On the Stipend: 1 of 4

           On the Stipend

 

          I write about the ‘stipend’, also known as ‘basic income’, or ‘Star Trek economics’. The idea is for everyone to have a guaranteed annual income, issued by the government. It is in effect a universal dole. I write because the idea is being discussed in Switzerland and elsewhere. Milton Friedman recommended it, in the form of a negative income tax.

          I think it’s a good idea, if done right, and that’s a big if; for if done wrong then it’s worse than what we have now.

          Please note that what we have now is already a stipend system, when you count public goods. Roads, bridges, sewer lines; all of these and many other goods are available to all for free. You are paid these things, simply for breathing; that is a stipend. Other stipends include protection from crime by police and courts; and protection from foreign invasion by the military. These are state-based stipends.

          A basic income is a free-market-based stipend. All get paid a minimum amount, simply for breathing; and they get to dispose of that income as they please in a free market. (Guarded against fraud by courts and cops; part of the stipend.) But why go to such an expense? And how to fund it? And fund it how much?

          Why a stipend? As part of Leviathan’s natural logic, both good reasons and bad. It’s civilization’s old bargain; liberty for security. A stipend stabilizes society by giving everyone a stake in the system. A stipend decreases public anxiety and improves public nutrition; this means better public health, both physical and mental.

          Of course a critic will say that this amounts to plutocracy insurance; buying off the poor to quash rebellion; and such critique is correct. Which is better; welfare or revolution?

An even more cynical critic would compare a stipend economy to “neocheating”. “Neocheating” is a card-sharping system, in which the neocheater cardsharps not for his own advantage, but for the weakest player on the table, from whom the neocheater can then win honestly by superior play. Similarly, a stipend economy taxes the rich to fund the poor, from whom the economy can extract wealth by normal free-market exploitation. The stipend closes the loop, so the wealth keeps cycling, and does not go stagnant. I call this “suck-up economics”.

          A stipend is Keynesian; it stimulates economic activity. The poor are certain to spend all that money as quickly as possible for the most valuable goods at the lowest price. The poor, unlike the rich, know the value of a dollar; they are not jaded; so the stipend stimulus would be efficiently applied. This is free-market Keynesianism, as opposed to the inefficient centralized military Keynesianism of Reagan and Bush.

          Paid for how? The same way all the other stipends (roads, sewers, armies) are paid; by taxation. This taxation must be graded to ensure a low effective tax rate on income at the lowest income levels, to preserve the incentive for labor. So the rich will pay for this, and the middle class too. It’s a tax burden, but I say it’s worth every penny, if done right. (If!)

          Paid for how much? Enough for the jobless to live on, with a little bit more for small luxuries. And paid to the working poor, as well, to preserve the profitability of labor.

          Some will object on moral grounds. What are we paying for? Who deserves it and why? Will it promote dependency?

          A stipend-recipient is paid to spend the stipend, and save none of it. The last thing we want is for the recipient to save the money; we want it circulating. Idle people are okay, for they make no trouble; idle money is not okay, for it makes no end of trouble. Stipend-receivers are job creators; their job is to be customers.

          As for who deserves it; the whole point of the stipend is that you don’t have to deserve it, you just have to breathe. The stipend works on a more basic level than merit. It’s about survival; for merit, consult ambition.

          Dependency is a serious concern. A stipend can be done wrong, and it can be done right. Done wrong, it is stingy and ends as soon as the recipient works; this creates a poverty trap, where the poorest are sick, desperate and idle but cannot improve themselves by labor. (A lot like what we have now.) Done right, the stipend is sufficient to support good health and judgment; which implies some limited comfort. Also, it must have a low effective tax rate on earned income at the lowest levels; that is, the stipend must phase out slowly enough with rising income for labor to be profitable to the laborer. Both of these things increase the public cost of the stipend; for doing it right costs more than doing it wrong. There is no free lunch.

          If effective tax on lowest income is low, then people will be naturally driven to climb the income ladder. A living minimum income will keep the poorest fed and sane, but they will still suffer from ambition, envy, greed, and sexual politics. Physical security does not quell these natural passions, so men and women will still strive; which implies labor.

          So capitalism need not fear a stipend, if it is a living stipend, and the effective tax rate on low income is low. A living stipend guarantees consumer demand and business profit, and this stimulus is applied efficiently; and low effective taxation of the poor efficiently diminishes their numbers by their own efforts.  A living stipend with low taxation of the poor is expensive and requires taxation of rich and middle class; there is no free lunch; but it’s a valuable investment, for that money will flow right back to the rich and middle-class taxpayers, and save them worry and trouble, too. Capitalism needs masses of choosy customers, so why not pay for them?

          One final point. I am an aplutist; I doubt the existence of money. If money is a useful collective hallucination, an enormous business placebo, and if the illusion is under our control, then why not make it a dream, rather than a nightmare?

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          The above is a speculation. Please critique. I foresee libertarian objections, also anarchist. Just how much is a living income? Rents and other prices vary. And so on.