What would a basic income do?

[gay_Aleks]

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?

If 10k was handed out every week, with approximately 52 weeks a year, resulting into 520k being given out to one citizens, this will result into 156 quintillion (the number after trillion, if I'm not wrong) for 52 weeks for 300 million citizens.

Can't backfire, is what I'm saying. Spread the wealth!

 

[Mise]

I've never seen a Basic Income of that sort of magnitude that's been properly costed. In theory you can get operational efficiency savings via reduced admin, but I've never seen anything to suggest that this outweighs the decreased overall efficiency of giving $10,000 to millionaires and unemployed disabled people alike.

 

[gay_Aleks]

Unless, of course, we start taking the money from the millionaires. But that would be communism, and that's evil.

 

[Mise]

We already do take money from millionaires and give it to poor people. If the goal is to give more money to poor people then we should just do that instead.

 

[Borachio]

The trouble with taking money from the rich to give to the poor, Mr R. Hood, is that you then have to determine who is rich and who is poor.

This is the major advantage of a universal benefit: you eliminate the need for costly, and wasteful, means testing.


Link to video.

 

[Winston Hughes]

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

If past evidence is anything to go by, I'd probably get a $10,000 a year wage cut. The state giveth and the state taketh away.

 

[Cutlass]

the economy grinds to a halt as incentive goes out the window?

Oh, is this in addition to any other income they earn? In which case inflation sky-rockets.

Maybe that's a tad unfair; best wait for an economist to turn up

Neither of those things happen. First of all, it replaces current welfare programs. This both offsets most of the cost, and has the advantage of improving the welfare system as a whole. But at $10k, it's not that big of a change from what welfare already costs. Of course, program design matters. For example, how are children handled? How are medical costs handled? How is the Social Security system handled? Is there a cutoff or phase out above a certain income? All of these things effect the final cost of the program.

Second, what would be the effect on workers? This is a subject people also get wrong. And they get it wrong because of the fundamentally conservative anti-welfare viewpoint which has always been with us, and has always been wrong. And that viewpoint is one which considers poverty to be a personal moral failure. In effect, blame the poor for being poor, and absolve yourself of responsibility for it. People have done this since the dawn of time to excuse turning their backs on their fellow man. But the reality is that if people believe that they can better their own situation through their own work, then they will. But you have to have 2 things in place before they will: They have to have an actual opportunity to better themselves, and they have to actually believe that they have an actual opportunity to better themselves. No matter how much you want to blame the poor for being poor, the reality is that in economy we have in the US, it is an absolute impossibility for all people to be able to better themselves through their own work. And because they know this, many people are discouraged from trying.

A basic income removes a lot of the disincentive to trying. While at the same time provides a safety net for those who still do not have actual possibilities of bettering themselves through their own work.

But with a basic income, any and all work a person does is an improvement in their condition. It is a real monetary incentive to work. You don't get fewer people offering less work. One thing you do get, fewer people will offer their work for the scummiest, most degrading, and worst conditions of work! That is, with a basic income, the McJobs will have to improve their working conditions to attract workers. No more treating minimum wage workers like disposable diapers. They'll just leave, and be harder and harder to replace. But, for any job where the working conditions are decent, more people will be offering more work than they do under the current system. And that is because people respond to incentives. And the incentive is to work and live a better life.

Don't fall into the trap of thinking that the poor respond to incentives differently from the rich. That's a core precept of conservative political-economic mindset. Always has been. And it has always been wrong.

As to inflation, that's a bogus strawman objection that has no existence outside of ignorance and fear-mongering. We aren't talking about spending more as a nation. We're only talking about spending what we already spend somewhat differently.

 

[uppi]

I've never seen a Basic Income of that sort of magnitude that's been properly costed. In theory you can get operational efficiency savings via reduced admin, but I've never seen anything to suggest that this outweighs the decreased overall efficiency of giving $10,000 to millionaires and unemployed disabled people alike.

Any decent proposal should also include a tax increase so that millionaires effectively get no extra money. It could certainly be made cost-neutral for the current situation. Predicting the impact on society and how that would change the economy is the hard part.

 

[Masada]

@Gucumatz and Cutlass. You dudes are more or less on track.

the economy grinds to a halt as incentive goes out the window?

Use some common sense. Australia's Newstart Allowance which is paid to the unemployed is more generous than this and last time I checked Australia had a higher workforce participation rate higher than the United States.

Oh, is this in addition to any other income they earn? In which case inflation sky-rockets.

Nope. Inflation would be unlikely to budge on the not unreasonable grounds that most of this funding would come from cutting existing welfare programs. In actual fact, inflation might well fall because funding that was going to the poor (who are far more apt to consume) would instead be going to the well-off (who would tend to save it).

Why? It's aimed at the poor who can use the money to be more productive, not to eliminate homelessness.

Homeless people are poor?

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.

It's money that was already being used for consumption for the most part. So it shouldn't?

 

[Borachio]

Homeless people are poor?

Yes. I think that's quite a reasonable assumption: homeless people tend to be poor. Otherwise they wouldn't bother being homeless. I daresay one could find one or two eccentric millionaire homeless people, but that's besides the point.

 

[amadeus]

Increasing the money supply to the poorest, who will always spend it, stimulates production directly. The more a manufacturer sells of a product the more they are incentivized to produce. What do you think the poorest are going to spend it on? Stuff that can't be produced in increasing amounts?

It sounds like a scheme to try and get wealth created by government fiat. Are we sure that the increased flow of money into the consumer economy isn't just going to be more money chasing fewer goods? $10,000/year or whatever is going to cause people to drop out of the labor force. It may be a marginal amount at $10,000, but what about more than that? And even if they don't drop out of the labor force entirely, they may be inclined to work fewer hours and refuse to accept jobs they'd otherwise take if they were wholly dependent on that income. And if we're putting more money into the consumer economy at the expense of investment, how likely is it that production could be expanded to keep up with demand?

 

[gay_Aleks]

I'd say that the initiative to work being dead argument is pretty much moot, and with risk of parroting what others said, it's quite obvious that if everyone suddenly started gaining 10k per month/week/3-months or whatever, the market would react appropriately. Which would mean a raise of the prices of goods and services to correspond to the rise in income. It's pretty much what we've been observing for the decades following the Industrial Revolution.

I guess.

 

[Borachio]

So. You're saying that people's standards of living haven't risen since the Industrial Revolution, two centuries ago, let's say?

Because prices have kept in exact step with wages?

 

[gay_Aleks]

No, the standards of living rose with the wages, alongside basically everything, I guess.

Don't take my word on it, I am no economist. I might be spouting hogwash and I wouldn't discern it from truth.

 

[Borachio]

I'm no economist either. To be frank, the circles of logic in economic theory defeat me quite.

I don't let that stop me spouting hogwash, though.

 

[Cutlass]

It sounds like a scheme to try and get wealth created by government fiat. Are we sure that the increased flow of money into the consumer economy isn't just going to be more money chasing fewer goods? $10,000/year or whatever is going to cause people to drop out of the labor force. It may be a marginal amount at $10,000, but what about more than that? And even if they don't drop out of the labor force entirely, they may be inclined to work fewer hours and refuse to accept jobs they'd otherwise take if they were wholly dependent on that income. And if we're putting more money into the consumer economy at the expense of investment, how likely is it that production could be expanded to keep up with demand?

For what reason would capitalists abandon the profit motive and supply fewer goods?

 

[uppi]

It sounds like a scheme to try and get wealth created by government fiat. Are we sure that the increased flow of money into the consumer economy isn't just going to be more money chasing fewer goods? $10,000/year or whatever is going to cause people to drop out of the labor force. It may be a marginal amount at $10,000, but what about more than that? And even if they don't drop out of the labor force entirely, they may be inclined to work fewer hours and refuse to accept jobs they'd otherwise take if they were wholly dependent on that income. And if we're putting more money into the consumer economy at the expense of investment, how likely is it that production could be expanded to keep up with demand?

There is enough money around to make the necessary investments. It would be stupid not to invest in expanded production to keep up with expanding demand, especially at current interest rates. So I don't think there would be a significant price increase in mass-produced goods (as long as there is enough competition in the relevant markets).

Labor-intensive services might increase in price, if labor costs go up as intended and demand for them increases. As rich people tend to use more services, that might end up as a redistributive effect.

 

[Mise]

Any decent proposal should also include a tax increase so that millionaires effectively get no extra money. It could certainly be made cost-neutral for the current situation. Predicting the impact on society and how that would change the economy is the hard part.

Yeah but then it's not a basic income any more is it. You're saying "let's give $10,000 to everyone, except for people who don't really need it, in which case, let's tax them more instead". That already reduces the amount of operational efficiency savings you make, because you're adding a layer of complexity, one that requires additional resources to administer. You might say that it's not a very big layer of complexity, but actually, the fact that it's the first layer of complexity makes it the most expensive to administer. Each additional layer will surely cost less to administer due to economies of scale. So if you're adding the first, expensive layer, you might as well add a second, cheaper layer. And another, and another, because each additional layer is (arguendo) cheaper than the previous, until the savings (or added benefits to poor/sick/disabled/disadvantaged people) you get from better targeted welfare benefits outweigh the additional marginal cost of administration.

So even before you get to the behavioural impact that others are discussing, there is already an economically optimal point, if you want to make the most efficient welfare system. It seems incredibly unlikely to me that this optimal point between operational efficiency and welfare efficacy is at "zero layers of complexity".

 

[Tahuti]

For what reason would capitalists abandon the profit motive and supply fewer goods?

They don't abandon the profit motive at all. They simply price their products higher and need to produce less to get the max profit.

 

[Borachio]

Yeah but then it's not a basic income any more is it. You're saying "let's give $10,000 to everyone, except for people who don't really need it, in which case, let's tax them more instead". That already reduces the amount of operational efficiency savings you make, because you're adding a layer of complexity, one that requires additional resources to administer. You might say that it's not a very big layer of complexity, but actually, the fact that it's the first layer of complexity makes it the most expensive to administer. Each additional layer will surely cost less to administer due to economies of scale. So if you're adding the first, expensive layer, you might as well add a second, cheaper layer. And another, and another, because each additional layer is (arguendo) cheaper than the previous, until the savings (or added benefits to poor/sick/disabled/disadvantaged people) you get from better targeted welfare benefits outweigh the additional marginal cost of administration.

So even before you get to the behavioural impact that others are discussing, there is already an economically optimal point, if you want to make the most efficient welfare system. It seems incredibly unlikely to me that this optimal point between operational efficiency and welfare efficacy is at "zero layers of complexity".

I can see that, Mr Mise. But millionaires are already being taxed and would continue to be so. How much more complexity does it add to adjust their tax rate (provided they in effect pay anything at all, of course, since mostly they pay the least, but that's by the by), so that in effect they receive zero net gain from a Universal benefit?