Tag Archives: UBI

Yang Was Right

The Guardian recently ran a headline that made me chuckle: “California Mayor Has Tried Universal Basic Income. His advice to Trump: Go Big.” The chuckle wasn’t due to the California Mayor’s conclusions about Universal Basic Income (UBI); it was a response to the demonstrably ridiculous idea that Trump would take advice from anyone about anything.

As federal lawmakers continued to squabble over the form of the zillion-dollar intervention(s) that are clearly required if we are to have any chance at all to avert a depression, the Mayor of Stockton, California was the latest to sing the praises of a UBI–the proposal that formed the centerpiece of Andrew Yang’s Presidential campaign.

Stockton launched a basic income experiment last year, and Michael Tubbs, Stockton’s mayor, has become an ardent advocate of providing direct cash assistance to people.

The idea of providing a universal basic income to citizens is not new, but it has found new supporters in recent years, as some tech industry leaders have embraced “UBI” as a possible response to rising inequality and a growing number of American jobs lost to automation. The Facebook co-founder Chris Hughes is among the proponents of the policy; the Economic Security Project, which he co-chairs, is helping fund basic income experiments in Stockton and elsewhere.

Stockton is just the latest in a global string of experiments with no-strings cash assistance. Results of those experiments have been extremely positive, as is the early data from this one, according to the academic researchers  running the evaluation of the program.

“If you give people free cash, how do they spend it? They’re very rational about it, and they make great decisions,” said Stacia Martin-West, an assistant professor at the University of Tennessee College of Social Work and one of the lead researchers.

Labor leader Andrew Stern has pointed out that, with a UBI, in contrast to welfare, there’s no phase-out, no marriage penalties, no people falsifying information. And support for the concept isn’t limited to progressives. Milton Friedman famously proposed a “negative income tax,” and F.A. Hayek, the libertarian economist, wrote “There is no reason why in a free society government should not assure to all, protection against severe deprivation in the form of an assured minimum income, or a floor below which nobody need descend.”

In 2016, Samuel Hammond of the libertarian Niskanen Center, noted the “ideal” key features of a UBI: its unconditional structure avoids creating poverty traps; it sets a minimum income floor, it raises worker bargaining power without wage or price controls; it decouples benefits from a particular workplace or jurisdiction; since it’s cash, it respects a diversity of needs and values; and it simplifies and streamlines a complex web of bureaucracy, eliminating rent seeking and other sources of inefficiency.

Hammond’s point about worker bargaining power is especially important. Today’s work
environment is characterized by vestigial unions and the growth of the “gig economy.” Employee bargaining power has eroded; wages  have been effectively stagnant for years, despite significant growth in productivity. In 2018, Pew Research reported that “today’s real average wage (that is, the wage after accounting for inflation) has about the same purchasing power it did 40 years ago. And what wage gains there have been have mostly flowed to the highest-paid tier of workers.”

If the U.S. had a UBI and single payer health coverage, workers would have the freedom to leave abusive employers, unsafe work conditions, and uncompetitive pay scales. A UBI might not level the playing field–but it would sure reduce the tilt.

It is also worth noting that a UBI would have much the same positive effect on economic growth as a higher minimum wage. When poor people get money, they spend it, increasing demand.

This is all, of course, pie in the sky so long as we have a self-absorbed, monumentally ignorant, mentally-ill President, and a Republican Senate led by the irredeemably  corrupt Mitch McConnell. It remains to be seen how the Coronavirus pandemic will affect November’s election, but if these men–representing the utter detritus of humanity–are still in office in January, the lack of a rational social-safety net will be the least of our problems.

Taxing The Rich, Helping The Poor

Political observers have consistently dismissed Andrew Yang’s chances of securing the Democratic nomination, and I’ve agreed with their assessment. Yang also agrees–he has terminated his campaign.

Policy folks and political pundits alike have also dismissed his signature proposal–a UBI, or Universal Basic Income. I don’t agree–and neither does the Brookings Institution.

Now, don’t get me wrong–no one who isn’t imbibing very strong drink thinks American lawmakers are likely to pass, or even consider, a UBI any time soon. But as I argued in my most recent book, Living Together, there is a high probability that  millions of jobs will be lost to automation within the next 15-20 years–presenting a challenge America’s current inadequate and bureaucratic social safety net is clearly unable to meet.

In my book, I laid out a number of reasons how–despite Americans’ deep cultural disdain for social welfare programs–a UBI would be both efficient and socially unifying. I also took a stab at explaining how we could pay for it. Nevertheless, some of the sources I identified would require ending fossil fuel and other subsidies and curtailing military expenditures–measures we should take in any event, but that would obviously be politically difficult.

So I was excited to come across an analysis by William Gale of the Brookings Institution that not only made a persuasive case for a UBI, but for his preferred mechanism to pay for it. Here’s the lede:

The Congressional Budget Office just projected a series of $1 trillion budget deficits—as far as the eye can see. Narrowing that deficit will require not only spending reductions and economic growth but also new taxes. One solution that I’ve laid out in a new Hamilton Project paper, “Raising Revenue with a Progressive Value-Added Tax,” is a 10 percent Value-Added Tax (VAT) combined with a universal basic income (UBI)—effectively a cash payment to every US household.

The plan would raise substantial net revenue, be very progressive, and be as conducive to economic growth as any other new tax. The VAT would complement, not replace, any new direct taxes on affluent households, such as a wealth tax or capital gains reforms.

A VAT is a national consumption tax—like a retail sales tax but collected in small bits at each stage of production. It raises a lot of revenue without distorting economic choices like saving, investment, or the organizational form of businesses. And it can be easier to administer than retail sales taxes.

Gale’s UBI proposal is similar to–but smaller than–Andrew Yang’s. The linked article gives the details of how the VAT that paid for it would be structured, and readers with a background in economics are encouraged to read and analyze those details.

The article also explains several of the virtues of the proposed combination of a VAT and a UBI.

The Tax Policy Center estimates that the VAT in conjunction with a UBI would be extremely progressive. It would increase after-tax income of the lowest-income 20 percent of households by 17 percent. The tax burden for middle-income people would be unchanged while incomes of the top 1 percent of households would fall by 5.5 percent.

It may seem counter-intuitive, but the VAT functions as a 10 percent tax on existing wealth because future consumption can be financed only with existing wealth or future wages. Unlike a tax imposed on accumulated assets, the VAT’s implicit wealth tax is very difficult to avoid or evade and does not require the valuation of assets.

Liberals have typically viewed VATs as regressive, but Gale points out that they can be quite progressive when combined with the UBI. He also notes that conservatives should support a VAT because the evidence suggests that VATs almost never increase overall government spending.

Assuming that Gale’s numbers are sound, a VAT would generate more than enough money to pay for a UBI.

Granted, under a UBI, all those caseworkers and number crunchers hired by government to decide who is worthy of support and who is not would lose their jobs. But they would have a UBI, so they wouldn’t starve…

 

Thoughts For Labor Day

Labor Day would seem to be an appropriate time to consider the massive changes that have transformed the American workplace and diminished the bargaining power of workers–one major reason for the enormous gap between the rich and the rest. (It may also be an appropriate time to worry about the continuing replacement of human workers by automation.)

The changing face of the workplace–and especially the enormous growth of the “gig” economy– are barriers to organizing; the reality is that it is increasingly unlikely that unions will ever be the guarantors of fair employment practices that they once were.

If it is the case that most labor unions cannot be revived, the question becomes: how do we bring back workers’ power? How do we arrange the economic landscape so that workers can tell their employers to go take a hike if they offer insultingly low wages or dangerous working conditions? How do we level the playing field between employee and employer–especially large employers?

There is one answer, and it is audacious. We could empower workers (and solve a lot of other problems) by enacting a universal basic income. (Alfred Yang won’t be President, but he isn’t wrong.)

As an article in Forbes, of all unlikely places, pointed out, a universal basic income creates bargaining power by increasing all workers’ capacity to refuse a raw deal. The article points out that a UBI acts to increase workers’ “reserve price” — the minimum each worker must be paid before she is willing to accept a given job with particular working conditions.

A UBI is a more flexible means of improving the bargaining power of labor than either unionization or a minimum wage, because it allows workers to drive a harder bargain. It would also have the same effect on the economy as a higher minimum wage–it would increase both workers’ disposable income and economic demand.

A UBI appeals to both liberals and conservatives. Liberals champion it as a better approach than America’s inadequate and demeaning safety net programs; libertarians embrace it because it avoids legally-imposed, one-size-fits-all measures, allowing firms and individuals the freedom to negotiate the terms of their employment.

A Universal Basic Income would allow employees to walk away from bad employers, unsafe work environments, or undesirable jobs. Most importantly, it would restore a balance of power in the workplace–and as one observer has written, employment would no longer be modeled after “a peasant and feudal lord dynamic.”

I did a good deal of research on the merits and problems of a UBI for my recent book, and although I’m not unrealistic enough to think America’s lawmakers are likely to pass anything remotely similar during my lifetime, I was persuaded by the data that the general approach is not only sound, but–thanks to automation– will be absolutely necessary sooner than most people think.

Labor Day isn’t just a good time for a cookout. It’s also a good time to consider how badly labor has been screwed by the GOP’s war on unions and by the changes to the nature of work itself –and a good time to consider how best to repair the damage.

It’s The Culture….

The other day, I was at the IKEA loading dock. I’d bought two porch chairs, and was wrestling their fairly large and heavy boxes into my car. A gentleman, probably in his late 50s, was walking by, and stopped to help me. I didn’t know him, he didn’t know me: he saw a woman struggling with something heavy and stopped to lend a hand.

I thanked him profusely, but on the way home, all I could think of was how utterly impossible it is to picture Donald Trump ever noticing that someone was struggling and offering help. (Yes, I know I’m obsessed with our insane and dangerous President…)

If there’s a moral to this non-story, it is that nice people make life better for everyone–that thinking of ourselves as part of a community of inter-dependent members who help each other out– rather than as isolated and besieged individuals– creates a supportive culture that really does “lift all boats.”

And that–strangely enough–brings me to public policy. (Pretty much everything these days brings me to public policy….)

As I was doing research for my most recent book, I looked especially at the way social safety nets around the world are constructed, and then at proposed reforms of the U.S. “system.” (I put system in quotes, because it’s a stretch to call America’s inadequate, costly patchwork of social programs a system.) I concluded that there are two major problems with our begrudging approach to a social safety net.

First, and most obviously, America’s welfare programs are inadequate, purposely demeaning and poorly functioning. There are major gaps in coverage, ridiculous bureaucratic requirements–the critiques are plentiful and easily available.

The second problem is far less obvious. Most of the programs in America’s social welfare system are designed in a way that divides, rather than unites, Americans.

Think about the difference between public attitudes toward Social Security and Medicare, on the one hand, and TANF and similar programs on the other. Social Security and Medicare are universal programs–everyone who lives long enough will benefit from them. Then think of the resentment frequently voiced about more targeted welfare programs: the government is taxing me to support “those people.”

When a tax-supported program or service benefits everyone, it tends to bring people together rather than dividing them.( I’ve never heard anyone protest that they don’t want the streets fixed or the garbage collected because “those people will benefit from a service paid for by my tax dollars.”)

One of the most compelling arguments for a Universal Basic Income (UBI) is that it would be universal.  There are many other virtues to a UBI, as Samuel Hammond of the libertarian Niskanen Center has noted: the structure avoids creating poverty traps; it would raise worker bargaining power without wage or price controls; it would decouple benefits from a particular employer or local jurisdiction; and It would simplify and streamlines a complex web of bureaucracy, eliminating rent seeking and other sources of inefficiency. But it is because a UBI is universal that it is so appealing at a time when Americans are so divided.

Programs that treat all similarly-situated members of a community or polity the same tend over time to support a more cohesive culture; they avoid contributing to racial and socio-economic resentments.

UBIs and/or similarly universal programs won’t turn self-centered and emotionally crippled individuals like Trump into nice people who stop to offer help to strangers. But such policies would go a long way to easing–rather than exacerbating– unnecessary and unhelpful social tensions and divisions.

Americans have always had trouble balancing between too much “I” and too much “we.” Social supports that are universal enable a mean between those extremes: providing individuals with membership in a common polity–the “we”–and liberating them to follow their own life goals–the “I.”

A girl can dream…

“Those People”

Most of us have been in conversations that included someone’s dismissive reference to “those people.”

When I was growing up in Anderson, Indiana (with exactly 30 Jewish families in the whole town), the term was often applied to Jews. It was also–and remains–a favored euphemism when race is being discussed by people who don’t like to think of themselves as racists; they just substitute “those people” for the “n” word when discussing the “lower orders.”

“Those people” is also a term frequently applied to the growing number of poor Americans. And it is particularly harmful when used in the context of economic policy. “Those people” wouldn’t need health care if they didn’t eat junk foods and fail to exercise; “those people” wouldn’t need social welfare programs if they weren’t lazy; any benefits provided to “those people” must be closely monitored, because they will use food stamps for candy and/or booze…”Those people” are irresponsible.

Facts and evidence are inconvenient things. Most poor people, according to overwhelming evidence, work 40 or more hours a week. Most recipients of food stamps use them to buy food. And there is growing evidence that needy folks are anything but irresponsible when they are given cash in lieu of benefit programs that are strictly “monitored.”

A recent study conducted by the Roosevelt Institute describes that evidence.

Providing cash directly to individuals has often been met with criticism, suspicion, and fear: the thinking goes that people who need financial assistance are not to be trusted, as their financial position reflects a moral failing rather than a societal one. These objections to cash transfer programs are rooted more in myth than empirical evidence. As the debate about a universal basic income gains prominence, it is important to set the record straight about the behavioral effects of unconditional cash assistance.

In this evidence review, we explore how unconditional cash transfers affected the behavior of recipients in three major natural experiments. While the amounts dispersed and time periods were distinct in each experiment, each provided money without set conditions and without a means test. We synthesize data for the following outcomes: consumption; labor force participation (employment, hours worked, and earnings); education; health; and other social outcomes, such as marriage or fertility choices. Each of these programs shares different components of a universal basic income (UBI), a cash transfer that everyone within a geographic/political territory receives on a regular basis with no conditions on a long-term basis. By understanding the effects of these programs, we can generate answers to how an unconditional cash transfer program might affect recipients in the future.

We may well be transitioning to an economy that simply cannot provide jobs for those who want them. Automation, as I’ve previously noted, is rapidly making many jobs obsolete. Changes in the way we purchase items–especially consumer goods– is inexorably reducing the number of workers in retail occupations.

The transformation of the economic landscape is accelerating, and it is a huge challenge–one which we ignore at our peril.

A UBI–a guaranteed basic income– may or may not be a viable approach to the dislocations to come. But continuing to sneer at the behavior of “those people” and dismissing emerging evidence of the utility of new social welfare proposals is clearly less viable.

A lot of the people who use the phrase aren’t all that far from becoming one of “those people” themselves.