For Want of a Nail: the Costly Consequences of a Lack of Basic Income
For those unfamiliar, the above proverb describes the massive consequences that can result from seemingly unimportant items or lack thereof.
Now to fashion a new variation of this proverb...
For want of a dollar the bus ride was lost.
For want of a bus ride the job was lost.
For want of a job the paycheck was lost.
For want of a paycheck the housing was lost.
For want of housing the health was lost.
For want of health the lawfulness was lost.
For want of lawfulness social cohesion was lost.
For want of social cohesion democracy was lost.
For want of democracy the nation was lost.
And all for the want of goddamn dollar.
Not having a single dollar can lead to hugely expensive consequences, and this isn't only a theoretical. It happens every day. Think about a recent time where not having enough money to afford something seemingly small, ended up costing you or others way more. Or from the other side of things, can you think of a time where having just enough money saved you from something that could have been potentially disastrous?
Not having enough money is expensive, and not just to the person in need, but everyone. For example, all over the US, there are people in jail simply because they can't afford not to be. According to a study by the Vera Institute of Justice, 730,000 people around the US are locked up in jails right now, 75% of whom are nonviolent, presumed innocent, and simply awaiting trials. Many of these people are there simply because they can't afford to pay bail or court-imposed fines. The total cost to taxpayers is $22 billion per year.
If we look at just the New York City jail system alone, about a third of the non-felony defendants are in jail because they don't have $500. How much does it cost the taxpayer to keep someone in jail for not having $500? The cost to jail someone in NYC is $167,731 per year or $459.54 per day. In other words, taxpayers are paying about $500 every day to keep someone behind bars for not having $500 period.
We see the same kind of extreme wastefulness in the US healthcare system where someone without the $100 required to treat a boil ends up in the ER where they instead end up receiving $90,000 in emergency treatment. Who pays for that? Not them. Instead we all do in the form of higher taxes and insurance premiums.
Put all of this together and we can imagine someone who is $100 short, falls behind on their bills, gets their car repossessed, loses their job, gets sick, ends up in prison, gets out and earns 11% less than they otherwise would have for the rest of their lives, and thus pays less in taxes for the rest of their lives. By the time of death, which is most likely years before they otherwise would have died if they'd had money when they needed it, the total cost can be millions of dollars that otherwise would have never been spent, for want of just $100.
A stitch in time saves nine.
We've all heard these sayings before, but we're terrible at applying them to government policy. Just think of all the money being spent that would not be spent if we just made sure that everyone started each month with an unconditional basic income of $1,000. How many people would not end up in jail? How many people would not end up in hospitals? How many people would not be dying before their time? How many people wouldn't drop out of school, or eat junk food, or get obese, or hurt other people?
Does it make any sense whatsoever to refuse to give someone $12,000 while simultaneously being okay with spending $90,000 to keep that person in prison, or $90,000 to treat that person in a hospital?
We can go on ignoring the lesson of the horseshoe nail, or we can realize the good sense in making sure everyone has enough money so that the entire kingdom isn't lost.
Which do you think makes more sense?
Interested in doing more to grow the basic income movement than you can through social media alone? Filling out this survey from the Universal Income Project would be helpful. You can also sign the Economic Security Project's belief statement, join the Basic Income Slack channel, Basic Income Action, and the U.S. Basic Income Guarantee Network.
How do you explain the extraordinary success of America, compared to every other nation before it, without UBI?
If what you're suggesting is true, it would follow that countries with more wealth reallocation would thrive. But it seems the opposite is the case. Why is that? I think it's because a decentralized market economy runs more efficiently and consequently produces goods and services cheaper than the centralized, planned economy.
So, instead of giving people money so they can afford things, you can bring down costs to achieve the same effect with more efficiency.
A basic income IS a decentralized market economy. It's an income floor distributed universally that can be used by entrepreneurs as capital, and by consumers as demand signals for the price mechanism.
UBI is the exact opposite of a centralized, planned economy. Instead of the government making decisions, people are, and a greater number of people are than under the existing status quo where people are prevented from sending demand signals due to a lack of money.
Hayek and Friedman did not both support basic income because it centralized the economy. They supported it because it decentralizes it. It shrinks the state. It reduces the number of bureaucrats and administrators deciding how to use tax money best, and instead let's people decide.
Look to Alaska to see the closest example anywhere in the world to UBI thanks to their annual Alaska dividend. Is Alaska a centralized economy and has it been since 1982? Of course not. It's also a state with consistently among the lowest poverty and inequality in the US, and highest measures of well-being.
I recommend reading this article about the Hayekian Price System to go deeper into how basic income will improve the market's ability to calculate.
That all makes sense, as long as we don't overburden our economy with taxes. Thanks for your thoughtful response.
The way we go about funding basic income is entirely up to us to collectively decide of course, but the cost is actually far lower than people commonly think it is, due to it functioning in many ways as a large refundable tax credit.
Most people would thus be a net recipient, paying less in taxes than they receive in basic income, about 8 in 10 households would see lower tax burdens, and the remaining 2 households would be net payers, paying more in taxes than they receive in basic income, but not in what I'd call a burdensome way. Taxes would need to go up about 10% for the top 5%, e.g. households earning over $300,000 per year.
Considering that for decades the top has kept all of our economic growth for themselves, with everyone else getting virtually none of it, I think that's an entirely fair deal, and vital to accomplish in a world where technology will increasingly do our jobs for us.
I don't know if the economy could survive a tax hike like that, bearing in mind that overburdened taxpayers can simply leave one economy for another with a more competitive tax rate.
Also, it doesn't address the complications of charging and collecting and enforcing taxes. I'm thinking that an easy solution would be to eliminate all taxes, but increase inflation of the dollar (since that's a tax anyway). Then you're taxing wealth, not income per se. More fair to my mind.
I'm aware of some pitfalls of increasing inflation. One of them being diminishing the dollar's standing as a reserve currency, but that's going to change with blockchain anyway.
For decades we had an effective tax rate higher than what's required for UBI, and that was actually when the economy worked best. With that said, I also don't think we should just ramp up taxes all in one go, and instead do it over a span of say five years to avoid shocks.
There are certainly other ways of going about UBI, like through monetary expansion as you mentioned, and if we pegged that UBI to rise with inflation, that would hypothetically work in a way that requires no increases in taxes, but does effectively decrease inequality through inflation. Bill Gross has suggested that method actually, possibly because he's a billionaire.
If you're curious about how I'd go about it, I'd like to see no increase in income taxes whatsoever for anyone, and instead an introduction of a value-added tax, land value tax, carbon tax, financial transaction tax, and seigniorage reform.
What if this additional information in the market is only about the value of cigarettes, booze, and lottery tickets? Could be that buying power already resides where it is best used.
If you fix those other taxes, You could remove the income tax. Would be less burdensome if people could work and not have to declare their income.
The U.S is not successful in terms of providing a good living standard for it's citizens. It's a giant failure. The only success the U.S has is based on the military industrial complex, having control over the global reserve currency, and the wealth of the 1 percent.
The U.S was successful in the past, but now its a failing oppressive empire.
Depends on who sets the standards of living. By my standards, it's one of the best places to live. I wrote about it here:
https://steemit.com/introduceyourself/@lostinthesauce/i-love-my-country
I don't really know what you're talking about. By all available metrics, we have a superlative standard of living on average, compared with all other countries.
And there lies the rub - "average".
Having lived half my life in Europe I have a much different perspective of America. I've long said "it's a wonderful place to be if you're employed and have a lot of money". That's assuming you don't care about the plight of anyone but yourself or are wealthy enough not to have to care (gated living, private security guards, have a driver, fly first class or access to private plane, multiple homes with lots of land around them or exclusive access, employees to shop for and feed you, security staff, concierge medical care, stay in exclusive hotels, etc. etc.) That takes care of about 3 million Americans, another 10 million or so are at least partially in that domain.
Our appalling lack of equity in income and wealth distribution skews that "average". Look at percentiles of income and wealth distribution and you'll see that. Look at the extraordinary number living at poverty income levels and below. Look at those with no savings at all. Those with no net wealth at all. Look at GINI coefficients, quality of life metrics not purely based on money, etc. etc. All point to American not being anywhere near the best country in the world on so many counts.
Scandinavian countries may be cold and expensive places to live on the surface - oh think of the taxes is all Americans fixate on - but the reality is far more of their populations are remarkably happy, healthy and enjoying an amazing quality of life.
I mean look at Norway - as recently as 1996 - just 21 years ago - they started taking revenue from their oil and keeping it for the country instead of privatizing that profit. Now a country of 6 million people has one trillion dollars. Scale that to the US and it would be like they have a $50+ trillion dollar fund. Just the interest alone on that could pay for half our US budget, even more if you deduct the debt interest payment we wouldn't have to pay.
Instead, we have a huge national debt, huge interest payments and all of that wealth is sucked into a tiny fraction of the country's population who hold onto it for dear life. Buying land ,property, stuff they don't need and holding onto that. Trickle down doesn't work - never has done, never will. The rich don't get rich and stay rich by sharing out all the money the US government showers on them - they get rich by holding onto it and rent seeking.
However like universal health care, it is pretty much a given that the US will be among the last, if not the last to adopt it, and we'll probably do it in the least efficient way. It'll probably even take a bloody revolution to get there, if that is still possible by then (all those drones, armed robots, surveillance systems and self-driving cars are going keep the man down and in his place, mark my word). If not a revolution from within it might even happen if the rest of the world simply cuts us off from all trade until we comply with humanitarian laws requiring UBI.
Or Skynet takes over, crushes us all and the robots are the only ones left standing (sorry, a vast matrix of human bodies plugged into a giant virtual reality network powering the planet is just silly and thermodynamically flawed, not going to happen).
And I don't know who you're saying is oppressed. We're one of the most tolerant nations in history, with more freedom than was thought conceivable. We owe it to the wisdom of our founding fathers, and the philosophy of the enlightenment.
I see your point. However, there are ethical cases for torture, are there not?
What about the thousands of lives saved by "enhanced interrogation"?
No, there are no ethical cases.
Would you like to be the person who is innocent and has to undergo torture? How would that feel? That's why it is also not ethical to kill people like they do it in the USA. Nobody has the right to kill anyone. Maybe the only person who should be killed by the collective is a person who tells other people to start a war. Who mobilizes others by giving them money to kill. That's why soldiers are killers and we have to make peace profitable so nobody falls into the trap of violence. It is not possible to undo violence and the harm created in the person who harms as well s the victim will be a problem for everyone. I just read @merej99's ost about the two sons who are now with the marines. I didn't want to comment in order to keep the peace. I don't see any reason to be proud of anyone who joins the military. It is a class of people who do not know that there is peaceful way of solving problems. It gets forwarded from generation to generation until someone breaks the cycle and condems the actions of their own family.
if torturing one would prevent torture of many, it would be unethical to not torture the one.
You are wrong:https://www.weforum.org/agenda/2016/07/these-countries-have-the-highest-quality-of-life
https://en.m.wikipedia.org/wiki/List_of_countries_by_Human_Development_Index
The U.S is number 10 on the list, defeated by countries with lower GDP per capita.
Number 10 out of 200 countries in the world is excellent! More countries should be like us.
New follower. I haven't look at UBI from this angle before. I am ironically reading Hayek's view of it right now. Agree or not, I appreciate the actual thought put into this argument instead of the type I usually receive about this issues & the minimum wage (not grouping the two together): "it's the right thing to do".
I always enjoy an economic (scientific) argument much more.
Thank you. If you check my history, you'll find many other angles I've already covered here on Steemit about basic income, and you can also find my FAQ on my blog which covers many more.
Also, if science is your thing (it's definitely mine), you might particularly enjoy this article I wrote that is basically a biological/physiological argument for basic income.
I've already bookmarked a bunch of your stuff to check out. I do a political podcast myself, and am always looking for topics outside of my normal niche (foreign policy).
Upvoted and resteemed, followed, and your website bookmarked.
Never, anywhere, have I read such a perfectly concise and heavily-sourced, logical, well-reasoned pitch for UBI. My own personal feeling is that we'll eventually have no choice but to implement this in the US due to a rise in automation pushing out most forms of unskilled labor.
Admittedly I've not worked my way entirely through your FAQ, but one point I've never seen brought up as a sell for UBI is the effect it has on illegal immigration. With UBI, anyone who is not a citizen of the country derives no benefits of the service, but instead pays a penalty in the form of potentially higher taxes on goods with no added funds to offset the increased cost. This not only makes it much less attractive to live here undocumented, but helps take care of situations where non-citizen residents consume services like the emergency room or public education, because they would now literally be paying for a potential hospital visit or a child's education every time they went shopping while citizens have that burden offset by the UBI.
In essence, UBI is a tax on non-citizens (just like the VAT in the UK) where the vast majority of non-citizens pay into the pool for services that are mostly consumed by citizens. For people visiting the country on vacation or temporary visas, this is just another cost of living in the US for a short period of time. For people here illegally, it provides an incentive to become a citizen. For people considering jumping the border, it provides an incentive to instead go through the legal path to citizenship.
UBI doesn't solve the problem of illegal immigration, but it's the easiest way to tax and punish it I've ever seen (unless I'm overlooking some massive mistake in my thinking).
Phenomenal post, @scottsantens. Thank you so much for writing it!
Congratulations! This post has been upvoted from the communal account, @minnowsupport, by scottsantens from the Minnow Support Project. It's a witness project run by aggroed, ausbitbank, teamsteem, theprophet0, someguy123, neoxian, followbtcnews/crimsonclad, and netuoso. The goal is to help Steemit grow by supporting Minnows and creating a social network. Please find us in the Peace, Abundance, and Liberty Network (PALnet) Discord Channel. It's a completely public and open space to all members of the Steemit community who voluntarily choose to be there.
This post has received a 0.45 % upvote from @drotto thanks to: @banjo.