Wall Street Journal hires crackhead to analyze the economics of universal basic income?

by philg

Charles Murray, (in)famous for authoring the Bell Curve, in which he pointed out that the world circa 1994 was unfriendly to those with a low IQ, has an editorial in this weekend’s Wall Street Journal: “A Guaranteed Income for Every American: Replacing the welfare state with an annual grant is the best way to cope with a radically changing U.S. jobs market—and to revitalize America’s civic culture.”

Here’s his proposal:

In my version, every American citizen age 21 and older would get a $13,000 annual grant deposited electronically into a bank account in monthly installments. Three thousand dollars must be used for health insurance (a complicated provision I won’t try to explain here), leaving every adult with $10,000 in disposable annual income for the rest of their lives. …

The UBI is to be financed by getting rid of Social Security, Medicare, Medicaid, food stamps, Supplemental Security Income, housing subsidies, welfare for single women and every other kind of welfare and social-services program, as well as agricultural subsidies and corporate welfare. As of 2014, the annual cost of a UBI would have been about $200 billion cheaper than the current system. By 2020, it would be nearly a trillion dollars cheaper.

How could this work in a country with the world’s most expensive health care system? Murray says people will spend $3,000/year on health insurance. But Medicare costs more than $10,000/year per beneficiary (2009 data). Medicaid also costs more than $3,000 per year (2011 data). Consider two non-working parents with five kids. Right now they will get an array of taxpayer-funded services whose value could exceed $100,000 (housing, Medicaid, food stamps, Obamaphones, etc.). How could they survive on $26,000 per year when that wouldn’t even pay for a medical/dental policy in the private market?

Separately, Murray’s article demonstrates the depth of American political support for a government-run system that turns heterosexual sex into cash:

The unemployed guy living with his girlfriend will be told that he has to start paying part of the rent or move out, changing the dynamics of their relationship for the better. … Or consider the unemployed young man who fathers a child. Today, society is unable to make him shoulder responsibility. Under a UBI, a judge could order part of his monthly grant to be extracted for child support before he ever sees it. The lesson wouldn’t be lost on his male friends.

If Murray advocates for free enterprise, why doesn’t he support the decision of an adult “girlfriend” to pay most of the household expenses for an unemployed man? Can we not infer that he is providing her with something that she values as much or more than the space and food he consumes? Would Murray consider an unemployed woman living off the fruits of a man’s labor to be equally reprehensible?

In a country that offers on-demand abortion and for-profit abortion, Murray scolds the second example unemployed man for the birth of a child. Why isn’t his sex partner scolded for not educating herself regarding U.S. family law (see California, Florida, and Massachusetts, for example) and having children who are cashflow-positive?

The author is against more government spending but he wants to continue to assign a taxpayer-funded judge and prosecutor to determine the profitability of every out-of-wedlock birth in the U.S.?

Readers: Can this WSJ piece be read as anything other than a fantasy? Could it possibly work without cutting U.S. health care costs by more than 50 percent? And if we could do that, with almost 10 percent of additional GDP available every year to invest or spend, wouldn’t our economy then be in such great shape that we wouldn’t need to tweak our welfare system?

Could the idea be rescued with some tweaks? How about tackling the elephant in the room head-on: universal health care at a modest budgeted cost. If the U.S. had an English-style system that covers everyone to at least a basic level of care, then older Americans could live off their UBI instead of handing it over to the health care industry. Today’s Welfare parents with five kids wouldn’t be doing so great at $26,000 per year, but at least they wouldn’t spend 100 percent of that money on health care. Speaking of kids, if nobody gets a UBI until reaching age 21 it will be tough on current Welfare recipients who have produced children with the expectation that taxpayers will provide adequate housing, food, etc. On the other hand, if ownership of a children produces a $13,000-per-year revenue stream to an adult that will presumably encourage adults to have more children and fight over ownership (“custody”) just as they currently do in U.S. family court. The difference in spending for a married couple with and without a child is about $4,300 (see discussion of UCLA Professor William Comanor’s analysis in the Methodology chapter). This is in the neighborhood of maximum child support awards that are obtainable, even after having sex with a truly rich person, in many European jurisdictions. What if health care were covered and each child yielded a $3,000-per-year revenue stream for the adult owner(s)? Now the married couple with five kids gets $41,000 per year. That would put them above the poverty line for a family of 7 (source) and, of course, they could supplement that income with paid work if they wished to. Because the children wouldn’t be hugely profitable there wouldn’t be an economic incentive to have more kids (though of course people who enjoy having children around might have more kids even if profit-neutral).

I think that it would be more interesting to see an analysis of the economics of a system in which major health care costs did not come out of the UBI and in which the additional expenses of children were accounted for at least partially. The current litigation-based system of establishing private-sector adult dependency (alimony), child ownership (custody), and child profitability (child support), probably costs the economy at least $150 billion per year ($50 billion in direct expenses and at least another $100 billion in lost productivity either from people following incentives not to work or from preparing for the courtroom rather than working). If that were torn down because an alimony or child support plaintiff can now collect UBI, that would enable UBI to be bumped up by roughly $500 per American per year. Health care remains the tough one, though. We have a track record since the 1960s of crazy high costs and high growth rates in those costs, fueled by tax breaks for insurance and government spending through Medicare and Medicaid. Is it reasonable to assume that we could one day cut health care spending to only double Singapore’s, as a percentage of GDP?

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12 thoughts on “Wall Street Journal hires crackhead to analyze the economics of universal basic income?”

  2. I don’t know about other issues that you raise (the 80 or so of them in this single post above), but can but note that you have an unhealthy fascination with the low public spending and other statistics of Singapore, a limited size city-state of extreme authoritarian kind (of the smiling fascist face variety), with economy, political and cultural conditions and traditions that COULD NEVER SCALE UP to the melting pot, continent-wide USA. So why bring up their GDP figures when they’re clearly inapplicable in other than strictly algebraic(?) contexts.

  3. I like the idea of cutting out the middlemen (the government workers) and just handing out the cash. But what I don’t get about this UBI is how doesn’t this cause inflation and prices to rise across the board if everyone gets it? Also, $10,000 is too little compared to what most benefits recipients get currently (eg, the sum of TANF, HUD, etc).

    Regarding healthcare, not sure about it working, but in concept it would be nice not to have to be tied to an employer to get decent healthcare. How can we call ourselves free if we cannot change jobs, or take a break in between careers when you are tied down to an employer simply for the healthcare?

    UBI concept sounds like it might turn the nation into a bunch of trust fund babies.
    Come to think of it, I look forward to being a trust fund baby. I was told trust fund babies are aimless and depressed. I dunno, I know a lot of things I could do in my spare time without a boss.

    If my spouse and I get $20,000/year for life, we could retire to a cheaper country with good internet I suppose.

  4. UBI works a lot better if its adults only. We stopped needing to subsidize creating children once the world population hit four billion. However, there is even less support for no longer subsidizing children than there is for something like a UBI.

    An income guarantee, which is a specific type of UBI, wouldn’t be that inflationary since already existing income streams, from jobs, government payments, child support, or whatever would count against the guarantee. The guarantee would only top off what people get from the other sources of income to reach a target, so the actual payments would be more limited than people would think. Of course there is an incentive to stop all these other income streams and just live off of the guaranteed amount, but then the guaranteed amount is a ceiling (you can’t do any better by definition if you just get that) and second many existing sources of income don’t really involve working.

  5. tldr; you can’t get something for nothing.

    The real economy (stripped of finance and banking sectors) consists of people doing work then exchanging their work products with each other. A UBI really amounts to people giving their work products to people who giv e

  6. Here’s my alternate idea, guaranteed roof and board. Also not means tested. No cash assistance to anyone. However, anyone who needs a meal or a place to sleep can show up at the Government Center in any major or middle sized city and get a free meal and a room. Families are given larger rooms. Healthcare is provided, so are basic amenities like basketball courts and benches and some nice trees and such. You can stay as long as you like. The food is not very interesting, get used to cereal and baloney sandwiches. Also free busing to schools. Lots of cameras. Like I said, no means testing, if you are a frugal businessman you could even use this on your business trips. Probably that will make newspaper writers mad when the one in a thousand guy does this, but means testing just wastes money in the end because it will be pretty rare anyone wants to do this at all. This replaces all Section 8, cash benefits, food stamps, etc. As a huge benefit, a person just entering the labor force part time or minimum wage and stay and save their money until they are in a good position to buy on the private market. And the safety net is still always there.

  7. So, Counterpoint Boi, essentially you advocate for what once were the targets of (if not destinations for) COMMUNISM? Good luck with that, and from now on be sure to wear a surfing thermosuit, because any day now you will be tarred, feathered, and hunted out of town at dawn.

  9. Not exactly.

    My idea is a different social safety net that, like the alternate plan that Philip posted, simply replaces the existing very generous and inefficient system with one that is more centralized and less generous, except that it is not means-tested which I regard as part of the inefficiency. In the non means-tested way, it has some parallels to the “basic income” idea, except a person available themselves of it gets “basic shit” rather than “basic income”. The key is that the net is minimal so almost no one would want to be on it, but it gives people some chance to stay while they build up to their way out. In no way is my plan more generous than the existing one and it can hardly be called Communism, unless you regard the existing social safety net as Communism.

  10. Sam, I just read, probably reread, Philip’s post from 1996. For all I know, my idea may have been influenced or even originated from that post. Around June 1996 was actually the time I started reading Philip based on searching for a good SLR body and finding that he had written more on the subject that practically anyone on the Internet at that time. I bought an N90s.

  11. Boi, this takes us full circle. Back in the day, they used to have “poorhouses” that were exactly like what you describe. Even now, most big cities have homeless shelters. These don’t really work because you end up with the most dysfunctional members of society all concentrated in one place and they are a nightmare to administer. Either you are too lax and the inmates run the asylum or else you are too strict and the place ends up being a prison. Many people would rather sleep in the street than subject themselves to the indignity of having to deal with either their fellow inmates or the staff.

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