Over at Bloomberg Megan McArdle gives her reaction to the Swiss rejection of a universal basic income that I wrote about yesterday:
Oh, we weren’t going to get rid of Medicare? Nor Medicaid or Obamacare? And of course we’ll keep providing public schooling, and assistance for disabled children, and…. By the time you’ve started saving programs that obviously can’t be cut without immiserating large chunks of the population who currently rely on the government, what you have is a $2.7 trillion program to substitute for Temporary Assistance for Needy Families (welfare), unemployment insurance, Social Security and food stamps — four programs upon which the federal government currently spends about $1.2 trillion.
Moreover, since the grant would be, in many cases, less generous than what a lot of people are currently collecting, we will probably have to either top up for those groups, or increase the size of the benefit, until we have a $3 trillion or $4 trillion program to replace $1.2 trillion worth of welfare spending. Even if we tax back the whole benefit from higher earners (which would reintroduce many of the marginal tax problems we were trying to avoid with the UBI in the first place), the dead-weight loss of the additional taxation needed to pay for this program will probably harm economic growth, making the program more expensive still. I’m not a supply-side hawk who thinks that any tax increases will plunge us all back into the dark ages, but running an additional $2 trillion to $3 trillion through government coffers every year might give even some ardent big-government Democrats pause.
These numbers are, of course, specific to the U.S., but the problem is the same in any developed country. Handing out a universal benefit of any size at all will be fantastically expensive. You can make it smaller, of course, but then you don’t get any of the vaunted benefits: It doesn’t prevent the benefit cliffs, doesn’t encourage entrepreneurship, doesn’t lessen the distortions of all the in-kind benefits you’ve left in place.
One of the key points is that the advocates of a UBI are trying to address a problem that we don’t actually have, may never have, and for which there are politically simpler solutions: displacement of workers by automation.
Whatever degree technological unemployment is presently a problem is overwhelmed by any number of other laws, regulations, and other policies we’ve introduced over the years. There are good reasons for some of them, e.g. some environmental regulations. The reasons are less good for others, e.g. occupational licensing requirements for jobs that don’t require much in the way of skills.
Something that’s generally ignored is there’s no law of nature that the proceeds that result from the market distortions that are created by such laws, regulations, and policies need to remain in the hands of those who benefit from them. IMO that should be the first line of recourse: either getting rid of unnecessary regulations or getting rid of the deadweight loss from necessary regulations.
That won’t solve the problems of poverty and unemployment in one, grand master stroke but good stewardship frequently requires boring, detailed work rather than grand master strokes.
There is no such thing as large scale unemployment caused by lack of skills. If there are a large number of jobs that cannot be filled because nobody has the skills for them, the jobs will be dumbed-down.
When cashiers do not have the arithmetic skills to count change, retail stores do not close due to a lack of qualified personnel. They purchase cash registers that calculate the change and/or dispense the coins.
When cashiers do not have the skills to enter the prices fast enough, the fast food restaurants do not become slow food restaurants. They buy cash registers with pictures on them.
In both of these cases, there were new products that needed to be created, produced, installed, and maintained. Amazingly, dogs, cats, and the much celebrated dolphin are not capable of doing these jobs.
In a production based economy, producing goods is the objective. Free-trade means trading one’s goods. It does not mean importing more of somebody else’s goods. This would be called Free-Importing, but then, one would need to have a clear understanding of the concepts involved.
The biggest problem with ending the gold standard was trade. Free-trade was no longer possible. One can only engage in free-trade when one trades like-for-like, and with free floating currencies, this is not possible. This is important because with a gold standard cheap imported steel in a produce based economy (with a G-S constrained financial system) is not a problem. (Also, it is a bad idea to not produce the basic materials.)
The pieces are not stand-alone parts. They are parts of a foundation, and when the foundation is properly laid, the economy can support the “nice to have extras”. All safety net and other social programs are possible because the US is wealthy. I harp on Venezuela because they should be a manufacturing powerhouse, but they are on the verge of collapse.
For the past eight years, the politicians and central bankers have tried every non-production based theory they could imagine, and then, they tried a few they never imagined they could imagine. Nothing has worked, but they refuse to accept that somehow printing money is not the same as producing goods.
Furthermore, goods are produced by people who are usually disliked by the elites. Eliminating production has the added benefit of eliminating the people working in the production industry, but that is another discussion.
The model for the UBI would be the Roman Empire. The US needs to conquer new lands and enslave the people. The newly enslaved people will produce goods, and those goods will be shipped to the US for purchase by the unemployed or underemployed using a government stipend. Oh wait, we are almost there, and like the Romans, some of the slaves were shipped to Rome to work there also.
Good job Democrats and Republicans, conservatives and progressives. You can pat yourself on the back, or better yet, you can get your illegal slave to do it for you.
I think you’re almost 180° opposite of what’s actually going on.
Have you ever heard a sales pitch for a point-of-sale terminal? (electronic cash register) I’ve heard dozens. I’ve never heard anybody cite employees who were unable to make change as a justification.
I have heard the issue of employee theft and fraud raised any number of times.
However, this is true: “There is no such thing as large scale unemployment caused by lack of skills.”
I think the change dispense was more for speed, but I know employees who were instructed to never manually calculate the change. These were not today’s POS terminals. They were the original electronic cash registers you would enter what the customer gave you, and it would tell you how much change to return.
UBI is one of those things that’s great in theory but is just about impossible to implement. In the US? It’s crazy talk. We can’t get a coherent tax or health care system, so the idea that we can create a coherent UBI is just wishful thinking. Might as well read Harry Potter books – it’s about as likely and a lot more entertaining.