April 30, 2016

What a government spends is a lousy proxy for what the citizens receive; it ignores redistribution costs and profits

Sir, Tim Harford writes that the idea of a universal basic income “appeals to three types of people: those who are comfortable with a dramatic increase in the size of the state, those who are willing to see needy people lose large sums relative to the status quo, and those who can’t add up.” “Could an income for all provide the ultimate safety net?’ April 30.

And while doing so he uses figures for UK’s social security spending of £217bn, and on health and education spending of £240bn. 

Over the last 15 years the poor in Venezuela have most surely received less than 15 percent of what they would have received, had only the oil revenues been shared out equally among all citizens as a universal basic income. In such a case, supporting a net oil revenue funded universal basic income could be done by someone like me, someone who wants the state to become much smaller, who wants poor people to obtain more, and who can add quite well.

The basic mistake the undercover economist makes in this case, is that he equates all social support received by the needed with what is spent on them. That ignores the redistribution cost and profits. A universal basic income, that would put aside in different account much of the redistribution, would help bring more transparency to what the real cost of real government’s functions are. In these Panama Paper days, when so much concern is expressed on the issue of tax evasion and tax avoidance, there is little mentioning of the possibility that pure tax revenue waste could add up to much more.

Many wealthy non-leftists do harbor serious concerns about the growing income inequality, not only because of a sense of justice, but also because they know it could come back to haunt them. And so for them, a universal basic income distribution of a pro-equality tax, and which would not have to cost more than 2 percent in administration fees, might seem as a quite reasonable way to go.

Also many of us concerned with climate change but who also do feel quite uncomfortable with all the climate change profiteers who surround most initiatives, could find a huge gas/carbon tax paid out by means of a universal basic income scheme much better. For a starter it would beautifully align the fights against climate change and inequality.

And please, whenever I mention “redistribution profiteers’, I do not only refer to those who get cold cash and favors, but also to those so much worse, those populist and demagogues who take out their share in political power.

By the way here is a question for the Undercover Economist: Would our economies be better or worse had the QEs been redistributed in equal shares to the citizens?

PS. The problem with governments is not they are monopolies. It is they are operated and exploited by too many monopolists.

@PerKurowski ©