Squareallworthy On UBI Plans

I want to signal-boost Tumblr user squareallworthy‘s analysis of various UBI plans:

1. Jensen et al’s plan
2. Healy et al’s plan
3. Andrew Yang’s plan
4. Torry’s plan
5. Sheahen’s plan
6. Dolan’s plan
7. Stern and Murray’s plans
8. Santens’ plan
8½. Varoufakis and Reich’s plan
9. Yang’s plan, redux

He finds that most of them fail on basic math – they rely on funding schemes that wouldn’t come close to covering costs. The rest are too small to actually lift people out of poverty. None of them are at all credible.

These plans fail even though they cheat and give themselves dictatorial power. “End corporate welfare, then redirect the money to UBI!” But if it was that easy to end corporate welfare, wouldn’t people have done it already, for non-UBI related reasons? “We’ll get a UBI by ending corporate welfare” is an outrageous claim. And even the plans that let themselves make it fail on basic math.

This is humbling and depressing. And it concludes the intelligent and useful part of this post that signal-boosts the work of a responsible person. Everything below is epistemic status: wild speculation.

About 40 million Americans live below the poverty line, which is $12,000 for an individual and a little higher for families. Multiplying these out to get $480 billion to end poverty is too high, first because most of these people live in families with each other, and second because most of them already have some income. Let’s halve it to $240 billion.

The top 1% are currently taxed at a rate of 37%, and this brings in about $560 billion. Increasing it to an even 50% would give an extra $200 billion or so, leaving $40 billion to get from random other places, the top 2%, etc. For a basic sanity check, the Bush tax cuts decreased revenue by $180 billion per year. A tax increase of the same scale as the Bush tax cuts would suffice for a basic income that ended poverty.

Isn’t basic income supposed to be universal? Yes, but most serious proposals accept that it will be gradually reabsorbed as higher taxes. People below some income gain money on net, people above the income lose money on net, and there’s some break-even point. I’m proposing the break-even point is somewhere between the poverty line and the top 1% – not in an abrupt way that forms a welfare cliff, but gradually according to the normal progressive tax system, and at a level so that we can imagine it abstractly as transferring money from the top to the bottom, with everyone else ending up about equally well-off, or getting gains and losses that cancel out.

This ignores the concern that higher taxes would stifle the economy, and the concern that the promise of a UBI would make more people quit their jobs and fall into the income stratum that benefits. But it also ignores the hope that lifting everyone out of poverty would obviate some welfare programs, or improve education, or bring other economic benefits. I don’t want to claim to be able to calculate all of these considerations, but order of magnitude estimate, we could give out a UBI sufficient to end poverty with a medium-sized tax increase.

If you think a world full of people trying to eke out an existence on $12,000 a year sounds dystopian, remember that’s the average cost of room and board at US colleges. I think the reason $12,000 can give college students such a good standard of living, but gives people on the edge of the poverty line such a bad one, is partly related to the hidden costs of work.

Why is this so much easier than the plans above? Number one, not pretending that it’s going to help the middle class. Number two, not pretending that it can be done without raising taxes. Remove those restrictions and the economics are easy.

Some people would say that it makes the politics impossible, but I’m not so sure. Raising taxes on the rich from 37% to 50% doesn’t seem outside the scale of what a Sanders or a Warren might do anyway. And pad it out a bit so that the middle class is still below the break-even point and gets maybe $1000 or so per year, and the pitch is still “end poverty in a way that makes you personally $1000 richer”. That’s still a pretty good pitch.

But if someone wanted a Yang-style universal income, one that went to everyone including the middle-class and which didn’t obviously raise anyone’s taxes, would there be a way to do it?

I wonder if you could just declare by fiat that it has to work, and leave the future to figure out the details. Start in 2020 with a basic income of $1 per person. Then mandate that it has to increase by $300 per year. Congress can decide how to do that, whether it’s by raising taxes or cutting other spending. If they can’t find the money, there’s a government shutdown until they can.

Even better, forget the $300 number and mandate that it has to increase at a rate pegged to GDP growth. Maybe fix the start date at 2020, and then in year X, one third of the difference between year X GDP and 2020 GDP must be given out as basic income. In theory you should be able to get a UBI of $10,000 per person in a few decades without making any person or government program poorer (though you will make their wealth increase less quickly than it would otherwise).

Aside from inflation (which means the $10,000 will be worth less than expected, but shouldn’t affect the system’s ability to reach $10,000 in 2020 dollars eventually) what am I missing?