Tuesday, January 29, 2019

UBI and Brexit some thoughts.

Morning musings.
UBI - universal basic income, is the latest fresh new idea emanating from the new-new-left, the new-Progressives. Heavy irony here - this idea was first posited by none other than Milton Friedman and was called a negative income tax. Needless to say, he is not getting any acknowledgement for it. As it is being discussed, for example as a solution to poverty in India, there are two important elements being neglected.

1. It was never intended to be, and can never be, a policy for obtaining economic growth. It is not an instrument for growth. One proponent on the BBC suggested that with everyone having a basic income, increased spending would stimulate the economy and make it grow. Ugh. Rather ii is a scheme for alleviating poverty as a safety net. It is expensive and it will inhibit growth compared to no welfare policy. But

2. It was originally proposed by Friedman as a *replacement* for ALL of the welfare programs now in place at all levels of government. It implies a massive downsizing of bureaucracy, waist and inefficiency, and in that sense it would be cheaper and more conducive to growth. There seems to be a vague realization that it should replace current programs. But this implies that it should not carry any increase in taxation. The income subsidy should be limited to the amount that can be afforded under current conditions. This is not recognized and there is talk of dramatically increasing taxes (in India!!) to implement it. That would be a disaster.
Not all no-deal Brexits are alike. There are good and bad ones in various degrees. The best, IMHO, would be one where the UK makes is very easy for those already in the country under EU laws to stay and continue what they are doing. A simple streamlined registration for example. Relatedly they should unilaterally extend to the EU the same conditions as are now in place for cross border workers in the future. An issue in the separation was immigration, so the UK could modify cross border rules to meet its concerns. This should not affect migrants with European job-market skills. Similar accommodations should be extended to investments and banking - this is very important. And border arrangements in Ireland should be establishment to be as close as possible to the current situation. A key element in the separation is the cost to the British taxpayer of subsidies to Europe and these would be abolished. The EU should be invited to match the UK's unilateral accommodations. I suspect eventually officially or unofficially they would. But maybe not. So be it.
My two cents. I suspect my advice will not be followed and we will get an unnecessary botch-up to some degree.

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