Sanders' vision of democratic socialism is just capitalism with a safety net.And not even with the most important part of the safety net, a job guarantee.
Pretty much all current public programs to assist households with low incomes suffer from the same seemingly unavoidable problem: As the household's income rises, the amount of assistance provided by the public program is phased out. For example, a person who earns an extra $100 might find that eligibility for public assistance has been reduced by $50. Economists call this reduction in benefits as income rises a "negative income tax," and it is not unusual for studies to find that certain working poor families face negative income tax rates in the range of 50% of the marginal dollar earned, 60%, or even higher (for examples, see here and here). These high negative income tax rates diminish work incentives for those with low incomes.
There's a way out called "universal basic income." Ed Dolan explores "The Pragmatic Case for a Universal Basic Income" in the Third Quarter 2014 issue of the Milken Institute Review (free registration may be required for access).
The idea of a universal basic income is that every U.S. citizen would be entitled to a chunk of money each year. This amount would not vary based on income level, or employment, or disability, or age, or any other reason. Specifically, when a low-income person works and earns income, the universal basic income check would not be reduced in any way. The "negative income tax" rate is zero percent.
The idea of a universal basic income raises obvious questions. How much would it be per person? How would it be financed? Are the politics of such a program conceivable? Let's tackle these in turn.Conversable Economist
Oh boy. Reihan Salam has a piece riddled with confusions, some conceptual, some technical, and some just downright strange. It is so confused that I will eschew the normal narrative type reaction and just go line-by-line."Confusions" might not be the right word. Inexcusable ignorance or intentional lying?
It is for these people that the Indian government recently announced an ambitious $19.5 billion National Food Security Bill. Passed by the legislature in the first week of September, the bill promises heavily subsidized wheat and rice for those who live below the poverty line — about 67 percent of the population.
As reported in the legislation, a total of five kilograms of food grains per month will be provided at a fixed price of Rs 1-3 ($0.02 to $0.05) per kilogram through ration shops across the country. If the food security bill works as planned, it will become one of the world’s largest welfare schemes.
“This bill makes the right to food a law,” says Chintan Kalra, a food security activist from Mumbai. However, Kalra is aware of the many ways the bill can fail, which is why “implementation will play a huge role in what the bill really achieves.”Truthout | Report
Now that President Obama is poised to officially endorse the adoption of chained CPI in his next budget—a change that would cut the future growth of Social Security benefits—Ed Kilgore ponders the political implications:
"Could Republican congressional candidates in 2014 actually run against 'Obama's Social Security Cuts,' after decades of lusting for 'entitlement reform' and several consecutive years of demanding that Obama give Social Security benefits a haircut or worse?"
Ha ha ha! That's a knee slapper. To his credit, Ed comes up with the obvious answer: Of course they could.
As I illustrated in a previous post, “a significant proportion of the balance sheet of wealthy Americans is made up of real assets – real estate, stock and business holdings”. Therefore “what wealthy Americans, businesses and banks share is a common interest in supporting asset prices (real and nominal), a lack of interest in seeking full employment unless it is a prerequisite for supporting asset prices, and an aversion to any policies that can trigger wage inflation”. The fact that our dominant macroeconomic policy doctrine depends upon the ‘wealth effect’ simply reflects the fact that our economy is driven by wealthy special interests.
The real question again is why there isn’t more mass opposition to such a blatantly regressive policy regime. In previous posts(1, 2), I have argued that crony capitalism achieves broad-based support by piggybacking upon broad-based programs aimed at the middle class. But they also achieve this support due to the absence of a safety net that breeds middle-class insecurity. This carrot-and-stick approach ensures middle-class support for the same stabilising policies that transfer wealth to the one percent.Got that? Read the rest to see how it is done.
