Universal Basic Income: An argument for wealth redistribution

Great Debates
1

What is it a basic income?

If the United States implemented a basic income, we could abolish or drastically mitigate poverty in this country.

The most immediate objections to this are: The financial cost, and the moral objection that we’re handing people money unconditionally (which
to some extent, may encourage laziness).

The cost issue isn’t as bad as it may seem. With this proposal in place would eliminate or drastically scale back government programs aimed at the poor, such as food stamps, social security, unemployment benefits, minimum wage laws, earned income tax credits, and Pell Grants. These would largely be unneccesary with everybody automatically being lifted above the poverty line.

To use an example of how much such a program might cost, let’s look at the federal poverty line for a family of three (two adults, one child): 18,310 . Divide that by three and
you have $6,103 dollars per person per year. With 307 million people in the U.S, that comes to about 1.87 trillion dollars. Sounds like a staggering cost. And it is. But it’s not an impossible cost. It’s only 13% of the nation’s total gross domestic product of 14.4 trillion.

According to this chart from Forbes Magazine ,
the U.S.A tax burden is only 25.5 percent of total GDP. Compare that with
France, which has a burden of 43.7%. Even implementing this plan, and making zero cuts to current government programs, we could implement this and still have a lower tax burden than France!

Now the next major question: Would this program be unsustainable, removing a major incentive to work, with substantial numbers of people choosing to drop out of the work force in preference to holding down a job? I don’t deny there will
be some small number of people who do this,there’s less of a danger of that with the Universal Basic Income than with traditional forms of welfare.

I think the main problem with conditional government benefits is this: An unemployed person will stop getting welfare/unemployment if they actually land a job. This creates a disincentive to find work. It doesn’t even take a particularly lazy person to turn down an offer to turn down an offer for part time work if that job would pay them less than they’re already collecting in benefits.

Under my basic income scheme,a poor unemployed person would always have something to gain by working, because he would also get more money by working than not working. The only incentive that would be removed would be the threat of “work or starve/become homeless”.

Without the need for a minimum wage, even the most unskilled worker could find someone to whom he could sell his labor, making it much easier to find work. And without the “work or starve” paradigm, no employer could abuse his lower paid
employees because the consequences of quitting would never be too dire.

Finally, and this is going to be extremely controversial, I think even the most shiftless and lazy person doesn’t deserve to starve. I’d rather see today’s Winos hanging out in a cheap studio apartment drinking Thunderbird and not bothering others than crowd the streets and bother people. And considering how many communities are literally criminalizing homelessness, it’d probably be cheaper to just cut them a check than to keep repeatedly jailing them for vagrancy and public drunkenness.

2

Nope.

You can’t successfully implement “wealth redistribution” unless you also have a corresponding equivalent distribution of human preferences. If the government allows the 300 million human brains the freedom to express preferences, then those preferences will inevitably be lopsided, which makes wealth distribution skewed. You can’t get around that.

People get mixed up because they think that money is wealth. It is not. It is the channeling of preferences that divides rich from poor. Every single preference for every single product or skill needs to be equalized or nullified.

You want true equality? You need to invent a pill that’s administered to all citizens to prefer a Honda as much as a Porsche. And prefer an ugly girl the same as a pretty one.

Find a way to equalize (or suppress) preferences and you’ll have the income equality you’re looking for.

3

Social security did this.

http://www.cbpp.org/cms/index.cfm?fa=view&id=1863

Social Security reduces the proportion of elderly people living in poverty from nearly one in two to fewer than one in eight, according to a new study released today of Census data. The study found that in 1997, nearly half of all elderly people — 47.6 percent — had incomes below the poverty line before receipt of Social Security benefits. After receiving Social Security benefits, only 11.9 percent remained poor.

So it does work to cut poverty. Medicare and social security have saved the elderly from pretty miserable lives.
As far as your statement about the homeless, Seattle found it cost $50,000 per year for health care and police interventions for the most severe homeless alcoholics on the streets, but just $13,000 a year to give them apartments and let them drink themselves to death in those.

http://www.nytimes.com/2006/07/05/us/05homeless.html

Also some oil rich countries try the idea you are proposing, just cutting checks each year to citizens.

Also, the poverty line for an individual is higher than for a family. It is 11k for a single person. Plus it is a flawed system that (to my knowledge) looks at food prices.

4

And yet, somehow this is inevitably a horrible disaster unless the country already produces significant wealth in other ways.

5

I like the idea of this. Its basically a “flat welfare” program, analogous to a “flat tax” idea some Libertarians are in favor of. It avoids lots of the issues of existing welfare as it’s you don’t lose your welfare if you get a job,. True you can still choose bum around and do nothing. But you will be significantly worse off than someone who puts the effort in to get a job, not matter how crappy (and the lazy guy will not be living a comfortable life). And you you don’t spend a ton of cash and bureaucracy working out who does and doesn’t get benefits, EVERYONE gets them from Bill Gates on down. Its not even that much more than we currently spend on welfare and pension ($1.1 Trillion according to this link).

The two problems I see are:

  • How do you take into account differences in cost of living ? What is enough to live comfortably in the boonies somewhere is way below the povery line in NY.
  • It’s a major incentive for very poor people to have lots of kids. Which is not a good idea on the whole.
6

Personally I don’t think of it as “wealth distribution”. At least far less so that our current system. Its not offering any preferential treatment to “failures”. EVERYONE gets that payment. And the one group that will benefit more than any other are those that ARE trying to work their way out of poverty. In the current system they are actually punished.

7

I fail to see where the proposal calls for equality of outcomes, or equality of anything. The person getting the benefit and not working will be unequal to the person getting the benefit and working a part time job, who will be unequal to a person getting the benefit and being a CEO. He didn’t even say where the money is coming from.
There is plenty to criticize in the proposal without making stuff up.

8

I do think it would act as a disincentive both at the bottom and the top of the economic ladder. How much that disincentive would be worse that the problems of economic disparity is impossible to predict.

But I think there’s a more central problem with this plan. A lot of people who are poor have problems beyond poverty. I’m not saying they’re to blame for being poor but there are reasons they’re poor. Handing people like this money is not going to solve their problems.

I think if you want to address poverty at the root level you have to provide minimum standards of the necessities of life: food, shelter, clothing, education, health care, security, etc. These are the things that poor people need and giving them money doesn’t necessarily provide these things.

9

I guess it depends on how one defines “http://en.wikipedia.org/wiki/Poverty_line#Defining_poverty_thresholds”.

If one defines it as a “relative” threshold (such as bottom 10% of the income distribution), then it’s not possible to eliminate poverty unless you equalize human preferences.

If one defines it as an “absolute” threshold (a basket of basic goods such as food and clothing) then a distribution is possible. However…

If you do that, then prices will rise universally to compensate for the fact that every citizen in the country has $5000 (or whatever). It cancels out the effect of everyone having a “basic income.”

It’s the same effect of dual-income households. Only the first wave of women leaving the role of housewife to join the workforce created a financial advantage. Now real estate, car prices, etc have adjusted to the fact that most households have 2 working parents.

10

That is kind of the cost, but you can’t just divide the poverty line income of a family of 3 and get a reasonable one for one person. I don’t think $6K is really adequate for one person to live on, at least in some places. However, reducing the payment slightly when people get married just discourages marriage. Thus, I think that practically speaking the minimum would have to be raised, which makes the program more expensive.

I’ll agree that this saves on welfare and food stamps. It is a bit misleading to say it saves on Social Security, since that is (still) coming from SS taxes. If they are eliminated by this plan, you’ve got a big shortfall. If they are not, then you’ve got a big tax increase for the poor, and there will be screaming.
You’d do better to lay out exactly how much of this hit is paid now anyway, and how much is new. I’m not sure touting it as cheaper than France will win many converts.

A good thing is that if everyone gets it, there need be no government workers checking on employment, or trying to find the unemployed jobs. I think you’d still need unemployment, since it would be tough for a highly paid worker to go directly to poverty level while trying to find a job; though the amount can be cut substantially. I think you might some sort of, lower, minimum wage. However, to a certain extent market forces will cut salaries by the amount of the dole, I think. This might help you sell it to business, but it would reduce tax revenues.
BTW, Mack Reyolds in the '60s wrote about a near future America where everyone had a certain amount of Inalienable Basic Stock (which can’t be sold) which paid dividends giving a universal basic income.

11

Blalron said:

To use an example of how much such a program might cost, let’s look at the federal poverty line for a family of three (two adults, one child): 18,310 . Divide that by three and you have $6,103 dollars per person per year.

There are real people today working real hours expending real labor to earn $18k (my mother would have been an example). Blalron proposes to also give $18k to people who do NOTHING. If that isn’t “equalizing”, what word would you call it?

12

No. First, there would be downward pressure on high end salaries. Second, those who get more money from this process than they do today (from welfare, say) will be buying basics for the most part. The demand for these will not go up much from the wealthier, so the increased demand on the basics would be relatively minor.

Are you blaming inflation on working women? Interesting. Bizarre, but interesting. You’d do a lot better blaming stagnant wages on this, assuming that employers could get away with paying less assuming another worker would take up the slack. However, I think there are better reasons, including the destruction of unions and off-shoring.

13

Under the proposal those making 18K today would be making $24K - $36K if you include two other people. How is that equal? If you have an unequal system now, and you bump everyone up by the same amount, you still have an unequal system - unless the amount is so great it makes the current equality be noise. And that isn’t the proposal.
The only equality I see is an equal right to not starve and not be officially poor. Oh, the horror!

14

The government should do everything it can to reward sloth. It hasn’t done enough to enslave millions on welfare, it needs to do more!

“But everyone pays taxes, so it’s fair!”. The bottom 50% pays basically no taxes. So you’re giving people money that is the result of other people’s work.

I like how some are saying “it may not be enough to live on”. Why would anyone work at all if they could live well and do nothing? Some would buy many would not. The loafers and layabouts should be supported by those with their nose to the wheel! Sounds great, if you’re lazy as hell. The country has a 1T deficit plus already, throw another 1.3T on the barbee, no bigee! Just raise everyone’s taxes 50%…well those who are stupid enough to actually work that is.

Poverty is about BEHAVIOR. Lack of discipline, lack of delayed gratification, etc. How could anyone have their head that far in the clouds? Have you ever lived with poor people?

What would you do with the poor who blew their money on drugs or liquor or gambling? Let them starve in the street? You’d have to provide for them too, so that would be an additional “welfare” program. Then you’d have people say “people are still poor? Guess we have to provide more money!”

15

First, please note that the title of Blalron’s thread is “wealth redistribution” and that phrase is almost always used in context of income inequality.

Second, it’s flawed to think a person would earn an EXTRA $18k (total $36k) on top of the $18k handout because that handout has to come from taxes. The increase in taxes is taken away from the money that could have been used for payment of normal wages.

16

I don’t blame working women for anything. I blame monetary policy for inflation.

In any case, the effect of dual-income demographics on pricing trends has been understood by economists for a long time.

17

Another objection is the same as to a “flat tax”: Has any modern, industrialized, and non-Communist country tried this yet? (It’s usually better, you know, to let some other country try a radically new thing first, and learn from their mistakes before we try it in ours. The pioneer is the dude lying in the sand with arrows sticking out of his back.)

18

True, wealth redistribution does affect income equality. In the Bush years wealth redistribution increased income inequality. But in any case, decreasing the share of the top 1%, which let’s say happens by increasing their taxes, hardly creates any sort of income equality, unless you have a very bizarre definition of it.

Why assume the taxes come from corporations? Like I said, there will be downward pressure on wages, especially if the minimum wage is eliminated. You might see a large cohort at or near the basic income level, but do you seriously think this will decrease high end incomes by an amount that would be anywhere close to income equality? It is okay for you to stop defending your kneejerk reaction and to concentrate on the things that are actually wrong with the idea.

19

It doesn’t have to come directly from corporations in the form of tax receipts. But we’re talking about $1.8 trillion here. Even if you restrict the tax burden to only individuals, then the individuals will then have less money to buy products/services that corporations produce therefore reducing the revenue corporations use to pay wages. It’s the same effect.

I think you’re double counting money that’s not there.

Absolutely not and that’s not what I was talking about. I interpreted Blalron’s “abolishing poverty” as abolishing poverty in relative (not absolute) terms. You will always have people in the bottom 10% of income distribution unless there’s a fundamental change made in how our brains work.

20

The problem here is that money and wealth are not the same thing. You are essentially giving trillions of dollars to people who did not perform any labor or services to create wealth to justify it. Really it’s just printing money. It would cause inflation to rise and the buying power of the dollar to drop negating any benefit.

Fundamentally that is the reason you can’t just solve poverty by giving a bunch of money to the poor. Say the government gave everyone $100,000 a year. Would we all live like lawyers and bankers and other six figure earners? No. Wages would increase because to get you to work for me, I need to compete against your $100,000 salary for doing nothing. And since everyone is making that kind of money, we can probably earn the revenue to cover it. Except that $100k or close to it will become the new poverty level since people with jobs will be earning many times that.