Citizen's dividend experiment run by Rumsfeld and Cheney

[Pointedstick]

Totally true! Apparently it didn't result in breadwinners wanting to win any less bread. Women did work less and stay home with their kids more, and the kids did better in school.

https://qz.com/931291/dick-cheney-and-d ... ard-nixon/

[WiseOne]

That is a surprising bit of history!! But, I feel obliged to point out a serious flaw with this study: the dividend was given to people living below poverty level, meaning that they weren't exactly leading fully productive lives and probably didn't have a lot of work hours to cut. A reduction of 1 hour per week in a population that may only work 10 hours a week on average (made that up) translates to a 10% drop in workforce participation - that's quite substantial.

The real test is what would happen if you gave a substantial dividend plus medical insurance to people working full time typical middle class jobs. I would guess that many people would take the money and buy new iPads and otherwise wouldn't change their lifestyles, while others would quit hated/crappy jobs and either live happily at poverty line or find other ways to supplement their incomes. None of these outcomes are a bad thing, but it remains to be tested in real life. Go Finland.

[Mountaineer]

Wow, if it worked under Dicks Cheney and Nixon, it should work universally.

Tricky that is!

[Libertarian666]

Wow, if it worked under Dicks Cheney and Nixon, it should work universally.

I wish I had the bumper sticker I saw in 1972:

"Dick Nixon. Before he dicks you."

[AnotherSwede]

I can't see true UBI possible in a democracy.
Voters must believe they gain advantage over other voters.

[stuper1]

I have to confess that I can't see why a UBI couldn't work in a democracy. If most of the wealth is concentrated in say the upper 10% of the population, then why wouldn't at least 50% of the voters vote to redistribute that wealth in the form of a UBI?

[AnotherSwede]

I can't see true UBI possible in a democracy.
Voters must believe they gain advantage over other voters.

What do mean?

Of course people could all off a sudden become rational and intelligent and realise UBI is a cheap, simple, fair way of guaranteeing a minimal living standard.

But ... this would kill a large part of what politicians do (redistribute money). Politicians like to win votes promising sick, unemployed, old, single parents, immigrants, urbanites, ruralists, left handed, whatever extra money. And people like to vote for this, thinking it is more fair that their narrow interest group gets extra.

This is a european perspective. Maybe in america the owners could decide UBI is correct and just instruct both teams.

[AnotherSwede]

I have to confess that I can't see why a UBI couldn't work in a democracy. If most of the wealth is concentrated in say the upper 10% of the population, then why wouldn't at least 50% of the voters vote to redistribute that wealth in the form of a UBI?

I am already amazed US can have such a unequal wealth and income distribution. It can hardly be explained only by politics, also wages effect it.

[AnotherSwede]

I am already amazed US can have such a unequal wealth and income distribution. It can hardly be explained only by politics, also wages effect it.

And to not contradict myself Sweden has had income (and wealth) redistribution for 100 years without UBI.

[WiseOne]

It's a little hard to compare the US and Sweden as the populations are different.

[Controversial view that not everyone will agree with follows.] We have a large underclass that is culturally and/or linguistically separate from productive society and in all likelihood will remain that way. Sadly, until now our government's policies have only encouraged this state of affairs to continue. The size of this underclass (taking a guess at about 25% of population judging from Medicaid participation) is large enough that you might label US society as feudal, rather than truly democratic.

I don't think a citizen's dividend will fix this situation, but it won't make it worse and it will at least keep politicians from constantly tinkering with the welfare system and introducing all sorts of crazy weird unintended situations. Like Representative Charles Rangel owning three rent controlled apartments in Harlem (paying < $500/month for apartments that would go for several thousand a month at market rate).

[Pointedstick]

The USA already has lots of income redistribution. The big difference between the USA and Europe (and other places) is that a lot of our income redistribution takes money away from the poor and gives it to the middle class, upper middle class, and wealthy.

This seems bizarre, but it's culturally in tune with the very American attitude that people get what they deserve. Poor people must be poor because they're lazy and useless, see? So it's considered moral for government to pull money out of their pockets and give it to people who are seen as working harder and contributing more to society.7

Now, we also have income redistribution that takes money away from those classes and gives it to the poor, so the whole thing is circular. The difference is that the income distribution towards the poor subtly encourage dependence, segregation, and bad decision making, entrenching the poor in their poverty. My own personal conspiracy theory is that this is by design. We don't want "those people" to have any power.

This is how everyone complains that they're taxed too highly and their money is taken to feed parasites (at the top or bottom, depending on attitude). More than 70% of the federal government's budget is simple transfer payments at this point, taking money from group 1 and giving it do group 2, and then taking money from group 2 to give it back to group 1. The federal government actually does very little investment in the classical sense of the word.

A major benefit of UBI is that it blows up this insanity, (theoretically) distributing the money fairly and evenly, with no political games, lobbying opportunities to beggar they neighbor, and incentives to make bad decisions.

[AnotherSwede]

WiseOne,
So one of your two parties should implement UBI to just mop the under class problem under the mat?

I must say that from my limited understanding of US you have really killed all incentive to move from welfare to a low paid job.

We are in full speed recruiting an underclass ourselves. Implementing UBI would be like admitting an ethnic group of people are unemployable and we should save us the trouble of even trying, and the anti-immigration party is already growing like crazy (all the other 7-8 are very pro-immigration).

I still havent met a person thinking UBI would be a good idea. If I describe it they admit it is not all bad but then says disabled never had a chance, old have worked all their lives or another group that should have special attention.

[AnotherSwede]

The big difference between the USA and Europe (and other places) is that a lot of our income redistribution takes money away from the poor and gives it to the middle class, upper middle class, and wealthy.

This seems bizarre, but it's culturally in tune with the very American attitude that people get what they deserve. Poor people must be poor because they're lazy and useless, see? So it's considered moral for government to pull money out of their pockets and give it to people who are seen as working harder and contributing more to society.7

...

A major benefit of UBI is that it blows up this insanity, (theoretically) distributing the money fairly and evenly, with no political games, lobbying opportunities to beggar they neighbor, and incentives to make bad decisions.

It was not that kind of redistribution I meant

I am all for UBI:
1. Every unemployed had incentive to find some work, no matter what extent or pay
2. The army of administrators working within the welfare system could be free to do something useful. Or at least fun.

Swedish pre-tax income (chose 20-65):
http://pejl.svt.se/visualisering/inkomster/var-ar-du/
98th percentile 39ksek post tax
46th percentile 17.2ksek (this is minimum wage for uneducated restaurant workers with 6 years experience ... yes! McDonalds employees)

So just about x2 difference between fast food workers and an engineer earning way above his peers.

[Libertarian666]

I'm all in favor of everyone who favors this plan moving to Sweden. In fact I'd even contribute to tickets for them. One-way, of course.

[Maddy]

The big difference between the USA and Europe (and other places) is that a lot of our income redistribution takes money away from the poor and gives it to the middle class, upper middle class, and wealthy.

Could you provide some examples of how income is taken from the poor and given to the middle and upper classes? This is not at all self-evident to me.

This seems bizarre, but it's culturally in tune with the very American attitude that people get what they deserve. Poor people must be poor because they're lazy and useless, see? So it's considered moral for government to pull money out of their pockets and give it to people who are seen as working harder and contributing more to society.

Okay, I'll say it. In many instances people are poor because they are lazy and useless. Specifically, they have dug themselves into a hole because of their own consistently poor choices. You see it most clearly in the "generationally" poor. Their lives are a succession of screw-ups that can be directly traced to the reckless, self-defeating choices that they make every day.

Even considering that some people are dealt a lousy hand through no fault of their own, this society still offers people who make consistently responsible choices the opportunity to improve their lot in life and to move freely between social classes. I can't think of too many obstacles that prevent a determined and hard-working person from achieving pretty much whatever status they want in life. That said, it IS possible to screw up your life so badly that you no longer have a whole lot of choices. Having children before you're not ready is right up there at the top of the list.

[Pointedstick]

The big difference between the USA and Europe (and other places) is that a lot of our income redistribution takes money away from the poor and gives it to the middle class, upper middle class, and wealthy.

Could you provide some examples of how income is taken from the poor and given to the middle and upper classes? This is not at all self-evident to me.

Social Security and Medicare are the big ones. These programs benefit a group of people that control the most wealth of any age group in the USA:


https://www.fool.com/investing/general/ ... where.aspx

Those programs are funded by regressive flat taxes that impact low-income wage earners hardest. And they cannot be reduced in any way. In effect, they take income from many who can ill afford the loss, and give it to people who on average control more than $150k. When you account for the fact that poor people have a lower lifespan, many will see little or none of that money, having died before age 65.

Additional poor-to-rich tax mechanisms are the additional income taxes required to offset the revenue lost from long-term capital gains taxes, pension contribution and income exclusions, the capital gains tax basis step-up after death, and deductions for home mortgage interest, state & local taxes and charitable contributions:


https://en.wikipedia.org/wiki/United_St ... ral_budget

These tax reductions look like they add up to $440 billion per year that must be offset by higher income taxes on everybody. Since income taxes are progressive, a lot of this is robbing peter to pay peter, but the wealthiest get less of their income from actual income compared to capital gains, so it winds up being an effective wealth transfer from the middle (highest income tax paying group to the top.

As you can see, the poor get back some of the money through the EITC and child tax credit--as well as the poor-targeting welfare programs like Medicaid, SNAP, LIHEAP, and Section 8 housing.

This seems bizarre, but it's culturally in tune with the very American attitude that people get what they deserve. Poor people must be poor because they're lazy and useless, see? So it's considered moral for government to pull money out of their pockets and give it to people who are seen as working harder and contributing more to society.

Okay, I'll say it. In many instances people are poor because they are lazy and useless. Specifically, they have dug themselves into a hole because of their own consistently poor choices. You see it most clearly in the "generationally" poor. Their lives are a succession of screw-ups that can be directly traced to the reckless, self-defeating choices that they make every day.

I largely agree. But look deeper: most people aren't like you and me and all of us here; most people make choices determined by the culture around them, not their own capacities for independent thought. You see this as evidently with a poor person whose diet consists mostly of Cheetos and Coke as you do with a middle-class person who buys a new truck for $50,000 or a large house for zero down. Most people follow cultural and institutional signals nearly all the time. You're absolutely right that there are opportunities to rise above, and some take advantage of them. But most people won't. If they grow up in a cultural and legal environment that encourages poverty, they won't rise above it, any more than most of the people who grow up in a cultural and legal environment encouraging middle-class values will make the jump to true wealth in their own lifetimes.

[Maddy]

The big difference between the USA and Europe (and other places) is that a lot of our income redistribution takes money away from the poor and gives it to the middle class, upper middle class, and wealthy.

Could you provide some examples of how income is taken from the poor and given to the middle and upper classes? This is not at all self-evident to me.

Social Security and Medicare are the big ones. These programs benefit a group of people that control the most wealth of any age group in the USA. . .

Those programs are funded by regressive flat taxes that impact low-income wage earners hardest. And they cannot be reduced in any way. In effect, they take income from many who can ill afford the loss, and give it to people who on average control more than $150k. When you account for the fact that poor people have a lower lifespan, many will see little or none of that money, having died before age 65.

I'm not sure I follow your thinking. FICA taxes, which fund Social Security and Medicare, are levied at a rate of 15.3 percent of earned income regardless of who you are. But when it comes time to draw on these programs, low-wage earners get a much greater benefit than high-income earners relative to what they've put in. That's because there's a "floor" built into the benefit calculation.

In addition, I suspect (though I don't have any data at hand to support it) that low-income folks account for a disproportionate draw on the Social Security disability rolls. We know this is true with SSI, which by definition provides benefits in excess of what's been paid in.

Additional poor-to-rich tax mechanisms are the additional income taxes required to offset the revenue lost from long-term capital gains taxes, pension contribution and income exclusions, the capital gains tax basis step-up after death, and deductions for home mortgage interest, state & local taxes and charitable contributions. . .

Im not sure I understand the argument. Middle- and high-income earners pay income taxes at considerably higher rates than the poor, so the fact that the tax law cuts them some breaks, reducing what would otherwise be a crushing tax burden, doesn't sound redistributive to me--unless you're coming from a radical egalitarian perspective and assuming that any financial advantage must necessarily have been won at the unfair expense of somebody else. We'd have to look at the effective rates paid by each group after the various deductions and credits are accounted for. I think you'd have a hard time showing that even after deductions your average middle- or high-income earner pays anywhere near the 0 to 10 percent rate enjoyed by most low-income folks.

I've been in some of the higher tax brackets and some of the lowest ones, but I've never felt so raked over the coals as when I was on the high-earning (and highly taxed) end of things.

[Libertarian666]

It may very well be true that most people won't make the effort to better themselves. What I don't see is how that imposes any obligation on those who do make that effort.

[Maddy]

Clearly you don't understand the doctrine of oppression.

Plus, you didn't build it, remember?

[Maddy]

On the subject of the so-called Citizen's Dividend, I'm struggling with the question why this proposed helicopter drop would not result in an immediate and commensurate increase in the price of the goods and services purchased by low- and middle-class citizens. Isn't this the predictable outcome?

I'm also wondering how an across-the-board increase in income could ever be meaningful in a practical, experiential sense. In this country, real poverty of the kind suffered by people in third-world countries is virtually nonexistent. We judge our "poorness" or "wealth" in terms of what we have come to expect--in terms of what we think we should have. And our expectations are based, in turn, upon what everybody around us has. The consequence is that I will feel poor and be recognized as poor--and therefore will be poor--so long as I'm surrounded by people who are have more than I do.

So let's say that we hand out a generous Citizen's Dividend to everyone. Alas, I get my long-awaited opportunity to buy that Ford Explorer that the Joneses have parked in the garage. I'm ecstatic--until the Joneses pull into the driveway with a new Mazarati. See what I'm saying?

[Pointedstick]

You make a lot of good points, Maddy.

We can pick the details to death until the cows come home, but the way I see it, our society is at a crossroads for the soon-to-be-former working class and we have three options:

1. Transform the working class into an intellectual class such that they can all get high-quality jobs in the service sector
2. Bring back the '50s labor market: expand manual labor blue-collar work opportunities and raise wages
3. Let the current generation of the working class become another government-dependent underclass for the next 30 years, and hope their children choose #1

#1 is what the left has been trying to do for 30 years with their urgings to go to college and support for job retraining programs. None of it has worked. More people went to college (still not a majority, though--a high of something like 40% in the millennial generation) but all it succeeded in doing was depressing wages in the fields, creating a permanent class of involuntarily underemployed educated people whose degrees don't match the labor market, and pumping up a historic student loan bubble--making slaves out of tens of millions.

#2 is what Trump campaigned on, but it's equally impossible. Most of those jobs are gone for good, victims of globalization, mechanization, the digital revolution, an immigrant labor base that isn't going anywhere, and simply different market dynamics. It also awkwardly requires bringing back the labor movement, which nobody seems interested in. And of course, there isn't the surplus purchasing power to afford the higher prices resulting from returning to this model.

#3 is the status quo as more and more people become dependent on government programs. The helicopter drop already happened: it's called Social Security, Medicare, Medicaid, and public employee pensions. There are retiree and working class towns without many jobs that get a huge chunk of their purchasing power from these transfer payment programs. I live in one such town. Lots of people have decent middle-ish-class lives, and there's plenty of retail and basic services because their federal government transfer payments provide purchasing power, but there aren't many jobs, because labor force participation is low--currently at a hair over 44% (USA average is 63%). The biggest high-wage industry is healthcare for all the old people. And of course most of the money there comes directly from the government.

CD/UBI is little more than an alternative approach to the same thing, hopefully with more dignity, less bureaucracy, and fewer perverse incentives, poverty traps, and market distortions. It's an unhappy improvement on an unhappy option because everybody knows that #1 and #2 won't happen. I'd love to be wrong, but I'm not optimistic.

[AnotherSwede]

On the subject of the so-called Citizen's Dividend, I'm struggling with the question why this proposed helicopter drop would not result in an immediate and commensurate increase in the price of the goods and services purchased by low- and middle-class citizens. Isn't this the predictable outcome?

UBI payments should match current welfare payments. It costs more to administer the welfare system than what it pays out.

Middle class will probably get taxes raised enough to offset their UBI payment, so don't worry where to park your new car.

But if the leaders decide we need inflation, perhaps because private debt is to high, they can of course raise UBI.

[Maddy]

Well, if it's all about reducing the costs of welfare, I can think of a number of alternative approaches that do not so blatantly act to enable irresponsible, nonproductive behavior and, accordingly, the galvanization of a permanent underclass.

I'm always struck by the Left's view of poor people--most notably minorities--as constitutionally incapable of bettering themselves. To me, that's the quintessential prejudice and the most invidious kind of discrimination.

[AnotherSwede]

Current system:
Pay unemployed 1000 money for nothing (after testing for eligibility)
If unemployed finds work money is gone.

UBI:
Pay everyone 1000 money, no questions asked
If person works s/he pays income tax but keeps UBI.

I can't understand why this shouldnt work (in practice, politically is another question).

[Pointedstick]

#3 is the status quo as more and more people become dependent on government programs. The helicopter drop already happened: it's called Social Security, Medicare, Medicaid, and public employee pensions.

PS, at the risk of going slightly off topic, how do you see the obviously unsustainable public pension debacle ending, particularly in places where the government is not a currency issuer and the pensions can not be reduced due to constitutional law?

With the pensioners dying off in the next in 10-30 years. Their younger peers don't have the sweetheart deals that they got, because it's politically and constitutionally feasible to reduce future employees' future benefits. The cities and states just have to stay solvent for a few more decades and the problem solves itself.