Bad ideas just won’t die. Ronald Reagan’s goal was to “leave Marxism and Leninism on the ash heap of history.” But they keep coming back, albeit in different forms. Of today’s bad ideas—from net neutrality to open curriculum and living wages—the most dangerous is the universal basic income.
For twisted reasons, Silicon Valley, the embodiment of meritocracy and incentives, thinks universal basic income will be the next great economic force. Facebook co-founder Chris Hughes is helping to fund a UBI pilot program in Stockton, Calif. He even wrote a book about the idea—something about 1%-ers paying money via tax credits—hardly original.
He’s not alone. Barack Obama has recently expressed interest in the idea. So have Bill Gates, Richard Branson, Mark Zuckerberg, Elon Musk, Marc Benioff and others in Silicon Valley. Why? I figure it’s their misplaced guilt about patriarchal dominance over workers displaced by automation. That’s a triple crown of bad excuses.
A Universally Bad Idea
The enthusiasm seems infectious. In July, Chicago Alderman Ameya Pawar told the Intercept, “We need to start having a conversation about automation and a regulatory framework so that if jobs simply go away, what are we going to do with the workforce?” It wasn’t a long chat. This summer, Mr. Pawar introduced legislation for a pilot program that would give $500 a month to 1,000 families. Think of it as a new version of walking-around money. Never mind that Chicago can’t even afford to fund its public-employee pensions.
It sounds eerily similar to startup incubator Y Combinator’s Basic Income Project Proposal. It’s the harebrained idea of the organization’s president, Sam Altman. A thousand lucky folks would receive $1,000 a month for as long as five years. Another 2,000 would form a control group and might get $50 a month for their troubles.
What troubles? Well, University of Michigan researchers will be asking how they spend their time, if their political and social attitudes change, the effect on crime, and if their children do better on standardized tests. And there will be blood tests too: The study will “measure markers that serve as predictors of later disease as well as cortisol, an indicator of stress.” If $1,000 a month lowers your stress, shouldn’t everyone get $1,000 a month? Netflix and chill is cheaper.
Mr. Altman has almost sinister plans for UBI. Forget $1,000 a month. He told Spectacle “instead of getting a fixed fee, you get a percentage of the GDP every year.” Maybe everything should be owned by the state and divvied up? All he’s missing is five-year plans. Perhaps Mr. Altman dropped out of Stanford before taking economics—or history for that matter.
Not to be outdone, this summer the People’s Policy Project—Get it? Like the People’s Republic?—proposed an American Solidarity Fund. Every citizen over 17 would own a share of this sovereign-wealth fund. Slowly but surely, up to one-third of the assets of the U.S. economy would find their way into the fund. That’s $90 trillion for those keeping track at home. Then the investment returns from the fund would be paid out as, you guessed it, a universal basic dividend. This isn’t sliding a slippery slope toward socialism, it’s a trapdoor.
How would the fund get all those assets? Start with all government-owned land and buildings. Then add a 3% market-capitalization tax on public companies. Apple would owe $30 billion. Add a continuing 0.5% market-cap tax, a 5% levy on initial public offerings and 3% on mergers. Smells Marxian: “government owning the means of production.” So much for the ash heap. Then increase the death tax and get rid of every tax deduction. Heck, they better pay hefty universal basic lay-on-the-couch dividends because why would anyone ever go to work again? Companies would have minimal retained earnings to invest in the future, and workers wouldn’t keep much of their pay. The fund would shrink annually as the stock market imploded.
Progress is about incentives. The reason UBI will fail is the cycle of dependency built into it. It is a gateway drug to collectivism. Turning the U.S. into Venezuela is a universally bad idea.
Remember Mr. Pawar’s fear of automation? He’s in good company. At a February 1962 press conference, when President Kennedy was asked about a Labor Department estimate that 1.8 million jobs would be replaced by machines each year, he replied, “I regard it as the major domestic challenge, really, of the ’60s, to maintain full employment at a time when automation, of course, is replacing men.”
In February 1962 U.S. nonfarm payroll stood at 55.2 million. Fifty-six years and several major tax cuts later, jobs stand at 149.5 million. Call it basic and universal capitalism. Let’s stick with that, shall we?
This article first appeared at wsjonline on Oct 22, 2018.