From a comment:
Does your endorsement of a UBI square with your broad insistence that new policies should start from where we are?
No. It is a radical idea to replace food stamps, housing subsidies, EITC, TANF, Medicaid, and even Social Security and Medicare with a UBI.
How could we experiment gradually with a UBI? One approach would be to replace everything except Medicaid, Social Security, and Medicare with a small UBI. Try it for five years, and see what happens. If the consequences are not dire, then enlarge the UBI and replace Medicaid with a mandate to purchase at least catastrophic health insurance.
If my view of the incentive effects is correct, then after about 15 or 20 years we should see higher rates of labor force participation and marriage, as people start to notice that they are not losing benefits by working or by marrying someone who works.
> If my view of the incentive effects is correct, then after about 15 or 20 years we should see higher rates of labor force participation and marriage…
Those are the key metrics? 2nd order effects after an extended period of time?
Maybe Google’s internal emphasis on OKRs isn’t such a bad idea.
What do we do when someone (or a family) spends all their UBI too quickly and needs food or other resources ?
This is the most important question. My view is that such cases would be common and thus likely to be successfully exploited to argue for reintroduction of the more bureaucratic and paternalistic provision of ‘merit goods and services’ welfare programs that we have now. I also fear that it would cause a predictable child protection services / foster care crisis, and eventually lead to the effectively complete federal centralization of those services under HHS’s Children’s Bureau.
One possibility is that you could give people the choice between receiving no-strings-attached UBI or receiving their welfare through the ‘merit suite’ programs. One could also make UBI conditional on not getting oneself or one’s family into that kind of trouble in the first place. First sign of trouble, you lose your UBI license and have to suffer the fate of dealing with the various bureaucracies and whatever tiny (and useful) social stigma might attach to being seen as being too much of a loser / screw-up to just get checks.
Yup. No one (much less a politican who can distribute largess to attract votes) will allow children to go hungry, lack dental care, or die of curable diseases or trauma. No attack victim will be left to bleed out on the sidewalk. No mother will be abandoned to give birth in an alley. No family will be left to sleep under a bridge just because the rent was spent on … something else. The first few stories of tragedy will result in “something being done” in the form of a government program. (And here’s another thought: if you get rid of all those government welfare programs, what do you do with those redundant bureaucratic government employees?
Let’s think about why in-kind rather than cash welfare was originally instituted … does anyone here think that human nature has changed so much that some of that cash welfare will not go toward “wants” rather than “needs”? We have stories about SNAP beneficiaries “buying” foods with their benefit and then selling that outside the store to obtain cash to spend on some “want” — why would that change?
Is it time to re-fresh our understanding of Chesterton’s parable of the fence, as well as the short tale of the scorpion and the frog?
Evolution happens.
That’s my main problem with the UBI. I don’t see any politically viable scenario under which the 80+ current welfare programs could be shut down. If recipients run out of money because of imprudence or just bad luck, what politician is going to say, “Let them starve”?
While such people could be cared for by private charities, many on the left and in the government are hostile to such programs because they believe them to be demeaning.
What happens when aid recipients over spend now? Surely there are cases under the current system where that happens. I don’t see how a UBI adds to that problem; does the state not get involved if a mom sells her baby food for drugs currently?
It’s a lot easier to fritter away a bunch of cash than even food stamps, let alone one’s Medicaid coverage or expected social security benefits.
One solution to prevent starving would be frequent small payments over the course of a month, say $27.40 per day, rather than $833.33/mo. That being said, you’d probably have a greater incidence of people failing to save enough up for rent. Maybe a large payment at the start of the month ($533.33) and ~$10/day thereafter?
If my view of the incentive effects is correct, then after about 15 or 20 years we should see higher rates of labor force participation and marriage, as people start to notice that they are not losing benefits by working or by marrying someone who works.
I dubious of this especially higher marriage rates.
The effect on marriage question is interesting. After a quick trip down google scholar lane, it appears some have found that increased financial independence decreases women’s incentive to marry. On the other hand, other studies found that after welfare reform, the divorce rate for newly employed women who had been on welfare decreased.
My uninformed guess would be that the efficiencies that could be achieved in rent and living expenses by a couple, each bringing a grand a month to the arrangement, would make many men, particularly those in the gig economy or in seasonal occupations, more attractive as candidates for marriage. And once in a marriage, the loss of the partner’s grand would be a disincentive to divorce. Dr. Kling’s prediction seems sound from this perspective.
From an evolutionary perspective, perhaps as a couple of generations of high-income women in the workforce who elect to not marry or reproduce die out, we will see an increase in the less-hypergamous shareof the female population.
My red-headed doctor friend married a man who earns less than she does. She mentions that point a lot.
He is taller than she is, and she isn’t talking about divorcing him. No children, obviously.
Collin, learn to use html tags, or, at the very least, quotation marks.
The “effect on marriage rates” issue brings up a bigger question.
At root, accurately assessing ideas like UBI in terms of its potential consequences and impacts on these matters require a correct model of the very core of human psychology and especially social psychology in the circumstances of our particular cultural context.
What really motivates people to work or to form families? How are men and women different in this respect? What is the true distribution of intelligence and traits like conscientiousness and how will people at different spots in that distribution react to changes in the welfare scheme?
The whole idea of a “Dark Enlightenment” is that expression of many of the most important and fundamental insights regarding these matters are effectively prohibited under the current system of public opinion management, and as a result, whole important conversations are pointless as they are doomed from the very start to go off in completely wrong directions.
It would be like a whole scientific journal publishing articles discussing proposals for launching a probe out of solar system, but all being written under the constraint of not being allowed to account for Jupiter’s dominating gravity in any calculations. No matter how many millions of words are written about it, the entire catalog of volumes is worthless from the get-go.
The ‘marriage’ issue here is case in point. I have no confidence whatsoever that 99% of even the public intellectual commentators on UBI have any clue about what actually determines marriage rates (or are willing to hint that they do), and that if they were to get a clue, and thus realize the radical measures that would actually be required to do something substantial about the matter, their crimestop instincts would immediately shut down their frontal cortex in protective unconsciousness.
I’ll bite. What “actually determines marriage rates” and what are the “radical measures that would actually be required to do something substantial about the matter”
That’s a long conversation, and one that, alas, like most discussions that touch on sexual matters, has become impossible to have in public, as no one can tell where the retrospectively safe boundaries will be even just a few years from now.
But there is plenty of wisdom embedded in the proverb, “Why buy the cow when you can get the milk for free?”
And if the reservation price for most cows rises above what many could ever hope to afford, then the demand side will detach from the labor force and make due with imitation creamer.
The health of the institution of the family and individualist sexual liberation are necessarily trade-offs. The decline of the formation of stable nuclear families is the price we must pay for sexual autonomy. Social traditionalists would say it’s too high a price, but that’s a matter of preferences. But the trade-off is a fact, and Dole Direct Deposits for everyone won’t do a damn thing to change it.
My understanding is that in countries in Europe, even a large majority of kids grow up in the same household with both parents, even when the parents aren’t married. So something more is going on in the US and UK than just individualist sexual liberation, which they have in France and Sweden and most of Europe.
@P Burgos:
Plenty more is going on! The milk market problem is just one important cyclone in the perfect storm.
“Try it for five years…” A prior question: can the federal government try anything for a while and then assess its effects, especially if the something being tried involves giving people money. So you try a demonstration project which generally don’t scale well though this might be different. I will say that I don’t know the data on this: do programs once started go on forever? FDR and LBJ thought so. But maybe they were only partially correct.
We have only a few of these experiments to try before we hit the Nixon Shock. the moment when too many long term experiments causes funding to dry up. So we have a Nixon Shock to allow defaults, then we have an overlap meeting of the generations to sort out the entitlements. FDR and Nixon/Reagan both did it in that sequence.
Arnold wants a consolidation, it is easier to negotiate a lump sum then go through all the various programs at generation overlap time. The key is to shorten the cycle to 15 years per Nixon Shock rather than the 45 years. Have smaller, more frequent Nixon Shocks and pricing becomes more accurate as folks update their lifetime plan more frequently.
Finland tried it for two years and then shut the program down. UBI supporters claim that the program was a success, detractors claim that it was a failure. The bottom line appears to be that the Finish government decided that they couldn’t afford it.
Andrew Yang’s proposal would be less radical but perhaps more persuasive. Under his UBI proposal, UBI payments would be reduced for recipients who elected to continue to receive welfare benefits. Economics would suggest straight cash payments without the hassle attendant to existing programs would be more desirable. Rather than shutting them down, the existing programs would be expected to shrink and lose funding as people lost interest and opted for UBI.
One problem with both the Kling and the Yang options is that there are some 80+ different federal welfare programs. I am not sure everybody agrees on definitions, but it is telling that it is near impossible to identify them all. And perhaps for that reason alone, Dr. Kling’s radical approach would be preferable to interminable incrementalism. Plus 5 year sunset provisions should be mandatory for all program authorizations. If something is worth doing, it is worth taking the time to renew the authorizaton.
How about having the federal government subsidize a smallish state in regards to UBI? Or maybe randomly assign a subset of participants into legacy/UBI pools so that you have a way to actually measure outcomes between the alternatives.
Good thing people can’t move between states.
P.S. Fifty years ago, the Supreme Court ruled that residency requirements for welfare were unconstitutional.
One of the motivations behind early experiments in welfare reform involved reduction of benefits and (theoretical) imposition of time limits and work requirements by Governor Tommy Thompson in Wisconsin, which Bill Clinton later claimed as a model for the federal reforms.
Thompson used terms like “welfare magnet” to describe an obvious phenomenon, which appealed to level-headed ordinary voters as mere common sense, but for which the mainstream press dumped scorn upon him, calling such claims clearly preposterous.
Who would move away from family, friends, and the comfortable known of their home towns, just to get a few more welfare bucks?
Books like DeParle’s American Dream and American Millstone documented how unpreposterous (i.e., real) the welfare magnet phenomenon really was. Apparently, poor people are pretty mobile, even when the difference is just a few welfare bucks.
Healthcare programs will never be replaced by a UBI + leaving it up to the person whether to buy insurance.
Any realistic implementation of it will be UBI + healthcare. It’s not even worth thinking about the more libertarian option. You’re not going to be able to take health insurance away from someone and give them a low-ish amount of money instead and have them be happy about it.
UBI *cannot* replace all the other programs, unless you are willing to let people starve in the streets. Drug addicts will blow it on drugs, gamblers will lose it, etc..
Too many people will not spend it responsibly, and you will either provide them with housing and food (all the old programs) or you are willing to watch them starve.
Hilary Hoynes & Jesse Rothstein provide a succinct, comprehensive, objective analysis of many issues around UBI in their study, “Universal Basic Income in the U.S. and Advanced Countries,” Annual Review of Economics (forthcoming). An ungated typescript is at the link below:
https://gspp.berkeley.edu/assets/uploads/research/pdf/Hoynes-Rothstein-UBI-081518.pdf
A note on terminology: The authors distinguish:
a) A canonical UBI, which doesn’t phase out by income, and doesn’t replace extant transfer programs.
b) Various modified UBIs, which phase out by income (e.g. a UBI equivalent to a negative income tax), and/or which replace (subsets of) welfare programs.
The authors review the (very limited) evidence from pilot UBI programs.
I should also note that the authors—unlike Arnold Kling—focus their feasibility analysis mainly on a large UBI, roughly equivalent to the poverty line (approx. $12,000 for an individual).
I can’t summarize the study adequately in a comment. IMO, it repays careful reading. For example, it provides a helpful typology of transfer programs.
I’ll simply mention that Hoynes & Rothstein, like many commenters here, are skeptical about UBI replacing social security, disability, medicare, and/or medicaid.
In _Anarchy State and Utopia_, Nozick asked why the owners of rent controlled apartments were not legally allowed to rent them out to the highest bidder. Doing so would be a pareto-improving exchange. Nozick suggested (I’m paraphrasing from memory) that allowing legal sub-rentals of rent-controlled apartments “would make the expropriation of the original owner by the current tenant too obvious.”
Since UBI is a great idea, and since we’re going to run it for 20 years to see if it works, I propose that we allow citizens to make full use of their freedoms by taking their future stream of UBI payments immediately as a discounted lump sum, courtesy of corporations that specialize in such an arrangement through “buying out” the UBI holder. This would be Pareto improving, and would benefit those who need the money right away.
Any competent financial institution could work out the net present value of the UBI stream and make actuarial adjustments, and then provide an immediate cash payment.
I assume that “Dead Men Don’t get UBI” so we’ll need some actuarial insight about how long recipients are going to live.
I’m sensible, so I oppose letting minors borrow against their expected future UBIs–at least until they reach the age of 16.
Prof. Arnold, what do you say?
See also Miranda Perry Fleischer and Daniel Hemel, “The Architecture of a Basic Income,” University of Chicago Law Review (forthcoming). An ungated draft typescript is a available at the link below:
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3346467
Fleischer & Hemel discuss various philosophical justifications of UBI, including libertarian arguments, but also get into the weeds: “This article seeks to advance the conversation among academics and policymakers about UBI implementation.” (Typescript, p. 1)
Like a number of commenters here, Fleischer & Hemel argue, “What might seem like technical aspects of a UBI (e.g., whether it is paid weekly, monthly, annually, or once in a lifetime; whether an individual’s future stream of UBI payments can be posted as collateral for a loan; and whether a spouse’s income is factored into the calculation of a phaseout) turn out to be essential elements that affect whether a future UBI will live up to the high expectations that supporters have set.” (Typescript, p. 3)
Fleischer & Hemel make a case for a UBI with the following attributes:
“— Size: While no number is magic, a basic income of $500 per person per month would bring an end to extreme poverty in the United States and would be feasible given the current size of the U.S. economy;
— Eligibility: A comprehensive basic income should cover citizens and lawful permanent residents of all ages;
— Uniformity: Household-size adjustments, asset tests, and geographic differences in payment amounts are all best avoided;
— Assignability: Adult UBI recipients should be able, within limits, to use future payments as collateral for short- and medium- term loans—either from private lenders or from the government;
— Payment Mechanism: Payments should be made via direct deposit on a biweekly basis and delivered through the Social Security Administration;
— Funding Mechanism: The cost of a UBI should be offset by, at minimum, the consolidation of some or all current cash and near-cash transfer programs as well as a surtax layered on top of the existing tax structure and administered by the Internal Revenue Service (IRS).” (Typescript, pp. 3-4)
The authors conclude:
“a basic income of $500 per person per month—$6000 per year—would be financially feasible given the current size of the U.S. economy. In a country with approximately 313 million citizens and lawful permanent residents and a gross domestic product of approximately $19.39 trillion, a basic income of $500 per person per month translates to a cost of roughly 10 percent of GDP, or about 7 percent after the various expenditure offsets discussed in Section III.F are taken into account. To put that in perspective, U.S. general government spending as a percentage of GDP is now around 38 percent—or about 11 percentage points below the level in Norway and 12 percentage points below the level in Sweden. We could thus afford a basic income of $500 per person per month while keeping our government spending-to-GDP ratio below Nordic levels. […]
[…] setting a basic income at $500 per person per month (or thereabouts) should allay the concerns of those who worry that a UBI will lead to a mass exodus from the workforce. It strains credulity to think that a substantial number of working-age American adults will leave their jobs to live on an income roughly equivalent to a $3-an-hour fulltime wage.” (Typescript, pp. 30-31)
Section III.F proposes to offset some of the costs of the UBI by reducing extant core cash transfer programs (social security, etc.) and by eliminating ‘tax expenditures’ (mortgage deduction etc.). Readers will judge whether these ‘offsets’ are remotely politically feasible.
The punch line is that a relatively small UBI—$6,000 per year for individuals—would have massive impact on public finance.
after about 15 or 20 years we should see higher rates of labor force participation?
I thought one of the reasons for the UBI is that automation is going to drastically reduce labor force participation
UBI, although not a smart idea, is very easy to package into a few soundbites which is why it will most likely be adopted eventually. But what about smarter solutions? What about UBC – Universal Basic Capital? Instead of paying a stipend out of current budget, let’s have the government buy for every citizen child born in the US a set amount of capital – an investment in US publicly traded stocks, to be owned individually but inalienable (cannot sell), managed collectively (by approved mutual funds) and with the individual option to re-invest vs. disburse a dividend.
This solution would solve the same problems but just think about how dramatically different incentives it would create for recipients, politicians, and business! Suddenly it would be in everybody’s individual best short-term interest to make sure the economy grows, rather than getting burdened as much as it will bear.
I doubt UBC would win a popularity contest against UBI but one can dream.
I think…off the top of my head….
What you argue is, in a sense, the argument that Martin Feldstein made about Social Security Insurance as a retirement asset and its potential to “crowd out” actual investments. In the best of all possible worlds we would have people save for their retirement by accumulating income bearing financial instruments that represented actual productive physical capital.
If you look at SSI as a pay-as-you-go system, you can hypothesize that it may short circuit the need for retirement savings to become channelled into productive investments.
= – = – = – =
My post above about letting people cash out UBI in advance is partly lame and partly just droll, but my point is a real one. Look at what you are proposing for UBI. Now, convert the hypothetical stream of UBI into the net present value as a lump sum award. If you wouldn’t tell the government to give every adult citizen the lump sum, why do it with UBI?
@charles w abbott
Indeed, SSI is a pernicious influence on the economy because it short-circuits capital markets. SSI is a dumb tax transfer from workers and capital to former workers. Taxes reduce the incentive to work thus introducing a dead-weight loss. On other hand, individual investments in productive assets are filtered through the judgment of competitive managers – mutual fund managers, bank loan officers, stock company officers, all of which are (or should be) disciplined by their competitors to remain efficient. This is why market based individual investments are one of the key sources of economic growth while SSI is a net burden.
Giving people a lump sum would even worse than UBI, since most would immediately burn the money on drugs, alcohol, luxuries and soon come back for more handouts. UBI at least prevents immediate dissipation of the funds and would keep the parasites pacified longer for less money.
Of course, as I noted in the beginning, I am opposed to UBI, although I am resigned to it eventually happening. It is sufficiently stupid to attract enthusiastic support from enough people to almost assure implementation.
UBI means huge numbers of young men living in parents’ basements playing video games all day thru their teens, twenties, thirties … for many all their lives. Less at $500 month (rather $125/week), than at $1000 month, but too many at any politically attractive level.
The silly ideal that most folks would be able to “follow their dreams” is silly because so few folk actually have dreams bigger than “getting to the next level”; at least, dreams which they are willing to act on to start, and start out being bad, and needing disciplined effort to be good.
Job Guarantee
Far better would be a voluntary National Service paying 80% of an enlisted person’s salary, and open to all, including the (slightly?) “disabled” (like back pain). Let the gov’t assign them work, including using them as “temp” workers available for business at a low cost to the business.
Much harder to implement than simply check-writing, but much much better for the future of those individuals and of society.
Much of the opposition to a UBI appears to be the fear that even greater numbers of young men will avoid employment. Poland has come up with a sound policy for increasing young workers participation in its labor force: exempting individuals 26 or under from income taxes. Encouraging young people to work by allowing them to retain their earnings not only increases the psychological connection between work and reward, by increasing young peoples’ experience may protect them from getting into education debt and wasting years of their life on meaningless credentials and leftist indoctrination. Such a policy might even work better than a UBI because the rapacious and predatory higher education system would no doubt demand students turn over their UBI payments as tuition.