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RE: Basic Income must be global or it will fail.

in #basicincome8 years ago

If all of this government spending were redirected toward a Basic Income, then every man, woman, and child in the United States could receive $21,000 per year. In other words, the government spends enough every year to guarantee every family in america an income that is larger than the current median household income.

You can't just spend all of it on basic income. There are still necessary expenses like defense, justice, basic infrastructure, the institutions to make government run in the first place, and of course interest on the debt. Those don't just become unnecessary because everyone has a decent basic income. Crime and violence would still exist.

Let's say you replace Social Security, Medicare, Medicaid, all education spending, and all other forms of welfare, from federal, state, and local levels. That would get you approximately 3.6 trillion dollars out of the 6.7 trillion dollars in total government spending per year. The population of the US is approximately 322 million, so if you were to just divide by that number you would get $11,180 per year per capita. That is right around the 2016 US federal poverty threshold of $11,880 for a 1-person household. For larger households, the threshold appears to increase by $4,140 per person.

Given the federal poverty guidelines for federal poverty thresholds as a function of household size (and the reasonable assumption that households larger than 2 can be thought to mostly consist of children for the extra members), I think we can use a better distribution than just giving equal amounts to every man, woman, and child. If you just look at spending on K-12 ($642.6 billion) divided over people aged 5-18, you get a number of approximately $11,000 per year per student. So given the additional yearly amount of $4,140 per person (presumably child) needed to maintain the poverty level threshold in a multi-person household, I think it would be fair to say that each child aged 5 or older would need to actually be allocated at least $15,140 per year for families to not get reduced levels of welfare service for a child's basic well-being (including essential education) compared to that which is currently received today. Personally, I think it makes more sense to just fund the K-12 budget separately (not via basic income) as is done today. That way irresponsible parents are not tempted to skim off the money allocated for their kid by providing them a cheaper and less effectual education. A voucher system can also alternatively be implemented to allow some free market competition in the education space, but the vouchers would only be valid for schools that meet the minimum standards of education to again avoid abuse (either intentional abuse by bad parents or more likely unintentional abuse by careless parents being fooled by predatory "schools").

So, with $650 billion allocated to the K-12 system (or optionally vouchers for competiting K-12 schools), that leaves $2.95 trillion for the basic income. Each child (up to age 18) could be given $5,000 per year by this basic income for food, clothing, and other basic needs (or rather this amount would be given to their parents or legal guardians). That would take away nearly $400 billion dollars from the $2.95 trillion basic income budget. For the remaining population of 244 million adults, the remaining basic income budget could be divided equally giving each adult $10,450 per year. This would be 93% of the federal povery threshold for a 1-person household. However, for a 2-adult household, it would be 136% the corresponding federal povery threshold. And even for a 1 adult and 1 child household, it would still be right at the corresponding federal poverty threshold.

Now this isn't my preferred distribution strategy. I think one way of further improving it (still within the constraint of not raising overall government spending) is to allocate some of the budget to mandatory single-payer health insurance. I think there are serious free market failures/inefficiencies when it comes to essential healthcare. Free markets work best when the consumer can reasonably be expected to take their time making their health care choices and can even choose the option of getting no service without serious repercussions to their health. Cosmetic plastic surgery is a probably one of the best examples where the free market works well in the medical services industry. But when services aren't anywhere near luxuries but are critical life-or-death essential services, I think the free market works poorly compared to some alternatives. And I don't see the point in giving people money only to then require them to spend it on a limited set of insurance options anyway (which is what Charles Murray seems to prefer). It seems more efficient to just provide a single payer health insurance system for some minimum standard of care we expect everyone to have. Forcing it into a single system also means that there is better bargaining power to negotiate with pharmaceutical companies to bring costs down. People would still be free, and likely encouraged, to shop around for supplementary private insurance to get a level of care beyond the basic required minimum.

So my current thoughts are that $650 billion dollars be allocated towards the basic single-payer health insurance system. Going by the OECD average health care expenditure per capita (which is less than half what we spend in the US by the way), a total amount of approximately $1 trillion dollars would need to be spent on health care in the US. So the difference of $350 billion (assuming the US was able to bring its health care costs down to OECD levels) could be made up for by private insurance and private payments for health care expenditures going beyond the minimum level provided by the public single-payer system. So with the single-payer system paid for, that would now leave $2.3 trillion dollars for the basic income. This time I would say to allocate $4,140 per child (same as the increase in federal poverty threshold per each additional person), which would leave approximately $1.977 trillion dollars to be divided equally by each adult. So that means each child would receive $4,140 per year and each adult would receive approximately $8,100 per year. This is right at the federal poverty threshold for a household consisting of 2 adults and 0 or more children. A household consisting of 1 adult would be at 68% of the federal poverty threshold, but a single person should be living with roommates anyway if they have no other source of income to support themselves.

Now regarding your comments on the problems with basic income due to globalization. First, the basic income shouldn't be paid for by printing money, but through taxation. That said there are still legitimate concerns with: lack of revenue due to movement of productive work to places with lower taxes; overspending on basic income relative to revenue due to immigration of welfare seekers; and producing enough value to the rest of the world to maintain a balance of trade with other countries (to maintain the value of the currency).

Regarding the risk that movement of people in and out of jurisdictions would cause a breakdown in the basic income system (net outflow of productive people and net inflow of unproductive people), I think this is not too serious of a problem. There are business advantages to getting access to the US consumers which can be used as the carrot to get companies to comply with taxes wherever they reside in the world. And many wealthy people (like the owners of these companies) will prefer to live in the US (and thus have to pay taxes) for a multitude of reasons assuming the tax rates don't rise to be outrageously higher compared to that of the rest of the highly-developed world. And as the math above shows, there isn't a need for a radical increase in overall tax rates compared to what they are now to support some minimum level of basic income that can be quite useful. Also, if other developed countries also adopt basic income, then they can slowly increase the basic income amount through higher taxes (assuming it hasn't reached the point where any harm to productivity outweighs the benefits) without creating a situation where one of them becomes a tax haven for the rich to move into. And again, even if a country decided to break away from the rest and go that route, there are ways (e.g. tariffs) the other countries can still extract wealth from the citizens of that tax haven country by restricting their access to their markets.

Abuse of the basic income system by immigration into the country purely for the easy welfare can be taken care of by having an initial multi-year period where their percentage of basic income pay slowly grows from 0% to 100% as the immigrant adds value to the system by earning an income and paying taxes. This can coincide with the probationary period for an immigrant becoming a full citizen. If they never work and thus never pay taxes their percentage would remain at 0% and so they wouldn't get any basic income. This way people serious about immigrating to the US to work hard and earn a better life would find it profitable to make the heavy initial investment (of their sweat from hard work if not capital) necessary to do so. These types of people would be unlikely to just stop working and live only off near-poverty-level basic incomes once they have satisfied their basic tax payment requirements to earn the full 100%, especially when continuing to work as they had for years would allow them to maintain (and in fact exceed) the higher-than-poverty lifestyle they would have gotten used to by then.

And now finally the trade balance issue. Globalization obviously means that corporations will move work to a place where it is cheaper to buy (all else, e.g. quality of work, being equal). This is a good thing for the poor of the world, because it will slowly raise their standard of living and allow their economy to develop. What about the relatively rich (by global standards) whose jobs are being taken away? First, wealth redistribution through taxes and basic income means that the poor of a country at least do not need to starve or suffer in abject poverty due to globalization. As long as the overall group (the nation) is generating enough resources, all members of the group can get the basic necessities needed to survive. And the US is generating a lot of value. Particularly, a lot of the added value of its exported goods come from the intellectual property created here. And I don't see that changing anytime soon. Something needs to eventually be done about the trade deficit though. Second, the basic income reduces the amount of surplus income a worker needs to earn to have a good standard of living. That means they can work at a much lower wage (there would be no more minimum wages under basic income) than they would have to in order to maintain the same standard of living in a system without basic income, which allows them to more effectively compete with the rest of the world.

Eventually, we would want all nations of the world to have developed economies and they would all likely need to implement some form of basic income to support their citizens that are made obsolete by advancing technology and automation. But trying to get everyone in the world to agree to something is pretty difficult to do. So the only realistic way forward seems to be for individual nations to gradually start experimenting with basic income. And for the reasons I stated above, I do think this is possible for developed nations to do that without requiring all other nations in the world to join them immediately.

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This was a sweet article. Great discussion.

Yes, it should be paid for with taxation to avoid massive (but at least expected) inflation.

I’m trying to imagine what it would be like to be a business owner. Say you owned a grocery in this utopia. You still receive the basic income and you have this job to keep these grocery stores open. Which I guess you like doing since you’re doing it. You get income but there is an automatic tax from every transaction from customers

(percent tax)=sqrt((income this month)/(50,000)) if the rule that we voted was business owners couldn’t make more than 50,000 a month

OR it could be done with inflation

if there was a currency that goods were priced in SEPARATE from money people earned, used, and spent. The ratio between these two currencies would be smoothly changing and automatically adjusted as more money was created to use for the basic income. You could hold the pricing currency or other assets after earning money. Could be done on bitshares blockchain perhaps. This would also mean the basic income would always be increasing. Could it be a perfect tax?

How about labour economics and the tax curve on labour? How would it influence behavior and happiness?

I think I have to read your other articles.