I've done the math and you can get it to work. You need to make implementation choices that will make some people very unhappy though.
First, you start with non-institutionalized adult citizens that brings you down to a payee base of ~210M (this part will be unpopular as parents will want to get more than other adults). Next you set the basic income at the poverty level for a single person, $11,700. That gives you a total nominal cost of $2.47T. You do not exempt the basic income from the normal taxation rules. That means you get some of it back in taxes. If you figure 20% that gives you a net cost of $1.97T. You then take a buzz saw to all social spending aimed at US citizens, including all parts of social security (this would be very unpopular among the elderly, near elderly and disabled). With all parts of social security adding to more than $800B/year It's fairly easy to find a $1T in savings there. That brings the total to under a trillion dollars. You take a buzz saw to tax expenditures, e.g. exclusion of fringe benefits, preferential rates for capital gains and dividends, mortgage interest deduction, state and local tax deduction, etc. (this is also going to be very unpopular). If you add it up, that's good for another $550B.
That leaves you with another $420B in new non-offset spending. I'm certainly not going to to claim that's a small number, but it seems achievable. It's about 2.3% of GDP. Maybe you can get states to kick in (or force them to through reduced grants in aid) given that some of their social programs can also be largely reduced or eliminated.
Yes, I might quibble with some of your numbers a bit (for example I don't think you'll get 20% back in taxes) but I'll agree that you're in the ballpark. I think this is a good demonstration of how massive the changes we're talking about are. Particularly:
* The hit it will mean to many seniors standard of living due to social security cuts.
* The massive tax increases this will be on the middle class (primarily due to changes in tax deductions)
* The massive tax increase this will be on the upper middle class to rich (primarily due to changes on taxation of capital gains and dividends. Changes, by the way, that most economists oppose.)
* The additional massive tax increase that will come from somewhere to close the 2-3% GDP gap you mention.
I can see how some people might be in favor of this plan. I myself am not.
I agree the what comes back in taxes is a bit of hand-wave, it's hard to find stats on the average marginal tax rate.
I think the non-elderly middle class net effect will be close to if not a wash. They'll lose various tax deductions, but they'll get $11,700 x num_adults_in_household x (1 - marginal_tax_rate). And tax deductions only kick in when they are larger than the standard deduction to begin with. You need to be closer to the "upper middle" side of things to get there or have an unusually large deductions.
I don't think you need to get the gap amount wholly out of new taxes, as I said I think you can get some of it out of reduced aid to states, and/or as suggested by the poster below, military spending cuts.
As to your overall point, I concede that it is a tough sell.
Ya, you and I are definitely within the margin of error in our analysis of the situation. Thanks, by the way, for the very substantive comment. This is exactly what I was hoping for. I think a lot of people just say "UBI!" with close to no understanding of what they are proposing. I think it's very educational for them to take a look at the real tradeoffs involved.
* The massive tax increases this will be on the middle class (primarily due to changes in tax deductions)
* The massive tax increase this will be on the upper middle class to rich (primarily due to changes on taxation of capital gains and dividends. Changes, by the way, that most economists oppose.)
Well, UBI isn't supposed to be a tax cut for everyone, surely it'll be revenue neutral for everyone making over, say $50k?
Slashing the defense budget by 75% would help, too.
May as well clip out a few of the DOJ agencies like the DEA while you're at it. If you want to get get really crazy, cut foreign aid. Maybe even increase taxes on non-UBI income. Close a few corporate/personal tax loopholes...
I think it's physically possible. Politically, probably not.
That's true regarding the DEA and foreign aid, but defense is not a rounding error. National Defense and Overseas Contingency Operations are more than $600B. The next largest military spending is China at $145B (before the cuts just announced yesterday).
Defense is indeed not a rounding error. I myself think the Pax Americana the world has lived in for the past 50 years or so is worth it. But this is certainly something that others would disagree with me on.
You mean the Pax Americana where there are an endless series of proxy wars in the third world? Cause that one sure as shit wasn't worth it, especially considering that most (all?) of the interventions failed despite large scale slaughter.
>... $420B in new non-offset spending. ... It's about 2.3% of GDP.
This assumes GDP doesn't plunge because of disincentives to work and/or skyrocketing hiring costs for low-wage (now medium-to-high wage) workers. We don't have solid evidence of that not happening since no country has instituted basic income on the scale of 300 million citizens.
Your math model shares a common theme I see with many of these back-of-the-envelope calculations: they all assume a static economy where all the other variables that are affected by UBI -- which in turn also feed back into paying for UBI -- are unchanged. I've commented on this aspect elsewhere: https://news.ycombinator.com/item?id=10172421
Yes that's true. It's a very simplified, guaranteed to be wrong, calculation. But it gets us past the first order objections ("it's too expensive we couldn't afford it") to the second order objections ("the reduced incentives to work would crash the economy"). If you have a model for dynamic effects, I'm all ears.
Incidentally, from the linked comment:
The level of "afford" I'm thinking of is a scenario where the USA suffers zero productivity loss and the middle & upper class do not see a decline in the standard of living.
This seems an unreasonable standard to apply to anything. Hardly any policy is a Pareto improvement. Applying such a tough standard amounts to very strong status quo bias.
>This seems an unreasonable standard to apply to anything. Hardly any policy is a Pareto improvement. Applying such a tough standard amounts to very strong status quo bias.
Sorry I wasn't clear. I wasn't making that statement as a "justification" for not implementing UBI. It was about how it's being "sold" politically.
Personally, if I were to push for UBI, I'd tell people that the only realistic way we can afford it is if we all agree to take a hit in standard-of-living. I don't have irrefutable proof but that's what I think will have to happen. However, it doesn't necessarily we shouldn't do it. With the mass effects of citizens avoiding low-wage jobs, maybe it's better for society that Walmart is open 6 days a week 9am to 7pm instead of 24/7 and for Amazon-Prime to scale back to 1-week delivery instead of 2-day, etc, etc. Or Amazon-Prime costs $199/year instead of $99.
If sophisticated dynamic equations show that middle & upper class will have to "suffer" a bit to provide the entire country a UBI... fine. But sell it that way to them and let everyone have open eyes going into it. I'm skeptical that we can fund UBI just by renaming existing govt assistance programs so that it ends up being virtually "free" to taxpayers.
>UBI doesn't create a disincentive to work, UBI replacing means-tested programs eliminates a disincentive to work.
UBI has complicated secondary effects. Some of them can be contradictory. One who gets welfare would have disincentive to work because of the loss of benefits in today's govt programs. UBI may spur some (not all) of them to join the workforce. However, another scenario is the mass populations of part-time workers earning mininum wage ($7.25) that total less than $11k a year. That's ~1500 hours of lost labor hours for those who are perfectly fine with not making more than UBI's $11k.
It's definitely not as simple as saying, "UBI only creates incentives to work and never any disincentives, and GDP can only go up or stay the same instead of down."
Well, here's the thing, if the level it is set at leads to output-reducing withdrawal from the workforce more than output-increasing effects, then it also leads to inflation which drives price levels up and drives people back into the workforce [0] -- its self-limiting.
The bigger problem is that the economy might not yet be able to sustain a level at which UBI isn't substantially worse for the neediest populations than existing support programs -- increasing capacity through automation will get us there eventually, but its far from clear we're there now.
Which is why, while I think UBI is a great idea to adopt and phase in, I don't think a big-bang short-term conversion is a good idea.
[0] unless it is pegged to inflation, then if its set initially in a bad place, its stuck there. So, if you are going to index it rather than manually adjust it, don't index it to inflation, index it to output/revenue measures, not price levels.
Its not a matter of which price measure you use, using any price measure as a control for UBI means if you set it outside the stable range the economy can support, inflation no longer acts to reduce the real value of the benefit down to the level the economy can support.
"Lost labor hours" in minimum wage fields might very well be spread across a larger labor base of formerly unemployed potentially reducing crime and incarceration rates.
Also, "lost labor hours" in what fields..? Reduced labor hours would not necessarily suggest reduced economic output, or a reduction in construction projects, or small business experiments.
>You do not exempt the basic income from the normal taxation rules
I have a really hard time understanding the logic here... "Let's give everyone 11 dollars, then spend a bunch of money (enforcement does cost) to make sure all those people give 1 dollar back to us before the year is up." What am I missing?
It's treated as income and consequently requires no additional enforcement. Whatever agency pays out this amount would also send some sort of 1099 like document. This information would be available to the IRS (which would also have greatly simplified tax rules with the other things GP is proposing). So if you fail to report your $11k on your tax documents it'd be glaringly obvious. If it's your only income, you pay no taxes (and don't get a refund, no taxes have been taken yet). If you have any other income, you might pay taxes on it at some marginal rate.
Or just remove the current terrible tax code and implement a fair flat tax on all new goods and all services at around 7%. Cut the military industrial spending in half ( US would still have a bigger mildick than anyone else ) and presto, we're living in a star trek future.
I'm occasionally asked where the money would come from, but it's not like we don't already just print it anyways. Although a gov. sponsored blockchain type distribution of the universal minimum income would be kinda neat.
First, you start with non-institutionalized adult citizens that brings you down to a payee base of ~210M (this part will be unpopular as parents will want to get more than other adults). Next you set the basic income at the poverty level for a single person, $11,700. That gives you a total nominal cost of $2.47T. You do not exempt the basic income from the normal taxation rules. That means you get some of it back in taxes. If you figure 20% that gives you a net cost of $1.97T. You then take a buzz saw to all social spending aimed at US citizens, including all parts of social security (this would be very unpopular among the elderly, near elderly and disabled). With all parts of social security adding to more than $800B/year It's fairly easy to find a $1T in savings there. That brings the total to under a trillion dollars. You take a buzz saw to tax expenditures, e.g. exclusion of fringe benefits, preferential rates for capital gains and dividends, mortgage interest deduction, state and local tax deduction, etc. (this is also going to be very unpopular). If you add it up, that's good for another $550B.
That leaves you with another $420B in new non-offset spending. I'm certainly not going to to claim that's a small number, but it seems achievable. It's about 2.3% of GDP. Maybe you can get states to kick in (or force them to through reduced grants in aid) given that some of their social programs can also be largely reduced or eliminated.