Monday, August 01, 2016

Universal Basic Income - yay or nay?

Welcome to Tony Island blog!

I have been seeing articles about the concept of a Universal Basic Income, but never read them until a few weeks ago. There was a short article on MSN that I decided to read and it really got the wheels in motion. I thought I'd be against the idea, but it does seem to have some positives to it.

The basic idea is that starting at age 21, the government would give each citizen a fixed yearly income (the article I read mentioned $13,000). In exchange, it was proposed that various government programs could be dismantled including Social Security. That one idea sparked other ideas in me. And so I thought I'd write them down here.

First, I think that the base income should be $15,000 as I think that's about the average a Social Security recipient receives.

Now, let's look at the Federal programs that can be eliminated:

Social Security - with a guaranteed income starting at age 21, this is a no brainer program that can be eliminated. We also eliminate all the paperwork and deductions for employers, too.

Unemployment Insurance - this is another no brainer that goes into the dumpster and passes the savings to employers.

Workmen's Comp - another program dismantled.

SNAP ("food stamps") - buh bye.

The elimination of the first 3 programs listed would give a huge lift to employers. SNAP wouldn't be needed since essentially the basic income would be a block grant to individuals to do with as they please.

Remember, most states would also eliminate their corresponding programs, too. The elimination of all these programs, their red tape and sticky taxes would kick the economy into high gear almost overnight.

Minimum wage would be repealed, too (at least Federally). A guaranteed $15k income is essentially $7.50/hour. Since workers would now have some leverage, they wouldn't have to take any job just to survive - they can wait out for a decent paying job. Employers would have to offer at least $7.50/hour (plus benefits) to attract workers. As the economy slows, employers would necessarily lay off employees who would have the guaranteed income as a cushion. Once the economy picks up, hiring would pick up too - wages would generally head up as available labor pools dry up. Instead of the government artificially keeping unemployment at a certain level, we would obtain a more natural rate of unemployment - those who want to work will, while those who don't want to won't (NB: productivity may also go up as you would essentially have motivated workers working; lazy people need not apply). Now, no one is saying that $15k is a livable amount, but it certainly is better than 0. And people could marry or live to together without fear of losing any of their income - this would hopefully help keep families together more. The Federal Reserve would no longer have the "low employment, fight inflation" conflict - it could actually just worry about monetary policy.

This is just a sampling of the benefits (and pitfalls) of a Universal Basic Income. Apparently there are going to be pilot studies in various communities and in Canada. There will of course be huge social issues to contend with - for example, take a group of 20-somethings gangbangers that suddenly have a pool of $100,000 or more to commit crimes - what are the repercussions? Or someone who spends his or her money every year without saving any of it for a rainy day? How do we address business taxation? Individual taxation? And the biggest question - where does the money come from? Taxing "the rich" to pass it to the poor isn't a long term viable solution. A national sales tax would probably be a good idea to start - though states may cry foul.

Would any of the power brokers in DC be willing to give up their power and money (think government worker unions and the slush fund they get now via weekly payroll deductions, among other players)?

As a society, I think it's really something to think about - but we must analyze it in depth. The repercussions need to be understood and solutions developed before rolling out such a program.

Do you have any thoughts on this? Please share them with us below! Links to any articles discussing this idea (pro or con) would also be of value.

Thanks for reading Tony Island blog!

No comments:

Post a Comment