Tyler Cowen on the Universal Basic Income

He writes,

If two able-bodied people live next door to each other, and one works and the other chooses to live off universal basic income checks, albeit at a lower standard of living, I wonder if this disparity can last. One neighbor feels like she is paying for the other, and indeed she is.

Compared to what, Tyler? Today’s fragmented hodge-podge of programs puts many of the working poor in 100 percent tax brackets. If the problem is to give able-bodied males an incentive to participate in the labor force, the solution is not to maintain a system in which somebody who earns $30,000 a year is no better off than someone who earns $10,000 a year.

Maybe the term “universal basic income” sends the wrong signal. How about “repeal and replace food stamps, housing subsidies, welfare, and Medicaid with a negative income tax?”

12 thoughts on “Tyler Cowen on the Universal Basic Income

  1. At the risk of being hyperbolic, how about repealing most of that stuff and not replacing it. Then actually limiting and enforcing immigration to bid up the value of low-skill labor. That will have a salutary effect on labor force participation rates.

  2. Of course Kling is right here, but he’s also hopelessly naive. Food stamps and housing subsidies aren’t going away. A world in which they do go away is not possible. UBI will be additive to most current forms of welfare. Progressives will dupe mainstream libertarians and conservatives into supporting it by suggesting it as replacement to other forms of welfare and then simply not repeal other forms of welfare.

    We’ve seen this movie before.

    This debate also distracts from the real problem (which Cowen) gets closer to. Giving people money isn’t working out very well. It makes recipients unhappy, unproductive, unhealthy and prone to all sorts of negative activities. It makes the payers spend ever-more money to get away from the recipients. It’s a terrible solution. This is the real problem.

    • +1

      Especially how I expect libertarians will increasingly be dupes for progressives.

      “It makes the payers spend ever more money to get away from the recipients” is the key line. You can’t buy your way out of having an underclass problem.

  3. I’m not going to let you spout disinformation about 100% marginal tax rates

    If you earn one dollar over Medicaid’s limit, you then have to pay ACA premiums equal to 3% of your income. That’s 3%, not 100%!

    The Right basically consists of hucksters, charlatans, and apologists for plutocrats.

    • Nick,

      Is that 3% tax on total income or on the income above the limit? If it is a tax on total income and that tax only goes in effect once the limit is reached then the marginal tax the person experiences may be well in excess of 100%.

      • It is 3% of income as a premium cap. So, for an individual, the applicable cutoff is $15,840. At $15,799, you get Medicaid at no out of pocket cost for premiums. At $15,800, and additional dollar of income, you are potentially on the hook for premiums of up to $475 dollars, a marginal tax rate of 47,500% (assuming, of course, that 3% of income is gross, not net after deductions, but the point still holds- the marginal rate is well in excess of 100%)

          • Yes, actually. The additional dollar triggers a nearly 500 dollar bill for medical care- that is why it is called a marginal dollar and a marginal rate.

    • Nick, I’m not following. I don’t think Arnold was talking exclusively about Medicaid/ACA. There are lots of programs / subsidies / etc (e.g. public housing) that phase out as the poor make more money. From analyses I’ve seen, the total implied marginal rate can be very very high.

  4. I recently attended an event at Cato at which Charles Murray spoke about his “in our hands” UBI proposal. I asked him about ‘merit goods restriction’ and he was open to it, but not convinced. At the same time he admitted he had to set health care off to the side as sui generis, and it’s not too much of a leap to including other special provisions.

    He’s been making the pitch for a decade, so he’s got well-honed answers to everything, and relies heavily on the “compared to what?” response to many objections

    A different kind of objection regards the political stability of the agreement or ‘grand bargain’. What prevents the left from predictably ratcheting up the value of the UBI. Says Murray, “since there is just one big program that costs all net taxpayers a lot of money, any attempt to increase the payout will immediately produce a significant class of people who will try to resist it, much as social security payouts are extremely hard to raise.”

    The problem with existing welfare programs is the typical combination of a lot of small programs to all of which no one can pay close attention, and concentrated benefits with dispersed costs.

    However, he did admit that this same political logic would mean that, once ‘repeal and replace’ was implemented, it would be very hard to stop the left from reintroducing the current multifaceted welfare system bit by bit, one program at a time, since they would be sure to point to any number of special and inevitable emotionally salient cases to rationalize yet another special exemption.

    Promising more free goodies to one’s faction’s loyal clients is of course an inherently irresistible temptation in any democracy, but there is another one often ignored in these discussions, which is the temptation to shape the electorate.

    In this case, it’s essential for the party with welfare clients to make sure they stay local so they can tip local elections. It’s no good giving people cash if the inner city rent is too damn high and they move outside the municipal boundaries. Better to subsidize in a way that allows you to geographically distribute your clients in exactly the numbers and places you need them. You can’t do that with cash, you need rent control, HUD vouchers, public housing projects, zoning control for ‘affordable housing’, and AFFH programs.

    That kind of political capability is worth a fortune. The only way to convince progressives to give it up is to change the rules of democracy and make it so that their clients can do something like military servicemembers can and continue to vote absentee in local elections even if they moved away and haven’t lived there for years, that is, decouple voting from current residence and permit the option of a ‘birthright franchise’.

    Once it’s no longer essential to have poor clients actuality live next to city dwellers while still guaranteeing a local one party state, then you’ll see progressives show a willingness to disarm politically and embrace innovative reforms such as UBI.

    Indeed, I suspect they would do so with surprising eagerness if it was clear that it meant both pan-urban gentrification without risking loss of political control.

  5. The choice is between high marginal rates over a narrow income range or higher marginal rates for everyone though. It is possible to view the ubi and higher marginal rates as two sides of the same coin and not consider it stifling but it is also possible to view them distinctly and the higher marginal rates as demotivating. Some of both would be likely which would limit its effectiveness.

  6. What is needed for the poor is Universal Job Offers. A voluntary National Service.

    The gov’t hires you, to come to “work” from 8-5 (hr for lunch), and farms you out to others willing to pay the gov’t, like a Temp Agency, even if the hospital or school pays less than the gov’t.

    For those where nobody will pay anything — they are in vocational training programs, perhaps learning how to take care of pre-school children, or to
    clean hospitals and throw out the contents night basins.
    They may also join a “junior military” where they get trained as if they were in the military, allowing them to later join the military if they qualify.

    For semi-disabled people, special various reading & sitting oriented jobs, plus required physical therapy/ exercise — often in a half time work, half time therapy arrangement (pay based on hours in attendance).

    The point is to allow poor people a way to “earn self respect”. This is done thru working, thru doing a good job. UBI does fail. Uni Jobs might work, and should be tried.
    Uni Jobs can, like UBI, replace most welfare programs — all for those who are “able-bodied”.

    This is becoming a bigger difference as more folk are already choosing low cost virtual reality non-productive lives, with current benefits, and with UBI would choose even more.

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