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.
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.
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 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.
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.
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.