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Intro
This week’s assigned reading is a presentation by Dr. Steve Trost titled “The Libertarian, Conservative, Progressive, Communist (Not Socialist) Case for a Universal Basic Dividend.” As OSU’s director of the Institute for the Study of Free Enterprise, Dr. Trost presents a plan for how a government could implement a universal basic dividend.
What is a UBI
He begins by laying down key definitions for a few of the terms he uses. Notably, his plan is not socialist, and thus, the government does not have ownership and control over the means of production. He explains that Venezuela has the greatest oil reserves in the world but is unable to use these resources to their fullest potential as a result of poor management by the state. He mentions one notable figure, F.A. Hayek, who supported the idea of a negative income tax. Hayek argued that there should be no reason that a society at our level of development cannot provide minimal sustenance to all without jeopardizing general freedom. One element of Trost’s plan is allowing people to leave poorer circumstances. This makes me wonder, for instance, how poor public housing would fare if people had the option to leave. Would these places become abandoned and eventually torn down? I agree that people should have more freedom, and I think, ultimately, a change like this would be better for the area as it provides an incentive for reform.
Potential issues
Another idea Trost proposes is capping federal spending at 9% of the United States GDP. I believe it is a good idea to lower the percentage of federal spending, but I’m curious about the reasons for such a low percentage compared to what already exists. Trost goes on to mention how he explained his plan to Bob Lawson, an economist at the Cox School of Business. Lawson had a few objections, including the “Nanny State,” which essentially means making citizens feel like they need the government to provide for them. He also mentioned the “income effect,” which is essentially that the more income people make, the less they work. He also argued it was not politically feasible. Some of the political issues included first having to get an amendment accepted. Additionally, his plan takes away a lot of power from the federal government, which adds another layer of difficulty. He explains that if Congress is faced with a potential constitutional convention, their chance of passing an amendment goes way up.
The UBI Plan
Trost outlines his plan as taking 16% of the GDP and giving $9,000 per citizen per year, with a 25% flat tax. He also includes that the dividend would increase by 150% for those of retirement age to help with health issues associated with old age. He states that for a family of four to be a net positive contributor to the tax roll, they would need to earn $144,000 a year. After this, he brings up numerous arguments against a universal basic dividend, including that it disincentivizes work, eliminates personal responsibility, and that we can’t afford it. I definitely want a deeper dive into how to afford the UBI and how it would change the existing things the budget is put into.
Non-negotiables
Trost outlines some non-negotiable elements of his plan, including that it is enacted through a constitutional amendment, UBI payments are tied to a percentage of the previous year’s GDP, and are not geographically adjusted. It’s interesting that it wouldn’t be geographically adjusted; I wonder what potential consequences or positives would result from that. Additionally, some more non-negotiables include a flat tax on all income above the UBI, the elimination of all welfare programs, and the elimination of all minimum wage restrictions. I personally am not entirely convinced that there should be a removal of minimum wage, as I feel some employers could potentially take advantage of it. One final non-negotiable is that no encumbrances can be placed upon a recipient’s future or anticipated UBI payments. This is a very interesting problem I hadn’t even thought of, but using money from future UBI payments should be off-limits, as it could easily lead to possible debt traps and overall disregard the UBI’s purpose.
The Positives
Some of the benefits he outlines are increased freedom and that the government no longer has to protect companies that are “too big to fail” and certain industries. Additionally, the government would be more limited, and tax returns would be easy, which actually does sound pretty nice. He also argues that businesses would be easier to start and that there would be more mobility for families. I also agree that increased mobility is an important part of his plan, as he outlines that there could be communities based on a percentage of the UBI.
Questions from Students
Near the end of the speech, an audience member asks if there would be a risk of overpopulation from citizens moving to lower-cost-of-living areas. Trost explains that this would actually be one of the benefits, as this would, for example, encourage people to move to rural Oklahoma, where schools could be highly specialized and thus provide greater choice and higher competition. Another student asks if there have been notable advantages to this plan being implemented in Alaska. Trost answers that it is nowhere near a UBI, as it’s only $1,000 a year, although it has still encouraged residents to move there, which shows that this could increase freedom and encourage mobility. Another question a student asks is whether the extra UBI money would damage private charities. Trost explains that the individuals receiving the help would actually be able to use their UBI money for other needs, which would help charities have more freedom and resources.
Conclusion
Trost presents an intriguing argument for his plan for a UBI, balancing economic freedom with limited government intervention. His plan offers increased mobility, but his removal of minimum wage and welfare programs raises concerns about potential exploitation and economic disparity. His argument is compelling, but the long-term effects are still quite uncertain to me. Overall, his proposal challenges conventional economic policies and is a very valuable discussion on how to best balance personal freedom and social responsibility.