The means to pay for a Universal Basic Income will come from 4 sources:
1. Current spending. We currently spend between $500 and $600 billion a year on welfare programs, food stamps, disability and the like. This reduces the cost of Universal Basic Income because people already receiving benefits would have a choice but would be ineligible to receive the full $1,000 in addition to current benefits.
2. A VAT. Our economy is now incredibly vast at $19 trillion, up $4 trillion in the last 10 years alone. A VAT at half the European level would generate $800 billion in new revenue. A VAT will become more and more important as technology improves because you cannot collect income tax from robots or software.
3. New revenue. Putting money into the hands of American consumers would grow the economy. The Roosevelt Institute projected that the economy would grow by approximately $2.5 trillion and create 4.6 million new jobs. This would generate approximately $500 – 600 billion in new revenue from economic growth and activity.
4. We currently spend over one trillion dollars on health care, incarceration, homelessness services and the like. We would save $100 – 200 billion as people would take better care of themselves and avoid the emergency room, jail, and the street and would generally be more functional. Universal Basic Income would pay for itself by helping people avoid our institutions, which is when our costs shoot up. Some studies have shown that $1 to a poor parent will result in as much as $7 in cost-savings and economic growth.
1. The $500 billion spent on welfare and other income support programs is usually significantly more generous than what a recipient would receive through Yang's proposed UBI. The fact you don't have to cover some people who already receive even more generous benefits doesn't "save you money" in any real sense. There is no real reason someone would choose a UBI over these programs except paperwork.
2. A VAT only gets you $800 billon a year when you need at least something like $3 trillion. This policy is also a little hard to understand if you are left leaning; don't you want to spend new tax revenue on something like universal healthcare, reducing the cost of college or renewable energy expansion? If you raise taxes to pay for a UBI it just becomes harder to raise tax revenue for any other priorities.
3. The roosevelt institute study assumed that the economy was almost completely constrained by demand to the point where even if the UBI was funded entirely through debt the net result would be an economy 13% larger after eight years. Leaving aside whether you agree with their simulation(I don't); this is an incredibly risking bet, if you are wrong that the economy is constrained by demand you have dramatically increased the federal deficit and probably caused a fiscal crisis in the process which would, of course, dramatically shrink the economy. It's interesting to note that the Roosevelt study doesn't actually model Yang's proposal of financing essentially the cost of a UBI through taxes/ spending cuts with the rest through deficit spending and it's hard to see how he came up with the numbers here.
4. So assuming you can save $100-200 billion on other government programs and you get everyone who uses welfare assistance to sign up for a UBI instead you aren't even halfway to the $3.6 trillion dollar price tag.
> 1. Current spending. We currently spend between $500 and $600 billion a year on welfare programs, food stamps, disability and the like. This reduces the cost of Universal Basic Income because people already receiving benefits would have a choice but would be ineligible to receive the full $1,000 in addition to current benefits.
Making UBI a choice vs. existing programs is administratively problematic (and, also, makes no sense.) But a lot of current welfare spending is state and local, and some of what he mentions (disability insurance) is not only state/local, but not classic welfare spending, it's insurance against loss of income, which UBI, despite raising the income floor, does not provide or meaningfully substitute for.
> A VAT. Our economy is now incredibly vast at $19 trillion, up $4 trillion in the last 10 years alone. A VAT at half the European level would generate $800 billion in new revenue.
What's the “European Level” referenced here? European VAT levels range between something like 8% and 27%.
> A VAT will become more and more important as technology improves because you cannot collect income tax from robots or software.
Yes, you can collect tax on income gained through capital investments like robots and software. We do that today, just at lower rates than labor income, but there's nothing fundamental that requires such lower rates.
> New revenue. Putting money into the hands of American consumers would grow the economy. The Roosevelt Institute projected that the economy would grow by approximately $2.5 trillion and create 4.6 million new jobs. This would generate approximately $500 – 600 billion in new revenue from economic growth and activity.
At best, the growth and new revenue lags; it helps with the steady state cost, but you still have to deal with getting there.
> We currently spend over one trillion dollars on health care, incarceration, homelessness services and the like.
That's true (talking government spending) even if you cut out everything after health care, but...
> We would save $100 – 200 billion as people would take better care of themselves and avoid the emergency room, jail, and the street and would generally be more functional.
That's... extremely optimistic for a $1K UBI. Especially since much of the government cost of healthcare, which is the bulk of this category, is in means-tested programs, particularly Medicaid, which presumably was already fully counted when you counted the full cost of existing “welfare” programs.
- Over half of means-tested welfare (including Medicaid) goes to people under the age of 18, so these costs won't be touched. "In an average month during 2012, 39.2% of children received some type of means-tested benefit, compared with 16.6% of people aged 18 to 64 and 12.6% of people 65 years and older." The median monthly benefit for these groups was $447, $393, and $303 respectively. The only means tested program that isn't dominated by minors is SSI, the vast majority of which goes to the elderly and people 18 to 64 with disabilities who would not re-enter the workforce. [2, p16, 24]
[1] http://rooseveltinstitute.org/modeling-macroeconomic-effects... [2] https://www.census.gov/content/dam/Census/library/publicatio...
(5-6bn in welfare cuts) +
(8bn in vat) +
(5-6bn in magic economic growth) +
(1-2bn in cutting stuff he doesn't really elaborate on) =
(1.8-2.1trn).
So even if all his fantastic predictions come true we're still short of the 3.1 trillion to give 1k UBI checks to all ~260m adult Americans.
Regardless of his purported numbers he's still banking on massive economic growth happening at the same time as a massive tax increase. This is next-level voodoo economics.
We (at least, public direct aid programs; food banks etc., may pick up some of the slack) do now if people squander welfare, why would UBI change that?
Well, exactly the opposite, but sure.
> Yang's assumption that we'll be able to scrap welfare program if we give people UBI is a fantasy. Because UBI won't change the fact that many people are still going to need welfare, UBI or not.
No, your idea that we will be compelled to double cover against because some people might not use their first-line benefits ideally is fantasy, because people not doing that happens now and we are fine not double covering.
Replacing welfare with UBI isn't going to happen, we will end up paying for both.
When my family was on food stamps, if we mismanaged our money and food stamps one month (spent them too inefficiently, accidentally let some food spoil, or such), then, yes, society would absolutely have let us starve (though not in the streets, as we did own our house and were in a rural area). We might have been able to get some further help from family or friends, but not from any form of welfare.
Yes, just as much as we do now if they resell (e.g., for drugs) or squander their food stamps. Or, for perhaps a more perfect parallel, the same as the existing system does for anyone who had the income or assets to fail to qualify for means-tested benefits in the first place but fails to use them to meet their basic needs.
> Again, you're not seeing the fact that welfare often comes in the form of services, which the welfare receipts can't waste.
The things that directly stop people from starving in the streets are cash aid and aid that purchases food, neither of which are proof against recipient waste.
There are other forms of means-tested aid (largely, by dollar value, Medicaid) which are harder to misdirect, but UBI plus a default (with premium) public health insurance plan that you can opt-out of the purchasing a qualified private plan (a no B.S. individual mandate rather than a pay-a-small-fine one) handles that.
> I guess someone could try to seell soup they get at a soup kitchen
Soup kitchens aren't means tested public welfare, they are generally private charity, and are usually means-tested only in that people with any other options don't go.
So the plan is to pass one of the biggest tax hikes in US history (probably the biggest one during peace time) and then keeping our fingers crossed hoping for rapid, consistent economic growth following said massive tax increase. I think I'll pass.
That "tax hike" would almost all get spent, and probably pretty quickly, because the overwhelming majority of it would be going to people who live close enough to hand-to-mouth that the differences are academic.
So is that pulling $3T/year out of the economy or pumping most of $3T/year into it?
Step 1. Pass 3T worth of taxes and spending cuts.
Step 2. Give everyone $1k a month.
Step 3. ???
Step 4. Poverty disappears, the economy grows by leaps and bounds.
It's a utopian vision. Tantalizing, yes I can empathize with people who like it. But let's not forget that Utopia comes from the Greek words "not" and "place". A utopia is something we all desire but does not exist. The pursuit of which has led many societies to ruin.
If we're going to premise the "health" of our economy in no small part on the movement of monkey status points, then move the things.
It's "trickle-up", not "trickle-down"...
Which is fantasy. It's not people paying the taxes it's a VAT that Yang's advocating for. This is money directly coming out of economic activity.
Have a nice day.
There's nothing automagical about it. It's plainly obvious, and unreasonable to assume the opposite.
Then there's the little matter that the money comes from somewhere. Moving $3T from one pocket to another may not result in any growth at all. (Ironically, if Yang were irresponsible, and weren't going to pay for this program, then this objection would not apply.)
It just seems absurd to me to think "may not result in any growth at all". Money in the hands of the poor and middle class moves faster than money in the hands of the rich, and thus creates more actual business. This is a well-understood economic fact.
> All economic growth comes from money moving somewhere.
No. No it doesn't. All real economic growth comes from more things that people want being produced. It results in money moving somewhere, but the money moving isn't the real growth, nor is it the cause. It's the result.
To adapt an explanation from Thomas Sowell, take beach houses. There's more demand for beach houses than there is supply, so they tend to be very expensive. I can't afford one - I can only rent. But if we gave everybody a bunch of money, there still wouldn't be any more beach houses. All that would happen is that beach houses would rise in price, because now there would be more money chasing the same beach houses.
This misunderstanding - thinking about money instead of about producing things - leads to the idea that you can cause growth by moving money around. Sometimes you can - when the demand is actually there, and the economy has the capacity to produce more. Well, in this situation (UBI), the demand is definitely there. The poor genuinely need stuff, lots of it. But even so, adding more money won't cause the economy to produce more unless it has the spare capacity. All it might do is redistribute the things that are already being produced. (And that may be fine. If we want to say that the poor shouldn't starve just because they're poor, and that the rich are going to have to make do with less so that the poor don't starve, there's a case to be made for that. But that's not the same as growth.)
So the question might be, how much spare capacity do you think there is in the economy, and why do you think that?
Sowell's example is woefully incomplete. He's talking only of limited, unique physical goods. He's not talking about things where production can increase in response to demand. He's not talking about services. And bluntly, UBI isn't there to help people buy beach houses, and won't cause enough inflationary pressure on beach houses to make a damn bit of difference on their price. It's there to help people afford a car, or child care, or medical bills, or any of the countless things that plague the poor rabble in this country.
Spare productive capacity is why UBI is feasible in the first place. The economy is producing more than people can afford to buy, and the machinery that makes it so productive is displacing jobs they need to afford anything at all.
If you're reading Sowell, you should read Yang's book. He addresses this stuff. He's not just treating UBI as a golden hammer. It's a straightforward, workable way to cope with a lot of problems that keep us from coping with other problems.
If technological advances wipe out 10% or more of existing jobs in the next couple of decades with no replacements in sight, what do we do? Blame them for being lazy? Retrain those truck drivers as computer programmers so they can get those hot programming jobs in their population 800 midwestern town? And move those local startups into the strip mall that closed because retail got wiped out by Amazon? If we don't do something about it, there will be blood in the streets, sooner or later. That's a much bigger problem than taxes.
Of course there is. You can have an economy without money. It's barter, but it's still an economy, and it can still have growth.
And, of course UBI isn't for buying beach houses. That was to illustrate the problem in an obvious way, not to be directly relevant.
> The economy is producing more than people can afford to buy
You have also claimed that UBI will grow the economy. If it's already producing more than people can afford to buy, first, why would it grow the economy, and second, why should we regard that as a good thing?
Since you seem to be misreading my position fairly consistently, let me try to be more clear. My claim is not that UBI is necessarily a bad thing. My claim is not that UBI is unneeded. My claim is not that the poor are doing fine. My claim is that your claim that UBI will grow the economy is highly suspect.
Ok, let's take this from another angle. Does bankruptcy at a large scale help the economy? Foreclosure? Homelessness? It seems reasonable to me that people are more likely to contribute to the economy if they aren't bankrupt and homeless. It seems likely that their children are more likely to become successful contributors.
And it's obvious that UBI can reduce these problems substantially. After all, homelessness isn't caused by a shortage of homes. It's caused by financial distribution problems. So right there, we have an opportunity for growth.
Now, I'm not arguing that UBI will totally pay for itself here either. But it seems likely to produce some economic growth, just because it does the most for the people currently least able to participate in the economy, and that's a majority of the population.
And why do you think it answers anything I have said?
And your claim, which is nonsense, is that the VAT will eat 100% of that $12k.
It would be paid for by a value added tax of 10%.