Universal Basic Income Is a Bad Idea

"...a UBI of just $1,000 per month would cost around $4 trillion per year, which is close to the entire federal budget in 2018. Without major cost savings, US federal tax revenue would have to be doubled, which would impose massive distortionary costs on the economy..."

So we need major cost savings or taxes to go up.

"Sacrificing all other social programs for the sake of a UBI is a terrible idea. Such programs exist to address specific problems, such as the vulnerability of the elderly, children, and disabled people. Imagine living in a society where children still go hungry, and where those with severe health conditions are deprived of adequate care, because all the tax revenue has gone to sending monthly checks to every citizen, millionaires and billionaires included."

This came our of nowhere as social programs were not mentioned before this line. It's basically fearmongering at this point.

Maybe someone can help me understand what the argument here is. Perhaps I'm being harsh on the author but I just don't see how you can make this argument with genuine intentions.

They state that the only and sufficient financing scheme to make UBI work are the so called monopoly taxes. Simply because if you hand out free money to the people, the monopoly service providers could hike up prices by exactly that amount given out freely to people in aggregate. Other non-monopoly providers would still be trapped in a competition so it would be more difficult for them to increase the prices after UBI implementation. Monopolies would set the prices exactly to the point where they would optimize their income by eating away all the free money suddenly given to people.

This is well described by Ricardo's law of rent (1809) in the context of land rents (which are essentially land monopolies). In other words the landlords would increase the rents exactly to the aggregate amount of UBI money handed out.

Interestingly enough the present day proponents of UBI don't understand this basic law. Some od them are aware of the UBI inflation problem but are not aware of this monopoly inflation problem.

Andrew Yang proposes Value Added Tax to finance it, which proves he has no clue.

> Besides, a more sensible policy is already on offer: a negative income tax, or what is sometimes called “guaranteed basic income.”

Negative income tax (NIT) and UBI are not alternatives; NIT is one possible model for implementing UBI; they become just alternate ways to describe the same math.

In both cases, someone with zero income receives, say $1000. Someone with $500 in income gets something between $500 and $1000, because taxes start to kick in. The benefit continues to be positive until some inflection point, say $5000, where higher taxes end up overwhelming the initial benefit.

By playing with the tax curves you can get any payout model you like and describe it as both NIT and UBI.

"Rather than giving everyone $1,000 per month, a guaranteed-income program would offer transfers only to individuals whose monthly income is below $1,000, thereby coming in at a mere fraction of a UBI’s cost."

Can you not see the obvious problems with giving someone $1,000 so long as they aren't making above $1,000? Why would anyone making $1k continue working for zero benefit?

With UBI, a minimum wage worker is still incentivized to work, as they don't lose benefits. That's kind of the point. Social safety net without getting trapped in the "net".

UBI has plenty of issues, but he's not making a good case.

This is the worst possible article one could write against UBI.

But the article is not written for fans, to convince them otherwise, it's to prevent people from becoming fans.

pg.com/submarine.html comes to mind.

> UBI advocates would argue that non-universal transfer programs are less attractive because voters will not embrace them as enthusiastically. But this criticism is unfounded.

Why is it unfounded? Am I just supposed to take that on faith? The author probably should've written more than 2 sentences after this statement before moving onto his next assertion.

First, let's assume we cannot solve the problem now, or in the short term. Short term here is < 50 years. What then?

Second, let's commit ~$100bn to the problem annually for that 50 years, and make that our max investment per year, not counting administrative costs. This amount would increase slightly each year as population increased.

Third, divide that $100bn among the babies born that year (~4million in 2018), using trust funds to get 7% interest, compounded annually at the start of the year with no additional contributions, and untouchable until they turn 50. Do this for the babies born each year.

Fourth, institute a fiscal responsibility education program with the vigor that sex ed was approached with, at elementary, middle, and college levels. No idea what the cost of this would be, but it would have to be factored in.

Fifty years later the first babies born under this program will be able to access their money. Each will have roughly $1.4million, and able to live off 5% annual interest without decreasing that amount ($70k per year). Since a couple will have roughly two people, each of their children should get roughly the same amount. In other words... in fifty years there could be little to no poverty in this country, if only we could think long term.

To put the $100bn into perspective, the annual defense budget for 2019 is $617bn with another $68bn for war funding. So, we could possibly eliminate poverty for $32bn more than what we are spending on the war.

The above plan is all under CC-By-SA 2.0 license, by Bill Barnhill, see https://creativecommons.org/licenses/by-sa/2.0/.

It's not a stretch to say 3 trillion is way too much but why does author feel the need to be deceiving and just make that number slightly larger is beyond me. This really discredited him in my eyes as trying to have an objective discussion about the matter.

Last time I checked the going effective tax rate across all corporations was something like ~17%. How about corporations stop fucking us all out of the revenue they owe us; because I'm pretty sure doubling that to the expected rate of 35% would fix the funding problem.

With any redistribution program, just looking at direct costs and not its effects on the economy, the average person breaks even. That's what redistribution means - there's no money being created or destroyed. The numerator and denominator don't change.

But most of us are not average. Like with insurance, most people end up paying most of the time, but if you're out of work for any reason, or just working a low-paying job, then you'll benefit. And like most other insurance, the advantage is security rather than actually saving money, most of the time.

Along with that security comes greater freedom. The question is a philosophical one: do you trust that most of your fellow citizens can handle freedom? Will they live in near-poverty rather than strive for more? Do you trust that if someone decides not to work, they usually have good reasons? And do you think it's worth paying in during good times in order to ensure everyone has somewhat more freedom to choose where to live and how to make a living?

Or do you think that people cannot be trusted and must be controlled via the threat of financial ruin?

That economic fluid, like blood, has to circulate in order to be useful. In many places, the flow is very asymmetric. A region has natural resources, or a cultural significance, or a coincidental concentration of skills. But for whatever reason, the value is then extracted and sent elsewhere, rather than staying in the community that produced it. Absentee landlords take their rents and spend them in a different city. Chain and franchise businesses send their profits to distant owners that spend their dividends and distributions elsewhere. Worker wages are sent to families that live in another city. Local money is spent mostly on consumables instead of development capital.

When owners don't spend money where they earned it, it becomes a circulation problem. The work that people do in their own communities is then being used to develop and improve someone else's community. Coal miners in West Virginia are actually digging up million-dollar houses in Washington DC metro area. Farmers in Iowa are actually growing luxury cars in Chicago. Software developers in New Mexico are actually launching a new live-act auditorium in Las Vegas. All the work done, everywhere around the world, is developing mostly the places where the owners live, and those people don't want to live in undeveloped places, even if those places are only undeveloped because all the development potential is continually sucked out to be sent to the owners.

So what is needed is universal basic ownership. If you just dump helicopter cash onto an undeveloped area, the owners can suck harder on their rent straw until they drain away all the excess. Live in a home you own, with no mortgage, and there are no checks being sent out of town for rent or interest. Buy fiber-to-the-home network access from the municipality, and the service fee is not being sent to Comcast or AT&T headquarters; it's being spent on local capital and jobs. When most of the ownership is local, it's much easier to balance the production that the community exports with the consumables that it imports. The only way to unbalance it from there is to make the community want more imports, without buying more of its exports.

That extra cash in the mailbox isn't going to fix the economic problems inherent in locally unbalanced earning and spending. It is only a short term fix to tax the high-ownership individuals and move the money to where it should have been spent. It's like performing a cardiac bypass without also attempting a lifestyle intervention with the patient. That new flow route will work for a little while, and then it too will get clogged with calcified plaques, just like the others. UBI treats a symptom, instead of curing the disease, which is that too few people own too much property, and thus they literally cannot spend enough in all the communities in which they own that property to keep them all healthy.