The problem with UBI isn't so much the politics, it's the feasibility of the cost. $12k a year over 300 million people is 80% of the US government's tax revenue.
A negative income tax might work out a lot better on the numbers, but it won't help the people that need it the most (the ones that can't get a job).
But hey, maybe it can work. The US has a deficit spending of $1.7 trillion in 2023, $1.4 in 2022, $2.7 in 2021. That $1.7 would cover almost half of a $12k ubi. But how long could that last?
The cost is fiction because it's a tax credit. The money is on both sides of the ledger. If you're making $60,000/year and your pre-credit taxes go up by $12,000 and then you get a $12,000 tax credit, you have paid an additional zero dollars in taxes. If you don't make much money and the government used to pay you a net $10,000 in benefits and now you get a $12,000 UBI and pay $2000 in taxes, that hasn't actually cost any additional money, all it does is convert the needlessly inefficient constellation of benefits into cash.
The "universal" part of a UBI is serving the same purpose as the progressive rate structure in the income tax, i.e. you want an effective rate curve which is higher for the rich than the poor. Which means that you don't need both. What you use instead is a flat tax rate which serves as the de facto "phase out" for the UBI. Except that because it's all in one place, there are no cliffs, and there are no poor people paying higher de facto marginal rates than rich people, and there are no mountains of paperwork to apply for benefits.
> The cost is fiction because it's a tax credit. The money is on both sides of the ledger. If you're making $60,000/year and your pre-credit taxes go up by $12,000 and then you get a $12,000 tax credit, you have paid an additional zero dollars in taxes.
Most people miss that the 'money' will get spent. This should lead to an income multiplier. Then hopefully to a reallocation of resources moving bureaucrats from administrative work to something else.
(Fiscal) income multipliers don't really exist (ie they are one) in an economy with a competent central bank that targets eg inflation or nominal GDP.
If whatever fiscal policy you have makes overall nominal spending go up (or down), that would have an impact on inflation, so the central bank will remove money from circulation (or add money to circulation) to counteract.
Thus neutralising any multiplier, you might naively expect.
(Also keep in mind that when you don't tax some money, it also gets spend or invested etc.)
Which is exactly the point. What's the "marginal tax rate" on low and middle income people of the existing benefits phase outs?
The >100% marginal rates that create actual cliffs are so patently absurd that no one can look at them and find any way to justify it, but even when the combined tax+phase out rates are in the neighborhood of 80-90% of marginal income, that's still not what we want, is it?
1. The federal government doesn't have tax revenue. It issues a currency and then taxes go toward countering inflation. The notion that a currency-issuing government needs to "balance its budget" in its own currency is a political fiction. Also, policies that benefit people at the lower end of the income spectrum disproportionately actually move money around in the economy, which generally speaking is less inflationary than allowing it to accumulate in various silos like hedge funds
2. A "negative income tax" doesn't have to require employment. You can make zero dollars in income as a self-employed person, and the self-employed still track their income for taxation purposes
3. There are many unnecessary-to-malicious subsidies and inefficient welfare programs that could easily have their rationale subsumed by UBI, and doing so would save considerable cost that is mostly the overhead of all the means-testing personnel and in some cases (like SNAP) completely separate financial machinery necessary to maintain them
Even setting all that aside, you could make considerably more "tax revenue" by funding the IRS or reversing some of the nakedly corrupt corporate tax breaks that have been created over the last several decades. There always seems to be more money to subsidize artificially lowering the price of certain goods, fund incredibly inefficient private government contractors to do things that once cost considerably less for the government to do itself, fund drug research only to then allow the resulting breakthroughs to be patented by a private firm and then gouge people for treatment, or buy ludicrously expensive weapons for militarized police forces, but propose anything that actually benefits people and suddenly everyone's worried about the costs.
Not to put too fine a point on it, but all this "Well have you considered the cost?" handwringing people do when UBI comes up just drastically misunderstands how governments use money, while claiming to be "responsible" and "realistic"
> you could make considerably more "tax revenue" by funding the IRS
The US government expenditure as percentage of GDP is now over one-third, as opposed to the pre-WW1 long-term average in the single digits. Keep in mind that massive infrastructure projects like the Transcontinental Railroad were able to be built in those single-digit percent times, or that US educational spending per pupil has been going up year after year for decades yet student achievement flatlined, and of recent years been trending down. Clearly, more tax revenue is neither necessary nor sufficient for the public good.
> reversing some of the nakedly corrupt corporate tax breaks
No arguments from me there.
> fund drug research only to then allow the resulting breakthroughs to be patented by a private firm and then gouge people for treatment
Fundamental research and bringing a drug to market are markedly different areas that require very different skills and incentives. An organization that is good at one is not necessarily good at the other. And this isn't confined to drug research; an architect can draw up plans for a house, but a family cannot live in a plan. Foundations need to be poured, chalk lines snapped, lumber nailed together, and plumbing and wires laid, all in the context of a competitive marketplace.
I attribute a lot of the higher expenditure and lower efficiency to the continued insistence that outsourcing to contractors, effectively picking winners in a "market" to give monopoly status, is a better way to provide government services. These firms have little if any accountability to the electorate, no incentive to set reasonable prices, get anything done efficiently, and in some cases don't even produce working services
Similarly, bringing a drug to market with a patent is not a competitive marketplace, by design, and it consistently creates an outcome wherein people are charged exorbitant sums of money because of this non-competitive market. Doing a bunch of government-backed R&D and then getting a patent for it is the government picking a winner, not creating a market
Basically, it seems like the government was and remains a lot more efficient when it directly builds the capacity to provide goods and services it determines to have an interest in providing, rather than try to do this through "the market" (again, this is almost never an actual market)
> outsourcing to contractors, effectively picking winners in a "market" to give monopoly status
In principle this is supposed to be a competitive bidding process, and then the winner is chosen by the most competitive bid rather than the government. In practice the process is corrupt and regulatory barriers are created to prevent smaller companies from submitting bids or project requirements are set such that only one company can satisfy them.
The problem here is corruption, which has nothing to do with whether the corrupting entity is a corporation. Public sector unions lobby for the same kind of labor-inefficient practices because they know that more jobs give them more members which give them more power, even (or especially) when the jobs are unnecessary or inefficient.
The advantage that existed pre-WWII is that neither large government contractors nor large public sector unions already existed in order to lobby for corrupt practices and their continued existence, so the government could just pay someone to do work and then have them to return to the private sector when the work is done. But WWII created such a large apparatus dependent on taxpayer revenue that it had enough lobbying power to sustain its continued existence, and now it needs to be disassembled before we can have nice things again.
But probably the best way to do it is under anti-corruption. You still want roads and ships to be built, but if you could get the corruption out of the bidding process then they'd be built by smaller and less consolidated companies with less individual lobbying power, and then you could address efficiency issues without having to fight a multi-billion dollar corporation or huge public sector union because that inefficiency is their profit margin/job. Another possibility would be anti-trust -- break the big government contractors up.
No, the problem would exist even if the bidding process was completely fair, because it still creates a situation where a long-standing project creates stable returns for a company while decoupling the service it provides from both market forces and public accountability. It is the worst of both worlds: shielded from market forces by having its customer be the government, providing a government service shielded from public accountability by the corporate veil
Yes, we should reduce corruption and break up existing entrenched players, but the core issue is in the structure of that kind of arrangement. I do also think that there's no good reason to have a "corporate veil" in the first place, but that's a broader problem
> it still creates a situation where a long-standing project creates stable returns for a company while decoupling the service it provides from both market forces and public accountability.
But that's just a mechanism for the corruption. The contract for the design of something and its manufacture and maintenance should each be separate bids. Even each stage of the design should be a separate contract that could go to someone else. The government says "we need a design for a ship" and they put it out to firms who submit their proposals and then the government picks one and buys it outright. Then they say "we need a design for a propulsion system for this ship" and take bids again. If you need to modify the ship's design some to facilitate it, that's fine, because none have been built yet and the necessary change gets incorporated into the design before you put out contracts to build any of it.
What you want is for each of the contracts to be as small as practicable, to maximize the number of potential bidders. None of this "single contract to design and build an entire fleet of ships and maintain them for 30 years" nonsense.
Yea, that does seem like a reasonable way to design less corrupt mechanisms for these processes, but I think the standard way piecemeal designs like that get rejected is by arguments to "efficiency" (Nevermind that efficiencies gained by bundling require some pretty strict discipline within a firm, mostly benefit the firm, and are easily dwarfed from the government's perspective by the inefficiencies taken on by the problem we're talking about)
That's the "monopolies are efficient" argument. Look, see, they can amortize their fixed costs over so many more units if they have the whole market.
Claims that you can increase the efficiency of a system by reducing competition should be met with the same level of skepticism as claims that you can violate of the second law of thermodynamics.
But let's try one that should get their ears to perk up. Monopoly suppliers are systemic risk, which is a threat to national security.
Your point (1) sounds like the same old 'modern monetary theory' that never amounted to anything. To quip, MMT is both novel and correct. It has both novel and correct parts (but no parts that are both).
Actually most of the money is created as debt. Lincoln and JFK both issued 'Green backs', money not created via debt issues. But neither lived too long
Yep, call it a negative income tax if it goes down better than UBI, but many other things would be better than the system we have now.