Transcript Here - Cameron Economics

Reform of a Modern Welfare-State
through a Basic Income to Restart Higher
Levels of Growth and Ameliorate the
Rule of Law
Cameron M. Weber
GBRS 2015
Istanbul, Turkey
Reform of a the Welfare-State with a Basic
Income for Everyone
Reform of a the Welfare-State with a Basic
Income for Everyone
Outline of Story
1. Evolution of fiscal centralization in USA
2. Emergence of welfare-state
3. Why welfare-state leads to “new normal”
4. Reform plan to replace welfare-state with a
Basic Income (BI) for everyone.
5. Posit that BI re-starts growth by freeing price
signals, and, creates more equality under law
Stylized Facts of the “New Normal” in a
Modern Welfare-State
Note: Analysis is specific to the United States of America but hopefully
there are some lessons learned for other welfare-states
Fiscal Centralization and the Welfare-State
Anti-Federalists against new central government
proposed in U.S. Constitution, thought would “crowdout” local decision-making and mutual aid
Federalists wanted “vigorous” federal state
American Revolution was won under Articles of
Confederation (1776-1788)
Reform of a the Modern Welfare-State
with a Basic Income
The Growth of the Central State
Grey: Local Direct Spending
Green: States Direct Spending
Red: Federal Direct Spending
Blue: Transfer to State and Local
Source: Chantrill, Christopher. 2015. “US Government
Spending History from 1900.”
[http://www.usgovernmentspending.com/past_spend
ing]
Fiscal Centralization in the USA
Collective Decision-Making and Basic Government
Most economists agree that collective decisionmaking necessary to provide “public goods”
Generally agreed to include national defense, court
system and the ability to negotiate treaties with
other social collectives
We call this “Basic Government” and juxtapose with
“Welfare-State”
Collective Decision-Making and Basic Government
• We propose that federal government beyond
“Basic Government” is “Welfare-State”
• Welfare-State imposes depersonalized
(relatively inefficient) rent-seeking federal
intrusions upon personalized and local
(relatively efficient) common resource
management and local mutual aid
Welfare State and “New Normal”
Hayek 1945
Price signals and social crisis
Krueger 1974
Rent-seeking and economic stasis
The Beginning of the End
United States has Basic Government at federal
level from 1789 – 1848
Common resources are managed locally
Department of Interior (corporate-welfare)
created 1849
“Basic Government” and the “Welfare-State”
A. Basic Government
Department of Defense--Military
2014 (est.)
571,882
C. Social-welfare
Department of Housing and Urban Dev.
2014 (est.)
49,479
General Services Administration
-231
1,040,661
Office of Personnel Management
86,723
Total
86,492
Department of Justice
32,652
Department of Health and Human Services
Department of State
30,505
Department of Education
68,991
Department of Labor
75,579
Department of Transportation
93,574
Department of the Treasury
Executive Office of the President
612,782
402
2014 (est.)
E. Overhead
USG Spending (A + B + C + D + E)
4,116,050
Legislative Branch
4,912
Social Security Administration (On-Budget)
92,247
Government (A + B)
1,511,459
Judicial Branch
7,432
Social Security Administration (Off-Budget)
838,917
Welfare State (C + D)
2,518,099
Total
1,260,567
Total
2,259,448
Welfare State % of Total USG Spending
Welfare State Overhead Allocation
B. Military-industrial-security complex
Department of Homeland Security
D. Corporate-welfare
45,034
Department of the Interior
13,172
Department of Veterans Affairs
146,357
Department of Agriculture
141,192
Other Defense Civil Programs
59,501
Department of Commerce
8,879
Total
250,892
Department of Energy
6,415
Environmental Protection Agency
8,412
International Assistance Programs
23,084
National Aeronautics and Space Admin.
18,104
Small Business Administration
Total
52,914
Welfare State Plus Overhead
2,571,013
Government Plus Overhead
1,545,037
4,116,050
31,026
Corps of Engineers-Civil Works
National Science Foundation
61%
7,409
Misc. Independent Agencies & Offsets
-232,955
958
258,651
Net Outlays
3,883,095
Data: US OMB 2015
Reform of the Welfare-State to Restart Growth
US GDP 2014 ( A )
17,701,000
Social Welfare Expenditures
Corporate Welfare Expenditures
Total Welfare Expenditures
2,259,448
258,651
2,518,099
Social Welfare with Overhead ( B )
Corporate Welfare with Overhead ( C )
Total
2,307,070 90%
263,942 10%
2,571,013 100%
Social Welfare % of GDP (B/A)
Corporate Welfare % of GDP (C/A)
13.0%
1.5%
2014 US Federal Welfare State Expenditures ( A )
$2,571,000,000,000
2014 Population Aged 16 and Over ( B )
251,293,200
Basic Income to Replace Welfare State (A/B)
$10,231 Per Year Per Person
US Poverty Level (2014)
$11,700 Per Person
Reform of the Welfare-State with a
Basic Income for Everyone
2014 US GDP ( A )
$17,701,000,000,000
2014 US Government Expenditures ( B )
$4,116,050,000,000
U.S. Government expenditures 23% of the
economy
Therefore extent of market is 77%
Welfare state 14.5% of economy
US Government % of the Economy
23% (B/A)
Reform expands the extent of market
price system to 91.5%
Assume “new normal” growth is 2%.
(1) 77% / 2% = 91.5% / x, where x =
2.4%, and, (2.4% – 2%) / 2% = 20%
With reform we expect a new rate of 2.4%,
an increase of 20% (1)
Reform of the Elitist Utilitarian Welfare-Warfare State
with a Basic Income for Everyone
Civilian Conservation Corps 1933 – 1942
creates “citizen–soldiers” (Suzik 1999)
Aid to Families with Dependent Children 1935
through today creates “obedient citizens”
(Russell 2010)
“Obedient citizen-soldiers”
Reform of a the Welfare-State to Restart Growth
“As O’Rourke has pointed out, there can’t be any poor
people in the United States. His proof is that if we take
the total amount spent on poverty programs and divide
it by the number of people in poverty, the income per
capita is above the poverty line. QED. But the money is
not reaching the poor.”
Munger, Michael. 2015. “One and One-Half Cheers for a Basic
Income: We Could do Worse and Already Have,” The
Independent Review 19 (4): 503-513.
Reform of Welfare-State through a Basic
Income to Restart Higher Levels of Growth
and Ameliorate the Rule of Law
The Anti-Federalist also warned that the
Constitution would turn patriots into partisans
and demagogues appealing to emotion instead
of reason
The Other, us versus them
Degeneration and Rent-Seeking in
Republicanism
Republicans and Democrats
Both parties expand size and scope of
government and each claim that the other is
abusing the U.S. Constitution
R: Oil and Gas (liability limits)
D: Clean and Green (subsidies and trade barriers)
Rent-Seeking in American
Republicanism
Democrat Party politicians (cities) pander
with food stamp (social welfare) and
Republicans (rural areas) pander with
agricultural subsidies and trade barriers
(corporate welfare)
From Patriots to Partisans
Food stamps and agriculture subsidies are on
the same legislative agenda, so both Parties
always vote for the bill despite the hypocritical
antagonistic rhetoric
Reform of the Welfare-State to Restart Growth
*Replacing the elitist utilitarian welfare state (for some
people) with a Basic Income (for everyone) is a more
just society
* Would encourage entrepreneurial behavior and
economic growth as reduces down-side risk
Reform of Welfare-State through a Basic
Income to Restart Growth and Ameliorate
the Rule of Law
A corollary, we recommend federal tax code reform,
another source of great rent-seeking in the U.S.
economy
A single income tax rate for everyone, shown to be
23%, the U.S. Government’s share of the economy
Reform of the Welfare-State to Restart Growth
*Or we can remove all social and corporate welfare and
have a single, same for everyone, tax rate of 8.5%
(Basic Government’s share of the economy)
*Optimal is some planned transition from here to there