Who needs the Basic income Guarantee (BIG) the most? Poor or near-poor people, which I’ll define as qualifying adults in the bottom two household income quintiles. That would be about 72 million people. Although BIG would be sent to adults in all income quintiles, those in the top three quintiles would receive no net BIG after taxes, so in my calculations I will ignore them.

Here’s where the 72 million figure came from: there are about 24 million US households in each income quintile. Each household has an average of 1.5 adults, not counting adults who receive Social Security, public sector pensions or veterans’ benefits (who would not receive BIG in my proposal). That adds up to about 36 million individuals per quintile, times 2 equals 72 million. Admittedly, the figuring is rough – but good enough for the purpose at hand. [Note: Social Security Retirement would eventually be replaced by BIG but that would be a complicated and lengthy transition, so for the purpose of a BIG that could be feasible within the next 20 years, I’m leaving SSR alone].

The upper household income limit for the first quintile is about $20,000 a year. For the second quintile, it is about $40,000. What would be a reasonable amount of money to send to these folks? Enough to move them away from the brink of destitution but not so much to discourage work.

In the last post, I found $545 billion in federal and state budgets to pay for BIG, all by transferring existing funds. While most adults would receive a monthly BIG, most would also pay the entire BIG amount back in taxes – from the middle income quintile and up. I’m thinking people would have the option to have the government set aside their BIG payments – perhaps in interest-bearing accounts – to pay back in taxes or as a way to save for major expenditures.

Let’s say 5% of the BIG budget goes to overhead expenses, including dealing with fraud. That leaves about $515 billion, which would be $600 per person for the 72 million in the bottom 2 quintiles.

However, starting with the second quintile, there would be an incremental increase in taxes on the BIG as other sources of income increase, so that the net BIG for individuals in the second quintile, on average, would be about $300 a month (more at the lower end vanishing to nothing at the upper end of the quintile). The idea is to make the tax increase sufficiently incremental that it doesn’t create any disincentive to make more money through other sources of income, mainly work.  This would release about $257 billion to increase the net BIG for the bottom two quintiles. I’m not going to calculate exactly how much, because it’s really complicated and we’d get lost in the numbers. (Remember that since everyone in the middle and higher quintiles essentially pay back their entire BIG in taxes, I’m not counting them in these calculations).

However, in order to proceed, I’m estimating that with the partial tax payback from the second quintile,  everyone in the bottom quintile would actually get a net BIG of $800 a month and the average net BIG for the second quintile would go up to $400/month.  Also, for the bottom quintile, almost all would also qualify for food stamps (SNAP) for themselves and/or their children. Average SNAP benefits are worth about $150/month per person, so a combined BIG+SNAP would be worth about $950 a month per adult for the bottom 20%ile of the population.

Enough to take the edge off but not enough to discourage work for those who can work. In addition, there would continue to be government programs to help children – and, less generously since they’re already getting a BIG, the homeless and disabled. All without raising taxes from their current levels.

Sounds good to me.

So how are we going to pay for my Basic Income Guarantee (BIG) – enough to meet basic housing, transportation and clothing needs of the resourceful and capable, allowing that some people (the less resourceful and capable or the just plain unlucky) will still need help and for whom other services and benefits will still be available. As discussed in the previous post, SNAP and Medicaid would continue taking care of food and healthcare for the poor.

According to the Center on Budget and Policy Priorities, in fiscal year 2014, the federal government spent $3.5 trillion, of which over $3.0 trillion was financed by federal revenues and the remaining financed by borrowing. BIG would be funded through the portion of government budgets devoted to safety net programs (about 11% of the federal budget, with states contributing matching funds). Let’s see if we can cobble together a decent BIG budget through the elimination of the programs that BIG would replace, plus selective reductions in other programs.

BIG would replace many of the big ticket programs, including the Earned Income Tax Credit, Temporary Assistance for Needy Families, and Supplemental Security Income. Per Federal Safety Net, TANF, EITC, and SSI cost about $150 billion annually. Move $150 billion to the BIG budget.

Social Security Disability Benefits are financed primarily by a portion of the Social Security payroll tax and totaled about $141 billion in 2014 (about 4% of the federal budget- SS Survivors and Old Age benefits are another 20% of the budget). We’re going to half the SSDI budget and payments, because SSDI recipients would also receive a BIG. That provides another $70 billion for the BIG budget. [For now I’m leaving the rest of Social Security alone].

In the last decade, the combined federal/state budget for unemployment benefits has ranged from $50-$150 billion a year, depending on the unemployment rate and allowed duration of the benefit. We’ll assume an annual average of $100 billion and move it to the BIG budget.

The Housing and Urban Development budget is about $50 billion. I’m going to take half of that and give it to BIG, The balance could go to rental assistance to the neediest families. (Note: as it is, almost all rental assistance goes to households with children or elderly residents).

Most other means-tested safety net programs would stay in place, such as SNAP (food stamps), Pell grants, child tax credit, school lunches, and childcare assistance. I’m leaving in SNAP because it is an efficiently managed program with already low overhead and is especially important to child nutrition. However, because BIG counts as income, the budget for some of these other programs will go down if a substantial number of people receive BIG (because they will qualify for lower/fewer benefits due to higher income). I’ll estimate these programs will get about 10% smaller, freeing up another $25 billion for the BIG budget.

In addition, some federal programs would be eliminated to reduce agency overlap and duplication of services, a pervasive problem according to the US Government Accountability Office. Let’s say elimination of these unneeded programs saves $25 billion. Those funds can be applied to BIG.

The states also contribute matching funds to many of the federal welfare programs. A portion of these funds – $150 billion – will go into the BIG budget.

Ok, based on the above, this is what we have to pay for the BIG:

$150b – existing safety net programs that will be replaced by BIG

$150b – state matching funds related to the above

$ 70 b – half of SSDI funds

$ 25b – half of the HUD budget

$ 25b – budget reductions in some remaining programs

$ 25b – elimination of redundant programs

$100b – unemployment compensation, to be replaced by BIG

So we have about $545 billion to pay for a BIG. It’s a start.

Short answer: no. There is no way a reasonable Basic Income Guarantee (BIG), be it $700 a month or $1500 a month, would eliminate poverty. For one thing, there will always be people who are bad with money, whose budgeting skills leave much to be desired – the net result being their checks run out before the basic necessities are provided for, even if they had even money to begin with. For example, there are about 3 million Social Security beneficiaries who have “Representative Payees” because they can’t manage their own money. But that’s only the tip of the iceberg, since these are only the SS recipients for whom help is requested. In addition, plenty of SSDI, SSI, and TANF beneficiaries manage money poorly, not surprising, given the prevalence of mental disorders within their ranks. (See also http://www.ncbi.nlm.nih.gov/pubmed/20439371 and http://dps.sagepub.com/content/18/3/148.abstract).

Bottom line: there will still be a need for social support services for a substantial number of people whose problems will not be solved by a regular basic income. There will still be homeless alcoholics and drug addicts; mentally ill folks will still get kicked out of their places; single moms will still be abandoned by their mates and find themselves suddenly unable to pay the rent. People will lose their jobs or their health and not have the funds to keep their homes. Sure, a BIG will help soften the blows and arrows of outrageous fortune – but bad stuff will keep happening and plenty of us will still need additional help to get through the tough times.

So it is unrealistic to completely eliminate the social safety net, to be replaced by a BIG, with the entire safety net budget transferred to support BIG (as some advocate). Unless, of course, one takes the hard-nosed attitude that once everyone is guaranteed a basic income, the government washes its hands of them, hard-luck cases be damned. That’s not my position.

Here I’m exploring how big the BIG (Basic Income Guarantee) needs to be to be an effective anti-poverty benefit in the US – that is, to cover the basic necessities of food, housing, clothing, healthcare, and transportation. Food and housing were discussed in the last post.

Let’s move on to clothing. Clothing is an increasingly small part of the American budget and I’m going to assume that there is no right to anything more than what could be bought through really cheap discounters and used clothing stores.

Then there’s healthcare. I’m going to say for the purpose of this discussion that with Obamacare – between the expansion of Medicaid, subsidies and tax credits – health insurance for the poor and near-poor is pretty much taken care of. It’s another matter whether individuals take advantage of government-sponsored healthcare benefits.

Regarding transportation; no one has the right to a functioning car, car insurance and fuel. Of course, lack thereof may make some people poor – but a basic income can’t be conceived as sufficient for all circumstances. The amount calculated for BIG inclusion should be sufficient for public transportation. Again, the size of the BIG can’t be determined by the expenses of a subset of the whole, or the temporary circumstances of given individuals. BIG should not be conceived as the exclusive remedy covering all contingencies.

Basically, then, my version of a BIG would help with housing, transportation and clothing, with the lion’s share going to housing. Healthcare and food needs would continue to be provided through existing programs.

How much would such a BIG cost? The answer depends in part on what the government and economy can afford. Some argue that the BIG would be affordable because it would be funded mostly by replacing existing safety net programs. Is that a good idea?

What does it mean to eliminate poverty? Very generally, it means that everyone can afford some basic minimum of nutritious food, housing, clothing, healthcare, and transportation.

Guaranteeing every adult a basic income (the Basic Income Guarantee, or BIG) may be one way to eliminate poverty. How big would the BIG have to be to accomplish this lofty goal in the US? And is a BIG the best way to help people afford all of life’s basic necessities –   food, housing, clothing, healthcare and transportation – or just some? Let’s take each category of expense one at a time.

Starting with food, I’m thinking the BIG would not be the best way to insure that everyone has the resources to buy nutritious food. Why? Because in my ideal scenario (and we’re talking about the US only), SNAP would continue to be available for low-income households. Applying for SNAP benefits is not particularly complicated or burdensome. The SNAP program is well-run with low administrative costs and keeping the program would insure children and poor money managers would have access to sufficient food to stay healthy. Federal expenditures for healthcare is a huge part of the federal budget (24%) and SNAP is a way to contain public health costs by insuring the poor are able to meet their nutrition needs. In other words, SNAP already pays much of its budget through improved public health. A healthy population is also a more productive population, which is essential to economic growth and maintaining a tax base to fund the BIG in the first place.

Housing would be the main expense that a BIG would help with. But what do we mean by ‘housing’? Should people have the right to afford a place where they don’t need roommates to pay the rent? Some individuals have mental health or temperament issues that prevent them from living with others; others have children and may not be able to rely on relatives or significant others for living arrangements. These individuals may very well need their own place in order to avoid poverty.

On the other hand, you’ve got your single and childless 20-somethings with no serious mental health or social issues preventing them from living with others – should they also receive sufficient income to live alone? As a one-time 20-something myself, I lived quite happily for several years with up to 12 housemates (often sharing a bedroom and for a couple years living in an unshared storage room). Should the BIG be large enough so that such living arrangements would be a matter of choice and not financial need?

According to the US Census Bureau, in 2012, nearly 57 percent of U.S. households were childless. Many of these individuals could take on roommates to help with housing expenses. Of course, some people just can’t live with others. But should the needs of a small subset of the population dictate the size of BIG payments for the vast majority? In other words, let’s say 10% of adults are simply unsuitable for living with anyone else. Should a BIG be large enough to accommodate them, even though 90% of adults could take reasonable measures to reduce housing costs by living with others?

And what about region or neighborhood? Should everyone be able to afford to live anywhere? Or should the standard be the cheapest areas in the city, county or state in which they already live? Given the cost of housing varies hugely throughout the US, should there be a single standard for what is deemed a sufficient amount for housing? Should the BIG be adjusted according to regional cost of living indices (mainly housing)? Should there be the assumption that every person has the right to live where they want (within a certain radius), because they have the right to live near family, friends, and jobs? Should the government make it easier for people to stay in expensive areas by giving them additional income for housing in these areas?

One problem with giving people a bigger BIG in more expensive housing markets is it could exacerbate housing shortages, resulting in higher housing costs and leading to even bigger BIG payments – a vicious circle. And the BIG doesn’t address an important cause of pricey housing: insufficient supply to meet demand.

For instance, housing stocks are often limited in desirable urban locations because of local opposition, zoning laws, and cumbersome approval processes. Should the government really encourage people of limited means to move or stay in these areas by giving them extra money? I think not. The cost of housing has to be addressed on the supply side. Increasing demand when supply can’t flexibly respond to increased demand would trigger a price spiral.

Just getting started….

The next series of posts will attempt to disentangle the concepts of poverty, income ranking, social mobility, wage stagnation, and inequality. All these posts will focus on the US.

We’ll start with poverty. Poverty means you don’t have sufficient resources to meet the bare necessities of life. Having a disposable income means one has enough to cover the necessities, plus more to spend on non-necessities, invest, or save for a rainy day. Without getting into the sticky details (yet) of how much income is enough to cover what necessities, it seems safe to say that the more disposable income one has, the less poor one is. (For the purpose of this discussion, I’m collapsing all resources into the concept of “income”, acknowledging that in some cases necessities may be provided for in other ways).

Economists Bruce Meyer and James Sullivan looked at income and spending patterns in the US over the past 50 years and concluded that the poverty rate has fallen significantly during that time, from an astonishing 32 percent in 1963 to 12 percent in 1979, and then to 7 percent in 2000. In 2010, 8 percent of Americans were living in poverty, according to their figures. Meyer and Sullivan found that the disposable income of an American at the bottom 20th percentile has risen somewhere between 24 and 41 percent since 1979, depending on what factors were included in the analysis.

Despite this impressive fall in poverty in US, there has been no corresponding increase in intergenerational mobility. This means there has been little social mobility between generations. So, although Americans are less poor than ever, their income ranking tends to be similar to that of their parents. For example, those in the lower quintiles more often than not had parents who were also in the lower quintiles.

Speaking of quintiles, the poor may not always be with us – but the lower income quintiles will be around as long humans have incomes (assuming some inequality, even if minimal). Poverty has to do with standard of living. Quintiles refer to relative rankings of income. Being at the bottom of that ranking may or may not mean one is poor. (Yes, some distinguish  “relative” poverty and “absolute” poverty, but the nature of these problems and their potential solutions are quite different and it doesn’t help to refer to both as types of poverty.)

So when we talk about helping people out of poverty, the conservation should start with what constitutes an acceptable standard of living. What are those necessities that no one should go without?

References for the above: http://www.economics21.org/commentary/persistent%E2%80%94if-insufficient%E2%80%94american-dream

http://www.economics21.org/commentary/actually-we-won-war-poverty

The US is projected to continue facing labor shortages for the foreseeable future. For instance, over the next decade, 3.4 million manufacturing ­ jobs will likely be needed, with only 1.4 million out of these expected to be filled – a shortfall of 2 million workers.

Unemployment and labor shortages do not exclude each other. When the unemployed don’t have the skills or experience to qualify for jobs, labor shortages result. (For more on this, see: “The Paradox of Worker Shortages at a Time of High National Unemployment” and “Labor Shortages Trip Up Big Home Builders”­.)

Shortages are greatest in the skilled trades, both globally and in the US.  Skilled trades includes jobs like Carpenters, Electricians, Plumbers, Steamfitters, Pipefitters, Machinists,  Industrial Machinery  Mechanics, and various kinds of Technicians. One issue with the skilled trades is that many of these jobs require a considerable period of training (school, apprenticeship, on-the-job) and commitment to a relatively narrow occupational field. More and more young people are opting out of that career path (the average age of those in the skilled trades is considerably older than average: 53 percent of skilled-trade workers in the U.S. are 45 yrs or older).

A modest federal Basic Income Guarantee (BIG) would work well for people early in their careers when their wages are lower and they are still learning the basics. But even with a BIG, issues remain. It often takes years to be really good at a trade and many employers of trade workers are small to mid-size and can’t afford generous pay on what is essentially a trainee. Many of whom will leave before the training is over (per the Bureau of Labor Statistics, while job tenure is increasing for those 25 and over – average 5.5 years per worker – it is really low for young men (1.4 years, age 20-24). So, the problem with getting employers to hire people that need a lot of training is partly a matter of retention – making good on your investment.

The highly competitive business climate also appears to play a role in current labor shortages.  Employers increasingly want workers with better skills, because  it’s riskier these days to hire inexperienced workers.   Says one employer: “If one of my techs doesn’t know how to do a particular thing right away, the client doesn’t want to hear that. Instead, they want to hear that I’ll give them a discount on the tech’s time. If the tech makes a mistake, I have to cover the costs for making up for it.”

In this age of Yelp and other online review sites, customer loyalty is more and more a thing of the past. Many employers can’t afford hiring trainees who will inevitably make mistakes, jeopardizing their customer base. Reading a couple Australian academics (the problem is global), they said specifically that pay/benefit increases haven’t solved the problem, but that worker retention is best with employers’ commitment to ongoing training and clear paths to career advancement. That’s probably not doable for the smaller employers. So change at educational institutions will be an important part of the solution. To increase employers’ willingness to hire inexperienced workers, schools will need to provide better and more comprehensive technical training programs.  Training programs should start in high school and schools need to work closely with business to get the skill match right. Adopting something like Germany’s system ­might help­.

For those who drop out of these training programs, they will at least have some skills to participate in the “on-demand” economy (e.g. doing minor repairs for TaskRabbit) while also getting their modest BIG and trying to come up with a Plan B.

This is about how to think about proposed Big Federal Fixes, such as the Basic Income Guarantee, the Paycheck Fairness Act, or free tuition for all public colleges. Questions to ask:

What is the problem the proposal is intended to Fix? What is the extent and nature of the problem? How has the problem changed over time? What is the trend: is it improving, getting worse or staying the same? How fast is change happening? What factors may be changing the extent or nature of the problem?

What might be the causes of the problem? What might be the conditions that exacerbate or reduce the problem? How would the Fix being proposed affect these causes or conditions?

What are the potential benefits and costs of the Fix being proposed? What trade-offs are involved? What are possible unintended consequences/ripple effects (especially on other areas we’re trying to Fix)? What are alternative proposals to address the problem? How do they compare to the Fix in terms of the above questions? Why are they inadequate?

Has the proposed Fix been tried elsewhere? What were the results? Why might our results be the same or different?

What are the best arguments against the proposed Fix? Why are they ultimately unconvincing? (Avoid the Straw Man Fallacy, ignoring the actual position of those with whom one disagrees and substituting a distorted, exaggerated or misrepresented version of that position, which then becomes easy to knock down.)

Regarding the proposed Fix, how easy would it be to retract if it turns out not to work or even make things worse? If the Fix is implemented, what might be some ways one rationalizes the costs or lack of progress associated with the Fix? (Be on the look out for blaming problems on outside factors or uncooperative parties and then proposing additional Fixes to deal with these factors/parties.)

If the Fix were implemented, what is a reasonable amount of time to see if it is actually helping matters? What data will one collect, not only to track changes in the extent and nature of the problem, but also to determine causes or factors that account for the changes? For instance, if the trend was already positive (the problem was becoming less severe over time before the Fix), how does one know whether the Fix made a difference if the trend continued after the Fix? What data will one collect to see if there are unwelcome side effects of the Fix? Cost/benefit analysis doesn’t stop at implementation.

Just a beginning of a process of thinking within the problem space….

In 2015 any California college or university that receives state financial aid must begin using a “yes means yes” approach toward sexual assault. That means both parties must give ongoing, affirmative consent during any sexual activity. Rather than using a “no means no” approach, the definition of consent under the new legislation requires “an affirmative, unambiguous and conscious decision” by each party to engage in sexual activity. Per the legislation: “It is the responsibility of each person involved in the sexual activity to ensure that he or she has the affirmative consent of the other or others to engage in the sexual activity. Lack of protest or resistance does not mean consent, nor does silence mean consent. Affirmative consent must be ongoing throughout a sexual activity and can be revoked at any time. The existence of a dating relationship between the persons involved, or the fact of past sexual relations between them, should never by itself be assumed to be an indicator of consent.”

Under this law, college disciplinary committees will evaluate whether a sexual assault has taken place. Individuals found to have engaged in sexual assault may be expelled from school.

Advocates for the “Yes means Yes” law say it’s long overdue. According to one 2007 study, 1 in 5 college women have been sexually assaulted. Our current cultural approach to sex undeniably puts the onus on women to say “no.” We buy into a sexist double standard that characterizes men as incessantly sex-crazed to the point of nonexistent self-control, forcing women to constantly police their partners and protect their purity. “Yes means yes” legislation re-frames sex so that both partners are held accountable for their actions.

Consent legislation doesn’t aim to unnecessarily micro-manage autonomous citizens, but rather the opposite: its purpose is to disrupt a problematic social status quo. We live in a “rape culture,” or a culture in which sexual violence is normalized, sex is framed in negative terms (we emphasize that “no means no”), and especially couched in rhetoric of blame (of survivors over perpetrators). Affirmative consent turns rape culture on its head and creates a positive, healthy framework of sexuality.

The Huffington Post puts it well: “This legislation teaches us what we can and should do rather than retroactively addressing transgressions. It’s not a restriction of our actions, but the opposite: it provides the structure to realize a whole new world of positive possibilities. At the end of the day, the only real solution to eradicating sexual assault will not be found in punitive measures, but in the construction of a society that is educated about and embraces healthy sexuality: a goal at the heart of this law.”

Critics of the “Yes means Yes” law say it’s an example of extreme overreach and sends universities into murky, unfamiliar legal waters. How will campus triers of fact determine whether an “explicit yes” was repeatedly rendered, satisfying the “ongoing” consent requirement? College disciplinary committees have fewer safeguards than criminal courts: often the accused has no right to a lawyer and no chance to cross-examine witnesses. The committees also tend to determine guilt based on a “preponderance of evidence” rather than “beyond a reasonable doubt”. This means that the accused can be found guilty if the panel thinks it slightly more likely than not that he is. And disciplinary action is not trivial: being expelled and labeled a rapist can follow a student for the rest of his life and ruin his reputation forever.

According to Joe Cohn of the Foundation for Individual Rights in Education, “Under this consent standard, if one partner touches his or her partner in a sexual way, and the person says ‘I am not interested tonight,’ that person has already committed sexual assault because he or she didn’t get permission upfront. It’s just not consistent with how adults act.”

Furthermore, sexual violence in America has actually declined sharply since the mid-1990s. According to the National Crime Victimization Survey, the gold standard for measuring crimes that are often not reported, the proportion of women subjected to rape or sexual assault fell 64% between 1995 and 2005, and declined slightly further by 2010, to 1.1 per 1,000 women per year. The reason some studies show a much greater prevalence of sexual assault is that their definition of assault is so broad, including, for instance, unwanted touching.

So what do you think? Is “Yes means Yes” a long overdue remedy for the epidemic of sexual assault that plagues our campuses and society at large? Or is it an example of overreach that is unnecessarily intrusive and has the potential to ruin lives?