What is an appropriate level of Basic Income?

http://hawkins.ventures/post/85265679392/what-is-an-appropriate-level-of-basic-income

by mchusma • 12 years ago

54 96 12 years ago

This is obviously wrong. I learned from HN that the poverty line in Silicon Valley is $120K, and your life is an utter failure if you work a 9-5 job.

gte910h9• 12 years ago

12,000 for 316 million people is 3.8 trillion dollars.

Total GDP was 16.8 trillion

Total federal tax revenue was 2.8 trillion in 2013

This would be an enormous tax increase if it was the only tool used to provide income to people.

ahomescu14• 12 years ago

This assumes that you'd give BI to every citizen. One twist I haven't seen so far in any BI discussion is this: what if you only give BI to those who ask for it (but still with no strings attached)? I wonder how many people would bother. For example, why would Bill Gates or Mark Zuckerberg put in the effort, however small?

enoch_r• 12 years ago

Say it takes 12 hours to apply for basic income each year... $1,000 an hour is still an absurdly good rate for all but the highest earners.

sp332• 12 years ago

In general, I would expect rich people to sign up for it. Two reasons: First, they didn't get to be rich by passing up opportunities. Second, they hire people who work full-time to maximize their money, and those people will sign them up for this.

jjdro• 12 years ago

so the top 10 percent or so that cant be troubled to pick up 12k laying on the ground would reduce it to 2.3 trillion? How about something worthwile and make the tax rate on income over 2 million (out of the air) to 90 percent like it was post WWII and use that to help pay for it.

rayiner• 12 years ago

Most people would get most of their tax back, though, in the basic income payment. Break even would be like $68k.

marknutter• 12 years ago

That raises the question - why bother taking those people's money in the first place?

gshubert17• 12 years ago

An enormous tax increase only if you figure there would be no compensating decreases in government expenditures. Unemployment benefits (60B$), medicare (600B$), social security (800 B$), welfare benefits (300B$) are just a start. [1] That's just at the federal level; there are a lot of state expenses that would go away as well. And there would be a lot of administrative costs eliminated, and a lot of corporate welfare programs could be cut as well, because everyone would have access to basic income.

[1] http://www.usgovernmentspending.com/us_welfare_spending_40.h...

maxerickson• 12 years ago

Medicare and social security benefits are worth a lot more than $12,000.

nardi• 12 years ago

No, enormous tax increase regardless, with a balanced budget. If tax revenues are currently $2.8 trillion, and basic income alone would cost $3.8 trillion, then even if government eliminates all other spending, taxes would still have to increase by $1 trillion in order to only pay for basic income.

Edit: The US Government does run a deficit, but it was $680 billion in 2013. A deficit of $1-2 trillion would be new.

JoshTriplett• 12 years ago

An enormous tax increase only if you figure there would be no compensating decreases in government expenditures. Unemployment benefits (60B$), medicare (600B$), social security (800 B$), welfare benefits (300B$) are just a start.

That's one of the more compelling arguments for BI: it's more sensible than the piecemeal programs we have. And don't forget the various tax credits and deductions that could go away, too. If done well, BI could be revenue-neutral or better.

But in practice, unless you delete all of those in the same bill that introduces basic income, you're going to find yourself stuck with both the basic income and those welfare programs.

sliverstorm2• 12 years ago

Can $12k/year actually replace medicare? Medicare is health insurance, so at the very least we would have to have a competitive market for self-health-insurance from which retirees could buy coverage, before Medicare could be scrapped.

cheald3• 12 years ago

Cutting Medicare to give people BI would leave the people who need Medicare in the lurch, because there's no way in hell that you're going to get the medical treatment you need on that $12k.

Medicare provides for the sick by levying a disproportionate cost:benefit on the healthy. Distributing BI to the healthy and sick alike in lieu of Medicare eliminates that.

You might also notice the "Total Federal Spending" line in that chart you linked is $3.6 trillion...a full $200 billion short of the $3.8b mark.

downandout4• 12 years ago

Medicare expenditures would in no way decrease as a result of the implementation of a BI (unless you plan to pay for BI by causing the deaths of most of our senior population, as they couldn't pay for medical services or medication on $12K). Also, tax revenue would decrease as at least a portion of the population would simply drop out of the workforce.

BI, like socialism and communism, sounds good on paper to a certain set of people. It won't work in the real world. I have always wondered why otherwise intelligent and successful people keep bringing up ideas to give others' money away, and then I recently heard casino mogul Steve Wynn's interesting explanation for it (that they believe that everything should be given to everyone, because everything has been given to them):

https://www.youtube.com/watch?v=tCitAufBvu8

baddox2• 12 years ago

An enormous tax increase only if you figure there would be no compensating decreases in government expenditures.

Which is a safe assumption, since I rarely observe governments decreasing their expenditures.

fernly• 12 years ago

Average SS monthly income is around $1500, or $18K annually. That kind of puts a floor on Basic, because if you propose a pay cut to all retirees, you would have a mob of cranky oldsters on your back.

neona• 12 years ago

Another non-obvious change would be the elimination of minimum wage, which would improve corporate profits, which should (theoretically, at least) increase the taxes they pay.

gte910h9• 12 years ago

I think 2.8 trillion to 3.8 trillion is a large tax increase no matter what spending you cut.

Btw, spending was 3.5 trillion.

gte910h9• 12 years ago

First off, I think the idea of BI is great, I just don't think we have the real taste of what that would look like yet from someone who knows how to write bills. Lots of handwaving from all corners.

I don't see how cutting medicare could work to solve income?

The reason we have socialized medicine for old people is it's too expensive for insurers to carry. $350 a month is not an annualized cost for EVERY american, it's for non old people. That's including sharp obamacare type subsidies still for many age brackets. I know even my (early 30's) healthcare premiums are above that.

I don't see how cutting someone who's reliant on a $2,642 dollar a month income social security retirement payment is going to work. At best, I see social security retirement largely staying at it's current level. Cutting Social Security Disability (and all the anti fraud apparatus around it) is likely very possible though

would be a lot of administrative costs eliminated

Those costs are rolled up into the SSA numbers in the federal budget. A portion of the medicare cost is the medicare overhead, etc. So it's not the budget numbers + overhead: the budget numbers are inclusive already

I think a wage floor (minimum wage still), strong policing of unpaid internships, and a smaller form of BI is possible, possibly without any tax increases or with far more moderate ones, especially if many state responsibilities are taken over at the federal level.

I just don't see the list of things that can really be cut nor the total take we'd get from that to work with.

gte910h9• 12 years ago

If we don't touch SS Retirement or medicare because lets be realistic if we want something passable:

We can reduce the rolls of people who need to be paid to 278 million people.

We can get 396 billion by cutting welfare (but if we do this, children get the same bi, and that's not being sure there aren't protective services in here which would need to still exist) at the federal level, we get $187 billion by cutting the people who don't get SS because they are old.

That's a total of $585 billion, with a needed sum of 3300 billion total (aka, 3.3 trillion).

This means we're still at a deficit of 2715 billion (2.715 trillion) dollars

Where else does that come from? (I'm asking, legitimately)

With the money I can see that could be freed up at the federal level, I see a yearly benefit of 585B/267M -> $2191, or 183 a month.

This is an equivalent (for fulltime job holders) of a raise of the minimum wage by 1.10 an hour.

dllthomas10• 12 years ago

Only skimmed this, but as an aside, I think we should not index BI to inflation. A basic income higher than the economy can support seems likely to lead to inflation, and if that's the case then the real value of it will fall to something we can support, which seems a worthwhile safety valve.

sanxiyn9• 12 years ago

Assuming this ensures BI not to overshoot the correct value, how do you ensure BI not to undershoot the correct value?

dllthomas10• 12 years ago

I don't have a specific proposal. It would seem less likely to have some sort of "spiral out of control" type risk, though, since we've already got a BI of zero.

I should amend my previous statement, though - BI should track targeted inflation, it should not track actual inflation.

chongli2• 12 years ago

Just tag the BI to a fraction of GDP; problem solved.

dllthomas10• 12 years ago

An interesting proposal, certainly. Have you carefully thought through the ramifications? (I've not yet, and I'm not hinting at anything, I'm just looking for more thoughts in the space).

dsr_• 12 years ago

$12K/year is equivalent to a 50 week, 40 hour job at $6/hour after taxes. If employment and social security taxes come to 20%, that implies an equivalent minimum wage of about $7.20/hour.

The Federal minimum wage is $7.25/hour and is widely considered to be too low.

waps• 12 years ago

The real answer is : it doesn't matter, unless you set it way too high. The economy will adjust until the value of basic income is equivalent to a particular value.

Now of course, what could happen is that you set it too high and we get massive inflation and dollar devaluation for a few months/years.

The reverse should also be true. Because fitting within basic income will massively expand client base for companies, there might actually be devaluation if it's set too low.

I think it's pretty obvious that one cannot choose the level of basic income. You can only do damage by choosing wrong. Given that it's currently zero, if you'd want to do this, start at a very low level (but still high enough to make companies want to provide services at that level), work out the kinks, and increase it over the course of a few years slowly until you see undesirable phenomena, then stop. Ideally, make this a state thing so regional differences can efficiently work.

pangram• 12 years ago

Ideally you'd want to make it adaptive based on a variety of economic metrics -- set it to a particular level, watch the effects on the economy, and then adjust for the next year.

LockeWatts7• 12 years ago

Ideally, make this a state thing so regional differences can efficiently work.

The problem with this strategy is it creates massive disparities between states, as the burden of caring for the poor will be disproportionately shifted to the progressive states providing a basic income, while the conservative states don't need to pay for anything.

Furthermore, state governments don't have anywhere near the tax base or cash reserves to implement a basic income. This can only be done on the Federal level.

A UBI provides mobility to citizens by not trying their source of food to their location. If a UBI can't support you in San Francisco or New York, you have the ability to move to where it will.

There's no need to have this be a state thing, except to screw up the program.

baddox2• 12 years ago

The Federal minimum wage is $7.25/hour and is widely considered to be too low.

That's comparing apples and oranges. The Federal minimum wage is the wage below which it is illegal to pay an employee. If you're unemployed, you still get no wage. Basic income would, obviously, get paid to every single person regardless of employment. It makes sense for it to be lower than the wage someone would earn for working.

andrewfong2• 12 years ago

I'd also point out that not having to work has the potential to decrease expenditures quite a bit.

For starters, the post itself assumes that if you don't have to work, transportation costs decrease quite a bit. Keep in mind that people who have a hard time finding work often travel farther to find work or hold down multiple part-time jobs instead of one full-time job, which increases transportation costs. If you're living in the Bay Area and have to commute every day, e.g., San Jose to San Francisco, a Caltrain + MUNI monthly pass works out to an extra $300 / month in expenses that you wouldn't have to spend if you weren't working.

In addition, the fact that you don't have to work gives you more flexibility in choosing where to live -- if you're not concerned about employment, you can live where the cost of living was cheapest.

We're also assuming that that basic income will always be guaranteed. One reason the federal minimum wage might be considered too low is that it doesn't leave any income left over to save for unemployment, retirement, or other scenarios where your income source is lost. That becomes irrelevant if everyone gets a guaranteed income.

Finally, simply having an extra 8+ hours of free time each day makes it a lot easier to optimize your costs. You have more time to plan your meals, to research and compare prices on every kind of expenditure, to exercise and minimize long term health costs, etc.

joelmichael• 12 years ago

You get this money without even working. Any money you earned while working (there would be no more minimum wage under this system) would be in addition to the $12,000 you got from the basic income. Also the basic income is presumably not taxed, as it's welfare income.

yummyfajitas6• 12 years ago

What does "too low" mean? Does "too low" mean that some testable negative consequences will result, or is it merely a moral judgement?

If there are testable negative consequences, we should look and see if Bulgaria suffers those consequences. Bulgaria has a PPP-adjusted GDP/capita that is $1/year less than your hypothetical 50 week, 40 hour min wage job. There are quite a few nations (generally considered "developed") with similar levels of income.

http://en.wikipedia.org/wiki/List_of_countries_by_GDP_(PPP)_...

sanxiyn9• 12 years ago

Would you prefer to live in Bulgaria or US? This seems to provide testable negative consequences.

LockeWatts7• 12 years ago

Your comparison does not take into account the relative cost of living of those places.

Furthermore, why do you say "merely" a moral judgement? Is a moral judgement that optimizes for human happiness somehow worse than a logical one that optimizes for efficiency?

joesmo2• 12 years ago

Negative testable consequences? How about not being able to buy basic goods like food? I believe that's quite testable, however cross-region comparison based solely on income is meaningless in this case as the cost of basic goods will vary. (http://www.novinite.com/articles/152387/20+of+Bulgarian+Hous...)

andrewfong2• 12 years ago

Note that the $12K/year is per person and excludes children. The federal minimum wage is considered to be too low, in part, because many of the people earning minimum wage have dependents.

gnarbarian• 12 years ago

transfire• 12 years ago

An important factor has been overlooked in this analysis: synergy. Individuals with low income live with other people. When a group of people all start receiving a BI, their spending power will be more then the simple sum b/c they share and buy in bulk. Therefore the BI does not need to be quite as high as one might otherwise think. I have thought about the appropriate level of BI for years. The best I have been able to determine is that it should be pegged to half the minimum wage, i.e. equivalent to a 20 hour job at minimum wage, which works out to about $600/mo. I believe this strikes the right balance between work incentive and poverty prevention and also lies within the potential budget of the government at approx. $1.5 trillion per year.

dionidium• 12 years ago

Which explains why this bit FTA isn't strange at all:

"The 2014 US Poverty line is $11,670/year for an individual, and ~$4,060 for each additional person.3 It is strange to assume that some humans can live off of $11,670 and others can live off of $4,060."

LockeWatts7• 12 years ago

An important factor has been overlooked in this analysis: synergy. Individuals with low income live with other people.

You make the assumption that they should be required to live with other people.

When a group of people all start receiving a BI, their spending power will be more then the simple sum b/c they share and buy in bulk.

So do rich couples. This is a non-sensical argument. I'd rather not keep repeating how wrong you are, but suffice to say, nobody lives on $600/month in America. Your number is simply unintelligent.

Mister_Snuggles• 12 years ago

Canada tried this as an experiment for a few years. While the Wikipedia[0] article is light on information, there are links to meatier sources.

[0] http://en.wikipedia.org/wiki/Mincome

sanxiyn9• 12 years ago

One interesting consequence is that this gives a good way to value US (or any other nation) citizenship.

Clearly, US citizenship is extremely valuable, but hard to value because it's not traded in free market. With BI, you can estimate its value as a portfolio with monthly payout of monthly BI. This works even if BI is unused, since BI is supposed to be equivalent of existing welfare programs.

If there was any doubt, this also proves equal opportunity does not exist. Just by being born to a particular nation, which is random, you get an extremely large head start.

adharmad• 12 years ago

A consequence of providing basic income to everyone could be rise in prices of consumer goods. This already happens in the housing market and the education market, where house prices and college fees increase as cheap money comes in the market.

dllthomas10• 12 years ago

I think the fact that the money for college and the money for houses can't be used for other things has a huge impact on the dynamics, along with the fact that both housing and college are often purchased (partly) as display of wealth and the fact that both are oversold as investment. Which isn't to say we'd see no change in the price level, but rather that we'd mostly only see that where costs of production actually rise - otherwise, competition will still hold prices down.

LockeWatts7• 12 years ago

How is an education purchased as a display of wealth? Education is the single most efficient way to raise your standard of living compared to that of your parents.

sanxiyn9• 12 years ago

Rise in prices of housing and education is largely due to their investment-like nature. You won't be able to sell food as a great investment to the future.

Chevalier• 12 years ago

Wouldn't the idea of Basic Jobs be more feasible than Basic Income?

HN is populated by people who love their work and would do it for free, given the luxury... but speaking from a legal background, other careers SUCK. Most lawyers I know would happily embrace Basic Income in exchange for sleep, family, and lifetime security. If the alternative to attorney life were picking up trash or scrubbing toilets as part of the Basic Jobs program, the workers who pay for Basic Income/Jobs might be less likely to stop producing wealth in the name of leisure.

I say this as a liberal who very much supports the idea of reduced work hours, mandatory vacations, and so on in a European vein... but there has to be middle ground between indolence and workaholism. Particularly when faced with the possible creation of a dependent underclass with little else to do but knock out kids they can't support.

dllthomas10• 12 years ago

I don't think it would be better. At the risk of excessive snark...

In exchange for your feeling of superiority making the underclasses earn their bread, you're getting political wrangling over what the jobs should be and tremendous misallocation of labor as the jobs aren't the best thing those people can be doing with their time, we take up the time they could be putting into making themselves more fit for more interesting (and more useful and better paying) jobs, and we do nothing to free people to work on projects they're passionate about which may have a harder time capturing value produced (unless a bureaucrat has specifically blessed them).

ahomescu14• 12 years ago

My idea of an alternative would be Basic Land: everyone who is poor/starving can get some free fertile land to work (enough to sustain a family). That way, they can become self-sufficient and live off their own work.

There are some extra issues with this, but I think they can be fixed. One would be housing: the land would also have to come with a house, and maybe transportation.

gte910h9• 12 years ago

While farmland is incredibly cheap in the US, small farms are on a boom-bust cycle basically tied to luck and the weather.

Modern farming is also very dirty to the surrounding watershed.

sjwright• 12 years ago

For reference, the US Poverty Line is $11,670 and the US currently spends an average of $20,610/year per individual below the poverty line to combat poverty.

That seems -- on the face of it at least -- to be a remarkable statistic. The citation is:

http://www.cato.org/sites/cato.org/files/pubs/pdf/PA694.pdf

It notes that a large portion of poverty spending is Medicaid, which is completely unsurprising given the dire state of US health care for the less fortunate.

grondilu• 12 years ago

Why is this on Hacker News?

joesmo2• 12 years ago

"For reference, the US Poverty Line is $11,670 ... The net result of these problems means that the official US Poverty rate is not really sensible measurement of poverty in the US. ... So implementing Basic Income at this amount [$12,000] would immediately eliminate poverty in the US."

This doesn't make sense. The current poverty line is two to three times below what it should be. Implementing a $12k a year basic income would only end poverty in theory based on the current definition and amount which is "not really sensible measurement of poverty in the US." It's impossible to deduce which of the mutually exclusive statements the authors agree with, although it seems to be that that the current US Poverty rate is actually a very accurate measurement of poverty in the US, off by only $330 from what is "not poverty."

"We feel there is very little necessary transportation today that is not related to work or entertainment, so is therefore excluded."

So this idea is based on the assumption that people on basic income should forget about finding a job in most of America, at least the parts without free or low-cost mass transit (pretty much all of it). Most of these people will never have a chance to work again. What about trips to the doctor or the supermarket. The authors are just completely out of touch with American reality here.

What is an appropriate level of Basic Income?

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