Re: "what we have now is actually worse than a UBI, because it has even more work disincentives built in. Under our current set of programs the working poor lose many of their benefits as their income exceeds poverty thresholds. I think of it as a UBI with a tax rate of close to 100 percent on earned income."
Arnold, Since replacement of means-tested welfare by a UBI is off the table, what reforms of means-tests programs might encourage rather than discourage work?
(Any suitable reform would have to be compatible with whatever relevant insights we have from behavioral economics about incentives and behavior.)
Is the incentive problem here intrinsic? Or is it an artifact of bad design of means-tested programs (shaped by politics)?
Is the 'eligibility cliff' fixable in principle by better design? Is there an economic theory of means-tested welfare that is 'incentive-compatible'?
Are we in a double bind because (a) replacement of means-tested programs by a 'UBI + charity' is off the table and (b) means-tested programs that would encourage work are either unknown in theory or off the table due to political economy?
If 1) people get money or something they value simply by being poor (and the poorer you are the more you get), and 2) people have no moral/status reasons for refusing "help" ("I'm not the kind of person who takes charity."), then, no, there is no better "design". It's pretty much a matter of arithmetic.
Marvin Olasky's The Tragedy of American Compassion argues that old systems of help didn't have the same incentive problems because 1) there was a distinction made between the deserving and undeserving poor, the deserving being those who were willing to work to help themselves by doing work for the charity, and 2) those giving out the charity took a personal interest in the recipients, often living with them, often being motivated by religious feelings, and 3) general social mores said it was bad to not provide for yourself. That is so not the case today.
Given that, it seems we are condemned to live Thomas Sowell's, "The more you pay people to be poor, the more poor people you're going to get." And the modern corollary, "The easier you make it to be homeless, the more homeless people you're going to get."
There are many more undeserving recipients of subsidies than the poor. The trouble is that the undeserving vote and are a reliable constituency for a party which promises to give them more stuff they don't deserve.
No doubt. My comment was limited to people who are helped because they are poor. The modern view seems to be that anyone who is poor is "deserving" simply because they are poor. So it is wrong to refuse aid to anyone or to put conditions on it. This has unfortunate long-term effects.
No, the whole idea of deserving and undeserving is absurd. You can be with someone 24/7 and not know what they are going through that prevents them from working. Ok, SOMETIMES you know there's no reason but in most cases you just don't know. Sometimes people act like they are gaming the system because it's more embarrassing to admit you aren't physically/mentally able to anything more.
The best we can do is set criteria as well as possible. Local control isn't much if any better. Without good criteria, each "local" decision-maker will decide differently, especially when spending someone else's money, which is almost always the case.
Mormons probably do it the best but there's still a federal benefit system backing them up.
It seems to me that the idea is actually quite logical and simple. It starts from the moral judgment that it is wrong to take support from other people if you can support yourself. To the extent that you do that, you are undeserving. Of course, "able to support yourself" is situation-specific. A lot of people who were able to support themselves in 1928 were unable in 1932.
There are going to be practical questions in any actual system of assistance to the "deserving." Like, under what circumstances can a person get assistance even if they have refused a job because "it's not in my field" or "that's way less than I used to make"?
Knowledge problems are always problems. A system of only helping the "deserving" largely deals with that by putting the burden of proof on the person asking for assistance. Olasky talks about people being given an ax and told to go outback and split the firewood for tonight. If they refused, they were not given entry into the shelter.
'Absurd' is going way too far. Sure, there is a lot of fuzziness in the spectrum of culpability one bears for one's own misfortune, and it's not always easy for an outside observer to tell clearly and precisely, but the law deals with those issues all the time in a wide variety of circumstances where those determinations are at the very heart of questions of who has what amount of liability to whom, who has excuses, defenses, mitigating circumstances, and so forth.
The guy who paid his insurance premiums and lost his house in a fire caused by a bolt of lightning deserves the payout. The arsonist fire-bug who burned it down on purpose does not. The guy who passed out while reading and smoking and unintentionally dropped his lit cigarette on his newspaper and barely escaped with his life is an arguable case, but to treat all these different situations as if they are the same and wouldn't benefit from the application of discerning sound judgment is what would actually be absurd.
How do you know the guy smoking and says he fell asleep wasn't a fire bug?
The person who can't work because of back pain, how do you know? The person with migraines, how do you know? Are you certain the person addicted to painkillers, alcohol, etc. should not? What about the schizophrenic, depressed, or agoraphobic? YOU DONT KNOW.
But decisions like that are made all the time. Do you really have debilitating back pain? If you do, you get Social Security Disability or, if you're a municipal employee, perhaps the local government's budget pays you for as long as you're disabled. There are always stories of the guy out on total disability who is spotted playing 18 holes of golf and carrying his own clubs. The decision-maker was wrong. But that is no reason to throw up your hands and say, "I don't know. Give everyone disability."
It can seem like modernity in the West anyway has this built in (I don't really know whether other countries still have an abyss into which you can truly fall, but I suspect there are some, and we should be very attentive to those, we should not look away from them, because they have something to tell us about reality). When I mention population growth, as a negative rather than the wholly positive thing it *always* is on an econ or libertarian blog - I always receive lectures about which lifesaving medical advances or comforts I would wish to go back on? Which aspects of the green revolution that allow some parts of the world to feed the others that cannot feed themselves? And so on. This response is another way of saying, basically - we have *no choice* about any of this. Prosperity has wonderfully raised the floor *for all*.
I would certainly not argue that this is entirely wrong. It is - ironically - rather complacent, though. People who think this way - your Tyler Cowens, your Matt Yglesiases - are actually the complacent ones. They don't really think people have now or have had at any time, any agency about the way the world is. They are humanists and materialists, certainly, but they don't acknowledge their chief ideology of equality, and its centrality. Or: they don't recognize that humanism is indistinguishable from radical egalitarianism.
But ideology still plays a role. It clearly has a role to play in the question of "who is reproducing the fastest". It has a thumb on the scale - it is interfering with the definition of success, biologically-speaking.
I don't think Christianity was ever going to lead to any other end than the one we're at, where far from the problem being that distinctions about deserts cannot be made - instead they are in fact made - in an inverted way.
In effect it's a situation where the very productive are as though pulling the cart loaded with the rest. And the very productive, when they say - how dare you talk about population, don't you know that we've had population growth because of all these wonderful advances? - seem not to realize the source of that growth, so fervently do they believe in egalitarianism. And boy do they believe it. You can go on any reddit thread about homelessness or drug legalization - and you will find the consensus view - which contrary to conventional wisdom is not a matter of "oh, that's just reddit" but rather is the view that results from the ideologues in charge of the American public school system - is that some should work, while others should be cared for and drugged by the government just like it's Wall-E or something.
So deeply steeped are they in this reductionist view of life - that never once have I seen in a perusal of such opinion - the slightest pushback on the order of - but what kind of life is that?
Meanwhile, the very productive are busy pulling the cart, and exercising reproductive restraint - because they thought that restraint was one of the good things they brought into being. Aspirin - and birth control!
And in isolation it probably could have been! But it wasn't allowed to be.
Meanwhile, the people in the cart could not care less about anything the pullers care about, and are busy reproducing at a *much* faster clip than the pullers.
Talk of how best to incentivize work, in America, seems like strange window dressing to me. This is not a situation where marginal tweaks matter.
I mean, the people in charge are hardly concerned with "American" as a category anyway - except cynically* in the "One Billion More" sense.
The earth - and people - would be just fine with many fewer people. But as long as humanism enforces the idea that one more human is always an unalloyed good, but life writ large in all its manifestation is accorded no such honor - we will continue in this situation - until the productive have become so few that they can't pull anymore.
And then what happens after that will potentially be cataclysmic and tragic. Sure, there will be a population fall. No, this will not have been the eco-warriors' fault. (My God.) What unfolds will not be any better for nature. What about war is good for nature? What about a mad scramble for resources will be good for nature? It will destabilize the whole world, and the animals and plants will suffer too.
It will be the fault of the people who thought they were doing the "most good" for - people in the aggregate.
*I mean, maybe they are true believers, in - whatever.
Economists, like Kling, support UBI as a solution to the problem of marginal taxation. That is a problem, but does UBI solve it? How?
The idea seems to be the classic empty ultimatum. Ok poor people, we will give you $ and you need to use it wisely, or else!
Or else what? Does anyone believe that giving poor people cash will end poverty? And when poverty and all the problems inherent with it persist, then welfare will be expanded.
I can't get over the dissonance of UBI economics. Intelligent people know that "democracy" doesn't work because too many people don't know what is good for them. Yet UBI is classic democracy. It is giving people money on the premise they will know how to better use it. Why would we think that?
The legalization of vice - marijuana, sports betting, drug legalization etc - is revealing that a portion of the population is not wise. They consume the vice to their own destruction. Not all consumers are bad decision makers. But a portion of people do not know how to care for themselves. UBI won't solve this. So what do you do then? You add back a social safety net. And then you are literally paying people to be poor and dependents of the state.
“Economists, like Kling, support UBI as a solution to the problem of marginal taxation. That is a problem, but does UBI solve it? How?”
UBI solves that problem *when used as a replacement for all the other assistance programs* (save perhaps healthcare, which personally I would leave alone).
The elimination of those programs is a solution to the problem of marginal taxation because it is the various eligibility requirements - and associated phaseouts - of these programs which create the obscenely high marginal tax rates that the poor face. Those high tax rates are the key element in the Poverty Trap.
There are countries with means tested programs that are not as bad, but unfortunately the political economy of the USA makes them quite unlikely to be implemented here. Mathematically, getting rid of the welfare cliff is easy: you just phase out the benefits at less than 100% (preferably at something close to the marginal tax rate - like a negative income tax). The reason this is difficult in practice is that the lower the phase out the better off some of the people receiving benefits are. If there is a large stigma associated with benefits then those who take advantage of this will be considered smooches. If there is not, the cost becomes much higher (even though it encourages work it won’t do so enough to pay for itself in the short term)
Expecting to get to a good system by fiddling with benefit phase-outs reminds me of the old saying, "Fast, good, cheap: pick two." Cause you can't have all three.
If you have large benefits, you either have to have a very quick phase-out (which means a high marginal "tax rate" and little incentive to earn income) or a slow phase-out and a very large proportion of the population is getting "welfare".
If you want to get out of that problem, you have to have low benefits. But then the basic benefit is "inadequate".
You've definitely hit on part of the problem but I don't think it is quite as bad as you suggest.
Be that as it may, besides losing some benefits entirely if you make one more dollar, everyone has different income dependent benefits and different marginal "taxes" on additional income. If most or all benefits were converted to a ubi, it would be possible to see what the marginal rate is. Under the current set up, it is effectively impossible.
Seeing the various and sundry marginal rates is not the issue.
The issue is that most of those rates are SO high that they act as a major disincentive to work and earn additional income, and so the skills that come with the higher income don’t develop. And the cycle continues.
My point is that you don't know how many that is true for. Definitely true for some and true for something like Medicaid that you either get or don't get. But I don't think it is true for all. Show me something other th as n a few anecdotal cases. I don't think you can because not only is every state and every family type different but there are wait lists for some benefits, others that people qualify for but don't even know about, and ones like home energy subsidies that depend on rates and usage.
MY point is that most people are not that stupid when it comes to their lives, and they understand if they take a minumum wage job they will only get to keep the 15% or 25% (or in some cases, -7%!) of the money they would earn (depending on their own situation). Whether they know the exact number or not. They talk to other people in the same situation. People know their situation.
The fact that it is complicated doesn’t make a (positive) case for you.
The relevant point is that the marginal rates for many are VERY. HIGH.
If your responses was that only a few face tax rates >100%, sure. So what?
By far, the most talked about disincentive is losing Medicaid. One more dollar means no medical insurance. Public housing is probably similar but I've heard little or no talk about this.
I think you will be hard pressed to find truly useful insights from behavioral economics. Try insights offered from the field sometimes referred to as “economic anthropology”. With only a few days of reading, you will see what is missing here.
Hear hear. My thoughts exactly. No system is perfect, and a UBI is quite possibly the least harmful. Especially if one accounts for the ability of governments to design more complicated yet effective welfare programs.
UBI would be the most harmful because the system is the problem. What was the average SS tax and payment when it was implemented? 2% on the first $3,000 earned, now its 12.5% on $147,000. Yeah, $5,000 UBI for a family of 4 is WAY better than our current crop of programs, but if you had the ability to implement it and keep it at that level you would also have the ability to reform SS/foodstamps/Medicare etc and make them functioning programs themselves. Comparing the fantasy of UBI against the reality of these programs will always make UBI look good, implementation of course would be as bad or worse.
You could write inability as well. But what I implied is that the ability of governments is severely limited. Compare with the sentence: "I doubt John can lift that rock, given his upper body strength."
Bonus benefit of true UBI as you describe it would be the destruction of the Welfare Industrial Complex, which I think is the primary reason that it isn't implemented.
Charles Murray wrote "In Our Hands" yet even he concedes that a deal to replace all the welfare programs with UBI would prove politically and legally unstable since the pressures and logic that got each welfare program started in the first place would still exist and be leveraged by the left as compelling cases of emotional compassionate blackmail for restoration in all of the likely many cases of people squandering their UBI instead of wisely buying enough of the right things (i.e., merit goods and services) who will of course need all those special safety net programs to prevent them from falling into destitition and degradation.
Fundamentally, to make a UBI regime sufficiently robust to withstand such piecemeal augmentation would take a cultural sea change in the direction of aggresive moral uplift and masculine tough love, "their just deserts, not my business, not my problem, the government has no further role to play" callousness in the face of various kinds of predictable misery.
It's not so much that UBI is dead today, but that it is this kind of Victorian-era mindset which has been dead for a hundred years and which would have to be reincarnated in order to provide the foundation upon which any stably workable UBI regime would have to be built.
"Does anyone believe that giving poor people cash will end poverty? And when poverty and all the problems inherent with it persist, then welfare will be expanded."
The basic problem I see with UBI will be the constant pressure to raise the amount. Humans like free "good stuff" and UBI looks like "free good stuff." Since the government will decide how much "free good stuff" people will get, there will be constant pressure to increase the amount.
Arnold, I interpret your qualifiers to UBI as an admission of the weakness of the argument. For once you abolish the current system of welfare and replace it with charity, why would you need UBI?
Consider what a durable social safety net would be. Anyone who needed food could get it . But it would be simple food, low on sugar but otherwise substantive. Anyone who needed shelter could get it. But it would be a dorm like room with no frills. Anyone who needed clothes could get it. But these would be simple clothes. Same for health care. Simple, basic care. Same for education. Accessible to anyone who will attend class and not be disruptive.
Do this and why do you need UBI? What purpose would UBI serve other than to induce inflation and enable persons to persist in unhealthy consumption?
Incentives matter. Incentives explain how the world works. What positives incentives does UBI create? Seriously. What does it do that is not better realized by simply expecting people to work if they desire a better life than basic subsistence provided by a true social safety net?
By the way, my harsh view of UBI is that it exists as a idea to salve the conscious of technocrats who knows their plans for world domination make humans disposable. I actually think their plans are idiotic. But they believe in their technology as their God and they don't know what to do with humanity that is made redundant by their machines. It would be a far better idea to recognize that it is a bad plan to organize society with machines as its master.
Did anybody talk about immigration? How in the world could we have a program of UBI and keep people from out of the country from coming here to join the party? Isn’t Massachusetts facing a huge financial problem just from the subsidies they are giving to “migrants”? There’s a reason that UBI and pie in the sky rhyme.
Medicaid can't be dumped unless you propose a better way than private insurance to handle the medical risk function. If you get private insurance, they will dump you the second the risks go against them and it is all legal. Prudential re-pooled me (doubling my cost ever 6 mo until I switched) when I made the mistake of having an angiogram when I was 40 (back in 1080) that probably cost me close to a million dollars before Medicare cut in. When I did get my 4X bypass at 64 the insurance only actually paid about $60,000 to the doctors and hospitals on billing of close to $400,000. If I could have obtained hospital and doctors at the cost insurance companies payed, I could be a million dollars richer as I could out of paid just $60K. The primary reason for insurance is to obtain a trivial part of the huge discounts they get on the cost of medial and risk protection from the obscene medical markups of 500%. Both the medial system and insurance companied benefit from "list prices" with huge markups by forcing insurance purchases.
If the costs were transparent with cash pricing the lowest, super high deductible medical insurance at low cost would be viable just covering very, very expensive events.
I don't doubt the replacement of our present poverty programs with a UBI would be an improvement but that is never going to happen- you will end up with both no matter how it starts out.
Ubi creates a smaller disincentive to work. Arguably, it is the smallest possible while still giving aid to the poor. The other option is no government aid and totally relying on charity. That's more hit or miss and of questionable adequacy.
Welfare is primarily a problem of single mothers. The best way to reduce it is to reduce single motherhood.
I think the state should pay married stay at home moms a stipend based on their husbands earnings. This would act as a counter negative marginal tax rate to offset the benefit phase out (the mothers stipend would count towards household gross income). The additional income would push most households above current welfare thresholds.
It would disincentive mothers with young children from getting whatever jobs current welfare requirements force them to while incenting their husbands to get jobs. This seems like a good trade.
Since benefits scale with income it won't be dysgenic.
It also doesn't require changing existing laws.
I also think there could be positives for divorce if alimony/child support were replaced with being able to continue the stipend for a period of time based on the length of the marriage.
The child tax credits are greatly appreciated by middle class families. I distinctly remember after the credits were expanded in the early 2000s that my federal tax bill dropped to the low single digits as a percentage of my income. I was able to be the primary income provider and still have our family enjoy surplus income.
And now my married children are greatly benefitting from expansive child tax credits. Without them they would be financially strapped and greatly discouraged from having children.
Our tax system was changed to mostly eliminate marriage penalties. Eliminate the two-parent (actually ANY two adults) household penalty and that would make a huge difference. ...but still need to minimize disincentives to more work. That is the goal of replacing benefits with ubi.
"Welfare is primarily a problem of single mothers."
Food assistance (SNAP, formerly food stamps), housing assistance (Section 8 and public housing), fuel assistance, and free to the recipient medical insurance (Medicaid) DO NOT require being a single mother. They are pretty much based on "need".
TANF (Temporary Assistance for Needy Families, the successor to AFDC) is an important but relatively small part of what governments do to support poor people.
Sure. But good luck qualifying for tanf or public housing as a single male. Part of the single parent issue is that it's tough qualifying with a two parent household.
So having criticized AK earlier for his “main” point that he seemed not to realize that in practice politically today UBI is only as an additive, not a replacement, program, having reread the transcript of the 2017 Mike Munger EconTalk podcast on the topic, I’d like to praise AK for two of the ideas he’s injected into the conversation - of course in the context of UBI replacing most/all current transfer programs - above:
1) that the “‘UBI” specifically *not* be enough to live on.
This minimizes the work disincentive problem. But of course, doesn’t on its own solve the problem of actually living. And so he adds:
2) that the federal government could fund charities who are closer to individuals who could then distribute more funds to “deserving” people.
There are of course all sorts of risks and problems associated with 2), but I think the principle is a good one.
In line with other public-private partnerships, let me suggest that IMO by far the best way to solve the single biggest problem with this approach - namely, that people are more careful with their own money than with someone else’s - the federal money could *only* go to organizations that are also putting up and distributing money of their own. Say 50-50 (maybe it could be as little as 30-70, idk, but it *must* be a reasonably large percentage). So federal tax money as a force multiplier to private charities for the poor.
It's more likely, far more, that a Job Guarantee, which replaces benefits with work-time wages for those who go to work, gets more poor folk to work more and earn more AND many to get such good work habits that they can escape poverty.
Since UBI to replace current programs ain't gonna happen, all arguments in favor of UBI, including Murray and Kling, are de facto arguments for adding a UBI on top of most current programs.
What poor, low IQ folk need are jobs. Few businesses, big or small, or even family, really want low IQ workers. Govt direction is more likely to have net benefits for those who can't find work on their own, or won't.
For most low IQ workers, showing up and doing anything, while getting money for it, will be a big improvement over a current existence of not even looking for a job but just doing low level crimes, video game playing, porn watching, nightly partying.
The employment rate, now still low, is more important than the quite low unemployment rate, with so many not even trying to find a job, tho they’re not working at a job &paying taxes.
I do not argue with you one iota, sir, that for almost everyone, showing up for and performing the basic services of a job is a big improvement over not working and subsisting on government handouts.
But that is very different from a “Jobs Guarantee” in law. If someone is guaranteed their job no matter what - and after all, that’s what a *guarantee* is - what would stop them from just just doing low level crimes, video game playing, porn watching, … partying” while nominally on the job.
You can insert the pejorative phrase “low IQ” as you wish, but it doesn’t change the fact that most people aren’t that stupid, and would quickly understand that such a “Job Guarantee” was just a facade for what exists now. Similarly, FDR style make-work jobs (one set of workers dig some holes, another set fill them in..) would be seen through as well.
Now if in fact you meant by a “Jobs Guarantee” that the state would subsidize for legit businesses taking in the unemployed, and those people would have jobs so long as they ACTUALLY executed the duties of the job - and there would be NO government transfers for the able bodied if they failed to perform on their job - then I might quibble with you about how to make this work in practice, but I would be in agreement that that would be a better thing for *most* than a UBI.
Recall, however, that for we libertarians/classical liberals, the main point of a UBI is to eliminate the even worse disincentives and economic waste (inefficiency) of the current system of government transfers, as AK notes in his piece.
My answers: In the essay, I suggested $5000 per year for a family of four, or about $1250 per person. Every citizen gets it. It is taxed according to the income tax code. For 2024, the seven federal income tax rates are 10%, 12%, 22%, 24%, 32%, 35% and 37%.
I totally agree the ubi needs to replace most or all other income subsidies but it gets tricky. Mortgage interest deduction? Grants and interest-free college loans? The most difficult part might be Medicaid. Current spending is more than $5k/recipient, some states way more than that, so your ubi of $5k/per family seems hard to fathom. I don't see that medical care cost being picked up locally. One potential way is to take Medicaid or Obamacare insurance premiums out of everyone's ubi and give rebates to anyone with other insurance.
But this points to the huge distortion UBI would create. For the non-poor, a UBI of $10,000 to $20,000 a year per person or adult would feed directly into consumption and luxury goods. Whatever inflation we see now in housing and education and autos would go even higher.
And why? To what purpose would it make sense to do this?
By the way, the Covid handouts added up to well over $10,0000 per teenager and other low wage workers - all you needed was to claim being unemployed and the government sent you $15,000. And voila! We had generational highs in inflation and massive distortions in the financial markets.
No. The tax rates have to be adjusted so that those needing no assistance see no increase in income. There is a phase out. We can't give everyone more, at least not indefinitely.
Ubi can replace existing benefits, be less than, or greater than. I'm not arguing here which it should be but if greater than, people well beyond need for assistance would need to see higher rates beyond just paying back ubi and end up with less than now.
Unfortunately I think a replacement IS off the table. Politicians almost never operate under a "this or that" framework (at least not transparently). For example, you will never hear a politician say something like, "we should spend more on healthcare, but less on XYZ to pay for it." Never, ever ever. Of course, this is why the federal budget incurs large deficits
Re: "what we have now is actually worse than a UBI, because it has even more work disincentives built in. Under our current set of programs the working poor lose many of their benefits as their income exceeds poverty thresholds. I think of it as a UBI with a tax rate of close to 100 percent on earned income."
Arnold, Since replacement of means-tested welfare by a UBI is off the table, what reforms of means-tests programs might encourage rather than discourage work?
(Any suitable reform would have to be compatible with whatever relevant insights we have from behavioral economics about incentives and behavior.)
Is the incentive problem here intrinsic? Or is it an artifact of bad design of means-tested programs (shaped by politics)?
Is the 'eligibility cliff' fixable in principle by better design? Is there an economic theory of means-tested welfare that is 'incentive-compatible'?
Are we in a double bind because (a) replacement of means-tested programs by a 'UBI + charity' is off the table and (b) means-tested programs that would encourage work are either unknown in theory or off the table due to political economy?
If 1) people get money or something they value simply by being poor (and the poorer you are the more you get), and 2) people have no moral/status reasons for refusing "help" ("I'm not the kind of person who takes charity."), then, no, there is no better "design". It's pretty much a matter of arithmetic.
Marvin Olasky's The Tragedy of American Compassion argues that old systems of help didn't have the same incentive problems because 1) there was a distinction made between the deserving and undeserving poor, the deserving being those who were willing to work to help themselves by doing work for the charity, and 2) those giving out the charity took a personal interest in the recipients, often living with them, often being motivated by religious feelings, and 3) general social mores said it was bad to not provide for yourself. That is so not the case today.
Given that, it seems we are condemned to live Thomas Sowell's, "The more you pay people to be poor, the more poor people you're going to get." And the modern corollary, "The easier you make it to be homeless, the more homeless people you're going to get."
There are many more undeserving recipients of subsidies than the poor. The trouble is that the undeserving vote and are a reliable constituency for a party which promises to give them more stuff they don't deserve.
No doubt. My comment was limited to people who are helped because they are poor. The modern view seems to be that anyone who is poor is "deserving" simply because they are poor. So it is wrong to refuse aid to anyone or to put conditions on it. This has unfortunate long-term effects.
No, the whole idea of deserving and undeserving is absurd. You can be with someone 24/7 and not know what they are going through that prevents them from working. Ok, SOMETIMES you know there's no reason but in most cases you just don't know. Sometimes people act like they are gaming the system because it's more embarrassing to admit you aren't physically/mentally able to anything more.
The best we can do is set criteria as well as possible. Local control isn't much if any better. Without good criteria, each "local" decision-maker will decide differently, especially when spending someone else's money, which is almost always the case.
Mormons probably do it the best but there's still a federal benefit system backing them up.
It seems to me that the idea is actually quite logical and simple. It starts from the moral judgment that it is wrong to take support from other people if you can support yourself. To the extent that you do that, you are undeserving. Of course, "able to support yourself" is situation-specific. A lot of people who were able to support themselves in 1928 were unable in 1932.
There are going to be practical questions in any actual system of assistance to the "deserving." Like, under what circumstances can a person get assistance even if they have refused a job because "it's not in my field" or "that's way less than I used to make"?
Knowledge problems are always problems. A system of only helping the "deserving" largely deals with that by putting the burden of proof on the person asking for assistance. Olasky talks about people being given an ax and told to go outback and split the firewood for tonight. If they refused, they were not given entry into the shelter.
'Absurd' is going way too far. Sure, there is a lot of fuzziness in the spectrum of culpability one bears for one's own misfortune, and it's not always easy for an outside observer to tell clearly and precisely, but the law deals with those issues all the time in a wide variety of circumstances where those determinations are at the very heart of questions of who has what amount of liability to whom, who has excuses, defenses, mitigating circumstances, and so forth.
The guy who paid his insurance premiums and lost his house in a fire caused by a bolt of lightning deserves the payout. The arsonist fire-bug who burned it down on purpose does not. The guy who passed out while reading and smoking and unintentionally dropped his lit cigarette on his newspaper and barely escaped with his life is an arguable case, but to treat all these different situations as if they are the same and wouldn't benefit from the application of discerning sound judgment is what would actually be absurd.
How do you know the guy smoking and says he fell asleep wasn't a fire bug?
The person who can't work because of back pain, how do you know? The person with migraines, how do you know? Are you certain the person addicted to painkillers, alcohol, etc. should not? What about the schizophrenic, depressed, or agoraphobic? YOU DONT KNOW.
But decisions like that are made all the time. Do you really have debilitating back pain? If you do, you get Social Security Disability or, if you're a municipal employee, perhaps the local government's budget pays you for as long as you're disabled. There are always stories of the guy out on total disability who is spotted playing 18 holes of golf and carrying his own clubs. The decision-maker was wrong. But that is no reason to throw up your hands and say, "I don't know. Give everyone disability."
Gee, I wonder how that would end up.
The perfect is the enemy of the good.
It can seem like modernity in the West anyway has this built in (I don't really know whether other countries still have an abyss into which you can truly fall, but I suspect there are some, and we should be very attentive to those, we should not look away from them, because they have something to tell us about reality). When I mention population growth, as a negative rather than the wholly positive thing it *always* is on an econ or libertarian blog - I always receive lectures about which lifesaving medical advances or comforts I would wish to go back on? Which aspects of the green revolution that allow some parts of the world to feed the others that cannot feed themselves? And so on. This response is another way of saying, basically - we have *no choice* about any of this. Prosperity has wonderfully raised the floor *for all*.
I would certainly not argue that this is entirely wrong. It is - ironically - rather complacent, though. People who think this way - your Tyler Cowens, your Matt Yglesiases - are actually the complacent ones. They don't really think people have now or have had at any time, any agency about the way the world is. They are humanists and materialists, certainly, but they don't acknowledge their chief ideology of equality, and its centrality. Or: they don't recognize that humanism is indistinguishable from radical egalitarianism.
But ideology still plays a role. It clearly has a role to play in the question of "who is reproducing the fastest". It has a thumb on the scale - it is interfering with the definition of success, biologically-speaking.
I don't think Christianity was ever going to lead to any other end than the one we're at, where far from the problem being that distinctions about deserts cannot be made - instead they are in fact made - in an inverted way.
In effect it's a situation where the very productive are as though pulling the cart loaded with the rest. And the very productive, when they say - how dare you talk about population, don't you know that we've had population growth because of all these wonderful advances? - seem not to realize the source of that growth, so fervently do they believe in egalitarianism. And boy do they believe it. You can go on any reddit thread about homelessness or drug legalization - and you will find the consensus view - which contrary to conventional wisdom is not a matter of "oh, that's just reddit" but rather is the view that results from the ideologues in charge of the American public school system - is that some should work, while others should be cared for and drugged by the government just like it's Wall-E or something.
So deeply steeped are they in this reductionist view of life - that never once have I seen in a perusal of such opinion - the slightest pushback on the order of - but what kind of life is that?
Meanwhile, the very productive are busy pulling the cart, and exercising reproductive restraint - because they thought that restraint was one of the good things they brought into being. Aspirin - and birth control!
And in isolation it probably could have been! But it wasn't allowed to be.
Meanwhile, the people in the cart could not care less about anything the pullers care about, and are busy reproducing at a *much* faster clip than the pullers.
Talk of how best to incentivize work, in America, seems like strange window dressing to me. This is not a situation where marginal tweaks matter.
I mean, the people in charge are hardly concerned with "American" as a category anyway - except cynically* in the "One Billion More" sense.
The earth - and people - would be just fine with many fewer people. But as long as humanism enforces the idea that one more human is always an unalloyed good, but life writ large in all its manifestation is accorded no such honor - we will continue in this situation - until the productive have become so few that they can't pull anymore.
And then what happens after that will potentially be cataclysmic and tragic. Sure, there will be a population fall. No, this will not have been the eco-warriors' fault. (My God.) What unfolds will not be any better for nature. What about war is good for nature? What about a mad scramble for resources will be good for nature? It will destabilize the whole world, and the animals and plants will suffer too.
It will be the fault of the people who thought they were doing the "most good" for - people in the aggregate.
*I mean, maybe they are true believers, in - whatever.
Economists, like Kling, support UBI as a solution to the problem of marginal taxation. That is a problem, but does UBI solve it? How?
The idea seems to be the classic empty ultimatum. Ok poor people, we will give you $ and you need to use it wisely, or else!
Or else what? Does anyone believe that giving poor people cash will end poverty? And when poverty and all the problems inherent with it persist, then welfare will be expanded.
I can't get over the dissonance of UBI economics. Intelligent people know that "democracy" doesn't work because too many people don't know what is good for them. Yet UBI is classic democracy. It is giving people money on the premise they will know how to better use it. Why would we think that?
The legalization of vice - marijuana, sports betting, drug legalization etc - is revealing that a portion of the population is not wise. They consume the vice to their own destruction. Not all consumers are bad decision makers. But a portion of people do not know how to care for themselves. UBI won't solve this. So what do you do then? You add back a social safety net. And then you are literally paying people to be poor and dependents of the state.
“Economists, like Kling, support UBI as a solution to the problem of marginal taxation. That is a problem, but does UBI solve it? How?”
UBI solves that problem *when used as a replacement for all the other assistance programs* (save perhaps healthcare, which personally I would leave alone).
The elimination of those programs is a solution to the problem of marginal taxation because it is the various eligibility requirements - and associated phaseouts - of these programs which create the obscenely high marginal tax rates that the poor face. Those high tax rates are the key element in the Poverty Trap.
There are countries with means tested programs that are not as bad, but unfortunately the political economy of the USA makes them quite unlikely to be implemented here. Mathematically, getting rid of the welfare cliff is easy: you just phase out the benefits at less than 100% (preferably at something close to the marginal tax rate - like a negative income tax). The reason this is difficult in practice is that the lower the phase out the better off some of the people receiving benefits are. If there is a large stigma associated with benefits then those who take advantage of this will be considered smooches. If there is not, the cost becomes much higher (even though it encourages work it won’t do so enough to pay for itself in the short term)
Expecting to get to a good system by fiddling with benefit phase-outs reminds me of the old saying, "Fast, good, cheap: pick two." Cause you can't have all three.
If you have large benefits, you either have to have a very quick phase-out (which means a high marginal "tax rate" and little incentive to earn income) or a slow phase-out and a very large proportion of the population is getting "welfare".
If you want to get out of that problem, you have to have low benefits. But then the basic benefit is "inadequate".
The arithmetic is cruel and inexorable.
You've definitely hit on part of the problem but I don't think it is quite as bad as you suggest.
Be that as it may, besides losing some benefits entirely if you make one more dollar, everyone has different income dependent benefits and different marginal "taxes" on additional income. If most or all benefits were converted to a ubi, it would be possible to see what the marginal rate is. Under the current set up, it is effectively impossible.
Seeing the various and sundry marginal rates is not the issue.
The issue is that most of those rates are SO high that they act as a major disincentive to work and earn additional income, and so the skills that come with the higher income don’t develop. And the cycle continues.
My point is that you don't know how many that is true for. Definitely true for some and true for something like Medicaid that you either get or don't get. But I don't think it is true for all. Show me something other th as n a few anecdotal cases. I don't think you can because not only is every state and every family type different but there are wait lists for some benefits, others that people qualify for but don't even know about, and ones like home energy subsidies that depend on rates and usage.
MY point is that most people are not that stupid when it comes to their lives, and they understand if they take a minumum wage job they will only get to keep the 15% or 25% (or in some cases, -7%!) of the money they would earn (depending on their own situation). Whether they know the exact number or not. They talk to other people in the same situation. People know their situation.
The fact that it is complicated doesn’t make a (positive) case for you.
The relevant point is that the marginal rates for many are VERY. HIGH.
If your responses was that only a few face tax rates >100%, sure. So what?
By far, the most talked about disincentive is losing Medicaid. One more dollar means no medical insurance. Public housing is probably similar but I've heard little or no talk about this.
I think you will be hard pressed to find truly useful insights from behavioral economics. Try insights offered from the field sometimes referred to as “economic anthropology”. With only a few days of reading, you will see what is missing here.
Hear hear. My thoughts exactly. No system is perfect, and a UBI is quite possibly the least harmful. Especially if one accounts for the ability of governments to design more complicated yet effective welfare programs.
UBI would be the most harmful because the system is the problem. What was the average SS tax and payment when it was implemented? 2% on the first $3,000 earned, now its 12.5% on $147,000. Yeah, $5,000 UBI for a family of 4 is WAY better than our current crop of programs, but if you had the ability to implement it and keep it at that level you would also have the ability to reform SS/foodstamps/Medicare etc and make them functioning programs themselves. Comparing the fantasy of UBI against the reality of these programs will always make UBI look good, implementation of course would be as bad or worse.
Did you mean inability??
You could write inability as well. But what I implied is that the ability of governments is severely limited. Compare with the sentence: "I doubt John can lift that rock, given his upper body strength."
Absolutely agree.
Bonus benefit of true UBI as you describe it would be the destruction of the Welfare Industrial Complex, which I think is the primary reason that it isn't implemented.
Charles Murray wrote "In Our Hands" yet even he concedes that a deal to replace all the welfare programs with UBI would prove politically and legally unstable since the pressures and logic that got each welfare program started in the first place would still exist and be leveraged by the left as compelling cases of emotional compassionate blackmail for restoration in all of the likely many cases of people squandering their UBI instead of wisely buying enough of the right things (i.e., merit goods and services) who will of course need all those special safety net programs to prevent them from falling into destitition and degradation.
Fundamentally, to make a UBI regime sufficiently robust to withstand such piecemeal augmentation would take a cultural sea change in the direction of aggresive moral uplift and masculine tough love, "their just deserts, not my business, not my problem, the government has no further role to play" callousness in the face of various kinds of predictable misery.
It's not so much that UBI is dead today, but that it is this kind of Victorian-era mindset which has been dead for a hundred years and which would have to be reincarnated in order to provide the foundation upon which any stably workable UBI regime would have to be built.
Exactly! As I replied to another comment:
"Does anyone believe that giving poor people cash will end poverty? And when poverty and all the problems inherent with it persist, then welfare will be expanded."
The basic problem I see with UBI will be the constant pressure to raise the amount. Humans like free "good stuff" and UBI looks like "free good stuff." Since the government will decide how much "free good stuff" people will get, there will be constant pressure to increase the amount.
Arnold, I interpret your qualifiers to UBI as an admission of the weakness of the argument. For once you abolish the current system of welfare and replace it with charity, why would you need UBI?
Consider what a durable social safety net would be. Anyone who needed food could get it . But it would be simple food, low on sugar but otherwise substantive. Anyone who needed shelter could get it. But it would be a dorm like room with no frills. Anyone who needed clothes could get it. But these would be simple clothes. Same for health care. Simple, basic care. Same for education. Accessible to anyone who will attend class and not be disruptive.
Do this and why do you need UBI? What purpose would UBI serve other than to induce inflation and enable persons to persist in unhealthy consumption?
Incentives matter. Incentives explain how the world works. What positives incentives does UBI create? Seriously. What does it do that is not better realized by simply expecting people to work if they desire a better life than basic subsistence provided by a true social safety net?
By the way, my harsh view of UBI is that it exists as a idea to salve the conscious of technocrats who knows their plans for world domination make humans disposable. I actually think their plans are idiotic. But they believe in their technology as their God and they don't know what to do with humanity that is made redundant by their machines. It would be a far better idea to recognize that it is a bad plan to organize society with machines as its master.
Did anybody talk about immigration? How in the world could we have a program of UBI and keep people from out of the country from coming here to join the party? Isn’t Massachusetts facing a huge financial problem just from the subsidies they are giving to “migrants”? There’s a reason that UBI and pie in the sky rhyme.
Medicaid can't be dumped unless you propose a better way than private insurance to handle the medical risk function. If you get private insurance, they will dump you the second the risks go against them and it is all legal. Prudential re-pooled me (doubling my cost ever 6 mo until I switched) when I made the mistake of having an angiogram when I was 40 (back in 1080) that probably cost me close to a million dollars before Medicare cut in. When I did get my 4X bypass at 64 the insurance only actually paid about $60,000 to the doctors and hospitals on billing of close to $400,000. If I could have obtained hospital and doctors at the cost insurance companies payed, I could be a million dollars richer as I could out of paid just $60K. The primary reason for insurance is to obtain a trivial part of the huge discounts they get on the cost of medial and risk protection from the obscene medical markups of 500%. Both the medial system and insurance companied benefit from "list prices" with huge markups by forcing insurance purchases.
If the costs were transparent with cash pricing the lowest, super high deductible medical insurance at low cost would be viable just covering very, very expensive events.
I don't doubt the replacement of our present poverty programs with a UBI would be an improvement but that is never going to happen- you will end up with both no matter how it starts out.
Ubi creates a smaller disincentive to work. Arguably, it is the smallest possible while still giving aid to the poor. The other option is no government aid and totally relying on charity. That's more hit or miss and of questionable adequacy.
Welfare is primarily a problem of single mothers. The best way to reduce it is to reduce single motherhood.
I think the state should pay married stay at home moms a stipend based on their husbands earnings. This would act as a counter negative marginal tax rate to offset the benefit phase out (the mothers stipend would count towards household gross income). The additional income would push most households above current welfare thresholds.
It would disincentive mothers with young children from getting whatever jobs current welfare requirements force them to while incenting their husbands to get jobs. This seems like a good trade.
Since benefits scale with income it won't be dysgenic.
It also doesn't require changing existing laws.
I also think there could be positives for divorce if alimony/child support were replaced with being able to continue the stipend for a period of time based on the length of the marriage.
The child tax credits are greatly appreciated by middle class families. I distinctly remember after the credits were expanded in the early 2000s that my federal tax bill dropped to the low single digits as a percentage of my income. I was able to be the primary income provider and still have our family enjoy surplus income.
And now my married children are greatly benefitting from expansive child tax credits. Without them they would be financially strapped and greatly discouraged from having children.
Our tax system was changed to mostly eliminate marriage penalties. Eliminate the two-parent (actually ANY two adults) household penalty and that would make a huge difference. ...but still need to minimize disincentives to more work. That is the goal of replacing benefits with ubi.
"Welfare is primarily a problem of single mothers."
Food assistance (SNAP, formerly food stamps), housing assistance (Section 8 and public housing), fuel assistance, and free to the recipient medical insurance (Medicaid) DO NOT require being a single mother. They are pretty much based on "need".
TANF (Temporary Assistance for Needy Families, the successor to AFDC) is an important but relatively small part of what governments do to support poor people.
Sure. But good luck qualifying for tanf or public housing as a single male. Part of the single parent issue is that it's tough qualifying with a two parent household.
The UBI should also replace all minimum wage laws
So having criticized AK earlier for his “main” point that he seemed not to realize that in practice politically today UBI is only as an additive, not a replacement, program, having reread the transcript of the 2017 Mike Munger EconTalk podcast on the topic, I’d like to praise AK for two of the ideas he’s injected into the conversation - of course in the context of UBI replacing most/all current transfer programs - above:
1) that the “‘UBI” specifically *not* be enough to live on.
This minimizes the work disincentive problem. But of course, doesn’t on its own solve the problem of actually living. And so he adds:
2) that the federal government could fund charities who are closer to individuals who could then distribute more funds to “deserving” people.
There are of course all sorts of risks and problems associated with 2), but I think the principle is a good one.
In line with other public-private partnerships, let me suggest that IMO by far the best way to solve the single biggest problem with this approach - namely, that people are more careful with their own money than with someone else’s - the federal money could *only* go to organizations that are also putting up and distributing money of their own. Say 50-50 (maybe it could be as little as 30-70, idk, but it *must* be a reasonably large percentage). So federal tax money as a force multiplier to private charities for the poor.
It's more likely, far more, that a Job Guarantee, which replaces benefits with work-time wages for those who go to work, gets more poor folk to work more and earn more AND many to get such good work habits that they can escape poverty.
Since UBI to replace current programs ain't gonna happen, all arguments in favor of UBI, including Murray and Kling, are de facto arguments for adding a UBI on top of most current programs.
What poor, low IQ folk need are jobs. Few businesses, big or small, or even family, really want low IQ workers. Govt direction is more likely to have net benefits for those who can't find work on their own, or won't.
A “Job Guarantee” is of course a massive disincentive to be productive in a job…
For most low IQ workers, showing up and doing anything, while getting money for it, will be a big improvement over a current existence of not even looking for a job but just doing low level crimes, video game playing, porn watching, nightly partying.
The employment rate, now still low, is more important than the quite low unemployment rate, with so many not even trying to find a job, tho they’re not working at a job &paying taxes.
I do not argue with you one iota, sir, that for almost everyone, showing up for and performing the basic services of a job is a big improvement over not working and subsisting on government handouts.
But that is very different from a “Jobs Guarantee” in law. If someone is guaranteed their job no matter what - and after all, that’s what a *guarantee* is - what would stop them from just just doing low level crimes, video game playing, porn watching, … partying” while nominally on the job.
You can insert the pejorative phrase “low IQ” as you wish, but it doesn’t change the fact that most people aren’t that stupid, and would quickly understand that such a “Job Guarantee” was just a facade for what exists now. Similarly, FDR style make-work jobs (one set of workers dig some holes, another set fill them in..) would be seen through as well.
Now if in fact you meant by a “Jobs Guarantee” that the state would subsidize for legit businesses taking in the unemployed, and those people would have jobs so long as they ACTUALLY executed the duties of the job - and there would be NO government transfers for the able bodied if they failed to perform on their job - then I might quibble with you about how to make this work in practice, but I would be in agreement that that would be a better thing for *most* than a UBI.
Recall, however, that for we libertarians/classical liberals, the main point of a UBI is to eliminate the even worse disincentives and economic waste (inefficiency) of the current system of government transfers, as AK notes in his piece.
For those loving UBI how about we start with the most basic of all questions:
How much UBI?
Who gets it?
How is it taxed?
Simple eh? So simple no one is in agreement on the answers to these questions or how they should be decided.
My answers: In the essay, I suggested $5000 per year for a family of four, or about $1250 per person. Every citizen gets it. It is taxed according to the income tax code. For 2024, the seven federal income tax rates are 10%, 12%, 22%, 24%, 32%, 35% and 37%.
I totally agree the ubi needs to replace most or all other income subsidies but it gets tricky. Mortgage interest deduction? Grants and interest-free college loans? The most difficult part might be Medicaid. Current spending is more than $5k/recipient, some states way more than that, so your ubi of $5k/per family seems hard to fathom. I don't see that medical care cost being picked up locally. One potential way is to take Medicaid or Obamacare insurance premiums out of everyone's ubi and give rebates to anyone with other insurance.
And Social Security spending averages ~$18k/recipient. How is $5k/household not a huge change in poverty reduction?
You don't mention Medicare but spending on that is over $15k/recipient.
Under UBI, benefits directed toward poor people should be AT LEAST as much as under current system(s).
But this points to the huge distortion UBI would create. For the non-poor, a UBI of $10,000 to $20,000 a year per person or adult would feed directly into consumption and luxury goods. Whatever inflation we see now in housing and education and autos would go even higher.
And why? To what purpose would it make sense to do this?
By the way, the Covid handouts added up to well over $10,0000 per teenager and other low wage workers - all you needed was to claim being unemployed and the government sent you $15,000. And voila! We had generational highs in inflation and massive distortions in the financial markets.
No. The tax rates have to be adjusted so that those needing no assistance see no increase in income. There is a phase out. We can't give everyone more, at least not indefinitely.
Ubi can replace existing benefits, be less than, or greater than. I'm not arguing here which it should be but if greater than, people well beyond need for assistance would need to see higher rates beyond just paying back ubi and end up with less than now.
Unfortunately I think a replacement IS off the table. Politicians almost never operate under a "this or that" framework (at least not transparently). For example, you will never hear a politician say something like, "we should spend more on healthcare, but less on XYZ to pay for it." Never, ever ever. Of course, this is why the federal budget incurs large deficits
Did anyone seriously expect this to be an exception to the law of supply?