
How to Cut the Poverty Rate in Half - samsolomon
http://www.theatlantic.com/business/archive/2013/10/how-to-cut-the-poverty-rate-in-half-its-easy/280971/
======
sologoub
Guaranteeing $3000 a year isn't exactly what the Swiss have on the ballot.
They are proposing the equivalent of $2800 per month. [1]

Sounds like a socialist idea right? But in fact the libertarian in me loves it
- if implemented, it removes the need for vast swaths of government. If
everyone is guaranteed a basic income, you no longer need vast systems to
manage all the means-tested programs. No social security, no disability, no
unemployment insurance, no retirement programs and tax shelters. No need for
minimum wage. The list goes on and on.

And that's why it won't happen here...

[1][http://www.salon.com/2013/10/11/rather_than_savage_cuts_swit...](http://www.salon.com/2013/10/11/rather_than_savage_cuts_switzerland_considers_star_trek_economics/)

~~~
bhauer
As a libertarian myself, I am also sympathetic to the basic income
proposition. I like the idea in principle, but feel more experimentation is
warranted. I like the premise of trying it out in small increments.

My chief concern is that progressives will ask us to explain how we contend
with people who despite being given a stack of currency still manage to
squander that, leaving themselves hungry, without shelter, or without savings.
They may not say that now, but I think that challenge would eventually arrive.
I personally favor family and charity as a last safety net, but progressives
routinely dismiss those as impractical or insufficient.

My pessimistic side believes that a portion of the progressive inclination for
central planning comes from a fear of allowing people to act stupidly and
suffer the consequences. In other words, it's not necessarily that they _want_
to manage the allocation of funds and/or delivery of services and products to
the poor, but that they believe if they don't do this, bad decisions will be
made, leading to suffering. Meanwhile libertarians such as myself routinely
are naively optimistic, believing everyone will make decent or good choices in
spending their basic income (knowing to put some into healthcare, some into
savings, and so on).

~~~
protomyth
> My chief concern is that progressives will ask us to explain how we contend
> with people who despite being given a stack of currency still manage to
> squander that, leaving themselves hungry, without shelter, or without
> savings.

Pay every weekday morning - it fixes the food part

Shelter is tough because we are not trying new things anymore. You rent an
apartment or rent / buy a home. We don't have many cheaper shelters like
capsule hotels[1] or maybe some modular-type apartments. Innovation in
shelters is not a thing and seriously hampered by existing laws.

> I personally favor family and charity as a last safety net, but progressives
> routinely dismiss those as impractical or insufficient.

It was the way of things in the early days, but we really need to stop making
it difficult for third-partys to actually provide these services.

1) yes, this is not long term or family friendly, but I've live in worse than
what I saw in videos of these things.

~~~
dllthomas
People with these needs having a steady source of income, low as it is, is
likely to drive competition to serving their needs. We might well find more
innovation there.

~~~
protomyth
I keep thinking you are right, but it just seems like all the regulators and
people's perceptions are going to kill any innovation. Never mind the
government screwing the market with loans to people who couldn't really afford
houses to get houses[1].

We got it in our heads that you must buy a home and our definition of home is
fixed. In my wilder moments, I wonder what would happen if a standard "module"
size and connection (structural support, door location, water, electric, etc)
for apartments happened and you could plug the modules into buildings. I'm
sure there are 1,000s of other ideas.

1) small fact, those programs won't loan money to Native Americans on
reservations since they cannot take the land anymore. Not sure that's actually
a bad thing, but it is odd.

------
steveplace
Here's some back of the envelope numbers...

The federal government spends:

-878B in Social Security and disability

-961B in healthcare

-422B in welfare

So that's about 2.26T just in these three categories. For a single year.

We've got about 320 million people in the US.

So this comes out to about 7,000 a person for these three categories.

You want basic income? That's fine, just use it as a replacement for some of
these programs. Instead of running a vast bureaucratic network managing these
benefits, just hand out a check every quarter.

This is hilariously simplified and a slightly more sophisticated system is
what's known as a "negative income tax."

Here is Milton Friedman (yes, Milton, not Tom) advocating for an NIT:
[http://www.youtube.com/watch?v=xtpgkX588nM](http://www.youtube.com/watch?v=xtpgkX588nM)

Want to keep going? When it comes to education, it's about 10k per child for
k-12 spending if you include state and local spending. A high school of 2,000
kids should have a budget of 20 million... and with a student/teacher ratio of
20, would be equivalent to $200,000 per teacher. Take 50% of that to run
facilities/admin and you've still got a six figure salary.

~~~
nickpinkston
And for people saying $7K/person pales in comparison to the Swiss $36K/person,
remember to consider that people who make a lot more would get a lot of their
$7K taxed away anyway - so it's probably closer to an effective $15K-25K a
year considering this.

------
DanielBMarkham
I know this is a cause celebre among some libertarians, but dang if it makes
any sense to me. I'd love to see it applied, though. It's a good thing to be
proven wrong :)

I see two lines of inquiry here. First, does this work on a small scale? Many
HNers have lots of disposable income. I see lots of people buying expensive
electric cars or talking stock options. So put your money where your mouth is.
Go find 10 people who are poor and give them each 15K. I'd offer three
stipulations. 1) It has to be anonymous, 2) It has to be one-time, and 3) you
should anonymously follow-up after 6 months.

I suspect at the end of six months you'll just find the same poor people, even
though technically you've offered them half a year's salary at 30K. But this
is very easy to prove one way or another. Somebody like Zucerberg could
probably run a sample of 100 or 500 without much problem. I'd love toe see the
results.

My second line of inquiry is: does this work at scale? In other words, is the
political system capable of simply giving out money? I seriously doubt it.
From what I've seen, a simple program, especially involving lots of money,
will grow in complexity very quickly. Yes, technically you should be able to
direct-credit anybody with a bank account within seconds. I have deep
reservations that anything like that would actually happen, though. If you got
50% of the money to the poor you'd be doing well, and I wouldn't bet on that
much traction.

The larger point is that literally trillions have been spent over the decades
on poverty. Programs have been created and executed by some of the smartest
people in the world. People who have managed empires of tens of billions of
dollars have went down this road. And poverty still abides.

I'm not saying it's intractable. I'm simply saying that caution is in order
here. "Prove it" is the correct response when offered really simple solutions
to problems that have stumped thousands of others. Don't write a flashy
article, don't persuade me in an opinion column, don't show me some economic
study. Prove it.

~~~
pbhjpbhj
> _I suspect at the end of six months you 'll just find the same poor people,
> even though technically you've offered them half a year's salary at 30K._ //

Isn't this rather like complaining that a hungry person will be hungry next
meal-time even if you give them a meal now?

~~~
DanielBMarkham
To clarify:

The hypothesis on the table is that you can only measure by poverty by income.
That is, if you gave a person making 0 per year 30K per year they would
suddenly have an apartment, healthcare, transportation, and all those other
things that most other people who make 30K per year have. A certain amount of
money over a certain amount of time is the thing to be adjusted (maximized?)

To test this, use a substantial amount of money and a non-trivial time period.
15K and six months come to mind because the sum of money is large enough to do
quite a few things and the time period is long enough to allow various random
things in life to occur. I'd think you could also test at greater income
levels. In fact, to do it right you'd use 15K, 30K, and 45K and time periods
of 6, 9, and 12 months.

So when you come back, you're not looking for poverty to be "solved", whatever
that means. You're looking on the previous time period to see if that person
lived the same as somebody who was making a similar amount from a job. Did
they have access to shelter? Food? Did the money last? And so on.

I'm by no means suggesting that poor people are going to blow it all on booze
and cocaine (of course, some will), but that _you 're measuring the wrong
thing_. This is a classic example of managing to whatever the metrics are,
instead of the underlying condition. Put a different way, we shouldn't care
how much money anybody makes, but whether they live a comfortable, happy life
and have access to opportunity. But whatever my personal bias, an experiment
like this would put in sharp relief whether or not the hypothesis had legs or
not.

~~~
pbhjpbhj
> _if you gave a person making 0 per year 30K per year they would suddenly
> have an apartment, healthcare, transportation, and all those other things
> that most other people who make 30K per year have_ //

It's a poor premise. There's a wearing down effect that poverty has. Over time
one can rely quite a bit on past wealth - for example clothing starts wearing
out after a year (shoes) but can last decades depending on wear. [estimated
periods:] A house needs re-roofing in 20 years, a boiler needs replacing in 10
years, a car needs replacing when it's 15 years old, et cetera.

It's quite easy to live on a low income for a shorter period. In 6 months
you're still using all the things you had when you were better off - probably
you still have some foodstuffs. Coming the other direction in 6 months of
higher income you'd still be spending on those things that have worn out.

The $15k for 6 months would make a dramatic change, IMO, but not necessarily
one that a casual observer would notice. As an example, I would probably still
be wearing worn out clothes but the house would be in a good state of repair,
we'd have a fully working cooker and washing machine, etc..

> _we shouldn 't care how much money anybody makes, but whether they live a
> comfortable, happy life and have access to opportunity_ //

Yes, amen.

------
rafd
I'm supportive of basic income, but slightly apprehensive of side effects. I
think it would have to be rolled-in gradually so as not to shock the economic
system.

Some other potential pros not mentioned in the article: \- lowers barriers to
entrepreneurship \- allows parents to stay home and take care of young
children \- lowers barriers for re-education \- could reduce costs of social
services (through elimination of complex programs)

Side effects I'm curious about: \- how will BI impact minimum wage? \- how
will BI impact entry level jobs? \- how will BI impact cost of basic goods?

Also, the 'poverty line' should actually be location dependent because of the
difference in food and rent costs in different places. Should BI be location
dependent too?

~~~
amerika_blog
One paradox of money is that the more you distribute it, the less it is worth.

When you think about it, this makes sense. If it's easy to come by, it's
proportionately "worth less."

~~~
eli_gottlieb
The actual distribution is an upside-down parabola, a "frowny shape".

Think, for instance, what would happen if one billionaire bought up the entire
world supply of Bitcoins for ideological reasons (meaning: he never reaches a
point of diminishing marginal utility as the price of BC increases). First,
there would be a price bubble as everyone holding bitcoins gets the highest
price they can. Then, everyone who had formerly used bitcoin but now sold to
the billionaire would migrate to some other crypto-currency, leaving the
billionaire eventually holding utterly worthless cryptographic certificates
accepted by nobody at all.

~~~
dllthomas
I see that it's lower at the ends than in the middle. I don't see that a
parabola is a good fit - especially not from your example, where my intuition
says it'd look more like a bubble bursting than a smooth rise and fall.

------
pliny
Lower the poverty line to the median income of people who are currently under
the poverty line.

You can repeat this as many times as you like to make the poverty rate
arbitrarily low.

~~~
gaius
A lot of statistics like this in the UK are published by the Joseph Rowntree
Foundation, which openly admits to using a relative measure of poverty, the
bottom third. So say your neighbours on either side were watching Blu-Rays and
you had a humble DVD player. They'd count that as "poverty". Every now and
then their PR machine will arrange for headlines like "one third of children
live in poverty!!!" which sounds terrible in a developed country, but
actually, is completely meaningless.

~~~
DanBC
Is there anyone doing better reporting of poverty in childhood?

Or is the problem more around behaviours and societal stuff than money?

A Channel 4 documentary is a poor source of information but the breadth and
depth of the problem is shown in programmes like Skint. The nihilism of
multiple generations, the apathy, the learned hopelessness.
[http://www.channel4.com/programmes/skint/4od](http://www.channel4.com/programmes/skint/4od)

While these people may not be objectively poor[1] the children have obviously
sub-optimal lives.

[1] People have homes, and food, and heat.

------
cbeach
Even as a right-winger, I'm in favour of universal welfare, provided this
isn't offered as a bolt-on to existing means-tested welfare. This should be
implemented as a straight replacement, so that we can reap the cost savings in
administration.

The article points out "the only thing standing in the way of dramatic poverty
reduction and dramatic inequality reduction is, as always, politics"

Unfortunately we'd almost certainly see a rise in the cost of living (food /
energy prices). If people can afford more, they'll be charged more - that's
how free markets work.

------
guylhem
Want a quick and dirty fix? Kill half of the poor. Problem solved immediately.
(I hate such rhetorical questions, so this is the ironic answer I always give)

There is no quick way out, and the various "basic income" schemes are untested
on such a wide scale, and their consequences unknown.

Those who favour basic income on the hypothesis it will be balanced by a
reduction of government redistribution jobs ignore a very important trend:
governments never shrink - they grow with time (IIRC, in the US over 40% of
the GDP is eaten by the gov)

~~~
dllthomas
_" (IIRC, in the US over 40% of the GDP is eaten by the gov)"_

[http://www.morganwarstler.com/post/44789487956/guaranteed-
in...](http://www.morganwarstler.com/post/44789487956/guaranteed-income-
choose-your-boss-the-market-based)

It looks like it's strictly less than 25%, though there could well be
categories of spending that's excluding.

------
melling
Any economics research into why this would, or would not, be a good idea?
There are often unintended consequences to such a large change. My
understanding, for example, is that having the tax deduction for home buyers
simply leads to higher home prices.

~~~
d4vlx
> tax deduction for home buyers simply leads to higher home prices

This is actually a desired effect of a basic income. The poorest people often
live in areas that are essentially cash starved with low real estate prices.
There is often little incentive or ability to improve or maintain their homes.
A basic income would provide the ability for many in such areas to spend on
non essentials like home maintenance which could lead to higher prices and
higher employment. Which in turn could lead to more pride in ownership and
eventually end up re-invigorating those areas.

~~~
notahacker
The poorest people _rent_ , so they have minimal incentive to improve their
homes, whilst the relatively-wealthy landlords they rent from have every
incentive to increase the rent, because their tenants' income has just gone up
by 20% or more (as have their own taxes...) but little incentive to improve
the property because the supply of low-end housing hasn't changed.

I agree that _some_ of the basic income given to some members of the working
poor will end up being spent on productive improvements that benefit
themselves and the people they hire to do it, but a lot of it will simply be
gobbled up by inflation of essentials.

------
xacaxulu
"That security might not just keep people out of poverty. It might let workers
demand better wages and working conditions, because they know they always have
something to fall back on. In other words, it could level the playing field
for the bottom 99 percent." This is exactly what America's corporate backers
don't want. Who wants a workforce that has the ability to say no or to do
anything other than beg for the chance to be hired at a low-paying job without
benefits?

~~~
legutierr
> Who wants a workforce that has the ability to say no or to do anything other
> than beg for the chance to be hired at a low-paying job without benefits?

The workers, I would hope. Unfortunately, many people don't understand their
own self-interest.

------
AJ007
Reduce the cost of living by $3,000 a year. Cut waste producing production,
reduce co2 emissions, and the results scale out to the rest of the world's
population.

How about a freemium economy? The fries are free but the salt and ketchup cost
money.

The biggest lesson I've learned from running a company is blanket money
tossing tends to be an excuse for intellectual laziness.

~~~
sseveran
Where would you remove $3000 of costs per year? Reducing CO2 emissions would
cause prices to rise since alternative forms of power are more expensive. What
you really want to do is mandate a lower standard of living, which is by
definition cheaper.

~~~
dllthomas
_" What you really want to do is mandate a lower standard of living, which is
by definition cheaper."_

That's not at all "by definition" \- incarceration, for instance, is a
horrible standard of living and is hugely expensive.

~~~
sseveran
_shakes head_

~~~
dllthomas
My example was obviously extreme, but it wasn't purely a usage note - there is
a meaningful distinction between forcing a lower standard of living and
expecting reduced resource usage, and forcing reduced resource usage and
accepting a lower standard of living.

------
lutusp
> High rates of poverty can, as a policy matter, be solved with trivial ease.
> How? By simply giving the poor money.

It's been tried. It didn't work. How can the author of this article be so
ignorant of history, not just of the many experiments in communism and
socialism, but of relatively limited, well-intentioned programs like AFDC in
the U.S., programs that are now recognized as having made the problem worse?

Giving the poor money is not, and never will be, "simple". Reasonable people
may differ, but I personally think putting the money into education would be a
better investment.

------
johnnyg
My first reaction was "hell no".

My second was "there would at least be one and only one number to vote on and
administer in this area of government"

My third "oh...wait, you can't live on 3k anyway. The rest of the machinery
would have to stay and this would be in addition. Worse, next year its 3.5k,
and then next 4k..."

So my counter is this:

Will it work if we give everyone 30k a year? Because that would actually
simplify and change things.

Anything less and this isn't a serious proposal.

~~~
pbhjpbhj
Our family income amounts to ~$4800 per person per annum. So you're proposing
a 6 times income increase (we're in the UK). I think $3k is probably _just_
enough to live on in the UK and it's generally accepted that the cost of
living here is greater, certainly it would be enough if one weren't spending
~50% of their income on a mortgage.

We run a car too (£1.30/l for petrol), if we weren't working we wouldn't need
the car and we'd be able to get an allotment to supplement our food supply. I
consider us to be quite well off yet, of course, relatively poor. We don't
qualify for free school meals so apparently there are a lot (400,000 children
in England alone do qualify) of people worse off than us and still surviving.

$30k per year sounds like it would be a massive disincentive to seek a wage,
whether that would also amount to a large population who don't work or not is
anyone's guess really (but I'd say yes).

~~~
johnnyg
Hrm. Maybe I misunderstood the proposal, which I consider radical, and took a
wrong turn.

I'm working back from median household income in the US.

[https://en.wikipedia.org/wiki/File:Median_US_household_incom...](https://en.wikipedia.org/wiki/File:Median_US_household_income.png)

I think the proposal's underpinnings are "lets pay everyone enough to live on,
shrink all the complexity down to one number so we can all understand and
impact what that one number is, and hope that those who produce for love of
the game do so to an extent that allows us to keep the system running".
Basically communism with a uber-capitalist kicker (slogan proposal: "Musk's
gonna Musk").

From your comments, it sounds like you'd think that if we put 30k more per
person on the table, the incentive to work would go away, and the poor are
needed to work so it would break the system. Well, I believe we've already
crossed this line with current entitlements and programs and there's already
an advantage to not working.

This is a far right alt source so read it carefully and do your own thinking
(could say the same for CNBC though!):

[http://www.zerohedge.com/article/entitlement-america-head-
ho...](http://www.zerohedge.com/article/entitlement-america-head-household-
making-minimum-wage-has-more-disposable-income-family-mak)

In conclusion:

1\. 3k is just another entitlement added onto a haze of entitlements.

2\. The value would be a single number. We're giving it away inefficiently
now, why not clean that part up and hope democracy/the light of day will bring
a moderation to it. Likely not, but better than what is.

3\. 30k would be a better number if all other entitlement of any kind were
truly going away and we were going to truly play it strait up.

4\. If I'm wrong on this and the number after cutting everything else off is
really 8k or 10k or whatever, I'm still fairly skeptical we could pay for it.

5\. I've focused a lot of my life on not being poor-ish like we were when I
was a kid. I think I'm pretty disconnected from what that word really means,
and intentionally so, but thanks for the reality check anyway. If you'd go
into more detail, I'd read it. Specifically, say you were poor but wanted to
make something, would the amount of money you'd need increase and by how much?

~~~
pbhjpbhj
I agree that the primary advantage to the state is in rationalising the
complex system of benefits and payments down to a single system of assessment.

It strikes me that the disincentive to work can possibly be countered by
employing on a limited-time basis those seeking the "benefit" in what would
otherwise be uneconomic work. Litter picking is a classic example; sorting
recyclables is probably a similar thing. Basically anything to act as a token
contribution to the community.

> _Specifically, say you were poor but wanted to make something, would the
> amount of money you 'd need increase and by how much?_ //

Certainly. We run a location-based business and want to move it to address a
larger market but the cost of moving is prohibitive.

Similarly I've a couple of inventions I'd like to work up; one of which I'd
need access to a decent workshop and a couple of months [proper] income to
spend on testing and prototype development.

On a slightly different tack there are educational opportunities that my kids
are missing out on which require finance - they're low level costs but still
out of reach. (Example, we do basic [chemistry|physics] experiments at home, a
bit more money would enhance them considerably).

------
prostoalex
> There is also plenty of room to cut tax expenditures on homeowners, personal
> retirement accounts, capital gains exclusions at death, and exclusions on
> annuity investment returns.

Let's use today's data and assume no changes in economic behavior.

------
JoeAltmaier
Unintended consequences rule. Taking people out of 'poverty' could mean they
become ineligible for other programs, with a net reduction in standard of
living. For example.

~~~
Shivetya
Then you find the benefits paid by all these programs, determine the
expenditure per beneficiary and set one flat basic payout per week to all who
qualify.

You toss all these other assistance programs in the trash. One central agency
administers the money. EBT cards could be administered separately from the
basic income card. The rules would be simple, the cards are usable wherever
debit and credit cards are. All government agencies would be required to
accept them as well.

There are so many aid programs just in the US alone I bet no one can find them
all, even at the Federal level the number of programs which partially if not
wholly overlap is costly. Then throw in state ones which do essentially the
same and we waste an incredible amount on money in just administration.

One way to solve that duplicate effort, get the feds out or get the states
out. One agency should be able to administer it all.

~~~
JoeAltmaier
Very positive. Until somebody is incapable of managing themselves for a
variety of reasons - not just mental health or drug addiction, but lack of
education or self-control.

Its galling to hand out money and have it gambled away or spend on cigarettes
and whiskey. Don't laugh - a generation of women had to scrape by during the
depression because the paltry paycheck went into a bottle. That's why we have
food stamps etc - they can't be spent on anything but food.

------
jfe
this article is ridden with economic fallacies.

~~~
steveklabnik
Half DH1, half DH3. You can do better!

[http://www.paulgraham.com/disagree.html](http://www.paulgraham.com/disagree.html)

~~~
jfe
i know, and i don't care.

------
raelmiu
This is the dumbest socialist propaganda I've read in quite some time. The end
result of such an intervention is inflation, not poverty cuts. Because the
money will be going out faster than it is collected simply because of
logistics and population increase.

There is a famous event of this happening in the old west, large portions of
land was just handed out in a state lottery. It changed nothing. This is not a
sustainable solution to the problem of bad income mobility.

~~~
dragonwriter
> This is the dumbest socialist propaganda I've read in quite some time. The
> end result of such an intervention is inflation, not poverty cuts.

Presumably, redistribution increases inflationary pressure in some sectors and
reduces it in others, but it only increases them across the board if it
results in more money being spent, e.g., by increasing the domestic velocity
of money, total economic activity, and aggregate demand. But that's not a bad
thing, and the danger of high inflation can be managed by monetary policy --
tightening monetary policy in response to expansionary conditions that would
otherwise produce inflation is pretty much monetary policy 101.

> Because the money will be going out faster than it is collected

Obviously, its trivial to aggregate benefit to a dedicated revenue source so
that its money is going out no faster than it is collected.

> There is a famous event of this happening in the old west, large portions of
> land was just handed out in a state lottery.

Presumably, this is a somewhat confused reference to the Homestead Act, which
had a pretty significant impact on building the American middle class.

But, even so, a continuous redistribution through basic income is different
than a one-time distribution of land.

~~~
raelmiu
First point: Inflation doesn't profit anyone, and it isn't strictly necessary,
just hard to avoid. Handing out money that then, because of the hand out,
loses a large portion of its value is not redistribution of wealth, but only
paper.

Second point: Trivial? It has never been done so far. No government has
managed to do this yet, it's the main source of inflation today.

Third point: It is different in that it's recurring instead of a one time hand
out. The problems still remain. But the idea of "citizen pay" is not a new
one. The problems remain: logistically difficult. Economically inflation
removes the "wealth" being redistributed so people end up with nothing.
Socioeconomically it removes pressure to invent wealth generating enterprises.

------
pdfcollect
Why not do this for the entire world? :-)

~~~
vixen99
Possibly because some lousy spoilers will object to working like a dog and
financing the bloke down the street who doesn't.

~~~
noonespecial
This is somewhat de-fanged by the idea that said lousy spoiler _also_ gets the
$3000. Its better than the current system where only those blokes who
won't/can't (damn them/pity them) get the handout. People still work like dogs
under the current system so... meh?

------
joshuaheard
Take 20 men and give each a dollar. Lock them in a room for a week. At the end
of the week one man will have all 20 dollars.

~~~
gaius
Wanna bet? ;-)

~~~
001sky
My money is on the bookie ... !

