A Biblical Welfare State?

A welfare state is defined as a system whereby the government undertakes to protect the health and well-being of its citizens, especially those in financial or social need, by means of grants, pensions, and other benefits.

For this system to work, you need three components:
1. Taxpayers or some other source of revenue.
2. Government Officials
3. Beneficiaries, those who receive the money.

The system is only sustainable as long as people are able and willing to pay into the system, and both government officials and beneficiaries do not demand and take more than the system can handle.

Venezuela built their social services of subsidized food, education, and welfare on profits from oil prices. Government officials were relatively faithful in their responsibilities in allocating money into their proper departments. The common people, for a while, benefited from these programs.

But when oil prices fell, the whole system collapsed and the people of Venezuela suffered from starvation and poverty. The money left in the system were seized by President Maduro, and distributed amongst himself, military officials, and political allies. All at the expense of the people that the programs were initially built for.

Social Security is where people have been paying into the system in their younger years and reap benefits from it in their retirement years, starting at around 66 years old, at least on paper. Because there is such a large number of potential retirement-age beneficiaries and few young taxpayers paying into the system, there is a danger that the system could collapse. To save the system, young people would have to pay more through higher taxes, or beneficiaries have to receive less money than promised, or the minimal eligibility age would have to be raised. There is also the concern that the government officials overseeing this program may have been pocketing money for themselves on the side at the expense of the expected beneficiaries.

In a nationalized healthcare system, everyone would have to pay more money than now through taxes, higher premiums, or health care plans covering services that they have no use for. Even if taxes are placed initially on companies making a lot of revenue, they may eventually have to cut costs elsewhere by closing down branches, letting go of employees, or providing low-quality goods and services.

The beneficiaries of a nationalized healthcare system are hospitals and doctors but if the government only agrees to pay a certain amount of money below market value in an attempt to make healthcare affordable, that policy effectively becomes a price ceiling. The overall outcome would be medical services demanded will exceed medical services supplied. In other words: an overburdened medical system.

Hospitals, doctors, and nurses would have triages to determine patient priority. Patients would have to wait long periods of times from months to years to see a family doctor. Basically, in an attempt to keep healthcare costs to a minimum, there will inevitably be rationing. There will be a shortage of medical services.

Now naturally if the government paid more money into the healthcare system, hospitals and doctors would be able to provide better services, but the government has the authority and power to withhold money from us even when it is needed. Instead of giving taxpayers’ money to the hospitals that need them, government officials could be pocketing that money for themselves.

Even as hospitals may suffer from inefficiency because of being underfunded, the government could take advantage of this situationto ask the public for more money by raising taxes to help out. More money may go into the system, but still not help hospitals out, because the money just went to further enrich the government officials.

Additionally, precisely because the government is in charge of the payments and have the power and authority to punish dissenters, the hospitals and doctors would essentially have to tailor their services to government standards.

For example, you might have a doctor that only gets paid by the government if he performs abortions, performs euthanasia on an unwilling patient, or prescribe some other treatment that goes against patient wishes. The government could potentially authorize all of this in the name of saving healthcare costs. Ideally, we would have a government that would not do this, but I doubt we live in such an optimistic world.

As I mentioned before, a welfare state comprises of the following:
1. A source of revenue.
2. Government Officials
3. Beneficiaries

Biblically speaking, we do have an idealized version of this.

1. A source of revenue: voluntary donors

“As for the rich in this present age, charge them not to be haughty, nor to set their hopes on the uncertainty of riches, but on God, who richly provides us with everything to enjoy. They are to do good, to be rich in good works, to be generous and ready to share, thus storing up treasure for themselves as a good foundation for the future, so that they may take hold of that which is truly life.” (1 Timothy 6:17-19)

“Speak to the people of Israel, that they take for me a contribution. From every man whose heart moves him you shall receive the contribution for me.” (Exodus 25:2)

“You shall give to him freely, and your heart shall not be grudging when you give to him, because for this the LORD your God will bless you in all your work and in all that you undertake.” (Deuteronomy 15:10)

“For if the readiness is there, it is acceptable according to what a person has, not according to what he does not have.” (2 Corinthians 8:12)

“Each one must give as he has decided in his heart, not reluctantly or under compulsion, for God loves a cheerful giver.” (2 Corinthians 9:7)

From the above passages, you can see that rich people should donate money to help the poor out, but this money given into the welfare system is a willing gift and not an exaction. Not only that, but they are able to give according to what they have, not according to what they do not have. Taxes, then, contradict the biblical model. Taxes are money given under compulsion. If you do not pay them, you get thrown into jail. Also, they may be set at a rate that exceeds the taypayer’s ability to pay them.

Should the super-rich pay their fair share? They are certainly encouraged to do so, but the government should not force them to do so. Ideally, the Holy Spirit would work in the hearts of the super-rich and give them a heart of generosity so that they would decide to give to the poor on their own. Barring that, they should still cultivate a culture of philanthropy where they invest in helping pay people’s medical bills, building more hospitals, and renovating existing ones.

Taxes would completely undermine this process, as the super-rich would be giving money under compulsion and sometimes at a rate greater than what they have available. If too much money is taken from them through high taxes, a super-rich individual would not be able to invest in philanthropy and even have to close up successful businesses, let go of employees, or provide low-quality goods and services.

2. Government officials

“Moreover, look for able men from all the people, men who fear God, who are trustworthy and hate a bribe, and place such men over the people as chiefs of thousands, of hundreds, of fifties, and of tens.” (Exodus 18:21)

“Therefore, brothers, pick out from among you seven men of good repute, full of the Spirit and of wisdom, whom we will appoint to this duty.” (Acts 6:3)

“Tax collectors also came to be baptized and said to him, “Teacher, what shall we do?” And he said to them, “Collect no more than you are authorized to do.” Soldiers also asked him, “And we, what shall we do?” And he said to them, “Do not extort money from anyone by threats or by false accusation, and be content with your wages.” (Luke 3:12-14)

From the above passages, government officials can and should play a role in the efficient redistribution of wealth to their appropriate beneficiaries. They should be trustworthy, hate bribes, be full of the Spirit and of wisdom, and collect no more than needed. They should not abuse the system and thus extort money from the common people.

Maduro abused the system and essentially extorted the people of Venezuela, enriching himself, military officials, and political allies at the expense of the people. The American government through Social Security, Medicare, Medicaid, and Veterans Affairs could also potentially do the same. The issue of corrupt officials is where Republicans and other conservatives have issues, and for historically good reasons.

When government officials simply keep tax money for themselves, then the beneficiaries the programs were designed for will suffer from poor or absent services.

Government officials should be content with their wages, but unregenerate human nature is greedy and will demand more. It is as true today as it was back in the days of John the Baptist with the Roman government through tax collectors and Roman soldiers.

3. Beneficiaries

“If any believing woman has relatives who are widows, let her care for them. Let the church not be burdened, so that it may care for those who are truly widows.” (1 Timothy 5:16)

Beneficiaries ideally should be people who truly need the help that the program is designed for. They would be people who did not lie about their need for help, and are content with the money they receive.

Since we are talking about free money, it is easy for people to lie to government officials in an attempt to qualify for money that they do not deserve. In addition, beneficiaries may ask for more money than they actually need, thus putting pressure on the source of revenue, such as voluntary donors and taxpayers. For example, hospitals and other subsidized businesses may negotiate with the government to give them more money than needed at the expense of another hospital that provides higher quality services at lower costs. Another way pressure can be placed on the source of revenue is when the number of beneficiaries outnumber the number of people paying into the system, as seen in Social Security.

In conclusion a biblical model of a welfare state would comprise of the following:
1. Voluntary donors, including rich individuals, who are generous and give according to what they have.
2. Government officials or other leaders are trustworthy individuals, who do not exploit the system to take more money for themselves than needed, manage the money well, and actually give the money to benefit their intended beneficiaries.
3. Beneficiaries are those who actually need the money, and generally do not ask for more than necessary, and receive the money promised to them.

Perhaps social services programs, like Medicare for All, could work like the biblical model where taxpayers are in place of voluntary donors if tax rates approximate what taxpayers such as large corporations are able and willing to give. They could work if government officials use the money well and think like a consumer to seek low cost and high quality healthcare services. They could work if hospitals receive money close to market value, and use that money to improve services.

But Medicare for All would fail because it is difficult and undesirable for people to pay a lot of money into the system at a constant rate, government officials could take more money than they need for themselves, and use their authority and power to go against market forces and force hospitals and doctors into undesirable positions, and hospitals and doctors could take advantage of the system to obtain money that does not actually go into lowering costs and improving quality.

Ultimately, I feel a welfare programs can work if morally upright and effective individuals are in power. They can help a lot of people if used well. Otherwise, a lot of people can suffer. The programs are not inherently wrong, excluding the use of taxes, where people are forced to pay and sometimes at rates beyond their means. Right now, I am wary about taking a gamble and giving the government that much control over healthcare which could do a lot of good or cause a lot of harm for everyone. My thoughts could be concluded by this proverb:

When the righteous increase, the people rejoice,
but when the wicked rule, the people groan.
(Proverbs 29:2)

A Biblical Perspective on UBI

I think Christians should consider the UBI from the perspective that 2 Corinthians 8-9 provides.

Speaking of the Macedonian believers, Paul states, “For they gave according to their means, as I can testify, and beyond their means, of their own accord, begging us earnestly for the favor of taking part in the relief of the saints – and this, not as we expected, but they gave themselves first to the Lord and then by the will of God to us.” (2 Corinthians 8:3-5)

Christians should be known as a people that are zealous to give generously. In a sense, giving and contributing to a UBI-like system is a matter of conscience, but the Christian faith is peculiar in that our personal preferences are involved as well.

If we are truly redeemed by Christ through the acceptance of the gospel, then the Spirit should be working on our desires so that our personal preferences gradually conform to the moral expectations set upon us by God through our conscience.

John Piper stated it quite beautifully, “There is built into the Christian faith an inner impulse by the Holy Spirit through the gospel to make sacrifices so that others have their needs met. And there is no such impulse built into human nature or the human heart apart from God’s grace. It is so vital that this kind of love and mercy and sacrifice be free and uncoerced that this is laid down as a principle by Paul in 2 Corinthians 9 and by Peter in 1 Peter 5 as he instructs the elders.”

The UBI, in principle, sounds much like the scene portrayed in 2 Corinthians Chapter 8 where Paul encourages the Corinthian believers to participate in the relief of the saints in Jerusalem.

“For I do not mean that others should be eased and you burdened, but that as a matter of fairness your abundance at the present time should supply their need, so that their abundance may supply your need, that there may be fairness. As it is written, “Whoever gathered much had nothing left over, and whoever gathered little had no lack.” (2 Cor 8:13-15)

One of the assumptions behind the UBI is the idea that even when some of our neighbors are working several odd-jobs at once, they still cannot make ends meet, and so they do not even meet the national poverty line.

Ideally, Christians should spearhead the effort to mobilize churches and influence the greater society to form non-profit organizations that are dedicated to supplying the need of our less fortunate neighbors.

Covenant Church already did something similar to what I have in mind: https://www.nbcdfw.com/news/local/Local-Church-Donates-100000-Eliminates-10-Million-in-Medical-Debt-478514693.html

The Bible does describe an economic redistribution between the rich and the poor, but the key difference between what the Bible describes and what people like Andrew Yang have in mind, is that the economic redistribution in the Bible is voluntary, while Andrew Yang’s idea involves coercion.

“Whoever sows sparingly will also reap sparingly, and whoever sows bountifully will also reap bountifully. Each one must give as he has decided in his heart, not reluctantly or under compulsion, for God loves a cheerful giver. And God is able to make all grace abound to you, so that having all sufficiency in all things at all times, you may abound in every good work.” (2 Cor 9:6-8)

As one can plainly see, God prefers voluntary donations from believers who want to give. Taxes, by their very nature, are coercive and compulsive, because if you do not pay them, you will face repercussions from the IRS.  Socialism is essentially economic redistribution accomplished through coercion.

Piper stated the case well: “In other words, Socialism borrows the compassionate aims of Christianity in meeting people’s needs while rejecting the Christian expectation that this compassion not be coerced or forced.”

The primary reason that God prefers voluntary donations is because such actions are a reflection of His own character:

As it is written,
“He has distributed freely, he has given to the poor; his righteousness endures forever.” (2 Cor 9:9)

Christians should consider ways to support the well-being of their less well-off neighbors whenever possible because such actions have a missional flavor to them and bring glory to God. Voluntary generous donations also help our neighbors see that our ultimate treasure is in Christ (“confession of the gospel of Christ”), and not in our riches. Ideally, our generosity will attract them to the riches of Christ Himself.

“You will be enriched in every way to be generous in every way, which through us will produce thanksgiving to God. For the ministry of this service is not only supplying the needs of the saints but is also overflowing in many thanksgivings to God. By their approval of this service, they will glorify God because of your submission that comes from your confession of the gospel of Christ, and the generosity of your contribution for them and for all others, while they long for you and pray for you, because of the surpassing grace of God upon you. Thanks be to God for his inexpressible gift! (2 Cor 9:11-15)

As for 2 Thessalonians 3:10: “For even when we were with you, we would give you this command: If anyone is not willing to work, let him not eat,” yes, this sentiment should be included in our considerations for how we help our neighbors.

There is a particularly helpful case study in 1 Timothy Chapter 5 where Paul tells Timothy to make a distinction between deserving widows and undeserving widows:
“If any believing woman has relatives who are widows, let her care for them. Let the church not be burdened, so that it may care for those who are truly widows.” (1 Tim 5:16)

Included among his instructions is the following statement: “But if anyone does not provide for his relatives, and especially for members of his household, he has denied the faith and is worse than an unbeliever.” (1 Tim 5:8)

So we should do what we can to supply the needs of our poor neighbors, but not in such a way that we enable them to live an idle life. Just as Paul told Timothy to “care for those who are truly widows,” we should “care for those who are truly needy,” as opposed to those who are not actively searching for a job. Therefore we should have an administrative program that can effectively screen people and distinguish those who are already working jobs but still cannot make ends meet from those who are not seeking a job.

Bottom line: A UBI is one way that Christians can demonstrate their generosity as we could invest our resources into helping genuinely needy people. Voluntary donations help our neighbors see that our treasure is in Christ, reflect God’s generosity, and attract our neighbors to Christ. We need to discern between genuinely needy individuals and those who are living an idle life.

For further reflection:
Ask Pastor John podcast: “How Should Christians Think About Socialism”:
https://www.desiringgod.org/interviews/how-should-christians-think-about-socialism

On Universal Basic Income

Andrew Yang, UBI, and the VAT

A friend of mine pointed this article out to me: http://www.yomyomf.com/entrepreneur-andrew-yang-is-running-for-potus-2020/

If you read the article, you find out about a man named Andrew Yang, who is running as a Democratic candidate for POTUS in 2020. He has proposed that all American citizens between the ages of 18-64 should receive a government check of $1000 every month. This is called a Universal Basic Income payment (UBI). The premise behind the idea, in Yang’s mind, is this: the US has a lot of resources, but those resources are not distributed to the people effectively.

Why $1000 a month?
-recommended by former Service Employees International Union president Andy Stern
-$12,000 a year brings an individual close to the US poverty line, which is $12,752 per person per year for those under the age of 65, according to the US Census Bureau.
-$1000 a month UBI has been studied and modeled by The Roosevelt Institute (It could grow the US economy by 12.56 percent after 8 years if paid for by increasing the debt).
-$1000 is low enough to help assuage a common criticism of UBI: that it will discourage people from working (It would make a huge difference for families, but not enough to lead one not to work.)

Yang believes UBI will encourage entrepreneurship, as it will improve mental well being.

Under Yang’s plan, the UBI payment would be funded by a value-added tax (VAT) of 10 percent on goods and services a company produces, particularly those produced by companies benefiting the most from automation.

Yang states that VATs will become more important in the future as we cannot collect income tax from robots or software.  He believes that this plan would generate between 700 to 800 billion dollars in revenue.  He bases this estimate on a study done in 2010 by Eric Toder and Joseph Rosenberg of the Tax Policy Center.

Under Yang’s plan, current welfare and social program beneficiaries in the United States would be able to keep their existing benefits if they prefer.

A Review of Economic Principles

Basically Yang states that a UBI is necessary because technological advancements are putting more and more people out of work.  There are so many robots doing jobs that people used to do that millions of people will be unable to work. Unskilled labor workers will have no other choice but to depend on wealth redistribution in order to survive.

However this scenario does not seem to be likely in the near future any time soon.

The very field of economics exists because of the existence of scarcity.  This world of ours simply does not possess enough resources, goods, and services for everyone to have limitless amounts.

Thomas Sowell said, “The Garden of Eden was a system for the production of goods and services, but it was not an economy, because everything was available in unlimited abundance. Without scarcity, there is no need to economize – and therefore no economics” (Basic Economics)

In other words, in a post-Eden world where scarcity exists, economics must exist unless we find a way to recapture the unlimited abundance of a pre-Fall world.

Even if robots do take over an increasingly higher number of jobs traditionally filled by humans, the reality of scarcity in the economy will not change. It still takes resources and labor to build and program these robots, and the robots themselves must use resources to produce goods and services.  More resources still will be required to service and repair these robots when they break down.   Therefore a more technologically driven economy will not change the fact that there are costs to produce goods and services and entrepreneurs will only continue to produce the goods and services so long as there are sufficient profits to leave them better off.

If the world of Disney’s Wall-E is ever realized, where robots will do literally everything including build and repair other robots and so humans will be able to simply relax all the time, then I suppose a UBI would be necessary, but I would not count on this scenario happening any time soon.

Therefore even assuming the robot takeover happens as all these doomsday technologists claim, the laws of supply and demand will still apply to the economy, even with a universal basic income.

Next, history has already given us many examples of jobs that became obsolete due to innovation.  For example, when was the last time you were walking down the street and saw a business that produced and sold saddles and horseshoes? There are still some around, but there were far more before the invention of the automobile. Nonetheless did a massive amount of unemployment result for ranchers and merchants who sold horse related equipment? Maybe for a short time, but the reality is that people simply found other lines of work that resulted from the technological shift itself. The creation of automobiles improved long distance travel and high-capacity shipment giving rise to a boost in the road construction and transportation industry.

As another example, despite whatever jobs may have disappeared as a result of the world wide web, I do not think anyone prior to 1995 could have predicted how many people would be earning 100% of their income solely by using the Internet.  The bottom line is even if the advent of technology predicts a shrink in a given industry, history has shown that it will inevitably lead to a boost in another new industry. If and when robots can literally do everything there is to do, we will have a different discussion but I just do not see that happening.

With these two things in mind, the continued existence of the laws of supply and demand and the eventual shift of people from one industry to another, let us continue.

Application of Scarcity and History

If there is a robot or machine that give you everything you want or need as UBI proponents predict, then we will have achieved the world of Wall-E.  We will have achieved the unlimited abundance of Eden instead of continuing to live in the scarcity of a post-Eden world.  There will be no entrepreneurs because robots will be doing literally everything. However because of the reality of scarcity, there will never be a robot that can give you literally everything you want or need.  Until a robot can create resources out of thin air this statement will remain accurate.

It has been said that Internet sales replace retail workers, diagnostic apps replace health care workers, and self-driving cars will replace drivers. According to a study by Carl Benedikt Frey and Michael Osborne, almost half of all US jobs are at risk of being automated in the next 2 decades.

However, we need to consider the job figures that will be created as a result of these technological advances. There still have to be people to build, service, and repair these self-driving vehicles. There will be competition amongst app developers and internet sales platforms. Even if we can predict that some jobs will disappear wholesale, history has already shown that we cannot possibly predict what new jobs will result.

The UBI experiments

UBI proponents like to point to studies (Oxford, The World Bank, MIT, Science Magazine) that have shown that people who receive free money do not stop working initially at least.  However, the biggest failure in economics is the failure to see the long-term consequences of a policy.

Hilmar Schneider noted, “Experiments are made that are supposed to demonstrate empirically that people would not or would only insignificantly reduce their working hours after the introduction of a UBI. These experiments are financed “externally,” and as such, the incentives for earning more than the UBI remain attractive because there is no necessity for internal financing. Furthermore, these experiments always cover temporary periods. People might therefore not quit their jobs just because they receive greater income temporarily, since they would risk longer unemployment after the experiment ends.”

So these studies have either been done on a small scale or are privately funded with money coming from voluntary donors outside of the small-scale economic decisions of the participants. Therefore there is a problem with extrapolating from the results of these studies to support a larger scale, permanent version.

If the money is coming voluntarily from private donors, the results of that study will not tell us anything about whether or not a UBI would be effective coming through the force of taxes in a large country like the United States.

As a thought experiment: If someone just offered you an extra $1000 would you turn it down?  Of course not. It is not surprising then that if people rich and poor alike are temporarily given some extra money for a few months, they will use it to enrich their lives with a new computer, help pay their school bills, or to make a new investment. This is the same principle behind what private employees do when they’re given a one-time bonus or a temporary pay increase.

However consider what happens when a UBI is permanently implemented on a large scale for a large country like the United States. If you simply provide everyone with a modest amount of cash but not enough to live on, all that will result is a form of inflation since everyone has a little more money to spend, when they all go out to spend more, prices will rise to compensate for the increased demand. The initial spenders will get lucky but once the price raises take effect, everyone will be no better off than before there was a UBI.

When money is redistributed from the wealthy to the poor, the poor will come out and start buying things that they were not buying before. Since there is now an increased demand for the things that the poorer demographic wanted but previously couldn’t have, the prices of these goods and services will rise to compensate for the increased demand. Just because it is not overall inflation caused by an increased currency supply (from printing more money, for example) does not mean this redistribution will not cause inflation in the very markets that affect the demographic that the UBI is supposed to help.

The Cost of a UBI

What if we give a UBI that can be lived off of without working?

David Freedman states: “Economists are quick to point out that whatever savings might result from cutting out the existing safety net bureaucracy, they are likely to be far outweighed by the cost of handing an annual check for, say, $10,000 to every adult in America. (Proposed amounts vary, of course, and are likely to be adjusted for those supporting children. It’s generally assumed that existing health-care financing programs would remain in place, as would Social Security.)  A rough calculation suggests that a $10,000 basic income, enough to lift the vast majority of Americans above the poverty line, would be at least twice as expensive as current antipoverty benefits and overhead, adding between one and two trillion dollars to the federal budget.  Halving the size of the check would go a long way toward solving that problem, but that would leave millions below the poverty line with fewer other programs to help.”

Ted Cruz pointed out in a debate with Bernie Sanders that even if the US confiscated 100% of the earnings of all Americans who make more than 1 million dollars a year, it only produces about a trillion dollars in tax revenue. What does this mean? It means that in order to provide a UBI of $10,000, it will mean massive tax increases on both the rich and the middle class.  Financing a UBI of just $10,000 a year would cost far more than could be paid for only by those who make a million dollars or more a year.

So coming back to Yang’s idea.  To support his annual UBI of $12,000, we would need at least one or two trillion dollars, and his VAT plan would only provide between 700 to 800 billion dollars in revenue.  To make up for the remainder, we would need to increase taxes on both the rich and the middle class.

The Problems with Increasing Taxes on the Rich and the Middle Class

Whether it is through the VAT or other taxes, profit earners will have to finance the UBI. Once the UBI becomes sufficiently expensive, those profit earners will no longer earn profits high enough to motivate them to keep working.  Once this happens the whole system will collapse.

As Margaret Thatcher once said, “The problem with socialism is that you eventually run out of other people’s money.”

Does a basic income create a floor from which people can lift themselves up? No, once you reach a certain threshold your basic income will simply be your own money being given back to you since the money is obtained through taxes. The tax rates that will finance the UBI alongside all other forms of government spending to include universal health care and other programs that most UBI proponents also support will mean that even middle-class families will likely pay up to 50% income tax or more.

It is extremely doubtful that government spending will ever go down or that people will stay happy with a UBI of $12,000 a year. It is practically human nature as this verse from Proverbs 27:20 astutely points out: “Sheol and Abaddon are never satisfied, and never satisfied are the eyes of man.” Over time there will be pressure to raise the UBI and in doing so increase tax rates even further. This will discourage people at the top from working hard and innovating.

UBI might appear to be successful in the short term but eventually it will bankrupt the country especially once the people at the top stop working as they see their success stolen from them.

The Problem with Socialism in General

People should be allowed to keep the money that they worked for.  Socialism, through its use of governmental coercion,  takes other people’s money and gives it to people that did not earn it for nothing in return.  This is theft, plain and simple.

There is a significant moral difference between donations and taxes done through socialism.
-Donations: voluntary; “I am giving money because I want to give money.”
-Socialistic taxes: militarily coerced; “I am giving money because people with guns will come for me if I do not”

As Friedrich Hayek said, “There is a difference in the world between treating all people equally and attempting to make them all equal.”

The more you steal from Peter to pay Paul, the less incentive Peter has to work hard and try to earn more the next year, which means this will only accelerate the spiral of failure that results from penalizing good behavior like smart work decisions with higher taxes and rewarding bad behavior like perpetual unemployment with free money. Eventually you run out of other people’s money.

What would a nationwide UBI look like?

Quite possibly, in the first year that a UBI is implemented, thousands of people will rejoice if not millions.  Although the higher income earners will groan as they see even more of their hard-earned profits stolen from them, there will still be enough low income earners who see it as free money. The media will run tons of stories showing poor women going to the store to buy enough groceries for the first time or proudly driving down the street in her new car. Everyone will praise the US for its progress.

There will be a significant amount of people who decide to simply leave the workforce and try to live off their UBI. What will be the result be? With fewer people willing to perform basic labor, prices of all goods and services will rise.

Schneider said, “Price reactions are likely if nobody can be found who is willing to perform low-wage labor. Wages for such work would have to be higher than under the status quo. Although UBI proponents see this development in a positive light, it would actually lead to a worsening of the real income situation of households, since the accompanying wage increases would be reflected in rising consumer prices.

Conversely, if for some reason the wages for these types of jobs did not rise, the UBI would dissuade workers from performing them. Consequently, households would be forced to spend their own time on tasks they would otherwise pay other people to do, such as housework or food preparation. In both cases, these households would be worse off than before, because they would either have to spend additional money or additional time to get what they used to have.

Due to the increased tax burden, the UBI would increase incentives for illegal employment and create even more financing needs. Furthermore, a UBI would destroy incentives for investing in one’s education. Not only would it lead to increased unemployment among unskilled workers, but it would also enlarge the group of workers with low qualifications.

Finally, a UBI would serve as a tremendous pull factor for immigration, which would consequently increase financing needs even further.”

Those who choose to live off the UBI will not be satisfied with a $10,000 per year income. Legitimate question: When is the last time you heard a welfare recipient say “I have enough, please don’t give me any more welfare?” Before long people are going to be complaining about how the UBI is not high enough and how the rich need to pay their fair share, even though by this time the highest earners will likely be paying more than 90% income tax.

Only the politicians who promise to raise the UBI will be able to get elected and as more and more of the rich stop working when they see their earnings stolen from them, the system will collapse into bankruptcy.

As I have repeated before, I will say again: The problem with socialism is eventually you run out of other people’s money.

How Socialism Undermines Motivation

Under any form of socialism to include the implementation of a UBI, the more successful you are at your job, the more you will be penalized by having the fruits of your labor stolen from you.  Where will the motivation to do difficult jobs come from?  Who is going to bother going to medical school when they see that being a doctor will not leave them any better off than a garbage man or someone who simply does not work and lives off his UBI. The personal satisfaction of work is not strong enough to motivate a high enough number of people to do these types of work.

Concluding Thoughts

To recap:

The problem that a UBI is meant to address: the lack of jobs that automation will bring, does not truly exist.
-we have not yet made a robot or machine that can create resources out of thin air and thus gets rid of scarcity, which is the very foundation of economics.
-when jobs are lost, people simply move from one industry to another industry; it may take time and be inconvenient at first, but people do eventually adjust.

A UBI could work well if it is done on a small scale, voluntary, and temporary basis.  But to replicate the results on a larger, permanent scale will be problematic.

The cost of a national, permanent UBI would require higher tax rates on the rich and middle class than what they already are.  This places a heavy financial burden on the rich and middle class, and if they chose to stop working, the whole system collapses.  The pressure to stop working will almost certainly come when the government and poor individuals ask for more money.  Also mandatory taxes are fundamentally different than voluntary donations.

The prices of all goods and services will increase because of inflation due to increased demand, and when a significant amount of people decide to simply leave the workforce and try to live off their UBI.

A national, permanent UBI may possibly work if the following conditions are met:
-the rich and the middle class are willing to shoulder the financial burden of financing the poor individuals of society
-government spending goes down and people stay happy with a UBI of $12,000 a year
-people continue to seek and stay in the workforce instead of living off their UBI.
However these conditions are unlikely to be met for very long due to human nature.

Ideally, we could replicate the results of the UBI through voluntary donations, not through socialistic taxes.  As already alluded to in the UBI experiments, people have  voluntarily invested their resources to participants on a small scale and temporary basis, and the results have been great.

I am personally fine with financing through voluntary donations a UBI done on a targeted, small scale, and temporary basis, which is a far cry from the mandatory, military coerced taxes that a national UBI would require.