The benefits of a basic income // much higher min wage

[prognastat]

I don't think people become mean and hateful. If this were the case I would have no contact with my parents as I'm financially very secure with plenty of income and lots of savings, but I'm not and I think the same goes for many people pursuing/having achieved FIRE.

If someone who no longer needs people financially becomes mean/hateful I think it would say a lot about that person and what their intentions were in the first place.

[tonyedgecombe]

Basic income is not good as it makes people less social.
Basic income takes away the fundamental right of parents and relatives to provide for, as it gets monopolised by the government. People become mean, hateful when there is no need to be nice, in general as a habit, to parents and visit relatives biannually.

Social capital, usually children, are the basic income for people in countries in which people haven't outsourced it to their governments. It is peak communism to expect the state to take care of you when you get cranky.

Wow, there are a lot of assertions there without any evidence to back them up.

[mcs2269]

I skimmed through this thread and there was a lot of discussion about whether people would be changed or saved by UBI. Andrew Yang attempts to make the case that it would "take the boot off of people's throats." A lot of people had negative views towards the concept and its feasibility, but the question I kept asking myself was how this could possibly negatively affect me. Someone tell me what my lack of creativity is not telling me, and that is how this could be bad for me.

This may have been discussed earlier, but if anyone has a reason I wouldn't want to opt in/vote for UBI please enlighten me. If there is a post, you can point me to that.

Bear in mind that I rent, I own next to nothing, live an 8 minute walk from work and a 10 minute walk from Kroger. I occasionally purchase flights to see my family. My point is that UBI wouldn't change my spending behavior and so I'm inclined to support the idea. I wouldn't even care if there were people across the street that just blew the money partying for the entirety of their lives, it just wouldn't bother me. And I also wouldn't think a marginal increase in taxes would turn UBI into a net negative deal for me.

[IlliniDave]

I suppose it comes down to whether are part of the cohort who comes out financially ahead with UBI, or the one that comes out behind. Ultimately the money has to come from somewhere, it's just redistribution. Taxing corporations (I think that's Yang's idea, Amazon et.al) ultimately gets passed to the rest of us. So in order for the government to hand everyone $12K/yr they need to up the average tax bill by somewhat over $12K.

I get what you're saying though. I could probably find a way to exploit such a scheme in the short-term. In the long run it would require me to effectively cough up $12K to the gov't for myself (either directly on my tax bill or indirectly through increased costs of goods/services to fund corporate/business taxes), and some unknown additional amount to fund a Freedom Dividend for others. Someone who can indefinitely keep both their income and spending extremely low might be able to ride longer or indefinitely in the black.

[Campitor]

A lot of people had negative views towards the concept and its feasibility, but the question I kept asking myself was how this could possibly negatively affect me. Someone tell me what my lack of creativity is not telling me, and that is how this could be bad for me... Bear in mind that I rent, I own next to nothing, live an 8 minute walk from work and a 10 minute walk from Kroger. I occasionally purchase flights to see my family. My point is that UBI wouldn't change my spending behavior and so I'm inclined to support the idea. I wouldn't even care if there were people across the street that just blew the money partying for the entirety of their lives, it just wouldn't bother me. And I also wouldn't think a marginal increase in taxes would turn UBI into a net negative deal for me.

According to the US Census Bureau, in 2010 there were 234.6 million Americans 18 or older: 112.8 million 18-44 yrs of age, 81.5 million 45-64 yrs of age, and 40.3 million 65 and older. 12k a year for every American 18 or older will be a 2.8 Trillion dollar program. Adding 2.8 Trillion into the economy (the assumption being that everyone will be spending their "free" 18k) will cause inflation and price increases as you have more dollars chasing the same amount of goods. As manufacturers increase production to meet the new demand, a price rise in commodities will occur. As prices in commodities increase, unprofitable/unethical sources of commodities (like fracking for fuel or deforesting the rainforest for wood) become more financially desirable. Not sure how you can avoid the negative impact of inflation, price increases, and increased GHG emissions that will occur. There are no free lunches in a finite world with finite resources.

[mcs2269]

Not sure how you can avoid the negative impact of inflation, price increases, and increased GHG emissions that will occur. There are no free lunches in a finite world with finite resources.

When I was living in Madison I joked with my friends that I was immune to inflation because somehow I always found a way to spend around $150 per month on food and $375 on rent. Even if the cost of basic food doubled and if my rent doubled I would still be below the federal poverty line. I would be interested to see that world play out because there would be much bigger problems going on.

The best way to find cheap rent is to make friends. And with friends you can rent at below cost of owning a home. I don't think I'll lose this valuable skill set. I can't imagine a world where this changes.

[mcs2269]

So in order for the government to hand everyone $12K/yr they need to up the average tax bill by somewhat over $12K.

Dave,

I find this awesome and common sense. It reminds me of a conversation I had with my cousin last week. I asked him if he had a problem with the border wall because it was so expensive. He responded that the budget deficit doesn't actually matter. Then I said to him, "Oh, you must be cool with UBI then?" To this he responded that he wouldn't want to pay for it and that it would certainly raise his taxes.

My point with this is that I understand the math but what I've never understood is how the federal government continues to operate on such large deficits. And since it blows my mind but yet we are all still somehow here there's obviously a key link in the chain of logic that I'm missing. So I'm hesitant to accept my common sense.

[tonyedgecombe]

I always though at least some of the money would come from removing the progressive tiers of income tax and some element of benefits. It's interesting to note that many people are already on UBI because they are old enough to claim a state pension. This particular demographic is going to get much bigger over the coming years and are likely to vote for this benefit to continue.

I'm not sure inflation is much of a problem except for products that have constrained supply (ie housing in expensive cities.)

The main problem I see is the proponents want to set it too high to start with. If they are really serious they should start with a low figure to establish feasibility.

[jacob]

Quick note: average != median

I don't think UBI will ever fly in the US or rather I think it would take a long time/something drastic for it to become accepted. However, I also think most of this is in the phrasing that jars with ingrained ideology, because ...

Something like UBI already exists via social security for retirees and people seem perfectly fine with that. Despite being set-up as a pay-as-you-go (aka a pyramid) scheme, the average person thinks they have earned their payouts. And indeed, practically everybody has paid in some even if it is not enough to cover all the payouts. UBI could be done very similarly and even be done using the same system: Just allow people to start talking payouts at any age but priced lower according to longer payout times. Basically, this would converge to a government run annuity scheme. If the government sold something akin to that, I'd be interested in buying. It would be similar to TIPS except it would be attached to my person (it stops when I die)---this would also prevent an aristocratic class (a dynasty of bond holders) from forming.

Another way would be to attach the payouts to some kind of [voluntary] service. Most Americans have zero problems with VA benefits, the most generous of which includes something akin to socialized medicine but for veterans only. The same exists for the various pension systems for people who have served in other ways, e.g. teachers, cops, firefighters, etc. That a lot of these systems were set up [inherently underfunded] to stick it to future tax payers is a problem that can be fixed by increasing savings/contribution rates or reducing benefits to correspond what was actually paid in.

[Jean]

Instead of UBI, I would reform our pension system. (refering to the swiss system) Turn compulsory payment from ~15% to ~85%, change pension age from 65 to 28.
Voilà. This would cost nothing, this would teach people that they are happy on little money, this might reduce growth and cosumption to a level where it doesn't make climate change worse. In addition, it would put retirement age at a point where people can imagine themselves at when they start working.

[mcs2269]

Despite being set-up as a pay-as-you-go (aka a pyramid) scheme, the average person thinks they have earned their payouts.

@Jacob,
My grandpa lived to be 98. He was a 50's man born in the early 20s, really conservative, anti-communist and anti-socialist. In his final years(he was retired for 30 years) I would accuse him of being a socialist because he outlived his contributions. He was very adamant he earned every penny. That generation and the baby boomers didn't learn math. You hit the nail on the head there.

[mcs2269]

Instead of UBI, I would reform our pension system. (refering to the swiss system) Turn compulsory payment from ~15% to ~85%, change pension age from 65 to 28.
Voilà. This would cost nothing, this would teach people that they are happy on little money...

@Jean,
Opinion: An obligatory savings rate implies that ERE is the right thing to do. I of course agree that consuming far less than one produces is the right thing to do... for me or for you, but not necessarily for everyone. I know many consumers (where in their case consumer is indeed the right word to use) where withdrawal from hedonism, or stepping off the hedonic treadmill, would destroy them. My parents for one. I don't think you can teach people to be happy on little money. Especially if they have a life of habits baked into them.

[Jean]

That's why it would happen when we are young, because later it's much harder to learn such things.

[IlliniDave]

jacob, regarding people's expectations: "earned" might not be the best term, what people believe is that they paid for it, it being SS and many gov't pensions*. In many respects from the payee/recipient's POV, it's like buying an annuity**. That govt's have generally mismanaged (being kind) is sort of a different issue. Peoples' error has been trusting gov't with money, and trusting the promises of gov't redistributive schemes.

I used "average" because when a Freedom Dividend is put on the same plate as the rest of the progressive agenda being formulated ahead of 2020 (with one of the overarching goals being to compress and ideally eliminate the wealth gap), those of us who remain in the federal income tax-paying cohort (about 50% of us at present) will pay increasingly larger shares irrespective of where we fall in the cohort liable for income tax.

*E.g., my dad did not pay SS tax while working as a faculty member in the state university system. Instead he paid a higher amount into the state university retirement system.

**The one I'm most familiar with is SS. It seems to be a mashup of annuity, a little redistribution, and a disability safety net. It operated with a surplus for a long time, but over the last few decades it has not been managed properly by the gov't.

Campitor, is the Freedon Dividend supposed to be "new money" (i.e., print an extra $3T of new money every year)? I thought I remember him saying it was supposed to be funded by a federal tax on the big internet retailers or something similar. Hard to imagine a $3T/yr targeting of any segment of the corporate universe won't send adverse ripples throughout, so maybe I misunderstood the concept.(?)

[mcs2269]

Campitor, is the Freedon Dividend supposed to be "new money" (i.e., print an extra $3T of new money every year)? I thought I remember him saying it was supposed to be funded by a federal tax on the big internet retailers or something similar.

That's what I remember him saying. I understood him to be saying that many corporations will dispense their earnings in the form of expenses to grow the business so that they end up showing no profit and thus paying nearly no taxes. I know this is certainly true for the companies I've worked for. He stated something along the lines of taxing fractions of internet transactions to compensate for this. I imagined something similar to SEC and FINRA fees for sell orders.

[IlliniDave]

Thanks mcs2269. Of course, growing businesses creates jobs and such, and taxing retail transactions always gets passed on to the consumer, not eaten by the business.It is a protectionist move that helps local brick/mortar retailers, which I have an emotional tendency to support, but I don't think it will eat into Bezos' pocket much, just those of us who occasionally buy online.

[Campitor]

Campitor, is the Freedon Dividend supposed to be "new money" (i.e., print an extra $3T of new money every year)? I thought I remember him saying it was supposed to be funded by a federal tax on the big internet retailers or something similar. Hard to imagine a $3T/yr targeting of any segment of the corporate universe won't send adverse ripples throughout, so maybe I misunderstood the concept.(?)

In his initial interviews, Andrew Yang didn't mention how he was going to fund UBI. Even if he could raise 2.8 Trillion by taxing internet sales (doubtful imho), there are a lot of other hidden expenses to running such a vast program.

The bullet points below are from Yang's website. He is making so many assumptions that it's hard to take his proposal seriously. I've bolded the sections that I believe contain questionable assumptions.

• Who would get UBI in Andrew Yang’s plan?
  
  • Every U.S. citizen over the age of 18 would receive $1,000 a month, regardless of income or employment status, free and clear. No jumping through hoops. Yes, this means you and everyone you know would receive a check for $1,000 a month every month starting in January 2021.
  • What would you do with $1,000 a month on top of whatever you now make? Let’s find out.
• How would we pay for Universal Basic Income?
  • It would be easier than you might think. Andrew proposes funding UBI by consolidating some welfare programs and implementing a Value-Added Tax (VAT) of 10%. Current welfare and social program beneficiaries would be given a choice between their current benefits or $1,000 cash unconditionally – most would prefer cash with no restriction.
  • A Value-Added Tax (VAT) is a tax on the production of goods or services a business produces. It is a fair tax and it makes it much harder for large corporations, who are experts at hiding profits and income, to avoid paying their fair share. A VAT is nothing new. 160 out of 193 countries in the world already have a Value-Added Tax or something similar, including all of Europe which has an average VAT of 20 percent.
  • The means to pay for a Universal Basic Income will come from 4 sources:
    
    1. Current spending. We currently spend between $500 and $600 billion a year on welfare programs, food stamps, disability and the like. This reduces the cost of Universal Basic Income because people already receiving benefits would have a choice but would be ineligible to receive the full $1,000 in addition to current benefits.
       
       Additionally, we currently spend over one trillion dollars on health care, incarceration, homelessness services and the like. We would save $100 – 200+ billion as people would take better care of themselves and avoid the emergency room, jail, and the street and would generally be more functional. Universal Basic Income would pay for itself by helping people avoid our institutions, which is when our costs shoot up. Some studies have shown that $1 to a poor parent will result in as much as $7 in cost-savings and economic growth.
    2. A VAT. Our economy is now incredibly vast at $19 trillion, up $4 trillion in the last 10 years alone. A VAT at half the European level would generate $800 billion in new revenue. A VAT will become more and more important as technology improves because you cannot collect income tax from robots or software.
    3. New revenue. Putting money into the hands of American consumers would grow the economy. The Roosevelt Institute projected that the economy would grow by approximately $2.5 trillion and create 4.6 million new jobs. This would generate approximately $800 – 900 billion in new revenue from economic growth and activity.
    4. Taxes on top earners and pollution. By removing the Social Security cap, implementing a financial transactions tax, and ending the favorable tax treatment for capital gains/carried interest, we can decrease financial speculation while also funding the Freedom Dividend. We can add to that a carbon fee that will be partially dedicated to funding the Freedom Dividend, making up the remaining balance required to cover the cost of this program.

[IlliniDave]

Thanks, Campitor. I was just going off an interview I caught on youtube (where they actually did press him on how to fund it, so it probably originated on FNC). I tend to agree that what you bolded is questionable. VATs hit everyone so its a case of let me take your money and give it back to you (although it's obfuscated). Don't like the idea of raising SS taxes then rather than implementing along-term fix for SS, divert the money to a new giveaway program. I also don't like the idea of eliminating special treatment for dividends/cap gains. Upping the government's reward for an investor putting his capital at risk means investors will dial back risk to compensate for blunted reward potential. I would favor eliminating special treatment for carried interest based on what I know about it (although I don't know that I'd favor it for a dubious proposition like a "Freedom Dividend").

I've never "gotten" the math of how taking money from one consumer and giving it to another would create net new economic activity--seems it would just shuffle existing economic activity around. That might be desirable from a social engineering perspective, not so sure it's an economic efficiency boon.

[unemployable]

Corporations don't pay tax. The people who buy their products do.

What will happen is the end cost of goods will go up by that $1000/month plus the cost to administer the program. Granted, it will not be evenly distributed, and Dave said that already anyway.

[unemployable]

That's what I remember him saying. I understood him to be saying that many corporations will dispense their earnings in the form of expenses to grow the business so that they end up showing no profit and thus paying nearly no taxes. I know this is certainly true for the companies I've worked for. He stated something along the lines of taxing fractions of internet transactions to compensate for this. I imagined something similar to SEC and FINRA fees for sell orders.

If a company has zero current and expected future profits then there is no reason to invest in it and the fair value of its shares is $0, whether it is publicly or privately held. Now multiply this across the entire economy... I'll let the rest of you with your VTSAX and 4% hypothetical withdrawal rates and whatnot take the thought from there.