What would a basic income do?

[gay_Aleks]

But if the citizens decide to use the money to arm themselves/donate it to their police station (rather unlikely), they could fight back the criminals.

 

[Tahuti]

What's special about Arab countries' food subsidies?

Well, many Arab countries plus Iran have food subsidies on the sale of food to consumers, which are completely unlike the EU farming subsidies which subsidise the farmers - which are nevertheless also a bad thing as they encourage consolidation, but that's another story. The Arab food subsidies basically like reverse sin taxes in which the government pays for a percentage of the food stuffs. Abolishing these is highly politically unpopular since these are perceived to make food affordable, though the only thing they really do is prop up food retailers with tax money who then change prices to take advantage of this fact.

This is perhaps the closest simulation we have of the effects of basic income IRL on prices. They are not unconditional pieces of income as a basic income gives income, the Arab food subsidies don't, but illustrates how government subsidies when done badly will simply jack up prices.

 

[Borachio]

I had read the whole page. I chose to ignore that you all said minors wouldn't get the income because as a practical matter you would have to. Either that or maintain a welfare system for the parents of those children. This isn't so cut and dry to say give everyone 10k or whatever amount you decide on and all is well. At best even if this system were to work it would take a generation to reduce the crime involved with low-income people. More likely though, low-income criminals would start using the money for criminal activities which would only increase the crime rates. Then you have to think about the low income wage earners who are making only slightly above that basic income line, do they get the money too? If not I'd bet they would quit their jobs as it wouldn't make a difference.

Next, Inflation. Yes poor people if used correctly spend 99% of their income thus improving consumption but if this is a basic income for everyone then prices would go up, if its only for the jobless then your unemployment rate goes up.

Collectively, to expect this system to work in any sense is a Utopian pipe dream.

So what do you think of benefits generally? Would you be in favour of abolishing them completely? Because, as far as I can tell, your logic should apply to them as well. Unemployment benefit just encourages people to quit their jobs.

 

[Colonel]

So what do you think of benefits generally? Would you be in favour of abolishing them completely? Because, as far as I can tell, your logic should apply to them as well. Unemployment benefit just encourages people to quit their jobs.

Some are good, some are bad, and most are in a gray area. Unemployment benefits have a time limit at least in the US which is good. I think food stamps are a great one especially where children are concerned. Overall for outright welfare I think that entire system needs to be overhauled and the government needs to get away from giving money out.

 

[Timsup2nothin]

10,000 added makes a minimum wage job a living wage job, which is a win for society. Minors should have their annual stipend funded at age 18, upon completion of a guidance course immersing them in the benefits of education and investment that some of them will ignore and some of them won't.

Injecting all this money into the economy, with most of it going to people who will spend it immediately, produces a giant increase in demand...so much so that it would have to be 'phased in' so that production could keep up.

It should be noted that you would see a shift in the traditional 'better jobs' towards lower wages. Instead of 'oh the only way to manufacture <insert product here> is with cheap labor in China' you would see investment in manufacturing plants paying low wages here, and since with the stipend those low wages would still be livable people would take the jobs.

 

[Tahuti]

10,000 added makes a minimum wage job a living wage job, which is a win for society.

What guarantee is there that it won't induce demand-pull inflation? None, as far as I can tell. Basically, a basic income will risk causing a threadmill effect.

 

[Greizer85]

The idea of a basic income has occasionally been tossed around in Finland. We currently have an extensive (albeit slowly crumbling) welfare-state. The idea with a basic income is that it'd replace the current system, leading to the sacking of most bureaucrats (and, ideally, reverting their vast human resources to more productive endeavors. wishful thinking, perhaps.).

Consider that the current situation in Finland is this:
a) there's people who can't make it on their own, whether due to unemployment, illness, substance abuse, etc.
b) there's thousands of bureaucrats who probe into these unfortunate souls' affairs on a monthly basis, asking questions like 'is your arm still broken this month, sir?' in three copies of forms to Bureau of This-and-That and He-Who-Where with month-long waiting times
c) after said probing, 90 % of said benefits are granted anyways
d) ~5 % of people manage to 'cheat' and receive undeserved benefits, or more benefits than they'd actually need

While with a basic income, it'd be like this:
a) same as before
b) no bureaucrats
c) 100 % of benefits granted, always on time to boot (same basic income for everyone, except for maybe the really rich)
d) you can't 'cheat' because you always get the same amount of money (substance abuse is a bit tricky; if you drink all your 'lunch money' for the month, the state shouldn't let you starve, probably. not sure how to solve this, especially without any bureaucrats.)

The assumption is that the savings incurred by the elimination of step 'b' would outstrip the new expense of everyone getting the basic income... There have been some calculations, and the level of basic income that could be afforded by the state has been judged too low for the system to work as suggested. But those calculations were flimsy at best, and the idea remains appealing (even though Finland has a light bureaucracy compared to most other countries, we still universally hate it). If some other country were to try this model and fare well with it (pun intended ), Finland might very well follow suit in the future (we never do anything first, ahem).

In a country with no existing welfare system, or a very light one (like the USA), I can understand the opposition to this system, as it'd be viewed as a 'free lunch', i.e. giving people something for nothing. But imo it is foolish to cling to such notions. The effort should be made to study what works best for the country, regardless of ideology, and then proceed accordingly.

I should also note that the knock-on effects of a basic income system (some of them already mentioned in this thread) haven't been considered fully in Finland. Not that I'm an expert in this matter, quite the contrary. I just have a passing interest because I'm a long-time recipient of welfare (unemployment). Ultimately the only way to find out for sure is to actually try it...

 

[Gucumatz]

There was a good thread on this concept when the Swiss were proposing a similar policy [Quite different from the responses in this thread]. From an economics perspective, it can work... under certain conditions. Yes it is a guarantee that the number of workers in the market, will decrease. The question is, how many - and also why that shouldn't be part of the goal of a society without enough jobs to go around. By decreasing the number of low wage workers, you create a situation where employers have to provide minimally higher wages/benefits to remaining workers.

The results also depend on a populations marginal willingness to spend. Certain goods would initially experience some inflation. However there are deflationary counter-measures that can be implemented. The sizable injection of capital into thousands/millions of people depending on your population will/would increase the amount of demand [considering existing trends of low wagers to spend more when they can afford to] and suppliers would naturally react to that. New businesses would grow, companies would prosper, etc. In essence, something like this could spark a similar result to industry to what the 2nd World War did.

But again, it depends on the marginal propensity of consumption of a population, a mixture of deflationary counter-measures, and exactly how much of the working population will be incentivized to leave. And while some degree of inflation would almost assuredly exist in the initial period, the growth in new businesses and additional demand coupled with proper policy could counteract this inflation.

For the US I don't think a "basic income" is a particularly feasible idea. For Switzerland, had they passed the proposal that was gaining steam there, I think they would have been fine. Different populations, different situations

 

[IglooDame]

Anecdote: My stepdaughter got about $10K handed to her when she was about 16, from a former guardian's partial-disablement Social Security payout. She started off paying nearly a thousand dollars for a puppy. Ultimately she had to give the puppy away, given that the apartment we were in did not allow pets. Within a year or so she'd moved back to her former guardian's hometown, and a lot of the $10K went towards renting a very nice house for a year. I don't know what the rest went to, but it wasn't anything particularly memorable. Her investing it would have been memorable, since when she first got it I recommended taking a couple thousand and blowing it on whatever she wanted, and splitting the rest between a CD and a mutual fund. No joy there.

Handing mature adults $10K/yr would help a lot of them climb up into the middle class, who have experienced not having it. Handing immature adults $10K/yr, I really wonder about the psychological impact of it.

 

[Harv]

Every citizen gets $10,000 a year, no strings attached. What happens?

As above, but combine with a flat income tax rate at, say 25%. So if you make $20,000 per year, you have a liability of $5,000 but get $10,000 from the government. If you make $40,000 per year, your net tax liability is zero. If you make $100,000 per year, your net tax liability is $15,000 per year. What happens?

What is the difference between this and a progressive tax rate?

Next question: Is this proposed to replace the social welfare programs or supplement them?

 

[Mouthwash]

As above, but combine with a flat income tax rate at, say 25%. So if you make $20,000 per year, you have a liability of $5,000 but get $10,000 from the government. If you make $40,000 per year, your net tax liability is zero. If you make $100,000 per year, your net tax liability is $15,000 per year. What happens?

What is the difference between this and a progressive tax rate?

Structurally, it's a lot more straightforward and psychologically it's a lot easier.

Next question: Is this proposed to replace the social welfare programs or supplement them?

Replace them, for the most part.

 

[Timsup2nothin]

There was a good thread on this concept when the Swiss were proposing a similar policy [Quite different from the responses in this thread]. From an economics perspective, it can work... under certain conditions. Yes it is a guarantee that the number of workers in the market, will decrease. The question is, how many - and also why that shouldn't be part of the goal of a society without enough jobs to go around. By decreasing the number of low wage workers, you create a situation where employers have to provide minimally higher wages/benefits to remaining workers.

The results also depend on a populations marginal willingness to spend. Certain goods would initially experience some inflation. However there are deflationary counter-measures that can be implemented. The sizable injection of capital into thousands/millions of people depending on your population will/would increase the amount of demand [considering existing trends of low wagers to spend more when they can afford to] and suppliers would naturally react to that. New businesses would grow, companies would prosper, etc. In essence, something like this could spark a similar result to industry to what the 2nd World War did.

But again, it depends on the marginal propensity of consumption of a population, a mixture of deflationary counter-measures, and exactly how much of the working population will be incentivized to leave. And while some degree of inflation would almost assuredly exist in the initial period, the growth in new businesses and additional demand coupled with proper policy could counteract this inflation.

For the US I don't think a "basic income" is a particularly feasible idea. For Switzerland, had they passed the proposal that was gaining steam there, I think they would have been fine. Different populations, different situations

$10,000 doesn't take anyone out of the job market, unless you think people generally can live on $10,000. While it is possible under certain conditions (form a commune) there will not be a whole lot of takers. What a $10,000 yearly stipend does is make a $15,000 a year income (roughly minimum wage) more attractive than welfare and other assistance programs. That makes it possible for low skill manufacturing jobs, which are currently shipped out of the US, to be offered in the US. The number of workers in the market would more likely increase than decrease because of greater availability of jobs.

 

[EgonSpengler]

Here in the US, $10,000 per adult totals about $2.4 trillion. Assuming that's taken out of the federal budget, I suppose that NASA, Housing and Urban Development, Department of Agriculture, National Science Foundation, Environmental Protection Agency, Department of the Interior, Department of Veterans Affairs, Department of Education, and the Small Business Administration would all be destroyed. Health & Human Services, Medicare, Medicaid, and the Justice Department would be gutted. I'm not sure what would happen to Social Security. The Departments of Defense and Homeland Security would have their budgets slashed, but probably not by nearly as much as the rest. This would be a Conservative's wet dream.

 

[Timsup2nothin]

Here in the US, $10,000 per adult totals about $2.4 trillion. Assuming that's taken out of the federal budget, I suppose that NASA, Housing and Urban Development, Department of Agriculture, National Science Foundation, Environmental Protection Agency, Department of the Interior, Department of Veterans Affairs, Department of Education, and the Small Business Administration would all be destroyed. Health & Human Services, Medicare, Medicaid, and the Justice Department would be gutted. I'm not sure what would happen to Social Security. The Departments of Defense and Homeland Security would have their budgets slashed, but probably not by nearly as much as the rest. This would be a Conservative's wet dream.

Just like any other government spending, the objective is to grow the economy and tax it all back anyway. The only difference is that this goes to everybody instead of the usual distribution through defense contractors to their employees and stockholders.

 

[Old Hippy]

Handing mature adults $10K/yr would help a lot of them climb up into the middle class, who have experienced not having it. Handing immature adults $10K/yr, I really wonder about the psychological impact of it.

you could pay it monthly... just put it in the bank account and once set up would require no futher additional bureaucratic oversight.

and working people who got it would most likely just invest it the stock market.

 

[Borachio]

Anecdote: My stepdaughter got about $10K handed to her when she was about 16, from a former guardian's partial-disablement Social Security payout. She started off paying nearly a thousand dollars for a puppy. Ultimately she had to give the puppy away, given that the apartment we were in did not allow pets. Within a year or so she'd moved back to her former guardian's hometown, and a lot of the $10K went towards renting a very nice house for a year. I don't know what the rest went to, but it wasn't anything particularly memorable. Her investing it would have been memorable, since when she first got it I recommended taking a couple thousand and blowing it on whatever she wanted, and splitting the rest between a CD and a mutual fund. No joy there.

Handing mature adults $10K/yr would help a lot of them climb up into the middle class, who have experienced not having it. Handing immature adults $10K/yr, I really wonder about the psychological impact of it.

Is the idea to hand it out as a lump sum each year?

Wouldn't your objections evaporate if it was handed out in weekly installments?

 

[Linkman226]

What would a basic income do?

It would act as a panem et circenses type affair that would simply delay the revolution and prolong the suffering of the working class, while assuaging the pseudo-concern of bourgeois liberals. Of course, as with welfare or the minimum wage, it would still leave the poor at the mercy and whims of the capitalist ruling class.

 

[Old Hippy]

What would a basic income do?

It would act as a panem et circenses type affair that would simply delay the revolution and prolong the suffering of the working class, while assuaging the pseudo-concern of bourgeois liberals. Of course, as with welfare or the minimum wage, it would still leave the poor at the mercy and whims of the capitalist ruling class.

as the poor are already at the mercy of the capitalist ruling class...
it would at worst, ease their suffering till the glorious revolution arrives...

 

[Linkman226]

Oh and I'm not denying that. I'd probably support BI if it were up to me. But it's imperative to not act like it's a panacea for all of capitalism's woes, which a lot of liberals seem to think.

 

[Gucumatz]

$10,000 doesn't take anyone out of the job market, unless you think people generally can live on $10,000. While it is possible under certain conditions (form a commune) there will not be a whole lot of takers. What a $10,000 yearly stipend does is make a $15,000 a year income (roughly minimum wage) more attractive than welfare and other assistance programs. That makes it possible for low skill manufacturing jobs, which are currently shipped out of the US, to be offered in the US. The number of workers in the market would more likely increase than decrease because of greater availability of jobs.

$10,000 would take people out of the job market though. Note, I am not saying that people can "live on $10,000", which is a different thing entirely. People who have supplemental incomes do self select themselves to leave the job market at certain thresholds. There is plenty of data post-EITC that confirms this, but the question is how much job reduction/hourly reduction occurs. And contrary to conservative fears of the EITC, hourly/job reduction was minimal and had marginal/little effect on the overall job market. The EITC is particularly efficient in that low wage workers need work and are more willing to maintain higher rates of work given supplemental income, than middle classes would be. A flat $10,000 base income would incentivize maybe some low wage earners to say cut maybe hours/a part-time job, but this job reduction would be more pronounced in middle income households. I am not saying that tens of millions would cut hours, but I am saying that there would be some degree of measurable effect.

But again, I think this misses part of the point. The natural rate of unemployment in the US is 5.2% at the moment. By artificially increasing unemployment (remember, small percentages we are talking about here), one could theoretically increase real wages for workers and employers would have a slightly smaller workpool to choose from. Inflation would rise in connection to this increase in real wages, but as this last decade has shown us - the government can effectively use a variety of deflationary policy tools relatively effectively, to counteract any connected inflation. Its like a reversed Phillips curve to be blunt