NIT vs. UBI vs. Job Guarantee
How to eliminate poverty?
The free market creates prosperity.
It makes things cheaper and better, but some people can’t even afford cheap so in the richest country in human history should We the People just let struggling individuals go without basic necessities like food, healthcare, and housing?
If your answer is “yes” well then most voters have thus far disagreed with you whereby since the New Deal, no matter who’s been in office, the welfare state has only ever grown, therefore, for better or worse, Americans will not accept “yes” as an answer so then the question becomes, “What’s the best way to provide basic necessities?”
The answer has thus far been to make them "free” for those who can’t afford them, but I think rather than a hodgepodge of anti-poverty programs, which just exacerbate poverty, we should eliminate poverty itself.
The poverty line is about $12,000 per year so let’s guarantee people can get that amount…
Milton Friedman supported a Negative Income Tax (NIT), which is where “earners above a certain level pay money to the state while earners below it receive money.”
If Person A has an income of $50K and Person B has an income of $10K then if the break-even income was $24K with a 50% NIT then Person A would pay taxes whereas Person B would receive $7K. If a person had no income they’d receive $12K.
In my opinion, the negative income tax is more compatible with the philosophy and aims of the proponents of limited government and maximum individual freedom than with the philosophy and aims of the proponents of the welfare state and greater government control of the economy. — Milton Friedman
Proponents say it would effectively eliminate the welfare trap, poverty, and streamline benefits.
The US has a version of NIT in the Earned Income Tax Credit, but one has to work to qualify for it. A political compromise could be to abolish Medicaid, SNAP, Housing Assistance, TANF, and CHIP in order to repeal the work requirement and increase the credit, therefore, making EITC into a full NIT.
In 2000, Milton Friedman said that a universal basic income was “simply another way to introduce a negative income tax.”
A Universal Basic Income is where the government gives money to every citizen on a monthly or annual basis.
But I think there are five key structural differences between NIT and UBI:
The first is a person receive’s less money the more one earns with NIT, which could disincentivize work more than UBI.
The second difference is that NIT would theoretically cost less than UBI because if the goal is to eliminate poverty then only people with no income would receive the full $12K whereas with UBI everyone would.
The third difference is that with NIT there’d be more political pressure to keep it low because fewer people would be receiving it whereas with UBI since everyone would be receiving money it’s easier for people to think “those people over there should pay for it!”
The fourth difference is in terms of payouts NIT is a bit more abstract where politicians could more easily jiggle with the level/rate without the same visceral response as giving everyone a higher or lower standard check.
The fifth difference is in terms of pay-ins UBI has greater flexibility. The taxes received from NIT should be more than enough to cover the cost of those who get money whereas for better or worse UBI’s funding source could come from anywhere.
Andrew Yang wanted to pay for his UBI proposal with a VAT tax, which is in my opinion a terrible tax because it’s overcomplicated and hidden from customers so it’s easier for politicians to evade responsibility for higher prices. In my opinion, a better funding source would be the rising value of a natural resource like oil (as is done in Alaska) or land (Georgism).
But the problem with NIT and UBI is every election cycle there’ll be politicians who promise to give out more money. Elections would increasingly turn into auctions with other people’s money. If payouts are tied to pay-ins then at least it’d be harder for politicians to cave to voters’ short-term desires, but just like with Social Security, which is a version of UBI, it now takes 2.3 workers to pay for one current beneficiary so the government has a poor track record of limiting its spending to what it receives in taxes.
My preferred way to effectively eliminate poverty is through a job guarantee.
Anyone who wants a job should be able to get one even if it’s something so simple as sweeping the streets.
As long as there are problems in the world there is a job to be done!
Anyone who pays taxes should support this policy over our existing system because if you had to work for your money shouldn’t those who effectively take your money by force?
But not all Job Guarantees are created equal!
First, a job guarantee should only exist at the state-level. Unlike the federal government, states cannot print their own money, most of them have Balanced Budget Amendments, and if they screw up due to bad fiscal policies it’ll affect a smaller portion of the US population where people can move more easily between states rather than countries.
How my job guarantee would work is a state resident could go to a local employment office where they’d be offered a wide array of public and private jobs.
If they want a job where their qualifications are too low then the office can help them sign up for DEESA (Degree-by-Examination + Education Savings Account).
But at the very least an applicant would be able to get one of these three jobs:
Beautifier: Sweep the streets, pick up trash, paint places, and landscape.
Manufacturer: Make clothes, bicycles, and/or furniture. Even if it operates at a loss it’s still better than paying people to do nothing. What products are there shortages in? What products could the state possibly make a profit from? State prisoners would have the opportunity to do this work too.
Security: They’d have body cameras and be stationed at parks, parking lots, high crime areas, schools, etc.
If a worker is fired then they can reapply after 30 days. If they keep getting fired then eventually as part of their training they’d be required to attend mental health counseling and/or rehabilitation.
My central concern for a Job Guarantee is if too many residents become state workers because then they could vote to perpetually increase their wages, and therefore taxes, which would eventually crowd out the state’s free market.
State-Based Job Guaranthree Conditions
For one, the guaranthree should be paid the same wage where the wage would be tied to whatever is 30% lower than the state’s average hourly earnings. For example, in December 2021, the average hourly earnings of all employees in the United States was $11.17 so if the guaranthree was implemented in the average US state then the wage would be $7.81. Simplicity trumps complexity. By tying the wage below average hourly earnings it takes the decision out of the hands of politicians and keeps it low enough so as to not drain the labor market.
Second, public-sector unions should be abolished. And all public employees should be paid in wages rather than pensions or salaries so as to make the true cost of their employment as transparent as possible.
Third, a version of the Hatch Act should be implemented on the state level, i.e. state employees would face significant legal restrictions on campaign fundraising, running for office in partisan elections, and using one’s government authority in the political arena. Another idea is to ban state workers from being able to vote in state elections due to a conflict of interest. Unlike NIT or UBI recipients, state employees would be a more feasible demographic to disenfranchise or at least mitigate their political influence.
Fourth, I believe in capitalism so I doubt many would choose to work the guarnthree, but nonetheless, we could cap state employees at 20% of the population (the national avg. is 5%) so if it exceeds that amount automatic pay freezes would kick in for public employees.
Finally, every state job should have a 12-year term limit so the system doesn’t become too entrenched with the same faces in the same roles.
Some leftists may dislike my proposal because they may feel it doesn’t go far enough, but what I’ve put forth here is better for the poor than what exists in every state now, and some capitalists may dislike it because ironically they don’t have enough faith in capitalism, which may sound oxymoronic, but is historically accurate if you contemplate how during the Cold War many Americans supported military adventurism because they were too insecure about capitalism’s strength.
A jobs guarantee eliminates the Left’s central justification to increase the welfare state because anyone who doesn’t want to be poor could choose not to be!
As the welfare state shrinks and the free market expands, the state’s economy would boom whereby more residents would become owners whose self-interest would demand keeping the government in check.
So what’s it gonna be?
Do you support the guaranthree or tyranny; job status or the status quo; freeing the free market or regulating it out of existence to “help the poor”?
Where there are jobs there is hope and where there is hope there is freedom.
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