaranteed income every month with no qualifications on who gets the money as well as no restrictions on what the recipient can spend the money on. Basically it's "free money" sent to you every month. Like anything, there are different flavors being proposed. Some have only adults receiving payment. Some have every man, woman, and child receiving their basic income. The amounts proposed also vary widely.
The basic idea is to use UBI instead of the welfare programs we already have. Critics of the current welfare system point out a few problems with it:
- There is a lot of fraud of people trying to get extra payments out of the means-tested programs that they may not qualify for. For example, how many people try to find undocumented work for cash payments so they don't lose their unemployment benefits?
- Even without the fraud there is a huge amount of "waste" on administering the programs. Those people who review applications, do investigations, handle the payments, etc all have to be paid.
- The "welfare cliff" phenomenon is an enormous disincentive to work. In many cases when someone on a particular welfare program goes and actually gets the job that society says to do, that person loses more in benefits than gains in wages. So why go to work if it will end up costing you money?
So I've been looking at the idea of universal basic income for a while now.
Proponents claims that if everyone gets a basic wage that will essentially cover a minimal standard of living that people will be free to quit jobs they hate, work on the things that they love, and everyone will be happier, healthier, and in the end, wealthier. They also say that the coming wave of automation with advances in computer technology, robotics, and general artificial intelligence coming to be that we won't have a choice in the matter since nobody is actually going to be working in the same sense that we now think of the concept.
Detractors say that being given something for nothing kills the human spirit and will create an enormous group of people consuming and not producing that will in turn wreck the entire economy.
Personally, I tend to think the detractors are right, but that's not what this article is about.
The Math
What I want to do here is look at the math behind what a realistic UBI program would look like. These numbers are based on a 2011 report I found from the Senate Budget Committee. 2018 numbers would be a bit different, but we'll be in the same ballpark.
According to the report, there was 1.03 trillion USD spent by the federal and state governments on various welfare programs. This includes everything from Indian Education to Medicaid to SNAP to Title I Migrant Education. Importantly it does not include Social Security and Medicare spending.
The federal portion made up about 746 billion USD with the rest coming from various state programs.
So this is money that is already being spent with all kinds of strings attached.
Let's do some easy math to see what this would look like.
In 2011, the population of the US was 313,232,000 according to the Census Department.
If we take 1,030,000,000,000 USD and spread it evenly among 313,232,000 people you come out to 3,288 USD per person per year. Most likely the payments to minors would be given to their custodial parents similar to how the SSI program works.
Is It Enough?
That's... not a lot given the cost of living in the ole US of A. But it's not nothing either. A family of 4 would bring in 13,153 USD per year. That's over half the federal poverty line for a family of 4 (22,350 USD) for 2011. Obviously the US is a big place with lots of variance in the costs of living. 13k in rural Arkansas will get you a lot further than 13k in Los Angeles. And maybe that will be an incentive for people to move.
One thing that I think the proponents of UBI have right is that it very well might reduce health costs. Human beings are not designed for chronic stress, but that's a large part of modern life. Poor sleep and high cortisol levels make for enormous health problems over time. In fact I was just listening to Joe Rogan's podcast episode with Matthew Walker, a neuroscientist who studies sleep, and Walker made the point that just a simple thing like drowsy driving is responsible for thousands of deaths every year.
One thing that I think the proponents have wrong is trying to calculate that GDP will grow by some percentage and that the growth effectively reduces the cost of the UBI. Studies forecasting the effects of major structural changes are always wrong. The economists and others who put together these figures seem to think they have human nature all figured out, but they are dis-proven every time. But nobody cares what was said 6 months or a year ago, so they just keep believing the experts and talking heads on TV.
In the 3,288 USD per person per year calculation we are not assuming any major changes to how everything works in our society. It's revenue neutral compared to where we are now. Like I said, this money is already being spent, but in all kinds of programs that reward some, punish others, and come with all sorts of administrative waste and conditions. With the simplification of administration, there will be some cost savings. Of course that means those government workers will find their positions eliminated, and they might be relying on their UBI a bit more than they expected.
Can It Be Done?
This kind of low-level UBI is 100% doable today. This is without creating a negative income tax or restructuring the minimum wage.
Politically it would be difficult to enact though. Even if UBI supporters get elected, there will be losers who are getting more than 3,288 in benefits today. Section 8 housing vouchers, for example, could be over 1,000 USD per month for a family. That could go past 3,288 per person in a hurry. These people might see their social safety net be eroded a little or even a lot.
Will It Be Done?
Not any time soon. The politicians who are seriously proposing these kinds of programs are still on the fringe of the political landscape. We might see this change over the next 10 to 20 years though.
Resources:
https://www.budget.senate.gov/imo/media/doc/CRS%20Report%20-%20Welfare%20Spending%20The%20Largest%20Item%20In%20The%20Federal%20Budget.pdf
Federal Budget
https://www.census.gov/prod/2011pubs/11statab/pop.pdf
https://aspe.hhs.gov/2011-poverty-guidelines-federal-register-notice
http://podcasts.joerogan.net/podcasts/matthew-walker
Excellent post about the debate with UBI. We like to see those who look to present this discussion in a fair and factual fashion.
We know there is no clear-cut answer at this time yet having debate cut of because of ideology is not the proper approach in our opinion.
Our program is designed to bring the issue to the forefront without having the roadblocks thrown up that come from a discussion that includes tax dollars.
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Congratulation nealmcspadden! Your post has appeared on the hot page after 4min with 3 votes.
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@escapeamericanow What do you think?
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I find Simon Black's arguments pretty compelling.
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As many know , for many years now its been known that AI implemented with robotics will indeed replace many jobs. As illustrated so clearly in this article that society will change depending on how UBI will be implemented, there still is the question where is all this wealth coming from and if you understand that then you may agree that its actually not a form of communism. My position on UBI is neutral, i do not support it, nor oppose it, however its important to know what needs to be known to understand how things work. I'm fairly certain the wealth generated that will be equally distributed is generated from Artificial Super Intelligence systems, that's one reason why computing power is the new military superiority.
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Your math is the usual napkin math, which is wrong. UBI cannot be calculated like other programs because it's a program where people are paying to receive money. Thus the cost is the net cost not the gross cost. If you paid $10 to receive $20, would you say that cost you $10? That would make no sense because you have $10 more, not $10 less.
https://medium.com/p/acb8aa5eab73
Another problem with your calculation is that you don't look at tax expenditures. If we are giving someone $12,000 in tax credits, why would we also give them $12,000 in cash? Just give them the UBI and eliminate their tax credits. The cost is the same. Right now we have $1.5 trillion in tax expenditures, so add that, or at least some of it, to the UBI pot.
Next, I take issue with revenue neutrality based on existing programs. For example, we could introduce a revenue neutral carbon tax. It would be a new tax, but the revenue would be returned via the UBI. Same is true for a revenue neutral VAT. These are ways of funding a higher UBI in a way that functions as a negative income tax, where some are net payers and some are net receivers.
There is nothing about UBI that is unaffordable, and although you only mentioned your belief that UBI would be damaging to the economy in passing with no support for that argument, there is no support for that argument. All UBI studies show positive effects, included increased entrepreneurship and increased part-time employment.
People are not inherently lazy, and when basic needs are covered, people are enabled to accomplish far more in life.
Our decision to adopt UBI or not comes down to a matter of will, not can. Part of this challenge is looking past what we think we know. Will you take up this challenge?
http://www.scottsantens.com/basic-income-faq
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The 1.03 trillion already includes the refundable tax credits, so using this approach those would be eliminated. Check the actual Senate report. There is no double spending in this case.
The people who currently pay income taxes would still be paying income taxes at the same rates. The only change would be how it's distributed.
Obviously there are multiple proposals for UBI with different structures. What I describe above is one of the simplest ways to do it given current taxing and spending levels.
Whether the societal changes were "people are enabled to accomplish far more in life" means economic value added or subtracted very much remains to be seen.
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