Universal Guaranteed Minimum Income
What is it?
A basic income (also called Unconditional Basic Income, Citizen’s Income, Basic Income Guarantee, or Universal Basic Income) is a universal unconditional (no strings attached) cash payment which all citizens (and residents?) of a country regularly (usually conceived as monthly) receive from the government, in addition to any income received from elsewhere.
How Much Will it Cost?
According to the US Census Bureau(1), as of April 1, 2020 their best estimate was –
> The United States has a total resident population of 331,449,281.
> Of that 77.7% were over 18 years of age – or 257,536,091.
> Leaving 73,913,190 people below the age of 18.
> Between 2015 and 2019, the average persons per household was 2.62
According to the US Department of Health and Human Services(2), for 2021, the Federal Poverty Level for the lower 48 contiguous states and D.C. was –
$12,880 per person for a single person household,
$17,420, or $8,710 per person for a two person household,
$21,960, or $7,320 per person for a three person household,
$26,500, or $6,625 per person for a four person household,
$31,040, or $6,208 per person for a five person household,
etc.
Using the Census Bureau’s national average of 2.62 persons per household, that calculates out as an average per person Poverty Level of $6,320 per person (or $16,558 per household for a 2.62 person household).
For purposes of calculation, let us set the Universal Guaranteed Minimum Income (UGMI) at an average of $6,320 per person. Which works out to about $527 per person per month. Although in practice it would be set at the Federal Poverty Level for the households in question. A one-person household would receive about $1,073 per month. But for purposes of the following calculations, it will be easier to use the national average figures.
Assume that, on average, we provide 50% of the UGMI for those below the age of 18.
Multiplying out ($6,320 x 257,536,091 + (50% x $6,320) x 73,913,190) we get an estimate of
$1.86 Trillion / annum.
How will we pay for it?
(1) Consolidate Other Welfare Programs
According to a Congressional Research Service report prepared for Jeff Sessions, ranking member of the United States Senate Budget Committee(3):
“. . . cumulative means-tested federal welfare spending in the United States in the most recent year for which data is available (fiscal year 2011). . . . CRS identified 83 overlapping federal welfare programs that together represented the single largest budget item in 2011 — more than the nation spends on Social Security, Medicare, or national defense. The total amount spent on these 80-plus federal welfare programs amounts to roughly $1.03 trillion. Importantly, these figures solely refer to means-tested welfare benefits. They exclude entitlement programs to which people contribute (e.g., Social Security and Medicare).”
According to usgovernmentspending.com(4), for fiscal year 2021, the US Federal government is budgeted to spend:
Even if we leave the Medicare and Medicaid programs in place, the rest of these programs total $1.9 Trillion per Annum
Therefore, by consolidating all the Federal Welfare programs (excluding Medicare and Medicaid), the UGMI program can be fully funded.
(2) Claw-Back the UGMI from High Income Earners
Since the Universal Guaranteed Minimum Income would be taxable income, some of the outlay would be recovered from those earning in the upper tax brackets. Suppose we assume that the entire Universal Guaranteed Minimum Income will be “clawed back” from the top 10% of taxpayers. (Although, in practice, such a “claw-back” would likely get progressively larger for those whose taxable income is above the median income, that is a hard calculation to make.)
According to the taxfoundation.org(5), for the year 2018 (the latest data available), the top 10% of income tax returns represented 14,431,787 returns. Assuming that the averages used above still hold (not a foregone conclusion), we can assume that each tax return represents an average household with 2.62 people. Therefore, clawing back the UGMI from these households would generate (14,431,787 x $16,558=) $239 Billion in additional taxable income. With the average tax rate of the top 10% being 19.9% (in 2018) this would generate –
$47.5 Billion per annum in additional tax revenue.
What Other Benefits will accrue?
Eliminate Poverty!!
Change the mentality of welfare. Return to the morality of self-reliance and give up the morality of paternalism. Eliminate all those government bureaucrats who have been entitled to pass judgments on those recipients. The current welfare approach is demeaning to those who have to suffer the paternalistic benevolence of those who are tasked to dole out the monies. And the system is hard to navigate for those who may not have a knack for lawyers’ notions of English. Many people, even those with good educations, find it difficult to navigate through the obscure conditions and confusing forms issued by so many different offices. How many properly qualified people are missed.
Eliminate the “poverty trap” of means testing. People who qualify for welfare support must be careful in finding employment so that they do not lose their qualification for welfare support. Many welfare recipients are subject to a 100+% Marginal Tax Rate – they lose more in welfare benefits for every extra dollar they earn in wages.
Reduce the incentives for economic segregation of welfare “customers” into ghettos of public housing. Encourage the economic relocation of low-income families to areas of the country where the cost of living is lowest.
Reduce the harmful side effects of traditional welfare. By providing a fixed sum to a young woman, whether she is a mother or not, will reduce the current economic incentives for many welfare children. By providing the same sum to both spouses, it will increase the economic benefit of spouses living together, and reduce the “married penalty”. By providing the child’s income payment in the name of the child, rather than in the name of the mother, it will increase the possibilities and incentives for the child to be raised in an environment other than the birth mother’s location.
Increase individual Freedom. What do you really want to do with your life? Are you doing what you really want to do? Or are you “settling” for a sub-optimal job in order to pay the bills, while letting your “dreams” die of neglect?? Do you want to run your own life? Or do you want some over-worked, ill-incentivized government bureaucrat — who has not walked a mile in your shoes — to tell you how to live your life.
Studies looking at Pilot Projects in many different countries provide substantial evidence that paying recipients in cash and expecting them to manage their own affairs can lead to important behavioral changes. For example, research indicates that these payments can help poor households to diversify livelihoods and improve their long-term income generating potential by funding the costs of job seeking, allowing them to accumulate productive assets and avoid losing them through distress sales or inability to repay emergency loans. Transfers allow households to make small investments and, in some cases, take greater risks for higher returns.
Reduce Welfare Fraud. Reduce the opportunities for welfare recipients, and welfare suppliers to game the system.
Reduce the size of government by firing all those bureaucrats who currently administer all those programs, unemployment insurance, and related stuff. The savings in personnel, office space, and pension costs are not included in the above calculations.
Get rid of Minimum Wage Laws, so that the poorly educated and the unskilled can find employment.
Prepare the way for “Technological Unemployment”. Many Technological Futurists predict that the growing use of Artificial Intelligence in Automation and Robotics in industry presages a growing level of unemployment for technologically displaced workers. For example, they predict that within 10 years, the bulk of the truck and bus drivers will be replaced with self-driving vehicles. This particular forecast may not happen, but similar kinds of automation will replace more and more lower skilled workers. In a much-written-about 2013 paper, two Oxford economists(6) estimated that 47 percent of all U.S. jobs were at risk of computerization . For example, Macdonald’s is beginning to replace counter/cash employees with automatic ordering machines. Bank tellers, of course, have already almost all been replaced by Automatic Teller Machines (ATMs). Even today, more and more people are facing a life of chronic economic insecurity. According to the St. Louis FED(7), the labor-force participation rate (the rate of eligible people working or seeking work, compared to the total age-eligible population) has been hovering just over 61%. Meaning that 39% of those who could work, are not in the labor market (ie. Nor even receiving unemployment insurance). How do they survive?
Negative Consequences?
One cannot argue against the UGMI program on the basis of some negative consequences (like for example – reducing the incentive to work, reducing self-reliance, etc.) All forced wealth redistribution programs have severe negative consequences! Therefore, to argue against the UGMI program, one must argue that the net (balance of positive and negative) consequences of the UGMI program are worse or less desirable, than the existing net (balance of negative and positive) consequences of the existing Social Welfare programs it would replace.
Known Pilot Projects
The Alaska Permanent Fund of Alaska is well established and is perhaps to be seen as a permanent system, rather than a basic income pilot.
The same could perhaps be said about Brazilian Bolsa Família.
The experiments with negative income tax in United States and Canada in the 1960s and 1970s.
Dauphin, Manitoba experiment (1974-1979)
The experiments in Namibia (starting 2008)
The experiment in Brazil (starting 2008)
The experiments in India (starting 2011)
The GiveDirectly experiment in East Africa (starting 2009)
The study in rural North Carolina (the eastern Band of Cherokee Indians built a casino that provided each member a share of the profits of about $4000 per capita)
The experiment in Utrecht, Netherlands (starting 2015)
In 2016 Ontario, Canada announced plans to run a basic income pilot, with a discussion paper on the program expected in the fall
A Selection of Notable Supporters of the Idea
Thomas Paine – American revolutionary.
Tim Berners-Lee (World Wide Web inventor)
Napoleon Bonaparte
Milton Friedman – Nobel Laureate in Economics, Libertarian
Martin Luther King
John Kenneth Galbraith – Nobel Laureate in Economics
Friedrich Hayek – Economist of the Austrian School
Bernie Sanders – Socialist, Candidate for President 2016
Elon Musk – CEO of SpaceX
Archbishop Desmond Tutu
President Richard Nixon
Matt Zwolinski – professor of philosophy at University of San Diego, and Libertarian.
Biggest Problems
- How to legislate / implement the massive changes to the existing programs, without politicians getting their own “pork” included in the changes.
- How to prevent the politicians from “tweaking” the system to favor their own preferred special interests, or raising the UGMI to “buy” votes.
- Who will receive the Guaranteed Minimum Income? What do we do about the many “unregistered/undocumented” residents?
- How to deal those who don’t want to be found? What do we do with those who don’t want to join the program?
- What is the risk to personal privacy if one government agency knows “officially” who and where you are?
What Problem(s) are we trying to solve by offering everyone a UBI?
We are not doing this just for fun. It is an expensive government program. To what problem(s) is the UBI a solution?
What are the success criteria for solving those problems?
I don’t care whether you are Republican, Democrat, or Libertarian. I don’t care whether you approach seeing the Problems and the Solutions from the Left or the Right, the Top or the Bottom.
If you conceive of the Problem as relating to “widgets”, and if your proposed “Solution” to the problem is to “provide easier/harder access to widgets”, then you must have a concept of what would constitute success in solving the Problem you envision.
And this had better be more than just greater or less access to widgets, because that is just begging the question (basing a conclusion on an assumption that is as much in need of proof or demonstration as the conclusion itself).
What is your criteria for success in solving the Problem you envision? How do you propose measuring how or whether your solution is successful in solving the problem(s)?
What unintended consequences might ensue?
What unexpected consequences might result from your proposed solution, and how might that affect your success criteria. How do you propose to detect if some unexpected consequences occur?
References
(1) https://www.census.gov/quickfacts/fact/table/US/PST045219
(4) https://www.usgovernmentspending.com/us_welfare_spending_40.html
(5) https://taxfoundation.org/publications/latest-federal-income-tax-data/
(6) https://www.oxfordmartin.ox.ac.uk/downloads/academic/The_Future_of_Employment.pdf
