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How does the largest welfare program imaginable have libertarian supporters?
- The idea for a universal basic income, or UBI, is increasingly popular.
- While it seems like a left-wing handout, many prominent right wing thinkers have endorsed the idea.
- The libertarian version of UBI does have a few key differences from the more standard version.
The libertarian case for the basic income<p>For those who don't know, <a href="https://en.wikipedia.org/wiki/Milton_Friedman" target="_blank">Milton Friedman</a> was an economist working out of the University of Chicago during the middle part of the 20<sup>th</sup> century. A leading thinker behind monetarism, he favored tinkering with the economy through controlling the size of the money supply rather than through fiscal policy. Even people on the American center-left acknowledge his brilliance as they criticize his <a href="https://www.nybooks.com/articles/2007/02/15/who-was-milton-friedman/" target="_blank">mistakes</a>.</p><p>When it came to the problem of poverty, Friedman supported letting the free market and private charity have a chance to solve it first. However, he understood that dealing with it effectively at the large scale likely required at least some state intervention. As he explains in <em><a href="https://books.google.com/books?id=CE49HAiRugAC&dq=capitalism+and+freedom&hl=en&sa=X&ved=0ahUKEwjsju27z-HiAhVlu1kKHeFgCu8Q6AEIKjAA" target="_blank">Capitalism and Freedom</a>, </em>its the free-rider problem that causes this:</p><p style="margin-left: 40px;">It can be argued that private charity is insufficient because the benefits from it accrue to people other than those who make the gifts [...] I am distressed by the sight of poverty; I am benefited by its alleviation; but I am benefited equally whether I or someone else pays for its alleviation; the benefits of other people's charity therefore partly accrue to me. To put it differently, we might all of us be willing to contribute to the relief of poverty, provided everyone else did. We might not be willing to contribute the same amount without such assurance. In small communities, public pressure can suffice to realize the proviso even with private charity. In the large impersonal communities that are increasingly coming to dominate our society, it is much more difficult for it to do so.</p><p>He argued that this justified having the state take steps to reduce poverty, as it is harder to skip out on paying money to reduce poverty when that is tax fraud rather then miserliness. This didn't mean Friedman supported the welfare state though; he argued instead for a much simpler solution in the form of the <a href="https://www.econlib.org/library/Enc1/NegativeIncomeTax.html" target="_blank">negative income tax</a>, or NIT. </p><p>In our current welfare system, there are a myriad of programs that each deal with a different aspect of life for the poor. One program provides food aid, another deals with housing, yet another provides low-cost utilities, and another one deals with income security for the elderly. A large number of regulations, such as minimum wage laws, exist to help hold wages high enough to keep other working people off the welfare rolls.</p><p>Friedman viewed this multitude of agencies as wasteful and suggested that a single program would do the same job with a smaller government by just giving cash to people who needed it. As a libertarian who placed a high value on the freedom of choice, he also suggested it was a much more dignified way of helping the poor than telling them what they could and could not do with the money we give them as is currently the case with things like food stamps. </p>
How would it work?<span style="display:block;position:relative;padding-top:56.25%;" class="rm-shortcode" data-rm-shortcode-id="3ab7d5eb8f57b818fcc271523e57fbfd"><iframe type="lazy-iframe" data-runner-src="https://www.youtube.com/embed/xtpgkX588nM?rel=0" width="100%" height="auto" frameborder="0" scrolling="no" style="position:absolute;top:0;left:0;width:100%;height:100%;"></iframe></span><p>The mechanism is relatively simple. Dr. Friedman explains it above in his interview on Firing Line.</p><p>For those who didn't watch the clip, it is easily explained. The income tax system is changed a bit to include an exemption based on family size. Only earned income above that point is taxed. If you make less than the exemption amount, you instead receive a subsidy.</p><p>The size of the subsidy would change based on how much you make and would also be subject to a subsidy rate. This means that if a person makes $1000 less than the exemption point, they would only get a certain percentage of that difference back as a subsidy. Friedman argued that the subsidy rate shouldn't any higher than 50 percent, as it would discourage work if it were raised past that point. </p><p>As an example, suppose we lived in a society where with an NIT where the exemption for me is $10,000, and the subsidy rate is 50 percent. If I were to only make $8000, I would pay no taxes and get back half of the $2000 difference between what I made and the exemption point, or $1000. </p><p>If I made exactly $10,000, I would neither pay taxes nor receive a subsidy. If I made more than that, I would start to pay income taxes on the income above that point. If I made absolutely nothing, I would get the largest subsidy possible under this system, $5000, which would be the "guaranteed" income under this arrangement. </p><p>Such a program would also have the advantage of not having a "welfare trap," the point where making more money at work causes welfare payments to go down by a larger amount and leaves the recipient worse off. The trap is a well-known problem and is bashed by many economists as a significant flaw that discourages people from trying to improve their situation. </p><p>The numbers used above were just for discussion; the exact numbers used in a working system would reflect economic realities. It should be said that Friedman intended to keep the guaranteed rate low enough to encourage people to still work while at the same time being high enough to correct for the failures of private charity. </p>
Has it ever been tried?<p>Yes, it has, and it <a href="https://basicincome.org/news/2017/12/basic-income-guarantee-experiments-1970s-quick-summary-results/" target="_blank">worked</a>.</p><p>Several experiments in the 1970s in the United States and Canada showed that the negative income tax could work as intended. The guaranteed income was set as equal to the poverty threshold and, as predicted, the labor supply fell because of this. </p><p>This fall was not as significant as experts feared, however. The simultaneous rise in high school graduation rates suggests that at least part of this fall in labor supply was caused people having the economic security to stop working and finish their education. Claims that the program resulted in an increased divorce rate were initially reported but are now known to be the result of a statistical error. </p>
What do others think of the NIT?<div class="rm-shortcode" data-media_id="LJS0KnfW" data-player_id="FvQKszTI" data-rm-shortcode-id="bdd90d971ab20b9a5ac3a3c5506c478c"> <div id="botr_LJS0KnfW_FvQKszTI_div" class="jwplayer-media" data-jwplayer-video-src="https://content.jwplatform.com/players/LJS0KnfW-FvQKszTI.js"> <img src="https://cdn.jwplayer.com/thumbs/LJS0KnfW-1920.jpg" class="jwplayer-media-preview" /> </div> <script src="https://content.jwplatform.com/players/LJS0KnfW-FvQKszTI.js"></script> </div> <p>Criticism of the idea comes from two directions.</p><p>On the right, critics often object on a fundamental level to any redistribution or an income tax of any <a href="https://mises.org/library/fallacies-negative-income-tax" target="_blank">kind</a>. Some who do support the NIT see it merely as the best version of a bad deal.</p><p>On the left, criticism tends to focus on either the mechanism of the NIT or on the details of Friedman's plan. Josh Martin, an executive committee member at the <a href="https://usbig.net/" target="_blank">US Basic Income Guarantee Network</a>, explained his objections this way:</p><p style="margin-left: 40px;">A negative income tax and a universal basic income seek to achieve the same goal — to ensure an income floor for everyone. But, given the choice between the two, a UBI is preferable as it solidifies this income floor as a universal benefit, while an NIT would only provide the income floor to those who need it. This conditionality makes it easier for politicians and for people who don't receive the NIT to justify cutting the program as they don't receive the benefit personally.</p><p>This concern that a purely redistributive program will be subject to political difficulties later is a common one. It is part of the reason why regressive taxes on the <a href="https://www.archives.gov/exhibits/treasures_of_congress/text/page19_text.html" target="_blank">poor</a> fund Social Security — you can't attack it in the way Mr. Martin describes. A system of basic income that pays <em>everybody</em> a set amount each month is similarly protected; it's hard to cut a program everybody gets direct benefits from. </p><p>Universal basic income is an increasingly popular idea that will likely exist in some form someday. It enjoys support from every part of the political spectrum for various reasons. While the far left and the far right might disagree on why a universal basic income program is needed or what form it should take, the fact that they agree on the need for such a program is surprising enough to almost count as an endorsement in itself. </p>
Discover the peril and potential of an automated robotic world.
- Journalist Andrés Oppenheimer, columnist and member of a Pulitzer Prize-winning team explores the cutting edge of automation.
- From South Korean robot schools, Silicon valley futurist predictions and automated Japanese restaurants, this book shows us that the future of work is almost here.
- Already replacing a growing number of workers while also creating new roles, the concept of employment is becoming even more dynamic.
A guaranteed basic income is an old solution to a new problem of labor automation.
- Economist Robert Theobald coined the team 'basic living guarantee' in the 1960s.
- He believed that we were going to suffer problems because of an overabundance of resources.
- Philosopher Alan Watts spoke about the possibility of an economic utopia through a universal basic income.
Early proponents of a guaranteed income<p>Economist and futurist Robert Theobald first rang the alarm bells on this economic threat, which at the time didn't have a name to it. Theobald believed that the threat to the American and subsequently world economy wasn't one of scarcity but abundance. His views were in direct contrast to the traditional strain of economics worrying more about scarcity. Theobald looked at the technology of the time and realized that the promise of future development would lead to even greater automated abundance in the future. </p><p>In his essay, <em>Free Men and Free Markets, </em>Theobald argued that technological progress would free surplus labor and capital in such a way that it would eventually prove detrimental to the society if this excess human capital wasn't fully utilized. He predicted that the mass of wealth would be transferred largely to the rich, which would fuel dissent and resentment among the lower classes. <em></em>To avoid the looming disaster, he called for a "basic living guarantee<em>". </em><em></em>Theobald states:</p><p style="margin-left: 20px;">"Unemployment rates must…be expected to rise. This unemployment will be concentrated among the unskilled, the older worker and the youngster entering the labor force. Minority groups will also be hard hit. No conceivable rate of economic growth will avoid this result."</p><p>Philosopher Alan Watts, who at the time called Theobald "an avant-garde economist,"<em> </em>took the idea one step further and tried to imagine what sort of psychological and sociological issues a basic income would rile up. Not only did he imagine what the after effects of this radical change would bring, but what kind of psychic change would be needed to also bring about a new<a href="https://bigthink.com/personal-growth/philosopher-alan-watts-on-the-difference-between-money-and-wealth" target="_self"> way we think about money.</a></p>
Automation and basic income<p>Alan Watts believed that we still place an unjustified fixation on the notion of a job or employment, which he said predates back to our pre-technological days. </p><p style="margin-left: 20px;">"Isn't it obvious that the whole purpose of machines is to get rid of work? When you get rid of the work required for producing basic necessities, you have leisure – time for fun or new and creative explorations and adventures."</p><p>The problem is we don't see that as the case. If you follow the outcome of automation to its logical end, you'll realize that the whole purpose is to eventually eliminate any human interference in rote menial tasks. But if the casualties of this instead creates a new invalid serfdom class, our entire capitalistic structure will become severely strained. </p><p style="margin-left: 20px;">"... we increasingly abolish human slavery; but in penalizing the displaced slaves, in depriving them of purchasing power, the manufacturers in turn deprive themselves of outlets and markets for their products," writes <em></em>Watts in <em>Does It Matter?: Essays on Man's Relation to Materiality</em>.</p><p>Those that lose their jobs will live in a more diminished and impoverished state. All the while, there is a surplus of cheap consumer goods being created by the automated factories. On the subject of who should pay for the basic income, Watts said that the machine should – something <a href="https://bigthink.com/paul-ratner/bill-gates-proposes-that-if-a-robot-takes-a-human-job-it-should-pay-taxes" target="_self">echoed by Bill Gates in recent years</a>, who suggested a robot tax.</p>
Theoretical outcomes for a universal basic income<p>Watts was a bit premature on his basic income prediction, but the picture he paints is still one that proponents of UBI look to as the future. Watts said:</p><p style="margin-left: 20px;">"I predict by AD 2000, or sooner, no one will pay taxes, no one will carry cash, utilities will be free, and everyone will carry a general credit card."</p><p style="margin-left: 20px;">"This card will be valid up to each individual's share in a guaranteed basic income or national dividend, issued free, beyond which he may still earn anything more that he desires by an art or craft, profession or trade that has not been displaced by automation."</p><p>Inflation arguments abound when talking about basic income. Watts understood at the time that the way people thought about money would prove most of these arguments true. </p><p style="margin-left: 20px;">"The difficulty is that, with our present superstitions about money, the issue of a guaranteed basic income of, say $10,000 per annum per person would result in wild inflation. Prices would go sky-high to "catch" the vast amounts of new money in circulation…"</p><p>Watts found inflation arguments to be null if people would simply realize the symbolic nature of currency instead of confusing it with true wealth. </p><p style="margin-left: 20px;">"The hapless dollar-hypnotized sellers do not realize that whenever they raise prices, the money so gained has less and less purchasing power, which is the reason that as material wealth grows and grows, the value of the monetary unit goes down and down."</p><p>While this idea has gained both supporters and detractors in the years since, the main point still stands: Automated abundance is at risk of disrupting the status quo of the past few hundred years. </p><p>Later on in his life, Theobald looked back on the foresight he had and its unnerving validity. </p><p style="margin-left: 20px;">"What's startling to me is that when I started talking about ideas like these 30 years ago, they were so new and strange that people looked at me as if I had two heads. In retrospect, I think I was looked on as something of a cultural clown – a "crazy" who was fun to listen to. The reaction I get now worries me a lot more, because what most people say is, "Bob, today you're right, but we're not going to do anything about it."'</p>
Facebook's co-founder wants middle-class workers to get a $6,000 raise<div class="rm-shortcode" data-media_id="KWC1Nxkq" data-player_id="FvQKszTI" data-rm-shortcode-id="1bb90bb93906579bcaf2c3da57b4225f"> <div id="botr_KWC1Nxkq_FvQKszTI_div" class="jwplayer-media" data-jwplayer-video-src="https://content.jwplatform.com/players/KWC1Nxkq-FvQKszTI.js"> <img src="https://cdn.jwplayer.com/thumbs/KWC1Nxkq-1920.jpg" class="jwplayer-media-preview" /> </div> <script src="https://content.jwplatform.com/players/KWC1Nxkq-FvQKszTI.js"></script> </div>
The Job Guarantee is a policy proposal that would have the state function as an employer of last resort.
Here at Big Think we like to talk about the basic income guarantee. While the basic income is an interesting idea, objections to it abound. Also, it isn’t the only idea for ending poverty making the rounds. While the basic income gets a lot of press, there's another idea: the Job Guarantee.
It really depends on who you ask, as one European poll found out.