David R. Henderson  

Bryan Caplan's Best Line and My Thoughts

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Why Libertarians Should Oppose... UBI Debate Video...

I was stuck at LAX for about 9 hours on Saturday after my wife's and my flight was cancelled. So we used our time to work and I used part of my time to watch on Facebook co-blogger Bryan's debate with Will Wilkinson about the Universal Basic Income. (No, I can't find it now, but look around and you probably will.)

I thought Bryan knocked it out of the park, both with his prepared presentation that he posted about today and with his back and forth with Will.

I had two favorite parts.

The first was his question to Will about the phase out rate. Will supported a $5,000 UBI per adult and Bryan asked him by what percent the UBI would fall as the recipient got other income and at what income threshold the UBI would fall. That was a great question to ask. Will didn't know the answer to the first part and said, if I recall correctly, that the phaseout would be gradual. I would bet he has in mind 25% or less, but he wouldn't put a number on it. Will did, though, put a number on the income one is allowed before losing a dollar of UBI: $20K. That is, $15K in other income and $5K in UBI. So if my hypothesized 25% phaseout is correct, anyone with other income of up to $35K would get some benefit. That makes the program very expensive.

The second, and my absolute favorite, was Bryan pointing out that his father, a man I met and liked, by the way, is not at all libertarian and that even he would oppose a UBI because it would give money to people who are not necessarily desperate. Then Bryan said, "I think libertarians should be at least as libertarian as my father."

Here's a point that Bryan didn't make but is important. In the UBI version that Ed Dolan supports, Dolan makes it spending-neutral by ending Social Security and Medicare as well as all the welfare programs. Consider what the Dolan $4.5K per person would mean to a 70-year-old couple who, in 2016, were getting the maximum monthly Social Security benefit: $2,639 for the high-earning spouse and half of that, $1319, for the other spouse. That's $3,958 per month, or $47,496 per year. Their income from the government would fall from $47,496 per year to $10,000 per year, a drop of $37,496. And notice that in these calculations, I haven't even measured the loss due to losing Medicare.

Will Wilkinson works for the Niskanen Institute, an organization that prides itself on coming up with partial steps that could be politically palatable. Imagine the political storm that this proposal would face. In 1981, when Reagan and Stockman proposed cutting the early retirement benefit for 62-year-olds from 80% of the benefit for 65-year-olds to 55%, they faced huge opposition and quickly took it off the table. A UBI fashioned a la Ed Dolan would be dead on arrival.

Why say this in a debate with Will when Will explicitly said that he would not touch Social Security? Because in the back and forth between Bryan and Will, Will was edging towards a UBI that would be spending neutral and would be about $5K. To get there, he would have to end Social Security and Medicare.

I gave a talk at my daughter's school, Santa Clara University, that Dan Klein sponsored in 2004 when he was on the faculty. It was titled "Social Security: The Nightmare in Your Future." I think one thing that many people do not understand is that with regard to federal spending, the cupboard is bare. If we're lucky, we're going to be trying to come up with ways of reining in the welfare state for the next 50 years.

Update: Bryan has informed me that I was unfair to Dolan. He does not advocate eliminating Medicare. Bryan quotes Dolan as follows: "In the following discussion of affordability, I will neither expect the UBI grant to cover healthcare expenses, nor will I look to any reduction of existing government healthcare spending as a source for financing the UBI."


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CATEGORIES: Social Security , Taxation




COMMENTS (14 to date)
AntiSchiff writes:

Dr. Henderson,

Do you favor wage subsidies or other government help for the poor or economically downtrodden, especially with regard to possible political ramifications of allowing some populations to live with less?

David R. Henderson writes:

@AntiSchiff,
No. The only government help I favor for the poor is to get rid of the myriad restrictions it puts in the way of making a living. quit sending them to prison for victimless crimes, and quit making it illegal for people to help them.

Mark Bahner writes:

I think Medicare is going to be an even bigger nightmare than Social Security. And much of that spending only briefly delays the inevitable.

About one-quarter of Medicare outlays are for the last year of life, unchanged from twenty years ago. Costs reflect care for multiple severe illnesses typically present near death.
Michael Stack writes:

If anyone is able to find a link to the video can you please share it in the comments? I've been unable to find it.

Thanks!

AntiSchiff writes:

Dr. Henderson,

Do you favor public financing of public roads and other infrastructure? How about schools?

And if the answer is yes to either of those questions, what is the difference between providing public goods and services and providing a GUI, for example?

And, hypothetically obviously, would your mind change if the value of human labor actually started to fall in general for the first time in history? Let's say automation in 30 years has wages falling across the board, with the extrapolation suggesting that even the quantity of jobs may soon be affected, if not already being affected by then. Then, is some form of redistribution justified?

Julien Couvreur writes:

If anyone could share a link, it'd be greatly appreciated. I searched on Youtube and FB and couldn't find it yet.

konshtok writes:

there are countries within the EU where youth(15-24yo) unemployment is 20-50%
there are countries in the MENA where it is 50-80%

this is probably not a phase but a result of technology erasing even comparative advantage

all of those people are already living on government money

When you look at it like that UBI is just an attempt to formalize an already existing arrangement

it might not be wise or just but it's whats coming

David R. Henderson writes:

@AntiSchiff,
Do you favor public financing of public roads and other infrastructure? How about schools?
Yes, just as I favor public financing of McDonald’s. But I don’t favor government financing.
To see more about roads, see Ben Powell’s excellent article “Sell the Streets".
To see more about schools, see Edwin G. West, Education and the State and see David Friedman’s excellent article “The Weak Case for Public Schooling.” He uses “public” the way I think you do: to mean government-financed.
And, hypothetically obviously, would your mind change if the value of human labor actually started to fall in general for the first time in history?
Probably not, but I would have to know more.

Thaomas writes:

How affordable a UBI or any other part of the welfare state is depends on the deadweight loss of the taxes that finance it. It's not clear that even the present reliance on income taxes has high dead-weight losses, but shifting to progressive consumption taxes would greatly lower the loss.

BJT writes:

For people who wanted a link to the debate, I was able to find it here on Facebook.

robc writes:

Thomas, If you are concerned about deadweight loss, then the Single Land Tax is the way to go, as the deadweight loss is zero (in theory).

Julien Couvreur writes:

Thanks BJT for the link to the video.

Thaomas writes:

@robc

I am not too worried about deadweight losses at current levels of even our very poor tax system (although the losses from the different rates applied in practice by the corporate income tax must indeed be pretty large). But the worse Libertarians think taxes are (and most seem to think they are pretty bad) the more they ought to inveigh against deadweight losses (and implicitly in favor of taxes with lower dead weight losses) rather than marginal rates or amounts collected.

Todd Kreider writes:

Mark Bahner writes:


I think Medicare is going to be an even bigger nightmare than Social Security. And much of that spending only briefly delays the inevitable. About one-quarter of Medicare outlays are for the last year of life, unchanged from twenty years ago. Costs reflect care for multiple severe illnesses typically present near death.

But Mark, what about those HBE (Human Brain Equivalent) computers coming in the millions, then soon billions and a few years later trillions?

Wouldn't that amount of computing power have a profoundly positive effect on slashing future health care costs? We also aren't that far away from everyone taking drugs that keep them very healthy until maybe 100 where they would likely rapidly decline in weeks or days instead of a year, a decade or two decades.

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