Kevin Drum

Is It Finally Time For a UBI?

| Wed Apr. 20, 2016 3:55 PM EDT

UBI is having a moment. Not a big moment, mind you, but a moment nonetheless. Why?

UBI stands for Universal Basic Income, and it's just what it sounds like. It guarantees everyone, rich and poor alike, a certain minimum cash income and replaces the alphabet soup of current welfare programs. No more food stamps. No more Section 8. No more unemployment compensation.

On the right, UBI got a boost a few years ago from Charles Murray, who championed the idea in his book In Our Hands: A Plan To Replace The Welfare State. On the left, the rise of Bernie Sanders has given it a bit of new momentum, even though it's not part of Bernie's campaign platform. It's also gotten some attention thanks to planned experiments in Finland and the Netherlands, and a referendum for a national UBI in Switzerland this summer. On his Freakonomics podcast last week, Stephen Dubner suggests it's "an idea whose time finally may have come."

So what are the pros and cons? Here's a quick, extremely non-exhaustive rundown.

THE GOOD

#1: A UBI eliminates bad work incentives.

There's a problem inherent with all means-tested welfare benefits: they phase out as you make more money. Suppose you make $15,000 per year, and above that point you lose 50 cents of welfare benefits for every dollar you earn. This means that working more hours or taking a more challenging job doesn't pay much. On net, a raise of $5,000 per year only gets you $2,500 of actual compensation. This reduces the incentive to work harder in order to escape poverty. But a UBI is different: Since you continue to receive a UBI no matter what your income, it has no effect on work incentives.

#2: A UBI reduces admin costs.

Means-tested programs all have to be administered, and that costs money. A UBI reclaims nearly all of that. The government just sends out a monthly check to every citizen, and that's it. Admin costs are minuscule.

#3: A UBI allows the poor to live freer lives.

Poor people no longer have to endure a demanding gauntlet of welfare offices and complicated forms. They don't have to prove their income is low, or that they have kids, or that they're actively looking for work. Nor do they have to accept only the specific forms of welfare the government feels like giving them. They just get a check every month, and they can spend it as they please.

THE BAD

#1: It costs a fortune.

A reasonable UBI would probably amount to about $10,000 per year, which works out to a total cost of $3.2 trillion. Of course, we'd also eliminate lots of welfare payments, so the net cost would be less than that. But even accounting for that, it would probably require the federal income tax to be doubled or tripled. That's a pretty tough sell.

#2: It can't replace everything.

You can—barely—live on $10,000 per year. But that won't pay for health care. It won't pay for public schools for our kids. We'll still have to keep some welfare programs around even with a UBI. On the plus side, as long as these programs are universal, they generally retain the benefits of a UBI: low admin costs and no bad work incentives.

#3: What about children?

This is tricky. Option A is to simply include them like everyone else. But this provides a substantial incentive to have children in order to get their UBI, and that's not something most voters are likely to accept. Option B is to give children a smaller UBI than adults. But would that be enough to provide for them properly? Nobody wants kids to suffer because their parents are poor. How do you ensure that?

#4: What about the elderly?

Should retirees be folded into the UBI? If so, their pensions would be quite a bit lower than they are now. If not, we'd basically be guaranteeing a higher UBI for old people than for young people. Would that seem fair to most people?

#5: Money is a sadly vulnerable commodity.

It's an unfortunate but painful truth that poor people are often vulnerable to having cash taken away from them. It can be stolen, of course, but more likely it's simply confiscated by someone they're living with. This is obviously a problem with earnings of all kinds, but one advantage of existing welfare programs is that it provides a minimum floor to this. A drunk and abusive husband can't take away your Section 8 voucher or your food stamps or your Medicaid in order to blow it on beer and smokes.

This is just the briefest outline. And it may be that in the near future we no longer have much choice about this anyway. As robots take away more and more jobs, a UBI may be the only realistic answer to a nation full of robots that can replace low-skill workers at almost no cost. If we get to a point where a substantial number of people flatly don't have the skills to perform any job for any wage, what are we going to do? The most likely answer is that we'll end up with a UBI whether we like it or not. And that makes it worth thinking about right now.

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Harriet Tubman Will Replace Jackson on $20 Bill

| Wed Apr. 20, 2016 12:58 PM EDT

Who says Broadway musicals are a dying art form?

Treasury Secretary Jack Lew on Wednesday will announce plans to both keep Alexander Hamilton on the front of the $10 bill and to knock Andrew Jackson off the front of the $20 in favor of Harriet Tubman, sources tell POLITICO.

....Lew's reversal comes after he announced last summer that he was considering replacing Hamilton on the $10 bill with a woman. The plan drew swift rebukes from fans of Hamilton, who helped create the Treasury Department and the modern American financial system....Supporters of putting a woman on the $10 bill have complained that it will take too long to put a woman on the $20 bill. But people familiar with the matter said new designs for the bills should be ready by 2020. Treasury is likely to ask the Federal Reserve, which makes the final decision, to speed the process and get the bills into circulation as quickly as possible.

The movement to keep Hamilton on the $10 bill gathered strength after the Broadway musical named after the former Treasury Secretary and founding father became a runaway smash hit.

Quick! Someone create a smash hit dubstep-zydeco dance musical featuring Andrew Jackson. It's his only hope.

I still wish Lew had chosen Frances Perkins, since I like the tradition of portraying people on currency who have served in office, but that's just a personal thing. (Though I do admire Perkins greatly, and think she deserves more attention than she usually gets.) Still, it's hard to argue with Tubman—or with any of dozens of other women. When you're going from zero to one, there are a whole lot of worthy choices.

And it's also nice to see that they can manage to put a new bill in circulation by 2020 after all. I mean, 2030? Seriously? How can it take 15 years to design a new bill and start shipping it to banks?

POSTSCRIPT: There's a bit of irony here. The $20 bill is ubiquitous largely because that's what ATMs have been spitting out since the late 70s. But a twenty today is worth less a ten back then. We really ought to be using $50 bills as our go-to walking-around currency these days, and that's what ATMs should be churning out. By 2020, maybe they will be. And by 2025 cash will probably have disappeared entirely. So by the time Tubman finally makes it onto the twenty, we won't be using them much anymore. Women just can't catch a break.

Factlet of the Day: Youth Turnout in New York Wasn't Much Different Than in 2008

| Wed Apr. 20, 2016 12:33 PM EDT

For the record, here's the Democratic turnout in New York in 2008 and 2016:

 

Total Turnout

18-29 Turnout

2008

1.82 million

273 thousand

2016

1.81 million

322 thousand

The turnout rate among all residents aged 18-29 was up from 9.8 percent to 11.5 percent. That's a nice increase, but as I recall, Obama didn't spend a whole lot of time in New York in 2008. When you take that into account, it's hard to see much evidence here of a massive surge in youth interest caused by the Bernie Sanders campaign.

It's Not Just Blue-Collar Workers Who Voted For Trump Last Night

| Wed Apr. 20, 2016 11:47 AM EDT

I don't really know how much to make of this, but Donald Trump's victory in New York last night was remarkably thorough. Take a look at the exit poll results on the right for evidence.

Yes, Trump did well in his wheelhouse of high school grads. But college grads and postgrads also voted for him by huge margins. In New York, at least, having a PhD (or an MA or a law degree or a medical degree) didn't do much to help you see through his obvious flimflam.

Perhaps even more remarkably, Trump's strongest support didn't come from blue-collar workers with modest incomes. It came from middle and upper-middle-class voters. Whatever their motivations, it didn't have anything to do with China and Mexico taking away their jobs.

Another Pension Fund Goes South After the Great Recession

| Wed Apr. 20, 2016 11:14 AM EDT

Here's the latest big pension fund in trouble:

More than a quarter of a million truckers, retirees and their families could soon see their pension benefits severely cut — even though their pension fund is still years away from running out of money.

....Like many other pension plans, the Central States Pension Fund suffered heavy investment losses during the financial crisis that cut into the pool of money available to pay out benefits. While the stock market has recovered since then, the improvements were not enough to make up for the shortfall....That imbalance left the fund paying out $3.46 in pension benefits for every $1 it received from employers. The shortfall has resulted in the fund paying out $2 billion more in benefits than it receives in employer contributions each year.

One of the big criticisms of 401(k) style retirement plans is that they can lose a bundle when the stock market tanks. And sure enough, that's exactly what happened during the Great Recession. The value of 401(k) plans fell dramatically, causing a lot of pain for people who were close to retirement.

But don't let that make you nostalgic for the good old days of defined-benefit pensions. Sure, they promise a steady retirement income, but promises are only as good as the money to back them up. This means that pension funds which lost a lot of money during the Great Recession are in no better shape than 401(k) plans that did the same. There's no magic here.

What's more, 401(k) plans have rebounded since the depths of the recession: taking into account both their losses and their subsequent gains during the recovery, the average 401(k) balance has grown more than 10 percent per year between 2007 and 2013. Apparently that's not the case for the Central States Pension Fund. Perhaps those much-maligned 401(k) plans are a better retirement vehicle than their critics give them credit for?

In the 21st Century, We All Want Smart, Gorgeous Mates

| Tue Apr. 19, 2016 7:59 PM EDT

Wonkblog points us today to a chart from Max Roser showing how men and women rated various aspects of potential mates in 1939 vs. 2009. (Since 1939 is the comparison year, it goes without saying that we're talking about straight, cis, and most likely white folks here.) You can see the entire set of data at either of the links above, but I was interested mainly in the traits that have moved up or down significantly over that period. Here they are, in a handily color-coded pink and blue chart:

What can we tell from this? For starters, keep in mind that this is what people say they value, not what they actually value. "Similar political background," for example, has allegedly moved up only one spot, from dead last to almost last, so it's not in my chart. But there's considerable evidence that a lot of people today would rather have their big toes cut off than associate with someone of the opposite party. So take all of this with a grain of salt.

Anyway, obviously chastity is out the door. No one cares anymore. Refinement is now decidedly old-fashioned, replaced by a desire for the more egalitarian virtue of sociability. And love has zoomed up to the top of the chart. (Allegedly, anyway.)

Beyond that, the two big movers are education and good looks. Apparently we all want mates who are both smart and gorgeous, which might go a long way toward explaining why marriage seems to be in decline. How many smart, gorgeous people are there in the world, after all? And if they have to be gregarious too—well, you're just being mighty picky. Good luck.

Notably, the boring traits haven't changed much: dependability and stability were near the top of the chart in 1939, and they're still there now. I guess meat and potatoes are always in fashion. Or so we tell the pollsters, anyway.

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Here's a Sneak Preview of the Upcoming Republican Health Care Plan

| Tue Apr. 19, 2016 6:46 PM EDT

Seven years after they first promised an alternative health care proposal, Republicans now say they're close. "Give us a little time, another month or so," Rep. Fred Upton (R-Mich.) told reporters this week. Steve Benen is unimpressed:

The problem probably isn’t dishonesty. In all likelihood, Republicans would love to have a health care plan of their own — no one likes to appear ridiculous while breaking promises — but haven’t because they don’t know how to craft one.

Not true! They know exactly how to craft one. In fact, I've seen a leak of their upcoming plan. Here it is:

  • Block granting of Medicaid
  • Tort reform
  • Interstate purchase of health plans
  • High-risk pools
  • Tax breaks for buying individual coverage
  • Health savings accounts

None of this would have much effect on the health care market, and it would probably fall about 19 million short of covering the 20 million people currently covered by Obamacare. That's why they don't want to unveil it. They know what they want, and they know how to craft it, but they still don't know how to make up a plausible set of lies about how it will do anybody any good. As soon as they figure that part out, they'll go public the next day.

Supreme Court Urges Nevada to Stop Hating on California

| Tue Apr. 19, 2016 2:58 PM EDT

Excellent news. In a case pitting a Nevada resident against the bureaucrats of the state of California, the Supreme Court has confirmed that Nevada does indeed hate California and needs to knock it off:

Nevada has not applied the principles of Nevada law ordinarily applicable to suits against Nevada’s own agencies. Rather, it has applied a special rule of law applicable only in lawsuits against its sister States, such as California.

....The Nevada Supreme Court explained its departure from those general principles by describing California’s system of controlling its own agencies as failing to provide “adequate” recourse to Nevada’s citizens....Such an explanation, which amounts to little more than a conclusory statement disparaging California’s own legislative, judicial, and administrative controls, cannot justify the application of a special and discriminatory rule. Rather, viewed through a full faith and credit lens, a State that disregards its own ordinary legal principles on this ground is hostile to another State.

....We can safely conclude that, in devising a special—and hostile—rule for California, Nevada has not “sensitively applied principles of comity with a healthy regard for California’s sovereign status.”

The case itself doesn't matter much. An inventor moved to Nevada and then sued California when it harassed him for back taxes. Nevada normally limits these judgments to $50,000 even if you win, but as long as you're suing California, it turns out the sky's the limit. The Supreme Court was not amused. Nevada can't do that just because they think poorly of California's laws.

But all is forgiven now. Come to the beach and relax, Nevadans! Don't let the dark side consume you.

Chart of the Day: Americans Think Hard Work Is the Key to Success. Europeans, Not So Much.

| Tue Apr. 19, 2016 2:25 PM EDT

Here's a fascinating result from the plucky pollsters at Pew Research:

I'm not surprised that the US ranks highest. But I am surprised at how much higher. Only a quarter of the French think that hard work is important for getting ahead in life? How about that. Even the famously diligent Germans clock in at only 49 percent.

Granted, in order to make the grade, you have to score this as 10 (or "10," as Pew puts it) on a 0-10 scale. Maybe Europeans tend to score it as a 9—still pretty important, but not quite totally life-engulfing. Either way, though, apparently we Americans continue to believe in the importance of hard work a lot more than our Europeans peers. No 6-week vacations for us!

The Gig Economy Is Mostly a Myth

| Tue Apr. 19, 2016 1:05 PM EDT

The gig economy. Uber for X. The on-demand revolution. Crappy part-time work with no benefits or job security.

Call it what you will, but it's big. Very, very big. It's the future.

Or is it? It's important to define things correctly here. The "gig economy"—and I really want to know who came up with this idiotic name—has nothing to do with using software as some kind of consumer front end. Practically every company in the world does that in one way or another. Nor is Amazon "Uber for diapers." They're just a gigantic retailer that delivers stuff fast.

What we're really talking about here is being able to hire the services of random strangers (a) quickly and (b) for unpredictable amounts of time. The truth is that Uber could be run entirely via old-school phones and a call center. It would be less convenient, but still workable. So why is it that Uber has been phenomenally successful but few other on-demand services have come anywhere close? Matt Yglesias suggests that everyone misunderstood what Uber was really doing:

What optimistic investors missed about Uber clones is that hailing rides is a bit of a unique case. In that particular market, digital ordering isn't just a little better than the old analog alternative, it's dramatically better. But that's because of the ways rides for hire were regulated, not something that applied to food or laundry delivery.

The traditional taxi market before the rise of ride-hailing apps was regulated in a peculiar way....In the vast majority of cases, the agencies in question were essentially "captured" by industry lobbyists who set the rules so as to protect the incumbent holders of taxi licenses from competition.

....App-based ride hailing was a game changer in this context, not just because it offered a somewhat better way to get a ride, but because in Uber's earliest cities it exploited loopholes in the way taxi regulations were written to put vehicles for hire on the road that would not have been allowed to operate as cabs.

In other words, Uber wasn't primarily a technology hack, as everyone assumes. It was a regulatory hack. Try to do Uber for groceries or Uber forbabysitting and you have to compete with everyone who's already out there—most of whom have been operating in a competitive market forever and know a lot about how to do it. It just won't work as well as it does when you're taking on a long-coddled industry.

If this is true—and it certainly sounds plausible—it's important to take away the right lesson from this. It's not that new startups should all start beavering away to find regulatory hacks. It's that you have to have some kind of hack. In its early days, Netflix hacked the postal service. Amazon hacked the clubby publishing clique. Uber hacked the taxi medallion system.

"On demand" is nothing new. Ask any freelancer or consultant or day laborer. App-based dispatching adds some convenience to on-demand services, but in most cases it's nothing to shout about. That's because the market economy is already an on-demand machine. That's the whole point of a market economy. If you make that machine a little better, you'll make a little bit of money. But if you find some kind of niche that you can make a lot better, you'll make a lot of money. You just have to find the niche.