Economy Kushay's Matter Bank

[AK] Universal Basic Income

This note will discuss arguments for and against a simple project where you give cash to people. That’s it. No complicated bureaucracy through government run welfare programs.

Proponents of universal basic income believe that it gives you more agency over your life (opt-out mechanisms from oppressive works and relationships, choice to pursue non-material endeavors like arts, more capability to determine your own budget, etc.). Apart from it, this proposed policy is also bipartisan since it reduces governments role in people’s lives (appeases conservative, even a diehard capitalist like Milton Friedman proposes a ‘negative income tax’) and can also be an affirmative action for the less affluent (appeases progressives).

Swiss is the closest entity to impose a national basic income, losing 23% to 77% vote in a referendum. Elsewhere, pilot projects on a single community and a single city is underway in places like Finland, USA, Canada, etc.

Within the tech community in Silicon Valley, a combination of concern about growing inequality as a result from automation and also the mindset of solving difficult problems through radical approaches, they also endorse this proposal.

Opponents, on the other hand, rest their case on 3 premises:

1. Universal basic income costs A LOT. Even when you switch all welfare program’s budget for this policy, it can reach 50% of what is required to lift people out of the poverty line. And this is the best case scenario.

2. It takes people out of workforce. Societal ties today are rooted in work, people see work not as mere tool for moneymaking but also as an extension of their lives, proven by how a lack of job is deeply depressing self-esteem and overall outlook for many people. A weekly meeting of jobseekers can become intensely emotional, it can be like a revival meeting. People are searching to understand who they are and how they fit in.

When people have an incentive to opt-out of the paying job culture, it could lead to a massive cultural revolution around a meaning of life.

3. It is very risky. A US survey has proven that the way the unemployed spent their free time (outside of finding work) is by watching TV and sleeping, not mastering new skills or developing new products. Researches done elsewhere proves contradictory results. So it’s hard for us to take conclusion without much experiment.

Since it takes much risk, why do it? Existing welfare benefits can still be expanded for easier bureaucracy and more generous benefits. For example, the Earned Income Tax Credit (EITC) ensures that after-tax income always rises with pay, while still ensuring that no benefits go to those who lives comfortably without it. For a married couple with three or more children, the maximum EITC is $6,242, reached for incomes from $13,870 to $23,630; if the credit exceeds the total tax bill, the balance is paid out as a tax refund. The credit is gradually phased out as income climbs above $23,630.

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