Questions for the UBI Guy

at an MMT and Job Guarantee conference

If you’ve read pretty much any of my writing, you’ll know that I’m a UBI advocate. I recently attended a Modern Monetary Theory (MMT) conference. It was dangerous territory, as MMT proponents have classically been avid proponents of the Federal Job Guarantee (JG) idea, specifically as an alternative to Universal Basic Income (UBI), to the extent that relations have been pretty tense between supporters of the two policies. Both sides are wont to promote one at the expense of the other, as walls go up and insults fly. I wanted to understand why these seemingly compatriot ideas should be at odds, and I wanted to build some bridges, so I headed on down to the conference. I may have been the only UBI advocate in attendance, so I quickly became referred to by some as “the UBI guy.” I was pleased to find a whole lot of common ground.

I wrote a shorter summary of my experience and takeaways in another article. What follows are the most interesting back-and-forths I had at the conference, in the form of answers and clarifications to the many questions and misunderstandings I discovered between the movements. The bolded italics represent questions and concerns from various JG advocates. The regular font indicates my responses.

The argument is over the nature of the problem: should the State guarantee income or work?

I believe this is a false choice. I believe these are different problems that should both be addressed. Leave aside that I think income is the more pressing. I hope we can agree that both are important.

What’s your general baseline proposal for a UBI policy by the numbers?

$1,000/month/adult, $333/month/child (to guardian)

These figures are negotiable but illustrate the approximate scale I’m thinking: enough to viably survive on, but not enough to live luxuriously on, not enough that it could start disincentivizing contribution back to society through work. $35K/year/person is what I heard from a lot of JGers as their understanding of what UBI would need to be to be livable, which to me would be far too much, at least for our first stab at it when we don’t really know all the consequences of a full national policy. The point is to guarantee choice and basic security to people while they find out how they want to contribute and pursue it. I would expect the number who choose to withdraw from social obligation at these levels to be extremely small, and many of those cases to be temporary.

Who would get it?

Everyone, regardless of work or any other conditions other than being a living citizen and enrolling. It’s universal.

How is it “funded” and why would we give it to the wealthy, too?

There are various funding options here, including money creation up to the level justified by the expanded productive capacity it would bring (Roosevelt Institute predicts a 12–13% permanent increase in GDP under a similar program). I support a diversified funding strategy, and I insist that much of the cost should be balanced through progressive taxation methods. I very much see UBI as a wealth redistribution program from the wealthy to the lower and middle classes. The universality, for me and the advocates I respect, is not some idea that everyone gets $1,000 extra. That’s absurd and would lead me to the same inequality and inflation concerns I’ve heard from many JGers. The U in UBI is the idea that everyone starts with $1,000/month no matter what, and the very moment one loses other sources of income, there is an instant floor of security. It’s universally guaranteeing everyone their first $1,000 per month. It’s the abolition of zero, of absolute poverty and economic powerlessness, for everyone. It’s a quantifiable distribution of distilled power to the people, and it’s the greatest instant stress reducer for the general public that I can imagine. Bill Gates would be receiving his basic income, but he would be paying millions in extra taxes, too, unless somehow he lost all of his income and assets, in which case the basic income would protect him from the deepest poverty, too.

If we’re taking it back from the rich, why not just target it in the first place as a Negative Income Tax (NIT)?

Because an NIT in practice has troubling consequences. If we intelligently design the taxes implemented to balance out a basic income, the net effect can be exactly the same as a targeted, sliding scale NIT, except the implementation can be much more efficient and humane. Our tax code is already in place to extract wealth from those who make too much, as an ongoing response to their changing incomes. We don’t need to go through all the effort and human pain involved in finding out who’s poor enough to need help. We already know who is rich enough not to need it. That’s why we should give it to everyone first and tax back the excess. It’s basically a simple accounting maneuver to put the recoupment after the benefits, because that renders all of the bureaucracy and perversity of means testing and targeting no longer necessary. This would result in greatly reduced stigma, nobody being missed (this is huge), and no additional tasks (applying and qualifying and waiting) heaped on people experiencing their times of greatest crisis. We’re witnessing the importance of this playing out in our UBI trial, and it’s quite impactful, especially in comparison to the perverse and wasteful condition of our current welfare system.

Would we replace welfare programs, and if so, which ones?

Some welfare programs would be possible, even advisable and important, to replace, provided the UBI level were high enough to justify doing so (which I believe $1000/person/month is, since it’s greater in value already than the ones I’d replace and unconditional to boot). Removing certain programs would bring down government expenses somewhat, sure, but more importantly, it would remove the perverse welfare cliffs, work disincentives, and stigma that we inflict upon the poor today through those means tested programs. It’s important to note that only programs that could be better handled by direct cash should be replaced. These include, in my mind, food stamps, unemployment, and housing vouchers, for example. These DO NOT include: programs that require the combined power of the government to protect the interests of the people from profit motive (like healthcare, which should be provided as a service, not in cash, and should also be universal), as well as programs meant to address conditions above and beyond average human need (disability). I reject outright any libertarian proposal that would seek to touch such programs, as do essentially all of the UBIers I know. Multiple JGers at the conference said they’d have no problem seeing and supporting UBI under this design as simply a better way to provide welfare for the poorest, an upgrade for the safety net that their JG would have left in place otherwise, and it’s perfectly fine and accurate by me to see it that way.

Why do you insist that implementing a JG alone would be so bad?

A few reasons:

(Don’t worry, JGers, I won’t forecast any sort of dystopian gulag system under JG or anything. I think that’s at least 10 years away. Kidding! Sort of. Also, here’s another more detailed piece I wrote just on this question.)

1) My studies have largely included following real people and their circumstances all over the country, and I can think of countless instances in which people who could better contribute to society in some creative avenue of their own design would feel compelled to work a guaranteed job, and that represents both an unfairness to individuals and a huge opportunity cost to society. A JG job can’t truly be said to be optional unless the choice to decline it doesn’t include the high possibility of hunger or homelessness for one’s family. Welfare, I’m aware, is designed to tend to those people, but it simply doesn’t do it well.

2) I think we would be wisest to make every effort to unleash ALL of the forms of valuable work and contribution as soon and completely as possible. I truly appreciate learning of JG advocates’ efforts to expand the definition of work. I don’t think that will be enough, though. I cannot imagine a JG robust enough to include every artist, entrepreneur, volunteer, or (crucially) activist, in its list of qualified jobs. Can you imagine a JG government qualifying people to protest itself? That’s increasingly one of the most important jobs we have in this country, if you ask me, and people are doing it at their own detriment in pursuit of their highest values. And can you not imagine the guidelines of what qualifies as acceptable work constantly changing as government priorities and worldviews shift with political cycles? Real people will be hurt by this. My premise is that, to an extent, life itself is work, and a valuable societal contribution, even down to getting enough sleep, maintaining one’s hygiene, and standing by one’s ethics, and that it should be supported at a survival level.

3) Whether or not you give credence to the threat of automation and globalization on the labor market, or to whatever extent you do, we already have many people in need of work. The problem is already big, and I see a Job Guarantee program alone being cumbersome and slow to act, or at least certainly not immediate, which is not desirable for a program that’s helping people at their most vulnerable. Personally, I expect automation to prove quite disruptive to the private sector, putting even more onus on a JG to pick up the slack in the fairly near future.

4) Simply, people will be missed. They will suffer. Of course I support making things better for a lot of people, but if we have a smart way to make things better for all of our vulnerable people and accomplish both goals, I will push for that.

Why should UBI and JG be combined?

1) I think they’d feed each other’s efficiency symbiotically. With a UBI in place, many people will be empowered enough to solve their own problems and find meaningful work, either through starting businesses, holding out a little longer for a job in the private labor market better suited to them, going to school, whatever. This would shrink the onus on JG to find/provide work for as many people. This greatly reduces the expense of JG and makes it easier to sell. At the same time, having a Job Guarantee in place on top of a UBI would greatly magnify the choice and opportunity provided to all to contribute and grow, as well as further stimulate the economy and create a sector of employment guided by societal values rather than profit motive (green jobs, infrastructure, care work, all super important), among other important benefits.

2) Fundamentally, I see the main goal here as guaranteeing basic human rights, and the questions are: how we define those rights, what’s the most effective way to guarantee each, and order of operations (which are the most urgent to implement?). My preferred order is based on Maslow’s Hierarchy. I don’t think it makes sense to first offer a job to someone who’s hungry, hurting, and stinking on the street. I think they need food, shelter, and a shower, and then we can help them find a job. Often, they will spare us the trouble when they’re no longer desperate.

So, looking at the Hierarchy:

a) Base (physiological security): health, safety, food, shelter: best achieved through universal health care and UBI

b) Second level (access): Employment, transportation, education, internet, etc.: Some of these could be universal services or subsidies. Employment would be bolstered by a job guarantee. Now I get the sense that JG people might put employment down at the base level as of that level of urgency. I don’t have a problem with that. My current feeling is that UBI and UHC need to happen immediately, and that job programs are also extremely important, and I see no reason why not to push for them simultaneously, especially because of the aforementioned symbioses.

c) Higher levels (self-actualization, love, etc): I think our most important job is to free people up to address these higher goals themselves.

I see building a healthy society and economy as building a house. UHC and UBI are the foundation and floors, JG is more like the walls (still very essential, obviously), other forms of access are the ceiling/roof/higher floors, etc. Maybe immigration is the doors? Anyway, the point is, it’s not a good idea to erect the walls before getting the foundation in place.

It’s an election cycle. You can’t expect politicians running for office to support something controversial right now.

(Clearly, I attended this conference before the November elections)

I very much agree with your sentiment that it’s not Bernie or Alexandria Ocasio-Cortez’s job to sell the complex economic concepts or radical new ideas. We as advocates must create fertile ground through grassroots awareness spreading. [At the time of writing,] JG has come further than UBI in this regard. I do not fault any candidate for pushing JG right now. It’s currently more salable and supported and they need to get elected. I simply want them to not take a stand against UBI while we get our movement in order. It is growing fast, and we’ll get there, and when we do, we want to help the progressive movement as much as possible. That’ll be harder if our favorite candidates have publicly denigrated the idea. I don’t need Andrew Yang to beat Bernie, per se. I want him to get on the stage and get people aware and excited and make it ok for Bernie to support UBI, too. Then I’ll have two candidates I’m fully excited about. So I don’t expect people running in 2018 to put UBI on their platforms two months before the election, but just to not shoot it down, to stay open to messaging and opportunity, and to let us sow that fertile ground for them to reap.

FYI, both Bernie Sanders and Alexandria Ocasio-Cortez have expressed sympathy, even support for UBI, in very careful and noncommittal ways while also pushing JG. I think that’s very smart.

UBI advocates are tied to the idea of a financially-constrained government.

Not this one, not any more, thanks to you guys. I feel that UBI fits very nicely within an MMT framework.

The debate should really be about whether the BI can be considered a superior option in a monetary economy where the fiat-currency issuer is a monopoly and private markets are constrained by inflationary biases.

I think, rather than debating superiority, we would be best served by working toward a more nuanced understanding of the different roles of the policies.

Overall we do not think this enhances the rights of the most disadvantaged or provides work for those who desire it. While the UBI might enable individuals to exist without work, it does not provide any firm promises of paid work for those who don’t have a job but who want to contribute their labor to the generation of social wealth.

I think it’s very important and valuable to provide the opportunity to work, but this in no way means that the guarantee of survival and true choice is a trivial thing. I am personally not ok with anyone being completely missed by society, even for a time, and UBI is the only program I have encountered that seems able to effectively and elegantly abolish the condition of zero. I have traveled the country extensively, interviewing and engaging with people in their regular lives, and I cannot be ok with a solution that gradually helps some fraction of the vulnerable, even if it were a large majority percentage, when I know of a clear and simple way to give absolutely everyone a floor of support. There is no number of people so small that I can ignore them for the sake of macroeconomic theory (and I don’t think that the number missed would be small at all anyway). To me, the establishment of a deeper human right takes precedence.

What’s more, I think the results of establishing that very right to choose any path and survive would surprise many of the economists with whom I’ve spoken. I generally feel that many economists, while well-studied in mathematical and economic theory, are lacking an accurate understanding of human psychology to the detriment of their predictive analyses. I find that the primary drive of essentially all people, from infancy to adulthood, is to matter, to have impact, followed closely by the drives to grow and elevate themselves.

Economists tend to look at human behavior under welfare and other conditions of the current and historical economic paradigms as a predictor of human behavior under an unconditional and guaranteed permanent income, and in doing so they fail to understand the transformational difference between these paradigms. Even at the same dollar values, an unconditional income completely changes one’s entire attitude. It creates hope where there was despair and apathy, it creates the ability to plan where there was only the feeling of temporary and unreliable support, it removes disincentives, and it nullifies the possibility of gaming the system (or the need to). It allows people to think about what they are able to give rather than what they must take to survive both in the short and long terms, and it encourages a feeling of community obligation to be living in a community that provides unconditional support. We become a different species when our basest existential fear is removed, and so historical behavior is not a reliable predictor of future behavior, because we have no large-scale evidence of the behavior of this new species.

Also worthy of noting is that economists also often tend to live fairly comfortably, such that many are well-removed from the realities of poverty and insecurity. I don’t suspect that too many have spent much time on food stamps or TANF or living in a shelter, or applying for such assistance.

As a former day trader, witnessing my colleagues trying to predict the unpredictable, I have often lamented the ability of economists to forget how much shifts in human psychology can shift the rules of the game, and the absurdity of those who think they can predict the whims and fears of hundreds of millions of people in aggregate. History repeats itself until it doesn’t, and then the history books call those unexpected shifts revolutions, transitions into a new age, often involving many years of war and suffering. The hunter gatherer knew nothing of the agrarian lifestyle to come, the agrarian farmers knew nothing of industrial age life, and those transitions between economies were quite awful for much of the population. Similarly, today’s industrialists know very little of the coming digital age. I’d rather be more proactive this time around and spare us the abject suffering as much as possible. I prefer evolution to revolution any day.

For my part, in an attempt to predict human behavior as closely as possible, I have done my best to study human behavior under UBI-like conditions, in trials that have existed before and elsewhere today, and in the trial that I designed and am managing. The results are remarkable and seemingly consistent under basic income. Entrepreneurialism blossoms, domestic violence decreases, hospitalization and crime decrease, vice decreases, school graduation rates increase, and on and on, in a far superior way when benchmarked to in-kind aid. Of course, we must grant that these are not true tests of a more universal UBI implemented across an entire population, or a permanent UBI guaranteed in perpetuity, but they show how different human behavior can be when the rules of the game have been altered. The only way we can really know the results of a true UBI in America is to implement it nationally and see what unfolds. Those who think they can predict such outcomes with complete confidence are deluding themselves, but all the evidence I have seen makes me quite hopeful for a positive and productive outcome relative to the alternative of not implementing UBI.

I continue to have concerns about the incentives for the unemployed to secure work in the presence of a UBI which is as generous or probably more generous than the current unemployment benefit.

This does not preclude a period of grace during which a payment is made to someone who becomes unemployed or enters the labour force and cannot secure employment. This payment is not a UBI, of course. I take the view that as citizens we have rights but we also have obligations.

As far as I understand it, UBI at the level I am talking about ($1000/month) is less than unemployment benefits in some cases (I know that New York, for example, provides up to $420/week). I think the level of the UBI is a very major consideration, and I would have concerns myself about a disincentivizingly large UBI. I’m not sure $420/week breaks into that territory anyway, in my estimation, and I certainly don’t think $1000/month introduces those problems in a significant way at all.

As one anecdotal example, I was once on unemployment at $420/week in New York while going through school and having recently been laid off my job in a downsizing event. In that experience, I was actively disincentivized from working by the loss of my benefits. I had wanted to work gigs here and there, mostly in catering, to contribute to society and to supplement my income while going to school, and when I did they essentially removed my entire paycheck amount from my benefits. I netted maybe $10 for 10 hours of work. I couldn’t justify that loss of my time for such meager reward, so I decided to focus on school and ride out the unemployment benefits. Even at a lesser dollar value, I would have preferred a UBI in that situation for the unconditionality of it and the knowledge that it would extend indefinitely to support me through difficult times while still leaving intact my incentive for pursuing those jobs. I suspect most others would feel the same.

I do agree that we have obligations to one another and to society. I just think the line for expecting fulfillment of social obligations for reward should exist just above viable subsistence levels (as opposed to either below minimum subsistence levels or up at more luxury levels). I also believe that people naturally experience community and societal obligation (the desire to matter and contribute) very strongly, especially when that community and society behave reciprocally, by showing that they are obligated to and supporting of the individuals within them. Under these conditions, as well as due to the human drive for growth in general, I firmly believe that people will actively pursue work and other contribution without need for coercion. Again, this belief is supported by all the data from UBI trials to date.

I assume your UBI would replace unemployment benefits, so it would considerably higher than $1000 per month, which reduces the incentive to work. If it is paid in addition to unemployment benefits, then it locks in unemployment.

My UBI would indeed replace unemployment benefits (not every proposal does), but not at a size necessarily equal to the maximum payout they provide (this maximum is for people laid off of higher-paying jobs, which is also somewhat perverse, in my opinion). I would keep the UBI at $1000 per month. The unconditionality, meaning that it would be received still by the long term unemployed, the underemployed, and the fully-employed (less whatever additional income taxes would be used to balance it), for me is far superior to a larger benefit for a shorter time that is conditional upon both remaining unemployed and reporting to have looked for work. That conditionality of current unemployment benefits (and other welfares) is, to me, the greatest work disincentive we can levy. That is what I seek to remove and replace. $1000/month would be larger than food stamp benefits and some other benefits it would replace in my UBI, for the record, but not necessarily maximum unemployment benefits, and that’s ok with me.

In the absence of a JG, I am somewhat surprised by your UBI scheme. You will be scrapping unemployment benefits, so the unemployed (and everyone else) are getting about $250 per week. For someone living in NY, they would be forced to take up work, if they could find it, or relocate. It would not be popular for those who would be entitled to rather more in Unemployment benefits, under current arrangements as per your example. Of course, Clinton introduced limitations on the duration of Unemployment benefits. (A separate issue, which we would agree on is that with limited jobs and unemployment benefits, the rate of loss of Unemployment Benefits, when a job is taken up should be relatively low. Otherwise there is no incentive to take up (particularly low paying) jobs). Here in [foreign country], Unemployment Benefits are uniform and not time limited, although there is a tough compliance regime and penalties for job seekers who do not attend meetings. For those without a fixed address, clearly this is a serious problem.

With a well-organised and administered JG, the public would be hostile if the able-bodied of working age could choose not to work and receive UBI. As noted in our paper, the concept of work is evolving. A JG does not preclude having a generous welfare system for those unable to work, families with kids etc. A contentious issue is whether any sort of interim payment would be available for someone who loses their job or (re)joins the labour force (after a break) before they would need to take up a JG job — in the absence of jobs paying market wages. I would not be opposed to such a payment for a limited period.

I think you would be surprised to learn how little people get in NY for unemployment. $420 per week is the maximum, and that’s when you were making decent money already (over $43K/year). If you were making $20K per year, your Unemployment check would be $192/week, for example, and it gets taxed, and it gets taken away when you get temp, part-time, or full-time work. The less you were making, the less you get. And the processes involved in qualifying for the benefits, maintaining the benefits, and proving you’re “looking for work” is quite shitty (a counterproductive, humiliating, waste of time). I know, because I’ve experienced it. Perhaps you’re basing your assumptions off of a more robust unemployment benefit you may have in your country (NOTE: this individual was from Australia), but the one in NY sucks.

As to $231/week not being enough, I’ve lived as a struggling artist in NYC for a decade now, so I have a few opinions about this. Many of those years, I lived on $10K or less in income as I pursued my art and my projects. It isn’t easy, but it’s doable. It might require finding roommates and never going out for movies, but you won’t be on the street. If your focus in life is starting a business or pursuing an art, it’s very much worth it to live cheaply and not have to give half your working hours and energy and concentration away to, say, a restaurant job, of which I’ve done plenty to scrape by. The same would go for a Job Guarantee job. And again, the point is not to incentivize people to leave the labor force by making it comfortable to do so. The point is simply to make it possible, so that labor participation is always a choice.

But nobody really wants to live at $1000/month, because it is so minimal, and so they’ll look for other ways to supplement with labor income, which is what you have said is your aim. When you say the rate loss of unemployment benefits should be relatively low, I agree. Right now in NYC, it’s essentially 100%. You want less than it is; I want zero. I think survival income should be guaranteed no matter what, allowing people to function in their decisions and aspirations as if existential fear were not actually hanging over their heads.

Perhaps an extra supplemental program could still exist to serve the function of unemployment benefits as we now know them, which function seems to me to be 1) monitoring whether or not people are actually looking for work and 2) incentivizing that effort. Maybe we could provide a smaller version of temporary unemployment benefits as we know them on top of UBI, like another $50-$100 per week, but it wouldn’t be my first inclination. I don’t think it’s really necessary to monitor and incentivize people, but rather to empower them and get out of their way. People, I find, want to work, without prodding.

By the way, the phrase “a well-organised and administered JG” is one that causes me great skepticism, because I’ve dealt with and researched benefits and government run programs of many types. I’ve never witnessed such organizational capability by the government, and this was with programs tasked with far less than a JG would be. I don’t believe it’s reasonable to think we’d suddenly be able to oversee and connect and guarantee tens of millions of quality jobs in a timely manner. Plus, people generally need assistance in their times of greatest crisis, so extra bureaucratic burden and delay is the sort of thing that can send someone into a downward spiral (say their kids go hungry, they miss their rent, etc, waiting to get approved for a JG job), when immediate and guaranteed cash could often get them out of that bind with no hassle and hold them over at minimal levels until they find employment. With a UBI floor underneath, nobody has to wait desperately for government aid to step in and help.

I believe that the sanest and most productive way forward here must be a combination of a universal floor of security through UBI and a reinvestment in value-driven social projects through some sort of a job program like a job guarantee, but one that isn’t expected to provide a buffer stock for every single person who wants to work and can’t find work in the private sector. Many people could be best utilized by empowering them to create their own work and value. Maybe consider UBI as the oil that helps the engines of the economy — including jobs programs — run smoothly, by reducing friction at all the contact points.

Want to read more? Here’s a handy list of links to all my Medium pieces on basic income.