Is the coronavirus making UBI look better?

My last Bloomberg column was co-authored with Garry Kasparov, here is one excerpt:

Another positive sign for UBI is that most Americans seem keen to return to their workplaces. One fear has been that UBI would lead to a couch-potato culture, with people choosing to stay at home even when they’re finally able to leave. But blue-collar service workers are continuing to brave the front lines even when faced with reasonably high risks of infection. They are not trying to get fired so they can collect unemployment. White-collar workers, meanwhile, are feeling restless and unproductive. Working from home may become more common, but most people seem eager to get back to the office — especially if the alternative is a combination workplace/schoolhouse.

And:

…the crisis is serving up a very different and inferior bargain than the one many original UBI supporters advocated. Institutionalizing emergency measures designed to respond to Covid-19 would be irresponsible. It would entrench UBI without the prerequisite productivity boom from artificial intelligence and automation. (For some time it appeared the opposite might happen — namely, an AI boom but no UBI.)

I can report that Garry was a real pleasure to work and co-author with.  Here is my earlier Conversation with him.

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That's my fear, rather than the virus, that the endless stimulus measures ( another $ 3 trillion voted by the house) will create a permanent class of UBI recipients, expecting free college, free medical care, credit card loan forgiveness and subsidized vacations leading to productivity Armageddon.

if you don't see that we are already in a productivity armageddon, your dogmatic opinion isn't valid.

Productivity growth was a little over 1% last quarter of 2019 and 0.32% down YoY the March quarter. I would not say it’s a catastrophe considering we’re in a pandemic.
It’s a difficult year but all we have to do is get back to work. It’s all reversible.

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The 'B' in UBI means basic. If you want more than a basic life, you are still incentivized to work. I know I want more in life and I'm not afraid to roll up my sleeves.

Obviously, though, the next round of lobbying will rail against how unjust and unequal it is that the UBI provides only bare subsistence, and not enough to allow a recipient to truly take advantage of what life has to offer.

It's a product of our failed economic system. For most American's working lives, work has paid less and less in both absolute terms and in comparison with productive capacity. This meant that workers have been subsidizing, through their impoverished lives, an increasingly inefficient productive system. We could go back to the 1950s and 1960s where the government raised minimum wages, subsidized housing, did industrial planning, expanded health care and tried to make sure that working would provide at least the basics. Alternatively, we could just hand out cash to make up the difference between rising productivity and stagnant wages and call that the UBI.

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It’s also critical to talk about, who decides what “basic” is?

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But see: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3518686

The only value in the UBI theory is that it identifies politicians too stupid to remain in office.

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"will create a permanent class of UBI recipients, expecting free college, free medical care, credit card loan forgiveness and subsidized vacations leading to productivity Armageddon."

A UBI, (assuming it's truly a universal basic income) would mean everyone got the same amount of income. People could spend it on what they chose. But it wouldn't make everything "Free".

Of course, I understand, a lot of the same people promoting UBI are also promoting free healthcare and free college, student loan payoffs, etc.

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Every negative shock makes Universal Basic Income look better.

By the way, UBI is left wing speak for Milton Friedman's negative income tax. It's always looked good compared to the other garbage welfare programs. All we gotta agree on is: How much? :-)

UBI has never looked bad until you had to examine how to pay for it. And that problem remains present through all these "negative shocks."

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Both these are good comments. Regarding how to pay for it, I think the only way that makes sense is with an additional payroll tax (probably expanded to include equity income), with the UBI being not a guaranteed number but based upon how much was collected over a fairly long period of time. Say a 3 year rolling average. Thus, negative shocks would be cushioned by the 3 years beforehand, and 3 years later (deep into the recovery) the negative shock would cause a proportional dip in payments.

This would keep the program solvent in a hands off manner.

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Milton Friedman's negative income tax will not work in a country like the USSA that continues to reward breeders financially while over-taxing the non-breeders to support them.

At the base of Friedman's negative income tax is the idea of taxing the healthy, able and productive to support those who cannot manage to support themselves. This does not include those who choose to cobble their own lives and pollute the world by choosing to breed at society's expense, any more than it would include those whose life goals are to sail in yachts, live in mansions and drive Ferraris without personally paying for them.

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UBI won't work without profound capital controls.
Of course it's looking more and more attractive in the face of a "liquidity crisis," but it's a story of putting the cart before the horse.

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How high are Garry Kasparov's GREs?

+1 funny

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TC: "My last Bloomberg column was co-authored with Garry Kasparov..." - wow, that's very cool name- dropping. Just wondering however, since the article was economics oriented and had nothing particularly "Eastern European" in it, or chess related, what Kasparov's contribution was?

I'm temporarily breaking my one month self-imposed absence (I lost an online wager) for this public interest post.

We miss you Ray!

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“Open up, ray.”

“Give us Liberty for ray or give us Death!”

“No more lockdown (for ray)”

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You write that people are itching to get out and work again. Is that true? Are people really itching to get out and make less money than they're making right now? I'm not so sure.

Exactly my thought. We have nothing but anecdotes (signalling anecdotes at that) to judge the extent to which people are enjoying lazing around "working" from home and picking up their pay.

Also having nothing to do, not even the parks are open, might increase the desire to return to work and normal.

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How many people are making more money than they made while working? anyone have the numbers? I strongly suspect it's only a small minority-- those who were working at or very near minimum age. I know if I lost my job and went on unemployment I'd be making a lot less than I do, even with that 600$ a week-- which is due to end in a couple months.

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A UBI seems unlikely in the US any time soon. A guaranteed income seems more likely. The difference is the poor get the full amount but it tapers off as income increases. It's a lot cheaper as each dollar of tax revenue offsets welfare spending by a greater amount than a UBI.

The problem is that the more money you save by tapering off or means-testing the benefit, the higher the implicit marginal tax rate you are imposing on low-income people is. Why work overtime or two jobs to try to better your circumstances if the government responds by clawing back your benefits?

I just looked at US tax brackets. It looks like you've got a lot of room to work there. And if you wanted you keep marginal rates much the same as they are for people earning under $40,000 or $50,000 a year if desired and put the burden elsewhere. If it's a UBI then there will be a much bigger burden in total.

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It does seem odd to call a single payment to individuals during a crisis a UBI. I know, the house wants to send more. But I thought UBI was a permanent institution: reach a certain age, be paid a certain amount of money until death. I certainly don’t want my monthly income to be subject to the minute-by-minute whims of congress. Also the libertarian version of UBI is that it be instituted *in place of* all other welfare spending. This has not happened with the CARES act, and it will never happen in the US.

Speaking of Congress, just wait until they sink their teeth into something like this after the election this November. The pay scales will be sliced and diced to compensate for decades of 'structural' and 'systemic' racism and sexism to do more of--what the government does already. Shaw said something relevant about Peter and Paul.

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Why not reduce the hours per week before workers get over time pay instead, that is share the work as well as the income

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'Itching to get back to the office.' LOL...said no one ever.

Clearly you don't have small children. ;-)

Or a very good job.

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20 million agents with the same income?
All the value chains will tune into that customer set. Product diversity collapses.

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People who advocate a UBI probably have not had teenage kids. A class of UBI do-nothings will take years to create as more and more teenagers decide it's easier to live a basic life sleeping in, playing video games, and hanging with other similar people rather than enter the workforce. Without something to push them into the workforce, a proportion of them (25%+) will just not do it. Groups of them will create a reasonably tolerable but completely unproductive way of living.

Most people who have worked for 5+ years depend on work for a lot of their purpose in life, and meet friends etc. but for many young people it's just a shit thing you've gotta do.

I don't think there is ever a danger that everybody is going to stop working, or even a majority. But just because many are calling for more work, it doesn't mean that in time a sizeable body of layabouts won't be created.

It’s either Capitalism and Freedom or Free to Choose, but in one of those, Milton makes the point that I think is most important for UBI, which is that the US government intentionally destroyed the culture of a lot of inner city working poor and turned them into government leaches/fodder for identify politics. If you support a UBI, you have to realize there is already a large population living on taxpayer support who would continue to do so.

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It wouldn’t be universal in this case, but what about excluding anyone under 30 from qualifying?

One danger is that unambitious young people will treat it as a “retirement” package to look forward to. Other dangers?

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"A class of UBI do-nothings "

I've always thought that a UBI wouldn't work for just those reasons. I think we'd be better off with a Universal Wage supplement, whereby all workers get an extra few dollars per hour from the Federal government for each hour worked up to 40. And have this funded off of a pay-roll tax.

We have one. It's just very niggardly. Bump the EITC up to make "fight for fifteen" relevant. Replacing the wage tax for financing SS and Medicare with a VAT would help,too.

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It would be fun to see how many UBI layabouts it would take to flip all of Table Mesa, at the foot of the Boulder Flatirons, into tenement rentals. The CU Boulder kids already create some problems, but imagine if they never had to graduate!

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>Most people who have worked for 5+ years depend on work for a lot of their purpose in life

That is incredibly sad.

>but for many young people it's just a shit thing you've gotta do.

The youth are right.

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So UBI should apply only to adults/people not claimed as dependents on someone''s taxes?

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Not sure you've mentioned, but if so it bears repeating: "home" is for many Americans NOT a 2 500+ sq ft house in the suburbs. The variety of sleeping (and eating, although arguably that's not the same) arrangements runs the gamut between homeless, crashing at friends, car/vehicle, cot in basement, 4ft x 10 ft closet with sink, apartment with 20-30 co-renters, ... all the way to living with the ex (and his.her significant other). I wonder how many people would not agree that "home (meaning where they actually sleep) is where their heart is"?

I'm sure life has proved difficult for roommates where one worked day shift and another worked night shift while both shared a single bed in a studio apartment.

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A couple issues come to mind. 1) everyone expects current benefits to be temporary. It would be positively irrational to quit your job or delay finding a new one because of a few months of checks. There’s a big difference between that an guaranteed checks for life regarding incentives. 2) lockdowns have seriously reduced the value of leisure time. Work doesn’t seem so bad compared to isolating yourself in your apartment for three months straight. Not sure that sentiment holds as much in normal times.

Iow, if a UBI seems more attractive it’s because of characteristics peculiar to the current crisis that don’t generalize to normal times.

With a few very narrow exceptions you can't qualify for unemployment if you quit your job voluntarily.

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In Australia administration eats up about 13% of money spent on welfare. A guaranteed income (not the same as a UBI as higher income earners don't get it) either equal to the old age pension or equal to the dole (unemployment benefit) with a simple increase at age 65 should pretty much eliminate administration costs. Yeah, tax revenue would still have to increase to provide it, but it makes things a lot more efficient.

Note: This does not mean we could not also have some kind of jobs program so that everyone who wants to work can have some form of paying employment in addition to the guaranteed minimum income.

Because 13% spent on administration would go away, right?!?! Dufus.

Most of it, yes. Why wouldn't it? Or are you about to tell the the US is still funding 5,500 ration boards from WW2?

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What Cowen and Kasparov are acknowledging is that the post-pandemic America will be very different from the pre-pandemic America: millions of jobs lost that will never return. Over 15 million Americans worked in restaurants and 29 million worked in retail before the crisis, and if the number of employees who don't work directly in restaurants or retail but rely on the restaurant and retail industries are added, the total would reveal just how economically vulnerable Americans are going to be. The relief bills that have been adopted sent the bulk of funds to employers not workers; indeed, one reason, a big reason, why there has been such a strong effort to re-open the economy now is that employers who received many billions in PPP loans must spend most of the loan proceeds within 60 days of receipt on compensation for employees in order for the "loan" to be forgiven. The clock was ticking. How many of the furloughed employees who have been re-employed will continue to be employed once the clock and funds run out.

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Cowen thinks 10 moves ahead.
Kasparov thinks 10 moves ahead.

Together they can think 20 moves ahead. Math.

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Despite its appeal, UBI remains very unpopular with the general public. One way to make it more palatable might be to turn it into a loan instead of an unconditional benefit. In other words, a "Universal Basic Credit Line". I discussed this idea a while ago here:

https://link.medium.com/EXOWYvW8w6

I'd be interested in the age breakdown of attitudes towards UBI and some form of national, subsidized medical care. A lot of my peers in their mid-50's and older still bristle at this but I find the attitudes start shifting significantly with middle-age and younger people. Also, with an increasing immigrant population, there are fewer folks who fall out of their chairs at the notion of the State taking a more vigorous role in enforcement of egalitarian outcomes.

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UBI a branding issue really.
England pays 80% of the employers wages up to a cap;
England pays 80% of self-employed wages up to a cap.

Let's say you wanted to give money to the unemployed ala UBI:

Simple: Become an employer who employs persons who cannot get work--have them dig ditches--and the government will pay 80$ of the wages.

State an local governments have potholes to fill.

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They are not trying to get fired so they can collect unemployment.

In most cases you can’t get unemployment if you get fired.

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I don't think the problem with UBI is the psychology (though that could be a problem), it's just the cost. Either the UBI is too low to be useful, or it's too expensive (would vastly inflate gov spending). e.g. in the UK, if everybody gets $15K a year, then that is more than current gov spending on EVERYTHING.

And you will still have people who need more help, and lots of people who just don't need a UBI.

So you end up means testing and you're back where you started.

Also, the benefit of the UBI would be eaten up by its inflationary effects. We gave everyone free money and cheap loans for college, and college responded by getting a lot more expensive.

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Yes, and if everyone gets $15K/year, then getting only $15K/year puts you back to the bottom of of the pile. If you could not find a house for $0/year, then you will not found a house for $15K/year when every is getting $15K/year just for breathing.

Ask yourself this: If everyone got a zero added to their paycheck starting tomorrow (eg you earned 10X more), what happens to the price of a car? It eventually goes up 10X.

I didn't realize we'd be paying China and India's UBI as well!

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That's a faulty analogy.

Adding an extra 0 to the paycheck is a linear increase. So it just devalues the currency.

But adding $15K to everyone's paycheck has vastly different effects at:

$15K per year current income (US minimum wage as an example) and $220K per year (top quintile average).

A person making minimum wage has twice the income to spend, the person making $220K gets a 6% raise.

And if it's funded off of a payroll tax of say 30%, then in reality, it's only adding a net $9K to the person making minimum wage, breakeven for someone around $50K per year, and a 20% tax hike on the $220K person.

I'm not recommending this, I'm just pointing out that it's not equivalent to a one time inflationary jump.

Yes, agree, but giving ANYONE free money--even one person--devalues the currency. The more you give it to, the more it's devalued. And this IS inflationary in a certain economic band. The bottom 20% all compete for the exact same apartments and houses. If you add a 10% to their income, but not to anyone else's paychecks, what happens?

Rents on the bottom 20% rise by 10% because they all can readily afford it (they have 10% more money) AND costs have risen for the landlords (higher taxes, higher labor costs). And in fact, even though the 20-40% decile didn't get any bump, they will still see their rents rise because of increased demand from the bottom 20% for the nicer apartments/houses.

So even if you flood just the bottom 20% with money, it's 100% inflationary among that cohort. Same story with buying a car, buying food, etc.

There's no free lunch. The buying power of the UBI recipient doesn't increase if UBI is done at scale. And that is the very thing UBI is trying to fix: How to give someone more buying power.

>Yes, agree, but giving ANYONE free money--even one person--devalues the currency. The more you give it to, the more it's devalued.

I don't get that; it seems like it would depend on whether or not you are taking that dollar from someone else first. Or even whether you are taking that dollar from some other program (e.g., most UBI proposals replace social security)

The bottom 20% all compete for the exact same apartments and houses. If you add a 10% to their income, but not to anyone else's paychecks, what happens?

Someone probably builds more cheap apartments.

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If people getting money they didn't earn for devalues the economy then lotto winners and trust fund heirs are also guilty.

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Clarifying question: I'm afraid I'm not understanding the meaning of the second substantial paragraph, the one that follows the free-standing "And." I don't fully understand what is being said in that second paragraph, or how it might fit in with the first substantive paragraph. Can someone clarify?

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Would it be okay to point out that the promised "productivity boom from artificial intelligence and automation" keeps not happening. The productivity boom will occur, if at all, when productive capital rather than financial assets are the investment of choice for investors. Cowen has the causation backwards: the obsession with AI and automation is why UBI may be necessary not what makes UBI possible.

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"Another positive sign for UBI is that most Americans seem keen to return to their workplaces"

They do now (though some employers have been reporting trouble enticing employees to return when the unemployment benefits are significantly higher than their former salaries). But people now understand that the current benefits are only temporary, so the option of staying off work permanently is not available. AND it's not enough for 'most' Americans to want to return to work -- a sizable minority being willing to live on UBI alone would still be a disaster.

Would that number be greater than the number of people currently (or rather, before Covid) not in the workforce? We don't have people starving in the gutters so somehow that ~37% of so of the working age population that was not working and not even looking for work was being supported somehow.

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There are two pieces to UBI: Shoveling out the money and paying for the money you are shoveling out. We've had a good experiment testing if people like getting money from free, and the answer is "Yes!" they do. Which is interesting, because 63.4% of those polled were not sure if people would like free money.

But now that we have that question answered, we can move on to the other piece and talk about how to pay for it.

Also, if the federal government decided tomorrow that everyone must be paid 10X more--you just stick a zero after your last paycheck and that is your new paycheck.

What happens to the price of houses and cars? Yes, they eventually rise to 10X their current price.

UBI will not do what you expect. If the bottom 20% suddenly have an extra $1000/month courtesy the US gov, then the price of food + housing will rise accordingly and what seems like extra money in the beginning will quickly be swallowed by rising costs.

Why on earth would Microsoft keep the price of an Xbox subscription the same if they knew that everyone had an extra $1000/month flowing in AND if they had higher expenses (taxes, labor costs) they had to pay to cover the $1000 check sent to everyone each month.

UBI only works if you have a very small group getting in a particular economic decile getting the money.

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UBI would permit the elimination of at least 300,000 federal employees in redundant social programs. Reason enough to go forward.

Are you nuts? If you think ANY social programs would be eliminated by UBI you are wrong. A "welfare package" today can net the recipient around $30 to $40K per year (housing subsidy, health care, food, daycare, utilities, etc). UBI would not make that go away. It would be in ADDITION to the welfare.

Even if if UBI paid $40K/year, if you have EVERYONE getting $40K/year extra means prices would rise to account for the new money. And the $40K the bottom 5% the earners are getting would soon by lost to inflation.

As I noted above, if everyone had their salary increased by 10X, the price of a new car would rise by 10X. UBI is inflationary in the decile it is applied, and the degree of inflation depends merely on what % of the decile is receiving the free money. If everyone gets the free money, then it's 100% inflationary.

Link to WaPo on how much you can get from various welfare packages. In Hawaii, for example, it's $49,175.

http://archive.is/x209b

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The fact that anybody thinks that corona is making UBI look better, makes UBI look worse to me

Because Corona just cratered our economy. You can't fund a UBI if the economy is in the shitter and there's no money. The fact that all these people seem to think that UBI is getting _more attractive_, are demonstrating that they think they can just magic free money into existence indefinitely. That is a dangerous path that ends in a literal hot class war with millions dead. This doesn't sound like "looking better" to me

In Washington state, we pull in around $53B/year in revenue. The shortfall thus far from C19 is around 14%. This will rip through the rainy day fund in short order. And it's only getting started.

K12 and Medicaid are entitlements that cannot be touched. Things like college subsidies, social services, higher-ed funding, green energy, funding for immigrants...these things will be destroyed by the shortfall.

It's ironic, in a way, but those demanding we not accept any risk and shelter in place are mostly blue voters. They are destroying the very things they love seeing the state spend money on--they just don't know it yet.

The downturn of 2008/9 caused states to grapple with 10% losses to revenue. This will be far more severe. Double, maybe even triple that depending on duration.

https://washingtonstatewire.com/how-big-is-the-washington-state-budget-deficit/

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No. What the unemployed need is unemployment insurance that replaces a generous portion of lost wages plus enough for health insurance.

And the employed need a much higher EITC plus getting read of the wage tax to finance SS and Medicare would be nice.

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The answer is a means tested basic income. It will obviously replace many programs and the bureaucracy administering them , otherwise it's pointless. During rough times, it goes up, during bad times, it goes down. Charles Murray 's book advocates a UBI, not my view, but his book should be consulted. The fear of people sitting on their ass has always been childish. Nixon mocked such a view when his plan was being put forward, and partly passed. "I don't give a shit if a few people sit on their ass," he wisely said. People thinking this need therapy. It's going to be enough to survive, not thrive. It's pathetic. Meanwhile, we've got all these programs that overlap, interweave, and defy a serious accounting. It's a great system. Finally, I don't believe people who boast that they never need or use the government. It's the kind of thing you anonymously post knowing nothing you say can be verified. A basic income is humane, sensible, and not hard to administer. If it really turned out that no one was working, it wouldn't last.

"The answer is a means tested basic income."

Which is an explicit rejection of a UBI.

They both endeavor to ensure everyone has a basic income.In that sense, they're alike. But you're right, my plan is intended to get rid of the bureaucracy involved in all the government programs, saving untold millions, and targeting money to people who really need it because they haven't any. To be honest, giving everybody a check seems asinine to me, but I'm looking for support for my idea, and I'm hoping that, if you're for a UBI, so much the more you're for my plan.

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Excuse me, during good times it goes down. In fact, what we want is a society that begins to ratchet down because people are better off and feel better about society. That's the only way government will ever get smaller.

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Unfortunately, the time sample doesn't answer the question. A plausible, and based on my experience the probable story for how work-ethic degrades is not so much from a general and wide-spread apathy or lack of work-ethic that constantly needs reinforcing, but rather a risk of emulation motivated by jealousy.

Initially, most individuals would keep working. Most being a very large majority. But a few slackers could slowly undermine this by presenting a bad example and invoking a FOMO response from others.

Most people actually like staying active, doing something, and like that to be something productive. But they also feel taken advantage of quite often and would rather quit working than feel like they are being taken advantage of, assuming they aren't at the same time coerced.

If we were simply better at not leaving people with a deep sense of unfairness we'd have little to worry about here. But, we're not that good, and besides, we're fighting up-hill because even if things are fair, individual bias's can usually find something to describe as unfair.

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We already have a class of UBI recipients with their incomes and wealth protected by repeated legislative handouts and the Federal Reserve. I am a personal beneficiary, granted at the lower end, but still capable of living quite well without working. Every time the Federal Reserve cuts interest rates to goose asset values, every time Congress cuts taxes to incentivize those who already have plenty, every time the executive prioritizes the needs of those who have the most, we are maintaining a UBI for the wealthy. The fact that the "basic" income is in the range of winning a lottery jackpot just tells us that the rich have a different view of the basics.

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Alaska has a UBI. Granted, it's not all that much and even less now with low oil prices. Has anyone studied if it has cut the number of hours the typical Alaskan works? I get the impression that Alaskans work as hard as Americans anywhere, but I might be wrong about this.

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