Universal basic income defense by AlterNet.org’s Lynn Stuart Parramore misses some basic points

Apparently the hip new trend in statist poverty fighting is universal basic income (UBI).  Lynn Stuart Parramore of AlterNet.org thinks so and gives five reasons to consider it.  Is it everything she hypes it up to be, or does she make some errors in her argument?

Let’s take a look at each of her five reasons and her arguments for them.

1.  It would help fight poverty.

She starts off by stating that “America is the richest country in the world, yet widespread poverty continues to afflict us.”  Well, being the richest country in the world carries some benefits for those who are considered poor.  According to the HHS.gov, the poverty line for a family of one is $11,670.  Compare that to the rest of the world.  That annual income would put you in the top 14.68% richest people in the world.  Parramore’s opening comment is really just a red herring.  The United States really doesn’t have a problem with poverty when you compare it to the rest of the world.  Our typical poor people don’t look like this:

That’s not to say that we shouldn’t try to do something about the poverty situation in the United States, but Parramore’s lack of concern that there are relative levels of poverty across the world is unacceptable and rather appalling.

Changing gears in her next sentence, Parramore praises the apparent success of Social Security in fighting poverty and asks, “Why not expand it to all?”

This is essentially what UBI is—Social Security for everyone.  Is this actually supposed to make us comfortable with UBI?  Do we really want to make a big Ponzi scheme even bigger?  And if we scale up an insolvent program, does that make it less insolvent?

She then links us to an article on Demos.org by Matt Bruenig who claims that a UBI of $3000 would cut the poverty rate in half.  Ignoring that Bruenig assumed ceteris paribus for his calculation, which is rather interesting considering the economic complexity of this endeavor, all this does is move people above the poverty line.  So if the poverty line were $10,000 and I gave a couple of bucks to a poor person who made $9999, then his earnings of $10,001 would mean that he is no longer considered poor.  $3000 per year comes to about $58 per week, so just imagine telling someone, “Here’s an extra $50 a week—congratulations, you’re not poor anymore!”  Not that someone wouldn’t take the extra money, but acting as though we’re eliminating poverty because we’re putting people a few digits past a number is silliness.

And how do we pay for this?  According to Bruenig, “We are a rich country and if we really wanted to, we could definitely make this happen.”  I’m not convinced by that.  He mentioned earlier in the article about transferring money used on the military to pay for it, but we all know how good the government is at substituting and cutting costs…

Parramore’s final poverty-fighting reason for UBI is the “Mincome” experiment in the Canadian town of Dauphin that ran in the 1970s.  She sings the praises of the program, but neglects to mention the part about drops in the labor markets in her linked Wikipedia article that read “some have argued these drops may be artificially low because participants knew the guaranteed income was temporary.”  Couple this with the fact that it was funded by the province of Manitoba and the Canadian federal government, we begin to see why the conclusions might need to be taken with a grain of salt.  If this program were applied nationally, then where is that outside source of money that is being pumped money in?  I guess you could use a printing press to supply the money, but that just drives up inflation, necessitating continuous increases in the level of UBI deemed necessary.

2.  It could be good for the economy.

Okay, it could be bad for the economy.

A basic guaranteed income has the potential to positively impact the economy in several ways, which is why economists from John Kenneth Galbraith to Milton Friedman have advocated it.

Hold on a minute, Milton Friedman did NOT advocate for the universal basic income.  It took a very quick Google search to figure this out, so it’s really a shame that Parramore didn’t bother to check this herself.  To be clear, Friedman advocated for a Negative Income Tax, which has similar aspects, but is not the same.  I think the Negative Income Tax is a bad idea, but that’s beside the point.  Let’s allow Friedman to give his thoughts on the UBI:

If Lynn Parramore could direct me to a source where Milton Friedman said something otherwise, I’m all ears.

For one thing, it could help solve the problem of demand. The great driver of the economy in a capitalist system is something economists call “aggregate demand.” The Econ 101 lesson is simple: when ordinary people have money in their pockets, they spend it on goods and services, which in turn allows businesses to thrive because they are able to invest and to hire more people. Proponents argue that a basic guaranteed income would increase demand, which would help the economy to prosper.

They also save it, which is another driver of the economy.  Furthermore, what is with this “ordinary” people qualification?  Do the rich simply hoard surpluses of money?  If it is true that more money being freely circulated to businesses is a good thing, then why not allow those with a lot of it to spend it instead of putting big tax burdens on them?

3.  It could have many benefits to society.

Parramore praises the successes of Mincome here again without mentioning the above shortcomings of the experiment that I laid out.  She writes,

Canadian economic researcher Evylen Forget notes that most people who participated in Mincome wish the program had continued.

Of course they wanted it to keep going!  They were getting free money that none of them were really paying for!

Candadians are now reviving the idea, many arguing that such programs would actually encourage people to work because they would eliminate welfare provisions that penalize the poor who take very low-paying or part-time jobs.

The problem is, even though it modifies the incentives, it still absolutely provides a disincentive to work.  If someone is comfortable and happy with making $25,000 a year, but given a basic income, he can work 25% less and still make the same money, what do we expect to happen?

4.  It might be more efficient than present systems.

I’m not necessarily going to argue against this point.  I’m not sure—it very well might be not as bad as our current systems, but there’s still plenty to not like about it.  It’s like this conversation:

A: “Would you like to be cracked by my whip 9 or 10 times?”

B: “Uh, actually I would like it if you didn’t crack me with your whip at all.”

As I briefly mentioned before, a likely source of this money would be the printing press and, even if it weren’t used, the government has shown a propensity towards inflationary monetary policies.  As a result, whatever the basic income that is chosen now will need to be continually raised in the future.  There is no doubt that this will create more dependence on the government.  I don’t even think that Parramore wants that to be the goal of this program.

5.  Let’s not forget simple human dignity.

Why is living in dignity not a right? These days, even Americans who get up in the morning every day and report to full-time jobs may not earn enough for a decent standard of living. People like fast-food workers, big-box store employees, caregivers, beauty salon workers, and farm hands often can’t earn enough to feed their families and keep a roof over their heads.

I guess that means Parramore believes that entitles people to steal from other people through the government.

Parramore does a sloppy job of defending her claim that the universal basic income would properly alleviate poverty.  She begs the question that the program would work the way she envisions it and doesn’t adequately address the unintended consequences that end up being the scourge of any government program.

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