A quick thought on UBI

I’m still not sure where I land on the issue of Universal Basic Income (UBI), but I just thought of a bit of clarifying language that lead to a thought. I’m sure this thought isn’t original, but I’m also sure it doesn’t come up as often as it ought to.

A UBI system’s appeal stems from the fact that it’s a minimal welfare state (kinda sorta). We all know the old debate between proponents of a minimal state–and the debates about what exactly that constitutes–and those of a welfare state–and again, there’s plenty of disagreement on what that actually means.

On a 0-10 spectrum of “how important should the government be? / how important is the government currently” a UBI is a lateral move with obvious efficiency gains. It strips out all the bureaucracy in our current welfare state, provides a wide safety net, and allows the poor to exercise their own agency using their local knowledge about their particular circumstances and opportunities. No cookie cutter solutions, no lines, just a modest check in the mail and an entire population looking for good ways to use it.

On the other hand, it lays bare some of the worst case scenarios of a maximal welfare state. Subsidizing sloth and dependency, enormous costs, reduction in savings, net negative cultural effects, and who knows what else!

But still, perhaps UBI with some minimal modifications is an improvement over what we’ve got now?

2×2 matrix (robust vs thin welfare state and broad vs targeted welfare state).

The maximal welfare state is robust, and broad. There’s a housing bureau, a food bureau, a work bureau, and nearly everyone is waiting in line at one of them at some point each week.

The minimal state would have no welfare, but the minimal welfare state would have a thin and targeted system. No social workers, no bureaucrats, just a check. And unlike a UBI, this would only apply to the poor. Which might cost it political support.

A UBI is thin but broad. That might require it to be less generous, but could (literally) buy it some votes. On the other hand, what do I know about what makes people vote?

The thinness and breadth of a UBI makes it startling next to the old dichotomy. It simultaneously opens up whole new realms of possibilities–it dramatically increases the opportunity cost of drudgery and bureaucracy and provides an easy enough safety net to allow widespread entrepreneurial activity. If we had the right culture we could do anything! But (!) we don’t get to choose the culture.

That breadth is pretty scary when we consider some of the negative behaviors it will surely breed. The lunatic fringe will be funded by the rest of us. A cult is easy to finance when all your members sign over a government check to you every month.

Here’s a possibility: Imagine a vastly simpler tax code. “What’s your income? Scan your tax/employment card that isn’t as stupid as a Social Security Number.” $X “Thank you, give us f(X). Insert cash or card into the machine.” You could file taxes every month (or more or less frequently if you prefer). In that world, we could just give a refundable tax credit to anyone who had a low enough income.

Mind you, I’m assuming away the issue of designing the right marginal tax rates and setting the level of the tax credit. But such a system could be simultaneously broad (it kicks in for anyone as soon as you need it) and narrow (you only get it if you’re poor… and you end up paying it back if you get rich). I think a simpler tax system would be necessary to make a minimal UBI workable

2 thoughts on “A quick thought on UBI

  1. Honestly, I can’t see an upside to it. It would, in addition to all the points you made, be ever-increasing and beggar the several states who I assume would have to cover any state-specific increase in UBI, i.e., NY, CA, and MA would need greatly increased UBI to have comparable spending power to AZ, FL, MO. And then there’s the local variances, e.g., NYC vs Schenectady.

    • That’s an important issue that I’ve got a good solution for:

      Don’t adjust for geographic variation, and don’t attach it to any specific geography.

      Instead, let people who don’t want to work move to some place cheap and free up scarce NYC real estate for the people who work there.

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