Tuesday, June 7, 2016

Universal Basic Income

Someone asked my thoughts on this article, so here are my thoughts on it.

The article, titled Why do the Poor Make Such Poor Decisions, suggests that a person in poverty is likely to exhibit worse behavior than if he wasn't in poverty. The example used to support the claim is a tribe of Cherokee with a very high poverty rate. Once a casino was built, greats sums of money were made available to the tribe. Many families incomes were significantly increased, and observed levels of degenerate behavior in the school children was observed to decrease. The conclusion is that the Cherokee example proves that a universal basic income is a good solution to address the issues with poverty in America.

First off, I do agree that the results of the Cherokee example reflect a generality. I agree with the premise that people who are desperate or humiliated by their circumstances will tend to act in an asocial way. Reducing crime and other undesirable behavior by reduction of poverty is a worthy approach. However, the Cherokee example cannot be extrapolated to larger US society. It is unique for two reasons.

1. Universal basic income is redistributive

Providing basic income to all citizens is ultimately a redistribution of wealth from the rich to the poor. Now it may be that the improved societal behavior of the underclass is worth taking money from the rich. Or, it may be that taking money from the rich, who are typically the most productive members of society and invest their wealth in the most productive ventures, is not worth the improved behavior because it tends to shrink overall wealth in the nation in the long term. Which logic is correct is circumstantial and not easy to answer. The difference of opinion on the matter is one of the core divisions between liberal and conservative viewpoints in America.

In either case, the Cherokee example does not possess the same redistributive characteristic. The money for the poor was not taken from rich Indians. It was from an entirely new and massive source of wealth coming from the outside. For the equivalent situation in the US as a whole, we would need many trillions of extra dollars per year in extra wealth from benevolent outside source. It would have to be aliens.

2. The Cherokee are a tribe, America is not

There are often cases where socialist successes in other places are used as shining examples of how things should work in America. Bernie Sanders has had great success in proclaiming that America needs to be more like Venezuela (hopefully he's stopped saying that) or Scandinavia. Always the socialist utopias are small nations, that are ethnically, culturally, and politically homogenous (relatively). Bernie Sanders thinks that America should be more like Denmark. But Denmark is roughly the size and population of Maryland, and it is populated almost entirely (until so recently) of Danish people, who share the Scandinavian worth ethic and are all social democrats to some degree. It is the quintessential high-trust society. In a high-trust society, you can leave your door unlocked, let your children roam, and give to those who are down, because you know the world is not fair, that the other person works just as hard as you, and it may only be a matter of fate that fortunes are not flipped.

America was at one time a high-trust society but that is no longer so. At least not in the cities, where most people live. And as America becomes more multicultural, and less willing to assimilate migrants, we move closer and closer to the low-trust extreme. It's a contradiction of liberalism that their goal of multiculturalism is directly at odds with the goal of socialism. Socialism only works in a high-trust society.

It may be possible for the Cherokee to spread the wealth among the people. The share an ethnicity, a culture, and common sense of purpose. There is a recent effort out of the Bay Area to provide basic universal income to the underclass in Oakland. It's a bit of an experiment, really. But the reality is this: the successful whites and east Asians in the area will be funding the survival of the impoverished blacks. Whether those paying the heavy tax load will accept this indefinitely, or end up moving to a lower-tax areas, is ultimately the question. Will the talent that has flocked to Silicon Valley in recent decades continue do so, when they are facing an increasing tax burden in what is already the highest cost of living in the US? No, and in fact they're already leaving for places like Seattle and Portland. The redistribution from rich to poor will only work as long as enough rich people stick around.

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