I love the idea. It might take some time to scale up the local charities. The LDS church’s Fast Offerings program would be an ideal model, if we can find a way to scale it. Funds are donated and used locally, but extra funds flow through the global church system to where they are needed. No overhead because it is run by volunteers in an existing org created for other purposes. Very low corruption because it relies on morality-tested bishops and funds are mostly given to people whose situations and needs are well known - boots on the ground everywhere. I would much rather have organizations like this in charge of caring for the needy than the government. Not sure if it could happen politically.
I am very familiar with the LDS welfare system and it has a lot to like. However, the program is an add-on to the modern welfare system, and not a substitute.
1) The LDS system is managed at the congregation level which normally contains 200 to 500 people. One person, the bishop, must approve all spending. The bishop is assisted by two other leaders who will help execute the welfare plan developed for each individual or family. The observation to make here is the LDS system does not scale well, mainly due to the oversight it requires for all spending decisions.
2) The assistance is almost entirely in goods and services, primarily the payment of rent and the provision of food. Food is provided by church run stores - it is not brand goods.
3) The LDS system is extremely reluctant to provide direct cash benefits, and it discourages any spending that is not deemed a necessity.
4) The LDS system has no provision for health care - it expects people to make use of the social safety net and government benefits.
5) The LDS system works very well as a short term stop gap. It is ideal for those who hit a rough patch of a month or two. It is not designed to provide perpetual aid.
Sorry, I just noticed your reply. Yes, you capture the main idea well. It would be a different kind of welfare system, but in my opinion a vastly improved system.
Re 2) I live in Wisconsin, and recently finished my 5 years as bishop. We don’t have the church-run stores like they do in Utah. Here we use local grocery stores, help with utilities bills, help with rent, help with medical bills. We don’t give money directly, but rent help, for example, has a similar impact in opening up the budget.
Re 4) we do help with medical bills as needed. True, if there are social services we ask people to tap into those first before asking the church for help. But I think this type of system could take up a lot of slack if the government were to scale back its welfare operations.
Re 5) The idea is to encourage self-reliance. I think this should be the goal of any welfare system. But if there are long-term needs, I think this type of system should be able to manage that as well.
Of course you are right, scaling this would be the challenge, absent everyone on earth joining the one true church of God. :) But the principles can be learned from.
What does the LDS church do if someone they consider "undeserving poor" wants something? Do they get it anyway? Is there some limit?
When you get right down to it, government replaced local charities because a large contingent of people were uncomfortable with the very idea of an undeserving poor (including the undeserving poor themselves). I don't mean everyone was uncomfortable. Reagen talked about welfare queens. But still a big enough and powerful enough contingent to end up where we are today.
The more questions you add on, the less willingness. Charles Murray for instance is fine shaming men, but keeps reminding people that basically all women are deserving and we aren't going to shame them.
How about women with children?
How about women and children with health problems?
What if those health problems are self imposed (drugs, alcohol, STDs, or just being obese)?
Fundamentally, there exist some case where a person would have to say "if you do this you are just on your own, even if that results in the absolute worst". If that isn't an option, the incentive structure will eventually push against this absolute.
I wonder too if what the LDS does could scale for say non-LDS inner city Baltimore.
The Fast Offerings system is used to help church members, but there is no “worthiness” or activity level or “deserving” requirement for getting assistance. Bishops usually counsel with church members about budgeting and managing finances as part of the assistance process. If those that receive assistance are unwilling to make obvious lifestyle changes to balance the budget, but instead are hoping the church will keep giving them assistance without any effort to improve their situation, the bishop may withhold assistance. The mantra in administering the funds is “support life, not lifestyle.”
I don’t know about Baltimore, but I served my mission in the poorest parts of Buenos Aires. I wasn’t involved in dispersing the funds at that point, but I got the impression that many of the church members were getting pretty regular aid. This program can be adapted to meet diverse situations because the bishops that disperse the funds are embedded among the people and know intimately the local situation and needs on the ground.
As is the fate of many family groups, you often end up with some marginally functional members that you try to help keep their heads above water. In my case two are not blood relatives, but we effectively inherited the responsibility to provide assistance. With both being on disability and other benefits, the insanity of the means tested welfare systems becomes apparent.
People with the capacity to fully handle the attendant bureaucracy of our system are people that are smart enough to function just fine on their own and game the system. The people who truly need the help and are the most marginal are the people who the bureaucracy is most likely to screw over. Little errors become major problems like one of our cases where he had an part-time janitorial job and they gave him a pay increase with minimum wage increase, which shoved him above some cut-off and his benefits were cut off. It took months of interactions with the bureaucrats and cutting back the "part time" to get him back on the payment roles. He couldn't have got through the system on his own.
My sisters "effective" family member ended up with requiring a "special needs trust" to be able to maintain his basic support. The cost to set-up and maintain the trust used a non-insignificant percentage of his inheritance from my sister.
The complexity of the present system benefits the "smart" person who understands the bureaucracy and rules, but the truly marginal among us must depend upon others. There seems to be no thought of the observation that people abilities have a distribution and the people on the bottom 20% of mental capacity overlap with the people on the bottom 20% of the income distribution. We are demanding that these people with limited capacity work their way through bureaucracy that the median person (or even top 10% without support staff) would have trouble with.
The current system is at least a good alternative for a combination of several reasons. First, it provides substantial equality for the bottom 50% of households by income. That’s good because equality. Second, it does not pay people with higher incomes. It is offensive for the government to subsidize the rich. Third, means testing is less expensive than a flat-payment program would be for the same level of benefit. Getting the bottom quintile over $40k/year is not achieved by Arnold’s $2500 payment per person. Fourth, the complexity of the programs are a strength because they focus money based on need. The difficulty people have in navigating these programs also helps limit them to people who actually need them.
Did I pass the intellectual Turing test? Maybe a real progressive would have omitted the last sentence.
I think one way to take a step towards Arnold’s proposal is do it first with payments for health insurance. Replace Medicare, Medicaid, Obamacare subsidies, and tax deductions for health insurance with a voucher based only on age and sex. Over time, perhaps one could supplement it with additional flat payments based on having the genes for specific diseases.
Then perhaps do the same for disability insurance.
With that out of the way, then perhaps you could do a UBI, but you’d have to start taxing income (or consumption) at dollar 1 -- ie replace all the standard deductions and zero-bracket stuff with the UBI. If you don’t tax the UBI away pretty quickly, it becomes prohibitively expensive or meaninglessly small.
I would not treat unemployment insurance or old-age pensions the same way. I’d convert each of those to a forced savings program, where your payroll taxes go into restricted but individually owned accounts. Doing that for social security would take oases spread over multiple generations though.
You say many things I disagree with but that pales in importance compared to what you fail to mention. Until Dr Kling say otherwise (or maybe a really compelling third party argument), I will continue to believe his primary concern was the disincentive to work and all the negative consequences that entails. His proposed alternative may not be the right path forward but it is much closer to getting the incentives right while still offering some care to the poor.
Even my Artificial Progressive might agree that Arnold’s most significant concern is the effect on incentives. But his challenge was as follows: “My challenge to commenters: before you attack the UBI (or Upward Mobility Grants), defend the current system of means-tested entitlements.” A progressive would not care about incentives nearly as much as equality. So I offered the defense that I think a progressive would offer.
I agree with your assessment that frequent readers of the substack would disagree with my Artificial Progressive. But I don’t think it is a straw man. I think it is actually the progressive argument that conservative and libertarian proponents of UBI will have to overcome.
I think this is a good answer. You current status quo is endogenous to the various programs in place. Changing some of the programs without compensating changes to others (medicaid, disability, etc?) is likely to have unforeseen consequences.
If you paid out a voucher based on age and sex, some people would cost more than that and some less.
Some of the people that cost more wouldn't have the money to make up the difference between what it costs to insure them and what their voucher is worth.
You can try your darnedest to risk score people based on health status, but we already do this. Inevitably, you run into the problem of risk scores being gamed and of the fact that lots of risk score conditions are self imposed (bad habits).
Our "solution" was make the not poor subsidize the poor (who tend to have all these health conditions anyway), but then you are right back to needs based programs with huge implied marginal tax rates.
In the context of a big voucher program, I think it would be easy enough to require insurers to provide anonymized table each month with just three columns: total spending by the individual, the age of the individual, and the sex of the individual. The government can then compile that information to modify the voucher amount so that insurers no longer care about your age or sex, which are the easiest things to discriminate by in insurance. I imagine that you would have to make price discrimination illegal to make it work. That annoys me, but not much in the context of a huge government spending program.
Well, I would say that my Artificial Progressive isn’t good at math, just like a real progressive. But the $40k+ for the lowest quintile is from the real world, and our anti poverty programs for the lowest quintile don’t cost $2.64T. The reason is that your math assumed that everyone in the lowest quintile got $40k of government money. They don’t.
The present system can't be defended, at least I can't defend it, but the UBI would simply be an add-on at some point to the present system- that is the way the politics work today, and I don't see it changing for the better, ever.
The current system of means-tested entitlements is indefensible, except that it is the status quo. Your proposal is clearly better, except there is no clear path to it. Maybe starting with Andrew Yang's opt-in UBI "Freedom Dividend" idea (https://www.quora.com/profile/Andrew-Yang)? Maybe modify it somehow to make it clear that we are definitely moving charity from the federal government to state/ local governments and private charities? Maybe states could opt in (as in Romney Care)?
>>There are some households where people cannot work, or they have very expensive needs—perhaps a child with a severe medical condition. Those households would be better off with means-tested transfers instead of Upward Mobility Grants. I would propose addressing the needs of those households with supplemental income from charities or local governments.
How would these sources determine who is eligible in a way that doesn't create an effective tax rate that's similar in scale to the one from means-tested transfers?
I'll put this in a way that I think will be credible to those with right-libertarian leanings, although it's not how I would see things myself exactly. The people who determine eligibility for local government or charity benefits will tend to be people who seek out jobs in charities or local government benefits offices. These are going to be people who think benefits should be handed out generously. So what will stop them from just paying out $40k to everyone in the bottom quintile all over again? (A big fraction of this is done through disability benefits today as it is.)
I think it's likely you will get the same system with less transparency, except in municipalities where charities are sparse and tax bases are weak enough that local governments can't afford to hand out satisfactory benefits to disabled and needier people. Which doesn't seem like an ideal outcome either.
Additionally, I wonder whether this would lead to a large amount of "rich flight" away from communities that have sufficiently affordable housing for poor and disabled people to live there. If you live on Martha's Vineyard, you won't be paying any local taxes toward poverty and disability benefits, because no poor and disabled people can afford to live there. On the other hand, if you're a wealthy person living in Detroit, the tax burden on you will be pretty extreme unless the city provides insufficient benefits for those who can't work to live off.
(On a related note, this would further heighten the incentives for rich folks to behave in NIMBYist ways. Affordable housing in their community doesn't just bring undesirable people, now it brings a higher tax burden.)
It's a great idea, and if you just made it same amount as the entitlements that people receive, (and which you would cancel upon implementation of this program) it would be strictly better (and likely have lower administration costs).
The only people who would lose would be politicians who need to condition voting for them against increasing a specific program/threatening to cut a specific program, or who had special interests in their district who unduly benefitted from the piecemeal/details of a given program. Which unfortunately means it will be difficult to do.
I agree that more of our net transfers to low income people ought to be in the form of EITC and substituting a VAT for the wage tax as a way to subsidize health insurance, retirement benefits and unemployment insurance. I'd leave means tested assistance for those that plausibly cannot earn enough from work. I am not "attacking" UBI, but don't see a lot of value in UBI divorced from work.
UBI is a lovely idea but it runs into the pie problem. The size of the pie available to fund all welfare programs is limited. Even doubling taxes on the Nordic model wouldn't help much. Pay a lousy $10k per head to every citizen and there's the entire welfare budget blown already.
Every government benefit program inexorably expands either its pool of beneficiaries or the scope of benefit awarded, or both. They are much akin to the Blob, in the old sci-fi thriller movie* of the same name: a periodic shiver and a shake and shazam! their size increases.
As one example of many, there's this program proposed enhancement that I just spotted this morning:
I'm and economist, too, and I see the income and substitution effects, but I wonder about the elasticities? Are increased income transfers not linked to employment the (a?) major driver of the decline in the LFPR among people in the lowest deciles? Or better said, how much can we increase LFPR by more closely linking income transfers to employment?
With all due respect to the author who is demonstrably an intelligent, thoughtful person: This is proposing doing more of what obviously, proven by nearly a century of fiddling about & nudging by psychopathic control-freaks, doesn't work, and therefore by common definition insane.
What instead might work is a system which breaks the back of oligarchy by preventing extreme concentration of capital, forcing the economic pyramid to have a much larger base and middle, and a tiny cap.
One way this can be achieved is by what I call allodial progressive Georgism/Geoism/Geolibertariansim: A land tax only, with a high minimum threshold (e.g. no tax on the equivalent of 50 acres of agricultural land AKA homesteaders pay no tax), and afterwards steeply progressive (e.g. very little increase in tax from 50 acres to 500, but accelerating rapidly so that if someone wants to own 10k acres, they pay e.g. 90% tax).
You wanna be a "Lord of the land"? Pay the f' up, you rich f'.
Caveats: All land must be held by a natural living person, if it's held by any legal fiction (corporation, trust, etc.) it pays the maximum tax. No hiding land ownership.
This prevents accumulation of the most scarce resource, land. Oligarchs must now pay through the nose if they want to control this resource and engage in their world-domination games (e.g. Bill Gates). Mega-corporations must now utilize the land they own more efficiently. Vast capital pools like Blackrock are entirely shut out and can no longer distort the housing market. The middle class vastly expands, as land will be held much, much more broadly, both increasing household net worth and land value overall (assets are generally more valuable when more widely held).
And perhaps most importantly: Government is ripped off the backs of the poorest, the wage-earner.
Here I would add that I don't defend the current system of means-tested entitlements. I would reform it, by reducing aggregate expenditures, targeting them more narrowly (as Arnold suggests), adjusting the phase-out (to encourage work), and shifting support partly to well-informed local charity (as Arnold suggests).
Your description contains precisely the consideration that is anathema to those making the decisions - namely, that the local community can monitor and respond to their own. The model of behavior offered for all local communities is that of oppression and sometimes community-wide incompetence. For communities entirely composed of the poor, there is no local charity to be had; and for communities composed of some poor, only enlightened bureaucrats can force the local people to accept, support, and stop abusing them. There is a rich literature valorizing those that flee these (traditional/rural, parochial, religious, etc) communities and thrive in enlightened, enobled places (like San Francisco or Portland).
The opposite perspective is community-level selection; which cannot be sustained in the context of intercommunity mandatory transfers.
I don't think it's necessary to defend the current system to oppose UBI in practice, either. One of the main theoretical supports for UBI is it would be *net* less expensive than the current system of means-tested and special purpose benefits because giving everybody a flat cash grant eliminates a significant source of overhead or would allow more benefits to be disbursed for the same budget. You're hitting on one of the main reasons to think UBI would be come 'both and' rather than 'either or.' There would be an immediate cry that this or that group was being underserved or disadvantaged by not receiving specific targeted benefits, and the entire cycle of bureaucratic fief-building would start all over again.
I love the idea. It might take some time to scale up the local charities. The LDS church’s Fast Offerings program would be an ideal model, if we can find a way to scale it. Funds are donated and used locally, but extra funds flow through the global church system to where they are needed. No overhead because it is run by volunteers in an existing org created for other purposes. Very low corruption because it relies on morality-tested bishops and funds are mostly given to people whose situations and needs are well known - boots on the ground everywhere. I would much rather have organizations like this in charge of caring for the needy than the government. Not sure if it could happen politically.
I am very familiar with the LDS welfare system and it has a lot to like. However, the program is an add-on to the modern welfare system, and not a substitute.
1) The LDS system is managed at the congregation level which normally contains 200 to 500 people. One person, the bishop, must approve all spending. The bishop is assisted by two other leaders who will help execute the welfare plan developed for each individual or family. The observation to make here is the LDS system does not scale well, mainly due to the oversight it requires for all spending decisions.
2) The assistance is almost entirely in goods and services, primarily the payment of rent and the provision of food. Food is provided by church run stores - it is not brand goods.
3) The LDS system is extremely reluctant to provide direct cash benefits, and it discourages any spending that is not deemed a necessity.
4) The LDS system has no provision for health care - it expects people to make use of the social safety net and government benefits.
5) The LDS system works very well as a short term stop gap. It is ideal for those who hit a rough patch of a month or two. It is not designed to provide perpetual aid.
Sorry, I just noticed your reply. Yes, you capture the main idea well. It would be a different kind of welfare system, but in my opinion a vastly improved system.
Re 2) I live in Wisconsin, and recently finished my 5 years as bishop. We don’t have the church-run stores like they do in Utah. Here we use local grocery stores, help with utilities bills, help with rent, help with medical bills. We don’t give money directly, but rent help, for example, has a similar impact in opening up the budget.
Re 4) we do help with medical bills as needed. True, if there are social services we ask people to tap into those first before asking the church for help. But I think this type of system could take up a lot of slack if the government were to scale back its welfare operations.
Re 5) The idea is to encourage self-reliance. I think this should be the goal of any welfare system. But if there are long-term needs, I think this type of system should be able to manage that as well.
Of course you are right, scaling this would be the challenge, absent everyone on earth joining the one true church of God. :) But the principles can be learned from.
What does the LDS church do if someone they consider "undeserving poor" wants something? Do they get it anyway? Is there some limit?
When you get right down to it, government replaced local charities because a large contingent of people were uncomfortable with the very idea of an undeserving poor (including the undeserving poor themselves). I don't mean everyone was uncomfortable. Reagen talked about welfare queens. But still a big enough and powerful enough contingent to end up where we are today.
The more questions you add on, the less willingness. Charles Murray for instance is fine shaming men, but keeps reminding people that basically all women are deserving and we aren't going to shame them.
How about women with children?
How about women and children with health problems?
What if those health problems are self imposed (drugs, alcohol, STDs, or just being obese)?
Fundamentally, there exist some case where a person would have to say "if you do this you are just on your own, even if that results in the absolute worst". If that isn't an option, the incentive structure will eventually push against this absolute.
I wonder too if what the LDS does could scale for say non-LDS inner city Baltimore.
Good question. Sorry, just saw these replies.
The Fast Offerings system is used to help church members, but there is no “worthiness” or activity level or “deserving” requirement for getting assistance. Bishops usually counsel with church members about budgeting and managing finances as part of the assistance process. If those that receive assistance are unwilling to make obvious lifestyle changes to balance the budget, but instead are hoping the church will keep giving them assistance without any effort to improve their situation, the bishop may withhold assistance. The mantra in administering the funds is “support life, not lifestyle.”
I don’t know about Baltimore, but I served my mission in the poorest parts of Buenos Aires. I wasn’t involved in dispersing the funds at that point, but I got the impression that many of the church members were getting pretty regular aid. This program can be adapted to meet diverse situations because the bishops that disperse the funds are embedded among the people and know intimately the local situation and needs on the ground.
As is the fate of many family groups, you often end up with some marginally functional members that you try to help keep their heads above water. In my case two are not blood relatives, but we effectively inherited the responsibility to provide assistance. With both being on disability and other benefits, the insanity of the means tested welfare systems becomes apparent.
People with the capacity to fully handle the attendant bureaucracy of our system are people that are smart enough to function just fine on their own and game the system. The people who truly need the help and are the most marginal are the people who the bureaucracy is most likely to screw over. Little errors become major problems like one of our cases where he had an part-time janitorial job and they gave him a pay increase with minimum wage increase, which shoved him above some cut-off and his benefits were cut off. It took months of interactions with the bureaucrats and cutting back the "part time" to get him back on the payment roles. He couldn't have got through the system on his own.
My sisters "effective" family member ended up with requiring a "special needs trust" to be able to maintain his basic support. The cost to set-up and maintain the trust used a non-insignificant percentage of his inheritance from my sister.
The complexity of the present system benefits the "smart" person who understands the bureaucracy and rules, but the truly marginal among us must depend upon others. There seems to be no thought of the observation that people abilities have a distribution and the people on the bottom 20% of mental capacity overlap with the people on the bottom 20% of the income distribution. We are demanding that these people with limited capacity work their way through bureaucracy that the median person (or even top 10% without support staff) would have trouble with.
I do not believe what I am about to say.
The current system is at least a good alternative for a combination of several reasons. First, it provides substantial equality for the bottom 50% of households by income. That’s good because equality. Second, it does not pay people with higher incomes. It is offensive for the government to subsidize the rich. Third, means testing is less expensive than a flat-payment program would be for the same level of benefit. Getting the bottom quintile over $40k/year is not achieved by Arnold’s $2500 payment per person. Fourth, the complexity of the programs are a strength because they focus money based on need. The difficulty people have in navigating these programs also helps limit them to people who actually need them.
Did I pass the intellectual Turing test? Maybe a real progressive would have omitted the last sentence.
I think one way to take a step towards Arnold’s proposal is do it first with payments for health insurance. Replace Medicare, Medicaid, Obamacare subsidies, and tax deductions for health insurance with a voucher based only on age and sex. Over time, perhaps one could supplement it with additional flat payments based on having the genes for specific diseases.
Then perhaps do the same for disability insurance.
With that out of the way, then perhaps you could do a UBI, but you’d have to start taxing income (or consumption) at dollar 1 -- ie replace all the standard deductions and zero-bracket stuff with the UBI. If you don’t tax the UBI away pretty quickly, it becomes prohibitively expensive or meaninglessly small.
I would not treat unemployment insurance or old-age pensions the same way. I’d convert each of those to a forced savings program, where your payroll taxes go into restricted but individually owned accounts. Doing that for social security would take oases spread over multiple generations though.
You say many things I disagree with but that pales in importance compared to what you fail to mention. Until Dr Kling say otherwise (or maybe a really compelling third party argument), I will continue to believe his primary concern was the disincentive to work and all the negative consequences that entails. His proposed alternative may not be the right path forward but it is much closer to getting the incentives right while still offering some care to the poor.
Even my Artificial Progressive might agree that Arnold’s most significant concern is the effect on incentives. But his challenge was as follows: “My challenge to commenters: before you attack the UBI (or Upward Mobility Grants), defend the current system of means-tested entitlements.” A progressive would not care about incentives nearly as much as equality. So I offered the defense that I think a progressive would offer.
Maybe. To me it looks you offered a strawman that most conservatives and libertarians could easily dismiss as faulty.
I agree with your assessment that frequent readers of the substack would disagree with my Artificial Progressive. But I don’t think it is a straw man. I think it is actually the progressive argument that conservative and libertarian proponents of UBI will have to overcome.
I think this is a good answer. You current status quo is endogenous to the various programs in place. Changing some of the programs without compensating changes to others (medicaid, disability, etc?) is likely to have unforeseen consequences.
Thanks, Mike.
If you paid out a voucher based on age and sex, some people would cost more than that and some less.
Some of the people that cost more wouldn't have the money to make up the difference between what it costs to insure them and what their voucher is worth.
You can try your darnedest to risk score people based on health status, but we already do this. Inevitably, you run into the problem of risk scores being gamed and of the fact that lots of risk score conditions are self imposed (bad habits).
Our "solution" was make the not poor subsidize the poor (who tend to have all these health conditions anyway), but then you are right back to needs based programs with huge implied marginal tax rates.
In the context of a big voucher program, I think it would be easy enough to require insurers to provide anonymized table each month with just three columns: total spending by the individual, the age of the individual, and the sex of the individual. The government can then compile that information to modify the voucher amount so that insurers no longer care about your age or sex, which are the easiest things to discriminate by in insurance. I imagine that you would have to make price discrimination illegal to make it work. That annoys me, but not much in the context of a huge government spending program.
*phases, not oases. Though spreading oases over multiple generations sounds cool, too.
Well, I would say that my Artificial Progressive isn’t good at math, just like a real progressive. But the $40k+ for the lowest quintile is from the real world, and our anti poverty programs for the lowest quintile don’t cost $2.64T. The reason is that your math assumed that everyone in the lowest quintile got $40k of government money. They don’t.
The present system can't be defended, at least I can't defend it, but the UBI would simply be an add-on at some point to the present system- that is the way the politics work today, and I don't see it changing for the better, ever.
The current system of means-tested entitlements is indefensible, except that it is the status quo. Your proposal is clearly better, except there is no clear path to it. Maybe starting with Andrew Yang's opt-in UBI "Freedom Dividend" idea (https://www.quora.com/profile/Andrew-Yang)? Maybe modify it somehow to make it clear that we are definitely moving charity from the federal government to state/ local governments and private charities? Maybe states could opt in (as in Romney Care)?
>>There are some households where people cannot work, or they have very expensive needs—perhaps a child with a severe medical condition. Those households would be better off with means-tested transfers instead of Upward Mobility Grants. I would propose addressing the needs of those households with supplemental income from charities or local governments.
How would these sources determine who is eligible in a way that doesn't create an effective tax rate that's similar in scale to the one from means-tested transfers?
I'll put this in a way that I think will be credible to those with right-libertarian leanings, although it's not how I would see things myself exactly. The people who determine eligibility for local government or charity benefits will tend to be people who seek out jobs in charities or local government benefits offices. These are going to be people who think benefits should be handed out generously. So what will stop them from just paying out $40k to everyone in the bottom quintile all over again? (A big fraction of this is done through disability benefits today as it is.)
I think it's likely you will get the same system with less transparency, except in municipalities where charities are sparse and tax bases are weak enough that local governments can't afford to hand out satisfactory benefits to disabled and needier people. Which doesn't seem like an ideal outcome either.
Additionally, I wonder whether this would lead to a large amount of "rich flight" away from communities that have sufficiently affordable housing for poor and disabled people to live there. If you live on Martha's Vineyard, you won't be paying any local taxes toward poverty and disability benefits, because no poor and disabled people can afford to live there. On the other hand, if you're a wealthy person living in Detroit, the tax burden on you will be pretty extreme unless the city provides insufficient benefits for those who can't work to live off.
(On a related note, this would further heighten the incentives for rich folks to behave in NIMBYist ways. Affordable housing in their community doesn't just bring undesirable people, now it brings a higher tax burden.)
It's a great idea, and if you just made it same amount as the entitlements that people receive, (and which you would cancel upon implementation of this program) it would be strictly better (and likely have lower administration costs).
The only people who would lose would be politicians who need to condition voting for them against increasing a specific program/threatening to cut a specific program, or who had special interests in their district who unduly benefitted from the piecemeal/details of a given program. Which unfortunately means it will be difficult to do.
I agree that more of our net transfers to low income people ought to be in the form of EITC and substituting a VAT for the wage tax as a way to subsidize health insurance, retirement benefits and unemployment insurance. I'd leave means tested assistance for those that plausibly cannot earn enough from work. I am not "attacking" UBI, but don't see a lot of value in UBI divorced from work.
UBI is a lovely idea but it runs into the pie problem. The size of the pie available to fund all welfare programs is limited. Even doubling taxes on the Nordic model wouldn't help much. Pay a lousy $10k per head to every citizen and there's the entire welfare budget blown already.
Every government benefit program inexorably expands either its pool of beneficiaries or the scope of benefit awarded, or both. They are much akin to the Blob, in the old sci-fi thriller movie* of the same name: a periodic shiver and a shake and shazam! their size increases.
As one example of many, there's this program proposed enhancement that I just spotted this morning:
https://www.cato.org/blog/senate-earn-act-would-expand-welfare-state#readmore
* starring Steve McQueen. It was right up there with the original "The Fly" for scaring little kids at a 1958 Saturday matinee. :)
I'm and economist, too, and I see the income and substitution effects, but I wonder about the elasticities? Are increased income transfers not linked to employment the (a?) major driver of the decline in the LFPR among people in the lowest deciles? Or better said, how much can we increase LFPR by more closely linking income transfers to employment?
With all due respect to the author who is demonstrably an intelligent, thoughtful person: This is proposing doing more of what obviously, proven by nearly a century of fiddling about & nudging by psychopathic control-freaks, doesn't work, and therefore by common definition insane.
What instead might work is a system which breaks the back of oligarchy by preventing extreme concentration of capital, forcing the economic pyramid to have a much larger base and middle, and a tiny cap.
One way this can be achieved is by what I call allodial progressive Georgism/Geoism/Geolibertariansim: A land tax only, with a high minimum threshold (e.g. no tax on the equivalent of 50 acres of agricultural land AKA homesteaders pay no tax), and afterwards steeply progressive (e.g. very little increase in tax from 50 acres to 500, but accelerating rapidly so that if someone wants to own 10k acres, they pay e.g. 90% tax).
You wanna be a "Lord of the land"? Pay the f' up, you rich f'.
Caveats: All land must be held by a natural living person, if it's held by any legal fiction (corporation, trust, etc.) it pays the maximum tax. No hiding land ownership.
This prevents accumulation of the most scarce resource, land. Oligarchs must now pay through the nose if they want to control this resource and engage in their world-domination games (e.g. Bill Gates). Mega-corporations must now utilize the land they own more efficiently. Vast capital pools like Blackrock are entirely shut out and can no longer distort the housing market. The middle class vastly expands, as land will be held much, much more broadly, both increasing household net worth and land value overall (assets are generally more valuable when more widely held).
And perhaps most importantly: Government is ripped off the backs of the poorest, the wage-earner.
We need to think and act differently.
See my comments (and embedded link to research by Hoynes/Rothstein) at Arnold's most recent (8/22) post about UBI, at the link below:
https://arnoldkling.substack.com/p/links-to-consider-822/comments
Here I would add that I don't defend the current system of means-tested entitlements. I would reform it, by reducing aggregate expenditures, targeting them more narrowly (as Arnold suggests), adjusting the phase-out (to encourage work), and shifting support partly to well-informed local charity (as Arnold suggests).
Your description contains precisely the consideration that is anathema to those making the decisions - namely, that the local community can monitor and respond to their own. The model of behavior offered for all local communities is that of oppression and sometimes community-wide incompetence. For communities entirely composed of the poor, there is no local charity to be had; and for communities composed of some poor, only enlightened bureaucrats can force the local people to accept, support, and stop abusing them. There is a rich literature valorizing those that flee these (traditional/rural, parochial, religious, etc) communities and thrive in enlightened, enobled places (like San Francisco or Portland).
The opposite perspective is community-level selection; which cannot be sustained in the context of intercommunity mandatory transfers.
I don't think it's necessary to defend the current system to oppose UBI in practice, either. One of the main theoretical supports for UBI is it would be *net* less expensive than the current system of means-tested and special purpose benefits because giving everybody a flat cash grant eliminates a significant source of overhead or would allow more benefits to be disbursed for the same budget. You're hitting on one of the main reasons to think UBI would be come 'both and' rather than 'either or.' There would be an immediate cry that this or that group was being underserved or disadvantaged by not receiving specific targeted benefits, and the entire cycle of bureaucratic fief-building would start all over again.