Institutional Changes for a Universal Income

Summary

Once established, a universal income must be maintained over time or else vested private interests will try to take it–possibly aided by some parts of government as well.  It’s universal nature provides an enormous political constituency and will likely be its best protection, but there’s a good argument for breaking the price setting power of many major private interests.

Intro

This is a rough draft, with many incomplete ideas.  The point is to identify approaches to preserving the value of a universal income over the long term.  There are two main approaches which I’ve dubbed Light and Heavy.

A universal income (UI) would be a monthly or annual cash deposit for every working age adult.  Child benefits go to parents.  National pension goes to retired seniors.  Scale according to geographical cost of living estimates.  Include modifiers for those with special needs.  Payments are otherwise unconditional, not tied to job seeking status or wealth/income level.

I assume that the government would provide the UI, likely distributed at the federal level.

Start modest.  A few thousand dollars per year per person would be good.  Slowly increase the amount over the course of a decade or two, eventually getting to subsistence level, hopefully beyond.  As the UI increases, start setting lower and lower caps for maximum annual compensation.  Ideally, the ratio of highest to lowest total income should be about 10:1—the richest person makes only about 10x the poorest, or 10x the universal income level.  This is roughly in line with many other developed nations.

Light

Under this scenario, the universal income is given an aggressive cost of living adjustment (COLA) by the administering program.  This raises the UI level according to the increase in the costs of goods and services that most people purchase, and also taking account of taxes.

I call this the light scenario because it only requires two pieces to function and a third piece for maintenance.  To function, there must be an institution that distributes the UI and one (or perhaps the same) institution that calculates COLA increases every year.  To maintain the accuracy of COLA increases and keep the UI, this system requires active public pressure on the government.  Since the UI’s constituency is everyone, this seems like a plausibly successful arrangement–the upper middle class and the wealthy may not be too vocal, but the remaining 80% of the population would be.

Heavy

The Heavy scenario is motivated out of a concern that the Light scenario could run into too much inflation, or that the COLA increases could be gamed over the long term by established interests.  As such, the Heavy scenario requires that the UI goes in tandem with economic restructuring and institutional changes.

Under the current economic structure, an annual cash infusion will lead to price increases.  Not due to scarcity of supply (though I do worry about oil and energy costs), but mostly because US citizens do not have pricing power—they are price takers.  The price makers are vested interests that have the political and economic power to suck up much of the UI increase over time.  They must be broken and regulated.  A widely adopted UI must come with institutional price controls or else its gains will evaporate.

The following sectors must be controlled, either through direct nationalization or some form of public regulation.  Maybe even price controls.  They represent the most basic services that people rely on, services which are virtually impossible to do without in modern life.  Otherwise they will extract the money given to the people.  I suspect price controls will only work well on basic material inputs, though I’m pretty ignorant on the specifics and history of how they can work.  Most solutions below tend to be “nationalize it!” but the real takeaway is that these particular sectors must be controlled and regulated in some manner so as to prevent a universal income from becoming a rentier/oligarchy subsidy and to keep costs reasonable and stable.

First, stores.  Stores are just ways to sell things—usually that someone else made—at a markup for the convenience of having everything under one roof.  Establish a system for the distribution of necessary goods by nationalizing Walmart, Target, and Amazon.  Expand beyond their current locations and warehouses as needed.  This enables the government to negotiate supplier prices, much as Walmart currently does.  An effective form of price controls for consumer goods without actually mandating specific prices via bureaucracy.  Convert to non-profit status, only making enough money to pay employees and invest in necessary maintenance and expansion.  Don’t sell all goods here—just basics.  Allow other, private stores to compete for more specialized or higher quality brands.  Don’t lock in national suppliers, transporters, etc.  Any private sector companies that wish to supply these government stores must exist in a competitive market.  This is imperative for bulk consumer goods.  Provide basic services such as post office and banking here.  Allow the workers to form unions.  Require that workers for private sector suppliers be unionized.

Telecom, internet, phones.  Nationalize the lines, then allow content providers to pay to get on them.  Again, the government can negotiate with private sector companies in a competitive market, while keeping a lid on prices.  The government can also fund fiber expansion through the last mile, or whatever infrastructure improvements are needed for the future.  Enforce strict net neutrality.  Easier to do if the government owns the lines.  There is likely a need to nationalize information retrieval services such as Google, since they can virtually monopolize online ad revenue and hold markets hostage.

Health insurance.  Same deal.  Universal single payer health insurance, government negotiates with private providers.  May even want to open some government hospitals as competition to speed things along.  Will likely require restructuring of medical school costs, doctor salaries, etc.  Must consider retaining specialists along with general practitioners—altered salary levels may change the distribution, but focus should be on quality, quantity, and continued innovation in practices and treatments.  Private companies may offer additional benefits on top of the universal ones.

Other Insurance.  The basic concept behind all insurance is to pool money across a population to hedge against the costs of some uncommon or rare event affecting a portion of said population.  Those affected receive a payout to help them cope.  Everyone pays into the system, ideally all at the same rate but sometimes based on ability to pay and their individual risk profile.  The bigger the pool the better.  Private insurance plans are often complex, opaque, and exist in a restricted market.  Competition for basic insurance is wasteful—advertising, jockeying for position, etc. all waste resources.  Eliminate the waste, eliminate the gouging.  Create national pools for auto, home, etc. insurance.  Allow private companies to offer additional benefits or protections that only the wealthy or highly selective populations would want.

College tuition.  Adopt systems similar to those found in many European countries.  Tuition is either free or very low cost.  Open additional colleges and universities—eliminate pure diploma mills, regulate the for-profit colleges (University of Phoenix, I’m looking at you).  Maybe just require all colleges to be non-profit.  Offer an actual education to all, not just pure credentialism.  Open up a comprehensive system of trade schools.  Would also finally give jobs to many despairing PhDs.  (via Matt Bruenig) Fund the system by placing a special tax on college graduates that is proportionate to their incomes.  The more you benefit from the system of higher education, the more you should pay back into it to keep it running.

K-12 education.  Eliminate private schools and any pay-to-play aspects of public school activities.  Eliminate much of the poor school, rich school divide by allocating funds to public schools on a per-pupil basis, not based on local tax returns.  Open to other suggestions, just noting that I see K-12 as being another possible avenue for cost inflation and gaining unfair advantages via wealth.

Transportation.  Comprehensive public transit project for the 21st century.  Increase bus services.  Reintroduce trolleys and streetcars in many major urban areas and many “inner suburb” areas.  Tax internal combustion engine (ICE) cars in inner cities, then switch to prohibition of ICE in city cores and then expand this out over time.  Expand and improve light rail and subway systems throughout major urban/suburban locations.  Develop high speed rail links between major cities on the coasts and interior.  Federal government ownership and control of interstate rail system, state and city control of other networks, with federal subsidies and oversight as needed.  Keep transit costs down/reasonable.  Viable competition with private air carriers, cars.  May be advisable to start a price-controlled government owned airline too.

Housing values, rent.  Reintroduce rent controls on a much larger scale.  Sprinkle rent controlled apartments in among every community and don’t stigmatize them by grouping them all together, highlighting who is in them, etc.  Heavily re-regulated the home lending industry and banks.  I’m open to other suggestions here.  Possibly zoning changes to increase density, allow for small businesses to operate out of suburban homes, encourage densification around new satellite city cores, lower barriers to starting small businesses.  Densification would work well with the new transit infrastructure above.

Banking.  Provide basic services at government run banks, also located in post offices and in national distribution stores.  Savings accounts, loans, etc. at reasonable rates.  Allow private sector competition for other services.  I want to work state owned banks in here somewhere, but I’m not clear that they’re needed for a UI (though they are a good idea anyway).

Legal services.  Not sure how to approach this one, but high cost legal services are a net drag on society and often a weapon of the wealthy against the rest.  Matt Bruenig’s idea of flooding the market with JDs might work—dilute the legal profession’s gatekeeping/extraction power significantly.  Open to suggestions.

IP and patents.  Potential exists for IP, copyright, etc. to balloon into the next big way to extract money from people.  You don’t own a copy of software, you rent access to it.  You don’t own a copy of that music, you rent it.  Stop paying and you lose access.  Etc.  Complex issue, so I’m barely scraping the surface here, but basically reduce all patents to something like 5 – 10 years maximum.  Major push to bring lots of knowledge into the public domain, eliminate patents on algorithms, genes, and so on.  Similar push on copyright.

Child care.  With a universal income, parents would likely have more time to spend with their children, and the drop in demand for child care services should decrease costs overall.  However, if this doesn’t happen or the drop isn’t large enough, government run child care programs should be established.  I would strongly favor a subsidiarity approach, where the establishment and running of such centers was managed by communities with heavy parental involvement, yet regulated by higher level (federal?) government.  Provide federal funds for centers in need.  Etc.  This will again keep a lid on costs.

Taxation.  All other items listed above assume that government is stepping in to stop extortion and gatekeeping extraction, but now we must consider what to do when governments (or sectors of governments) do the same.  Especially increases in regressive taxes, such as the sales tax.  These could be manipulated by local, city, county, state, or even federal government to grab up as much of the UI as possible, either for budgetary or ideological reasons.  This won’t be a problem for the wealthy but is definitely an issue for the poor, who are the major beneficiaries of the UI.  There would be some natural incentive to not tax away the UI due to the increase in demand from putting more cash in people’s hands—tax receipts would naturally go up due to the economic boost.  But it seems inevitable that some group will gain power at some level of government and either get greedy or have an ideological desire to tax away the UI, likely in a subtle manner over a lengthy period of time.  Similar to cutting Social Security benefits by raising the retirement age or using chained CPI.  It’s also possible that taxes confiscating much of the UI will be raised/instituted as temporary measures but eventually become routine—institutional drift.  I have three ideas to protect against this:  Make our politics truly democratic and accountable to the people, greatly increase the power of labor unions or UI advocacy groups, and/or create a dedicated UI watchdog that tracks the purchasing power of UI recipients and the impacts of prices, taxation, etc.  The first is utopian and vague, but is an ideal long term goal.  The second is realistic, probably effective, and could be pushed via the nationalizations above plus some changes to US law.  The third is easy, but would probably have little protective power over the long term unless it is rolled into a COLA setting institution.  Options 2 and 3 seem to be the most viable, concrete ideas.

Finally, the issue of free time.  Most people want to do something with their time.  Increasing automation plus the consolidation involved in the nationalizations above will put a lot of people out of work.  The universal income and other safety nets will be there to catch them, and I believe that many of them will find something to do with their time.  But there will be some individuals who see these developments in a negative light, who will have difficulty finding ways to occupy their time.  Neighborhood hobby and recreation centers should be supported for these people and for the general populace.  Not just for playing cards or sports, but also for education and building things.  Center them around community colleges.  Make them centers for public/community owned capital—have space for people to tinker with electronics/robotics, learn how to make clothing, learn how to grow food, build microprocessors, fly kites, paint, etc.  Obviously there won’t be space for all this at all sites, but some kind of distribution of activities should be attempted.  Locals could vote for which activities to support, with denser urban areas likely getting more capital intensive facilities/tools.  Open smaller satellite campuses with more specialized activities for those who want them.  Allow for gradual capital accumulation in these satellites, letting people take any inventions, services, etc. into private companies, or at least some form of organization that can grow and spread the benefits around.

(Edited on 7/12/14 to add in COLA thoughts, slightly restructure the post)

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3 thoughts on “Institutional Changes for a Universal Income”

  1. Creating a new kind of retail store is key. Nationalizing and unionizing the retail space might be good for the social norms embodied in basic income, but for building a store to facilitate basic income, particularly to defend it against price distortions, I suggest the key feature might be transparency. For starters, apply the GDFL on the point of sale (POS) data stream, minus identifying data such as credit card numbers. Except for identifying data, the entire log of POS data should be queryable by the public. The kinds of deep analytics associated with high-end market research should be available to all. The crowdsourcing of this kind of analysis should identify what are the preferred goods and substitute goods, what are the demand elasticities, and the answers to the usual market research questions like which item-pairs have a statistical tendency to land in the same shopping carts. There will of course be ample over-fitting of data, but at least it should be possible to identify quite clearly what Thoreau called “the grossest of groceries” (necessary goods, just the basics). This should also allow very close tracking of price trends, facilitating accurate and objective COLA calculation. Ideally the store’s wholesale transactions (and indeed general ledger) will be in the public domain.

  2. Yes, that’s a very good point getting at the mechanics of how IT could make the system of stores much more responsive and in harmony with the UI. Thank you!

    I think it actually fits well with my call for unionization and nationalization, as these were also aimed at facilitating the maintenance of the UI and not just for social norms. (Although nationalization is mostly my lack of imagination speaking–the exact mode of operation is important and not restricted to just that).

    The reason I would still push unionization is to address the power dynamics involved. Crowdsourcing, transparency, and data abundance are great, but I don’t think they will directly benefit the employees in the same way as organizing would. Additionally, requiring unionization of suppliers would spread the benefits of this organization much further. This is designed to restore the political and economic clout of workers vs. management/owners, which would be important for maintaining the COLA in the long run. Inspired by J.K. Galbraith’s idea of countervailing powers and some of my own observations on history.

    1. Makes sense, since the power you are trying to countervail is the trend of labor turning into a commodity. For suppliers of commodities, economics is necessarily a race to the bottom. Collective bargaining attempts to undo this, while excluding name brands demotes the merchandise to commodities, countervailing the monopoly effects of brands (trademarks, “secret” recipes, other IP monopolies). It’s good if you’re shopping for commodities, if that means your grocery bill is a race to the bottom.

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