Wednesday, November 12, 2014

Why I support a guaranteed basic income

I've been a radical social liberal for a long time, but agnostic about most economic issues.  Macroeconomics is black magic, after all.  Nonetheless, over the past few years my economic politics have skewed more and more liberal, even though I don't blog about it much.

For example, one hypothetical policy I would support is a policy of giving everyone money.

That's a policy that I never would have supported when I was younger.  Even when I was a teenager, I understood that money is a fictitious entity.  If everyone had more money things would just cost more.

Put another way, say we had enough bread and houses to provide food and shelter for a million people.  If you gave everyone money, then prices would just rise until only a million people can afford bread and houses.  The same number of people would starve and go homeless, because it's not really a money issue, it's an issue of how much resources we have.

On the other hand, if you give everyone the same amount of money, that has the effect of redistributing wealth.  It would reduce inequality, basically.  And there really would be fewer starving and homeless people, because we would invest less in producing luxury goods for the most wealthy, and invest more in producing additional bread and houses for the poor.

One thing that colors my view is that I'm part of the millenial generation.  I'm entering the workforce in a time when unemployment is higher than ever.  What do unemployment rates say about our society?  It's possible that it means we're just allocating resources poorly.  But the other interpretation is that we have a surplus of labor.  We're too efficient at producing the goods that we need.  This is a bad thing only because employment is the primary way we distribute money.  If individuals can't find jobs then they're in financial trouble.  The easy solution is to distribute money by other means.

I think the unemployment levels are really just the tip of the iceberg.  When people are desperate for jobs, they'll accept worse jobs.  I'm coming from a cynical grad student perspective, and one of the things I despise is the workaholic culture in academia.  People expect you to work longer than normal hours.  And in order to advance to professorship, most people have to spend years in postdocs for low pay.  You just have to put up with it, because there are too many other people who want your job.

There are also governmental jobs which provide no real value to society.  They're just there because governmental employees can vote, and therefore vote to maintain their own jobs.  I would rather just give those people money instead of having them waste their time to get it.

Why a guaranteed basic income?  Why not welfare instead?  There are two reasons, one economic, and the other social.

Earlier, I learned a bit about how welfare works in the US.  People are awarded a certain amount of money, with a certain percentage of their income deducted.  And in order to remain eligible for welfare, people need to eventually find a job.  But if we have a surplus of labor, why require people to find a job?  And deducting a percentage of people's income amounts to an effective tax on the poorest people.  By giving everyone the same amount of money regardless of income, we remove that effective tax (not to mention cut down on bureaucratic costs).

Welfare also has a social problem, since they're perceived as handouts rather than money that is rightly owned by its beneficiaries.  Taking welfare amounts to admitting that you are unable to provide for yourself.  But this isn't really a matter of individual failure, it's a matter of correcting an economic problem that comes from labor surplus.  Thus, nobody should feel bad about receiving money.  If wealthy people receive the same amount of money, it would be harder to stigmatize.

Anyway, I have the impression that this puts me way to the left of US democrats.  Although to be fair, libertarians often support a similar policy under the heading "negative income tax".


miller said...

I wonder how this would affect inflation and prices? Surely inflation would skyrocket with so much more money in the economy, plus that money has to come from somewhere. The government could just "print" more money but that would make the dollar weaker and spike inflation. Plus costs would skyrocket because nobody is going to work at a fast food place or construction or whatever at our current minimum wage when they can choose not to and sit at home with guaranteed income. I think the societable benifits overall would be great - parents having more time to stay with their kids and be involved in their academic lives, for example.

miller said...

I would support some sort of taxation to pay for the guaranteed income. Since the entire point is to redistribute money, taxation is a feature, not a bug.

Inflation is basically a kind of taxation, which taxes people according to how much money they have. I'm not sure it's a particularly great form of taxation, since people can just put their funds into some sort of physical capital rather than money.

If food service and construction are such undesirable jobs that people will only do them when their survival depends on it, rather than the ability to consume more goods, then maybe those jobs should in fact get higher pay.

miller said...

In addition to the possibility of raising taxes, in most proposals the cost of guaranteed income is counterbalanced by reductions in the spending of other programs like social security, welfare, etc.

Also, the effects could vary widely depending on the specific form of guaranteed income: some more conservative proposals suggest only small payments of about 3k - enough to bump someone above the poverty line, but nowhere near enough to live on without other income.

And even in proposals meant to guarantee a *livable* income, that's typically for a bare minimum standard of liveable - 10-15k seem to be common numbers in proposals I've seen. Which is enough to live on, yes, if you live in a very inexpensive neighborhood and eat cheaper food like rice and beans and never get seriously ill or go on vacations. But if, for example, you wanted to live some place like the SF Bay area, that amount would barely cover your rent (and not even be close if you wanted to live in SF instead of a neighboring city) - if you wanted to be able to eat too, you'd still need income on top of the guaranteed income. While some people might be fine with just barely scraping by in order to avoid having to work, most people like nice things and would be willing to work for them. (In previous experiments with guaranteed incomes, it appears that most people wouldn't change their work habits much anyway - the major exceptions were students and parents of very young children (who often still worked reduced hours), who ideally shouldn't be working as much anyway)

Also, I'm not so sure that it would make people stop working for low wages - if anything, I would think it might make some people *more* willing to work for lower wages, since they are no longer depending on those wages for their very survival.

That might be a problem in some forms of income assistance where the minimum income is only gauranteed to those with a low income, where you lose benefits if your wages rise too much, but (if I'm understanding correctly) that's not what's being discussed here - in most guaranteed income scenarios, you get the boost no matter what your income level is.

miller said...

3k a year is definitely not enough to bump someone above the poverty line--unless you meant bump just a few people? (see here)

10-15k was around the amount I was imagining, although I think smarter people than me should decide the quantitative details. I'm not sure if being enough to afford rent in the SF bay area is a particularly good standard, given how much of an outlier it is. Where you live is one of the components of wealth, although it often doesn't feel that way, because you're surrounded by people who live in the same location as you.

I'm interested in these experiments with guaranteed incomes. Cite?

miller said...

I think one of the biggest challenges with minimum income - and one of the reason most established Democrats aren't in favor of it - is that implementing minimum income also typically includes reforming/replacing/dismantling existing social programs, and in a country the size of the US that presents a huge practical challenge, both in terms of the legwork required to take down old systems and set up new ones, and in terms of the huge political obstacles required to change/dismantle existing social support systems. Plus, if existing programs are dismantled and minimum income for whatever reason fails to function (whether due to actual flaws or whether due to unrelated political problems), it could leave the US without a working safety net. And so since the current social security system works "well enough", most established government figures are very hesitant to replace it.

Practically speaking, I think if something like minimum income were to happen, it would have to happen first in a country that's a lot smaller and/or already has experience with somewhat related systems like universal healthcare - the political obstacles in the US are such that I think it only really has a chance if it's already been proven to work and work well somewhere else. Which is why it'll be interesting to see if the current movements in places like switzerland gain any traction.

miller said...

I wouldn't dispute that there are major political challenges in the US. I'd probably just leave the existing social programs there (slowly shrinking due to declining political support), and raise taxes. Of course, taxes are not really a winning political proposition.

miller said...

re: the 3k proposals, you're right, they bump *some* people above the poverty line but they don't help everyone. I think those are mostly meant to bump up people working minimum wage jobs over the poverty line, and it doesn't do much for the disabled or retired or otherwise non-working. From what i can tell those types of proposals are also meant to supplement more traditional social support systems (including social security and medicare, etc.), rather than a replacement, in an attempt to make a more politically feasible "compromise"

I'm actually calculating based on my rent in richmond, which is on the lower end for the SF area; it was just sort of the first thing that popped into my mind, since 10k is about how much my rent costs me per year, even with a flatmate (and is pretty close to the US average annual rent, which is also around 10k, at least by some calculations). I guess my point was that, for example, while some people might theoretically be able to drop their minimum wage jobs if a minimum income was implemented, the actual "cost of living" for many areas is much higher than the federal poverty level, which is what minimum income experiments tend to be calculated on.

re: studies, most of the ones I know of are short term enough that they may not be generalizable, but they're still interesting to look at. The main one I've seen before is the Canadian "Mincome" experiment:

The other ones I'm aware of have been more about negative income models, so they may not be as applicable:

miller said...

In 1972, the Democratic candidate for president, George McGovern, proposed giving every American $5000/yr, the equivalent of $28,500 in today's money. It was a hugely unpopular idea, even for those more liberal times, and he had to back away from it. The Republicans loved it that they hardly needed to criticize it - they only had to gleefully repeat it and hand out $5000 play money bills to campaign against him. I was a student who did some work at a local campaign office of his, and even I heard nothing in favor of it, even his supporters were aghast that he seemed to be throwing the election away like that. And so who won? Richard Nixon, by the biggest landslide in history, who soon became the most unpopular president in history and the only one forced to resign. So no, the chances that mainstream Democrats will support your idea is flat out zero, at least for any significant amount of money, and probably for any money at all.

miller said...

So what? I don't think that miller is trying here to come up with a winning electoral strategy for the Democratic party. An idea that is presently unpopular can become popular only through analysis and advocacy. It has happened before, e.g. the "democratic" republic and capitalism.

miller said...

So what so what? I am making conversation. I happen to know miller extremely extremely well.

miller said...

You don't hace inflation if you don't inject money into the economy. Which UBI does't. UBI it's a way to redistribute wealth do there is nobody with nothing.

Look what happens with inflation if you inject money.

Otherwise, economics is not a science, neither precise. Those economist who claim that there is going to be inflation are those that couldn't predict the 2008 crisis. Those with the privileges. Those who would lose with UBI implementation.

Spanish model:

miller said...

Ugh, some people in this thread know me, and some people don't. But this is a public thread so I want to avoid privileging the former group.

miller said...

My feeling about this is that the future is a long time. Guaranteed income almost seems inevitable in the long run, as increasing technology concentrates wealth more and more.

miller said...

It occurs to me that one reason you'd want it in the US as opposed to say, Sweden, is that the US is a world power. The wealthiest people will have greater trouble running away from it.

miller said...

This has been an interesting conversation. Instead of taxation as a way to pay for it, how about "nationalizing" resources, then using profits to fund it? The idea that a nation's gas, oil, coal, stone, minerals, gems, etc belong to the people, not just landowners. Also, universal income should be the step after universal health care and universal higher education, so we have to solve those two first I think.