- Good afternoon and welcome to our debate
on the Universal Basic Income.
My name is Charles Wheelan.
I'm a senior lecturer at the Rockefeller Center.
The last decade, if not longer, has obviously seen a debate
over our market-based capitalist system.
The financial crisis
brought a lot of the weaknesses to the fore.
Now, we are experiencing several political campaigns
that discuss whether moneyed interests
have co-opted the system,
whether there's sufficient competition,
particularly in high tech,
whether we should reinvestigate antitrust.
Obviously big concerns about income inequality
with San Francisco and California being an example of places
where enormous wealth are being created
even as there are 10 cities that are more familiar
in developing countries than in modern America.
Amidst all that, people are asking questions
about capitalism itself.
If you look at surveys of young people,
support for both democracy and capitalism have fallen.
People are bandying about the word socialism,
which is somebody who lived through
the Fall of the Berlin Wall was not something
we thought was going to be resurgent.
When you push on that a little bit,
what people tend to really mean
is they kind of want to rethink
the finer points of our market-based system.
So it's not necessarily throwing out the car
but maybe a redesign,
if not some serious buffing and polishing.
One idea that has emerged from that larger discussion
is the possibility of a universal basic income
and I'll define what that means in a little bit
and that's the narrow discussion that we're going to have.
But of course it touches on lots of other big issues,
income inequality, what we owe the poorest Americans,
what we ought to ask of the wealthiest Americans and so on.
That's what we're going to explore.
It's obviously important enough
that it is basically launched and sustained
the political campaign of Andrew Yang.
It's kind of a one idea that has resonance.
There are two guests who are going to be debating this issue.
On my far left, Karl Widerquist, who is associate professor
of Georgetown University at Cutter.
He is an expert in political philosophy
and distributive justice,
which is really a discussion of who has what
and is that fair?
He holds not one but two doctorates.
Around here, we're usually impressed
with people who have one PhD, but he's got two.
One in political theory from Oxford
and the second in economics
from City University of New York.
He is the author of numerous articles and books
including the book,
"Independence Propertylessness, and Basic Income:
"A Theory of Freedom as the Power to Say No."
To my immediate left is Oren Cass,
who is a senior fellow at the Manhattan Institute.
He is the author
of "The Once and Future Worker:
"A Vision for the Renewal of Work in America."
He was the domestic policy advisor for Mitt Romney
in his presidential campaign in 2012.
Before that, he was the editor of the Harvard Law Review.
He worked at Bain and Company
he has BA from Williams and a JD from Harvard Law School.
Karl will be kicking it off with his defense
of the universal basic income and Oren will go after that.
They'll each talk for about 10 minutes
and then we'll allow them to debate
and eventually, we will open it up for questions
from all of you.
In anticipation of Karl's talk,
let me just set out the parameters
of what we mean by universal basic income
and we can debate the nuances.
But for opening purposes, it is a benefit that is cash.
So it doesn't have to actually be bills
but it's not an in kind benefit like food stamps.
It is a cash benefit that goes to all individuals
who are eligible.
So if there's a household of three, it would go to the male,
to the female, to any of the kids in trust of their parents.
It is not means tested.
So it goes to all folks in America.
We can talk about whether that's citizens,
non-citizens and so on.
But it's unlike say food stamps
where if you're below a threshold, you get them.
If you're above the threshold, you do not.
This is a universal benefit
and there is no work requirements.
So there's nothing you have to do
in exchange for that basic income.
And it is regular,
meaning that it is not a one-time payment.
It is something that can be given annually
or as we may discuss more regularly
because that's more important
for people who are struggling
at the low end of the income scale.
There are different flavors of a universal basic income.
We can get into that.
It can be additive to existing benefits.
So it can be layered on top of the social safety net
or it can also be used to replace some of those benefits
because it's simpler than some of the means-tested programs.
So with that basic explanation,
I will turn it over to Karl who will make the case
for universal basic income.
- Thank you.
I support basic income because I think it's wrong to become,
to come between people,
anyone and the resources they need to survive
and that is exactly what we've done.
We've taken the resources of the earth
that were here before anyone came along
and we've said this is government property
or this is private property
and these belong to these people.
And then we divvy them up
between the privileged people in the world,
but the rest of you didn't get a share.
And the only way you can get a share
is if you work for these people
and you can't work for yourself.
We've taken away any possibility for propertyless people
to work for themselves.
And we say the only way you can work
is the follow order for these people
who already control resources.
I think that's a really terrible thing to do to anyone.
And I think all of you in your heart of hearts
to some extent and agree with me.
And I think that's why suppose some entrepreneur
came in here right now
and he appropriated the air in this room.
He just sucked all the air out of the room and said,
and an improved mixed his or her labor with the air
to make it better air and say,
so this air is my property now.
We were sharing it.
Now it's my private property.
If you all get jobs, you can buy air from me
and you better hurry 'cause you have seven minutes.
I think all of us would be pretty upset.
We'd say, well, if you want me to work for you,
maybe I will show me what the job is,
but give me my air back first.
You can't hold me under this duress
that you're holding under by depriving me of air.
But yet we do that every day with other resources,
food and shelter and water and the resources to make them.
We hold most of the working in the middle class
and the people under this duress
of you don't get these things unless you work for somebody.
I think that the people who own stuff,
the people who own stuff really need to pay back
for what we own.
That when you take a piece of the earth
and you make it your property,
what you're doing is you're imposing a duty on everyone else
saying this part of the earth
or whatever I've made out of this part of the earth
used to be anybody could use it, now only I can use it.
So you're all under this duty.
Well, if you're going to impose a duty on other people,
you should pay for it.
So I envision is you're paying taxes on the property you own
and you're getting paid for the property
that everybody else owns.
You're simultaneously paying,
you're simultaneously getting paid.
Some of us are going to pay more than we can get.
Some of us are going to get more than we paid.
If you pay more than you get,
if you pay more than you get back in basic income,
that is your reasonable fee
for hogging a bunch of the earth's resources.
And if you're getting more than you pay,
that is your reward to spend as you wish
on the services provided by everyone else
for using less resources than everybody else.
It's only normal.
Now, it's in the sense it's really not a radical reform.
We can combine it with lots of other reforms.
But if all we do was introduced basic income tomorrow,
what we'd have is a market economy
where income doesn't start at zero.
That's not so radical, but it might have radical effects.
It might have radical effects because as I showed
in that opening illustration
about air ownership of resources
gives you not only enjoyment of those resources
but control other people.
If you control things that people need to survive,
you control not only those things, but those people.
It puts all the rest of us in this position
where we have to go to whatever privileged group
owns the resources.
And it doesn't matter if it's a capitalist group
or if a socialist group or somebody else.
If it's not you, they have control over you.
And we should not be putting people in this condition.
Now, people who oppose this idea will often say,
I think fanciful things.
They'll pretend that we actually do provide these things.
We don't.
We have most of our policies run out.
If you get disability that lasts for the rest of your life,
if you live long enough to get social security,
that will last of the rest of your life.
Food stamps don't.
And TANIF doesn't and most of the things that we do
to help poor people run out,
and most of them come with conditions.
Now, a lot of conditions are popular.
People say they want to fight poverty, but with conditions.
But often these conditions are very self serving
on the part of the privileged.
First of all, it's the privileged
who are deciding conditions.
So we've already taken all the resources
and now we're the ones who get to decide
what those who didn't get any resources,
what they have to do
to get the resources they need to survive.
Well that's kind of self-serving, and kind of cruel isn't it?
That you don't get these resources until you do what I say.
And I'll show you how self-serving it is.
What's the number one thing we always ask
of the less privileged?
To prove they're amongst the truly needy
rather than those bad, needy people
who aren't really truly needy.
Is that you must be willing to work.
Well, that sounds good, but you know what they mean by work.
They mean take a job,
go in and be a servant to your employer
in a sense of you might not be in the service industry.
You might not be a butler,
but you're a servant in the sense
that you have to go in and take orders every day
from someone with more privileges than you.
And we think that's natural,
that that is synonymous with work.
Well, that's not what work was
through most of human history.
People could work for themselves.
You can not work for yourselves anymore,
since we enclosed the commons,
since we killed the Buffalo,
since we had the colonial movement
that created the private property rights system
around the world.
We made it impossible for the mass of people
around the world to work for themselves.
Work means those of us with less,
following orders of those of us who have more.
I don't think there's anything wrong with the job.
I just think if you want somebody to work for you,
you should get them to agree.
You shouldn't be able to starve them into submission.
You shouldn't be able to deprive them
of air or food or shelter or water
or the things that they could make those out for themselves.
You shouldn't be able to do that.
And if you do, if you do deprive them
of the ability to work for themselves
without following someone, being a follower
of someone else's orders,
then you owe them back compensation
and compensation is always in cash.
Another problem with conditional approach
is the conditional, people say, I want to end poverty,
but with these conditional programs.
You can't do it because unless you have phony conditions.
Because conditions, people will always test your condition.
If you have a policy
that approaches poverty with conditions.
if you do this, we'll get you out of poverty.
Then you have to have the threat of poverty
or some other threat like jail or something
for the people who don't meet your conditions.
So the conditional programs
inherently use poverty as a threat.
That's cruel.
Shouldn't we be ashamed of ourselves?
That's been our approach to poverty for over 100 years.
Is threatening people with it.
Now of course they'll say things like,
well, if we don't make people,
if we don't force people to work
with this threat of homelessness and economic destitution,
they won't work.
They'll be lazy.
These lazy workers won't work.
Notice they do it.
Why is it always lazy workers and never cheap employers?
Maybe if people, if somebody offers a job
and you don't want it, maybe the wages are too low,
the working conditions are too poor.
Nobody ever talks about this being a conflict
and that wages and working conditions might be too poor,
that people shouldn't.
Maybe they should say no to these jobs.
Maybe these are crappy jobs.
So we put employers beyond reproach and we judge.
You're judging the weakest and the most vulnerable people
as being lazy, but the people with privileges,
you're not even subjecting them to judgment,
not even admitting that this is really a dispute
or that people could reasonably disagree on.
All of us say everyone must work.
We have a work ethic.
No, we don't.
We don't have a work ethic in this country.
Rich people don't work.
Well, they can if they want to,
but that's what I want for everyone.
I think if we're not going to say every single person
has to work, then we have to say,
no single person has to work.
That's equality before the law.
We all get access to enough resources
so that work is voluntary for everyone,
or we have some kind of system where everybody rich or poor,
all has to work in equally onerous job.
And we're not doing that work.
We're not about to hold the wealthy to this.
And they'll say everyone and also,
they'll say that jobs are fulfilling.
Well maybe they are.
Sometimes they are, but also things you can do by yourself.
Things you can do with resources of your own
to combine with other people like you are fulfilling.
It's really a condescending way to say
that a job where you go in and follow orders
is the only way to get familiar.
That that's automatically fulfilling.
I don't know.
I've washed a lot of dishes in my time
and I didn't find it terribly fulfilling.
Maybe somebody does, that's up to the individual,
but up for us, the privilege to say the less privilege
are only going to get fulfillment by following orders,
but not by getting money that they can buy resources
and start their own projects.
Well that'll never fulfill them.
Only following our orders will fulfill them.
That's kind of condescending and self serving.
But ultimately, it's self-defeating,
at least for most of us, except for the very wealthy
because in the last 41 years,
national per capita income has doubled.
But yet most of us haven't shared in that.
We could be working half as much and consuming the same,
or we could be working same and consuming double,
but most of us are where we were.
Most of us were where we were 40 years ago.
All those benefits have gotten to the top 1%
because of this enormous incentive problem
where companies don't have an incentive
to share the benefits of economic growth with us.
And also people who don't want this.
So let's say they'll say, UBI just won't work.
It won't work.
As if the entire system is going to collapse.
People who otherwise praise the market system will say,
it'll never work as if the entire capitalist system
will collapse if we don't force the less privileged
with the threat of poverty
and homelessness and destitution to play along.
We can never get their voluntary agreement.
We must threaten them with this
or the whole system collapses.
I don't know.
If that's true, it shouldn't be so.
Also they'll give exaggerated cost figures.
They'll say it's really accent.
They'll just multiply the number of people
getting the basic income by the population.
That's not the cost of basic income
'cause most of it's pain and getting paid,
you pay your own basic income.
Privileged people get 20,000 or 10,000 or 12,000,
whatever the figure is.
They get that, but they also pay that in taxes.
And I've done some estimates that up to five sixths
of what you're paying in basic income
is just people paying themselves.
Once you net that out, the cost of a poverty line
basic income at 12,000 a year is 539 billion.
And the cost of a much more generous one,
a $20,000 a year basic income is,
I didn't write that down.
Well anyway, it's something in the,
it is less than 10% of GDP.
- [Charles] Thank you very much.
Oren, you're up.
- Thank you.
All right, well thank you everyone for coming and Karl,
you've had to come a lot longer than I had.
So I'm glad to be here.
I usually try to spend some time
at the start of these discussions
emphasizing just how crazy an idea
of universal basic income is.
I think it's important to emphasize
that while there sort of seems to be
a lot of cultural interest in it right now,
and Andrew Yang is making great hay of it.
It's not actually anything that has
real political salients with the actual population.
And one way you can tell this
is because when the Green New Deal was initially introduced
AOC put out this fact sheet
and one of the sub bullets on it
was one part of the Green New Deal
was going to be unconditional economic support
regardless of whether or not someone works.
And the backlash and outcry was so severe
that it had to quickly be taken out,
not from the right of center.
The right of center thought
this was hilarious and delightful.
But from the left of center for whom the AOC Green New Deal,
outlandish as it might be was worth discussing.
But unconditional economic support
was so obviously a nonstarter.
And so obviously detrimental
to the cause of trying to advance the Green New Deal
that it had to be struck.
So people who actually work in politics
and look at what what people want and are thinking about
don't see this as an especially plausible or viable idea.
And I think you see some of that in Karl's remarks,
which are very interesting philosophically,
but I don't think actually hold a lot of water tangibly
with respect to how our lives actually operate.
I was writing down some of the comments
and just to take a few,
the idea that you can't work for yourself isn't true.
In fact, many, many people work for themselves,
start their own businesses, are self employed.
The idea that if you take a job,
you're a servant to your employer
is again a very strange description of employment,
which is an agreement between two people
to perform a productive task.
The idea that if you don't take the job,
your employer is therefore "starving you into submission,"
is again not relevant in a market economy.
If you had a single communist employer, it might be.
But in an a market economy,
part of the premise is multiple employers
are potentially competing for and offering work to workers
just as multiple workers
potentially offer their labor to the employers.
So in the abstract,
this idea that somebody is depriving or oppressing somebody
might sound appealing,
but it's not clear to me who that person is,
doing the depriving.
And we should be skeptical if we can't identify who that is.
I think if we want to believe
that we're depriving people of something,
we'd also need to know what we're depriving them of.
Certainly we don't want to deprive people of air and we don't.
And in fact, we have strong environmental laws in place
that are widely supported because we can make sense of that.
Karl mentioned food, shelter and water as other items.
Water, again, we typically protect
and is provided by the government.
Things like food and shelter though
do not exist in the state of nature
for us to just go in frolic among.
We actually have to produce those things.
And so I think it's really important to keep in mind
that what we're talking about is how much stuff
and material quality of living is our economy generating
and under what conditions do people gain access to it?
If for instance, we said the basic necessities
of staying alive, food, shelter, medical care
are something we should provide to everybody,
I think that's a view that would achieve widespread support
and is of course, exactly how we provide
our safety net today.
It's not true that food stamps run out.
We provide in addition to guaranteed access
to emergency care in hospitals.
We obviously have a trillion dollar,
well, $600 billion of Medicaid
and another trillion of Medicare.
And so we have all these programs
and the question is to look around and ask,
well, what's missing?
Do we really have all of these people
being starved into submission?
And the answer is no, we don't actually have anybody
being starved into submission.
Do we have holes in our safety net?
Could we make it more effective?
Absolutely.
And I think that would be a great conversation to have.
But to take the fraction of a percent of a population
that not only is not able to participate
in the productive economy but is also not served
by the trillions of dollars we spend a year
in making sure those basic needs are met and say,
rather than address that we should replace the entire system
with up to $20,000 going to every person in the country,
I think is very hard to justify
just on the practical merits
when we talk tangibly about what actually is happening here.
And now all of that being said,
we could still say, well, okay,
so we don't need a UBI, but we like one.
We think it sounds nice.
Would be great if we just all got a check every month.
And I want to talk about the couple of reasons
why that would not in fact be nice.
One of them is more sort of conceptual and in principle
and then one is very nuts and bolts.
And I'll take the nuts and bolts one first
because I think it's easier,
and ultimately less important.
We could technically do a basic income as Karl pointed out.
It is within the scale of resources
in our society to do one.
It's important to recognize though
that even if what you're saying at the end of the day
is that people are going to be receiving
their own basic income to offset the taxes they're paying.
The tax burden is still enormous.
And this is similar to the debate we're seeing
in Medicare for All where supporters of it
are trying to explain, well, ignore the fact
that there's a massive middle-class tax increase
because you're also getting free healthcare.
And that's fine.
That's an exchange we could decide we want to make,
but let's make sure we understand
what the tax side of that equation looks like.
If you wanted to provide $10,000 to every American,
you'd be talking about upwards
of three trillion dollars a year.
We typically talk in 10-year budget frames.
You're talking about $30 trillion over 10 years.
Conveniently, that's about what Medicare for All costs,
though note that money doesn't cover your healthcare.
So in addition to that, we're going to need to decide
what we're doing about healthcare.
But where would we get 30 trillion of income
on top of the $15 trillion
10-year budget deficit we already have?
Well, even if you took every dollar earned by everyone
who earns over $500,000 a year,
you could get maybe 10 trillion,
assuming they all still work
and just give you all their money.
CBO has scored what it would take
to actually raise the $30 trillion for Medicare for All,
or in this case, to provide basic income.
And what you'd be looking at
is a 39 percentage point increase in the payroll tax.
So what that means is every dollar you earn
beginning from the first dollar,
the majority of it is now re collected in taxes.
Now, do you also get the basic income?
Sure.
But what's that going to do to how you feel about working
to the return to actually participating productively
in the economy, to create all of these things
that we are allegedly excluding people from?
It's a real problem.
Another thing you could do as an 88% value added tax,
roughly a sales tax that doubled the cost
of everything in the economy.
That would pay for this.
But now everything in the economy would cost twice as much.
So essentially, taking out of one pocket
to put into the other.
So that's sort of the scale of tax increase
you're talking about.
And again, then with no money left over
to do something like Medicare for All
or all of the other things we might still care about.
Even if you could do it though,
for me, the more interesting question is should you?
And here I think the conceptual question
is such a fascinating one.
I think Karl has presented one view on it,
which is based in this idea that the resources
that exist in the economy
and to be a little bit on charitable,
magically exist regardless of whether or not we make them
are everybody's entitlement
and that that is a preferred way that people think is fair.
I don't think that's actually true.
I think actually the value of work
and the reason that we say that work is fulfilling
is not because dishwashing is inherently fun,
but it's because actually doing something productive
for society in return for which you receive back
the things you want from society
is core to both our understanding of ourselves
and core to a healthy society.
Social science repeatedly shows that employed work,
this exploitative avoidance of starving into submission
is in fact crucial to people's life satisfaction,
their self esteem, their mental health.
Certainly if you ever want to move up on the economic ladder,
you'd better step onto that first rung.
It's at least as important for family formation,
the economic rationale for marriage,
the centrality of that relationship
to being able to support and provide for a family
is critical to creating marriages in the first place
and to their stability.
When work goes away, especially for men,
family formation declines, divorce skyrockets.
Work is critical for children.
Children being raised in households where people are working
have better outcomes.
Children being raised just in communities
where people are working, have better outcomes.
And all of this is holding constant income.
This isn't because people who are working are earning more.
It's because work really has value in the human condition.
And so what I'd say we should think about conceptually
is this, do we believe a basic income
is the right way to raise our kids?
Because today, certainly everyone who's well-off
has that choice.
You could raise your kid telling them,
maybe you'll go off and do something productive,
but I want you to know I'm going to provide you
this steady income that's enough to live on
regardless of what you do with your life
beginning at age 18.
Typically we think that's probably
not the ideal way to build a healthy society.
And the thing about a UBI is that a UBI
is the equivalent of your crazy uncle Sam
showing up and doing it at Thanksgiving.
Because if we create a UBI,
you as a parent can't exclude your kid from it.
Your kid will receive it.
The cultural message will be there,
that when you turn 18,
you could start moving forward with a productive life.
Or you could also just smoke pot in the basement
and play video games and backpack around Europe indefinitely
and there'd be nothing you could do to prevent that.
And so I think the day when we say,
actually, gosh, yes, that is the society we want,
that's what we should be striving for.
That's the day when this will be politically viable
and when philosophically we should find it compelling.
But until then we should recognize it
as an interesting thought exercise,
a good way to test our priors,
a good way to think about how we can be doing a better job
with the safety net we have,
but not something we would ever want to consider actually
imposing on ourselves.
Thank you.
- Thank you.
And then we'll have a five minute rebuttal
and both of you are allowed to ask each other questions.
It's going to be a discussion as well as the debate.
So Karl, five minutes for your response.
- Okay, sure.
Sort of making competitive assertions here.
Let me try to explain what this,
I think you're under an illusion
of wildly exaggerated cost figures,
and let me try to explain that.
What really affects people's behavior
and their lifestyle as far as what tax costs are,
are their total tax burden and their marginal tax rates.
And making a universal basic income
rather than a target program doesn't affect,
it doesn't affect either one.
The targeted version of basic income
is called a negative income tax.
And negative income tax only gives to those with low income
to make sure we get up to some minimum.
So let me imagine it.
So let's say that the people
on my right side of the aisle to my right,
that group of people are,
let's say it's about a sixth of us,
say those are the low income people
and everyone here is the higher income people.
And you're all collectively going to pay taxes
to help this group.
And that's going to cost you.
So you're going to give them each a dollar.
What's that about?
That's about 50 people.
That's going to cost you collectively about $50.
Now then, so that's a targeted program,
and then where say, okay, then what I want you all to do,
all the rest of, we're going to change this targeted program
into a universal program.
So I want you all to do is to take a dollar
out of your wallet and put it back in your wallet.
How much does that cost you?
That costs you nothing.
Your wallet after the first one,
your wallets all got a little smaller.
That cost you something.
After the second one, your wallet didn't get any smaller.
We took it out, we put up again.
We could do that again.
Take it out again, put it up again.
We can do that a trillion times.
It wouldn't make any difference.
The only meaningful cost that affects
either your marginal costs or your total tax burden
is how much is being distributed from the net contributors
to the net beneficiaries.
That's the only meaningful cost
and that's less than 3% of GDP
for a poverty line, basic income
and less than 10% of GDP for a $20,000,
much more generous basic income.
Now, the idea that you can work for yourself
it's just simply not true.
If you have no resources, you don't get resources.
You can work for a client, but a group of homeless people
cannot work for each other as clients
'cause they don't have any money or resources
or anything to reward each other with.
And it's not true that we all work in a circle,
that we all work for each other.
We work in something like a pyramid.
The extent that you can work for a boss or a client
depends on how much money they have.
And how much money they have,
depends on how many services they provide
with people with even more money.
We cannot in any meaningful way, work for ourselves
the way my grandfather did on his farm
or the way a friend of mine's grandfather in Somalia did
as a nomadic herder.
That opportunity is lost to us in this system
without a basic income.
We have to go and find somebody with property to do it.
It's simply not true that we can work for ourselves
in the meaningful way that I'm talking about it.
And so jobs mean following the desires
and the winds of those.
And many of our jobs are meaninglessly
following whims of wealthy people.
A lot of them are counterproductive,
doing very wasteful things for very wealthy people.
And we are killing the environment that we live in
doing all these wasteful things for wealthy people.
And we wouldn't be the first society that did it.
In Easter Island, they had people chopping down trees
to build monuments to rich people
and then carry them across the island and set them up.
And they chopped down every last tree on the island
and then couldn't go out on fishing expeditions anymore
and had a big population crash.
And were doing something, not all work is productive.
And multiple employers is better than being a chattel slave.
But multiple employers is not the same thing
as working for yourself with your own resources.
It is a choice of masters.
And this, if people will pretend,
choice of masters is exactly the same
as being able to work for yourself.
They will pretend that.
Now, even though the people who created this system
explicitly said that's not true,
and that's why we're doing this.
The peasants of Europe before the enclosure movement,
many of them were able to work for themselves.
And you know what they said about those peasants
who worked for themselves on their own farms
or on common lands?
They said, these are lazy
because they won't accept my wage work.
And so they intentionally said, what we need to do
is to privatize, enclose all of this land
and then they'll have to work for us.
Now they pretend, as long as you have a choice of people,
then we're not forcing you to do anything.
No, it's true.
No one employer is forcing you to work for them,
but the government system is forcing all of us
to work for those who control enough property.
(mumbles)
- [Charles] Oren, five minutes roughly.
- I just don't think this is an accurate description
of our economy.
I mean you could go start a pizza shop
in a working class neighborhood
that sells pizza virtually exclusively
to other working class people.
That'd be fine.
We live in an economy where you actually are expected
to produce and contribute something of value to others
in return for the things you want a value from them.
And to describe that as this exploited pyramid scheme,
I think is both conceptually and in fact wrong.
One easy way to say this is to just,
let's kind of embrace the hypothetical
and say you know what, you're right.
That enclosure movement in 1600s England was a tragedy.
Let's take some federal lands out West and open them up
where anyone who wants to go be a homesteader
and farm themselves is welcome to.
Would that satisfy us?
The answer is it wouldn't.
No one would take that seriously
because the things that we want
and that you're supposed to be able to buy
with this 10 or $20,000 of basic income
includes health care and cars, and electronics
and all sorts of things
that of course you can't produce for yourself.
So by definition, if we want to live in the modern economy
and enjoy the material standard of living
that a basic income is attempting to provide to people,
we've already given up on this idea
that working for yourself could mean genuinely,
simply supplying your own needs.
We are going to be in an exchange economy
and then the question is just do we like the idea
that we actually expect everyone
to contribute and exchange in it?
And I think we do.
And the what did you start me at?
(mumbles)
- [Charles] You got about three minutes.
- Perfect.
'Cause I'll keep going. - Yeah I know.
(laughing)
(mumbles)
- But this question of why we want the exchange economy
and what does the alternative look like
I think is really important.
'Cause I think Karl made a very fair point
in his opening statement, which he said,
some people say the capitalist system
is going to collapse with a basic income.
People do say that, and I agree it's a silly thing to say.
The concern is not in my mind
that the capitalist system will collapse.
It's that we will accelerate
on the trajectory we are on right now
of an ever smaller share of the population
creating ever more of the economic value
and essentially writing checks
to everybody else to leave them alone.
In 2010, at sort of the depth of the recession,
we were down to a point where only 53%
of working class households had even one full time worker.
Now, in terms of material standard of living,
everyone at every point in the socioeconomic spectrum
is doing better than they ever had before.
Thanks to the range of transfer program
and thanks to progress in technology.
People have more better stuff than ever
at every point on the socioeconomic spectrum.
But we don't actually, we recognize
that that's not satisfactory,
that a society in which an ever smaller share
are the productive valued members
and everyone else who's supposed to live
on transfers to them is not a good one for society
and it's not a good one for the recipients.
And by the way, if you speak to people
in working class households,
people who are struggling about what they want,
it doesn't tend to be a check, it tends to be a job.
In fact, if anything, you will find an inverse relationship
between how wealthy someone is
and how excited they are about universal basic income.
So the idea that we have these exploitive masters
who are forcing everybody to work
and it would be much nicer if we just wrote them checks
is again, neither conceptually nor factually accurate.
It's condescending and it completely fails to appreciate
what is actually central to a good life,
what people want, what we all want.
The idea that rich people don't work is simply not true.
Rich people, including these Dartmouth college students
when they graduate, most of them are going to go work
really hard and we consider that to be core
to how you build a good life.
So what I worry about is not the system collapsing,
but releasing the political pressure
to actually make the kinds of reforms
that would move us toward an economy
where everyone can be a productive contributor
and support a family.
Because when Karl said
no one subjects employers to scrutiny, that's just not true.
I wrote an entire book called,
subtitled, " A Vision for the Renewal of Work in America,"
which is about all the three ways
that elites have screwed up policy
and employers are behaving badly and we need to do better
if we're going to provide meaningful
and family supporting work for everybody.
And I would say that's a much more constructive conversation
to have in a much better direction for our society
than how big a check we need to write
to make them leave us alone.
- So I want to probe what I think is an area of agreement
we were meeting before we came out here.
And one of the rationales
for a more comprehensive social safety net and the UBI,
if you choose to do it that way,
is the fear of rising automation, artificial intelligence.
So there's always been creative destruction,
jobs being destroyed, but there's a fear
that that will likely accelerate and therefore,
we have to pay more attention
to those who will be displaced.
And if you could each comment
on that and how it relates to your view of the UBI.
- You can go first.
- I'll say, I think it's an interesting question
because you can't prove the negative.
I can't prove that it never will accelerate
and the singularity will never come.
And so I will stipulate that if and when
the singularity comes then like luxury automated communism
or whatever the kids are talking about these days
is something left to at least grapple with.
What I can prove is that it's not happening now,
that in fact we are not seeing increased rates of automation
and technology and production.
And we can tell because we measure productivity.
And productivity growth is not accelerating.
It's in fact stalling out.
We can have a great conversation
about all the reasons for that.
If I could say it really succinctly,
it would be robots are cool,
but you know what's even cooler, electricity.
And that is as incredible
as the things we're developing right now seem frankly,
the lower hanging fruit was in the past
and we showed it was perfectly compatible
to increasing incredible amounts of new technology
and use it to actually boost workers productivity
and boost quality of life
and standard of living for everybody,
and that that's what we should still be striving for.
- I don't make this automation argument as you described.
I think that it is possible that that could happen,
but it also leads to the (mumbles)
and then if it does someday, then we'll have basic income.
But I think there are automation related reasons
why we need basic income now.
One of which I mentioned in my opening remarks
is that we have this incentive problem
where we don't have incentive
for employers to pass on the benefits
of automation to all of us.
The reason that our economy as on a per capita basis
has doubled in the last 41 years
is largely because of automation.
And the reason so many of us haven't got our share
is because we don't have the power to say no to poor wages
and bad working conditions.
Is that if basic income is not about nobody works.
It's about we as a society commit ourselves
that nobody ever lacks for their most basic needs,
but we offer them good positive reasons to work,
good wages, good working conditions,
and they say everyone has their price.
People will work if you pay them enough.
And that's a responsibility we should all give to ourselves
is to pay ourselves enough.
So you create the situation where people don't have to work,
but they can work.
You give this incentive to pass on
the benefits of automation to everyone.
That's one reason why we need a basic income now.
Another reason is that basic income
is that creative destruction,
is that it destroys this industry
and it creates that industry.
So even if the number of jobs isn't ultimately decreasing,
or even if it's increasing,
if you've worked in this industry
and you're in your 40s and your 50s
and that industry is destroyed,
then you go back to the bottom.
That's cruel to people and very often,
they can't find a job in the bottom.
You find a lot of people whose jobs
are out motored applying for disability
or for something else because they can't find a decent job.
And this is why there was a lot of movement 200 years ago,
not because people were against technology,
but because technology was taking away the middle class jobs
of people who worked in the textile mills
and forcing them into the bottom,
which was poverty-wage jobs at the time.
It was this very rational response.
You need basic income to cushion people
to what would be one of the otherwise
really cruel aspects of a creative destruction economy.
We don't need that.
- I have a question for both of you all.
I'm going to ask it in two different ways.
So Karl, are there some aspects of the social safety net
that are targeted that might be more productive
than giving people cash?
So for example, targeted early childhood education,
which might make other workers of future generations
more productive, more successful in the labor force.
That will be that example.
Flip side of the question for Oren is,
are there some aspects of the social safety net
that would be better to give people cash?
So for example, unemployment for workers in their 50s
where we know retraining isn't very effective.
We know some of the systems for making people eligible
are very cumbersome.
So really flip side of the same question
or something's better targeted and some things better,
just lump sum cash, Karl.
- Oh yeah, I think it would be very cruel
if you had a basic income society and then you told somebody
somebody who is a paraplegic,
you're going to have to buy your own wheelchair
out of your basic income.
You want to have a little more
of a level playing field than that.
And specifically target things.
I think healthcare is probably better provided.
I'm not an expert on the health industry,
but I think it's probably better provided with direct means
rather than just giving people cash
and putting them to the private healthcare market.
Public school or some kind of targeted school,
I don't think we should be letting parents decide to say,
well, I'm not going to send you to school,
but I'm going to put your basic income
have a basic income high enough to cover your school.
But it's all private schools
and your parents can just decide
to put that in a trust fund for you
and they get it when you're 18.
No matter how much you get when you're 18,
it's not going to make up for that very bad decision
your parents made when you're young.
So yeah, there are things that are better targeted.
- I do think there's a particular case for cash,
which I'll come to in a moment, but I want to emphasize
the importance of the case for not cash.
And this comes back to to the point Karl was making
about why the expense isn't necessarily that large,
which is essentially they were saying
today we have this system that phases out
as you start to earn more money
and that unfortunately, has the effect of discouraging you
from going to work in the first place.
It's a huge problem with our safety net.
And what I took to be his defense of basic income
from a fiscal perspective was that at the end of the day,
the basic income kind of works the same way.
You start with a bunch of cash,
and because we're going to have much higher tax rates
as you switch into work, the marginal gain of working
isn't going to be as high as it might otherwise be.
And so I think it's very interesting
to actually kind of line these up next to each other
and say, well, one way to think about basic income
is we're kind of just taking all those benefits
we already provide and saying it wouldn't it be better
if that was all just cash?
And my answer that question is no.
That while certainly our existing mix of benefit programs
is messy, that that messiness is a feature and not a bug.
And that what we've done is to build a safety net
that guarantees that people don't truly go
without the basics, food, shelter, medical care
but that we provide those basics
in a way that's frankly not as good
as being able to afford them yourself.
And while that might seem harsh,
it's actually critically important
in a society where we commit to providing the basics
to everybody that we still say, you know what?
You're still better off in a relatively low wage job
earning and providing yourself
than asking government to provide for you.
And so I would say it's affirmatively a good thing
that we provide safety net benefits in kind and not in cash.
The one place where I think a cash benefit
could be very attractive is in what I call a wage subsidy,
which is one policy I very strongly support
is trying to actually boost wages
at the low end of the scale
by putting more money directly in people's paychecks.
So one way to think of this
is sort of as a reverse payroll tax.
Just as today, we look at how much your paycheck is
and we take money out, even if it's a very low paycheck.
You could just as easily look at that and say,
well, for people earning,
if this is a nine dollar an hour job,
we're going to put three or $4 an hour in
and that's going to phase down.
So by the time you're at $15 an hour,
you're just earning the market wage.
But if we did that, we would get more support to people
at the low end of the income spectrum.
We would make it more attractive
to get in and take that job in the first place.
But we would do it in a way that affirms the value of work
and ties it to a commitment
to making a productive contribution to society,
instead of offering it
in the absence of that kind of activity.
- Arthur Brooks was here a couple of weeks ago,
former president of the American Enterprise Institute.
I think he agreed with both of you in some respects.
He proposed a fairly significant jobs program.
I think he may have, I don't want to put words in his mouth.
He may have offered up a jobs guarantee.
And so my question for you is,
if this were Congress and they came to you,
both of you and said, okay, Karl,
we're going to provide a basic standard of living
for everybody, but we're going to violate
one of your precepts here,
which is they're going to have to work.
It's going to be conditioned on that
but everybody's going to get it.
And they said, Oren you've said a lot
about the importance of work, but it's going to be expensive
and some of these jobs are going to be make work jobs,
but we will be getting people into the labor force
and it probably be meaningful for them.
Is that a world where you guys might be able to compromise
and say yes or is that unacceptable to both of you?
- I suspect we'll both say no.
I don't know who you want to have sets.
- That's my unique gift here.
(mumbles)
- I'll say no first.
In theory, the idea of a jobs guarantee
I think sounds like a step in the right direction.
I think the problems with the job's guarantee
are very practical.
One is just that it is not something
government is especially well equipped to doing.
And like you said, you end up with a lot of regret.
I think it's very explicit
that it's actually a lot more expensive than tax
'cause you get--
- Right.
Secondly, you actively crowd out private sector jobs.
And so you actually, you end up even with a drag
beyond just the make work nature of what you're doing.
Thirdly, you have a real cyclical problem,
which is you need to come up with a program
that can both employ 15 million people in 2009
but only three million people in 2019.
And so while we hear about all these things,
we need more workers for, elder care, pick your thing,
none of those actually work for this
because they're also going to be times
when there aren't a lot of people taking you up
on the public sector job guarantee.
So in my mind, the wage subsidy is actually
effectively a private sector job guarantee.
The idea is to say we value the existence of these jobs.
We would rather set a essentially market price
on the creation of UBAM
and let whoever in the private sector
is going to find the best use of that labor step forward.
And then it's automatically responsive
to the business cycle.
And it leaves government doing what it's fairly good at,
which is running the money process.
But I think the public job guarantee
just doesn't work at the end of the day.
- Karl. - Yeah.
I actually, one of the...
One of my complaints about the job guarantee.
I think a job guarantee could help a lot of people.
I think we have to admit that.
And whether it's, even though it's not
our most desired program.
But I think it has one of the same problems
as this patchwork of conditional programs
that you spoke in praise of earlier,
and that is that it creates,
all of these things create a poverty track,
where you either you do your guaranteed job
or your work in the private sector
and there's the kind of a dichotomy there.
You have a similar thing.
Either you're on unemployment insurance
or you lose the whole unemployment insurance
and you're in the private sector.
Either you're on disability or you lose a whole disability
and you're in private sector.
Very often you lose an entire house,
public housing subsidies and get around.
And what these do is they create
this notch where actually you make more,
but your income goes down.
Basic income, unlike the job guarantee
and many of these other things,
you might be able to structure a subsidy that work this way.
They try to structure the earned income tracks
credits this way so that there is no such notch.
There's always a possibility of you earning more.
The incentive to work and basic income
is the basic income is basic.
It's not deathly low, but homelessness is real.
We really do have people living on the street
and eating out of dumpsters.
And people and very often you find people in shelters,
they try to get them eligible for something
and they don't find anything they're eligible for.
But other people who are on programs,
they often have to give it all up.
Where if you have the whole thing up to get something,
where the basic income and if you have a marginal tax rate
that is say 30% you've got say just to make the math easy,
a $10,000 basic income, you get a $10,000 job,
your after tax income is $17,000, not quite double.
That's a pretty good,
that's a pretty big boost in your standard of living.
Pretty good incentive for you to take a job.
So basic income works in better than,
I think it works better for getting people
to be able to move back into the labor force
where they're in a system
where you've got to prove you're disabled
and then keep proving it by never working again.
- So we're going to have microphones in a minute.
My last question is, I think you both agree
that we're all better off if people enter the labor market
with more skills, right?
And a lot of the debate
over whether they can really work for yourself
depends on what you have to sell to a capitalist economy.
Do either of you have top of mind suggestions
about policies that would upgrade
the skills of the workforce,
irrespective of what we do for the folks who fall out
and don't thrive in that system?
- Well, one of the best things you can do
for improving education outcomes
and for improving productivity is to make sure
no child ever grows up in poverty.
Poverty during childhood
is one of the worst things that you can have
for the rest of your life, increased costs for you
and it creates cost for the rest of society.
But when they talk about we've got to give
this work incentive, they're actually,
your children, the fear that your children
are going to grow up in poverty is one of those incentives
and it's not the children's fault.
So one of the things we most need
is to make sure no child ever does.
No child ever grows up in poverty
and that very much increases their performance in school.
They found that in a lot of the negative
income tax experiments in the 1970s
is they found that student performance
and students staying in school went way up
when they're not under this constant threat.
And that's why we have things.
We have all this patchwork of policies
like school lunch programs, subsidized school lunch programs
is a bare substitution for a system
makes sure that no child grows up in poverty.
- I agree with the child poverty point,
although again, I would ask kind of how do we plan
to solve it and what are we going to give up along the way?
It's certainly true that kids raised in better off homes,
have better outcomes.
It's even more true that kids raised
in two-parent households have better outcomes.
So my favorite stat about American public policy,
which is work that Richard Reeves did
at the Brookings Institution found that if you look at kids
who grow up in the bottom quintile,
the lowest 20th percentile
are 20% of the income distribution.
If they are raised by continuously married parents,
they have almost exactly equal chances
of landing in any queen tile as adults.
In fact, they are more likely to land in the top quintile
than stay in the bottom quintile.
If you asked the same question
about kids raised in single-parent homes,
they are 10 times as likely to remain in the bottom quintile
as reach the top quintile.
So I'm certainly sympathetic to the idea
that material conditions matter at the margin.
But if I had to choose, I would care an awful lot more
about finding way to get our society
to a point where kids are being raised
in stable two-parent households
with at least one parent who's working
over moving to a system that is probably going to,
based on everything we know,
lead to fewer people in that situation
even if they are receiving larger checks.
Where I would focus is on providing
non-college pathways into the workforce.
It's this critical juncture point
around when people are entering adulthood
around age 18 where I think saying,
and you now get a check every month,
regardless of what you do is so damaging.
But then what we do today is also incredibly damaging,
which is we say, go to college or you get nothing.
Go to college and we spend
about $150 billion annually subsidizing you.
Don't go to college and we don't know,
we haven't thought about it.
And the reality is that most high school graduates,
let's not forget, we still have almost 20%
who don't even complete high school.
Most high school graduates are not ready for college
and most people who enroll in college
will not complete or will end up in a job
that doesn't require a degree.
So rather than just keep shoving people
through that pipeline,
we should be frankly doing the opposite.
We should be saying,
if you think you're going to succeed in college,
there are going to be great economic opportunities for you
and you'll probably be able to pay back your loans.
But we have a $150 billion over here
to invest in helping people who aren't on that track
to actually get into their first job,
develop some real skills and get them to age 20
with years on the job, marketable skills,
money in the bank, an employer.
And I think that would be a much better pathway.
And so step one would be for places like Dartmouth
to give all the money back.
- [Charles] And what's step two?
(audience laughing)
- Step two is to then commit that money to alternatives.
So one thing you can do
is directly invest in better vocational education programs,
which we should start at the high school level.
It makes no sense to just have college prep academies
until you walk across the stage with your diploma,
even if most of those kids
aren't going to succeed in college.
But I also think we should be providing,
as with wage subsidy,
we should be subsidizing employers directly.
We have this weird kind of concept
that obviously it makes sense to give Dartmouth $10,000
to help some for a year here.
But oh, heaven forbid we give $10,000 to a corporation.
And yet if I step back and ask
which institution in our society
is best suited to help exactly the population
that is struggling to establish themselves
in the labor force?
It's not Dartmouth.
It's not any school.
It's employers.
Now a lot of times what employers will do
is turn around and make a deal with the community college
to set up a training program.
But if they did that,
then the employer would be the community college's customer.
And I think we get awfully better outcomes
than the 15% completion rates
we get in community colleges today,
if the way they stayed in business
was to provide value to employers
as opposed to by enrolling students
and then cashing federal checks.
- Okay, let's open it up.
I think there are microphones back there.
So put your hand up.
I'll call on you.
Wait for the microphone 'cause it's being recorded.
We'll start, so up here in the front.
Eliza Jane?
- Area. - No, that as me.
- I will repeat the question, so go ahead.
(speaking off mic)
- I was wondering if you would talk about
(mumbles)
What I mean by that is this,
the way as our economy grows,
the money supply needs to grow too.
The way we do account was by borrowing money.
Like I mentioned, the $24 trillion federal debt
and bankers buy bonds and then loan out money to all of us
with home loans and credit card loans and things
and grow the money supply.
That one what have they said that we figured out
how much we need to grow the money supply
and then issue everybody their share.
Isn't money a shared resource?
Why did the bankers get the profit
and not the guy whose already with a PDR,
which I think is more valuable.
- Okay.
Raise the tax issue.
The question is seigniorage,
can we use an expanded money supply
to fund some of these plans?
- You were you not expecting a seigniorage question?
- I was not.
I love seigniorage.
- It's a very interesting question.
I actually have a friend in Boston
who's working on a similar concept.
And so I won't do full justice to it
'cause I'm not a monetary policy expert.
But what I would say at least in part
is I think it's really important to separate
the way that we expand money supply through credit,
through the banking system
from the way we expand money supply
through actual seigniorage,
literally the government just creating money
out of thin air.
And my sense is that the government creating money
out of thin air, I mean in a sense of just fun,
at the end of the funds is part of the government.
So in a sense it is shared by all of us.
Everyone gets a slightly lower tax burden as a result.
Whereas to your point,
when the money supply is expanded through credit,
that is something that operates within the financial system.
It's not clear to me if you could replace
the expand money supply in the financial system
through credit with just giving everyone more money.
And the reason I say that is because I think
it would be quite inflationary.
And so that may be an insufficient response and I apologize,
I'm not not the expert on it,
but it strikes me that to the extent
our solution is just kind of throw money
out of helicopters to everybody.
You have a problem that if it's chasing
the same set of stuff in the economy,
we haven't actually produced anything more.
So we could have a redistributive effect,
but we're not actually any wealthier.
We've simply created more money
chasing the same amount of stuff.
- [Charles] Go ahead Karl.
- I think that there's an enormous amount
of government giveaway in the federal reserve system.
I'm also not an expert on financial accounts
and so I'm not going to get on with it
in the technicalities of it.
But the federal reserve system versus government
lends either creates money directly,
lends it to the federal reserve banks at a very low rate.
Then they rented out to the rest.
They lend it to the rest of us at higher rates,
then we buy stuff, deposit it back in those banks
and they lend it out again, which creates more money,
which means that most of the money creating,
the banks are just doing this,
based on this little amount that the government makes.
The banks are creating most of money
and getting most of the profits out there.
And the federal reserve system is set up
to make the banks have very little risk as they do this.
The government insures them against all the risk
and the federal reserve system
is run by very wealthy private bankers.
And it's set up that all the boards are made up
around a very wealthy private banks.
It's supposed to be,
it's one of our most essential public trust
and it is being run by some of our wealthiest people
whose first concern is for their own corporations
and their own money.
And that's part of the corruption
that is built into our system that is so corrupt
that we don't even think of it as corruption.
Which is one of the reasons I'm skeptical
of giving even more money to businesses through subsidies.
We'll do anything for the poor,
except for actually helped the poor.
We'll give it to the rich people.
So we want to help the poor.
Okay, let's have a casino.
We'll subsidize a casino.
Oh, let's help the poor.
We'll get some jobs for the poor
by subsidizing the local football team.
Oh that'll generate jobs.
Well, it'll generate a lot of money
for the guy who owns the sta,
who gets to own that stadium.
Oh, we want to help people get jobs.
Let's subsidize the automobile companies.
While it's very good for the automobile companies,
but very few jobs end up coming out of it
and we do one thing after another.
The government just gives out one favor after another
for wealthy people including the fact
that we probably, almost everybody here
has pennies in their pocket.
I don't like throwing them in the trash where they belong.
Pennies.
We only make pennies
because the company that sells the pennies to the government
gives so many bribes.
I mean campaign contributions to members of Congress
that they keep buying the pennies.
That's the way most of the defense department works.
It's not because the generals and the admirals
think we need most of that stuff.
It's because companies want to sell this to the government,
so they give those bribes we call campaign contributions
to members of Congress and the government buys it and says,
oh, it's a public works project.
It'll give people jobs and it'll defend us.
I have this ridiculous weapons things
is that we live in a system
where the corruption is so built in
that we don't even think of it as corruption.
All of those senators and Congress people
who are taking all these campaign contributions
don't even think of it as a bribe.
That is one of the most fundamental things we attack
and the banking system is just one small example.
You take away this stuff
and there's lots of money to finance basic income
and other things that are actually going to help
the people who need it.
- So do we have questions on this side?
So Taylor in the red hat.
- Thank you both for your remarks today.
Really enjoyed hearing from both of you.
I think a common theme in both of your remarks
was the incentive structure and whether or not
the UBI or an alternative welfare system
incentivizes work or productive contribution to society.
And so on that theme,
I have two targeted questions to both of you.
Apologies, I'm going by first names
'cause I can't pronounce last name.
Karl, I was wondering--
- [Karl] That's what I tell all my students to do.
- Okay.
Karl, I was wondering to what extent do you think
UBI incentivizes or disincentivizes work?
The empirical evidence is kind of mixed
and I was just wondering what your take on that was.
And Oren, I was wondering,
you've talked a little bit in your remarks
about how the cutoffs and a lot of the welfare programs,
that's like a problem that needs to be fixed
based on like how much income you earn.
But a program that we studied extensively in our class
is the disability program
and how it actively disincentivizes work
by cutting people's disability checks
if they're engaging in work.
And I was like, part of the reason why people support UBI
is because it doesn't have that same conditionality
because it's universal.
And I was just wondering if you could comment
on the disability program and whether or not you think UBI
actually fixes that incentive problem that exists there.
- Go in reverse order.
Oren, you want to go first?
- It's a great question.
I think and Karl spoke to this too,
that we have programs
that are incredibly poorly designed today
like disability Medicaid
especially Post Affordable Care Act
is creating some very serious cliffs.
Unemployment insurance, how it's typically deployed
has just this massive, as soon as you start working,
you lose it all kind of model.
And so finding a way to deliver benefits
that do not have those features
I think is an incredibly important reform.
And there are lots of good reform proposals out there.
I mean, when you're talking in terms of healthcare,
it's actually somewhat perplexing
that we set up these Obamacare exchanges
that have a contribution,
a subsidized contribution to your premium
and it phases down and we said,
unless you're below this percent of the poverty line
and then you can't access that system.
You get Medicaid instead.
A phase down Medicaid would make an awful lot more sense.
A phase down disability instead of a cliff,
a period where you can go back to work for a period of time
before you lose the disability.
There are lots of ways do better than we do
and there are lots of good proposals out there on them.
So I certainly think those things need reform.
Even if you get rid of the cliffs,
you still have the problem of the phase out.
Effectively a marginal tax rate.
And in fact, if you look,
the highest marginal tax rates in our society
are not paid by a high income households.
They're paid by the lowest income households.
If you take into account what they lose in benefits
for every dollar that they earn.
And that's really silly.
So again, you can address particular programs.
Another thing you can do is what I just described.
With the wage subsidy concept,
which is if you say, look, we really want the safety net
to be for people who can't work.
And if you can work, we really want to find ways
to make sure that, that the work actually is sufficient
to support your family.
And if you provide the support, the wage subsidy,
you don't get the phase out.
And the reason you don't get the phase out
is because you only scale down the subsidy
as your wage goes up.
So if you work 40 hours a week at a given wage,
you get some amount of subsidy.
If you want to work 80 hours, you can get twice as much.
If someone else from your household works,
still get the subsidy.
It's just based on your wage.
Now, when you get a promotion, when you get a raise,
10 to 12 to $14 an hour, your subsidy starts to decline.
But unlike with extra hours of work,
people tend to like promotions in wages.
It's not nearly as much of a problem
to discourage on that margin.
And so again, you can't avoid the problem entirely
without pure university reality.
Although I take Karl's argument to be in fact,
actually UBI also imposes quite large marginal tax rates
and even lower income households.
But you can do it a lot better.
And then the last thing I would just say
is that it's important to keep in mind
that the kind of extremely analytical
economic measurement of marginal tax rate
is just one of many factors
that influence people's decisions about work.
Other factors, cultural and social factors
about expectations, the economic structure
of career trajectories available or at least is important.
And so trying to optimize a system
for the bright marginal tax rate
at the expense of completely blowing up
all of your social and cultural expectations around work,
I think will not have the effect
that the Economics 101 blackboard might say it would.
- Okay, so the question is to what extent
does UBI incentivizes or disincentivizes work?
UBI is a lump sum payment.
And in that sense,
it neither incentivizes nor disincentivizes work.
It's what we call a neutral, that lump sum payments
are considered by economists to be neutral.
You don't have to change your behavior
to get the basic income.
Now the taxes, depending on how you collect the taxes,
those might have a disincentivising
or incentivizing effect.
But basic income in and of itself doesn't have one.
Now you need to look at it in combination with those things.
It does have income effects,
but it does not have the incentive.
So if you get on disability, you have a strong incentive
to say, I'm going to stay on disability.
Whereas basic income, you can go back and forth
off of basic income all you want.
If you find you're temporarily eligible
for unemployment insurance, you have a strong incentive
not to get a job until that runs out
because you can't get it again
in the way it's structured in most states.
So it takes away these disincentivizing effects
of a lot of the policies that we have now.
And if you reverse a lot of the giveaways
that I'm talking about for the very wealthy
that we have now, and you reverse
a lot of the decrease in taxes for the very wealthy
that we've witnessed over the last 40 years or more,
if you reverse those things,
you might be able to have basic income
with actually rather very marginal,
low marginal rates for people near the bottom.
And that will create a much more equal society.
But I think what we have to really understand here
is that we need to look at this
in a different, in much more realistic way,
is that the incentive problem that we face
is that employers don't have a good incentive
to pay good wages and offer good working conditions.
Why would we need a job subsidy if we didn't admit
that yes, there is a problem.
Employers don't have an incentive to pay good wages.
The fact that we have proposals for minimum,
why would we need a minimum wage
if employers had a good,
in a sense, those things simply admit
that we have an incentive problem.
The regulation of working hours.
Why do we have regulations of working hours?
Because we know we have an incentive,
we have a poor incentive for employers
to offer good wages and working conditions.
The regulation of child labor,
the prohibition of child labor
is because we know we don't have a good set of incentives
for employers to pay good wages.
So people don't need to send their kids
into the labor market.
The problem that I'm talking about is obvious
and the best way to address that problem
is to give the workers the power to say,
no, I will work for myself.
And rather than you, unless you make it worthwhile.
And I think we can handle it.
I think we can make jobs worthwhile
for everybody who wants to take one.
- Can I say one quick thing? - Sure.
And somewhere over here.
Someone can find the microphone in the meantime.
- Yeah the disability,
there's one other very interesting thing
about the disability example,
which is that while the incentive on going back to work
is problematic, you could also look at it and say like,
well wow, wait a minute, look at this.
We created this great program for people who aren't working,
that provides them.
It's on the order of $12,000 a year.
It's actually very close to basic income.
We have all these communities around the country
where the share of people who have chosen
to take us up on that bargain has skyrocketed,
and this is great.
We're all really excited and feel like it's a great success
that we have all of these people out of the labor force
living on $1,000 a month provided from the government.
And of course, we don't think that.
We think it's a complete disaster
because it is not in fact the vision that we want to pursue
for a healthy society.
(mumbles)
- It is.
So I'm from just North of San Francisco.
There's no power in my neighborhood,
and it's full of smoke.
This has been happening for the recent few years.
The school is canceled for smoke my senior year,
and when I think of UBI, I think of the money
that wouldn't be going into infrastructure.
While it may be true that this is going into places,
into politics that could be shifted
with major structural changes to the system that we have,
I wonder how with the UBI
we could still support infrastructure
with things that will be really,
that will be requiring attention very quickly
with rapidly increasing climate change.
How could we find the money for that
and still care for vulnerable people?
- Yeah, I think that that actually,
climate change and other environmental problems,
I think climate change
is an enormous environmental problem,
but it's not even our biggest one.
Plastics in the environment, radiation in the environment,
general toxins in the environment,
the general loss of habitat,
the nitrogen nation in the ocean.
All of these things are killing us.
And one of the best ways to address this
is to tax all of those things.
Tax anything that's bad about the economy.
But one thing people will say,
so tax the overuse of our environment,
tax the pollution of our environment,
tax these things, tax the emission of greenhouse gases.
But if you do that alone, if you do that alone
and don't do anything else, that's creating a drag
on the otherwise creating a drag on the economy.
But if you combine that with a dividend,
the tax and dividends solution to global warming
and other environmental problems, you tax the bads,
you tax the polluters, you tax the pollutants
and then you redistribute that back
as a dividend for everyone,
then you are, then if you're paying more than you receive,
that's your penalty for being a polluter.
And you ought to be paying that.
If you're receiving more than you pay,
that is your reward for polluting less
than the average person and you deserve that.
And that then then what you're also doing when you do that
is you're creating an incentive to pollute less and go,
so you're making everything that the production of which
involves pollution cost more
and you're effectively by redistribute that money
in a dividend, making everything
that the production of everything
that doesn't involve pollution costs less.
So basic income is a very important tool
as part of a system of fight climate change
to make it both equitable.
So it's not just all coming the backs off the poor.
If all we did was tax these things and not be distribute it,
the poor would be the ones most effected,
not the rich who are the biggest polluters.
And it would also create a drag on the economy
that doesn't need to be there if we have a tax and dividend.
It is part of an overall strategy.
And on your first thing,
is that we need a greater commitment to both things
like infrastructure and to helping the least among us.
And we get away from this corrupt system
where our two priorities are less taxes on the rich
and more government giveaways to the rich.
If we get away from those things,
yes, we can afford to do things.
We can afford to do things and they're not in conflict.
(mumbles)
- My question was yes or no
on the carbon tax.
You don't have to spend it on UBI.
- No, but that's a much longer discussion.
Although it feeds into to this issue,
which is that a tax and dividend system for UBI
is almost kind of taking all of the product.
We have a UBI and making them worse
because taxes on basic essentials
like goods with plastic in them or energy
are extraordinarily regressive,
relative even to other consumption taxes,
let alone relative to progressive income taxes.
And so the more that you try to fund these kinds of programs
through taxes on these bads, the higher a share of it,
you will be asking your lowest income households to fund.
And can touch them and saying,
driving to grandma's house in your minivan is bad,
and so we're glad that you are paying more for it.
But the reality at the end of the day
is that you are managing to shift
the overall economic balance
even further in negative direction with the added bonus
of particularly discouraging exactly the kind of employment
in which particularly men
and particularly people with less formal education
tend to work most productively and at the highest wages.
- Last question, back there.
- First of all, thank you both for being here
and sharing your thoughts today.
I think something interesting
is that we haven't really defined
the scope of how a hypothetical UBI
would affect the existing welfare state.
And I was curious about your thoughts
on whether we implemented a UBI
and removed the existing hodgepodge system,
120 different programs that we have currently,
whether that would factor to the calculation one
to weather Milton Friedman's argument, for example,
for a negative income tax kind of his philosophy on this
factors into it.
Also keeping in mind that Milton Freeman
also said that a temporary government program
is the most permanent program out there.
- Okay.
Well as with any program, the devil is in the details
and it is possible to have a bad,
to have a bad basic income program.
And to me that would be one that had,
one that involved less of a commitment
to help those who are less fortunate
and less privileged than the rest of us.
We have systematic inequalities
that generation by generation benefit those at the top.
And we have a problem with economic mobility
and with health at the low end that affects everyone.
We need a greater commitment to help for people
at the bottom.
Basic income programs that are replacing things
but making people, but replacing them
with something bigger and better
that is making people at the bottom better off
are good programs.
People that would take you,
people that will say, well, let's just take
everything we're doing for the poor
and then redistribute it in the form of the basic income
and they'll cost the basic income
in terms of the gross costs, which I said is of course
an unrealistic look at the cost.
What you're doing there is lowering our commitment
to helping the poor by five, six.
That would be a bad plan.
So it has to be one that is a greater plan.
And there are some things that are more readily replaceable
by basic income that can.
If you are poor, then cash buys everything
that food stamps buys and more.
You have every reason to prefer
and basic income is higher than food stamps.
And yeah, every reason to prefer that.
Now, but if you're in a big city
and you're getting public housing,
it's very hard to get a basic income
that's going to replace that public housing.
That might not be replaceable.
So that has to be considered on a case by case basis.
But the overall rule is we simply are not doing enough
to help those in need.
We need to stop judging and start helping.
- I think that is an admirably clear and honest response
and I don't mean as compared to your other responses.
I mean as compared to what you will often hear
from UBI advocates, which is a sort of hand-waving
that we can do this instead.
And the reality as you just sort of walked through
is when you look at what we spend today,
it's actually incredibly difficult
to replace it with the UBI.
So biggest things we spend on today
are Medicare, Medicaid, and social security.
We already provide in Medicare and social security
to a typical retiree, close to $20,000 of value,
if not more.
So good luck convincing them
that they should just get the UBI instead.
And as Karl noted, you can't really replace
medical care with it, especially easily
when you get to Medicaid, you have the same problem
to the extent it's health insurance.
A lot of its nursing home care.
Can't cover nursing home care with a UBI.
Then you get to things like disability,
which as you noted, were presumably still going to address
the added costs of people with substantial disabilities.
Housing in high cost markets,
UBI is not really going to cover that.
You pretty soon get down to out
of what is about three trillion dollars a year
that we make in transfer payments and means tested benefits.
You get down to a couple hundred billion food stamps
and so forth that TANIF which is traditional welfare
that you could genuinely say like,
but now they're getting basic income
so they don't need that.
And so you're really talking about this
incrementally on top of most of the architecture
that we already have which I find conceptually puzzling
and again, means you're having to find a place
to get all that money.
- Well, a quick response.
I think that is true.
There's probably only a few hundred billion
that you can replace with the UBI, but as I said,
the cost of a poverty line UBI is $539 billion a year.
So if it's $300 billion worth of stuffing replaced,
that's half of the cost of UBI right there.
That takes it from a cost of 2.95% of GDP,
down to maybe one point something percent.
For a country without poverty.
I think that's really worth it.
- I want to thank you both for your thoughtful discussion.
Thank you all for coming.
(audience applauding)