Universal Basic Income

I am doing something that I have never done before on this blog. I am coming at this rather Liberal subject with the mindset to make it work rather than just shoot it down. I may have found a way.

I’ve been broke in my life. As in $1,600 a month income and supporting two households broke. You don’t turn the lights, AC or heater on more than is absolutely necessary to keep the utility bill down broke. So broke that when everything goes perfectly right, there is still a lot of days where all you get to eat are air, water and plain ramen. And if there’s any bump in the road, a flat tire on the car, something important breaks, you eat less ramen and more air, then go couch diving deep enough to get the bends looking for spare change to gather enough money to fix what’s broken. All while trying to keep things together.

Being broke is a condition that beats you down every second you’re awake. No one should be broke. I don’t want anyone to be as broke as I have been in my life.

So to do my usual due diligence, I found several articles on Universal Basic Income. I did some reading from very pro-UBI articles, Source 1, Source 2, Source 3 and Source 4.

My initial thoughts on this subject was to regard it as an expansion of Welfare, thus triggering Ben Franklin’s quote on the subject:

I am for doing good to the poor, but...I think the best way of doing good to the poor, is not making them easy in poverty, but leading or driving them out of it. I observed...that the more public provisions were made for the poor, the less they provided for themselves, and of course became poorer. And, on the contrary, the less was done for them, the more they did for themselves, and became richer.

I immediately backed up and started over.

I also thought about “cash vs. things.” Instead of cash, how about a basic apartment, and MRE’s (Meals, Ready to Eat, military field rations) to eat. This however spiraled out of control, when it came to “providing necessities,” like Internet, a cell phone, utilities, and a slew of other things. Any argument that I could give for any necessity other than food worked for the rest of them as well. And of course, some of us have seen have all seen how wonderful and high quality government housing is, just look at any public housing project.

Okay, attempt three.

So let’s start at a basis of the #fightfor15, and figure a basis of $31,200 a year. That is $15/hour for 40 hours a week and 52 weeks for the year. Because most people don’t have the budgeting skills to handle one check a month (Surf and Turf for a week, ramen for three weeks) let’s go with $1,200 every two weeks. Since this falls under the definition of “unearned income,” zero taxes are withheld and it is not counted on your federal taxes on April 15th.

We also have to take into account where you live as well. I took a look at Expatistan to get an idea of the cost of living in multiple cities. To keep is simple, I only looked at three data points, a 480 sqft furnished Studio apartment in a normal area, utilities for that apartment and 8Mbs Internet.
San Francisco topped that list, requiring $2,571 a month for those three expenses. The lowest I found with that data is Indianapolis coming in at $761.

So some indexing to local cost-of-living would have to be considered. I do not have the time or resources to build that list by county for the entire US, and in the end would only provide an adjusted number that is germane to the conversation anyway. So for my purposes we will stick to a straight $15/hour nationwide.

In order to be fair, every adult needs to receive this, from the homeless guy on the corner to Bill Gates and Warren Buffett. If you don’t want Bill Gates, et.al., to get this, then some sort of graduated scale must be worked out. You can either make it graduated (say the first $250 you earn in a month doesn’t count, every two dollars above $250 reduces your UBI by $1 or the “cliff method,” where if you make annually (example) $50,000 you get your full benefit, however if you make $50,001, you get nothing. I can see the good and bad of both methods, however again, this point will have to be worked out by people smarter than me and in the end, and it is germane to my overall point anyway.

Now let’s look at the cost. In 2015 we had about 246,528,000 adults. This would work out to an annual disbursement (not including administrative costs) of $7.7 Trillion dollars. For comparison, in 2015 federal government took in $3.1 Trillion and spent $3.8 Trillion, leaving a deficit of $583 Billion.

I can lessen that $7.7 Trillion a bit. Let’s say we excluded the top 15% of households from receiving UBI because they “make too much.” In 2015, there were 148.8 million households filing for federal taxes. If we figure 1.8 people per household (not everyone is filing married filing jointly) that’s going to save you about $1.3 Trillion (15% of 148.8 million, times 1.8, times 31,200).

Let’s also get rid of Social Security, Medicaid/Medicare, and the Department of Health and Human Services. These departments are already providing a form of UBI by their services anyway. If someone on Social Security receiving $1,250 a month gets UBI, they are getting almost a 100% raise in their benefits anyway. If you are paid a living wage, you also don’t need food stamps, WIC or any other type of services. Cutting those agencies out entirely (or folding what is left into the UBI Department) will reduce the effective price tag to an overall $5.34 Trillion by reducing the base federal budget. With excluding the top 15%, that’s now $4 Trillion and change.

Remember, I want this to work. However if we don’t want to end up like the Weimar Republic (1930’s Germany before Hitler took power) with worthless paper money, we have to raise taxes on companies and those who are working.

So a massive tax increase will be required to accommodate a now minimum $7.8 Trillion annual federal budget. Remember, the 2015 government’s total income was $3.1 Trillion. So even to keep the $585 Billion deficit, we have to raise $7.2 Trillion in taxes. The current tax rates would have to be increased 232% at a minimum. Which is okay, because every adult will be getting $31,200 more a year anyhow. Again, some of this could be averted if we make the UBI taxable. Taxed at the maximum rate in current tax tables (single with no deductions) we could generate $4,213.75 from each UBI, or go back to no taxes and pay them $26,987 annually, or $1,038 every two weeks. This would save a bit over a Trillion.

This is where I hit an insurmountable wall.

Because the Law of Unintended Consequences is an integral part of the Law of Economics, I am sure that when you double the income tax rates, there will be shifts in the tax base as many citizens will change their behavior and opt out of working in favor of the “free” UBI.

I am not an economist in any way, shape or form. However in my studies and observations, I see that whenever the federal government starts “giving away money,” the prices for those goods and services invariably skyrocket. As one example, since the federal government got involved with subsidizing the price of college, the cost of a degree has doubled and more over the rate of inflation since 1978. When you factor in inflation, from 1978 to 2008, the price of college rose about 1,600%.

To even suppose that this would not happen to the broader economy shows a level of naive that borders on irrational delusion.

This is my personal kicker. My current living condition is I live my disabled wife and disabled son. My wife cannot work and cannot receive SSI because she’s married to me and “I make too much.” My adult son is unable to work or live on his own and receives SSI.

I bust my ass running 45+ hour work weeks right now. I’m up with the sun, out the door at 7:30 in the morning and working with lunch being a sandwich on the run between calls and who knows when I get home at night. One week in four I’m running swing shifts, which means I leave the house at 12:30 in the afternoon and I’m the only one working after 5pm. This means that I get to work harder and without backup. On swing shifts, I’m usually home about 2am. If I get home at 11pm, it means I didn’t have a lot to do. The good news is if things continue this way, our household income will gross over $60,000 in 2017.

If UBI comes about, my family will receive a 30% pay boost after I quit my job. This is why I want this to work. I can sit on my ass all day every day perusing Facebook and we make $93,600 a year. What’s not to love about this?

I’m reasonably sure a vast majority of people who aren’t making $15/hour are going to do the same. I mean, why go through the effort to buy work clothes, go to work, actually work, put up with stupid work rules, difficult co-workers and a micromanaging supervisor for $12.50/hour, when you can sit at home and do what you want for $15/hour. I don’t see that as a difficult choice.

And for each worker that makes that choice, that’s one less taxpayer paying for that UBI.

What makes this a ticking time bomb is for every young person who decides to live off the UBI, this means no incentive to learn a skill. No skill means they will never pay taxes because they won’t have a job that pays more than the UBI. When the older workers die off and there is no one to replace them (and their tax money), the economy as a whole will collapse (no workers to build/maintain things), along with the government’s ability to tax workers to pay for everything.

So the system self-destructs in 20 years. Yes, I saw the chart that shows that every time UBI is tried, it’s a success. With the exception of Alaska, these are all small studies (<100,000 people). To scale a program up to a nationwide scale would be a growth factor of over 3,000 times. That will be a little difficult at best.

Here’s the real kicker: there is a darker consequence.

In 2017, Graeme Wood wrote a book titled The Way of the Strangers: Encounters with the Islamic State. This author sat down and broke bread with ISIS members, to get inside their heads and understand why they are doing what they are doing.

One of the points that seems to cut across the whole spectrum of those who join ISIS is that the fight and struggle of “Jihad” (which actually in its’ true form refers to one’s internal struggle, not fighting Infidels) gives their lives meaning and purpose.

The Muslim faith also states that when Muslims die, they will spend time in Purgatory, where their sins of their earthly life are burned away. Imagine being constantly in a lake of fire until all your sins are burned away. This can take several years to several centuries, depending on the amount and type of your sins.

Unless you martyr yourself. Then you get to go straight to Heaven, no time in Purgatory needed. That’s a deal that can’t be beat.

Think about this for a moment. By and large, people want to be productive in their lives. They want to have something to do and know that what they do makes a difference in the world.

We are seeing that right now, this very minute. Thousands of men in other countries who are supported in their basic needs yet they have nothing to do with or for their life because they don’t have to work.

So they go looking for something to give meaning to their lives, which is when ISIS and their brand of Radical Islam steps in and offers them Jihad and before you know it they are off to a blessed heaven with 72 virgins. Of course, those 72 virgins are armed Catholic Nuns, but I digress.

It would be absurd to say everyone will radicalize. Some will go back to school and get a degree, some will continue to work and some will sit at home all day and play videogames.

The main point is when government provides a basic income where your needs are met and you don’t have to work, then many people will not work. And for every single worker that decides to subsist on just the UBI, that’s a bit less tax income to pay for everyone else’s UBI.

So, to recap my third try at this,

1) This will double the Federal budget and then some, even under the best of circumstances,
2) Taxes will have to raise dramatically to keep the deficit within bounds,
3) To those with no/low skills, they will likely leave/never enter the workforce. This will lead to a severe shortage of skilled workers further on down the road and a collapse of the economy.
4) For lack of constructive things to do, a portion of the population could be radicalized, leading to an upswing in domestic terror attacks. Think of attacks with a death toll on par with the Pulse nightclub shooting monthly, if not weekly.

Then something rang in my brain. I talked about Milton Friedman some time ago. Mr. Friedman was a very down-to-earth, well-spoken economist who put the macro- and micro- economic realities in plain language so that anyone could understand. So I went back and studied what he called the “negative income tax.”

Here is Source 5, what Mr. Friedman had to say about his plan.

To paraphrase Mr. Friedman, a negative income tax is a rebate a taxpayer gets if they don’t make enough money.

Let’s say the minimum income is $25,000 a year and the rebate is 50%. These are example numbers! Mr. Friedman used $3,000 for a family of four in 1968, which based off the median income would work out to about $25,000 today. The exact numbers would have to be worked out by people smarter than I.
Let’s say your taxable income (AGI or Adjusted Gross Income minus deductions) is $30,000, you only pay taxes on $5,000 ($30,000 minus $25,000).

If your taxable income comes up short of the $25,000, you get a tax rebate of 50% of the difference (say you only made $10,000 for the year, you receive a tax rebate of $7,500), delivered in the form of a “tax credit” on your paycheck, or deposited directly into your bank account if you don’t have a job. That $7,500 would result in $288 more in your biweekly paycheck for the next 26 two-week pay cycles. If you have zero income, you get $12,500 (half of the $25,000) again, in $480 deposits every two weeks.

The nice thing about this is you don’t have to take an entire day off from work, go down to the local HHS office, wait in line, prostrate yourself before a government worker and present to them a list of all your assets and liabilities, proof that your family exists, where you live, then have said government worker say that you may spend X on rent, Y on food and so on. All you do is accurately file your taxes and that loving, kindly, benevolent governmental entity known as the IRS will do the rest for you (a small amount of sarcasm there).

The great part of this proposal is when you work and fall short of the basic level, you end up farther ahead than just the subsidy or just the job by themselves. If you earn enough that you no longer qualify for the subsidy, you don’t really care because you are making enough that you don’t really need it.

I like this last option because

1) only those households with low income will qualify for it,
2) it is provided as an incentive to work (which actually falls in line with Ben Franklin’s quote above), and
3) the cost is more manageable than the multi-trillion conglomeration of the third option.

What do you think?


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