Source
The Universal Basic Dividend
I will start off by saying that I do agree with Dr. Trost about how our current welfare system is absolutely terrible. It creates a cycle of dependency on the government and allows for the creation of a nanny state. Comparing the Alaskan oil dividends vs the Venezuelan dividends was a good way to highlight that socialism wont work in the long run. Venezuela’s issue was they the government, on top of paying out their citizens, was extremely corrupt and took so much for themselves that they deferred maintenance on their equipment to make more short-term profit. So, when the oil price collapsed they were entirely screwed because their rigs were failing too so they couldn’t export anything. I like how you phrased it as a Universal Basic Dividend, it is a lot less “nanny state-esque” than saying Universal Basic Income. Anybody working in finance knows that a Dividend is more or less directly related to the performance of the company, so I really think this a good phrasing. After listening to the talk, I am still not onboard with the idea as you proposed it.
The Universal problem of a Universal Basic Dividend
One of my main issues with this dividend is inflation. If EVERYBODY gets the extra $9,000 per year (or 23,000 for retired people), it is essentially that nobody gets that $9k. Businesses know people have that extra money, so they raise prices. Landlords know you have that at least, so they raise rents. The economy would just adjust upwards to account for the 9k minimum. COVID payments were sort of like a trial, tiny scale run of a UBI. Everybody got $2,400 over two checks, and then surprise inflation came roaring in. I believe that program ran around $4.6 trillion in total. Using a VERY rough estimate of 330 million Americans and just giving each of them $9,000 (so not accounting for the 1.5x retirement check), that would cost roughly $2.7 trillion per year, and a 25% flat tax rate for the government would yield ROUGHLY $6.5 trillion in income. So, theoretically, yes, there is enough money to support such a program. Regardless, I don’t see a way in which this program produces very harmful inflation for every American, which disproportionately impacts low-income people anyway.
The US Budget
My next big qualm with this is how the government allocates the remaining 9% of their funding, roughly $2.46 trillion. We are already paying (or should be paying) 1 trillion in interest on our current debt. Yes, this program would cut our spending and help pay it down, but over 1/3 of the government budget going to interest is a bad play. Fiscal year 2024-2025 for the US has earmarked $6.5 trillion for our activities. So already 25% of the GDP (your proposed tax) is going to the Federal Government. Let’s breakdown that budget a bit, shall we? Our biggest expense ($1.7 trillion) goes to healthcare, probably our only social service that sort of works as it should. People SHOULD have access to healthcare, survival is after all a basic human right. Next comes pensions at a cool $1.5 trillion. As someone from Illinois, pensions must be the quickest way ever to “sink the ship”. That $1.5 trillion is expected to balloon to nearly $2 trillion by 2028. Next, and this is the big one, is defense spending at roughly $1.3 trillion. The defense sector is NOT going to roll over and allow this program to come in and take any of their budget. The DOD has about 2.9 million employees and the defense sector in America employees 700,00. I think defense spending should be cut by AT LEAST 2/3rds, but I really don’t see that happening. The biggest money spent on lobbying in Washington goes through defense companies (Raytheon etc.). These companies will fight tooth and nail against anything that would cut their funding, the Universal Basic Dividend included. Under your proposed solution, I understand that all OTHER government assistance programs would cease, but I have to know if that includes writing off all current pensions? Pensions are an ever increasing burden on those who support it, but in many cases it is the only reason people take certain jobs. Erasing Pensions, Healthcare, Welfare, and Education from the US Government Budget WOULD open up over 3 trillion to spend on other areas, but doing that would also slash millions of jobs from the economy. I would argue that those jobs (most of whom are pay much higher than minimum wage) are more helpful than a 9k per head stipend.
On Citizen Mobility
A big plus of your program that you brought up is that people would have more mobility to leave inner cities and whatnot, but again, I can’t see how from a monetary prospective. I don’t see why landlords, flippers, and contractors wouldn’t just raise prices to reflect the fact that everybody has that extra $9,000. Expensive neighborhoods would stay proportionally expensive, wouldn’t it? There would still be a poorer inner city, right? Even in countries that hand out massive “dividends” to their citizens (Saudi Arabia), there is still a lower class. I suppose my whole argument is from a financial perspective, as I am worried that giving everybody the money would raise prices for everybody in a vicious cycle. Some people would be allowed to leave their crappy neighborhoods and move out, but eventually the market price would just stabilize to reflect the higher prices in my opinion.
My alternate proposal : The “nearly” Universal Basic Dividend
I really don’t think that giving EVERYONE the UBD is a smart plan. 9k means a LOT more to those at the low/middle level of the current income status than those at the top. For those at the top this might mean a nice dinner out with the missus or part of a vacation. Those at the bottom will be much better spending this on rent. I also believe that to receive these payments one must be either actively employed OR searching for work. We’ll have to rework what “looking for work” even means, but this would incentivize a more active economy. Obviously, those who are disabled or have reached retirement age would still receive the income. I also disagree about a 25% flat tax across the population. I sort of like our current tiered tax system, but I think we need to be even kinder to those at the bottom and slightly harsher to those at the top. Those who have the good fortune of making it out to the top can easily afford to pay more into the system. Eliminating those in the top, say, 10% on incomes in the US from being eligible for the payments will allow those at the bottom to receive more. I also believe the payments should be tiered, with those unlucky enough to be at the bottom of the barrel receiving at least double that of those closer to the cutoff. This sends money to the poorest neighborhoods, where hopefully residents will band together, and instead of bailing out, making the neighborhood “great again”. Is my proposal any more viable than yours? No, not at all, its just my idea to hopefully tier it better.
