Tag Archives: politics

A new vision for UBI

Being a US citizen is inherently valuable. It gives the right to work in the richest major country.  We can travel to much of the world visa free and very few countries want any harm to befall American citizens within their borders. The US has a very high standard of living and good infrastructure and its relatively easy for citizens to take advantage of that. Its not uniquely good. Being a British citizen or German citizen is comparable and better in some respects. But its better than being a citizen of many countries and so there are always a lot of people who want to immigrate to the US.

At the same time, there are a lot of US citizens who have trouble utilizing their status to its full potential. For a variety of reasons there are just 10-15% of the population that can’t seem to make it work. They have this great asset but its just not producing a return for them. So what would happen if we allowed these people (or anyone) to sell their citizenship. Imagine if the only way for a non-citizen to become a citizen was to buy another person’s citizenship. There would be millions of people who would be happy to do that.

Furthermore, lets imagine that instead of taxing citizens and then distributing that money to other (mostly) citizens in arcane ways, the US government taxed at the laffer max and then distributed most of that money as a “citizenship dividend.” That’s essentially a UBI but rather than setting its level and then seeing how crazy high taxes have to be, you set taxes to what will give the greatest NPV of revenue and pay out whatever you can from that. Like a corporation not a charity!

Combine those 2 ideas. The only ways to become a citizen or legally work in the US are either to be born a citizen or to buy a citizenship. Citizenships also pay a reasonably fat dividend (Got to be at least $5K/year if not more like $10K given current taxing and spending). How much would a citizenship be worth on the open market? Given the stability of the dividends, the impossibility of bankruptcy, and current low interest rates a multiple of 40-50 would be extremely reasonable. Plus some premium for the value of working in the US, and you can see how a citizenship could easily be worth $300-500K. Maybe more. Get rid of worldwide taxation and rich foreigners would buy them “for a rainy day.” Think about the value to low income people of being born with a $400K inheritance. It would be immense. That pays for college + a good start in the world.

Selling your citizenship would have to have consequences. You’d lose the right to vote. You’d lose the dividend but as long as you were born a citizen you should retain the right to live and work in the US and your kids (if born in the US) should still be citizens. We could pay out a decent dividend while still having a safety net for those who really need it so even if some unfortunate people sell their citizenship and then blow it on smack or whatever then they wouldn’t end up starving in the street. Real actual welfare for people who really need it is just not that expensive. To protect minors make it illegal to sell your citizenship before 18. That way parents can’t have kids as a way to get rich, though they would still get the dividend.

The total level of immigration might decrease, and particularly low skill immigration. But skilled workers would probably still be able to afford it. If they are going to be able to make a decent living, then they should be able to borrow to buy a citizenship. They can pay it off using the dividend + part of their earnings. It would be slightly painful but well worth it for smart people coming from poor countries, and of course their kids could get the massive benefit of being born citizens. More importantly, immigration would now be guaranteed to benefit American citizens since it would keep the value of their citizenship up, and would allow citizens in poverty the chance to escape.

Universal Basic Income

The Universal Basic Income (UBI) has come back into public consciousness with Switzerland holding a referendum on the idea and I think some dbag from a tech incubator is “researching it.”

The Swiss referendum was pretty bad. I think 22% of people voted for it but supporters of UBI declared that a victory. I think they underestimate how many people would come out to be against it if it were more likely to pass though.

Most of the articles about UBI focus on the idea that AI is going to take everyone’s jobs and then a UBI will be necessary for actual people to have any money. Maybe that will happen but So what? If it happens we can vote for a UBI then! AI could take over a lot of things that humans do now without destroying many net jobs as long as people still value having people do things. Ever seen a sign outside of an ice cream parlor advertising their “hand-dipped” cones? People like a human touch, so as long as humans own the companies with the AIs and therefore make the money and can spend it, its very likely that they will spend it on having other humans do things for them. Already most people work in the service sector.

Another pro-UBI argument is that the current welfare state has high implicit tax rates for certain people, meaning like if a single mom on TANF gets a job she might lose nearly as much in benefits as she gains in earned income. That can be a problem, but it effects a fairly small number of people for a fairly small amount of income. If she starts making a decent amount of money her marginal tax rate will go back down. On the other hand, paying for a UBI at a level high enough for people to live on would require really high taxes on everyone so instead of a few people facing a high marginal tax rate on a small amount of income, everyone else would face a really high marginal tax rate on all their income.

UBI proponents like imagine that if people are free from the need to work they will do more innovative or creative things instead. There are a couple of reasons to disbelieve this. One is that in the US, most young people already have the equivalent of a basic income. Its called living at their mom’s house. See the movie “Stepbrothers” for an example. Since that’s available to the top half of the income distribution at least, giving it to everyone wouldn’t add a ton. Another reason why you should not expect to see a creativity boom if there was a UBI is the example of Saudi Arabia. For decades the Saudi government has employed most Saudi citizens in undemanding, well paying jobs. They could afford to do it because of their enormous oil wealth. What’s been the result? Saudi Arabia is not a tech hub. Culturally its backwards. They have to import people to do the actual work. No one will talk about Saudi Arabia or the other gulf states in the context of UBI but they are much closer to the real experience than most small scale western experiments.

Finally, UBI advocates say that we can get rid of a lot of the existing welfare system, including social security and maybe medicare with one simple program. That would be nice but here is the thing, what about people who squander their UBI payments? What about people who need more help, due to disability? We’d still need a welfare system on top of a basic income to avoid people starving in the streets. In my next post I will lay out an alternative vision for a basic income that also solves the immigration issue and everyone will hate it!

Do democrats understand capitalism?

Yesterday Hillary asked “How can you go bankrupt running a casino?” in reference to Trump’s troubles owning casinos in Atlantic City. Apparently people laughed and dummies posted it on facebook and isn’t that great? The only problem, IMO is that its a really dumb question. Tons of casinos have gone bankrupt! Even native american casinos. I guess now Hillary shouldn’t be counting on Elizabeth Warren’s vote. Casinos are basically big rooms full of slot machines that suck money out of sad addicts. The table games and entertainment and everything else are just a sideshow. But the slots are a commodity and the sideshow is really expensive. Just because the core activity of sucking nickels out of gambling addicts is profitable doesn’t mean that the whole billion dollar resort complex built around it will be.

II. 

Has Hillary Clinton ever built a successful casino business in AC? Nope! She’s never tried. That’s probably a wise decision since the Clintons have managed to get fantastically wealthy just by writing bad books and giving boring speeches. That’s certainly a much easier/less risky way to make money if you can do it! But since she’s never tried running a casino, shouldn’t she maybe refrain from mocking someone who had the guts to try?

III.

One of the most fundamental and poorly understood facts about the capitalist system is that nobody knows how to be successful. If there is a well established way to make money, a bunch of people will do it and compete all the profit out of it. All anyone can do is try their best and hope that it is good enough to make some money for now. Occasionally someone stumbles on a formula that works amazingly well, but the stumbling part is key. They can’t know ahead of time that their formula will work or else it already would be working for someone else. Our economy advances through this process of people trying, taking risks, often failing and occasionally succeeding. Most people don’t really have the stomach for that kind of risk-taking, so they work at jobs where someone else takes the risk and tells them what to do. But we all benefit from the important work that the risk takers do. People who take risks and fail (including The Donald) deserve respect and praise for their efforts, not mockery.