The Progressive Case for Greatly Replacing the Welfare State with Unconditional Basic Income
Time for a floor under all instead of a net under some...
Establishment voices have picked up on a way of opposing the idea of a monthly citizen dividend of about $1,000 per month, known as Unconditional Basic Income (UBI), in a way that successfully leaves some progressively-minded people afraid.
The fear inspired is that those with the greatest need may be left worse off with UBI compared to the existing status quo of more than 300 government programs and tax expenditures that currently comprise the U.S. safety net that UBI has the potential to greatly (but not entirely) replace.
The argument goes that because we currently target money to those in need, by spreading out existing revenue to everyone instead, those currently targeted would necessarily receive less money, and thus would be worse off. Consequently, the end result of basic income could be theoretically regressive in nature by reducing the benefits of the poor and transferring that revenue instead to the middle classes and the rich. Obviously a bad idea, right?
The problem is that those usually from the left who make this particular argument are building somewhat of a straw man, not only because of the blanket assumptions they are making around a very specific tax-neutral design, but also because they aren’t publicly acknowledging just how poorly our present means-tested programs are targeted by virtue of their applied conditions, and just how unequal one dollar can be to one dollar, however counterintuitive that may seem.
Basically, this particular argument would only make sense if we in no way altered our tax system to achieve UBI, and if our programs worked as we assume they work because that’s how they should work. The problem is they don’t work that way.
Assuming things work as we think they work is exactly one of the biggest obstacles we’ve always had to improving anything, because to fix something we first need to understand it’s broken. If it ain’t broke, don’t fix it, right? Well, guess what? Our safety net is broken, and it’s broken at such a fundamental level, there’s no fixing it, because it is by design. A net full of holes must be replaced by a floor free of holes and that floor is unconditional basic income.
Nothing but net holes
In the United States today, on average, just about one in four families living underneath the federal poverty line receives what most call welfare, which is actually known as Temporary Assistance for Needy Families, or TANF. It gets worse. Because states are actually just written checks to give out as they please in the form of “block grants,” there are states where far fewer than one in four impoverished families receive cash assistance.
In Oklahoma, 7 out of 100 families living in poverty receives TANF. In Wyoming, merely 1 in 100 of those living in poverty receives TANF. Where does the money go instead? It goes to educate the children of those earning over six figures. It goes to programs trying to convince women to get married. And it goes directly to state government treasuries so they can cut taxes on the rich. The fact is that cash welfare, as it exists today, is not given to the overwhelming majority of those living in poverty who need it.
Single adults without children know this better than anyone. They even have their own moniker: ABAWDs (Able-Bodied Adults Without Dependents). ABAWDs have the lone distinction of being the only demographic in the U.S. to be literally taxed into poverty, all 7.5 million of them. Because they earn income and because they do not have the child necessary to qualify for virtually any assistance — even the earned income tax credit (EITC), which is meant as a boost for low-income workers through the tax code — those earning enough to be above the federal poverty line can end up beneath the poverty line after paying taxes. And those already beneath the poverty line are pushed even deeper, effectively punished for being childless and working.
Combine all of those without dependents with all of those with dependents but without sufficient income to qualify for EITC and living in states averse to cash assistance, and the reality is that tens of millions of adults and children fall straight through the net purportedly designed to catch them. Any net is mostly nothing but holes, and nowhere is that more true than in the United States.
Assumption: Everyone living beneath the poverty line receives cash assistance.
Observation: Most don’t.
The same is true of housing assistance. There is a belief that poor people galore are sitting on easy street with affordable living conditions, where housing vouchers are given away like Halloween candy to anyone with a hand out.
The truth is that 24 percent of those who qualify for housing assistance get it, and getting it can mean years of waiting on lists. Here in New Orleans, where I live, the wait list is opened about every seven years or so, and when it is, tens of thousands apply despite fewer than 1,000 people becoming new recipients of vouchers each year.
Additionally, vouchers are not at all “just like cash.” Cash is accepted in payment by all landlords everywhere. Section 8 vouchers, however, are accepted only by those who choose to accept them, which is few and far between, and certainly not in what are considered to be “high opportunity” neighborhoods. This is true even of “supervouchers” that are specifically designed for that purpose.
Assumption: Everyone living in poverty receives housing assistance.
Observation: Most don’t.
Food stamps, too, are not given to everyone living under the poverty line. About one-quarter of those living in poverty get no government food assistance, and of those who do, a third of them still need to visit food banks for added assistance because the amount given is nowhere close to being sufficient to get people through each month.
Estimates point to food stamps lasting on average about three weeks of every month. Worse yet, food stamps can even have harsh time limits (e.g. three months of SNAP every three years), growing restrictions on how they can be used (sorry, no seafood allowed) and work requirements (30 hours per week).
This is food we’re talking about. Why should any bureaucrat ever exist between the most basic human need of all — the need to eat — and access to food?
Assumption: Everyone living in poverty receives food assistance.
Observation: Some may temporarily, but the amount is insufficient and full of costly strings.
However, one of the best examples of all the vast differences between the assumption and the observation of how government benefits work is how we target those with disabilities. It has been estimated that 22 percent of adults in the U.S. have some form of disability. At the same time, only 4.6 percent of adults age 18–64 in the U.S. are receiving disability income. So again, about one-quarter of those we say we should be targeting actually receive anything, while the bulk get nothing.
Additionally, there are currently over 1 million people waiting to prove they are disabled, and on average they wait for two years. During that time, over ten thousand of those waiting die every year, and none are allowed to work during their wait, or else by virtue of working, they prove they are fit to work after all. That is also true for everyone on disability and it's something too few people seem to understand about disability benefits.
When it comes to disability income, you are essentially not even allowed to earn additional income. If you’re on SSDI and earn one dollar over $1,090 in a month, you are dropped from the program and lose 100 percent of your benefit. That is the steepest of “benefit cliffs” and it’s the equivalent of taxing those with disabilities at rates far greater than 100 percent as a reward for their labor. It’s also the exact opposite of a basic income that is never taken away.
It is this clawback of means-tested benefits with the earning of income that is possibly the single greatest flaw of all targeted assistance, and also the single most ignored detail when people defend the current system over the introduction of a basic income that would replace it. Simply put, $1,000 per month in welfare is not at all the same thing as $1,000 per month in basic income. It’s not just apples and oranges. It’s rotten apples and ripe oranges.
With welfare, because it is targeted and therefore withdrawn as income is earned, people on welfare are effectively punished for working. Their total incomes don’t really increase with employment. Welfare functions in many ways as a ceiling.
With basic income, because it is unconditional and therefore never withdrawn as income is earned, people with basic incomes are always rewarded for working. Their total incomes always increase with any amount of employment. Basic income therefore functions as a floor.
Do you see the difference?
So when someone says the details matter when it comes to the idea of basic income and suggests the possibility that it could be regressive, and even increase inequality by taking money being targeted at the poor and giving it to the non-poor, understand that the details of the details matter even more than just the details.
The regressive argument operates on the myth that for every four people living under the poverty line, four people get an amount of assistance that lifts them far above the poverty line, and that $1 of welfare is exactly equivalent to $1 in basic income.
The basic income argument operates on the reality that for every four people living under the poverty line, only about one person gets an amount of assistance that does more to trap them in poverty than to lift them out of it, and that $1 of welfare is worth far less than $1 of basic income.
It’s really important to understand this, so let’s zoom in a bit on a worst-case scenario. Let’s assume we replace all of our programs targeted at the poor with UBI, including even Medicaid (which I don’t recommend unless we replace it with universal healthcare instead), and that we provide the UBI to adults only, with nothing for kids (something else I don’t recommend).
Using an example of a single parent with two kids within the current system, we could regressively replace around $45,000 of benefits (if we also eliminate child care, which is yet another detail I don’t recommend) with $12,000 in cash. That is a worst-design scenario and totally regressive right? No. It’s actually partially regressive and mostly progressive.
Although true that one in four would be worse off in such an inferior UBI design, it’s also true that three of four would be far better off because they would no longer receive little to nothing. As an oversimplified example for the sake of clarity, that means instead of the distribution across four adults being $45,000/$0/$0/$0, it would be $12,000/$12,000/$12,000/$12,000. That is more progressive as a whole than it is regressive, and inequality is reduced overall, not increased, because the total at the bottom went from $45,000 across four people to $48,000 across four people. And that is for basically the worst possible, most unrealistic of UBI designs.
But again, those numbers cannot be compared dollar for dollar. Welfare dollars disappear with work and basic income dollars are kept with work. That same parent receiving $45,000 for nothing, if they got a job paying $30,000 right now would receive $20,000 in benefits. That would be a gain of $30,000 combined with a loss of $25,000. That’s a gain of $5,000 for a $30,000 job, or in other words, an income tax of 83 percent. Who else is taxed at 83 percent? No one. In fact, the richest are taxed the least because their income, which isn’t derived from work, is special. It’s simply capital gains, which is taxed at 20 percent.
Even more troubling, welfare dollars themselves are not equivalent to each other. Despite it being against the law to vary welfare dollars along racial lines, that’s exactly what we do. How? It’s again due to the nature of block grants for states. When Bill Clinton signed his welfare reform into law, he agreed to write checks to the states and let them handle how they dish out welfare. As a result, just five years after welfare was reformed into what it is today, 63 percent of those in the programs with the least-harsh conditions were white and 11 percent were black, while 63 percent of those in the programs with the most-harsh conditions were black and 29 percent were white.
In other words, a dollar in welfare has about three to five times as many strings for someone who is black than someone who is white. These strings absolutely affect end results. Joe Soss, co-author of Disciplining the Poor: Neoliberal Paternalism and the Persistent Power of Race describes his findings thusly:
“The stringency of the rules matter tremendously for outcomes. The tougher the rules — and the more frequently people are punished for breaking them — the worse the outcomes are for people after they finish the program. In fact, in the toughest programs, people actually end up in worse shape after they get through them than they were before they got the benefits to begin with. And remember, they were in such a bad situation that they had to turn to a welfare program that’s been so stigmatized that pretty much everyone wants to avoid it. We also found that people who go through the toughest programs learn lessons about government that lead them to retreat from participating in politics. They become less likely to make their voices heard, and less likely to participate in elections and community organizations.”
Does this sound like a just and equitable system? Or does it sound more like a racist meat-grinder?
The bare naked truth of our present welfare system is a racially biased, overly paternalistic, unnecessarily controlling, grossly exclusionary system of punishment and blame that limits opportunity and taxes working beneficiaries more than any other worker in any income tax bracket.
It doesn’t abolish poverty. It helps sustain it. And this is the system establishment voices wish to improve upon in piecemeal fashion, possibly because they’re not the ones being chewed up and spit out by it, or even neglected by it entirely.
However, even if all of the above is clearly understood, there is one absolutely vital thing remaining to understand about basic income that cannot be replicated in any other way, by any other means. Because basic income lacks conditions and is paid regardless of work, it provides recipients the power to refuse to work. This is the real fear of those who worry a basic income will result in people working less, but it is also its greatest strength.
The ability to say no to an employer provides people the bargaining power and the choice to determine how they work, where they work, for how much and for how long. No other policy does that. A minimum wage certainly doesn’t. Wage subsidies certainly don’t. Without basic income, the labor market is coercive, and that means people accept what they can get. With basic income, wages for low-demand jobs must go up and/or hours must go down in order to attract people with incomes independent of work to do them, or those same jobs must be automated to be performed by machines instead, whichever is cheaper.
No other policy but basic income rewards ALL forms of work either, especially the massive amounts of unpaid care work going on to the tune every year of around $700 billion, or 5% of US GDP. With UBI, the ability to pursue unpaid work over paid work becomes an ability of every single citizen instead of only those fortunate enough to not have to worry earning money to live.
A basic income is most simply a minimum income floor. It’s a new starting point above the poverty level instead of below it. There will still be jobs for people to earn additional income and those jobs can pay more if people hate doing them. Additionally, considering a potential future where there’s half as much employment, that also means just as many can be employed if we all work half as much so as to better share the remaining employment. And with the increased bargaining power UBI provides, that can also mean getting paid more for less work.
Basic income is not some regressive conspiracy of the Silicon Valley elite to create a neo-serfdom where the entire population only earns a maximum of $12,000 per year. That is the exact opposite of how it works. With basic income, $12,000 becomes the new absolute minimum for everyone and no one is a serf because everyone’s basic needs are covered. Poverty is eliminated. Inequality is reduced.
Additionally, everyone is free to earn any additional income, and on their terms. For the first time, everyone will have the individual negotiating power to dictate terms to employers that must be met. People who have this fundamental power are those who can then make further desired changes in the economy, in their businesses, in their governments, and in their lives.
It is vital to understand UBI as a foundation upon which to build not only our own lives but also other policies. With UBI, money spent on child care and elder care will go further, because those with UBI could choose to care for their own families instead of requiring the services of a paid care worker. With UBI, money spent on education will go further because not having enough money for basic needs hinders educational outcomes. With UBI, money spent on healthcare will go further because not having enough money for basic needs creates sickness where it would not otherwise exist. With UBI, any universal healthcare system would cost less thanks to a population of physically and mentally healthier people.
Without UBI, everything we build is built without a foundation underneath it, and that kind of building leads to unstable structures full of cracks, that can eventually collapse.
So you tell me. Would you prefer conditional welfare nets or would you prefer an unconditional basic income floor? Because one of these options is a relic of history, and the other is a road to the future.
Top illustration by Lousine Boyakhandjyan
Infographic by Julia Sevin
Hi Scott. Great discussion of basic income (as always). I hadn't seen the Nation A/Nation B infographic before - such a good illustration of the concept.
I don't know that I'm enough of an expert on economics to say for sure if this would work - though I 'm pretty certain it would. What I can say is that the ethical justification for unconditional basic income is sound. I'm a believer in Rawls' arguments that a rational and just society is one in which even the worst-off have a reasonable standard of living and as much opportunity to achieve as anyone else. I also think the idea, that inequality is only as justifiable as the good it does for society as a whole, applies here too.
Thank you. I originally had the infographic created for my first World Economic Forum piece last year.
https://www.weforum.org/agenda/2017/01/why-we-should-all-have-a-basic-income
The economics of UBI are sound, and it has backing from an increasing number of economic Nobel winners in addition to a growing pile of evidence in favor. And I agree the ethical justification for UBI is absolutely sound as compensation for the privatization of the commons. Our great challenge is a matter of collective will. We have to decide nation by nation as citizens, that a just society, and even a strong economy, requires UBI as a starting point below which no one is allowed to fall, and on top of which everyone is allowed to thrive.
It took from me a life time to read but it worths.. I wonder how much time it took from you to give such an amazing topic ..Wich is very rich of information.. I really appreciate your efforts.. upvoted even if it doesn't worth anything sorry
Thank you for taking the time to read this, and for the upvote! I originally wrote this article for TechCrunch back in 2016, and if I remember correctly it took me at least a week to write. To republish it here on Steemit, it took about a day to reformat and update. Cheers!
Hefty, amazing write-up on the subject, and hopefully it will get the attention it deserves. My only addition is that I believe that UBI is a stepping stone to a Universal Corporate Dividend either on top of or replacing it (as corporations continue to grow and everything else continues to fade away) that all people should receive, and that is kind of implied in UBI, but I think there are some key differences, at least as far as how I envision UCD should be implemented. Welfare being used as a control tool and a deterrent to moving up is a complete joke, society can and should do far better than what we have done.
This has me thinking of the market socialism of Oskar Lange, Fred M. Taylor, and Abba Lerner, where industry is all publicly owned but citizens all get a social dividend from the publicly-owned industry. Also, Robert Anton Wilson's RICH economy idea is pretty cool, with the plan of automating everything and giving everyone a basic income. Wilson's plan would have basic income increase until it becomes a national dividend, where all of gross national product funds a dividend. Interesting ideas, in my opinion. I'm not really pushing for the full socialism thing, though. I want basic income and social democracy, but I do think that automated industries ought to be taxed to such an extent that it basically serves as an analogue to public-ownership. As they become more and more automated, they ought to be taxed more and more.
I think socialism can only evolve properly in a bubble, or if the whole world was socialist, along the original lines of thinking of when socialism could actually be successful. Competitive forces kind of squash the notion when it comes to head with capitalistic nations that compete for resources more ruthlessly. Social democracy is nice, nearly anything is better than most of what's out there in the world now. I personally think that things should be taxed so heavily as to make most things unproductive, if we roll in the absolute costs of producing things then maybe we can save the world some destruction. Combine that with an educated population that understands the damage their consumption does and we're looking at a brighter future. Great to see other thinkers on the site talking about this kind of stuff.
Definitely. We need cap and trade and Pigouvian taxes, that will make the negative externalities be reflected in the final cost of products. That Noam Chomsky line is pretty much spot on: 'under existing capitalism, we have the socialization of costs and the privatization of profits.' We need to use taxation in order to keep corporations from being able to socialize costs.
There's one argument you missed - unless economic rents are taxed first, UBI will accelerate inequality growth.
UBI directly reduces inequality. That is mathematically true because it changes the distribution of income. However, I do agree that focusing funding on economic rent is the optimal way of funding UBI, especially via a land value tax, for UBI to have the greatest possible effect on inequality.
I've written more about this for the World Economic Forum: https://www.weforum.org/agenda/2017/04/extreme-wealth-inequality-alaska-model
I’m afraid that it would and there’s already empirical evidence to support it.
I usually reference a speech that Winston Churchill made to Parliament in which he said that people who lived on the south side of London had to pay sixpence each week in tolls to cross a bridge to get to work. It make not sound like much these days, but it was serious enough for the government to buy the bridge so that they could cancel the toll.
Churchill noted that, shortly after, rents on the south side went up by sixpence per week.
This is an example of how giving a known increase in income to everyone will accelerate inequality growth - UBI money would simply flow from the hands of the many into the hands of the few, which is why taxing economic rents is mandatory - it’s how you combat this rent-seeking behaviour.
There is not empirical evidence to support it. Here is some evidence.
In Lebanon, people were given unconditional cash grants comparable in size to basic income. Those above an elevation line got it, those below didn't. This created a natural experiment where the only variable was getting or not getting the money. Result? There was no effect on rents.
In the 70s experiment in the US, the cash resulted in a 4-6% increase in home ownership. That reduces upward pressure on rents.
In Mexico, I suggest just reading this next.
https://www.vox.com/policy-and-politics/2017/9/20/16256240/mexico-cash-transfer-inflation-basic-income
Also keep in mind that as long as the UBI is a flat nationwide rate, it essentially puts landlords in high CoL areas in competition with lower CoL areas.
There’s nothing but empirical evidence to support what I said.
The first example you gave was from an experiment that gave money to some people. This is a non-UBI and therefore sub-sufficient for proving the viability of an actual UBI. It’s the same mistake that they made in Finland.
Universal basic income must be funded by land value tax (LVT), and supplemented by things like cap and trade (which is actually a logical extention of LVT).
I did not read the thread at all.
to the topic alone there will be some good outcomes to it like reduced bureaucracy and less people trying to claim entitlements they do not deserve, but it will have some bad outcomes too like the basic income becoming devalued more and more by inflation to the point of it being far from sufficient, and most probably will be less than sufficient before any further devaluing happens.
It will also keep the disadvantaged and disabled disadvantaged, because their disability will not grant them any compensation relative to other people.
Basic income should not be granted to people with above average income.
Please read this next to better inform what you are assuming about inflation.
https://medium.com/basic-income/wouldnt-unconditional-basic-income-just-cause-massive-inflation-fe71d69f15e7
Just by reading the informative link text you provided without clicking on it I know you did not comprehend what I wrote about inflation.
You simply saw I used the word and reacted to it.
Read and think about what I wrote and think if the link you posted as a reply to me has any relevance to what I wrote.
So you didn't read the original article, and now you didn't read the article I wrote in response to your reply that directly addresses in great detail the uninformed point you made?
Seriously, start reading articles instead of just thinking you know everything based on urls and titles.
Read and think about what I wrote.
So you let me read your entire article including its irrelevant parts to your quarrels about my claims and let me guess how it answers one of my claims instead of leaving nothing to doubt and answering shortly.
My guess is that you think basic income would enforce a lower rate of inflation and make my claim about governments devaluing entitlements by inflation.
Even if I guessed correctly, which I still wonder why should I guess what you mean, it only addresses only 1 of my claims.
The cases you provided in your article, Alaska and Kuwait, may have been affected by other factors and may be counteracted with a larger amount of cases that showcase the opposite of what you tried to showcase.
My claim is simpler: if a government or a central bank wants to enforce a higher rate of inflation it can.
In the cases you provided, the state of Alaska which is not even a sovereign and the state of Kuwait might have acted in additional ways which you did not mention in your article and these additional actions were the real reason to the reduction of inflation.
So is the lesson that UBI will curb inflation created by central banks and governments in order to devalue this same UBI?
Simply put, inflation is a multi-variable equation. By increasing money velocity for the bottom 60-80% through a tax and transfer of existing money from the top 20-40%, a range of effects will occur that all depend on other factors. To assume inflation across the board, especially to the point of eroding the entire value of the UBI is just about as dumb as saying if you jump really high, you can land on the Moon. Theoretically speaking, that's possible, but it's really really stupid.
Some prices will go up, some will go down. Some supply will not be able to be increased as much or as quickly as others. Some supply is infinite. More money in the hands of more consumers will drive the economy, creating more jobs, and also improving the price mechanism. Because of unconditional income, more people will also be able to engage in the sharing economy as prosumers, where money doesn't actually exchange hands at all.
There's a lot to think about with UBI. Don't think it's as simple as going, "Duh, more money equals higher prices equals pointless."
I did not mean that inflation will devalue UBI to 0 quickly or even slowly, just that even if by some surprise it will be sufficient initially, which I do not believe, since sufficient means discourage to work, it will be devalued as much as the government will see fit.
I am not against UBI, I just explained why it will not happen and where and when it will, it will not be sufficient.
I also maintain the belief that it will be inflationary, and already explained why despite reading your article, not that it was even a part of my claim originally, because I thought it was too obvious to mention, and even if it is inflationary, it is still not sufficient to rule against, so I still wonder why you brought your other article from medium.
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Not even shadowstats.com John Williams, whose data would not be accepted anyway by governments.
Also why give him anything upfront?
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What do you mean devalued by inflation more and more? Should not be given to people above average income, congraz you watered this shit to nothing more than another failed socialist experiment. You are not supposed to be compensated for being disabled, solidarity is nonsense, we are not communists and I also believe that people receiving basic-income will help those disabled as they have time and little extra for that.
You should learn what inflation is and how it is used by governments to avoid paying back as much as they should.
I guess UBI is a capitalistic libertarian idea.
Sorry for not knowing it before.
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Thank you for shining a light on the details of the US welfare systems. I exist in the severely disabled category and what you said it spot on, though you did leave out an important detail. Disabled people and those that marry them are also punished when they get married. My spouse's income disqualifies me for disability benefits, and the same is possible for my health coverage.
That is an important detail and thank you for sharing it here. I need to mention that more often, how marriage affects all benefits.
What about neither? Taxation is theft. Labor is already optional if you want to survive. In a truly free society, you are free to succeed or fail.
You state, "The ability to say no to an employer provides people the bargaining power and the choice to determine how they work, where they work, for how much and for how long."
This already exists. No one is forcing you to work for anyone, and no one is stopping you from bettering yourself. When you have a desirable skill set, you have bargaining power and are sought after companies. You are essentially proposing that the prospective employee should be able to hold the employer (the people who will PAY you) hostage. That seems completely asinine. Businesses simply wouldn't succeed if employees constantly held them hostage. Employees don't take the risk, employers do, thats why they make the rules.
I recommend reading this next. It's much longer but it's also much more up your alley.
http://www.law.nyu.edu/sites/default/files/upload_documents/The%20Libertarian%20Case%20for%20a%20universal%20Basic%20Income.pdf
You lost me at the very title of the paper. Wealth redistribution is only plausible through taxation. Taxation can only be enforced through force. The use of force goes against the NAP - one of the very core fundamentals of Libertarianism. Governments will never be as effective as a truly free market or charities. That paper tried very hard to make something simple very complicated to justify its point.
Wow, that's a very well argued post. I like to think of UBI as having a moderately well-off parent who supports you while you pursue something meaningful so that you don't starve.
Andy Stern (former president of the SEIU and author of Raising the Floor) speaks of UBI on similar terms. He talks about how many kids are already receiving parental basic income.
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