Economic Bonus (EB) and the comparative morals of two nations

The Ten Steps to Prosperity, which is at the end of most posts on this site, includes:

Step 3: Monthly bonus for all Image result for generous

This step proposes we give a monthly Economic Bonus (EB) to every man, woman, and child in America, regardless of any other income or wealth they may have.

You would receive the same EB as the poorest receives and as Bill Gates receives.

No need to go through the convoluted steps our gigantic tax code demands, to determine what is “income,” and what kind of income it is, and when you received it and how you received it, etc., etc.

If you live in America, you receive your monthly EB.

The whole economy benefits by receiving dollars from the government, but the poorer would benefit proportionately more from this direct infusion.

It’s just more dollars for the economy, and it costs no one anything — not you, not me, not even our federal government, which creates dollars, ad hoc, by paying bills.

How much should the EB be? My early thought is $1K per month for each person above the age of 21, and $500 per month for everyone below that age.

Why not more? Or less? I wish I could give you a strong reason, but there is none. The U.S. government already has done something similar.

In a weak attempt to moderate the Great Recession of 2008, the government mailed each taxpayer a check for as much as $500, depending on their tax return.

Had the government sent every person $5,000 rather than the $500 maximum per family, the recession likely would have ended immediately.

Starting with $1K and $500 per month allows time to evaluate results. The program could be stopped during the first year, modified, or extended indefinitely.

Perhaps sending money to the “lazy” poorer, goes against our Puritan grain and our self-image of deserving what we get. But we should move past that notion.

There are many reasons people don’t have money, and unwillingness to work isn’t anywhere near the top of the list.

There have been three primary objections to EB:

  1. It would cost the federal government and taxpayers too much.
  2. It would cause inflation.
  3. It would encourage sloth and discourage people from working

Readers of this site understand that as a Monetarily Sovereign nation, the U.S. government never can run short of dollars, and so does not need or use tax dollars to fund its spending.

Those readers also know that our Monetarily Sovereign government has absolute control over the value of its sovereign currency, the U.S. dollar, so federal deficit spending does not and has not ever caused inflation.

Finally, moral readers understand that a nation can be considered great only if it is willing to care for the poorest and least powerful of its people.

Liberals think the purpose of government is to protect the poor and powerless from the rich and powerful. Conservatives think the purpose of government is to protect the rich and powerful from the poor and powerless.

Here is an article describing Finland’s experiment with something similar to EB, and the attempt to care for anyone who lacks sufficient income for a healthy productive life:

New Scientist Magazine, Feb 16, 2019
Universal income study finds money for nothing won’t make us work less
By Joshua Howgego

For the last two years the Finnish government has been giving 2000 unemployed people a guaranteed, no-strings-attached payment each month.

It is the world’s most robust test of universal basic income, and the preliminary results, released this morning, seem to dispel some of the doubts about the policy’s negative impacts.

Universal basic income comes in different flavours, but the essence of the idea is to give everyone a guaranteed income that covers their basic needs, like housing and food.

Here it differs from Step 3., Monthly Bonus for All, in that it has the specific goal of covering listed needs rather than merely to give everyone money.

But merely giving everyone money has the advantage of eliminating all argument about what “basic needs” are, and how much is “basic.”

(What kind of food? How much food? What kind of housing? What housing location? Is education basic? Etc.)

Crucially, the income is the same for everyone all the time – it does not get reduced if, for example, a person gets a job or a salary increase.

This approach is the same as for Step. 3.

The Finnish results were hotly anticipated because the experiment’s careful design promised robust evidence on UBI.

This is an exceptional experiment, both socially and globally,” said Pirkko Mattila, Finland’s minister of social affairs and health, at a press conference.

The experiment began in December 2016. Kela, the Social Insurance Institution of Finland, randomly selected 2000 people aged between 25 and 58 from across the country who were on unemployment benefits.

It then replaced those people’s unemployment benefits with a guaranteed payment of 560 euros a month. They would continue receiving the payments whether they got a job or not.

Continuing to receive payments, whether or not employed, is similar to what EB would offer.

The experiment ended on 31 December 2018 and compared the income, employment status and general wellbeing of those who received the UBI with a control group of 5000 who carried on receiving benefits.

The surveys also showed that the UBI group perceived their health and stress levels to be significantly better than in the control group.

“This is early data but nonetheless a significant moment as global interest gathers in basic income,” says Anthony Painter at the RSA think tank, which is working with the Scottish government to scope out a possible trial of UBI in Fife.

Supporters of UBI say that it frees people’s time for social goods like looking after children or serving their community, although this wasn’t measured in the Finnish trial.

Additionally, requiring unemployed people to continually prove they are looking for work creates a lot of stress for them, which is bad for their health and may mean they are less likely to be able to find work.

The above are just two of the many criticisms of the Modern Monetary Theory’s “Jobs Guarantee” (JG)proposal.

It also creates bureaucracy for the state.

The above is another of the many weaknesses of the JG proposal.

Not only would JG necessitate a huge bureaucracy, but the bureaucracy constantly would have to change with changes in the economy. As more or fewer people were unemployed, at any given time, they would need service.

On the other hand, basic income is expensive, even if it replaces existing benefits. And some say it could encourage people to work less.

“The criticism levelled at basic income that it would disincentivise work is not supported by [the Finnish] data,” says Painter.

There was no difference between the two groups in terms of the number of days in employment in 2017.

The fact that UBI and EB would be “expensive” (however that term is defined) is a feature, not a flaw — at least in the case of the U.S. government.

“Expensive” by any definition merely means that the government pumps more growth dollars into the economy.

Interestingly, Finland is monetarily no-sovereign. They use the euro, which is not their sovereign currency. Finland does not have the unlimited ability to create euros. It can run short of euros.

Yet it was Finland, and not the U.S., that felt the moral and economic needs to run the experiment. It makes one wonder about the comparative morals of the two nations.

UBI is a concept that originated at least 200 years ago. But over the past few years it has become a fashionable policy idea, with many countries exploring pilot studies.

One reason for the increased interest is the fear that automation might displace large numbers of people from employment – essentially robots taking our jobs.

There have been several other trials of the idea, but none were definitive. Take for example the Mincome experiment, in which the 10,000 citizens of Dauphin in Manitoba, Canada, were guaranteed a basic level of financial security in 1975.

Recent analysis of public records from the time showed that it was only young men and young women who spent less time in work during the trial, and this because they were either in college or looking after babies.

Again, the Puritanical “sloth” concern did not emerge.

Yet there was no control group. And it wasn’t a true basic income, because the money wasn’t given unconditionally — people’s earnings were topped up when they dropped below a threshold.

Painter points out that, because the Finish experiment chose people randomly from across Finland, it can’t tell us about any regional differences in the effects of UBI. “There is a strong case for further experiments,” says Painter. “It would be good to see ‘saturation’ pilots where everyone in an entire area receives a basic income.”

Today, the U.S. debates various, insufficient versions of Step 2, Federally Funded Medicare –Parts A, B & D, Plus Long Term Care — for everyone, and has not even addressed the easily-taken Step 1, Eliminate FICA — all because of non-existent cost issues.

Other nations, that do not have as much financial ability as the U.S. to support social benefits, recognize the need and move forward with experiments and actual implementation.

Meanwhile, the wealthy and Monetarily Sovereign U.S. focuses on how to reduce Social Security, reduce Medicare, and pay for walls and other ways to keep out refugees.

Yes, it makes one wonder.

Rodger Malcolm Mitchell
Monetary Sovereignty
Twitter: @rodgermitchell
Search #monetarysovereigntyFacebook: Rodger Malcolm Mitchell

…………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………..

The most important problems in economics involve the excessive income/wealth/power Gaps between the richer and the poorer.

Wide Gaps negatively affect poverty, health and longevity, education, housing, law and crime, war, leadership, ownership, bigotry, supply and demand, taxation, GDP, international relations, scientific advancement, the environment, human motivation and well-being, and virtually every other issue in economics.

Implementation of The Ten Steps To Prosperity can narrow the Gaps:

Ten Steps To Prosperity:

1. Eliminate FICA

2. Federally funded medicare — parts a, b & d, plus long-term care — for everyone

3. Provide a monthly economic bonus to every man, woman and child in America (similar to social security for all)

4. Free education (including post-grad) for everyone

5. Salary for attending school

6. Eliminate federal taxes on business

7. Increase the standard income tax deduction, annually. 

8. Tax the very rich (the “.1%) more, with higher progressive tax rates on all forms of income.

9. Federal ownership of all banks

10. Increase federal spending on the myriad initiatives that benefit America’s 99.9% 

The Ten Steps will grow the economy, and narrow the income/wealth/power Gap between the rich and you.

MONETARY SOVEREIGNTY

17 thoughts on “Economic Bonus (EB) and the comparative morals of two nations

  1. Excellent idea overall. The EB of Step 3 is indeed a form of UBI, a very good form which I support both in the mechanism of funding and its structure. It is universal, simple yet effective, and literally costs nothing. The only (modest) quibble I would have is that it should be $1000/month for everyone over 18 (as opposed to 21) and $500/month for people under 18, or perhaps even the same amount regardless of age, but otherwise I agree that would be a great starting point. And as you note, it can always be adjusted up or down in the future.

    Liked by 1 person

  2. It all comes down to human nature. People want to work, be useful and express their competence. Unlike the commonly held idea that people are takers, the more you give to someone the more they want to give in return. I see this when buying friends a drink; they want to buy me one back, or at Christmas exchanging gifts.
    If people were really selfish by nature (as Ayn Rand would claim) there would be no volunteers or life saving heroic efforts.
    “People are basically good” : Anne Franke.

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    1. I would rate this article as a hullabaloo of 1) ignorance about both Monetary Sovereignty and Gap Psychology (thus ignorance about the economy in general), 2) zero-sum thinking, 3) straw-man arguments, 4) paternalism, 5) vague alarmism, and of course, 6) playing the Venezuela card. And in the various experiments done on UBI around the world, these fears really did not pan out. Am I missing anything?

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      1. Furthermore, 7) UBI need not replace everything else, 8) Single-payer Medicare For All (aka Step 2 of the Ten Steps) would refute much of the author’s arguments, 9) the logistics of JG (what the author calls “Basic Jobs) can be problematic, as Mitchell has noted repeatedly, and finally 10) drug abusers are already abusing drugs right now without a UBI, and no pilot experments with UBI have shown any increases in drug or alcohol abuse (some even show decreases). And workers will work and shirkers will shirk regardless. QED.

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      2. Did you actually read it? I felt he promoted a hybrid system which I do too. He was quite anti a JG[a very bad idea] etc. He discussed a lot of ideas so I don’t get where you are coming from.

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        1. Yes, I read both that article as well as its Part 2 as well. While he does make some good points, some of his fears regarding UBI appear to be unfounded, and he does not demonstrate any awareness Monetary Sovereignty. I am not against a hybrid UBI and JG system myself either, and would in fact fully support it at least in principle (logistics aside), but I would also still support a UBI without JG just as much. It’s JG by itself without UBI that would be truly problematic. And certainly I think that we need single-payer Medicare For All regardless of (and addition to) what else we choose.

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          1. OK. I don’t quite agree. The UBI has a propensity to become a pet of the rentier class because they can approve it with no effect to them. JG is more selective and we used to have it anyway post WW2. It worked well although today a lot of the menial jobs of those days have been exported. But for those disabled or similar only a UBI will do. Also I am on record as proposing a UBI for farmers, to husband their land and stop them having to trash it in a desperate effort to avoid foreclosure etc. We need desperately to look after our land as it’s all we have alongside the 6″ of top soils. Otherwise its curtains.

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          2. BINGO. Well-said, Rodger. UBI/EB in Step 3 is literally Social Security for all, and single-payer healthcare in Step 2 is literally Medicare for all, both minus the FICA as per Step 1. As for JG, the best quasi-analogy for that would be the WPA, CCC, and the rest of the original New Deal alphabet soup plus the later Job Corps all scaled up–except minus the “guarantee” part. So far, no one has been able to figure out the logistics of that part, or at least haven’t put it into action yet. Not even Argentina’s limited JG-Lite program in the 2000s was enough to eliminate unemployment.

            As for the rentier class, outside of Silicon Vallwy they generally oppose UBI for the most part or are neutral. And of course if everyone’s a rentier, then no one’s really a rentier, just like if everyone’s on the dole, then no one’s really on the dole.

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          3. Indeed, those are the two biggest pitfalls of MMT that cause its proponents to paint themselves into a corner, or at least go through mental gymnastics to try to get around them.

            The second one, using taxes to fight inflation, brings up the image of Mitch “Awkward Turtle” McConnell being in charge of fighting inflation, comical if it weren’t so tragic.

            The kernel of truth of course is that the mere *existence* of federal taxation, without changing tax rates at all, *does* act as an automatic stabilizer in the background, albeit crudely, since the tax “take” automatically increases roughly proportional to the velocity of money, which in turn is roughly proportional to the inflation rate.

            It reduces the chance of excess liquidity accumulating in the system year after year. But that is different from the MMT howler that raising tax *rates* is somehow an effective way to fight inflation as it happens, along with its twin MMT howler that interest rates must be rigidly and permanently parked at zero no matter how high inflation rates go, period.

            While setting the Fed Funds rate at a low rate may very well be good as a rule, since interest rates are a razor-sharp double-edged sword, denying the flexibility to raise such rates as needed is essentially tying the hands of policy unnecessary.

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  3. I found this is piece and thought everyone here could use a chuckle. Austrians say the darnedest things, lol.
    https://sovereignnations.com/2019/11/11/hidden-costs-universal-basic-income/

    So many fallacies in this one, lol. I am not surprised that the Austrian School of Crank Economics would oppose #UBI. The idea that we would have to raise taxes to “pay for” it is laughable since a Monetarily Sovereign government can simply print the money. Inflation, you say? Well, the FERAL Reserve created about $30 TRILLION out of thin air to bail out the banks, and inflation still remains low. The rest of the article is mere speculation, moralizing, and vague alarmism. The idea that “everybody and their mother must work for a living” is also laughable in the 21st century with today’s technology, and also devalues unpaid work as well. And it also ignores the inevitable effects of automation that will force our hand to accept #UBI if we are to have a future at all. QED

    Liked by 1 person

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