Sleepless in Midland

Italy's universal basic income -- one more experiment to watch

The idea of a universal basic income (UBI) has been met with resistance from several quarters. One view of it is that it will stifle initiative and dampen the desire to work. Well, most countries are doing that already with generous welfare programs.

The best approach to this idea came from Charles Murray a few years ago. His UBI plan called for replacing all other forms of government outlays to individuals. And that plan would be cheaper than the programs it replaced. So far, none of the governments or entities that have experimented with UBI have done that. Now the latest experiment will take place in Italy. And they'll be doing it wrong, too.

One of the problems is that there's a big underground economy in Italy, and it's likely to get bigger as people angle to get their incomes low enough to qualify for UBI. Another problem is that there are already plenty of taxpayers who are comfortable with cheating. They could probably be counted on to cheat the UBI system as well.

For the longest time I was in favor of a UBI for the money savings as a way to pay off the federal debt and ultimately reduce taxes. But the more evidence that pours in, the less likely it appears to be a system that would do what the original proponents hoped. After all, it's just people who design and implement it. And there simply isn't a genius smart enough to anticipate and overcome all the problems. Think Obamacare.

Meanwhile, check out these two articles, both of which describe the problems Italy will encounter:
Italy Starts Handing Out Free Money by Ferdinando Giugliano; and
Italy Institutes a Universal Basic Income. Is the U.S. Next? by Adam O’Neal.

------

1:37 PM 3/3/2019

Basic income experiment in Finland is over - results inconclusive - they did it wrong

The basic guaranteed income experiment in Finland has ended with most saying it didn't accomplish what the proponents hoped would happen. See Finnish basic income trial: creates happiness, but not jobs.

Perhaps I'm sounding like those socialists who say, "Yeah, yeah, socialism hasn't worked anywhere it was tried, but they just didn't do it right." And therein lies the problem. It could probably never be done right. And that's what is happening to the universal basic income theory.

After reading Charles Murray's explanation I was a supporter of the idea. But the reality is that no jurisdiction is likely to embrace Mr. Murray's formula for successfully implementing the system. Here's Murray.

I think that a UBI is our only hope to deal with a coming labor market unlike any in human history and that it represents our best hope to revitalize American civil society. ... The great free-market economist Milton Friedman originated the idea of a guaranteed income just after World War II. ...

First, my big caveat: A UBI will do the good things I claim only if it replaces all other transfer payments and the bureaucracies that oversee them. If the guaranteed income is an add-on to the existing system, it will be as destructive as its critics fear. ...

The UBI is to be financed by getting rid of Social Security, Medicare, Medicaid, food stamps, Supplemental Security Income, housing subsidies, welfare for single women and every other kind of welfare and social-services program, as well as agricultural subsidies and corporate welfare. As of 2014, the annual cost of a UBI would have been about $200 billion cheaper than the current system. By 2020, it would be nearly a trillion dollars cheaper.

(Bold added to highlight the formula for success of the plan.)

It's a decent theory. But getting it done right is a challenge.

------

8:54 AM 2/17/2019

universal basic income test in Stocton, California, probably won't be a fair test

By now anyone with a passing interest in universal basic income knows about the upcoming trial balloon that's supposed to begin in early 2019. If not, see Stockton to become first U.S. city to test universal basic income plan. To wit:

Stockton, California, will soon become the first U.S. city to experiment with a universal basic income program, granting 100 residents $500 a month with no strings attached.

The project is being backed by Silicon Valley titan Chris Hughes, whose Economic Security Project gave $1 million toward the effort.

I'm not enough of a statistician to know whether 100 recipients are enough to get reliable results. But there's a bigger obstacle to a fair reading: U.S. government entitlement programs combined with California's generous welfare system and the likelihood that they will all still be available to the recipients.

Here's the way Charles Murray envisioned it, from his article A Guaranteed Income for Every American:

The UBI is to be financed by getting rid of Social Security, Medicare, Medicaid, food stamps, Supplemental Security Income, housing subsidies, welfare for single women and every other kind of welfare and social-services program, as well as agricultural subsidies and corporate welfare. As of 2014, the annual cost of a UBI would have been about $200 billion cheaper than the current system. By 2020, it would be nearly a trillion dollars cheaper.

Alternate link.

But even if the Stocton experiment isn't a true test of a pure system, the results will be interesting, nonetheless.

------

1:23 PM 7/16/2018

Stockton California to test Universal Basic Income

I say "go for it!" Test the hell out of it, but be fair, and report the results honestly.

The original idea for universal basic income was that it would save money by doing away with welfare and other entitlements. This article about it doesn't really spell out how it will be implemented, other than it that the amount would be $500 per month and it would involve "Several-dozen families." But we'll get details eventually. Post-bankruptcy California city tests ‘universal’ income for residents.

If implemented correctly, i.e., in the manner proposed by Charles Murray, Social Security, Medicare, Medicaid, food stamps, Supplemental Security Income, housing subsidies, welfare for single women and every other kind of welfare and social-services program would be replaced by the UBI. In the Stockton experiment, the UBI will likely be in addition to all that.

Nevertheless, the only way to know whether the one proposed in Stockton will accomplish anything is to test it on a small scale and wait for results.

------

9:15 AM 2/8/2018

Finland tests basic universal basic income on small scale

The idea has some merit, especially the aspect of eliminating all other subsidies. But here in the U.S. entitlement reform always meets hard core resistance. What we would end up with is a system of universal income AND subsidies.

And that's what the Finland test involves: A basic income as well as continuation of the already generous benefits. See What If Everyone Got a Monthly Check From the Government?

The experiment in Finland isn't over, but the brains behind it are losing interest. It's too expensive -- already high taxes would go even higher. From the article:

The wealthiest would be relatively unaffected by such a change because their taxes are already high, but a swath of middle- and upper-middle-class Finns would pay more in taxes than they’d get back in basic income. In national polls, when the possibility of a 55 percent flat tax was raised, the percentage of Finns who supported basic income dropped from 70 to about 30. “We would need to implement another study for the whole population to understand it,” says Miska Simanainen, a tax specialist who was part of Kangas’s team. No such studies are planned.

The biggest revelation from the article was that Milton Friedman may have actually supported a universal basic income in some form or other.

If it could be done right, i.e., the stipend for everyone but nothing else on top of that, it just might be affordable.

------

2:38 PM 1/11/2018

Universal Basic Income -- more experiments needed

In a recent WSJ article, Dan Nidess tried to explain: Why a Universal Basic Income Would Be a Calamity (Psst. It's paywalled at WSJ, but you can read it here). He makes a good point here:

At the heart of a functioning democratic society is a social contract built on the independence and equality of individuals. Casually accepting the mass unemployment of a large part of the country and viewing those people as burdens would undermine this social contract, as millions of Americans become dependent on the government and the taxpaying elite. It would also create a structural division of society that would destroy any pretense of equality.

We already have a government bent on creating equal outcomes, and the people the current system of government largess foster discontent, too. The beauty of a good UBI is that it would abolish all other forms of government handouts. As Charles Murray's original plan said, it would replace Social Security, Medicare, Medicaid, food stamps, Supplemental Security Income, housing subsidies, welfare for single women and every other kind of welfare and social-services program.

Mr. Nidess asks:

How long before the well-educated, technocratic elites come to believe the unemployed underclass should no longer have the right to vote?

Well, given how difficult it has been to get laws requiring voter IDs and the uphill battle to ferret out voter fraud, he needn't worry too much about that.

Anyone who has read any of the previous posts at this blog about Universal Basic Income know that I favor it, so long as it's properly implemented. But before jumping head first, we should pay attention to those jurisdictions that are experimenting with it and learn from them.

universal basic income -- not such a bad idea if it really means extinguishing all other subsidies

Mark Zukerberg is the latest prominent person to advocate for it.

And conservatives are vehemently opposed to it, because after all, our nation was built on personal responsibility. They have a point. But we're on the verge of socialism anyway with that "safety net" propping up a lot of able bodied citizens already.

The beauty of the basic minimum guaranteed income as it's been proposed by Charles Murray and others it that extinguishes all over subsidies. That would include welfare, social security, SSI, food stamps, and all other forms of subsidies. Overall, they say it will be cheaper.

If it were to be implemented as they propose, it probably would be cheaper. But all those stuck cows will be screaming like stuck pigs. Under the guise of opposition to socialism, those beneficiaries of government largess will stop it from ever happening. Too bad.

As much power to influence as Mark Zukerberg has with the Facebook mind control tool, it's doubtful he could change attitudes enough to get this one through. Heck, Congress is so set in the status quo that it can't even adopt something as beneficial to the people as tax reform.

Meanwhile, as conservative argue it goes too far. Progressives argue that it doesn't go far enough and should also ensure a guaranteed job. Now we're talking real socialism.

Guaranteed basic income -- the concept grips the imagination and won't let go

WSJ.com has a review of a took titled "Basic Income." Hyperlink here: Cash Handouts for Everyone. That link is behind a paywall, but another discussion on the book topic can be found at WaPo here: How to ensure everyone a guaranteed basic income.

We talked about it at this blog almost a year ago in Charles Murray makes the case for a universal basic income.

The concept sounds simple: The government gives everyone a modest income -- just enough to pay for minimum existence. There will be some for whom that will be enough so long as they don't have to work. Others will work at jobs or their own businesses to better their lives. By eliminating all other forms of welfare and government payments the overall cost to taxpayers will be lower.

Would it work as predicted? It's an intriguing concept, especially the part that eliminates welfare and subsidies. While most Americans are probably curious, they/we are not likely to want to uproot the economic system in the U.S. for such a grand experiment. What we need is some country to do it first and offer some proof that a guaranteed basic income would accomplish all those lofty goals.

Addendum: It's interesting, although not surprising, that so many of the tech billionaires -- those geniuses whose inventions are probably responsible for the loss of more American jobs than were lost to the factories in China -- are in favor of it.

Charles Murray makes the case for a universal basic income

Free money! What's not to like about that? It's a wonder Bernie Sanders isn't promising that.

Not everyone likes the idea, though. A referendum was just defeated by voters in Switzerland which would have given every citizen a basic income paid from the government treasury. Most of us thought that was probably the best outcome. However, Charles Murray has a different take on the universal basic income (UBI) that's worth a look.

He contends "that a UBI is our only hope to deal with a coming labor market unlike any in human history and that it represents our best hope to revitalize American civil society." See A Guaranteed Income for Every American.

However, it will work only if replaces all other payment systems and the agencies that manage them. And there's where it starts to make sense. Here's Murray:

The UBI is to be financed by getting rid of Social Security, Medicare, Medicaid, food stamps, Supplemental Security Income, housing subsidies, welfare for single women and every other kind of welfare and social-services program, as well as agricultural subsidies and corporate welfare. As of 2014, the annual cost of a UBI would have been about $200 billion cheaper than the current system. By 2020, it would be nearly a trillion dollars cheaper.

Read the whole thing for the numbers and the upper individual income limit where it would partially phase out. He acknowledges that the UBI might make bums of some people. But, he says, we've got plenty of those already. The question would be whether we would have more of them.

In that regard, the survey cited here isn't encouraging:

"The millennial workforce is predominantly 'checked out,' not putting energy or passion into their jobs. They are indifferent about work and show up just to put in their hours," said the survey of the 73-million strong group.

In any event, Murray always makes a good point. And we would do well not to ignore him however unlikely the ideas are to get implemented.

Guaranteed income -- proponents make a fine argument but omit one important issue

There was a social experiment in a community in Canada in the '70s wherein each resident was guaranteed a minimum income. It's written about fondly at The Town Where Everyone Got Free Money by Whitney Mallett. Here are some excerpts that should provide the gist of it, to wit:

Between 1974 and 1979, the Canadian government tested the idea of a basic income guarantee (BIG) across an entire town, giving people enough money to survive in a way that no other place in North America has before or since. For those four years—until the project was cancelled and its findings packed away—the town's poorest residents were given monthly checks that supplemented what modest earnings they had and rewarded them for working more. And for that time, it seemed that the effects of poverty began to melt away. Doctor and hospital visits declined, mental health appeared to improve, and more teenagers completed high school. ...

"Originally the interest was primarily prompted by the concern that the welfare system was discouraging people from working,"Ron Hikel, who coordinated the Mincome program, told Dutch television last year. Today, he says, the motivation for guaranteed income is an increase in inequality. "At some point, the income inequality begins to interfere with people's ability to have education, and also to take care of their own health. To the extent that that effects the relations in society, it begins to accentuate divisions and differences, and you get an increase in social pathologies, alcohol addiction, the use of drugs, an increase in mental illness, a decrease in provision of educational courses and an increase in the crime rate."

Let's assume for a moment that a guaranteed income does not discourage the recipients from working. There's still a pretty big issue out there. And that's the fact that in order to give money to some people, you have to take it from other people. There's where the disincentive to work occurs. As Margaret Thatcher famously said, "the problem with socialism is that eventually you run out of other people's money."

A BIG Allowance

What would happen if everyone got a monthly allowance? It was tried in a grand experiment in an impoverished village in Namibia.

The Basic Income Grant was a project in which some churches and NGOs gave N$100 to each resident under 60 years of age in Otjivero-Omitara, Namibia, between 2007 and 2009. They took care to get everyone registered as of a certain date so that new arrivals wouldn't qualify. Then they set up a system to pay an allowance to each of the registered residents each month.

The sponsors evaluated the program and reported it a success. Among the things resulting from the grants were the following (from the executive summary):

- the community organized a committee to advise the recipients how best to spend the money;

- there was a significant increase in population of the village after the grant program was implemented;

-- economic activity increased: "The rate of those engaged in income-generating activities (above the age of 15) increased from 44% to 55%;"

-- number of people with incomes below poverty level fell;

-- child malnourishment declined;

-- the recipients could afford more nourishing food and medicine;

-- school attendance rose and the drop out rate fell;

-- use of the settlement health clinic increased as the residents could afford the fee;

-- household debt fell and savings increased;

-- crime rates fell;

-- women were freed to some extent from "the pressure to engage in transactional sex";

-- no evidence that alcoholism increased, helped no doubt by agreements with the liquor outlets not to sell alcohol on the days the grants were paid.

All well and good, and the people in the project must have benefited, if for no other reason, from being able to put some food on the plate. But there's still not enough evidence to overcome the basic principle that handouts do nothing to instill a work ethic and do little else than develop dependencies. The welfare programs in the U.S. up to the mid '90s proved that. And it took welfare reform to turn that around.

The real cure for poverty would be an environment that protected property rights, allowed free trade, and allowed the individual to generate income with his/her own ingenuity and keep it.