We were told four years ago that 17 million people went to bed hungry each night. Well that was probably true. They were all on a diet. But now we’re told that 9.3 million families in this country are poverty-stricken on the basis of earning less than 3,000 dollars a year. Welfare spending [is] 10 times greater than in the dark depths of the Depression. We’re spending 45 billion dollars on welfare. Now do a little arithmetic, and you’ll find that if we divided the 45 billion dollars up equally among those 9 million poor families, we’d be able to give each family 4,600 dollars a year. And this added to their present income should eliminate poverty. Direct aid to the poor, however, is only running only about 600 dollars per family. It would seem that someplace there must be some overhead.–Ronald Reagan, A Time For Choosing
In the midst of $1,200 checks and huge unemployment and the utter pointlessness of these attempts at saving an economy that–let’s be honest–was already being destroyed and rotted away by a policy of isolationism, bigotry, and hatred of the free market.
But on the plus side, this might be a way to bring back an intelligent discussion of the Universal Basic Income.
Obviously if we instituted it now it would help spare of the worst of the problems caused by COVID-19. That’s a no-brainer. But this gives us a chance to look at why it could be a long term solution.
In the works of Milton Friedman, F.A. Hayek, and Ronald Reagan you will find an idea called a negative income tax. The negative income tax says that the easiest way to solve the problem of poverty is not to give people housing, and food stamps, and SNAP, and Medicaid…no the easiest way to solve the problem of people not having money is to give them money. It’s so simple only a government could be too stupid to not get it. At the time the negative income tax was the idea they pushed…but I believe if they had considered it, they would have approved of the UBI.
Mostly because the UBI has an advantage over the negative income tax in that it requires a far smaller and less intrusive bureaucracy.
The basic concept of the UBI is that instead of the welfare/entitlement state (food stamps, public housing, Medicaid and Medicare, Social Security, the whole swath of all entitlements) being replaced with a $10,000-15,000 payment to every citizen in the US over the age of 21. At least the intelligent version is that–people like Andrew Yang want to put the UBI on top of all the existing programs and that’s just stupid–misses the whole point of the UBI. Properly done, it reduces huge amounts overhead, it actually removes many of the current system’s disincentives to work or get married. It would actually be cheaper and since we believe in the power of the market we have to believe that in most cases individuals will be much better at spending their money than the government telling them how to spend their money. This idea has merit, I deeply respect many of the people who are advocating this, especially Charles Murray of the American Enterprise Institute (also here, here, here, and here) but also respect some of those who are against it (here and here though I feel these arguments are a bit knee jerk and don’t look at the bigger picture). And it works even better if you match with a completely flat tax.
If coupled with a $3,500 voucher for private health insurance (and a law requiring all private insurers to have a $3,500 plan that covers all emergency and genetic conditions) you pretty much catch all of people’s financial needs to survive…not thrive, but survive. Which should be the goal. We want people to know that there is always a safety net to keep them on a footing that they can once again pull themselves up the economic ladder. The UBI would guarantee that they have all the basic needs–food, shelter, emergency medical care–but not go beyond that. It costs less than all of the current dole programs and helps more people with a smaller government. But some just aren’t convinced.
The most prominent argument against them the UBI boils down to: “if you give everyone a minimum income they won’t because they’ll have all their basic needs covered.” This is a really stupid argument for two reasons. The first being that most people through the myriad of welfare systems out there can earn $25,000-$50,000 a year if you know how to bilk all the systems for assistance out there. Removing all those programs and offering everyone only $12,000 a year is hardly offering people more of an incentive to be lazy, quite the opposite in fact. It’s providing them the bare minimum needed to survive and giving them the agency to spend it in the way they see best rather than the way a government bureaucracy sees best. Further, getting those full benefits takes time, so we’ve now freed up people’s time to search for a job, and removed all the disincentives to work that current welfare programs have. So while everyone will have a basic income guaranteed to make sure they can meet the bare-bones necessities of life, they’re not going to be provided with any comfort. In fact, this will likely, just in the replacement of Medicaid, Medicare, Welfare, Unemployment Insurance, SNAP, TANF, and Social Security save $600,000,000 to 1 Trillion dollars off the federal budget right off the top.
But there are other advantages to the UBI that many people haven’t considered.
As the UBI will replace Social Security as the fixed income of senior citizens, the Social Security fund will have to be just rolled back into the general government fund. With that comes all the assets the Social Security System has invested in. Specifically, about $3 Trillion in US government debt currently held by the Social Security fund (a little over that when you count Medicare and other retirement funds which would be made useless by this)…so that $3 Trillion in US government debt will go back to the US government. For those of you not picking up on what this means, this means the debt will be erased, as we will just owe it to ourselves. That’s a little over a tenth of all US debt, gone. Completely gone. Now there is other money in Social Security but I assume much of that will be eaten away in the inevitable transfer from one system to the other (you can’t just switch people who are only on Social Security now to a different program without giving them time to adjust).
So no one is in poverty, we’re spending a trillion less a year, and a good chunk of our debt is gone.
Oh, and our interest payments on debt have also been cut. If we were really smart we would use those savings in interest payments to buy back even more debt and further dig our way out of this hole but, we can only hope for so much.
Oh but there’s more. As everyone is now guaranteed a basic level of income, do you know what you don’t need? You don’t need a minimum wage. Minimum wage laws started as a racist way to keep minorities from competing for a job and continuing because of the dumb comment about needing to provide a living wage certainly doesn’t hold water anymore. Now while not every state will get rid of their minimum wage laws, a good many will. That means that employment will go up in those areas and more people will be willing to take lower wages because, hey, they’re starting off with $1,000 a month. That means people will get experience faster as more people will be employed, which has from there a compounding nature to economic growth from increased employment will be astounding.
And, since farmers are now also getting the rewards of basic income, they will no longer need subsidy programs (they don’t need them now, but this will undercut their last excuse). Not only will this mean we can get rid of one of the most useless expenditures of the federal budget, but it also means we don’t need to subsidize corn anymore, which also means we can end the nightmare that is ethanol. This, in turn, will actually drop food prices the world over, and thus that $1,000 a month will actually go even further than you initially thought. And we get to just end the Department of Agriculture and the Farm Credit Administration.
And now that everyone has income coming in that means job security means a lot less. They can leave a job and still be moderately secure at least for a while even if their income was well above the UBI level. Do you know what this means? It means that while employers can pay less because there is less of a risk of employing someone, it also means employees have greater freedom to leave at any time. That means employers will have to work harder to keep employees they want to keep. That means one of the primary goals of most unions, protecting employees from abuse, is no longer needed. Yes, unions will still need to be legal, but as they will no longer be a core part of employment in America you certainly won’t need idiotic things like the Department of Labor and the Federal Labor Relations Authority. Plus all those rules from idiots like OSHA can go out the window as employers will be too concerned with keeping employees. Granted there will be some need for the state versions of these institutions, but as the need for them will be so few and far between the federal government need will no longer be there.
And since the UBI comes with a voucher for health insurance (which is the reason why we won’t need Medicaid or Medicare), it also means you won’t need the Department of Health and Human Services…and if you just want to double the voucher for veterans you won’t need the Department of Veterans Affairs either. The fact that there won’t be massive fraud in Medicaid, Medicare, and the VA, not to mention the lack of government pricing, the price of all medical care will drop while quality will go up.
And as you’re giving money people for housing you don’t need to government to run housing, which means you can either sell all that public housing or give it all to the states…it also means you don’t need rent control laws. This, in turn, will actually drop the price of housing for everyone. And the Department of Housing and Urban Development can go to. So your bills just went down and that $1,000 goes even further.
So, let’s be clear here, we save on yearly costs of entitlement programs, employment goes up, regulation on business goes down, the debt is cut in half and we get rid of the Departments of HUD, HSS, Agriculture, VA, and Labor (plus a lot of other smaller offices)…and all the opposition has is that people will be lazy if you pay them money (even though they can get more right now under the current system it just comes with incentives to not work that the UBI will not have).
Again, some states will not have the brains to implement the needed free-market reforms that the UBI allows them to do. But the thing is that now people aren’t tied to a particular state’s welfare checks and can use their newfound monthly check to move to a state that is booming because of the free market expansion. Yes I know that under the current system of welfare it is possible to move to a different state, but it’s not easy to do….under the UBI it’s very easy, which means people will go where the jobs are and thus bringing more economic growth in the long run.
Granted, there are millions of ways the UBI could be screwed up as the devil is always in the details. This is a system that can only be set up by amending the Constitution, and while most have not gotten as far as those details here are some things it will need to include: the federal government will not be allowed to give any form of entitlement other than the UBI, the UBI should only be adjusted for inflation every 15-20 years, any increase in the base amount needs to be accompanied by a tax increase (which is why this works best with a universal flat tax so people can see the immediate effects of a 1% increase in the UBI resulting in a 1% decrease in their take-home from their job thus ensuring that few will ever want to use the UBI to enrich themselves beyond the basics).
*I realize that when eliminating these departments there is always one or two offices that will need to remain. Like getting rid of HHS won’t get rid of the CDC because that is still a fairly important thing, but it can be an executive office as so many things are. When I say get rid of the department in reality that will only translate to getting rid of 80%-90% of each department (except Agriculture, you can fire all of those useless idiots without negative effects).
The assurance of a certain minimum income for everyone, or a sort of floor below which nobody need fall even when he is unable to provide for himself, appears not only to be wholly legitimate protection against a risk common to all, but a necessary part of the Great Society in which the individual no longer has specific claims on the members of the particular small group into which he was born. F.A. Hayek, Law, Legislation and Liberty.
Some Further Reading:
In our Hands: A Plan to Replace the Welfare State by Charles Murray (free pdf of the book on AEI.org)
Flat Tax Revolution: Using a Postcard to Abolish the IRS by Steve Forbes
“The Case for the Negative Income Tax” in The Essence of Friedman by Milton Friedman
Capitalism and Freedom by Milton Friedman
Law, Legislation and Liberty, Volume 3: The Political Order of a Free People by F. A. Hayek
Three Reasons for Universal Basic Income
A Budget – Neutral Universal Basic Income
Experts Think UBI Is the Solution to Automation. This Year, We’ll Find Out.
The case for a universal basic income
Universal Basic Income: Pilot Programs
What happens if you replace every social program with a universal basic income