How do you pay for Universal Basic Income?

[Zhavric]

Topic for debate: Universal Basic Income (UBI) is impossible.

I'd actually REALLY like to be wrong about this because I think UBI would solve a LOT of problems in America. I just don't see how you'd be able to do it.

Let's do the numbers first. Let's say you wanted to give UBI to saaaaaay 30% of Americans over the age of 18. The homeless. The people really struggling. Let's say you wanted to make it $1000.00 per month / $12,000.00 per year. Assuming that there's about 250 million Americans over the age of 18, the math works out to $900,000,000,000.00. Juuuuuust shy of a trillion dollars. For comparison, the 2017 budget was in the ballpark of 4 trillion.

So how do you make it work? What's your argument that proves my assertion (that it's impossible) false?

[futureboy]

Why not just start with the homeless? Last stats I saw for 2016 showed just over half a million homeless in all of USA, which works out to only 6.8 billion - less than 1% of the military spending budget.

Don't you think the impact of providing UBI to all of USA's homeless would warrant 1% less being spent on USA's military endeavours?

[SharmaK]

Finland just scrapped their plans for UBI because they ran out of money (http://dailytorch.com/2018/05/univer...-its-lesson/):

Even finance minister Orpo had to admit to the Financial Times that the UBI system in fact made people “passive”. Orpo explained, “When we look at our economy that is now growing, we have tens of thousands of free jobs [that cannot be filled] and more than 200,000 unemployed people. We have to look at the incentives to work.”

That said, I think the idea of UBI, with the right people and the right mentality, would help people get on a better footing since they'll be able to focus on getting a job. The problem is that these programs are decided by the worst offenders who take advantage so they end up failing. It might work if other programs are cut to pay for it but some of those programs are specifically targeted so people don't waste the money.

On the whole though, I think it's a terrible idea.

[Sigfried]

UBI is a utopian ideal of sorts, not a bad one, I think it's great in fact, but ya, very hard to make it work. Before I try to answer the question.

A: I think UBI should live up to its name and be universal. It's not just for the poor or 1/3 of people etc... you should give the same value to absolutely everyone in the society. (BTW this doesn't really impact its cost much, any money you "save" by not giving it to the wealthy, basically only decreases a tax on said wealthy people. Its a 0 sum game at the top end. But there are political and pragmatic reasons why you should have it be universal.)

B. It really works best with a world government. With nations, you have the problem of tax flight in a UBI scenario and I've yet to really figure out a way around that unless you make it impossible to renounce citizenship or if you do you loose all your assets etc...

All that said... how do you pay for it?
1. Automation
The main reason why UBI is so often talked about is the concern about intensive automation. AKA you get to a point when robots can do pretty much anything a person can do, but better and cheaper. Rich people buy and own robots, they make more robots, and pretty soon a very tiny sliver of humanity simply doesn't need ther rest of humanity for anything.

If you do get to that point, or start to approach it, then the clear answer is to tax value from all the robots. they are creating massive wealth, and you take a share of that and give it to everyone in society at a subsistance level. They can just be consumers, or they can invest it in their own robots etc... Basically, the outrageous level of overall wealth makes it possible to collect the kind of money needed.

2. Removal of other social services
BUI is meant to replace things like social security, AIFDC, Food aid, housing assistance etc... Basically all the welfare that isn't medical coverage (that's a whole different problem). Getting rid of all those programs gives you some of the money, and those things take a lot more overhead than UBI does so it is more efficient.

3. Gradual implementation - Baby UBI
Until you ge the robot singularity thing going, you might do a lesser version of UBI, UBI training wheels as it were. I'd probably start with a program that starts a bank account for all newborn Americans, contributes to it each year, and invests the money in relatively safe securities. When the child comes of age and achieves adult status, the money becomes available to them to borrow from (piad back to themselves essentialy). This gives all AMericans some capital stake to start life with. They can go to school, start a business, save for retirement, or possibly just piss it away. But rich or poor, every kid starts their capital expereince with a stake. And the up front commitment wouldn't be all that massive. Big, but probably managable.

[Squatch347]

Overall, the UBI is a good solution when compared to the monstrosity of welfare programs we currently run that are both expensive and ineffective. The UBI has a lot going from it from an incentive and applicability point of view. The devil, however, is in the details.


Paying for it

Well, the usual answer for paying for it, is that the UBI would replace existing welfare and transfer payment schemes. Which very conservatively covers that $1T number. That said, there are probably significant savings in there as well as we currently spend something like 40% of the transfer payment on administrative costs. So moving to a UBI would be much more efficient.


Rationrecipientint assumption

I am a bit wary of the homeless suggestion here. There is significant evidence that at least a large bulk, if not the majority of homeless are homeless due to mental illness. The defense of the UBI relates to empowering rational decision makers about their own future and I'm not sure that would apply to some segment of the homeless. We would need to keep some portion of that money back for mental illness treatment most likely (not the best solution imo, but the most feasible in current environments).


Marginal Effects

There is one very significant problem I don't think anyone has mentioned yet. The marginal cost or marginal tax rate for the UBI is really high unless it is significantly increased in size. To illustrate, let's take the OP's solution for the homeless. If we give someone who is homeless $12K, and they use it to move into a group home, are they no longer homeless? Does that mean the payment stops? That kind of problem is relativley universal. If I get a job that pays me an extra $4k a year such that I am now over the threshhold, do I stop getting the $12k? Obviously there is an disemployment effect there. a

So for the UBI to be practical, we would need to phase out its application over several wage levels most likely. Of course, that problem is solved if we are faithful to the name;


A UBI that isn't universal

All of the options here involve the UBI not being universal. There are a couple of problems with that kind of implementation, not the least of which is creep. Why $1000 per month? Why not $1500? The inflationary effects of transfer payments are going to make not only that $1000 less valuable, but also impact those just above the income line as well, making them better candidates. Historical evidence shows that those kinds of programs tend to expand dramatically and overrun costs (medicaid/medicare anyone?). That is generally why adherents tend to include this as a universal basic income. It resolves a lot of the incentive problems that come from a pure transfer payement program.





If anyone is legitimately interested in the complications, benefits, drawbacks of a UBI this is the best podcast on the issue I've heard: http://www.econtalk.org/archives/201..._munger_3.html

[Belthazor]

That said, I think the idea of UBI, with the right people and the right mentality, would help people get on a better footing since they'll be able to focus on getting a job.

If takes "the right people and the right mentality" to make a great idea work, don't do it!!!

I have a feeling we are headed in this direction though. Robots and AI are projected to take over the vast majority of jobs in my lifetime. Will altruism prevail, since there should easily be "enough" for everyone, or will a more socialistic situation take hold where food/housing/things/etc are rationed for the general public (of course the elite [looking your way Al Gore, for instance] will live in abject luxury at the commoners expense as always).
History is a great predictor of societal outcomes, but that and common sense were "outlawed" a while back

---------- Post added at 07:57 PM ---------- Previous post was at 07:57 PM ----------

On the whole though, I think it's a terrible idea.

Agreed

[mican333]

From what I've seen from pro-UBI articles, it is assumed that automation and other things will take up so many jobs that eventually it will be inevitable that there will not be enough work to keep everyone employed. Of course whether this will come to pass can be debated and if it doesn't, then the case for UBI might be pretty weak. But in the discussion of UBI, it's worth examining the issue if the prediction is correct.

So I'm going to present the hypothetical scenario that we don't have enough jobs (and arguing that it won't happen is off-topic for this particular discussion). So let's say the we produce enough of the basics (food, shelter, health care) to give everyone in the US a decent standard of living but we cannot produce enough jobs to keep many people employed. In that situation, it seems the only two options are giving a certain amount of the necessities away or just letting people go without despite the fact that they would work to attain the basics if they had the opportunity. In that situation, it seems the clear morally correct choice is to provide some necessities without condition.

[Belthazor]

From what I've seen from pro-UBI articles, it is assumed that automation and other things will take up so many jobs that eventually it will be inevitable that there will not be enough work to keep everyone employed. Of course whether this will come to pass can be debated and if it doesn't, then the case for UBI might be pretty weak. But in the discussion of UBI, it's worth examining the issue if the prediction is correct.

So I'm going to present the hypothetical scenario that we don't have enough jobs (and arguing that it won't happen is off-topic for this particular discussion). So let's say the we produce enough of the basics (food, shelter, health care) to give everyone in the US a decent standard of living but we cannot produce enough jobs to keep many people employed. In that situation, it seems the only two options are giving a certain amount of the necessities away or just letting people go without despite the fact that they would work to attain the basics if they had the opportunity. In that situation, it seems the clear morally correct choice is to provide some necessities without condition.

I think the moral question in this scenario is maybe more like:

Is there still going to be the "many" and the "few'?
IOW, are a few people always going to have exponentially "more" than the average person? Insane wealth vs comparative poverty (even if all the basics are covered).

I wonder how this will affect population. When most people farmed, a large family was a benefit. Move to the city, a large family is a financial burden.
What would happen when all basic needs are taken care of?

[mican333]

I think the moral question in this scenario is maybe more like:

Is there still going to be the "many" and the "few'?
IOW, are a few people always going to have exponentially "more" than the average person? Insane wealth vs comparative poverty (even if all the basics are covered).

I wonder how this will affect population. When most people farmed, a large family was a benefit. Move to the city, a large family is a financial burden.
What would happen when all basic needs are taken care of?

If everyone's needs are taken care of then I would say that others being insanely rich, as long as they legitimately earned their wealth, is a non-issue.

Assuming we could afford to do it, the UBI payout should be at the level where no matter what, a person should not have to worry about homeless or starvation for him and his family but if he wants more than that, then he will need to earn more money. If one goes out and earns A LOT of money and becomes incredibly wealthy, good for him. But when the rich keep getting richer (while not really do much more for others as they were doing before) while others are homeless and starving is when one can legitimately question how we are distributing wealth.

And one benefit of UBI (assuming we really can give everyone the basics) is that it better allows a person to pursue a career where his talents lie. If one has a knack for painting but doesn't have to spend 40 hours a week at a job, they have more time to develop their skills and might perhaps become so good and have a highly satisfying career where they make a lot more money than they would if they stayed at their day job. And it's also good for everyone else because assuming the painter becomes truly great, society is better served by this person as an artist than they would if he stayed in a menial job that he was mediocre at. And if it turns out the person isn't going to make it as a painter, he won't end up homeless and starving because he followed his passion.

And the scenario goes for all kinds of artists and we would likely have better novelists and musicians. And also inventors. Wouldn't society be better served if those who have a genuine talent for invention spent their time inventing instead of mopping floors? And of course an artist can still work a bit. They can work 10 or 20 hours a week for some extra spending money or to have a car or travel some times.

[Belthazor]

And of course an artist can still work a bit. They can work 10 or 20 hours a week for some extra spending money or to have a car or travel some times.

Well, my comment in context assumed most jobs will be performed by AI or robots
"I have a feeling we are headed in this direction though. Robots and AI are projected to take over the vast majority of jobs in my lifetime."

If it did happen in my lifetime it would be unprecedented in human experience.

The artist then may not be able to work part time or at all...
And, if people are not working to earn "money", who is the artist going to sell to and how would he be paid? What would he do with the "money"?

If machines are doing most labor, energy would likely be/nearly free. Transportation also.
At that point, there really won't be a cost to anything. Robots will make more robots and everything else.
There is an initial cost, but we are paying for some of that as we speak since it is happening all around us.

[MindTrap028]

The easiest way, is to just print the money. It's not like we arn't doing that already. Clearly we can print money, so we can pay for UBI.
Combined with replacing current welfare, and removing any other monetary aid. Like subsidizing cars or some such, it would probably not be out of the realm of affordability.

[Squatch347]

The easiest way, is to just print the money. It's not like we arn't doing that already. Clearly we can print money, so we can pay for UBI.
Combined with replacing current welfare, and removing any other monetary aid. Like subsidizing cars or some such, it would probably not be out of the realm of affordability.

That would certainly work to cover $10,000 or $12,000 or whatever in nominal terms. But printing is inflation, and generally is followed by price inflation. It would be a UBI, but it would just make everyone a little poorer.

[Belthazor]

That would certainly work to cover $10,000 or $12,000 or whatever in nominal terms. But printing is inflation, and generally is followed by price inflation. It would be a UBI, but it would just make everyone a little poorer.

Spending money you don't have:
"ALWAYS" the right choice"

Once robots do most of the labor, where is the "cost" coming from?

[Sigfried]

That would certainly work to cover $10,000 or $12,000 or whatever in nominal terms. But printing is inflation, and generally is followed by price inflation. It would be a UBI, but it would just make everyone a little poorer.

I think that is especially true in this case. While I poo-poo the fiat currency critics, the reason I do so is that printing money makes sense in an expanding economy. More economic activity means more currency is needed to keep currency values relatively stable. But UBI would probably come with some productivity decline among labor so it would put you in a pinch of more currency and less economic productivity backing it. I think that could be a pretty bad mix.

I think it has to come on the back of durable capital productivity and you need quite a lot of it to make that happen without dramatically disincentivizing capital investment.

[Squatch347]

Once robots do most of the labor, where is the "cost" coming from?

Assuming that they will actually do all the labor (try telling that to the luddites), it would result in pretty signficant deflation since goods would become so readily available.

I think that is especially true in this case. While I poo-poo the fiat currency critics, the reason I do so is that printing money makes sense in an expanding economy. More economic activity means more currency is needed to keep currency values relatively stable.

In theory I agree with that. The problem is that it is essentially impossible to really measure that kind of change. Was the price deflation due to economic expansion of production vis the money supply or was it because that set of items was superceded by later items. Laptops are cheaper now due to technology and productivity improvements. VCRs are cheaper now because they are obselete.

Hard to really measure that difference, and the capital signals being sent, even if you are right, tend to misallocate resources into short term projects.

Of course, if we are talking the difference between Austrianism and Market Monetarism (I think you position here), then the world is still a much better place than it is today imo.

But UBI would probably come with some productivity decline among labor so it would put you in a pinch of more currency and less economic productivity backing it. I think that could be a pretty bad mix.

I just came out of back to back meetings so it might be me, but I don't quite follow you here. Do you mean that there would be a productivity decline because people would work less (total output)? Or some kind of productivity decline would trigger a UBI? Or am I not even in the right ballpark?

I think it has to come on the back of durable capital productivity and you need quite a lot of it to make that happen without dramatically disincentivizing capital investment.

100% agree here. This would also (I expect) alleviate an UBI as people would probably change their work habits if such a capital based return became available. We see that now with used vacation time increasing and people adjusting their lifestyles to work more remotely, etc.

There is a distribution part there that we might discuss, but generally I think you've made the most accurate and insightful point of the thread here.

[mican333]

Well, my comment in context assumed most jobs will be performed by AI or robots
"I have a feeling we are headed in this direction though. Robots and AI are projected to take over the vast majority of jobs in my lifetime."

If it did happen in my lifetime it would be unprecedented in human experience.

The artist then may not be able to work part time or at all...
And, if people are not working to earn "money", who is the artist going to sell to and how would he be paid? What would he do with the "money"?

If machines are doing most labor, energy would likely be/nearly free. Transportation also.
At that point, there really won't be a cost to anything. Robots will make more robots and everything else.

But then we are no longer in a scenario where we would have a reason for UBI. If all of our needs are taken care and there's no need for anyone to work, then there is no need for trade and therefore no need for money.

UBI is for a situation where we still have money and people generally get their money through work but there's no longer enough work available for everyone to earn enough money to live in an acceptable standard (so some people, through no fault of their own, are homeless/hungry).

So the Star Trek Utopia situation is not really an example of UBI.

[Belthazor]

But then we are no longer in a scenario where we would have a reason for UBI. If all of our needs are taken care and there's no need for anyone to work, then there is no need for trade and therefore no need for money.

Right, your needs will be taken care of, but by robots performing the labor the labor instead of the gov't sucking money from people and companies and then redistributing it in a "fair" way!! The whole idea of UBI is so people don't have to work, and still live a "good life", not how that situation comes to pass.

It amounts to a similar situation where people do not need to work, but still have their needs met and it would pay for itself when technology allows.

At the point when needs are met without working, then what will people do (Star Trek or sloth) was a minor point and really, a bit off topic, though it is an interesting topic IMHO

[Sigfried]

I just came out of back to back meetings so it might be me, but I don't quite follow you here. Do you mean that there would be a productivity decline because people would work less (total output)? Or some kind of productivity decline would trigger a UBI? Or am I not even in the right ballpark?

I'm just saying that if we had UBI, people would, on average, work a bit less. That would shrink the economy somewhat, which, coupled with monitary expansion, could have inflationary pressure. So you have to balance it with the productivity growth of capital.

Some major technological breakthrough like reliable fusion power systems could send us into a situation where capital growth explodes and at the same time reduces the relative value of labor significantly by making power for automated systems insanely cheap.

[Squatch347]

I'm just saying that if we had UBI, people would, on average, work a bit less. That would shrink the economy somewhat, which, coupled with monitary expansion, could have inflationary pressure. So you have to balance it with the productivity growth of capital.

Some major technological breakthrough like reliable fusion power systems could send us into a situation where capital growth explodes and at the same time reduces the relative value of labor significantly by making power for automated systems insanely cheap.

Yeah, I see what you were saying now, sorry. Totally agree with you on these effects. The other major factor, imo, would be the creation of new labor categories as labor changes. I, of course, have no idea what those are (or I would be on a boat right now or my own plane). That could be expansion of the service sector or the gig economy or whatever. In general though I agree with you on the price inflationary effect outlined and its resulting minimization of UBI's benefit.