by Jason Burke Murphy | Aug 16, 2017 | Opinion
I hardly ever respond to anything in writing if I am not remembering it at least a year or so later. The piece I am remembering is an episode of the podcast Freakonomics called “Is The World Ready for A Guaranteed Basic Income?” I recommend it as an introduction.
I am going to give you a quote and then I want you to keep reading.
Sam Altman runs Y Combinator, a technology venture capitalist firm that has had some great successes and is now interested in funding social science research that will include basic income. Here is the quote, which came up during his interview in this podcast episode:
Maybe 90 percent of people will go smoke pot and play video games. But if 10 percent of the people go create new products and services and new wealth, that’s still a huge net win.
We are back to the couch potato. This character appears in a lot of objections to basic income. Altman concedes that there will be couch potatoes. He just thinks that is a good price to pay to get more entrepreneurs, even only a few of them. I appealed earlier for the reader to keep going because most people in my orbit would not like this quote. (If it sounds good to you, then I guess I should still urge you to keep reading.) I will explain why some will push back and why I ultimately do not.
We are starting to see increased support for as well as new sorts of negative reactions to the idea. Not very long ago, basic income advocates were often introducing the idea to specific audiences. This meant one could get away with starting where you thought the listener would react best. If you were talking to someone on the left, you might call it a “strike fund for all”. If someone is more liberal, you would emphasize that a basic income reaches people that welfare is supposed to help. With libertarian types, you start with the efficiency and non-bureaucratic character of a basic income. I have been very impressed by recent writing that emphasizes basic income’s ability to remedy asset inequality for people of color and women.
Now, I am very pleased to see more people who have already heard about basic income from someone. Sometimes they caught the wrong person for them. As we explain basic income, we will need to separate the policy (giving everyone an unconditional cash grant) from the project (which can range from left to right).
A quote like Altman’s can swing a listener in different directions. I know this from my social media work. I imagine people running different movies in their head. Some hear “new products and services and new wealth” and visualize start-ups and think it all sounds great. Others try to imagine a world working well with 90 percent of people not doing anything anyone else wants them to do and they just can’t see that working out well. Others hear this and worry that basic income is part of a larger scheme to organize our lives around Silicon Valley capitalists. To them, Altman seems to overly glorify the tech entrepreneur. Other writers are more desperate in labeling basic income a “neo-liberal plot”, which would make you laugh if you went to one of our Congresses. We would not want to merely swap one set of capitalists for another.
I have not met Sam Altman. His other statements show that he also finds basic income interesting because it directly answers a moral mandate to make sure people are clothed, fed, and sheltered. I highly recommend the rest of the podcast. My objective here is to explain why I think we ought to look at this quote charitably. I will show in what way I think his quote is true. I also want to propose an alteration that makes it much more palatable for those I see reacting negatively.
No One is Saying Ninety Percent of Society Will Hit the Couch
Altman is not talking about a whole society in which only 10 percent work. He is saying that even if we lose some work-time to lame leisure (pot and video games), we will make it back even if only 10 percent start up new enterprises. Nor is he saying that he knows that we will get one successful start-up for every nine lives lost to the coach. He is only saying that losing nine to the couch would be an acceptable price to pay if we gain a start-up, which would offer something someone wants and would also be offering jobs. This is very plausible.
Most people with a basic income will live a lot like they do now. They will have a more stable income. They will worry less about many of their friends and family. They will have a plan if they need to train for a job or pay bills between jobs. This cuts into the number of people who would choose the couch. Work can be a place where we get recognized for our talents and for our cooperativeness. And jobs pay money. In fact, you can still count on a basic income if you take on a job. And you can count on it if you change your mind.
The problem now is that employees have very few options when workplaces go sour. Basic income creates one option (work for no one) and enables people to survive while they search for and train for other options. This will increase pressure on workplaces to improve.
I used to be suspicious of most rhetoric surrounding markets. I think that was because so much of it ended up with a conclusion like “Therefore, government should do less/nothing.” I have come to value markets more and more. Now, I want them for everyone. A basic income secures the capability to participate in markets for everyone. There are many sections of the United States that get very little government or market attention. That would be less likely with a basic income in effect. You will also see more start-ups under a UBI because failing doesn’t risk losing everything. Most entrepreneurs now come from the upper one percent of our society. Whole communities aren’t going to see much startup soon if we wait for the elite to try to make money there.
Add Caregivers and Organizers To The Mix
Someone organizing a non-profit, a political organization, or even an informal social scheme fits under Sam Altman’s phrase of “new products and services and new wealth.” He is not confining his hopes to technological startups.
Robert Putnam’s book Bowling Alone, written in 2000, lays out the loss of social networks and the harm that has caused most Americans. These can be voluntary associations, political clubs, fraternal organizations, or sports leagues. Participation has declined as work-hours per household has increased. This means that many will look for alternative ways to interact with like minded Americans, especially when it comes to sporting events.
There is a strong link between organizational affiliation and many different metrics for happiness or meaningfulness. We also see more affiliation in communities that have more political power and that generate more market activity. (There is likely a causal loop there. Lack of power and lack of market options may often precede losses in organizational depth. And a lack of organizational depth may well often precede losses in money and power.) Social-capital comes hand in hand with capital-capital.
Michael Lewis and Eri Noguchi apply Putnam’s work, and combine it with survey data, to give us strong reasons to think that we would see improvements in civic networks as well. Declines in civic participations can be shown to coincide with an increase in work hours. People who value civic participation will have an option to do so.
If you want to know how a basic income will benefit society, let’s make it clear that we are including “organizers” within our understanding of “entrepreneur”. Our culture is one that has to be reminded of this. Once we expand our understanding, we can look around and see how many people are trying to participate in institutions that organize in pursuit of truth, justice, and beauty.
Examples will help here: church committees, symphony boards, rotary clubs, sports leagues, poetry circles, craft guilds, environmental organizations, identity-based youth groups, identity-based cultural organizations, music bands, theater companies, unions, political organizations, lobbying organizations, etc. This list could go on a very long time.
At this point, I want to share a little bit of what I learned as a community organizer in Arkansas for ACORN. Organizing is difficult. There are many ways in which it is not like entrepreneurship at all. You aren’t selling anything. All organizations have trouble finding this skill set. It is also difficult to get the resources together for full-time organizing. We would often hire someone who loved the mission of the organization but had to leave for pretty small increases in money. It might also prevent the loss of organizers to the for-profit sector.
Please note: I have noticed that a large section of the US internet is trying to malign the very term “community organizer” but my argument includes organization of groups I disagree with.
The ratio of organizers to members goes beyond the one to nine ratio that Altman imagines. About six of us at Arkansas ACORN served around 5,000 households if you are only counting dues payers. The community that responded to our work was larger than that. There were meetings every month. People debated goals and tactics. Political leaders were interviewed or protested. Organizations that despised us did the same things, though often with more funding from fewer people.
Every time I hear the term “couch potato” brought up as some sort of nightmare case for basic income, I remember that I sat on thousands of couches, urging people to get active, to get involved with their community’s decisions. I know that with a basic income, we would have had more organizers and more active members. Rival organizations would have had the same benefit. We will live in a more democratic place.
I am still involved in political work, even though I am not employed to do it. I also have been published as a poet and as a photographer, though not paid. You will find a lot of people working on magazines, readings, and websites in which the true, the good, and the beautiful are debated. A lot of people can see how to raise some money doing cultural, social, or political work but they can’t get to a decent level. A basic income would generate audiences for artists, philosophers, preachers-good and bad. A thriving art world is full of disputed art. A thriving philosophical culture will have disputed philosophical projects. We will live in a more interesting place.
Norman Rockwell “Freedom of Speech”
Finally, we should look at the decision to care for a family like we would a “start-up”. The “caregiver” has started a “career” that works for many people like a vocation. For each caregiver, there is at least one other person, usually more, benefiting in a meaningful way. Economists often do not count care for children and elders unless someone is formally paid to do it. A basic income would enable people to say no to employment if someone they love needs them. We will live in a more caring place.
In fact, Robert Putnam shows us in his research, as do Michael Lewis and Eri Noguchi in theirs, that the “stay-at-home” mom was often a civic association organizer as well.
More markets, more culture, more democracy, more care. This looks to be well worth investing 3% of our GDP and letting a few people stay home.
When I read the comments and notes that come with all basic income articles, I can see that some people would worry about people not working because of basic income. Basic Income enables people not to work. Kate McFarland points out that a basic income enables people to say no to all social useful activity. But we are far away from that. Some people will live incorrectly. Many people live incorrectly now. Basic income is a good bet for increasing socially useful work.
- More entrepreneurs means more people are offered employment.
- More organizers mean more people are being invited to venues where what is true, what is good, and what is beautiful are debated and plans are made.
- More caregivers mean more people are taken care of.
Therefore, most likely, for every couch potato, we will have better reasons than ever to get off the couch.
About the author:
Jason Burke Murphy teaches philosophy and ethics at Elms College in Western Massachusetts. He serves on the board of US Basic Income Guarantee Network and recently presented at their North American Congress. He helps with social media for US Basic Income Guarantee Network. He has written before for Basic Income News. His most read piece so far is “Basic Income as Proposal, as Project, and as Idea.”
by Florie Barnhoorn | Aug 5, 2017 | News
Summer 2017,
On Thursday, July 21, the city council of Amsterdam decided that it will in no way adopt stricter local rules for its social assistance recipients, not even on paper. A large majority of the members supported a motion submitted by the chairman of the GreenLeft (GroenLinks), Rutger Groot Wassink.
The motion called for Amsterdam’s alderman for Work, Income and Participation, Arjan Vliegenthart (Socialist Party), not to lay down regulations for forced compensation in a local statute (as described below) and to launch its own social assistance experiment in September. Only the VVD and the CDA voted against it. A conflict was born.
The Participation Act, which was introduced in 2015, requires municipalities to force each social benefit recipient to make a useful contribution to society, in exchange for his or her social benefit payments. This is the very controversial so-called ‘compensation’ (Dutch: Tegenprestatie). The ‘compensation’ can be voluntary work, taking up a language training or giving informal care.
The Participation Act also requires every municipality to lay down the regulations regarding the ‘compensation’ in a local statute. This document may contain for instance punitive measures that can be imposed on a reluctant recipient. Since the introduction of the law in 2015, Amsterdam has refused to fulfill these requirements. The city does not demand a compensation from every social benefit claimant and has not recorded the necessary regulations in its local statutes. However, Jetta Klijnsma (PvdA / Labour Party), the State Secretary for Social Affairs and Employment, will only give her permission for social assistance experiments in municipalities that have fully implemented the Participation Act.[1] (See also NETHERLANDS: Design of BI Experiments Proposed.)
Consequently, Amsterdam is heading to a confrontation with Klijnsma, who insists that the municipal authorities record their local rules on paper first in accordance with the law. Only then would Amsterdam be allowed to start with its social assistance experiment.
Earlier in the week, on July 14, Klijnsma called on Amsterdam to be pragmatic by incorporating the desired ‘technical adjustment’ (i.e. regulations with regard to the compensation as stated in the Participation Act and the local legislation in case of default, mentioned above) into its local statutes: “It would be very sad, if the Amsterdam City Council misses the opportunity, because of this ‘technical point’, to execute an experiment with the social assistance program. If Amsterdam participates, wide public support will be generated and the experiments will gain more significance.”
Additionally, in an attempt to pacify the situation, she stressed that “Municipalities do not need to impose that obligation in practice, because they have much ‘freedom of policy’ in the execution of the Participation Act.”
Municipal councillor and leader of GroenLinks, Groot Wassink, refers to Klijnsma’s demands as ‘ridiculous’. He does not want to ‘give in’ due to the ‘blackmail’ of an outgoing secretary of state: “It seems that the state secretary has launched a kind of punitive expedition to Amsterdam.”
Vliegenthart, who is not happy with the politicized debate with the PvdA state secretary, is nevertheless planning to implement the motion. He wants to present the design of his own experiment in September. According to the councillor, such an experiment exclusively for Amsterdam is legally possible: “I will make it legal as waterproof as possible.” The plan will be very similar to a research proposal that the city submitted earlier to Klijnsma and which was already approved.
“According to scientific research, compulsion and coercion do not help,” says Vliegenthart, “We want to make it easier for our social benefit recipients to find a job, not to impose on them restrictive measures.” He wants to start a social assistance experiment whereby recipients, who have difficulties in getting paid work, are allowed to earn some money on top of their benefits. In this way, on Vliegenthart’s view, work would be not only a compensation for society’s ‘gift’ (i.e. the welfare payments), as Klijnsma views it, but a project that really yields something.
The Council of State has already decided that the municipalities are free to include the compensation in the experiments or not. Vliegenthart also thinks so, after obtaining legal advice. “I suppose the state secretary is wrong,” he has said. However, she can still block Amsterdam’s experiment by legal means.
Groningen (including the neighboring village of Ten Boer), Wageningen, Tilburg, Deventer and Nijmegen are the first municipalities which have been given permission to begin social assistance experiments. Since early July, another municipality, Apeldoorn, has also started a social assistance experiment directed at developing self-management skills and tailor-made solutions. The municipalities of Epe, Oss and Geldrop-Mierlo, relatively rural municipalities situated in the eastern and southern part of the Netherlands, have joined the project that is led by Apeldoorn. This experiment fits within the framework of the Participation Act. The research involves about 90 participants from Epe and 450 from Apeldoorn and receives scientific guidance from Tilburg University. The trial will run until July 2019.
Under the Participation Act, up to 25 municipalities in the Netherlands may execute experiments, with each experiment lasting two years. Nationwide there is room for over 18.000 beneficiaries between the various projects.
See also Kate McFarland in The Netherlands: Government authorizes social assistance experiments in first five municipalities.
Credit Photo: Pixabay (Amsterdam, City Hall), tpsdave.
Thanks to Kate McFarland for reviewing the article and for her enthusiasm.
1. All social assistance experiments must be approved by the Ministry of Social Affairs and Employment. For that reason the ministry has developed a general administrative regulation (Dutch: Algemene Maatregel van Bestuur / AMvB). This document sets out the exact standards for the implementation of the social assistance experiments. See also The Netherlands: All that’s left is the action. Where do we stand with the social assistance experiments?↩
by Ashley | Jul 28, 2017 | News
Pictured: Sam Haque, founder of Wise Media, social entrepreneur in Canada. Credit to: Steve Russell, Toronto Star
Mowat Centre Report shows how basic income can be a transformative support network for social entrepreneurs to solve society’s deeply entrenched issues. An online platform could help do this. Of course, HostiServer the best for websites trying to project a strong online presence could be useful. Moreover, the report suggests a thriving social mission ecosystem can be an outcome of basic income that be integrated and measured in ongoing pilots.
Canada is one of many countries leading the world in the new stage of paradigm shift politics by piloting universal basic income in its communities. Anchor institutions have been weighing in on special topics for researchers to consider as basic income pilot projects are ongoing. For example, University of Toronto’s Mowat Centre recently published a report titled, Basic Income Examining the Potential Impact of a Basic Income on Social Entrepreneurs. Authors Michael Urban and Christine Yip highlight the three main pathways basic income may impact social entrepreneurs, including by:
- “Reducing barriers to entry into social entrepreneurship, thereby helping create a more diverse and representative social entrepreneurship community.
- Enabling social entrepreneurs to build their organizations and their own capacities by adding to and improving their skill sets.
- Helping to protect social entrepreneurs against illness and provide the psychological space required for social innovation to occur by reducing individuals’ financial stress and anxiety”
A basic income could help derisk social entrepreneurship “for those whose life circumstances have reduced their ability to absorb the potential downsides of risk-taking.” Poverty as a whole costs Canada between $72 billion and $84 billion annually. A snapshot of experiences of historically marginalized populations in Canada include:
- Indigenous Peoples (including First Nations, Métis, and Inuit peoples) are overrepresented among the population of people experiencing homeless in Canada
- The United Nations has called housing and homelessness a national emergency in Canada
- The cost of socioeconomic disparities in the healthcare system account for 20% of all healthcare spending
- One third of food bank users were children in 2016
- 20% of families of color are experiencing poverty compared to 5% of white families
- All seniors receiving the Guaranteed Income Supplement live below the most basic standard of living in Canada calculated at $18,000 per year, whereas seniors receive about $17,000 per year
While precarious employment has increased by 50% in Canada over the past two decades, Mowat Centre posits that universal basic income can empower historically marginalized people to be social entrepreneurs. More importantly, the report suggests empowering this population is particularly important as they can use their lived experience with some of society’s most deeply entrenched social issues to recommend new models of living that are more sustainable and equitable for future generations.
Due to these new policy and economic structures supported by social entrepreneurs, this would lead to a paradigm shift in social interactions that would introduce new ways of thinking and co-existing:
“A basic income could help to shift society from a system where an individual’s worth is determined by the amount of money they earn to one where individuals earn esteem through the ways they choose to use the money to which everyone is automatically entitled. When conceived in this basic way, a basic income represents a validation of every individual’s inherent worth and, by extension, a validation of and support for their freedom to choose the life path that they see as most appropriate for them and the contributions they make to society in doing so.”
By helping to potentially further support role models and community leaders making positive impacts in their neighborhoods, a basic income is able to make social entrepreneurship a more appealing and viable career path. This may attract a critical mass of people to integrating principles of social entrepreneurship into their ways of living, beyond their career. A basic income can help sustain social entrepreneurship by providing financial protection from unexpected losses in income. Another positive effect is bolstering the holistic health and wellness of a social entrepreneur by reducing stress and anxiety created by financial insecurity and instability. Chronic stress and anxiety can lead to chronic illnesses such as depression, cardiovascular disease, obesity, and diabetes among others. Living with anything like this can be hard for anyone, especially if they are not sure how to deal with it. It then comes as no surprise to find that some people may have checked out sites similar to https://www.canadacannabisdispensary.co/product-category/edibles/ (as medical marijuana products are known to have relaxing properties) in the hopes of finding alternative ways of managing how they are feeling.
Particularly among historically marginalized populations, these chronic illnesses are disproportionately prevalent, which adds to how, under the current structure, they experience increased barriers to social entrepreneurship. By alleviating these stressors, a basic income could be a pathway in healing historical trauma and inequities between classes of people. It could also allow people to access options like CBD pills without worrying as much about the potential finances.
However, the Mowat Centre also mentioned a list of outcomes from a basic income that social entrepreneurs and ongoing pilots should consider to create the necessary supports to ensure this social ecosystem can thrive:
- Allocate additional resources from basic income to expanding sufficient support system for social entrepreneurship to ensure accessibility to career pathway and mitigate amount of well-intentioned, but ultimately unproductive business models and innovations
- Consider incentives for cross-sector partnerships in social entrepreneurship to prepare the broader political, economic, and social infrastructure in communities to absorb the potential increase in effort by empowered social entrepreneurs to fulfill their missions
- Ensure sufficient accountability mechanisms through adoption of universal impact measurement practice, training/coaching, and peer-mentoring for social entrepreneurs to achieve quality and standard metrics that are customized to their business model to support the monitoring of outcomes and social impact
- Consider social entrepreneur wage and labor policies to ensure equity between employer, employees and volunteers
- Consider ongoing measurement of social impact in the field based on lived experience of historically marginalized populations to ensure that basic income is not assumed to have solved social issues like poverty or barriers to social mobility, but rather there are metrics to offer ongoing evaluation of status of social issues to inform innovations
More information at:
American Psychological Association, “Understanding chronic stress,” July 2017
Canada Without Poverty, “Just the Facts,” July 2017
Laurie Monsebraaten, “Basic income hailed as way to give people chance to chase their dreams,” Toronto Star, 25th May 2017
Michael Crawford Urban and Christine Yip, “Basic Impact: Examining the Potential Impact of a Basic Income on Social Entrepreneurs,” Mowat Centre, May 2017
by Hilde Latour | Jul 17, 2017 | News
Investopedia published an article in May this year, “The Long, Weird History of Basic Income – And Why It’s Back”
In this article, written by David Floyd, the history of support of UBI is described from the period of hunter-gatherer societies and how the networks in those societies took care of people who could not provide themselves with a basic standard of living. The article then describes how agriculture and urbanization made an end to such networks and how problems were not handled well by the institutions that took the place of the original networks, referring to Charles Eastman who described this problem in 1915.
Thomas Paine was one of the famous people who noticed the creation of poverty, caused by cultivation, which did not exist before. He was the first to propose a UBI (Paine called it a “groundrent”) in the late 18th century, as a compensation for the dispossession of the majority of inhabitants of their natural inheritance. Cole first used the term Basic Income in 1953.
From Paine, via Henry George, Huey Long, G.D.H. Cole, Martin Luther King, Mc Govern and Nixon, the current boost of support for UBI in the 21st century is explained as a reaction to poverty and inequality, predominantly used as an argument by proponents on the left political spectrum, and inefficiency of the welfare state, used as an argument on the right wing.
In addition to the political perspective, a distinction between “reformers” and “futurists”, which cross-cuts left and right, is described in further depth.
The group of “reformers” is described as a group of basic income supporters who is mostly concerned with addressing problems in society as it is now, mostly caused by the broken welfare system, such as:
- “Employment traps” (where people are kept form leaving their job out of fear and bad employers are supported as a result of that)
- “Unemployment traps” (“earn a dollar from work, lose a dollar in benefits”)
- “Welfare cliffs” (where the effect tax on additional income even exceeds 100%)
- Stigma associated with public benefits
- Bureaucratic inefficiency
The group of “futurists” is described as supporters who see technological unemployment as a main threat in the future and offer basic income as a solution or who see a basic income as a cornerstone of an eventual utopia.
The two main criticisms of a universal basic income are its cost and the expectation that it would reduce or eliminate incentives to work.
This discussion is described with calculations of “The Economist” and views of Bill Gates, Karl Widerquist, Guy Standing, Philippe van Parijs and others. Brief attention is given to Alaska’s “Permanent Fund Dividend” and the outcome of experiments, such as Manitoba and India. Furthermore, the definition of ‘work’ is discussed, the effects of UBI on poverty and even the experiments in Finland, Oakland and Ontario get attention.
Floyd summarizes his article with a question: “Could doing away with poverty, sweeping away patronizing bureaucracy, neutralizing the threat of mass unemployment and increasing the value society places on worthwhile, but unprofitable, pursuits really be as simple as handing everyone cash?” He then uses Confusius’ quote to guide us towards the answer:
“The way out is through the door.”
Info and links
Full article at investopedia.com
Photo: Money! by Hans Splinter, CC-BY-SA 2.0
Special thanks to Dave Clegg for reviewing this article
by Benjamin Sadlek | Jul 16, 2017 | News
(Former Republican House Majority Leader Eric Cantor speaking at the American Enterprise Institute. Credit to: The Washington Post)
The American Enterprise Institute, a conservative think tank, released a piece of research in late May, which was an attempt to analyze the effect of the implementation of a universal basic income (UBI) on the current American social welfare system.
The proposal has been released as a working paper, meaning in this case a preliminary research paper with incomplete considerations, but a base model nonetheless to move forward with and make improvements.
The Basic Proposal
The paper’s proposal is a budget-neutral form of a UBI, meaning instead of implementing a basic income in addition to the existing American social welfare system; most existing programs like Medicaid, Veteran’s Benefits, and Social Security for the elderly over 65 are repealed and replaced with a UBI. Using data from the Federal government’s budget outlays from 2014, the paper finds that the repeal of large programs in America would yield about $2.54 trillion dollars. In addition to this, the proposal repeals 23 different tax benefits like the Student Loan interest deduction and Earned Income Tax credit, bringing in more revenue and freeing up a grand total of about $3.21 trillion for a UBI.
With additional taxes coming in from the UBI itself, and increased tax liabilities on all income tax brackets, the proposal finances and prescribes a basic income of $13,788 for individuals over the age of 18 and $6,894, or half the income of adults, for individuals under the age of 18.
Using Federal government tax data, the paper analysis the net benefit gain or loss by tax bracket and age. Using the parameters described, the findings show that some of the most adversely affected by this system are in the lowest tax bracket ($0-$10,000). This is unsurprising, because many of the programs this proposal had repealed to finance the basic income are concentrated on this tax bracket.
Another group adversely affected by this proposal are individuals 65 and older, also because their benefits, such as Social Security, have been repealed and distributed among the rest of the population. When excluding age groups of 65 and older, however, nearly all tax brackets see a net benefit in this proposal, with the brackets seeing the greatest benefits being those in the middle.
Assessing the Real Value of Welfare Dollars
The second section of the paper attempts to add in the variable of welfare multiples to estimate the real cost and benefit to this proposal. Welfare multiples try to calculate the value of each dollar the government spends to the value by the welfare recipient for each government welfare program. The value of the welfare recipient comes from the idea that funds allocated by a government program are not always as valuable as cash (for example, if a family receives funds allocated for food by SNAP, but would rather use a portion of those funds for other purposes). A good government program would have a welfare multiple close to 1, while a bad government program would have a welfare multiple closer to 0.
Essentially, this section attempts to use welfare multiples to assess the gains in efficiency made in eliminating government waste by allowing people to spend the money how they see fit, or giving them a cash payment as they would have with a basic income.
The paper draws from current literature that estimates the welfare multiple of some government programs, but the authors admit to having to estimate others (see referenced literature for welfare multiples in working paper). They range from more wasteful programs like Medicaid (around .30, as used by this proposal) to less wasteful programs like Veteran’s Benefits (around .95, as used by this proposal). The literature on welfare multiples shows that there are various estimates on how effective these programs are, and therefore other authors may come up with slightly different welfare multiples. The ones employed by the authors in this proposal are an approximation based on different estimates.
When adding the welfare multiples into the equation, the net loss in benefits for the lowest tax bracket is reduced by about $4 thousand dollars per tax unit, though there is still a net loss in benefits. In addition, benefit losses to the tax brackets aged 65 and older are decreased, but by a lower margin than the lowest tax bracket as the welfare multiple is higher for these government programs. This means that the greatest increase in efficiency by implementing a UBI would be in the lowest tax bracket.
Review of the Findings
The important findings in this proposal from the American Enterprise Institute show that, if a UBI were to merely replace the existing social welfare system in the United States, by repealing existing welfare programs and tax benefits, there would be an overall redistributive impact from the old to the young, and from the poor to the middle class; though there would be a gain in efficiency overall.
Again, this is not a surprising finding as the goal of redistributive programs in America is to allocate taxpayer dollars mainly to the poor and the elderly. Some programs allocate funds too stringently, as the welfare multiples try to demonstrate, and sometimes it may be better for a welfare recipient to merely receive a cash payment. While in this proposal of a UBI the overall efficiency is increased, it does not compensate for the net loss in benefits to the poor and the elderly.
It is worth noting that the American Enterprise Institute espouses classical liberal values of entrepreneurship and free enterprise, as expressed on their website. One of their main interests in exploring a UBI, therefore, is to eliminate government waste, but this may also mean increasing the freedom of welfare recipients to make financial decisions that make sense to them.
One area the paper could do better in is to explain with detail how the repeal of tax provisions increased tax liabilities for different brackets and age groups. In their base model, to help finance the UBI, the paper repealed several tax provisions, which brought the average tax liability for the second tax bracket ($10,000-$20,000) to around $6,714, or on average 45% of their income. The average increase in tax liability for the tax bracket of $200 thousand to $1 million, on the other hand, is $28,425, or on average 4% of their income. The increase in tax liability that helps finance this proposal, therefore, is falling mainly on the lower tax brackets and individuals over 65.
In future research, proposals like this could examine the current tax code with more detail, and how it could be restructured to help finance a UBI. Because most of the new tax burden in this proposal seems to be falling on the lowest tax brackets and the elderly, there should be a conversation about who needs to be bearing the new tax burden, and how much that should be.
Notably, the paper admits that it does not take into account behavioral changes that would take place with the implementation of UBI. Proposals like this could potentially include insights from other basic income projects like the Mincome experiment in Canada, which revealed increases in high school graduation rates, and a drop of health care costs.
It is fair to be wary of the intentions of the AEI in releasing this working paper, but clearly a fair amount of effort was put into it, and it appears to be an honest inquiry into the subject. Finally, it is worth saying that the proposal is only a particular vision of a basic income, one that may not agree with many other visions, but research such as this may nonetheless come across some useful insights.
More information at:
https://www.aei.org/publication/a-budget-neutral-universal-basic-income/
