UBI – That Radical Right-Wing Idea?

basic_incomeLast week’s post — on a poverty eradication experiment in Africa of giving no-strings-attached cash — was a bit of a Trojan horse for this week: UBI is the idea of granting all adults a small amount of income, for life.

UBI is having a moment right now. Finland launched an experiment in 2017 to address joblessness with basic income, and the Netherlands is also attempting small-scale trials. Swiss voters rejected it in a referendum in 2016, but Swiss UBI supporters rejoice that it at least came up for a vote. A Silicon Valley startup Y-Combinator plans to launch a basic income experiment in Oakland, California, this year.

Futurists see UBI as the solution to the automation problem, when robots eliminate all of the human jobs. 1


The best advocate in the United States for UBI that I’ve read is Charles Murray, in his 2016 version of his book “In Our Hands: A Plan to Replace the Welfare State,” in which he calls for a universal basic income of $13,000 for every adult in the United States. Somewhat to my surprise, I found his book, and the ideas, very compelling.

Is Charles Murray a fellow traveler of Bernie Sanders, attempting to socialize America with his plan for free money? No. Actually, he’s just the opposite. He is a hard-core Libertarian, opposed to big government. In his version, UBI is meant to replace the welfare state built by President Franklin D. Roosevelt’s New Deal of the 1930s and President Lyndon B. Johnson’s Great Society programs of the 1960s.

Murray’s unexpected advocacy is what got me intrigued enough to read his book.

Charles Murray first came to wide academic prominence in the 1990s with his controversial book “The Bell Curve,” which placed him somewhat to the right of Attila the Hun on the political spectrum. Why, I wondered, would a right-wing guy propose UBI?

Murray’s idea, briefly, is this:

charles_murrayEvery American 21 years or older would receive a $13,000 annual stipend, of which the first $3,000 must be dedicated to catastrophic health insurance.

As a Libertarian, Murray believes that giving recipients a choice of how to spend their money, rather than relying on a massive federal bureaucracy to control choices and incentives over housing, nutrition and work will improve the lives of people in poverty.

Although the UBI would cost $2.58 trillion per year (in 2014 dollars), Murray points out that our welfare infrastructure, as currently constituted, costs $2.77 trillion per year (also in 2014 dollars.), offering the federal government — and therefore, U.S. taxpayers — savings from UBI from the start.

Murray makes the interesting point that for people in poverty — in particular unwed mothers or unemployed young men of working age — a guaranteed income suddenly changes certain incentives. Those incentives, he argues, could address the roots of endemic poverty.

Murray speculates that UBI could directly benefit single mothers, for example, by providing a guaranteed source of income even if they cannot join the workforce while caring for a child. In addition, the fact that a child’s father receives a guaranteed income — easily tracked through a known bank account — would greatly aid collection of mandatory alimony payments. Murray further speculates that unemployed working-age men who might have previously lived for free with a relative or girlfriend may suddenly find themselves forced to pay rent, as they have known sources of cash.

A UBI could increase labor mobility for people who would like to move to where jobs are more plentiful, but do not have enough financial cushion to take the risk of relocation. Although $10,000 in available annual income is not very much money for any individual, when pooled by cooperative adults it could also serve as a boost to solve collective housing needs.

The long-term benefits of UBI remain speculative because only short-term and small-scale experiments have ever been tried in the United States — the largest being a 1970-1980  experiment in Seattle and Denver, with 4,800 participants. It produced data and policy directions thatresearchers found inconclusive.

Look, I know that it’s incredibly easy to criticize UBI. Just twenty seconds of thought gets me the following word salad:

  1. Politically untenable
  2. Disincentive to work hard, or work at all
  3. You might snort money-for-nothing straight up your nose
  4. Without necessity, where is the invention?
  5. Higher taxes
  6. Now we’ll REALLY need a wall
  7. Replacing some or all our social safety net programs at once sounds scary
  8. Is $13,000 the right amount?

I’m sure you will be able to come up with additional objections in another twenty seconds, and we’d probably agree on those as well.

robots_for_basic_incomeInterestingly, in the United States UBI receives the harshest criticism from the left.

Robert Greenstein, an advocate for traditional Democratic Party-sponsored programs to reduce poverty, came out strongly against UBI last year, calling it both politically unrealistic and a distraction from programs such as subsidized housing and minimum wage increases. Roosevelt Institute fellow Mike Konczal has argued that Libertarian claims of a bloated welfare state obscure the important work that social programs accomplish. Bernie Sanders has been asked repeatedly about UBI but always expresses a preference for “basic standard of living” policies rather than “basic income.”

Personally, I find the idea that people in poverty could be trusted with no-strings cash highly compelling, when compared with the complex alphabet soup of federal programs, including SNAP, Section 8, TANF and EITC. We should pay attention to poverty-relief experiments with direct cash payments in Africa, as they may do better than targeted programs that attempt to control the behavior of people in poverty.

In the face of financial dysfunction and the persistence of poverty — despite our great national wealth — we ought to be able to have a conversation about speculative and interesting ideas to address poverty.

 

A version of this ran in the San Antonio Express News and Houston Chronicle.

 

See related posts:

Cash Transfers in Africa

Inequality in America – the Washington Post Map

Video: Inequality in America

 

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  1. Except finance blogging, obviously, which can never be automated. It is too essential and too creative to ever fall prey to Skynet.

Cash Transfers and Inequality

conditional cash transfersMarkets work great, if the goal is to

1. Maximize total output;

2. Encourage innovation;

3. Reward maximum effort;

4. Reward talent; and

5. Use resources most efficiently.

As a result, limiting markets tends to impair one of more of the above, valuable, outcomes. Also, non-market solutions to problems often produce sub-optimal results in one or more of the above areas.

Markets work poorly, however, if the goal is to

1. Make sure that the maximized output gets distributed equitably, or justly.

What I mean by that is that while some people control hundreds, thousands, or millions of times more resources than other people, its hard to argue from an equity, or justice, standpoint that some people are hundreds, or thousands, or millions of times more ‘worthy’ of the world’s resources than others. Especially if you include in your analysis of the efficacy of markets the estimated 870 million people on this planet in poverty, at the lowest end of resources, without basic survival necessities such as food, water, and shelter, sanitation, or protection from destructive elements.

Markets also work poorly to

2. Overcome inter-generational barriers to human development over long periods of time, where the upfront costs only get paid out over, for example, decades. For those aforementioned 870 million people in poverty, for example, its not enough to just say “let the markets be free,” because that’s not likely to help. The real long-term solution of human development for the most impoverished requires the investment of extraordinary resources today, right now, in order to make it possible to lift the next generation (or more distant generations) up to a standard at which a market economy even has a chance of working, through such things as education, skills training, and connection to productive economic networks. That extended ‘payoff’ over decades basically doesn’t work for markets or capitalists. I mean that markets don’t invest well in communities to achieve a return on human capital 50 years from now, even though realistically, that is what is needed.

I’m thinking about all of this after reading a review in The Economist about experiments with transfer payments, especially for the word’s poorest.

Discussing ‘transfer payments’ in the United States often degrades quickly into political name calling, with pro-market folks mistrustful of social democratic or socialistic approaches to alleviating inequality. Outside of the US – or more specifically in areas of extreme poverty – it becomes perhaps easier to discuss the efficacy and theory of transfer payments. Clearly a ‘market solution’ is not happening right away in situations of extreme poverty, or fast enough to alleviate clear human suffering, so a taboo solution like ‘transfer payments’ in some contexts (the developed world) becomes easier to discuss, I think, across a broader spectrum of ideologies, for basic practical reasons. People are dying and suffering right now, so in a sense we can leave aside the ideology and theory, and try to discuss what works.

Cash Transfers

The Economist ran this interesting review last year of programs known as Unconditional Cash Transfers (UCT).

UCTs are typically philanthropic programs that drop unexpected money on very needy people – a rural villager in Kenya identified by a Google satellite image by his lack of electricity in one example, with the hope that even small amounts of money can catalyze higher standards of living and human development in very efficient ways. Targeted UCTs may seek out mothers in a certain region, with the credible theory that mothers can best decide how to feed, clothe, and educate their children, if they only had a boost in resources to do so.

UCTs contrast with a more conventional development model of Conditional Cash Transfers. CCTs typically seek to influence and incentivize behaviors, around vaccinations, or education, for example. If the children attend school, the parent receives cash, for example

The UCTs provide a tantalizing alternative to the paternalism of CCTs, by requiring less resources to administer and enforce. Imposing conditions means the philanthropy or government behind the transfer has to build a structure of monitorig compliance with its rules.

So far, The Economist reports, the CCTs show more effectiveness at addressing the root causes of poverty. Still, the rise of UCTs will bring in more data over time to continue the comparisons. Even though these fall firmly in the ‘non-market solution’ category, the competition between the styles should lead to improvemnent.

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