Saturday, January 18, 2014

Rep. Paul Ryan Proposes "Universal Credit"


Paul Ryan was out this week with a GOP proposal that could easily be interpreted as a form of a Basic Income Guaranty that Dems should consider as a shot across the bow.  Story at The Fiscal Times here.

Rep. Paul Ryan appeared at the Brookings Institution this week to talk about poverty. 
The Wisconsin Republican and 2012 vice-presidential nominee discussed how the poor could be “reintegrated” into society, and as part of his speech, he proposed that the United States consider adopting a “Universal Credit” scheme that would both streamline the various social safety net payments and tax credits the poor receive and, rather than cutting off abruptly when recipients cross a certain income threshold, would taper off as income rises, thereby reducing the disincentive to finding work .
To be clear, Ryan has not suddenly changed his mind about the need to cut entitlement costs. He firmly believes that the U.S. is spending itself into economic oblivion and that the main drivers of the problem are our healthcare and entitlement programs. What’s happening here is that Ryan, having taken a couple of runs at entitlement reform, with no success, is changing his approach. 
Ryan cited work done by economist Gene Steuerle, who has pointed out that current policies that abruptly strip recipients of their government benefits when they find work or reach a certain level of income, have the same effect as drastically raising their marginal tax rates and create disincentives to work. 
“According to Steuerle’s calculations, if she’s enrolled in programs like food stamps, Medicaid, and SCHIP, her implicit marginal tax rate will be as high as 55 percent,” Ryan said. “And if she’s enrolled in other programs—like housing assistance and welfare—the rate will reach above 80 percent. In other words, go to work, and you’ll keep less than 20 cents of every extra dollar you earn.
Sort of like a "supply-side" twist to a Basic Income Guaranty with Ryan doing the math to show how small a percentage of the transfers are effectively retained if someone becomes employed; you gotta love it.  I guess this is just the general way these people's brains work.

The key change to the GOP/Ryan approach here is that the Treasury transfer payments don't disappear when the recipients get a job; rather they are reduced as other "earned" so-called income increases; in effect, functioning as a Basic Income Guaranty for the individuals and households.

The article indicates that this part of the GOP leadership still remains stupid and blind and in the dark on fiscal authority; but even so, this is manifestly a change of course towards a more progressive policy taken by the Ryan faction here.

If Ryan has serious desire for national office, this change of course was absolutely necessary for him.

He takes some flack from the GOP crazies faction in the form of Sen. Rubio chronicled in a video embedded in the story; but Rubio has NO CHANCE of obtaining national office without an appeal that is accepted by a significant percentage of Christendom in the U.S. who vote primarily on the issue of social-economic justice.

After the 2012 loss, Ryan perhaps knows he needs significant votes from this cohort of U.S. Christendom (who were run off by Romney's "47%" remarks despite VEEP candidate Ryan's attempt to counter via his soup kitchen high jinks) and has come up with a policy that may appeal enough to these people to get him over the top... and in his moron view it has the added benefit that it "won't cost the taxpayers any more money!".

Win-win for someone like Ryan.


26 comments:

Ryan Harris said...

Republicans are rapidly becoming the party of the poor and rich. Their loud rhetoric about the way things should be in an ideal world reverberates with the poor and rich like a church sermon of what needs to be done. If they get rid of the deficit mongering, to me, they look alot like the Old Democrat party of big projects where they just want to make government work to help people in a way that appeals to their rich and poor base. I think the Dems are so twisted up in their logic and looking for demons that support the evil republican meme that they haven't really seen the shift in moderate Repub rhetoric and actions.

Dan Lynch said...

No surprise since Nixon and Uncle Milt advocated a BIG by way of a negative income tax.

I support a means tested BIG, but the devil is in the details. I will be looking closely at the overall benefit of the Ryan plan (compared to existing benefits), what kind of restrictions there are on benefits (i.e. drug tests, work requirements, limits on duration, etc..), and how the BIG is dispersed over the course of a year.

One problem with a Negative Income Tax is that the poor need a weekly check to live on, and many poor work part time or seasonally, making it difficult to predict their annual income.

For that reason and others, I advocate a *WEEKLY* basic income guarantee of say $250/week. Administration would be simple enough since people could file their weekly claim online or by phone, similar to how they currently file weekly claims for unemployment benefits.

Ryan Harris said...

An annual tax credit is almost worthless to poor. The interest rate for low income americans is in the hundreds of percent, if you look at their national lenders like Advance america, Ace Cash and the other micro-credit lenders.

Matt Franko said...

Ryan,

"the Dems are so twisted up in their logic and looking for demons that support the evil republican meme"

You have identified the whole purpose of the MSNBC channel... which hardly anyone watches.

rsp,

Matt Franko said...

Dan,

" I will be looking closely at the overall benefit of the Ryan plan"

I'll bet it will not be very good as it will have to be tempered by their remaining moron belief that "we're out of money!"...

but as far as the 'phrasing' the use of "Universal Credit" at least sounds like a step in the right direction... ie the 'framing', etc... maybe a product of Luntz hard at work figuring out what to term it ...

rsp,

Daniel said...

Ryan Harris I agree with you that Democrats have become too obsessed with demonizing the other side rather than forcefully pushing for positive changes themselves, but I just don't see this economic moderation from the GOP that you seem to think is happening. The deficit mongering is their identity now; they went all in on it years ago. Wherever Republicans are in charge, they're gutting the social safety net and slashing spending in an unprecedented manner. Keynes has become just as dirty a word as Marx in conservative circles, believe me, i've seen it firsthand. A national politician like Ryan making a few slightly less than scorched earth comments doesn't change their record.

If anything, the place you're seeing some moderation from Republicans is on the social side of issues like gay marriage and the decrease in their enthusiasm in military adventurism. But fiscally, I just don't see it. They're closer to Ron Paul than they are to Richard Nixon when it comes to money matters in this day and age.

Matt Franko said...

Daniel,

Agree with a lot of what you say but this is just Ryan I am writing about...

Ryan went thru a national election (on the bottom of the ticket) and lost/was rejected... this gives him a different perspective than all the GOP others...

He may be considering that his key problem was not doubling down on the Ayn Rand worship... and he has had run-ins with the Catholic Church personnel in the past and that was before Francis came into the picture...

So how is he going to win the Presidency with this approach? He cant and he may now be knowing this and having to modify his policy positions...

His ticket almost won despite the "47%" comments and his soup kitchen fiasco... all he perhaps needs is to put a "serious" progressive policy together like this one here that is like a progressive/supply-side cocktail and he may get a few % of voters in Christendom to buy into it and he wins...

This is about winning and losing (to him)...

rsp

The Just Gatekeeper said...

All of Ryan's proposals effectively subsidize slave wage employers. I guess for him this is the next best thing to eliminating the safety net all together. We need to get back to a 40% private sector unionization rate and a Job Guarantee/high minimum wage.

Tom Hickey said...

"All of Ryan's proposals effectively subsidize slave wage employers. "

Basically a form of workfare with Walmart and MacDonald's getting subsidized.

Ryan Harris said...

he Repubs like a BIG because it gives to the poor and to the rich. The middle class not so much. But don't worry, the Dems have the middle covered!

The good news is that someone is looking after the poor instead of no one.

Matt Franko said...

Justin,

If we had a robust BIG, couldnt you say that was then subsidizing every firm out there if any people went to work in addition to the BIG?

So that leaves out a BIG as a rule? As everyone knows that "we cant have that..."

I think it would chasten firms and perhaps incentivize them to provide the correct workplace environment or people would just quit if they knew they could just fall back to the BIG as a worst case....

rsp



Matt Franko said...

Ryan, The people against the BIG (like Pavlina T) seem to think that if we had a BIG that would lead to an (metaphor alert) "inflation" or "currency debasing" so-called as people would drop out of the workforce...

But this is just the corollary of Peter Schiff in the WalMart parking lot trying to get people to pay higher prices so wages could be higher... as someone commented there, the Kalecki equation does not contain price variables.

rsp,

Tom Hickey said...

No one is dealing with the structural causes of endemic poverty, which are social rather than economic. Poverty cannot be solved by giving money to the poor, but that doesn't mean that there should be inadequate welfare support either.

Welfare support is necessary on many grounds, but we also have to recognize that welfare alone will never solve the structural issues involved since it doesn't address them. Different groups of poor are poor for different reasons, and different approaches are needed — Appalachia is not Harlem or Watts, for instance, and rural poverty is quite different from urban.

Matt Franko said...

btw Peter has a nice post up analyzing the situation where we might have all a JG, BIG and public and private employment all going on at the same time here:

http://heteconomist.com/unearned-income-and-its-distribution/#more-10404

rsp,

Tom Hickey said...

"I think it would chasten firms and perhaps incentivize them to provide the correct workplace environment or people would just quit if they knew they could just fall back to the BIG as a worst case.."

You can bet that Ryan has an antidote for that. The GOP is never ever going for a plan that increases worker freedom and security, and raises labor bargaining power, at least the way the party is presently configured. Limiting worker security and reducing labor braining power is part of the not-so-hidden agenda.

Ryan Harris said...
This comment has been removed by the author.
Matt Franko said...

Tom,

My position is that they are not that smart...and that they LITERALLY are made to think "we're out of money!".

They are under control of:

"the god of this eon (who) blinds the apprehensions of the unbelieving" 2 Cor 4:4

They are made LITERALLY blind to this authority we have imo... they just can't see it.

rsp,

James said...

Ryan is just taking this idea from the tories and lib dems over here in the UK, they're trying to bring in a universal credit, and so far it's been a disaster, the project is costing a fortune and the pilot schemes are not helping people in any way, shape, or form.

It's just another way to make cuts, and they've been using the rhetoric of deserving and undeserving to try and push it through. I think they simply want to bundle all the benefits received together for political reasons, that way they can try and turn people against welfare recipients even more by referring to the amount certain individuals receive, and by focusing on those receiving the higher amounts it will build resentment in the target audience, which obviously is the "hard working taxpayer" who they continually say are the ones paying for the idleness of those on benefits, that resentment will then be used in campaigns by politicians telling their target audience about, how tough they'll be on people receiving benefits, and how they're going to end the 'something for nothing culture', if they get elected, and on and on it will go. This is basically what's playing out here now.

The simple fact is, the people who believed in neoliberal policies before the financial crisis, haven't changed one bit. In fact they're only becoming more dogmatic and more extreme, and there is no real political or media opposition to this ideology anymore, so they're being quite brazen about it as well, far from the financial crisis being their undoing, it has been their coming out party, they're richer than ever, have more power than ever, and are now exerting more control over public policy than even they believed was probably possible.

Matt Franko said...

James,

"it's been a disaster, the project is costing a fortune"

How can the "cost" of a govt project be associated with it being a "disaster"? (remember this is an MMT site...)

And Ryan lost as the vice president candidate in 2012 so his type of previous approach (whatever you want to term it) is being rejected (at least over here...) and the GOP will never be able to achieve a national office again imo unless they wake up to this fact... I believe there is a faction in the GOP that understands this and Ryan looks like he is now at least associating with that faction if not leading it...

Dems will need to respond to this in order to maintain their large lead as far as public perception on the socio-economic issues... otherwise this type of policy from the GOP may be enough to put them (GOP) over the top next time...

so lets see how the Dems respond... and I dont think a response of "dont believe it, its all part of a neo-liberal conspiracy!" is going to fly... they have to come up with something credible...

And as far as it "not helping" if someone is "poor" (ie lacking means of subsistence) and you xfer balances of state currency to their account regularly and in sufficient amounts, they are NO LONGER "POOR".

Now some may consider "poverty" as a separate issue, but imo that is slipping into "class" type of issues and we run the risk of trying to apply our "values" on others and comes across as snobish and dogmatic imo...

iow we look at the lifestyle of a cohort of others and say: "they are in "poverty"!" when they might be very happy with the way they are living as long as they are not "poor"... this is how all of this discussion about "class" and "poverty" comes across to me anyway ... snobish.

rsp,

Matt Franko said...

Tom,

"labor bargaining power" is meaningless in a nation where national income is not rising because the govt officials think "we're out of money!" and in a nation where we allow foreign firms to come in unfettered to sell their goods for payment in our domestic state currency...

There is nothing there for "labor" to bargain for, other than perhaps that "labor" groups rate of decline to the bottom they will experience... its like all they can be "bargaining" for is how fast they get screwed...

rsp,

Peter Pan said...

The Universal Credit: coming to a town near you!

This could be a step in the right direction, but not if it is means-tested. I believe we have a form of tapering in Canada, but the lack of jobs is the underlying reason for welfare dependency.

Tom Hickey said...

"How can the "cost" of a govt project be associated with it being a "disaster"?"

Spends a lot with low to no expected outcome. Aka waste, or graft.

Tom Hickey said...

""labor bargaining power" is meaningless in a nation where national income is not rising because the govt officials think "we're out of money!" and in a nation where we allow foreign firms to come in unfettered to sell their goods for payment in our domestic state currency…"

Not meaningless is an environment where real corporate profits have been rising for decades with real wage stagnant or declining. If labor had bargaining power and political power as well, that would not be happening. One of the highest priorities of neoliberalism is to break labor and the neoliberalism have largely succeeded in this, but they are not done yet. The safety net still needs to be removed.

Tom Hickey said...

There's a germ of a good idea in universal credit but the devil is in the details and neoliberals are very good at using the details to achieve their objectives behind the façade of an appealing concept. Let's see the fine print.

James said...

"How can the "cost" of a govt project be associated with it being a "disaster"?"

It's who the money is flowing to that's a disaster, mostly to companies and consultants. Meanwhile the people who need the money are being denied access to it more and more.

That's what I meant by it not helping those who need it, the money isn't going to them, in fact more money is being withdrawn from them and they're being told we can't afford it anymore. If the money that's been wasted bringing in companies and consultants had instead been used to increase the benefits people get, it would have been more useful and would have also gone right back into the economy.

Personally I'd like to see an income guarantee, set at a living wage, I think it's ridiculous that the most precious and finite resource any of us has(our time) is expected to be available cheaply, and if people don't offer themselves "freely", then the government will discipline you until you comply. Those people who decry government intervention are only too happy to allow the government to intervene in the lives of poorer people if they don't make themselves available for exploitation.

Matt Franko said...

Tom

Total 'earned' income is running at about a 6T annual rate... then you have to take taxes out which is a bit under 2T...

so that leaves individuals with lets say 4.24T in after tax income to subsist on...

Divide by the 310M in US and that leaves less than 14k annual per person if all earned income was equally distributed... a bit over 1k per month... this is not enough for a well provisioned life with adequate shelter/food/clothes/education/medical, etc...

If you and I are lost at sea and down to our last 3 thimble-fulls of fresh water and you have 2 and I have one, I do not care that you have "twice as much as I do"... that is not the key takeaway imo..

rsp,