Last Wednesday’s newsletter on Universal Basic Income experiments in Chicago, Alaska, Stockton, California, the Y Combinator trials, Western Kenya, Ontario, Canada and Finland received an incredible response from readers worldwide. I would like to share some readers comments that were interesting and thought provoking. I emphasize that I do not necessarily share these views.
The first response was from Colin Fabig, an Australian serial B2C internet entrepreneur, who founded and successfully exited another four tech startups which employed over 400 people over the past 15 years, creating revenues in the hundreds of millions and with total exit values in excess of $350m.
There are a few issues with UBI:
- In the US it needs to be around $2k p/month to be above the poverty line.
- UBI vs a dole. It's not progressive - why give rich people money then tax them again?
- It's really a form of dole which alongside lots of free state services like health and education is a staple of social democracies from Australia and NZ to the Northern European states which all have the world’s best lifestyle metrics.
- Doles have many different flavors and the vanilla dole of just giving cash without looking at who is getting it and the enabling of alcoholism or drug dependence or simple joblessness has led to digital card doles that can only be spent on certain food and shelter items as well as work-for-the- dole ideas that try to prevent long-term unemployment
- Elementary budgeting and math can show that it is impossible to fund a "living wage" UBI. Let's say 200m adult Americans = 12 months x $2000 X 200m = $4,8 trillion. The entire US government tax revenue is about $3,8trn. Even if you halved that to $1k per month = $2,4 trn - there is not enough left to pay for government services. And that's the idea!
- UBI is a libertarian idea to get rid of most government services. No hospitals, no free education, no roads, no parks, no EPA, no SES, no infrastructure - leave it all to the market.
A far better idea is a livable wage for every adult via a progressive negative tax with provisos that they are contributing to society in some way (from volunteering to creative efforts to caring etc. or are physically or mentally unable to. So, if you earn zero, you get a rebate of $24k. If you earn $12k - you get a rebate of say $14k. If you earn $18k - you get a rebate of $8k, if you earn $24k you get a rebate of $6k and at say $30k. Up to $40k you get an extra $2k etc. Then progressive tax from there with top rates of say 60% over $1m per annum and progressive capital gains tax from say 20% at $1m to say 50% at $10m and above.
The outcome of this will be:
a) Massive ongoing Keynesian demand stimulus from poor people spending money vs rich people hoarding cash in fixed investments and capital stagnation.
b) Massive new business and jobs creation to satisfy new demand form the poor.
c) The US could actually expand social services like universal healthcare and possibly college education.
d) all funded though demand lead and progressive tax.
Oren Castro from Burnish Creative in the United States writes:
Bob, there’s one piece missing here. In Alaska they have oil revenue to pay for this. Everywhere else is looking at a 7-14% VAT tax increase or else how is it paid for? So, get a free check in the mail, but everything you buy gets more expensive.
Isn’t that basically a wash?
Allen Phillips, B.B.A., of Atlantic Speakers Bureau in Canada wrote:
Bob, the new Premier of Ontario, Doug Ford, and his cronies are having none of that. The Ontario basic income pilot project is coming to an end, says Children, Community and Social Services Minister Lisa MacLeod. MacLeod said Tuesday that the project was expensive, and "clearly not the answer for Ontario families."
Philippe Lewicki, from France says:
Bob, you want to check into France's RMI and RSA programs the RMI exists for 30 years now. It’s way more than a pilots.
The results of this universal basic income program are very mixed and once you start them its complicated to change or revert without big social and economic impact