Michael's Blog

Now is the time for a universal basic income in the United States.

Summary

• A new flat tax on all income, in addition to existing taxes.
• Distributions are exactly equal to all people
• Tax revenue is set aside for immediate redistribution. It never touches the general budget
• Distributions are based exactly on the revenue from the tax. There is no commitment to any particular amount

Details

• The definition of ‘person’ who is eligible would require a bit of thought. At a minimum, all adult citizens should be included. Whether to include children or various types of non-citizens is debatable. In any case, anyone eligible for distribution must also pay the tax.
• Tax is set aside for immediate redistribution (say, monthly). It never touches the general budget. It requires no ongoing authorization. It never gets invested in anything or held for any substantial length of time.
• The calculations on which the payments are made might happen somewhat less frequently than the payments themselves, for example annual calculations but monthly payments. This probably makes things a bit more stable for people in the short-term.
• Let’s not create a new administrative agency, let’s just use the Social Security Office. They’ve been doing a fine-enough job distributing cash to millions of Americans and have all the infrastructure in place. And this program is similar to SSI anyway.
• All Income must be included in the taxable amount, including payments from this program. No exceptions. It particular it would include capital gains, dividends and carried interest. ALL income from ALL sources.

Advantages:

The system is self-adjusting. Because there is no guaranteed payment amount and it’s based just on the amount collected from the tax, then as people work less, the payment will be lower and people at the margin will more likely choose to work, pushing the tax revenue back up. As more people work, the tax and corresponding payments go up. There will always be some free riders – but that’s a feature, not a bug. If you have enough money and don’t want to work anymore – then don’t. That’s okay. The important thing is that because this program wouldn’t be means-tested, then there is never a dis-incentive to working more if you want more money. This contrasts with something like unemployment insurance and all other means-tested government programs, which DO penalize you for working more, by reducing or eliminating your benefit.

Not subject to the whims of politicians. Because the revenue from the tax never enters the general budget or is invested in any way, there is no way for politicians to use it for their own ends, or to tie it up in political battles.

It preserves freedom and dignity. An important part of being a free person is the ability to choose for yourself. It’s something that many of us take for granted, but any program that comes with strings attached, vouchers, subsidies or earmarks is a way for politicians and bureaucrats to control what the beneficiaries do and thereby take away their freedoms, dignity and basic humanity. Distributions from this program will be made equally to all, with no strings. People have the dignity and responsibility to choose for themselves.

Lately I’ve been making some sourdough bread that everybody seems to love. It’s a very simple no-knead recipe that I got from Breadtopia . It took me a few tries to get it right, but now it’s pretty consistent. The ease of this no-knead method does come at a cost: time. You have to let it sit at least over-night, with best results coming after letting the dough sit for 18(!!) hours. You can let it sit as little as 12 hours, but it won’t be as sour.

There are four ingredients:

• Sourdough starter – 1/4 cup
  • You can get a good one from Amazon, but there are lots of different choices or you can even make your own.
• White bread flour – 18oz BY WEIGHT
  • White bread flour, not “all-purpose” or anything else. You can also substitute some or all for whole wheat flour, but then you’ll have to adjust the amount of water upward a bit.
• Water – 12 oz BY WEIGHT
  • Purified is best
• Salt – 1.5 teaspoons
  • Ordinary granulated table salt. Not coarse or koshering salt.

You also need some equipment:

• A big bowl. Glass/pyrex works well, but whatever is fine as long as it’s at least 6 quarts or so.
• A proofing basket.
• Dutch Oven or La Cloche
• A scale for measuring the ingredients.
• Various measuring spoons and cups
• A work surface, like a cutting board, that you can flour liberally as needed.
• A bench scraper
• Dough scraper or silicone spatula. (optional)
• Wire rack (optional)

I’ll start with the assumption that you already have a good, active sourdough starter. If not, there are lots of instructions out there on how to buy or make your own and make/keep it active. Basically you should have at least a cup or so and when you feed it with more flour and water it should bubble actively and double in size within 12 hours.

Please note that this is a TWO DAY process, so plan ahead.

1. Combine flour and salt in the big bowl and mix a bit.
2. Combine sourdough starter and water and mix a bit until mostly dissolved.
3. Pour liquid into bowl with dry ingredients.
4. Mix around until mostly incorporated and difficult to stir.
5. Flour hands liberally and fold dough over itself in the bowl a number of times to fully incorporate all the water and flour together. Scrape down the sides once or twice to try to get the everything mixed together.
6. At this point you should have a ball-shaped blob of dough in the bottom of your bowl.
7. Cover the bowl with plastic wrap and set aside ON THE COUNTER AT ROOM TEMPERATURE for about 18 hours or so. Do not refrigerate the dough. Yeast action is heavily temperature dependant.
8. Come back after 18 hours and check your dough. It should have risen considerably – more than doubling.
9. Flour a work surface liberally – I use a large wooden cutting board.
10. Turn out the dough and use a scraper or silicone spatula to scrape the dough completely out onto the work surface.
11. Gently push the dough out until it’s about 10×15 inches. Try not to massage the dough too much as you don’t want to lose the air bubbles.
12. Fold it over twice the long way, like folding a letter. Then fold it once over itself the other direction so that you have a rough square.
13. Cover the dough with plastic and let it sit again for 15min while you clean out the bowl and tidy up.
14. Use your bench scraper to scrape up the dough into your hands and try to form it into a rough ball without messing with it too much, then dump it into your proofing basket.
15. Let the dough sit in the proofing basket for 90min, but also:
16. After the dough has been sitting in the proofing basket for 60min, pre-heat your oven to 500 degrees with the dutch oven inside it.
17. After the dough has sat for 90min, open the oven with the hot dutch oven, take the lib off, and sprinkle some cornmeal inside. Then carefully invert the proofing basket over the oven and let the dough drop out, then put the lid back on the dutch oven and close the oven door.
18. Bake the break for 30min, then take the lid off and turn the oven down to 450. Bake an additional 15min at 450.
19. Take the bread out and set it on the wire rack to cool.

 

Recently I got into a discussion with a friend of mine about health care and how it gets paid for. We were comparing different flavors of private and public insurance and payment mechanisms. At some point during the conversation, he mentioned removing “the profit motive” as being a desirable attribute of some of the publicly paid options. It occurred to me only later that a lot of people don’t really understand what “profit” is, or what function it serves. In fact, many people have it exactly wrong!

Sometimes when I’m considering economic principals, I find it helpful to ignore money for a moment to get better clarity on what is actually happening. Let’s take a simple example of this and see if we can discover the role that profit really plays in society. Suppose that I own a furniture business and set about making a chair. I start with, say, 10 pieces of nice lumber (I don’t really know anything about furniture, so I’m making this up, obviously) and my employee spends 25 hours putting the chair together. I then give the chair to someone. Have I done something good for society? Well, let’s see: Society provided me with 10 pieces of lumber and 25 hours of labor. In return I provided society with a nice chair. Again – was this good? Hard to say, right? We’re talking about three different goods – lumber, labor and chairs – and those things don’t compare with each other very well.

In order to know whether I’ve done any good for anybody, I have to know what value society places on those three resources. What if that lumber came from the very last tree on the island? What if those hours of labor came on Christmas day? This is where money comes back into play. As the business owner, I have to pay whatever society thinks those things are worth to somebody else, before I can use them for myself. Likewise, when I give someone the chair, they have to pay me whatever society (including me) thinks that chair is worth. Now we’re getting somewhere. Let’s suppose that the lumber had a value of $50, the labor $100, and the chair $200. Now we can do a simple, straight comparison. $50(lumber)+$100(labor) = $150 of inputs from society, and the chair provided back $200 of value. So society gained $50 worth of net value from the process. Where did the value go? The value went to society in the form of a nice chair, less some wood and time. The money ended up in my pocket – profit!

Now we can see that profit is really just a measuring stick. It’s a way of keeping me informed and accountable for being productive. You can certainly imagine a scenario where all of the above takes place entirely without money. This is the dream some have of a sharing, (dare I say communist here?) structure. Everybody is working hard for the common good, and nobody needs money! I could just make that chair as before, not paying for the wood or labor, and not charging for the chair. But in that case, how would I – or anyone else – know whether it was a net positive or not? We couldn’t! Maybe it would have taken 100 hours of labor, or 1000. Who could say that it was or wasn’t worth it?

Businesses that continue to consume more from society than they contribute have shrinking bank accounts and are eventually forced out of business – as they should be. Business that consistently add value are profitable and grow and prosper, to society’s long term benefit.

Some folks still have the vague idea that profit here might be added value, but that the value goes into someone else’s bank account and is somehow “overhead” that might be reduced to our benefit. The opposite is true. Remember that money is not value. You cannot eat money. Money is how we maintain accountability. The value went to society already. You can’t put value in the bank. Society is already better off for the action (making the chair, in our example), and this would be true to the same degree, whether or not money is involved. Profit gives us a way to measure WHO created HOW MUCH value, and then gives them the ability to make additional decisions that we hope will create even more value (by buying more lumber to make more chairs).

Now you can see the potential danger in removing the profit motive: It eliminates measurement and accountability from the equation. In a program without profit, who can say if it’s doing a good job or not?! It’s impossible. In particular, with government programs, it’s usually the value of the output that goes un-measured. Costs are typically set by the market (society) and the government has to pay for them with money just like everybody else. What we can’t know is whether the outputs were really worth it, since the outputs don’t get paid for, or get paid for at non-market prices.

Say we spent 100 doctors treating 1000 patients over the course of a year, and they all ended up healthy. Was that a good thing? Who can say? Were they good doctors? Were the people sick in the first place? Could we have treated the patients with fewer doctors with the same result? Could we have instead treated 2000 other patients with those 100 doctors, to greater total benefit? How much time and effort was spent educating the doctors? Could 200 nurses have achieved the same result? Would that have been a better outcome?

“But wait!” you say “What about all the profit at companies that hurt society?!” A valid concern, especially in the way of the recent real-estate crash. Well, I won’t go to much into detail in this post as there’s a lot to say on the subject, but here’s a thought for you: Taking away profit doesn’t help that. It only hides it.

Here’s an idea for you: If you think it’s a good idea for the government to help people out, that’s great. Just don’t take away the ability to measure and hold accountable by taking away the profit. Just give cash (not a voucher – cash) to the people that you want to help. That’s really the best way to help people, but you won’t catch many people in the government going for it. They don’t want to be taken out of the loop or held accountable for success.