The Guaranteed Universal Basic Income: An Introduction

I'd like to introduce my ideas for the Guaranteed Universal Basic Income (GUBI) in the United States, starting with the fundamental terms then digging into the details.

Let's start with the headline: every U.S. citizen adult would receive $11,500 per year (2013 dollars), and every U.S. citizen child would receive $4,500, paid monthly. At age 65 the benefit would increase to $20,000 per year. Rich or poor, it doesn't matter: everybody receives the benefit. (The under 65 figures are very slightly over the U.S. poverty line, for reference.)

Simple, yes! Expensive? Not really, because here's a partial list of government programs that would be terminated: Social Security retirement benefits, Social Security disability benefits, Social Security survivors' benefits (mostly, except that orphaned children would receive the adult amount, and widows/widowers would receive an additional amount for up to 5 years equal to the child benefit), unemployment benefits, workers' compensation benefits, food and nutritional assistance programs (such as SNAP), "Section 8" housing benefits, home heating support programs, foster care and adoption assistance (mostly), Native American benefit programs, some veterans' benefits, and numerous tax expenditures (such as the Earned Income Tax Credit and Child Tax Credits), among others.

The minimum wage would be abolished. However, labor unions would be free to organize through "card check" (e.g. independently administered Internet voting) and to negotiate "closed shop" contracts with management in every state if both agree.

Benefits would be administered and paid through the Social Security Administration. GUBI would be 100% free of federal, state, and local taxes.

Benefits would be indexed to inflation. Since "chained" inflation indices seem fashionable, OK: Chained CPI-U will be used in general to adjust benefits. However, if using the Chained CPI-E results in a higher benefit amount than the Chained CPI-U (both calculated from the 2013 base year), then Americans age 62 and older will receive a benefit based on the higher CPI-E amount. The CPI-E better reflects inflation experienced by older Americans, but they will never be penalized even if their inflation experience is less than general inflation.

Individuals age 57 and older when GUBI begins would be able to join GUBI (immediately if they wish) or receive Social Security retirement benefits under the existing program and formula, including COLAs and taxability. Once they start receiving benefits under either formula the decision is irrevocable. Note that Social Security payroll taxes would be abolished for GUBI recipients, so nobody would "lose" anything. The maximum retirement benefit is currently just over $30,000 at age 66 (increasing to 67) compared to GUBI at $11,500 until age 65 and $20,000 (average) thereafter (with different inflation, taxability, and survivor terms). Some older Americans (with relatively high incomes and long working careers resulting in maximum Social Security contributions) might want to stay in the existing program (and in existing Medicare), even if it means waiting for benefits. Other Americans would and should want the immediate tax free GUBI benefit.

Taxes would change a lot and for the better. As mentioned, Social Security payroll taxes would be abolished for all but "classic" Social Security participants. Only older Americans already receiving classic Social Security or those who opt out of GUBI (among those 57 and older when GUBI starts) would continue paying payroll taxes. General revenues would fund GUBI and its transition, and the tax system would be radically simplified. GUBI would be tax free, but there would be no personal deductions or exemptions, no child tax credits, and no earned income tax credits. Tax rates would be progressive and start at 15% (from dollar one excluding GUBI) and increase smoothly up to 50%. (Remember, there are no payroll taxes under GUBI.) That is, there would be no brackets per se but rather a smooth formula of gradually increasing marginal rates up to the income threshold for the top 50% marginal rate. There would be no weird "bubble brackets" in the effective tax rates because there would be no deductions or credits to phase out. Interest, dividends, and capital gains would be treated as ordinary income but all gains would be subject to inflation adjustment like GUBI. That is, you'd only pay tax on the after-inflation gains. Tax preferences for retirement savings would be abolished since everybody is getting a guaranteed GUBI annuity already, since GUBI helps working people save more, and since taxing only after-inflation gains encourages saving. The threshold for the top rate would also be adjusted for inflation. The mortgage interest deduction and primary residence capital gains exemption would be eliminated, although almost no one would owe capital gains on long held property due to inflation indexing and maintenance expenses. Deductibility of state and local taxes would be limited to income taxes based on a simple percentage of federal income tax. Charitable, medical, and educational deductions would be mostly or completely eliminated, as examples.

Estate taxes would start at a 15% rate for estates above $1 million in value and rise smoothly to a 50% rate on estate amounts above $20 million. Annual gift limits would be set equal to the GUBI. Loopholes would be firmly closed, as always.

GUBI benefits would be very well protected. "Reverse annuity" contracts for GUBI benefits would be illegal and unenforceable. GUBI benefits would be protected against child support/divorce judgments and creditor claims. GUBI could be suspended to those who are not tax compliant, but the beneficiary would have the opportunity to dispute the suspension if true poverty would result. Partial GUBI benefits could be awarded under court order as restitution to a victim of a crime (and/or survivors) but only for the duration of a beneficiary's incarceration. Parole boards may not consider GUBI impacts in their decisions. Back GUBI would be paid to anyone wrongly imprisoned but would not be counted against any other awards for wrongful imprisonment.

GUBI benefits would be payable to Americans living overseas at 75% of full GUBI, reflecting the fact that many possible overseas locations have lower costs of living. Overseas Americans would be responsible for paying any gap between U.S. and overseas taxation (and only the gap), and any foreign taxes paid on their 75% GUBI would be refundable from the U.S. (with caveats). Expatriating Americans would have to pay back the net present value of GUBI payments they've personally received (i.e. the current GUBI amount multiplied by the number of months they received GUBI), and they would have to "mark their financial assets to market," i.e. pay the capital gains taxes owed if they sold all assets, as with today's "exit tax."

GUBI data access would be fairly heavily restricted to protect privacy.

Since GUBI benefits would be contingent on citizenship (and quite attractive) there would need to be a change to automatic birthright citizenship. But it should be a very narrow limitation. For example, it might be that a child born in the U.S. to foreign parents is not a U.S. citizen unless the mother has a legal, long-term (non-tourist) right to stay or unless the child has continuously resided in the U.S., even illegally, for his/her first 18 years of life (with the presumption that he/she has). To facilitate GUBI eligibility determinations and administration all beneficiaries would be able to obtain and renew U.S. passport cards free of charge, although there would be a modest fee ($20) for replacing a lost card.

Paired with GUBI, the federal government would also be responsible for two important public goods: healthcare and education. The government would operate (partly directly, partly on a contract basis not to exceed 50% of the system) a national network of medical centers and elder care facilities offering $10/visit and $10/drug care to every GUBI recipient and covering all "essential" medical care. Much of this system would be a relatively simple expansion of the VA, the best part of U.S. healthcare. And government would be responsible for delivering free K-12 education and $5000/year public university and technical colleges, primarily building on the existing state institutions. The Pentagon could continue to offer recruitment bonuses such as paying the $5000/year for higher education, cutting the medical co-pays in half, and pushing veterans to the front of the line for elective procedures (maximum 15 days wait instead of 45). Public medical and higher education expenses could be deducted from the beneficiary's next monthly GUBI payment if the beneficiary chooses to pay that way. The aforementioned passport card would facilitate access to these services.

The Federal Reserve would be granted the authority, as part of its stabilization mandates, to inject cash into the economy through GUBI rather than through the banking system to prevent or to reduce the impacts of financial crises. The Fed must exhaust GUBI policy responses before resorting to banking system injections in crises.

That's GUBI, at least in introductory form. It's simple, effective, and fair. It reduces the economic distortions of government and gives the American private sector tremendous competitive advantages. Practically everybody wins, even wealthy Americans who would benefit tremendously from the wealth generation GUBI would unleash.

Thoughts on "Wiki Weapons"

I watched an interview with Cody Wilson, founder of Defense Distributed. Defense Distributed is trying to create a "wiki weapon," a set of downloadable blueprints for one or more gun models that anyone can use to print one or more guns using a 3D printer. Such guns would be plastic and have no serial numbers. I had a few reactions:

1. It'd probably be relatively easy to trace such guns to the printers that constructed them, thence to the owners of those printers. Especially if 3D printers are already inscribing small identifiers in the products they produce.

2. Those printers don't produce the explosive charges required for working ammunition.

3. The NRA, which comments on everything gun-related, won't comment on this new reality. I'm sure that's because it would harm the gun industry the NRA really represents if it became popular. But of course the NRA can't admit that truth, so they're saying nothing.

4. If you're the sort of person that believes you need a gun to fight against an overbearing government, then you don't actually need to stockpile guns any more. You just keep a 3D printer nearby and a set of digital plans. That's much safer and cheaper, because you don't actually need to blow your budget on 3D printing supplies unless and until you need your gun(s). And another reason not to stockpile is that the designs are bound to get better and better, so why fight your revolution with yesterday's model?

5. If you're the sort of person who thinks you'd win an arms race against a modern government, you're naive. Wiki guns don't change that.

6. If the price of 3D printing continues to fall expect a broad group of patent holders to try to do something political, much like Hollywood has convinced Congress to extend copyright protection to ridiculous lengths. Said another way, gun manufacturers are among those who like the status quo just fine.

Revising U.S. Taxes

I just saw a video clip from CBS's "60 Minutes." U.S. Republican presidential candidate Mitt Romney said that he thinks it's fair that he pays a lower tax rate than someone earning $50,000 per year.

Even Ronald Reagan said that was unfair. But wealthy Americans like Mitt Romney have had great success convincing Congress and the last U.S. president (George W. Bush) to revise the U.S. tax code in ways that are highly favorable to the wealthy and to corporations. The compromised tax code is one of the three major reasons why the U.S. economy is weak and why deficits are moderately high. (The other two reasons are privatized medical care rather than single payer, and too much spending on wars of choice, including the "war on drugs" and other contributors to the high incarceration rate in the U.S.)

I've posted my ideas for fixing the U.S. tax code before, but here's a simpler version:

1. Raise the top income tax rate to at least 40%, or add a new rate;
2. Tax all interest, dividends, and capital gains at the ordinary progressive income tax rate after adjusting for inflation (i.e. index the gains first);
3. Eliminate all Social Security and Medicare payroll taxes on the first $15,000 of income, with that amount adjusted for inflation every year;
4. Eliminate the income cap for payroll taxes, and extend payroll taxes to interest, dividends, and capital gains;
5. Eliminate the "carried interest" and other loopholes involving financial assets.

I'd also like to see the U.S. federal government, through the U.S. Postal Service, enter the supplemental defined benefit pension business. That is, you could visit any Post Office to open a modest retirement account, and you'd have a guaranteed retirement benefit above Social Security. Those retirement accounts would be managed (and taxed) just like any other classic, private sector defined benefit pension. The Post Office would also be allowed to provide basic banking services (but not loans), including low cost international remittance services.

Financial Institutions in Singapore Are Strange

Here are a few things I don't like about financial institutions in Singapore:

1. They insist on seeing a passport instead of the Singaporean government's own photo ID card (which every resident must have and which is valid for all sorts of official purposes). Do they really think that a passport issued by, for example, the Tanzanian government is more authoritative in Singapore than Singaporean government-issued ID? It's bizarre.

2. They ask for your "overseas address" if you're not a Singaporean. I live in Singapore, 100% of the time. I neither own nor rent any real estate outside Singapore, nor does my wife. Why should we? We live in Singapore. And when I point out that simple fact, they still ask for an overseas address. I gave one bank the address of the civil records office where my birth certificate is kept, and I explained what I was doing. They didn't like that, but what exactly am I supposed to do? Would they prefer the address of a Holiday Inn overseas? Or the address where my second cousin-in-law lives?

3. One bank -- and there may be others -- simply refuses to issue a credit card to anyone who is not a Singaporean citizen or permanent resident. You could show up with impeccable credit (like mine), and it simply wouldn't matter. Those are the rules, and in Singapore we follow the rules. I should point out that this particular bank isn't even headquartered in Singapore, so it can't even issue a credit card to its own country's prime minister. But did I mention the rules?

4. Using a Singaporean credit or debit card outside Singapore is expensive -- 2.5% or higher markup -- with the possible exception of a Diners Club card issued in Singapore. Singapore is tiny, so practically every Singaporean travels outside Singapore. You can take a city bus or taxi to Malaysia or a quick ferry to Indonesia, after all. It's actually cheaper for me to use, say, a U.S. credit card and move funds from Singapore to the U.S. to pay the credit card bill. And, with at least one bank, it's cheaper to withdraw cash at an ATM outside Singapore and spend that instead of using a credit card issued by the same bank. Crazy isn't it?

5. Speaking of foreign transaction fees, shame on the Monetary Authority of Singapore (MAS) for not mandating much more clear disclosures about such fees. I found one bank that simply doesn't disclose such fees even in their fine print unless you specifically ask a bank employee. And then is that information accurate?

6. It's extremely expensive to invest in mutual funds, stocks, bonds, etc. in Singapore. Management fees are both poorly disclosed and ridiculous -- 2% per annum is on the low side. Trading fees are also ridiculous. Again, it's far cheaper to move money to, say, the U.S. and to buy financial investments there. A company like The Vanguard Group could do extremely well in the retail investment market in Singapore.

What Microsoft Should Do to Recover from Windows 8

Microsoft is struggling to cope with the rise of much bigger non-Microsoft application ecosystems among smartphones and tablets, notably Apple's iOS and Google's Android. While the PC won't "die" in the near term, it's no longer the center of the client computing universe.

With the release of Windows 8, Microsoft has tried to graft a mobile-appropriate user interface that hasn't proven popular atop its franchise desktop and laptop operating system. The result is a disaster that pleases almost no one. It's a technical approach to solving a fundamental business model problem, a problem that Microsoft must address.

As part of the solution, Microsoft ought to consider introducing a base edition of Windows that's genuinely free. Microsoft badly needs to preserve and to extend its application ecosystem, and that's much easier to do if that ecosystem continues to be popular. Apple and Google both offer free ecosystems: iOS and new iOS versions are free with every applicable Apple hardware purchase, and Android is just plain free provided the device manufacturer maintains preferential placement of Google's content services. That's not a problem for Android device manufacturers because Google's content is extremely popular and useful.

Free Windows? Am I crazy? No, not at all. To pull it off, though, Microsoft would need to establish two boundaries in the right places. The first boundary is what level of function to include in the free base Windows package -- more on that in a moment. The second issue is that Microsoft needs to beef up the range and value of optional add-ons available through the application store. In other words, Microsoft needs to offer compelling content that Windows users will want to buy using their free base Windows. Right now Apple is doing a better job in that area. Apple's customers know that the base package offers exceptional value, but then most of them happily buy more. Getting the boundaries right between "free" and "paid" is critical, and Microsoft needs to do a better job in that area.

So here's what a free Windows 8 would include:

1. A smaller download that can install from a 1 GB USB memory key. That would be more than enough to get onto the Internet to perform Internet browsing (but only after applying the latest critical security patches for that purpose) and, optionally, to install the remainder of base Windows.

2. Full English plus a multi-lingual post-install panel to allow users to install any language pack from the Internet.

3. Support for a maximum of two SATA/IDE hard disks, both with full disk encryption if the user desires. (Full disk encryption could be one of the free downloadable features.) USB-attached hard disks and memory keys would be unlimited.

4. A 32-bit version only, with unlimited PAE support, provided that there's a mechanism for the user to pay for an in place upgrade to 64-bit Windows without losing data and settings.

5. No Windows Media Center, IIS, or domain login.

6. Limit of 5 visible user logins. Applications could still create more user IDs for their purposes, but only 5 would be available to choose at the login screen.

7. Reduced accessories and games collection.

8. Mandatory activation via e-mail verification. (Users could opt out of Microsoft's e-mails after that, though.)

9. Support for a maximum of one CPU socket and a maximum of 3 cores.

10. Basic backup, but with support for encrypted/compressed backup to network and cloud drives. (Cloud storage above a certain amount would be chargeable.)

11. Remote desktop to a Windows phone or Windows tablet (single session at a time).

12. Ability to share a maximum of two printers and two network folders at a time.

13. DVD playback (sans Dolby).

14. Single monitor.

15. User interface cleanup.

That's essentially a mixture of Microsoft's previous "Starter" and "Home" (probably "Home Basic") Windows editions. And that's just about right.

Denise Rich's Lawyer: Transparent Bullshit Artist

After Facebook co-founder Eduardo Saverin renounced his U.S. citizenship, Denise Eisenberg (formerly Denise Rich) did the same. She'll save millions in U.S. taxes, but more on that in a moment. Her attorney said that she made the move "so that she can be closer to her family and to Peter Cervinka, her long-time partner."

Bullshit. Ms. Eisenberg is an Austrian citizen and was also a U.S. citizen. She was already living in London with her "partner" based on her EU citizenship. Possession of U.S. citizenship in addition in no way limited her ability to do so. (They aren't living in Havana.) Evidently her lawyer thinks we're fools, and shame on CBS News for not pointing out that her lawyer is a liar. "He said, she said" stenography is not journalism. Saverin's "explanation" for his renunciation was also 100% bullshit.

As for her U.S. tax savings, perhaps. But, like Saverin, she'll now become a pariah in the world's largest economy, an economy with enormous wealth generation opportunities for wealthy people. Even if you're a completely self-obsessed selfish bastard, losing all physical access to the U.S. is a mighty big price. And yes, she (and Saverin) lost access. Justifiable U.S. citizen outrage will make sure of it, and existing law already provides that option to U.S. immigration authorities. Eisenberg will never be able to walk along Park Avenue, shop on Rodeo Drive, or attend an exclusive party in New York City ever again.

Today Greeks vote to decide their national government for the second time this year. SYRIZA, an anti-bailout/anti-austerity party, stands a chance of winning outright.

In my view that'd be a healthy outcome. Policymakers around the world have committed egregious economic malpractice for years. Most western economies need massive jobs programs, with direct government hiring of every woman and man who wants to work. Then that workforce would repair and rehabilitate everything possible: transportation and utility infrastructure, hospitals, schools, post offices, parks, etc., etc.

There's a global depression afoot, with unemployment rates soaring. As with most Greek voters, I'm tired of policies that ignore the massive joblessness and pleas that there's little that can be done. That's bullshit. Hire idle workers, dammit, and do it now. Fire up the Works Progress Administration, the Civilian Conservation Corps, and other programs like them. Fix America, and fix Europe, literally.

Fixing the Federal Budget

Although there are countless "pundits" who pretend otherwise, it's astonishingly simple to repair the U.S. federal budget:

1. Restore corporate and personal income taxes to early Reagan Administration levels.
   
2. Treat capital gains exactly the same as any other income, albeit with capital gains indexed to inflation.
   
3. Treat estate transfers exactly the same as any other income, with $3 million (indexed to inflation) and spousal exemptions.
   
4. Eliminate the "carried interest" and related loopholes.
   
5. Introduce a 40% tax rate plus time limitations on non-repatriated corporate earnings, less credit for foreign taxes paid.
   
6. Offer states and localities centralized federal collection of their corporate and personal taxes. They could set a single percentage based on federal taxes owed. Residents of states that choose not to participate would default to 3%, which the federal government would keep. Whether participating or not, states and localities would still be free to levy their own taxes.
   
7. To reign in healthcare spending (and improve outcomes), open up the Veterans Affairs and Medicare health insurance programs to all Americans.
   
8. Extend Social Security contributions so that there's no income cap and so that all forms of income are included. Also exempt the first portion of income (e.g. the first $15,000, indexed to inflation).
   
9. Cap defense spending at 4.0% of GDP for 5 years then 3.5% of GDP thereafter, with exceptions only permitted if the U.S. Congress passes a formal declaration of war against a specifically named country, if the excess funds are dedicated to that narrow purpose, and if Congress renews that declaration every 24 months.

Family Security: Society's Choice

I don't generally pine for the "good old days" which really weren't so good. However, I am profoundly concerned about the persistent attacks against social insurance in all its forms around the world. (The exceptions, ironically, can be found in the Middle East.)

Let's start with some basic principles. Freedom is good. However, poverty and infirmity are antithetical to freedom. Serfs living 1,000 years ago in Europe weren't free mostly because they were poor and constantly at risk of utter destitution and starvation, not because the lords cared much about which songs they sang.

So why, 1,000 years later, in the developed world, do I worry about much the same problems? Why are so many people one illness away from bankruptcy? One spouse's untimely passing away from poverty? One lawsuit away from financial ruin? There are myriad risks, and many governments seem hell bent on dismantling what little social insurance exists. The private insurance market is flawed in many ways, and it's difficult or impossible to insure against these calamities without government.

As one example, consider disability insurance in Singapore. If your employer is typical, and if you have a job of course, you would receive a maximum of two years' salary if you become disabled and cannot work. If you're disabled for 10 years or for a lifetime, tough. You had better hope that someone in your family or a charity takes pity on you. And that's in Asia's most developed economy excluding Japan.

But "we can't afford social insurance." Rubbish. This is a world in which Mark Zuckerberg is a billionaire , but he will pay a far lower tax rate than his company's employees. Developed countries are comparatively wealthy. Decent social insurance is an affordable choice. It also happens to be consistent or even essential to upward mobility and entrepreneurship.

America: The Not-So-Grim Truth

A relative e-mailed me a link to this blog post by Lance Freeman: America: The Grim Truth.

I take issue with several of the author's assertions. As examples, many developed countries don't have single-payer healthcare systems, and, while a lot of tax dollars go to the Pentagon, it's not 70% of them. The factual mistakes make it harder to take the author seriously. Also, people simply have different preferences. If you love musical theater, or skiing, or recreational aviation, or somebody of the same gender, you aren't going to choose, say, Singapore if you have a choice. Different countries have different attributes. The United States isn't everybody's favorite, but nor is Switzerland.

That said, I agree with the author in one narrow respect: the United States (and its government) are generally headed in the wrong direction. In the U.S. there's growing inequality, decreasing financial security, and increasing threats to civil liberties. Those disturbing trends tend to make the United States relatively less attractive as a place to live, work, and vacation, if you have other choices and other things being equal.

I'm an optimist, and I wouldn't bet against the United States yet. The world's oldest democracy has shown an amazing ability to correct its course.