People sometimes ask me what I think about Universal Basic Income (UBI).

TL;DR it’s just a name…I’m skeptical of any radical implications…what matters is the marginal rate.

There are societies that let people starve in the streets. We are not one of those. Voluntary giving is laudable, but it’s even more laudable for a society to say, everyone will contribute to helping the least fortunate who are too old or too ill to earn a living.

If you agree that we don’t just let people die and there should be some minimal safety net, the fair thing is for everyone to contribute. It’s people taking shared responsibility, today I help you, tomorrow maybe you help me.

Once you agree to some minimal safety net, you agree in principle to something like UBI, we’re really just debating how much, in what form, under what terms.

  • You can provide assistance in kind, like soup kitchens, homeless shelters, free clinics.
  • You can provide scrip that can only be spent on approved items, i.e. food stamps.
  • You can provide cash.

You can provide assistance to anyone who asks, or you can have people apply and determine whether and how much assistance they are eligible for, according to some need-based criteria.

When I think of UBI, I just think of some amount of unconditional cash, recouped by a tax from higher-income folks. So basically no-strings welfare.

UBI has advantages. No bureaucracy. No arbitrary determination of eligibility. No restrictions on spending. Just give people cash that they can freely decide how to spend. High freedom, low overhead.

A lot of people view those as features. Some people might view them as bugs, taking the view that only the ‘deserving’ should get assistance, they should have to work for it, they shouldn’t be able to spend social assistance on beer or Twinkies, etc. (Paternalism FTW? Government should stay out of people’s business…unless they’re poor?)

I have trouble generating strong feelings about it. Whether the safety net should be partly in the form of UBI is unimportant compared to the size of of the safety net and the marginal rate structure, i.e. how much you get to spend out of every additional dollar you earn.

I have strong feelings about two pet peeves. The first is the discussion tends to be mostly woodshedding. People get worked up about small pieces of the picture. It’s meaningless to say I like UBI, or food stamps, or don’t like sales tax or VAT because of the distribution implications. The only thing that really matters is the distributional effect of the whole system, i.e. the marginal rate structure. If a particular tax or benefit is efficient, you can always offset the distributional impact elsewhere. You can even have a progressive VAT. You can’t divorce a benefit like UBI from how you pay for it. You have to look at the efficiency and distributional impact of the whole system, not each individual component.

The second is, it’s pretty hard to be poor in this country. The system is built around the needs of the wealthy and middle class. In some countries you can be poor and have very little in material possessions, and you can manage, live, work, your kids have opportunities. In America, in a lot of places if you don’t have a reliable car, you can’t get to work, if you don’t live in the right place you can’t get a proper school, and don’t even get me started on access to minimal, basic medical care. People seem to think that’s part of being poor but it’s really not. There are countries where you can live with dignity on a low income.

It costs a lot to be poor in America, even at a level of income which would be middle class in most other countries. It’s practically a crime to be poor, there’s a war on poverty, but not in the sense LBJ meant it.

You could get lot of bang for the buck improving the supply side for poor people: cheap housing and transportation.

Personally, I think for sure there should be soup kitchens, free clinics, homeless shelters, a real rock bottom safety net.

And there should be a marginal rate structure without perverse incentives. We should ensure it really pays to work, if necessary subsidizing initial wages via the EITC, not taxing people 17.65% on the first dollar when they start to work. And especially we should avoid benefit cliffs, where you lose a lot of benefits when you reach a certain level and so it doesn’t pay to earn an additional dollar.

Those are the most important: A secure minimal safety net, and a rational marginal rate structure. People find meaning through work, taxpayers who work hard get cranky when people get benefits and don’t work. Welfare queens and rich panhandlers are media stock-in-trade. See Exhibits 1, 2, 3.

Politically, I think UBI is a hard sell, because you have to reclaim the UBI from high earners to balance the numbers out. You give people something and then take it away, they feel worse than if you never gave it to them in the first place. And giving money for nothing to the poor, no work requirement, just annoys them even more.

It seems like a political loser, and raising UBI to a level where the ‘basic’ means everyone has basic needs met, no-strings-attached, seems to entail more redistribution than a lot of people want. It’s possible that in the future, robots and automation will make so much labor redundant that we will need more redistribution just to avoid mass poverty. The robot singularity is something we should keep an eye out for but might as well deal with it if it becomes a problem.

Ultimately I don’t see UBI as an anti-poverty game-changer. It could be part of that rational marginal rate structure.  I like the simplicity of UBI more than, say, food stamps and a hodge-podge of local and federal welfare programs with complicated administration, eligibility.

I just don’t think you can make UBI a complete substitute for in-kind assistance, then let the market deal with everything, food, health care, housing, education.

While I’m at it, I find it pretty inexplicable that Obama passed a health care plan that is basically private insurance for about 1/3 of the uninsured, while creating a multi-$100b+ bonanza for insurers, hospitals, doctors, and big pharma, and the GOP wants to reverse it, take away health care from 20-30m Americans. Asshole economics is too kind, it’s just politics to piss off liberals and most people who aren’t cray-cray.

Again, we don’t let people die in the street. So at some level society pays for that minimal care, the question is how. It’s extraordinarily expensive in human and cash terms to have EMS and emergency rooms deal with things that shouldn’t be emergencies. There are armies of people employed to push costs on other people, often in sketchy ways, getting in the way of doctors trying to provide the best possible treatment, and there are a lot of expensive, not necessarily helpful tests and therapies.

This is how I solve it, with a 3-level system:

Essential care: dedicated NHS-like facilities funded by a dedicated tax, like a 3% payroll tax. Free clinics and hospital beds. Tax proceeds go to the states to provide care, as long as it’s within guidelines. Services are going to be basic. Nothing non-essential. There are going to be waiting lists for surgery. You are not going to get a $1m liver transplant. If people make a fuss that it’s crap, then improving it means raising that dedicated tax. Social contract is, you aren’t going to die in the street, but if you want top care you will have to pay for it.

Normal care – something like Obamacare – everyone can buy a health plan on more or less a level playing field, whether they are corporate or not. And everyone who can should, in the sense that you get some subsidy if you do and some penalty if you don’t. If anything, there should be more teeth to the Obamacare penalties to prevent free riders. If you pay 28% income tax, and health care is paid by your employer out of pre-tax dollars, there is currently a 28% tax subsidy there. I think as a moral imperative we should apply that subsidy to everybody.

And then of course if people want more they can buy it on the free market.

I don’t see how you can reasonably reconcile, don’t let people die in the street outside the hospital, with anything short of a single-payer system at this point. Anything less seems cruel and perverse and actually endorsing a free-rider situation instead of a rational scheme for indigent care.

Anyway, I find the low quality of the debate distressing. We should be able to agree that we will not have people die over toothaches. We should be able to agree that the current system delivers poor care and enriches a few in strange ways. And it’s pretty messed up that you will basically go broke if you get sick, sometimes even if you have insurance. We can argue about what constitutes a minimal acceptable level of care and what is a fair way to pay for it. But a system where you exclude people arbitrarily, everyone has to fight the system for basic care, we have poor outcomes, and pay a ton of money, should not be acceptable to anyone and we should be talking about ripping it up and starting over.