Basic Income

It turns out there is supporting evidence for a lot of the claims I have made in the past.  I write based on a number of things.  One big part of my writing is extensive research.  Another part is observations.  A third part is math and logic.  I have made claims about where our economy is headed, if we keep automating everything.  This claim is based part on observation and part in math and logic.  It is completely illogical to assume that our economy will never change.  It is also illogical to assume that increasing automation will not decrease necessary work.  Thus, we can assume that our economy will change, and we can further assume that as a vast majority of trivial work is automated, that work will no longer be necessary for humans to do.  We can also assume that unless we create as much new work as is automated, that cannot be automated, human labor will become less and less useful and valuable.  Observation has shown this to be true.  Currently, many businesses are dramatically underpaying their employees, and still we have a shortage of work (jobs).  Businesses can automate many processes cheaper than they can hire humans to do the work, so less human labor is necessary.  This results in a surplus of human labor, which drives labor prices (wages) down.  I have argued that the logical progression of this will end where most Americans are forced to live off welfare, and very few will actually work for a living (mostly engineers and other creative workers).  All of this is based strongly in logic, math, and observation.  Now, this is not the case I plan on discussing today, but it is related.

Recently I have argued that we need to improve welfare enough that it will keep people out of poverty.  I showed how the U.S. government's definition of poverty is almost half the actual poverty level, and I showed how the current welfare system seems to take advantage of this to trap people in poverty.  I argued that we need to fix the legal definition of poverty, and I argued that we need to then fix the welfare programs to take the new definition into account.  I also argued that we need to raise minimum wage to reflect the actual poverty level.  I may have also argued that Congress needs to regularly reassess the defined poverty level and change the definition if necessary.  My take on the current situation changed today, and I find that some of my arguments may be obsolete.  I would like to discuss why this is.

Today, I read two things (brought to my attention by a friend).  The first is a letter by a guy who quit his job and started writing for a living (found here).  This man, Chuck Bukowski, compared the current state of the U.S. economy to slavery, and he once said, “Slavery was never abolished, it was only extended to include all the colors.”  If you have read my previous articles, you know that I have the same opinion.  The second is an article by Rutger Bregman, a guy from the Netherlands, who discusses a bunch of research that opened my eyes to another system of welfare (found here).  The first was interesting.  The second was an epiphany.

This idea of a "basic income" has been around for a while.  The idea is that the government pays everyone a small wage that is enough to survive on.  Note that I said, "everyone."  This means rich and poor alike.  Now, I can hear a lot of people asking, "why the rich?"  This is a valid question, with a very good explanation.  The answer is "privacy."  Another answer is cost.  It turns out that running a welfare system that has a lot of restrictions and requirements costs a lot of money.  In May 2009, London did an experiment where the city gave thirteen homeless men 3,000 pounds (around $4,500 in U.S. dollars at the time), with no strings attached.  Now the biggest argument against a government provided basic income in that it will cause a lot of people to quit their jobs and freeload off the state.  Out of these thirteen guys, eleven of them dramatically improved their lives.  They got housing, some took classes to learn useful skills, some got treatment for drug abuse (one quit heroin), and they made plans for the future.  Eleven of thirteen is pretty good odds.  The best part is that the 50,000 pound expense of giving these guys the money (a bit was spent on administrative and research costs) actually saved the city around 350,000 pounds that would have been spent by law enforcement dealing with these guys.  It turns out that this argument that a basic wage will reduce incentive to work is wrong.

This London experiment is neither the only, nor the most recent experiment of this type.  Manitoba, Canada funded an experiment dubbed "Mincome" where an entire town was placed under something like a basic income for four years.  The requirement of the experiment was that it would ensure no one would live below the poverty level.  This resulted in around 1,000 families getting some kind of government pay check.  Evidently the results of the experiment were hidden by the provincial government until 2009.  The research showed that very few people decided to quit working.  Further, it showed that a number of the residents started their own businesses, because the basic income reduced the risk substantially.  Ultimately, it turns out that the experiment was an awesome success.

There are plenty of other instances showing the same results.  In Kenya, a guy was randomly given a year's pay, and used it to buy a taxi motorcycle, so he could increase his income from $2 a day to $6 to $9 a day.  There is also evidence that he used some of the money to help neighbors start their own businesses and fix their houses.  Uganda once gave $400 each to 12,000 youths, which dramatically improved their chances of getting education and a good job.  Uganda also gave $150 each to 1,800 poor women, which ultimately resulted in permanent income increases.  In the last case, it was discovered that while the women who accepted support from aid workers turned out better, the difference would have been even more had the salaries from the aid workers been given to the women, instead of the support.

Another argument against a basic income is that without restrictions, many people would spend the money on things that are not necessities and would still live in poverty conditions.  The London case disproved that pretty effectively.  It turns out that homeless people buy alcohol because they cannot afford anything else.  Give them a large amount of money, and they have a very high probability of spending it wisely (most of the London guys spent only 800 pounds of the money in the first year, saving the rest).  Evidently poor people are poor because they do not have enough money, not because they are too stupid to use it wisely.  If you give them enough money, they will use it to get out of poverty long term.

The last serious argument against a basic income is the massive cost.  One estimation of the U.S. is that a basic income system would cost around $175 billion a year.  Contrast this with our $700 billion a year military, and it does not seem like so much.  It gets better though.  The Mincome experiment showed crime reductions.  This means reduced law enforcement costs and reduced crime recovery costs.  The London experiment showed a dramatic reduction in costs from getting homeless people off the street, to the point where the savings was seven times the cost of the program.  There are also clear economic advantages to providing enough money to everyone.  Economic condition tends to be based on how much money flow there is.  An economy where a large portion of the money goes to CEOs, which then save or invest the money, is weaker than an economy where most of the money continues to circulate back into the economy (and do not try to tell me that investing is the same thing; investing is taking the money at the top, and transferring it one level down, so it can sift back up one level).  Basic income systems have been shown to dramatically improve economies.  The last financial benefit of a basic income system is the cost savings.  A welfare system that has many restrictions and regulations requires a great deal of administration.  This administration is expensive.  Instead of paying a large number of employees well over the poverty level (government employees), get rid of the administration, and just send out checks to everyone.  No more paper work, no more employees doing hours of work to decide who is allowed to have welfare and who is not, no more rent or maintenance costs for government office buildings for the welfare workers, no more expensive forensics to identify welfare fraud, and no more lawyer fees to handle cases that have been identified.  That is a lot of savings.  Getting rid of the huge amount of infrastructure for administering welfare would save a huge amount of money.  Admittedly, the cost will still be a lot, but nothing like opponents claim.

So, here is how this works:  You give a basic income to everyone.  The money comes from businesses and those who have extremely high income (for those with huge incomes, it is more like an extra tax deduction).  The businesses do not suffer from it though, because minimum wage is abolished.  Ok, so here I identify a major conservative upside.  Most conservatives oppose minimum wage, or at least oppose a fair minimum wage.  A basic income makes minimum wage obsolete.  With a basic income, everyone gets enough to survive, without working, so even at $1 a day, they can survive.  This also reduces the need for other workplace regulation.  If I can walk out whenever I want with low risk, my employer had darn well better make sure the workplace is safe.  Also, if my employer makes unwanted advances (ok, I am a guy, so this is far less likely, but the point still stands), I can just quit.  Instead of expensive legal fees, for a case that I may or may not win (and I am almost guaranteed to loose my job despite anti-retribution laws), I can just leave (if I like the job that much, I can still press charges, but if I do still manage to get fired, at least I do not starve).  One of the biggest benefits observed in experiments is the creation of small businesses.  The risk with starting a business is that if it fails, I starve.  A basic income eliminates that risk.  Now, maybe I will have to move to a smaller house, but there is still very low risk.  As I mentioned, this has been observed.  Now, small businesses create jobs (in fact, a majority of U.S. jobs are provided by small businesses).  A basic income even creates more jobs!  Yes, it is true.  A basic income increases the number of small businesses and improves the economy, which ultimately creates more jobs.  Also, a very small percentage of people will quit their jobs if given enough to stay out of poverty.  This will open up a few more jobs.  So yes, there will be more up front costs, but a better economy means more tax revenue.  A basic income could also simplify the tax system, because by not taxing the basic income, people are ensured enough to get by.  Anything over that could be taxed with few deductions, because the government no longer has to worry about anyone getting enough.  Things like the Earned Income Tax Credit and the Child Tax Credit could be eliminated (along with the expensive infrastructure necessary to support them) without hurting anyone.  The basic income does not need to be reported, because the government already knows, and the IRS can ignore it, because it does not make any difference.  The benefits appear to severely outweigh the costs.

Now let us look at privacy.  I may have mentioned this already, but one concern is that a basic income would violate privacy.  First, you already report all of your income to the IRS, where is the privacy right now?  Now, a well implemented basic income system would actually improve privacy.  The requirement is that the basic income is unconditional.  A murderer, child molester, a thief, a gang leader, or anything else, all get the basic income.  The reason is that it would be a very bad idea to give the government the power to control people by restricting their basic income benefits.  Now, here is the privacy: If you are currently on welfare, you will sometimes be asked if there are guns in the home.  This is a way that the government can violate privacy, and it could allow the government to compile a list of poor people that are armed.  A basic income that is unconditional will not do this.  In fact, because it replaces welfare, a basic income removes requirements for government welfare agencies to know your financial state (the IRS still knows).  No one is going to ask how much assets you have that are not in the bank (Food Stamps and Medicaid interviewers are required to record this information).  No government office is going to record how much money you made in the last six months as a qualification for welfare.  An unconditional basic income will dramatically improve personal privacy.

Evidently the U.S. actually almost implemented this idea several decades ago.  Around 80% of U.S. citizens supported it.  The House of Representatives actually passed the bill.  The Senate did not though.  It went back and forth, and as Reagan commented, "In the sixties we waged a war on poverty, and poverty won."  What killed it?  The divorce rate in Seattle allegedly went up by 50%.  The great thing is, years later it was discovered that the numbers were reported wrong, and the divorce rate had not changed at all.  So, what killed it?  Poor reporting.  The U.S. was almost the first large scale experiment with the basic income, an experiment which has never failed on small scales.  Where would we be now, with all of the benefits of this system?

What should we do about this?  Dump the horrible mess that is Obamacare (which still has not born good fruit).  Abolish our current broken welfare system that effectively traps people in poverty.  Lay off the huge number of people employed in rewarding poor people for trying to get jobs that do not exist.  Tear down the unstable infrastructure that is helping businesses keep the American people in bondage.  Finally, once and for all, establish what poverty really is, and define a poverty level that will be regularly reassessed and that is accurate.  Then, take all of the money currently going to welfare, and apply it to the basic income.  According to this, that would covers almost half of it (it covers about $80 billion, of around $170 billion; this does not include administrative costs of Obamacare).  The other half could come from the military (it would be about one eighth of the military budget), until the government reduces the tax exemptions for large businesses.  In fact, even a slight reduction in tax exemptions for large businesses would cover the entire basic income.

We can afford this.  In fact, it is possible that we cannot afford not to do this.  It would eliminate a lot of the problems with our current system.  It would raise our so called civilization to an actual civilization where we do not let anyone starve.  It would give people the opportunity to do the work they want to do, instead of work at a job they hate, but that they are stuck at.  The moral increase would improve productivity.  It would eliminate the huge overhead of our current welfare system, and it would increase our privacy from the government.  (Worried about "big government?"  This will make so much of our current government welfare infrastructure obsolete that it will significantly reduce the size of our government.)  It would improve our economy by a huge amount.  It could even end slavery in the U.S., once and for all.  And, it would not increase the divorce rate by 50% (I hope I am not wrong; I would hate to feel stupid).  A basic income is really the answer to most of our financial and economical problems in the U.S.  And this time, my claim is not just  based on logic and observation, it is also based on a good body of strong evidence.