Economists who want to study the effect of a basic income can travel to Alaska and see the impact for themselves.
It always struck me as ironic because Alaska is one of the most conservative states, and conservatives are not usually in favor of handouts. In this case, however, the inflows to the fund come not from personal income taxes but from taxes and lease-revenue on the state's natural resources, notably oil and gas. Because of this, people view it as a birthright, similar to an inheritance, rather than a handout, like welfare.
In 1976 Alaska's citizens just banded together and determined that (1) all of these natural resources are shared, and the benefits from them should be shared also; and (2) none of us trust the Government to spend this money for us, better than we could spend it ourselves. Today, it is the most popular Government program in the state with near absolute bi-partisan support.
So there seems to be precedent that this can work, if you have a massive sovereign wealth fund that is fed by revenues from shared resources. There are other countries, like Saudi Arabia or Norway, who will probably be the first to try this on a nation-wide scale before Switzerland.
The problem with the states as laboratories of democracy is that, from a scientific perspective, they're pretty crappy experiments in terms of having any control groups. While an economist can travel to Alaska, it's hard to tell whether any given quality in the current state is due to the experiment or not. For instance, the price of food is quite high in Alaska; is this due to some basic commodity inflation, or is it because there are no road and rail links to most major population centers? Probably the latter, and you can look at Alaska both before and after the Permanent Fund was implemented, but even then, it's not a perfect control.
That is also the disadvantage of state power. At least, if you are a person whose life is being controlled by the coercive power of the state government in ways that might be harmful to you.
If you are powerful in the state, of course, it is very good for you to have fewer checks on your own power. It also helps things like arranging elections, like by excluding demographics less likely to vote for you.
My position is that state's rights is invoked so often in defense of bad or disgusting policy in the United States - and frankly, used so infrequently to test genuinely interesting policy in a meaningful way - that it's not a hugely important thing. I feel this is an empirical observation that won't necessarily hold true in all times or places.
When people try to state these things about how government should work purely out of principle, it usually seems pretty unconvincing. We can judge methods of government based on their outcomes to a large extent.
Or more recently medical marijuana, and in general drug legalization efforts rely on states rights argumentation.
then we get Alaska oil production of 2mi barrel per day (it is much lower now than a decade ago). Assuming a very conservative $100/barrel = 200,000,000/day = 2,400,000,000/mo
That's 3% if you tax on top of gross profit (no idea how oil is taxed. it is probably much less than my income tax if i know how the world works...)
And I am not counting fish, gas, lumber, minerals, etc.
That sound like the citizens are doing a much worse job than the gov in setting the rent for the oil companies.
Can you say more about this? What is the perceived impact?
The only people they found that were less represented in the work force were teenagers and new mothers (in my opinion, people that could do without being in the workforce for a while...). Hospital visits decreased (with socialized healthcare, this is a good thing financially). Crime went down. Kids did better at school... Really, the effect was a pretty clear net positive.
(It's important to note, however, that as you earned your own income the money was subtracted from your 'mincome' at half that rate. There was never a point where "working more" or "earning more" would equate to making the same or less money. Something missing in many current social programs.)
The program ended because of a shift from a more socialist party to a more conservative one, not because of any intrinsic issue.
> go back to work
It sounds to me like they're working pretty hard already.
They are working, as you note -- just working in a manner that they clearly prefer to wage labor.
Is it not unfair that they are only shared with people who live in Alaska? Shouldn't they be shared with all Americans? If I was an an American I would be in favour of one of two things:
1. The money from the resources is shared with all Americans either via a handout or government spending on something that benefits all Americans.
2. Use the money to subsidise current unemployment benefits (or some other nationally available benefit) in Alaska.
Currently the fund apparently holds about 1% of the total share capital of all listed companies worldwide (though it is by no means evenly distributed) - about 2% of the share capital of European listed companies - and a few months ago it was worth $670 billion, or more than $130,000 per Norwegian citizen.
Sure, if you have a virtually limitless supply of free money, you can give away free money. Alaskans like the fund so much because a) that money goes into their pockets rather than the pockets of politicians or the wealthy and well-connected, and b) it's not welfare. Unless you have a large resource/population ratio, basic income generally isn't feasible.
The thing is that Alaska is not taxing Alaskan to share the wealth. Alaska is giving everyone a s share of what it gets from what they have underground. Arab countries have generous welfare systems but I doubt they'd have them if the richer ones were taxed to provide for everyone.
Until we have Star Trek style technology for these free ham sandwiches, I don't see how Star Trek style economics will actually work.
Specific, though informal, measurements were made by Pascal J. for Canada. A 2004 taxable basic income benefit of $7800 per adult could be afforded without any tax increases by replacing welfare, unemployment, and core Old age services. (Canada has supplemental poverty old age programs and pension system). The number excludes any intangible benefits of tax revenue increases due to higher spending and lower personal savings, and any expenditure savings on criminal enforcement.
No you don't. The basic income is set off against your income tax liability, in fact, it's also been referred to as "negative income tax".
One of the nice aspects of the negative income tax is that it reduces the marginal tax rate at the bottom, which can often approach or even exceed 100% (you lose close to or even more benefits compared to the income from a low-paying job). Instead it's all just one smooth scale.
Another aspect of this is that it is one way of distributing the "automation dividend" that technology has given to society more equitably: "if robots and algorithms replace us in the labour market, they should also substitute us as taxpayers."
Inefficiencies in the social insurance system are one aspect, but a rather small one, IIRC.
As an IT professional who spends his days writing code to automate people away, I'm completely okay with this.
Beyond that: yes, you could in theory make things cheaper by only giving the basic income to people who need it. But that's a fool's errand: although that course would reduce average tax rates as a first order effect, it would drastically raise marginal tax rates, which are much more relevant for predicting behavior. On top of that you instantly add a whole lot of administrative costs and interest group jockeying about determining who deserves it and who doesn't.
You get a huge amount of value out of an unconditional grant, and it distorts the market far less than any other structure of welfare scheme.
If a BI shifted spending from investment/savings to consumption, demand for necessities would increase, driving up the cost. I.e., inflation.
Also, there is another structure which distorts the market even less than Basic Income. It's called the Basic Job. You get a Basic Income, but you need to show up and do work to receive it. It solves all the same problems as Basic Income, but with far lower disincentive for work, and at far lower cost.
There is a basic assumption people make that a basic income would result in masses of people lazing about doing nothing just because they can. Canada experimented with a minimum income in the 1970s in a Manitoba town, and here's what happened: http://disinfo.com/2013/02/the-forgotten-history-of-a-canadi...
"Only two segments of Dauphin’s labor force worked less as a result of Mincome—new mothers and teenagers. Mothers with newborns stopped working because they wanted to stay at home longer with their babies. And teenagers worked less because they weren’t under as much pressure to support their families."
More sources at Wikipedia here: http://en.wikipedia.org/wiki/Mincome
Also, wikipedia's secondary sources don't agree with each other. Some do list small disincentive effects, and suggest they would have been larger if mincome wasn't a short term thing (i.e., "don't quit your job, mincome is going away").
I also don't don't propose that the basic job should pay well at all - the pay should be well below market so you always have an incentive to get a real job.
From what I remember from my childhood there was some very limited private sector. Trust me, much damage on the psyche was done not by not allowing people to start companies but by bringing all to places where they couldn't do much and giving them money for just sitting there (and usually drinking copiously).
2) I'm not too familiar with the Basic Job idea, and it's not very google-able. But I expect my general response would be two-pronged: firstly, I reject the idea that there's a huge disincentive to work with Basic Income. No one is materially satisfied at the basic income level, which my gut says should be $10k-$12k. Most working age Americans make more than that, and most are happy to take on more work when it means more money. (At some point most people do value time over money, but that's well above the minimum income level.)
But more fundamentally I reject the idea that a government has the capability to designate what're jobs that involve real, economically valuable work and what're not.
Should a person who dispenses psychoactive consumables be considered a worker? Yes, but try getting that through Congress. Should an NSA snoop? No, but same deal. What about an artist? An entrepreneur exploring a new market? An unpaid intern building up social and knowledge capital? A family caretaker?
Even if I trusted bureaucrats in DC not to be subject to special interests and regulatory capture, it's a matter of capability. They just don't have the knowledge to make these judgments, and investing enough money into providing that knowledge would be a huge waste if not impossible. On-the-ground individuals have far more knowledge about their particular circumstances and the needs of their communities than anyone else. Building the ability for dispersed economic activity to leverage dispersed knowledge has to be a cornerstone of policymaking, because those knowledge costs are increasingly the costs that define our modern economy.
Your definition of necessities is, I believe, narrower than the BLS. Consumer goods is probably a better term in retrospect. When you redistribute wealth from savers to spenders (as a BI is purported to do), you are increasing demand for consumer goods.
No one is materially satisfied at the basic income level, which my gut says should be $10k-$12k...No one is materially satisfied at the basic income level...(At some point most people do value time over money, but that's well above the minimum income level.)
This is simply incorrect. Most Americans below the poverty line already choose time over money.
I don't propose that basic jobs necessarily involve real, economically valuable work. I expect basic jobs to cost the government money.
The point is that it's cheaper than a BI, for two reasons. First, only a small subset of the population will even take the basic job - perhaps 10-50 million people. The rest will find jobs in the market economy paying more than $7.25/hour. Second, you gain some economic output from them - a low skill worker might be worth only $3/hour, and you pay him $7.25, so the loss is $4.25/hour rather than $7.25/hour. This would actually save the government money in some cases if the basic job worker replaces a unionized government worker making $20/hour.
Incidentally, the Basic Job program has been tried. FDR did it. We got a national park system out of it, among other benefits.
Present-day welfare systems have tremendous amounts of overhead to run. In a basic income system, most of that overhead goes away - you don't need an Office of Unemployment Benefits, or a Food for Underprivileged Children program - because everybody gets a check.
Do the savings completely offset the cost? I have no idea. But, it seems reasonable that they could offset a substantial portion. Of course, getting a government to willingly reduce it's size is a whole other problem.
Social Security and Medicare comprise a large majority of social spending in the USA. SS-OASI has overhead costs of 0.5%, and Medicare has around 1%. That's owing to them being unconditional, outside of age. Even their less efficient brethren aren't that bad: SS-DI is around 2%.
Medicaid is much higher (~6% I think) because it is so targeted and is really administered by 50 different agencies on top of the feds. But after that you get to programs that might be super inefficient but just aren't big enough to generate the huge kinds of savings we might want.
Social Security is not unconditional; both whether you are eligible at all and the benefits for which you are eligible are based on your history of qualifying contributions, not merely your age.
And because, while Medicare is usually a primary payer, Medicaid is the payer of last resort, so Medicaid has a lot more expense in verifying that there isn't another payer with an obligation to pay (including Medicare -- there is a substantial population eligible for both programs) that should pay before Medicaid, or reimburse Medicaid.
Whether or not it would cause inflation is unclear, because wages may decrease correspondingly.
With GMI, there's no justification for class resentment - you get the same benefit as everyone else.
Guaranteed Minimum Income is the idea that if your own income is insufficient, the state will step in and provide one for you. The conditionality in that definition, however, means that it would be a means-tested programme with all the attendant implications for marginal tax rates, poverty traps, class resentment, etc.
A Universal/Unconditional Basic Income is different -- it's provided to everyone with no means testing whatsoever. I think that's what you meant, based on how you're using it. But just be aware that GMI/UBI are actually quite different things.
For replacing poverty-targetted programs, this effect is limited if its used in a system which already has an appropriate progressive income tax system, further, it makes "needing it" less durable, as it doesn't prevent gains in personal earning potential from being negated by cutbacks in benefits that create a disincentives (because the costs to realize the gains + the cutbacks do to receiving the gains mean that gaining income-before-benefits actually reduces effective income-after-benefits.)
Also, the whole economy benefits by simply giving out money that people can choose to spend as they wish, instead of in limited categories (like food stamps).
Finally, people who work (legally) already pay taxes and are managed by the IRS, so taking this basic income back from them in taxes wouldn't be that much overhead.
Unfortunately Medicare runs headlong into the other point the comment above was making: Medicare forces you to spend a very large income grant on a very particular category of consumer good. And that effectively forces huge spending on healthcare when society would be better off if they could spend it on other things.
In the states. Really.
This is true.
>The rationing, measuring and paying is really very expensive to administer.
This is not.
We have written legislation that prevents us from negotiating for healthcare goods and services; we protect US doctors from foreign competition and allow the profession to artificially constrain the supply. We also prevent Americans from importing drugs, or buying into other countries' health care systems - also shielding the domestic market from competition. Also, patents and reformulations.
Administration is actually a very small overhead. Rent-seeking is the problem.
"We have 17 million uninsured americans in this country!" (or whatever the number was. Well... just expand medicaid eligibility (or even allow people to pay for medicaid coverage on their own, regardless of pre-existing conditions). Problem solved (or solved a lot more broadly than this force-everyone-to-buy-private-insurance-and-make-the-insurance-companies-change-their-underwriting-practices).
It wasn't because a political concern was to get something that could pass without beign scuttled by pushback from the industry and resistance Congressional Republicans and even from conservative Democrats that met and scuttled Clinton's reform efforts (why Clinton didn't seek a simple single-payer solution is another question), and so pretty much all the proposals from the major Democratic candidates in 2008 were variations on the mandatory/subsidized insurance purchase idea that had been being pushed by the insurance industry since, IIRC, the early 00's, and had been frequently floated in Republican circles -- including being a signature accomplish for Mitt Romney in Massachussettes.)
Well, several decades ago it did, before the shift to encourage purchase of private managed care plans with government subsidies through what (after several name changes) is now called "Medicare Advantage".
Medicare now is more like the ACA model plus a public option than it is like single-payer.
One example might be public transit where the cost of printing tickets, tokens and passes, plus paying fare collectors and maintaining the equipment to prevent people from jumping gates is way more expensive than just letting people on for free.
Or, to be precise, there were tickets, but they weren't enforced. No turnstiles were present anywhere in the system.
Coming from previous transit systems like MARTA and the DC METRO, this was a shocking turn of events.
Supposedly officials come around and ensure everyone has a ticket, but I never saw that happen.
The buses, on the other hand, require payment to board.
The point of such a citizen basic income, is that it would eliminate the need for plethoric armies of "civil servants", at all levels. Instead of paying them to bother and harass the public, we pay they to do nothing, and the money that was wasted on their useless activity (beside their salaries converted into citizen basic income), is used to pay this citizen basic income to the other citizen.
In other words, YOU are already paying for it!
As for the free ham sandwiches, what is required for that to work is:
- material resources: the universe is big. Even the Earth is big! (but we need energy to dig deep down).
- energetic resources: the sun is big too! And there's uranium, thorium, and perhaps soon hydrogen fusion.
- to put this energy to work moving mater into a ham sandwich, what else is needed is information, the command and control systems, which any programmer will be delighted to implement, if you give him the chance to do it.
Robots and 3D printers are already doing a lot of work, we just need to automatize more. Why aren't google cars already driving on the roads everywhere?
Why are we still making buildings with man power, when the can be made in automatic factories or by big 3D printers?
If there was a basic income, he could become someone who could advise how to build better, and thus make use of a higher order knowledge process where as labouring is done by automated means. The end result is a house gets build faster, and cheaper.
Marginal tax rates are the taxes that you pay on additional income. Eg., if I make (rounding numbers recklessly) £9k per year, I am taxed nothing. However every pound I make over £9k is taxed at 15% -- that's my marginal tax rate at the £10k income level -- then there is another step at £20k-something, etc.
For the poor, however, effective marginal tax rate include not only escalations in progressive tax rates, but the withdrawal of social support. Eg., let's say I am unemployed and receiving £700/month worth of benefits. Then I get a job which pays me £800/month. The first £750 is tax free, and I'll have to pay £8 of income tax on the remaining £50, so my total take-home pay is £792. Fair enough, so far...
Except now that I'm earning an income, all my benefits are withdrawn. This means that although I'm now doing £800 per month worth of work that I wasn't doing previously, at the end of the day I'm only receiving (£792 - £700 = ) £92 pounds of additional income. Hence my effective marginal tax rate on the extra income is a whopping 88.5%.
I'd have to think very hard about whether I wanted to keep that job, or stay on benefits. In fact, this is a fairly generous example: many benefits programmes are structured in such a way that they impose an effective marginal tax rate of more than 100% upon people who increase their incomes -- in other words, you can end up with less money by getting a job than by staying on benefits.
This is the mechanism which turns benefits programmes into poverty traps -- by de-incentivising people to work via astronomical marginal tax rates. Unfortunately, people have a very difficult time understanding this mechanism, and their intuitive reaction is often to "fix" benefits programs by increasing conditionalities and means-testing. The problem is that the more conditionalities and means-testing you impose, the more you increase the marginal tax rates for people trying to get out of poverty -- so such programmes are inevitably counter-productive.
A Unconditional Basic Income, however, is never withdrawn. This means that it imposes no penalties for increasing your earnings -- meaning that it actually minimises the effective marginal tax rates.
In fact a very fair basic income could be funded via a flat tax: tax every income at 50%, and then redistribute the earnings as a flat Universal Basic Income. Mean income earners, in this scenario, would pay exactly as much taxes as they receive back from the UBI -- so their tax rate would be zero. Non-income earners would earn 50% of the mean (which is roughly the level that Switzerland is proposing). Billionaires would see their income reduced by nearly 50%. However the marginal tax rate would be identical at every level of income. No matter what your standing in the economy, you would always receive the same UBI, and you would always pay the same rate of tax. It would seem almost fair.
It's time to start embracing the fact that as a civilization we've come beyond the point where we're scrabbling like mad to shake loose the resources for existence, and instead we can now start actually trying to make people, everyone, safer and happier and more actualized.
I'm not trying to be provocative, it's just that you're thinking about this in the wrong way. You can't associate it with any uses that you may think beneficial or worthwhile. You need to accept that it's no-strings-attached money, otherwise you're just going to be disappointed.
I don't mind that it's no-strings-attached money, because I might myself want to blow my allotment on a fleeting pleasure someday.
We need to give up this "keeping up with the Joneses nonsense".
Welfare already exists and while the lazy scrounger stereotype definitely exists, I feel it's worth that overhead to take care of vulnerable people and those in hard times.
Do you feel more confident that a government entity would do a better job at picking a family or students? Or would you only want to do it if everyone at your income bracket was also doing it?
Serious question, not trying to be a dick.
They give it to everybody. If you think that the government does a poor job of allocating the absolutely colossal amounts of money currently spent by social programs, or you recognize that trying to "do a good job" and prevent fraud, and all the other social engineering requires a vast, wasteful bureaucracy, then this is an interesting option.
This is a program that eliminates extreme poverty, but requires almost no infrastructure. You'd only need to verify that recipients are citizens and that they file their taxes. Since you can abolish Social Security, a stripped down social security bureaucracy, which already prevents people who haven't paid into social security from receiving benefits, could take over that task.
It could allow one of the largest and most sweeping reductions in the size of government in our lifetimes.
And if you believe in freedom, but also want to live in a country where people don't have to beg for food, then this is your best bet. You trust people to make their own decisions about what benefits them and their family. You don't discourage work or enterprise.
I think it's a political long shot of epic proportions, but also a great idea.
The fact is, our .gov is doing a pretty shitty job as far as social contracts go, and the incentives for playing nice only exist once you've bought into the thing wholesale and are doing quite well for yourself.
Given the way we treat felons, the poor, and the ill I'm rather surprised things aren't boiling over sooner.
I have never seen anyone advocate for UBI who expressed any position other than support for using it to replace, at a minimum, means-tested poverty support programs, and generally they want it to replace many other targeted social benefit programs that currently provide services, direct subsidies for selected purchases of goods and services, or indirect subsidies through tax credits and deductions for purchases.
The usual argument for UBI is that it eliminates the most of the administrative overhead and duplication of function in the multiple programs it would replace, as well as replacing the perverse incentives that occur with means-testing.
And in any case, I don't think a handful of people donating to charity is a serious systemic solution to inequality and poverty. For one thing, it fails to give a guarantee of a safety net, which is what's needed to give people a believable backstop. For another thing, there's a bit of an adverse selection problem: people who get rich retroactively decide they have no need for the existence of a safety net, and don't want to pay for one, because poorer people are lazy/stupid/etc.
I did move from California to Denmark, which is in a way putting my money towards what I'd like to see more of (due to visas/citizenship/etc. this is not equally easy for everyone). I now pay more taxes, and in return I am part of a more social-democratic system.
And, IIRC, Denmark rates much, much higher on social mobility than the US.
And with universal basic income, recall that there is no 'picking' performed.
If your going to talk about a socialist country you may have a point. But unfortunately I think your going to find you dont have as much evidence as you thought you did, should you do some research.
The most productive level of intellectual growth in the history of mankind has consistently come out of groups of people who have been 'freed' from the burden of worrying about their 'next meal' so to speak. From renaissance era patronage through to the modern trends you see with the flow of capital in California.
Socialized != Socialist.
A centrally planed socialist economy has no place for entrepreneurship at all, ergo it will be suppressed and not flourish. A socialized economy is one where all citizens are invested into the social fabric of society, for instance I have a level of free health care here in Australia, but I choose to work and pay for a higher level of medical care and I am free to do so. This is a socialized system, a socialist one would deny my right to chose a higher standard via some logical argument about the higher standard I want to pay for being excess capacity that should be redistributed to all.
I hope this brief illustration helps clarify some things to anyone else that might be having trouble seeing a clear difference between socialist and socialized.
I think this is general answer to this question (at lest it's mine). It's similar to prisoner dillema: I am happy to agree to rules forcing cooperation but in absence of those I won't cooperate that happily (reasons I think are easy to imagine and I've just seen that one poster did great job explaining those).
The purpose of government, if it can be said to have a purpose at all, is to cover those items where we're better off doing them but they wouldn't happen on their own due to various game theory considerations or just plain transaction costs.
You can do this right now, without having to set up any controversial and potentially corruptible political programs, and have a greater certainty that the funds you supply are actually going to the purposes you support.
I don't understand the mindset that these goals should only be pursued through coercive politics.
At first glance one might think, the recipient now has more to spend, but that amount is taken from others, so it's a break-even. But in fact, the "others" are higher income people, and would spend the money differently.
The poor people relying on the assured income boost total demand for things like food and clothes, while the richer taxpayer would have more likely spent it on either luxuries or investments. A transfer of spending from luxuries to basic items corrects a social balance, and increase of aggregate demand has better outcomes than feeding the supply side.
Yeah, I know I'm questioning something quite basic. Do you (not just you, ds9, but anybody) have any justification for that that isn't a direct quote of Keynes? Because investing boosts the economy (by increasing productivity - Keynes never modeled that, go figure), and spending reduces the potential for investiments, so the picture is at least more complex than that.
Because the economy is the whole set of exchanges of goods and services, and spending is economic activity.
> investing boosts the economy (by increasing productivity - Keynes never modeled that, go figure),
Actually Keynes directly considered not only that investment produced future gains in output, but how those gains changed with additional investement in the same area. 
> and spending reduces the potential for investiments
How? If spending by A to acquire a good from B decreases A's funds available for potential investment, it does so only by increasing B's funds available for potential investment by the same amount.
 See, particularly Book IV (commencing with Chapter 11) of The General Theory of Employment, Interest and Money (1936).
It’s fair to question whether Orange, SC should be kept alive as a going concern, but this franchise owner was able to employ ~20 people because of the social assistance funds provided to the community. His employees would be able to spend their paycheques, too.
Investments in infrastructure provide much the same value (as in the TVA, which did more for pulling Tennessee out of its deep poverty than anything else). Investments without spending associated with those investments are dead money. While savings should be encouraged so as to reduce individuals’ emergency needs for money, they don't keep an economy going as much as spending does.
(And yes, that pains me to say as someone who doesn’t like our consumer culture even as I participate in it because it’s what we have. I don't have a rightful solution to that dichotomy.)
First, if we define "the economy" as GDP  (a generally poor approximation, but still better defined than a vague "the economy" entity), spending tautologically boosts "the economy". It either falls under the "private consumption" or "gross investment" part of the equation.
Now, I'll try and respond to your analysis point by point.
> Because investing boosts the economy
Again, we're on solid ground here if we're considering "the economy" to mean "GDP"
Woah, hold on there. This assertion doesn't make sense from several perspectives. First, the economy isn't some zero-sum game where players must choose between spending and "investiments". Spending by one party can be converted into productive investments by another. e.g. if people start buying a ton of G.I. Joe action figures, the maker of G.I. Joe Figurines can convert that capital inflow into a factory.
In addition, many forms of consumer spending are investments from their perspective. A new washing machine frees productive time that can then be spent e.g. learning a trade. A new car might enable them to find new jobs or reduce their maintenance expenses on their current car.
> so the picture is at least more complex than that.
Right, but generally when parties are producing things other people want to spend money on, the economy is "working". The corollary is that when nobody is willing or able to spend money on new goods, the economy is probably not healthy.
Also, many 'luxuries' are things that eventually become things we need (Tesla Motors?).
Having said that, I Am Not An Economist, so it's possible I Know Nothing.
Also, a question occurs to me. Would this scheme still function at a rate other than 50%? If the billionaires would only allow the scheme with the rate set at 45%, it would change the "zero" point, but maybe not much else?
Consider also that the proportion of people who actually earn an income in many countries is falling already due to ageing of the population. Plus once this guaranteed income is available, it's only going to encourage more to give up working. Personally, I have already given up, even though my available income is substantially lower than the $2800 in the Swiss proposal, and really only covers my basic living expenses. Nevertheless, I value my free time highly enough that I prefer it this way.
I doubt they're that many. Can you give any examples? And in the cases they do, most will be for an exceedingly small number of people.
Even countries people like to consider high tax, like Norway, does not get to 50% other than in extreme outlier examples (if you're an extreme high earner with a shitty tax accountant, has no debts or other means of getting deductions, and spends vast amounts of your money purchasing highly taxed items like alcohol and luxury cars).
If you mean marginal tax rates, then it's a different matter.
But I'd be pretty much nobody has an overall tax bill that approaches the marginal tax rate on their gross income. Norway, for example, has a marginal income tax rate that's 40%, but that only kicks inn on income greater than ~$135,000. Someone who makes $200,000 (about 3 times the national average) still only ends up paying 33% income tax total before deductions. Let's say said person spends $50k/year on stuff that's VAT rated at the full 25% rate (which is frankly unrealistic, and that only adds about 6.25 percentage points to their tax rate, bringing our example person close to 40%.
But if said person pays substantial debt interest (say on a mortgage), they'll also have massive deductions - it'd be fairly unlikely for a person at that kind of income level to end up paying more than about 35% between income tax, VAT and other taxes.
But consider how much taxes would need to rise to pay for the basic income. Let's say 50% of people who are eligible for basic income actually work. Then you'd need to collect two times the basic income from each of those people, on average. Surely this would push marginal, and probably overall, tax rates over 50%. Tax rates this high are only going to encourage even more people to give up working. I suspect such an economy would simply collapse.
It's possible that invention of Star Trek replicators would change things. If people could have all material things they wanted with minimal effort, then I imagine that the remaining work could move to a volunteer model.
For example, suppose we want to provide free mass transit. We then get terrible rush hour traffic and the system is overburdened. So we must charge for transit access. Even better would be charging more for rush hour than off-hours, more for long-distance, etc. But this is regressive! Relatively cheap for the wealthy for rare events, expensive for the poor who need it for everyday commuting. The solution is to provide a lump sum grant to all citizens equal to the amount a person would pay for everyday transit commuting. Thus the poor get "free" transit and the wealthy get a few bucks and the positive externalities of transit.
How does this solve the rush hour problem?
Or is the lump sum grant based on something like the average price per ticket over both rush and non-rush hours? Then you can solve the crowding problem (by averaging appropriately to adjust the apparent cost of rush-hour transit), but you haven't solved the equality problem, because poor people won't be subsidized enough to take the transit during rush hour.
Giving this amount of money to every person in Switzerland would total almost half of the country's GDP.
Even if you exclude children and get the total amount down around 30% of GDP, you're still right around the total amount of money that the Swiss government takes in in a year.
So to get this basic income with no new taxes, the Swiss government would have to abandon all its other obligations. Or, put another way, to fund this and still function at the same level, the Swiss government would have to double its tax income.
Of course this might devalue the currency as a whole, but the central bank had to institute an exchange rate floor because Francs were becoming too expensive relative to the Euro. So they probably wouldn't even consider a minor devaluation a bad thing.
But, (from my point of view unfortunately), this proposal has no chance of passing. Like many articles about what Swiss do, this forgets about the (awesome) nature of Swiss direct democracy, which sometimes ends up in voting on completely off-the-wall ideas (which sometimes even pass, but this won't be the case).
Effectively, 8.1m * 2500 * 12 = 240b CHF would have to be redistributed every year. With the CHF at $0.9 that's roughly $218b - the Swiss GNP is $636b.
Now I don't know how much of this is additional instead of replacing traditional unemployment benefits, disability welfare etc - but still it seems a lot.
I can't imagine an entirely different economic system that would be more efficient, but just as a thought experiment, suppose you were the supreme world dictator and other than the command logistics, you could somehow redistribute all the capital in the world anywhere and direct the work of everyone. Would you have the technology to feed, shelter, and clothe everyone in the world? How many busy hours would it really take?
To pay for food, you "pay" the amount of joules it takes to fuel the robots that create your food. Ditto with any automatable production (clothing, houseing), and any land has a tax equivalent of the amount of solar energy extractable from the land.
You could attempt to save your joule allocation, but i suspect it will become too difficult. You cannot borrow joules the way you can borrow money (that is, the "bank" cannot be a fractional reserve system). But you would be encouraged to invest your joule allocation into useful endeavours, such as scientific research, which is always made available to all to use.
You can get richer by investing in improvements, and get richer by growing the size of the pie. There would be no way to get richer at the expense of making someone else's allocation lower.
And are you constantly "rebaselining" the division of energy production or to you let the accumulation ride? If you let it ride, you'll have the same slow redistribution of a wealth gap between those who are capable/lucky enough to get a little bit of a headstart and continue to leverage it to more and more wealth. (or do you think you need some hybrid between the two, some something else entirely?)
It always struck me as odd that the ghost of the Protestant Ethic is still haunting us to this day. There are plenty of reasons why we can and should work less and still enjoy the benefits of a decent, modern life. And in spite of our advances there is a pervasive belief that we should work more.
I think this will be a very good thing and I'm interested to see how it turns out for Switzerland.
Why is that odd? A strong work ethic has historically led to if not happiness, at least success & progress on a national scale. It is only natural that it would then be selected for.
Or work more, but do so because you love your work, not to cover for some basic need. If I could retire next week, I'd probably work a little less, but wouldn't stop.
>Or work more, but do so because you love your work, not to cover for some basic need. If I could retire next week, I'd probably work a little less, but wouldn't stop.
If you read the essay I linked to, Bertrand Russell makes this very point. It's not that we should work less and be completely unproductive, but rather that we should work less so that we may better utilize our time to pursue those interests and lines of research that satisfy our curiosity.
I used some downtime I had a while ago during a job search to pursue such avenues. I don't think I've ever had a more productive period. As I was unconstrained by profit motivations I was free to think ideas I would have otherwise dismissed due to a lack of time and energy.
Then cut the government around that. School lunch programs, cut. Welfare, cut. Old age benefits, cut. Even some parts of healthcare get cut, like having someone care for you for free when you are bed ridden (since presumably you would be able to spend a portion of your money on hiring a personal assistant). Imagine laying off 30 to 60% of people that work for the government in a "knowledge worker" role (ie, administrators, not trash disposers). Completely scrap science grants and arts subsidies. Increase taxes slightly. Etc.
But for all that sacrifice, we insulate our economy from political turmoil of the continued mechanization of the economy. One day most people won't be working. I'm not 100% convinced that BI is something we should be doing right NOW, but I'm pretty sure we'll have it in 50 years or less.
- Union strikes for non-safety related issues have to be made illegal. You don't get to strike for higher wages when there's a GBI.
- Hire/fire policies need to be made completely at-will, with pretty much no exceptions.
- The minimum wage has to be eliminated (generally won't matter, since the GBI will bring the wage of "bad jobs" up, rather than down.)
- The rest of the welfare system will likely need to be largely dismantled. The person answering the questions in the article seemed to conflate "public schooling" with welfare, which should be decoupled; things like schooling, health care, etc. should not be touched (and should not be considered welfare - they are regular public goods.) If the Swiss have things like TANF, Social Security, SNAP, WIC, etc. - those will probably need to go.
- Opt out. Any person who doesn't want to take the money (because they already have plenty) should be able to refuse it.
I'm glad to see a country starting to experiment with this, though. It's the only way forward in a world where the need for human labor is going down every day.
A few answers :
- Strikes are mostly illegal in Switzerland and are very rare
- Apart from a standard 3 months notice it's easy to lay off people in Switzerland (unless they are pregnant or sick)
- There are no standard minimal wage but there have been discussion recently of introducing one
- We do have quite a few "program" in our welfare system a GBI would simplify a lot of things
- There have been no mention of a possibility to opt-out
Why is this necessary or useful? It adds administrative complexity to the system and doesn't serve any apparent useful purpose.
>- Hire/fire policies need to be made completely at-will, with pretty much no exceptions.
So employers should have all power, and employees should have none? Why should employers have the right to fire at will, but employees should not have the right to stop working at will?
Yes, they can just quit their job and still survive. (Although it is not "without financial consequences.") That is the point. I don't see how that justifies making it illegal to leave your job whenever you want to.
EDIT: What I'm trying to say is this: if the business depends on the workers, and they go on strike, and you're not allowed to fire them and hire new ones, then they're effectively "stopping a business from functioning".
But at the same time, the conditions for when a strike is legal wary substantially, and strikes for wage reasons are generally restricted to periods during wage negotiations.
> - Union strikes for non-safety related issues have to be made illegal. You don't get to strike for higher wages when there's a GBI.
> - Hire/fire policies need to be made completely at-will, with pretty much no exceptions.
The second means you can fire striking workers and replace them, so the first is unnecessary and rather draconian.
Historically, wealthy societies that guaranteed incomes for citizens had slaves. I'll bet if you go digging around in these proposals you'll find a class of people who aren't eligible (new immigrants or something), who are going to wind up doing all of the low paying jobs.
Note that life in Switzerland is expensive enough that $2800 is not a whole lot more than minimum wage level in the US.
Also, it would be much easier to become self-employed or become an employer yourself; not only is the risk of failure lower, but your payroll expenses would shrink enormously. If there were a basic income, I'd have started my own company long ago (or at least tried).
Note also that "keeping more to yourself" is modulo the higher and more progressive taxes you'd need to finance a basic income.
The big question is rather: would enough people still have an incentive to work? It depends, I think, on how close to the subsistence level such a basic income would be.
That's my other concern. $2800 a month isn't enough for me personally to be able to stay home and play video games all month, but it might be for a fair number of people. And they wouldn't be contributing much to the economy (other than to the makers of Cheetos snacks.)
A lot of people I know abuse of this. Pay the rent with the social help, then get money "under the table". A lot of people abuse of it, but I still think it's worth it. I work hard, but I know that if all else fail, I won't be stuck in the street.
It's also not a perfect solution. There are still homeless people (who are often too ill to be able to ask for the social help, or don't have a permanent address to sent it to). You can't live very well in Montreal with it alone, but you can manage to get somewhere to live, especially if you have "sidejob". Otherwise, there are HLM (French for "housing at moderated rents") where the rent is actually based on your income. You can live for $350 - $900 / month in a three room apartment in those. Especially if you live around the island on Montreal and not on it.
People who use this service are frowned upon. They call them "BS" (Guess you would call them SH in english, for "Social help"). The stereotype is that they all abuse the system, take your hard earned money and live in a big appartment with the latest computer, drink all day (no work!) and do drugs. People fail to see that computers are not as expensive as they were before.
I actually grew up in that world. The abusers were a minority. A large, noisy minority, but a minority nonetheless.
And there will be an extra kick to the young, whose labor is less valuable.
A negative income tax or EITC tends to work better, since you have to do some kind of work to get them. And the best way of determining if someone has a job tomorrow is if they have a job today. Long-term unemployment sucks.
The employer has to pay enough to get people to bother to apply for the job. If it can convince people to come into work while paying $1300 instead of $2800, then why not let it? We don't have to worry about people being forced into a job they hate, because they've got their basic needs cared for. Employer gets cheaper marginal labor, employee gets minimum income plus more income plus lower effective marginal tax rates.
I don't think there's any reason to believe that low paying jobs will just go away, and more reason to think that the people who want nothing more than those low paying jobs will take them.
Then we will have to pay more than $2800 per month (or the job simply won't get done, which isn't necessarily a bad thing).
You can work a job that pays $1200 a month, and the program will chip in the rest to top it up.
This is not so people will do crappy jobs that pay very little, but instead so they can pursue things that otherwise don't pay very well, like working at a charity or other non-profit with a very slim budget.
I think this could pose a problem for truly awful jobs like at slaughterhouses, because nobody would be desperate.
I think this would pose a great solution for awful jobs: in order to attract workers you'd have to dramatically improve your working conditions.
Take Amazon's practice of hiring temps to work in their warehouses - Amazon might have to pay to introduce air conditioning and heating to their stockrooms, give their employees actual breaks, raise wages, etc.
Alternatively they'd invest more heavily in automation to replace employees, driving technological innovation while not displacing human labor.
Bit of a win/win.
It might drive up the price of meat until you could pay people enough to work in a slaughterhouse (or make it cost effective to automate them), but is that a bad thing?
You just instituted a 100% marginal tax rate on the working poor.
Who? Who does this?
Earn $13,000 a year and get a $5,000 bump up.
Earn $15,000 a year and get a $3,000 bump up.
That's a 100% marginal tax. It is the worst possible design.
GMI means you get $2800 unconditionally. If you do a job that pays $1200 a month you get paid $4000 a month.
The way these programs are paid for is because most people would be making more than $2800 a month anyway, so their net cost to the government is zero.
Mincome worked differently from this, but the OP talks about Basic Income, which just gives a fixed amount to everyone.
There are a few approaches to solve this problem - in some cases a negative income tax is applied, and in others the government actually issues a 'citizens dividend'.
Neither case necessarily mandates a 1:1 decrease in benefit as your other income sources go up. It all depends on how things are structured... someone with a significant monthly income could have a high enough tax as to effectively remove the base payment, where a particularly poor worker may not lose any.
And unfortunately I don't speak enough French to read the petition, and none of the sources in English I can find actually spell out the details.
Poor reporting wins again.
> who are going to wind up doing all of the low paying jobs.
This proposal removes the concept of a low paying job.
With a basic income, the government gives you the same size check, regardless of if you work and how much. I believe what Switzerland is proposing is a basic income.
I would be happy if this works, but correct implementation of this law is the hard part.
People freak out that a carbon tax would be regressive, and it would, but the return would be so progressive that it would more than undo that.
In general I think this kind of theory should be applied to more use taxes – places where ostensibly a tax supports something like roads, making a system self-supporting. But the use taxes only address a small part of the cost of roads, they don't consider the opportunity cost of using land for roads and they don't address the negative externalities. A use tax that included all of that, and returned some portion to people, would be a fairer tax. In that context something like congestion pricing would be fair in a way that it isn't currently.
At least some presentations of Star Trek (or, at least, Federation) "economics" were that it was not economics; not having money was a symptom of that, but the fundamental thing presented was that scarcity was solved because resources were not practically limited (which is why they didn't have money.)
(Of course, there was a whole lot presented at other times that seems to be at odds with that.)
interestingly enough in star trek they still have constraints on things like dilithium, and of course wars are waged over territories
you forgot the Continuum - they have no scarcity at all, so no economics (yet, surprise!, they still have politics)
"Star Trek economics" was an incoherent mess where the explanations given didn't match what people were actually shown doing.
I suppose, in that respect, its pretty much like economics everywhere.
Interestingly enough, this is not true for Switzerland. In some cantons, up to 60 percent of the inhabitants have a migration background. (i.e. they or their parents were born abroad) 
I think therein lies the disparity I see a lot in talking about "diversity" between some Europeans and some Americans: here, we generally view diversity as a plurality of races, whereas it seems (to me) in Europe it is seen as a plurality of ethnic groups.
[EDIT: What deserves a down-vote here? Does racism not differ from ethno-centrism? Can we not have a reasonable discussion on the point of the person I am responding to? He points out that welfare has nothing do with racism in Switzerland, because they're so well integrated with other races, yet does not provide any evidence to that point. My statement was clear, not argumentative, and as far as I can tell completely non-combative. If you disagree with my statements, then please tell me why, so we can have a discussion.]
In fact, for major parts of Europe it was never true in the first place, the continent has seen centuries of migration of various ethnic groups and cultures before many of today's nation states were even formed.
Pointing to European countries "homogeneity" is just a cheap and borderline racist (they're all white people right, so how can they be ethnically and culturally different?) excuse used by Americans that don't want to examine their own motives.
To have a migration background does not necessarily to have a different ethnicity.
Also, in Switzerland's case, it would be worth mentioning that the (cultural but also the ethnic) diversity was always a little higher than a lot of other European places and somehow they learned to handle it pretty well.
Lets say the US has 100mm families. 30K per family is $3 trillion.
What do we stop doing to find that kind of money?
The first trillion is "easy", insofar as it's revenue/spending that you could eventually redirect:
~$600B in existing Social Security taxes/spending.
~$400B in non-healthcare-related welfare spending, like food stamps and unemployment benefits.
You could maybe squeeze out another couple hundred billion from reducing aid to states and other programs made redundant by the new payments.
But the next nearly two trillion is really hard. Eliminating the entire defense budget wouldn't get you even a trillion. Doing the equivalent of lifting the Social Security tax cap and adding a marginal 12% to high-earner income would only net you another $125B.
If you were serious, you'd need to either double income taxes, most of which would come from the middle class, or impose a VAT or sales tax around 20% that would raise the equivalent (which would hit the middle class and the poor). Taxing the rich alone won't do, unless you really believe that ~70% marginal rates would actually raise twice the revenue of ~35% marginal rates.
And all of this assumes you can do this without tanking the economy and thus tax revenue.
Anyway, I'm actually hoping Switzerland goes through with it, since it will be interesting to see what happens. I'm all for unconditional cash payments as the main form of welfare, though I think something like the EITC on steroids would work better to ensure people who can work productively do.
I have a hard time figuring out what the ideal grant amount is, but I'd want $15k as an absolute maximum, and more likely something like $10k-$12k. And like you mention, getting to there from here is pretty trivial if you think redirecting SS and Medicare funding is an option.
That seems unrealistically low. Around here, 10k isn't even enough to pay rent on a studio in a low-income area populated largely by migrant day laborers. What is the point of a minimum income if it isn't even enough to keep a minimum roof over your head?
There's no shame in having roommates, and there's no shame in living in Nebraska. My goals are (a) to make sure no one lacks the necessities of life and (b) to make us a richer society. Making it so that everyone can afford a studio in the Bay Area would be very low on my list of priorities, if it were even possible.
That's a pretty big if.
At least for the USA, I would never support $30k/year (can't speak knowledgeably about Switzerland).
What you end up with is a much simpler system. Everyone gets enough to survive, if you decide to earn extra you pay standard rate tax on it all.
Also, if you just give people money, will they really spend it on basic necessities or spend it unwisely? Seems like it would work better if the money were given as housing, food, and healthcare insurance vouchers that could only be used for those purposes.
It will be interesting to see if/how this works out Switzerland.
I was asking myself the same at first. The thing is, all those would limit choices, the effect of which would be an object of hate. In addition, in USSR people were directed (or at most offered a choice of a few options) to planned working places where they should live and work, which was in fact just the way they were given many of the other things. As expected, that only spawned an underground markets (for products, services, and even for perspectives) on which were traded choices that weren't freely available. I think therefore that it's better to let everything on the table for the benefit of all.
About the quantity of money, maybe it would be best if this "citizen allowance" to be not a fixed sum, but calculated from how much the state can afford to give. Say it is 50% of the entire budget split on the number of citizens. More money gathered in budget - more per allowance, and if the allowance is getting smaller - the more people are encouraged to get involved as taxpayers. It would be a fair circle and a strong argument for everyone to either shut up or get involved.
As far as I can tell, Mutualists = Market anarchists who believe local judges (who aren't officially given any power) and embarrassment will keep everyone behaving ethically - no need for formal laws or governments. It seems a very very deep misunderstanding of the role of weak-tie trust in economics to me.
Number of US Households from 2010 census - 114,800,000
Times $30k per household - $3.4 trillion
Total US Federal Government Revenue 2010 - $2.163 trillion
Total US Federal Government Spending 2010 - $3.456 trillion