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Previous studies have shown that one of the best individual measurements of wellbeing is satisfaction with life. Satisfaction with life was measured by a variable where the value 0 on a scale from 0 to 10 means very high dissatisfaction with life and the value 10 very high satisfaction with life. In the test group the average value for satisfaction with life was 7.32 and in the control group 6.76. The difference is statistically highly significant (p=< .0001). The difference remained significant even when we controlled for the background variables: gender, age, education, structure of the household and income. The same applies basically to all statistically significant differences between the groups presented below. Table 5 compares the test group and the control group as regards trust in other persons, the legal system and politicians. Trust in other persons refers to so-called generalised trust, which according to previous international studies is high in Finland and the other Nordic countries. 8 One explanation for the high level of trust has been the universal way of delivering benefits and services in the Nordic welfare states.9 Furthermore, the perception of a sufficient level for social security benefits is connected to a higher level of trust. 10 In this study, all three dimensions of trust are evaluated on a scale of 0 to 10 where the value 0 indicates total distrust and the value 10 the highest possible level of trust.

In a population survey carried out by Kela in 2017, the average level of generalised trust for the whole population was 7.4. Table 5 shows that the level of generalised trust is lower than for the whole population in both the test group and the control group. However, in the group that received basic income, trust in other persons is at a slightly higher level than in the control group.

A universal basic income (UBI) is at the heart of the debate about how society will organize itself after robots and algorithms do more and more of today’s work. Not everyone agrees how we do this.

One side argues, with some evidence, that giving all citizens a minimum stipend that covers basic needs discourages punching our time cards. Jobs also give us more than just money, they offer purpose and social cohesion.

I. Artificial Intelligence & Automation There is growing acknowledge and discussion that as Artificial intelligence develops and automation improves it will transform the nature of work. A November 2017 report from global management consulting firm McKinsey on the effects of automation on jobs, skills and wages expects 400 million to 800 million people could be displaced by automation in the next 12 years. 4 Automation will not only effect low wage and low skill jobs but middle-income jobs like office workers, junior workers. 5 Lower incomes and potential unemployment looming for middle income workers, governments could face fundamental problems like lost taxes and dissatisfied voting classes. 6 These predictions create a pressing problem that needs to be addressed by our government, businesses, and us as citizens. This disruption of our current economy by automation is a threat whether or not we choose to address it or prevent it. However, some disregard the threat of automation and believe that automation will create new jobs, as the Industrial Revolution did. Yet, having blind optimism that at a minimum 400 million new jobs will be created in response to automation is not a solution that I support. Funding research to potential solutions is a proactive solution that could curb the effects of automation and may be the solution that saves our economy and middle class. II. Universal Basic Income as a Solution Following many discussions of the future of work and automation is the mention of Universal Basic Income as a program that may be needed in the future to uphold our economy and redistribute the immense wealth created by technology. A universal basic income (UBI) is a fixed amount, at a level sufficient for subsistence, given by the state to all its citizens regardless of income or work status.7 UBI is often proposed to be distributed at scheduled intervals, a week, month, or even a year.8 The average amount proposed is around $10,000 annually (about 20% of average earnings), although this amount varies widely from country to country.9 The cost of UBI in the U.S. would be about $3.2 trillion, or $1.5 trillion if excluding payments to households earning more than $100,000, retirees receiving Social Security, and children.10 Proposals vary in how they will fund the program but possible sources of funding include: carbon taxes, income taxes, value added tax, negative interest rates, earnings from investments, decreases in military spending, sovereign wealth funds, and resource-based revenues.11 Universal Basic Income can be a solution for the future of automation and preventing a rapid increase in the amounts of economic inequality in our country. UBI is a way to distribute the fruits of technological advancement fairly, in order to correct for the eventual job loss caused by automation. The most substantial benefit would also be do eliminate households living below the poverty line.12 Some even cite a potential for people to explore creativity, entrepreneurship, and research. Nobel prize-winning economist, Paul Krugman, has argued that a minimum income is a way to cushion the blow from the automation revolution, a way of ensuring the middle class isn’t decimated in the transition to a new economy

Dismissing vague warnings that robots are coming for our jobs is pretty easy. Not so easy? Dismissing hard evidence that they've already arrived and are doing those jobs better and more cheaply than we ever could.

Those are the facts the workers of the world faced when news broke earlier this year that a Chinese factory increased its production by 250 percent and dropped its defect rate by 80 percent by replacing 90 percent of its human workforce with automated machines. In fact, the transition to machines has been so successful, the plant may soon cut its remaining workforce from 60 to just 20 human workers.

Generative artificial intelligence systems could lead to "significant disruption" in the labor market and affect around 300 million full-time jobs globally, according to new research from Goldman Sachs.

Generative AI, a type of artificial intelligence that is capable of generating text or other content in response to user prompts, has exploded in popularity in recent months following the launch to the public of OpenAI's ChatGPT. The buzzy chatbot quickly went viral with users and appeared to prompt several other tech companies to launch their own AI systems.

A worker stands near the chimney stacks of a neighbouring factory at IceStone, a manufacturer of recycled glass countertops and surfaces, in New York City A worker stands near the chimney stacks of a neighbouring factory at IceStone, a manufacturer of recycled glass countertops and surfaces, in New York City, New York, U.S., June 3, 2021. REUTERS/Andrew Kelly Summary Manufacturing PMI at 46.3 in March versus 47.7 in February New orders index tumbles to 44.3 from 47.0 in February Employment contracts; prices gauge declines WASHINGTON, April 3 (Reuters) - U.S. manufacturing activity slumped in March to the lowest level in nearly three years as new orders plunged, and analysts said activity could decline further due to tighter credit conditions. The Institute for Supply Management (ISM) survey on Monday showed all subcomponents of its manufacturing PMI below the 50 threshold for the first time since 2009. Some economists said this suggested a recession was around the corner, while others said much would depend on the services sector, whose PMI remains consistent with a growing economy. The survey made no direct comment on recent financial markets turmoil. Makers of miscellaneous products said they were "closely monitoring the global banking situation" but there were no impacts "at this time." Federal Reserve rate hikes to fight inflation have raised borrowing costs and cooled demand for goods. "Manufacturing is pulling back, but the service sector was still chugging along in February," said Chris Low, chief economist at FHN Financial in New York. "As long as it remains well above 50 when reported on Wednesday, the broad economy should be just fine. Nevertheless, the health of manufacturing is related to the health of the overall economy." The ISM's manufacturing PMI fell to 46.3 last month, the lowest level since May 2020, from 47.7 in February. Outside the COVID-19 pandemic, it was the weakest reading since mid-2009. Economists polled by Reuters had forecast the index would dip to 47.5. The PMI remained below the 50 threshold for the fifth straight month, a sign of contraction in manufacturing, yet hard data have suggested continued moderate growth in manufacturing, which accounts for 11.3% of the economy. Manufacturing expanded at a 4.5% annualized rate in the fourth quarter, the government reported last week. Reports last month also showed orders for capital goods excluding aircraft eked out a small gain in February as did manufacturing output. A separate survey from S&P Global on Monday showed an improvement in U.S. manufacturing in March from February. "Economic statistics in the rest of the economy are not showing convincing signs of a recession," said Christopher Rupkey, chief economist at FWDBONDS in New York. According to the ISM, 70% of manufacturing gross domestic product was contracting in March, down from 82% in February. It said more industries contracted strongly last month. "The proportion of manufacturing GDP with a composite PMI calculation at or below 45 percent, a good barometer of overall manufacturing sluggishness, was 25 percent in March, compared to 10 percent in February," said Timothy Fiore, chair of the ISM Manufacturing Business Survey Committee. Of the six largest manufacturing industries, only petroleum and coal products as well as machinery, registered growth in March. Other manufacturing industries reporting growth were printing and related support activities, miscellaneous manufacturing, fabricated metal products and primary metals. Twelve industries reporting contraction included furniture and related products, nonmetallic mineral products, textile mills, transportation equipment and computer and electronic products as well as electrical equipment, appliances and components. Comments from manufacturers were mostly downbeat. Transportation equipment producers said "sales are slowing at an increasing rate." Electrical equipment, appliances and components manufacturers reported "new orders are starting to soften." Makers of chemical products said "sales (were) a bit down, and budgets being cut with a greater emphasis on savings." But food, beverage and tobacco products manufacturers said "business is doing generally well, with input costs falling in some areas and rising in others." U.S. stocks were trading mixed. The dollar fell against a basket of currencies. U.S. Treasury prices rose. ISM Manufacturing PMI ISM Manufacturing PMI NEW ORDERS PLUNGE The ISM survey's forward-looking new orders sub-index fell to 44.3 last month from 47.0 in February. Demand could come under pressure following the failure of two regional banks recently. Banks have tightened lending standards, which could make it harder for small businesses and households to access credit. "Manufacturing activity was slowing before the recent stress, and we expect tighter conditions will contribute further to that slowdown in investment spending," said Tim Quinlan, a senior economist at Wells Fargo in Charlotte, North Carolina. Work backlogs shrank further last month, reflecting slower demand and improved supply chains. The ISM survey's measure of supplier deliveries slipped to 44.8, the lowest level since March 2009, from 45.2 in February. A reading below 50 indicates faster deliveries to factories. With supply improving, inflation at the factory gate is retreating. The ISM survey's measure of prices paid by manufacturers dropped to 49.2 from 51.3 in February. But oil prices jumped on Monday after Saudi Arabia and other OPEC+ oil producers on Sunday announced further oil output cuts of around 1.16 million barrels per day. Prices for services also remain high. Last month, the Fed raised its benchmark overnight interest rate by a quarter of a percentage point, but indicated it was on the verge of pausing further rate hikes due to market turmoil. The U.S. central bank has hiked its policy rate by 475 basis points since last March from the near-zero level to the current 4.75%-5.00% range. With weak demand, the survey's gauge of factory employment fell to 46.9 from 49.1 in February. The ISM said companies were "attempting to maintain workforce levels to support projected second-half growth, but to a lesser degree compared to February." Six industries reported a decline in employment. Economists were confident nonfarm payrolls growth in March would exceed 200,000 in the government's employment report on Friday.

Claude Forthomme, Seniore Editor of Impakter, graduate of Columbia University, Why Populism is Dangerous: The Propensity for War, 2018, https://impakter.com/populism-dangerous-propensity-war/

Populism is dangerous and has shown overtime an irresistible propensity for war. Public safety, health and the economy are at risk. But populist propaganda is hard to resist. Populist politicians thrive on fake news: it is so much easier to fuel people’s emotions if you feed them fabricated news of imaginary crises. And if you divert their attention from real economic problems with the irresistible lure of national identity politics and blaming foreigners. Previous articles have addressed the issue of austerity (here), the public health crisis (here) and the false “migrant crisis” (here). Here we take a look at populism’s propensity for war. Historically, populist leaders have been warmongers, Hitler first among them, for waging war across national borders and Pol Pot within borders. Nowadays, exhibit A is Putin’s invasion of Ukraine’s Crimea in 2014, diverting Russians’ attention from a deepening recession. Exhibit B is Trump’s rising militarism that has just jumped to the next level with John Bolton’s visit to Moscow this week to tell Putin the U.S. will withdraw from the I.N.F. Treaty. Mikhail Gorbachev, former president of the Soviet Union, has no doubts: A new nuclear arms race has begun, he writes in an opinion piece for the New York Times. He should know what he’s talking about. He is the man who signed with President Reagan in 1987 the I.N.F. treaty, one of the major arms non-proliferation treaties. For Europe, it is the most important since it aims at eliminating the arsenal of intermediate and shorter-range missiles. Back then, Gorbachev was at the helm of a dying Soviet Union shaken by the fall of the Berlin Wall, and he, more than anyone, believed in a new age of peace and international cooperation. He famously talked of a “Common European Home” and hoped to bring Russia inside Europe as an equal partner. That did not happen and the rise of Putin put paid to those hopes. In that article, Gorbachev reminds us that the I.N.F. treaty was followed by two more important ones, the Strategic Arms Reduction Treaty (a.k.a. Start 1, signed in 1991 by George H.W. Bush) and the New Start Treaty (2010 signed by Obama). By 2015, The US and Russia were able to report at the United Nations Nuclear Nonproliferation Review Conference that 85% of the arms had been retired and mostly destroyed. An amazing success that Trump, another Republican President, is about to reverse. Predictably, Russia is accused of violations, the standard way to break off treaties. And yet, the Republican party was not always the party of the military-industrial complex, a notion another Republican President warned America against: It was Eisenhower, in his farewell address in 1961, who identified the threat and famously coined that phrase. In the Trump era of America First, it’s hard to remember that just three decades ago, in the 1980s, there were politicians who had genuine liberal, progressive ideas – even in the Soviet Union that after 70 years of dictatorship looked like a hopeless case. Especially in the Soviet Union which, as events showed with Gorbachev’s Perestroika, was ready for a dramatic change, putting its Communist past and the Cold War in the dustbin of History. Now, History’s dustbin is about to be emptied on the world stage, bringing the Cold War back. Firebrand John Bolton, Trump’s National Security adviser (appointed last April) is having his moment of glory. A former U.S.Ambassador to the United Nations (under Bush), Bolton has always hated international treaties in general and the United Nations in particular. His fondest memory, he recalls in his 2007 memoir, was to pull the U.S. out of the International Criminal Court treaty. No matter the Court presented no particular danger to American sovereignty and that it was a major step forward for international law and justice. Bolton is an uncompromising hawk. For him the world is a jungle, justice is for sissies and the U.S. needs to be top dog. Now he is pushing Trump to withdraw from all international treaties – including further blocking the ICC and even moving out of some minor treaties like the Universal Postal Union, a 144 year-old postal treaty run by the United Nations, accusing it of letting China ship goods at an unfair discount. That was done last week. The fact that the ICC, as per its mandate, cannot prosecute any American without the consent of an American court is not mentioned by John Bolton or anyone in the Trump administration. They all prefer to present the ICC as illegitimate and a threat to American sovereignty. They do not accept the simple fact that the ICC is a UN body and therefore not illegitimate; and that it is never a threat to a country that respects international law and justice. And America used to be a paladin of justice but with populists in power, that has changed. Trump’s priority now is moving out of nuclear arms treaties – and that fits in nicely with his military build-up strategy. Let’s tick off the ways Trump has gone about re-militarizing the U.S.: Pumping up the defense budget to a historic high of $717 billion, even though America has always spent more than the rest of the world combined on military expenditures; of special note: $21.9 billion for the Department of Energy’s nuclear weapons programs that includes research and testing; Getting out of the 2015 deal to limit Iran’s nuclear activities; And now systematically pulling out of all remaining non-proliferation arms deals. To be fair to Trump, the U.S. had already pulled out of the Antiballistic Missile Treaty in 2002. That was done by the Bush administration without a good explanation, much to the dismay of the Federation of American Scientists, an association created in 1945 by the scientists who built the first atomic bomb. Their 2001 letter of protest to Congress ended with the following words that apply equally well to all the treaties that Trump is seeking to undo: “America has always sought to lead the world by example. Yet if other countries were to follow the example we have just set, the framework of international law would disintegrate. President Bush has just released NMD’s first shot, and it has landed squarely in the heart of American security.” Bolton’s trip this week in Russia was clearly intended to lay the ground to kill off the I.N.F. arms treaty, much to Putin’s barely concealed amusement. Watch him smile: This is exactly what makes Putin happy: He gets a green light from Trump to go ahead with building up his military arsenal, and takes none of the blame. The military build-up is entirely Trump’s. Bolton’s visit was relatively “friendly” and ended with an invitation to Putin to visit Washington in “early” 2019. Before then, Trump and Putin will see each other in Paris on 11 November, on the sidelines of the 100-year anniversary of World War I armistice. But Bolton stood his ground and warned Russia “not to mess with American elections”, threatening more sanctions to address Russia’s interference in its elections and its annexation of Crimea. What we get here is the American side of the story. But what is interesting is to look at the Russian side. Putin lays bare his thoughts, detailing the danger for Europe in the course of a recent press conference (25 October – Italian Prime Minister Conte was on a state visit). Putin’s candor is extreme: Should Europe worry? Judge for yourself. Putin puts it in very clear terms: The question is, he says, what will the Americans do with the new missiles they plan to build? Deliver them to Europe? If they do so, Russia will have no choice but to enter the arms race…Then he makes it even clearer: The European countries that agree to host American missiles need to realize that “they put their own territories under the threat of a strike response”. No matter how you interpret Putin’s statement or Trump’s breaking off arms treaties, there is little doubt that the Cold War will soon be back. Whether it will be as cold as the original one remains to be seen. But one thing is certain, populism’s obsession with national sovereignty is a source of tension, if not of out-and-out war. At least not yet.

Broadly shared economic prosperity is a bedrock of America’s economic and political strength—both domestically and in the international arena. A strong and equitable recovery from the economic crisis created by COVID-19 would be a powerful testament to the resilience of the American system and its ability to create prosperity at a time of seismic change and persistent global crisis. Such a recovery could attack the profound economic inequities that have developed over the past several decades. Without bold action to help all workers access good jobs as the economy returns, the United States risks undermining the legitimacy of its institutions and its international standing. The outcome will be a key determinant of America’s national security for years to come.

An equitable recovery requires a national commitment to help all workers obtain good jobs—particularly the twothirds of adults without a bachelor’s degree and people of color who have been most affected by the crisis and were denied opportunity before it. As the nation engages in a historic debate about how to accelerate economic recovery, ambitious public investment is necessary to put Americans back to work with dignity and opportunity. We need an intentional effort to make sure that the jobs that come back are good jobs with decent wages, benefits, and mobility and to empower workers to access these opportunities in a profoundly changed labor market.

U.S. manufacturing may depend on automation to survive and prosper Martin Neil Baily Monday, December 21, 2015 Can this sector be saved? We often hear sentiments like: “Does America still produce anything?” and “The good jobs in manufacturing have all gone.” There is nostalgia for the good old days when there were plentiful well-paid jobs in manufacturing. And there is anger that successive U.S. administrations of both parties have negotiated trade deals, notably NAFTA and the admission of China into the World Trade Organization, that have undercut America’s manufacturing base. Those on the right suggest that if burdensome regulations were lifted, this would fire up a new era of manufacturing prowess. On the left, it is claimed that trade agreements are to blame and, at the very least, we should not sign any more of them. Expanding union power and recruiting are another favorite solution. Despite his position on the right, Donald Trump has joined those on the left blaming China for manufacturing’s problems. What is the real story and what needs to be done to save this sector? The biggest factor transforming manufacturing has been technology; and technology will largely determine its future. DISAPPEARING JOBS Employment in the manufacturing sector declined slowly through the 1980s and 1990s, but since 2000, the decline has been much faster falling by over 6 million workers between 2000 and 2010. There were hopes that manufacturing jobs would regain much of their lost ground once the recession ended, but the number of jobs has climbed by less than a million in the recovery so far and employment has been essentially flat since the first quarter of 2015. Manufacturing used to be a road to the middle class for millions of workers with just a high school education, but that road is much narrower today—more like a footpath. In manufacturing’s prime, although not all jobs were good jobs, many were well paid and offered excellent fringe benefits. Now there are many fewer of these. SUSTAINED BUT SLOW OUTPUT GROWTH The real output of the manufacturing sector from 2000 to the present gives a somewhat more optimistic view of the sector, with output showing a positive trend growth, with sharp cyclical downturns. There was a peak of manufacturing production in 2000 with the boom in technology goods, most of which were still being produced in the U.S. But despite the technology bust and the shift of much of high-tech manufacturing overseas, real output in the sector in 2007 was still nearly 11 percent higher than its peak in 2000. Production fell in the Great Recession at a breathtaking pace, dropping by 24 percent starting in Q3 2008. Manufacturing companies were hit by a bomb that wiped out a quarter of their output. Consumers were scared and postponed the purchase of anything they did not need right away. The production of durable goods, like cars and appliances, fell even more than the total. Unlike employment in the sector, output has reclaimed it previous peak and, by the third quarter of 2015, was 3 percent above that peak. The auto industry has recovered particularly strongly. While manufacturing output growth is not breaking any speed records, it is positive. UNDERSTANDING THE PATTERN The explanation for the jobs picture is not simple, but the Cliff Notes version is as follows: manufacturing employment has been declining as a share of total economy-wide employment for 50 years or more—a pattern that holds for all advanced economies, even Germany, a country known for its manufacturing strength. The most important reason for U.S. manufacturing job loss is that the overall economy is not creating jobs the way it once did, especially in the business sector. This conclusion probably comes as a surprise to most Americans who believe that international trade, and trade with China in particular, is the key reason for the loss of jobs. In reality, trade is a factor in manufacturing weakness, but not the most important one. The most important reason for U.S. manufacturing job loss is that the overall economy is not creating jobs the way it once did, especially in the business sector. The existence of our large manufacturing trade deficit with Asia means output and employment in the sector are smaller than they would be with balanced trade. Germany, as noted, has seen manufacturing employment declines also, but the size of their manufacturing sector is larger than ours, running huge trade surplus. In addition, right now that there is global economic weakness that has caused a shift of financial capital into the U. S. looking for safety, raising the value of the dollar and thus hurting our exports. In the next few years, it is unlikely that the U.S. trade deficit will improve—and it may well worsen. Even though it will not spark a jobs revival, manufacturing is still crucial for the future of the U.S. economy, remaining a center for innovation and productivity growth and if the U.S. trade deficit is to be substantially reduced, then manufacturing must become more competitive. The services sector runs a small trade surplus and new technologies are eliminating our energy trade deficit. Nevertheless a substantial expansion of manufactured exports is needed if there is to be overall trade balance. DISRUPTIVE INNOVATION IN MANUFACTURING The manufacturing sector is still very much alive and reports of its demise are not just premature but wrong. If we want to encourage the development of a robust competitive manufacturing sector, industry leaders and policymakers must embrace new technologies. The sector will be revived not by blocking new technologies with restrictive labor practices or over-regulation but by installing them—even if that means putting robots in place instead of workers. To speed the technology revolution, however, help must be provided to those whose jobs are displaced. If they end up as long-term unemployed, or in dead-end or low-wage jobs, then not only do these workers lose out but also the benefits to society of the technology investment and the productivity increase are lost. The manufacturing sector performs 69 percent of all the business R&D in the U.S. which is powering a revolution that will drive growth not only in manufacturing but also in the broader economy as well. The manufacturing revolution can be described by three key developments: In the internet of things, sensors are embedded in machines, transmitting information that allows them to work together and report impending maintenance problems before there is a breakdown. Advanced manufacturing includes 3-D printing, new materials and the “digital thread” which connects suppliers to the factory and the factory to customers; it breaks down economies of scale allowing new competitors to enter; and it enhances speed and flexibility. Distributed innovation allows crowdsourcing is used to find radical solutions to technical challenges much more quickly and cheaply than with traditional R&D. In a June 2015 Fortune 500 survey, 72 percent of CEOs reported their biggest challenge is that technology is changing fast, naming it as their number one challenge. That new technology churn is especially acute in manufacturing. The revolution is placing heavy demands on managers who must adapt their businesses to become software companies, big data companies, and even media companies (as they develop a web presence). Value and profit in manufacturing is shifting to digital assets. The gap between current practice and what it takes to be good at these skills is wide for many manufacturers, particularly in their ability to find the talent they need to transform their organizations. Recent OECD analysis highlighted the large gap between best-practice companies and average companies. Although the gap is smaller in manufacturing than in services because of the heightened level of global competition in manufacturing, it is a sign that manufacturers must learn how to take advantage of new technologies quickly or be driven out of business. CLOSING THE TRADE DEFICIT A glaring weakness of U.S. manufacturing is its international trade performance. Chronic trade deficits have contributed to the sector’s job losses and have required large-scale foreign borrowing that has made us a net debtor to the rest of the world — to the tune of nearly $7 trillion by the end of 2014. Running up endless foreign debts is a disservice to our children and was one source of the instability that led to the financial crisis. America should try to regain its balance as a global competitor and that means, at the least, reducing the manufacturing trade deficit. Achieving a significant reduction in the trade deficit will be a major task, including new investment and an adjustment of today’s overvalued dollar. The technology revolution provides an opportunity, making it profitable to manufacture in the U.S. using highly automated methods. Production can be brought home, but it won’t bring back a lot of the lost jobs. Although the revolution in manufacturing is underway and its fate is largely in the hands of the private sector, the policy environment can help speed it up and make sure the broad economy benefits. First, policymakers must accept that trying to bring back the old days and old jobs is a mistake. Continuing to chase yesterday’s goals isn’t productive, and at this point it only puts off the inevitable. Prioritizing competitiveness, innovativeness, and the U.S. trade position over jobs could be politically difficult, however, so policymakers should look for ways to help workers who lose jobs and communities that are hard hit. Government training programs have a weak track record, but if companies do the training or partner with community colleges, then the outcomes are better. Training vouchers and wage insurance for displaced workers can help them start new careers that will mostly be in the service sector where workers with the right skills can find good jobs, not just dead-end ones. Second, a vital part of the new manufacturing is the ecosystem around large companies. There were 50,000 fewer manufacturing firms in 2010 than in 2000, with most of the decline among smaller firms. Some of that was inevitable as the sector downsized, but it creates a problem because as large firms transition to the new manufacturing, they rely on small local firms to provide the skills and even the technologies they do not have in-house. The private sector has the biggest stake in developing the ecosystems it needs, but government can and has helped, particularly at the state and local level. Sometimes infrastructure investment is needed, land can be set aside, mentoring programs can be established for young firms, help can be given in finding funding, and simplified and expedited permitting processes instituted. Martin Neil Baily Senior Fellow Emeritus - Economic Studies, Center on Regulation and Markets It is hard to let go of old ways of thinking. Policymakers have been trying for years to restore the number of manufacturing jobs, but that is not an achievable goal. Yes manufacturing matters; it is a powerhouse of innovation for our economy and a vital source of competitiveness. There will still be good jobs in manufacturing but it is no longer a conveyor belt to the middle class. Policymakers need to focus on speeding up the manufacturing revolution, funding basic science and engineering, and ensuring that tech talent and best-practice companies want to locate in the United States.

*** “rethink our policies about work and education” BIG allows laid off workers time to retrain and not have to be employed

This is why the US isn't ready for automation Economists have long argued that automation, not trade, is responsible for the bulk of the six million jobs shed by the manufacturing sector over the last 25 years. Now, they have a put a precise figure on some of the losses. Industrial robots alone have eliminated up to 670,000 American jobs between 1990 and 2007, according to new research from MIT’s Daron Acemoglu and Boston University’s Pascual Restrepo. The number is stunning on the face of it, and many have interpreted the study as an indictment of technological change — a sign that “robots are winning the race for American jobs.” But the bigger takeaway is that the nation has been ill-equipped to deal with the upheaval caused by automation. The researchers estimate that half of the job losses resulted from robots directly replacing workers. The rest of the jobs disappeared from elsewhere in the local community. It seems that after a factory sheds workers, that economic pain reverberates, triggering further unemployment at, say, the grocery store or the neighborhood car dealership. In a way, this is surprising. Economists understand that automation has costs, but they have largely emphasized the benefits: Machines makes things cheaper, and they free up workers to do other jobs. For instance, 41 percent of Americans were farmers a century ago, but thanks to tractors and mechanical harvesters, only 2 percent work in the agriculture today. The rest of us now can now aspire to be programmers or anesthesiologists or DJs or drone pilots. The latest study reveals that for manufacturing workers, the process of adjusting to technological change has been much slower and more painful than most experts thought. “We were looking at a span of 20 years, so in that timeframe, you would expect that manufacturing workers would be able to find other employment,” Restrepo said. Instead, not only did the factory jobs vanish, but other local jobs disappeared too. Acemoglu and Restrepo say that every industrial robot eliminated about three manufacturing positions, plus three more jobs from around town. If we are to make it through the next wave of automation, which is predicted to upend even more industries, we may have to rethink our policies about work and education — and learn from the industries that have coped the best. Their research from Acemoglu and Restrepo joins the work of David Autor, David Dorn and Gordon Hanson, who have shown that the harms of trade with China were similarly concentrated in certain communities. The laid-off manufacturing workers couldn’t quickly find new jobs, so the economic pain lingered in their neighborhoods. Experts still believe that trade and automation can benefit Americans overall, contributing to lower prices and creating new kinds of jobs. But this evidence draws attention to the losers — the dislocated factory workers who just can’t bounce back. The United States does have a program to retrain workers who lost their jobs to overseas competition, but research shows that most of them turn to other parts of the government safety net, such as Social Security, disability benefits and Medicaid. None of these efforts, though, seem to be doing enough for communities that have lost their manufacturing bases, where people have reduced earnings for the rest of their lives. Perhaps that much was obvious. After all, anecdotes about the Rust Belt abound. But the new findings bolster the conclusion that these economic dislocations are not brief setbacks, but can hurt areas for an entire generation. Acemoglu and Restrepo’s paper is also notable for its specificity. It has been difficult to pinpoint the impacts of technology on employment, in part because the effects have been so widespread. “When economists talk about automation, we’re actually talking about a bunch of stuff — we’re talking about capital, software, machinery, robots, artificial intelligence,” Restrepo said. Many of these changes are invisible, or at least taken for granted, which is why false narratives persist, like the idea that trade with China caused the vast majority of job losses in the past decade. It’s harder to villainize Microsoft Word, or the robotic welders that have quietly replaced humans in many car factories. How do we even know that automation is a big part of the story at all? A key bit of evidence is that, despite the massive layoffs, American manufacturers are making more stuff than ever. Factories have become vastly more productive. Many factors contributed to these changes and Acemoglu and Restrepo focused on one in particular — the rise of the industrial robot. Image: Washington Post These are what people typically envision as robots — the autonomous sleds that carry parts across the factory floor, or the programmable arms that can weld, paint and even operate heavy machinery. The researchers obtained new data on the spread of this new technology, which is what enabled them to estimate how many jobs it displaced. Theirs is not a full accounting of the costs of automation, but a precise look at one component of this trend. Since industrial robots still represent just a fraction of what we think of as automation, the claim that they caused 670,000 lost jobs is all the more surprising. As the researchers mention, some consultants believe that the number of industrial robots will quadruple in the next decade, which could mean millions more displaced manufacturing workers. Restrepo is the first to concede that his research focuses on mostly the debit column. The benefits from robots — and from technological advancement in general — are even harder to measure, and it’s a matter that many economists are still sanguine about. In the past, machines did automate many jobs out of existence, but new technology always created new opportunities — new kinds of desires, and new kinds of jobs to fulfill them. The recent anxieties about technological change are hardly new: Writing in the 1930s, the economist Maynard Keynes counseled patience, promising that any jobs lost to technology marked only a “temporary phase of maladjustment.” The question, now, is what to do if the period of “maladjustment” that lasts decades, or possibly a lifetime, as the latest evidence suggests. Some say the time is nigh for a universal basic income. Bill Gates recently offered another provocative suggestion: Perhaps robots should pay taxes to compensate the workers that they replace. Another lesson from history is that humans may have to become more flexible. America’s transformation from an agricultural nation to a manufacturing nation didn’t happen by accident, says Michael Chui, a partner at the McKinsey Global Institute who studies automation trends. “For people to go from working on the farm to working in factories, we greatly increased the educational attainment of the country over that time,” he said. “Our leaders made intentional decisions that made those changes possible.” Some workers have weathered the strains of automation better than others. The number of jobs in finance, for instance, has continued to climb in recent decades, despite computers taking over many tasks, from filing papers, conducting research or even executing trades. Computerization displaced some people, but also created new kinds of work — jobs for programmers and people who sift through terabytes of financial data. In this case, automation amplified opportunities for people with advanced skills and talents. Even in auto manufacturing, an industry that has been the poster child for robots displacing workers, there are signs of new opportunity. Ron Harbour, an analyst at Oliver Wyman, says that many of the most automated factories these days actually require more human labor to produce a car. That’s because cars themselves have become more complex, with things like powered seats and side airbags, and entertainment systems and backup cameras. “There’s actually more work required of a plant today than ever before, so the labor hours have actually gone up a little bit,” he said. “The plants have made significant productivity improvements, but that has been offset by increasing complexity of the process. There’s just more work.” The latest auto jobs are not the same as the old auto jobs, of course. These days, plants are seeking more robot technicians than assembly line welders. But this illustrates the hope that someday there will be more than enough work for both humans and robots and artificial intelligence routines, as long as we are prepared for it to look different than we're used to. We just have to muddle through the meanwhile.

Automation And The American Manufacturing Renaissance It is no secret that the manufacturing industry in the US has fallen behind over the last several decades, even though innovation in related technologies, including factory automation and robotics, are thriving in America’s universities and start-up community. While some industries have embraced factory modernization, including the automotive and consumer electronics sectors, sourcing continues to favor countries where not only is the labor force less expensive, but the equipment and methods used in other countries has been proven to deliver higher quality products at lower costs. It is time for the US to pivot from the mentality that automation and robotics is taking away jobs when, in fact, modernization along with education creates higher quality jobs and career opportunities when American factories can produce quality products at scale, leading to competitive pricing and healthy margins for the brands who bring products to market. New technologies have always fueled the American and global economy, as breakthrough software and hardware innovations make what used to be impossible not only achievable but scalable. The world is now in the Fourth Industrial Revolution, a concept first introduced by a team of scientists developing a high-tech strategy for the German government. Klaus Schwab, executive chairman of the World Economic Forum (WEF), introduced the phrase to a wider audience in a 2015 article published by Foreign Affairs. "Mastering the Fourth Industrial Revolution" was the 2016 theme of the World Economic Forum Annual Meeting, in Davos-Klosters, Switzerland, based on Schwab’s 2016 book, which described advanced manufacturing technologies that combine hardware, software and human interaction, and emphasized advances in communication and connectivity. Included in his book were disciplines including the Internet of Things, the Industrial Internet of Things, 5G networking technologies, 3D printing, artificial intelligence, nanotechnology, quantum computing and robotics. Looking back, the first industrial revolution transformed manual production methods to machines, powered by team and water. The second industrial revolution, which spanned the 19th and 20th centuries, drove tremendous economic growth with the advent of electricity, telegraph networks, rail transportation, and “production lines” which had a lasting impact on unemployment as traditional factory workers’ tasks were taken over by machines. The third industrial revolution further accelerated the role of technology and is one that most of us witnessed in our lifetimes, leveraging computers, connectivity networks, the rise of the Internet, and the use of software automation to completely transform the way people and things interact, from PCs to mobile devices, websites to social media. Today, we are in an even more accelerated industrial revolution. We are now seeing faster product development, more efficient product manufacturing, more intelligent supply chains, and simply higher quality goods with lower costs thus allowing for higher profits. Given the enormous amount of value being created, entrepreneurs and massive corporations have benefitted; however, a loss of manufacturing jobs has also resulted from this revolution. People And Machines For The Win Engineer manager check and control automation robot arms machine in intelligent industrial factory on real time monitoring system software. Welding robotics and digital manufacturing operation. Engineer manager check and control automation robot arms machine in intelligent industrial factory ... [+]GETTY The American ideal is built upon the premise that economic progress can benefit all when opportunities are created, even as digital transformation is underway. Because other countries have been more aggressive in adopting new automation and robotics solutions in manufacturing, the US has fallen behind, making prosperity for all even more elusive. As we now embark on the economic recovery in the US, following the catastrophic COVID-19 pandemic, we can take a fresh look at manufacturing innovation, and embrace AI, machine learning, automation, and robotics to make our country, our businesses, and our people stronger. This will take strong and clear intentions, policies, collaboration, and cooperation, from the private and public sectors, and from the educational institutions adopting Science Technology Engineering and Math (STEM) curriculums to advanced degrees in “Industry 4.0” categories, including the accelerate of smarter factories, smarter communities, and simply better ways to create, produce and distribute products that are healthier for people and the planet. Automation can make it easier to feed a growing population with precision horticulture and agriculture. Automation can drive the electric vehicle manufacturing industry in the US to produce better cars and trucks that use less or zero fossil fuels, and include safety features that can reduce accidents, injuries and deaths. Automation has the potential to create not just new and better products, but to create higher paying jobs – for example, training traditional autoworkers in computerized services to digital auto techs, moving “blue collar” workers to “new collar” workers with less dangerous, more creative, and higher paying jobs. Governmental policies and reforms, legislated across the aisle, can make a huge difference in encouraging and rewarding the development of new technologies and new collar jobs. Investors and businesses can also make a huge difference, but transforming the workforce with exciting new jobs, thinking ahead about how they can transition their teams from the mundane to motivational, including proven practices such as “co-botting” in factory settings. Let’s not reject manufacturing innovation because it may be disruptive. Let’s embrace it, extend it, evolve it, enhance it and move to a place of enlightenment through collective efforts to create responsive and responsible policies designed to ensure the “unintended consequences” of our best intentions are address as part of the process. Let’s build the American economy while we make it possible for every entrepreneur and individual to build their American dreams, creating dignified jobs and career opportunities, bringing prosperity for all, in addition to liberty and justice for all, as foundational to the future of the American Experiment.

The carbon tax is the key policy measure to meet BC's 2020 emission reduction target of reducing GHG emissions by 33% below 2007 levels.3 The tax covers all greenhouse gas emissions from fossil fuel combustion as well as emissions from combustion of other materials such as tires and peat for energy and heat generation, which together account for an estimated 77% of the Province's total emissions.4 In 2008, the initial tax rate was set at $10/tCO2e and it has since increased annually by $5/tCO2e per year to reach its final, now constant level of $30/tCO2e in July 2012. The carbon tax applies to fuels purchased or used in BC according to emission factors based on the specific carbon content of the different fuels (greenhouse gases other than carbon dioxide are included and weighted according to 100-year global warming potentials). All sectors and activities are treated the same.5

A key design feature of the BC carbon tax policy is revenue neutrality, i.e. the recycling of carbon tax income to BC residents by means of other tax reductions and lump-sum payments (British Columbia, 2012a). In fact to date, the BC government has not only ensured revenue neutrality, but implemented rebates and tax cuts slightly larger than the carbon tax. Each year from 2008 to 2012, the granted tax cuts and transfer payments exceeded carbon tax payments by roughly 10%. For example, in fiscal year 2011/12 total carbon revenue equalled $959 M but recycling measures amounted to $1,141 M. Table 1 provides an overview of recycling measures implemented in the fiscal year 2011/12 and forecast for 2015/16 (British Columbia Ministry of Finance, 2013).

The effect of environmental taxes on GDP is a major policy concern and it continues to generate heated debates in public squares. One side argues that environmental taxes produce a negative effect on the economy since they increase costs and may also adversely affect competitiveness. The other contends that, not only can environmental taxes reduce negative externalities such as pollution and global warming, but they may also increase GDP via the double-dividend economic argument. This can notably happen when the new tax is designed to be revenue-neutral and it replaces less efficient duties, such as those applied to personal and business income. We rely on a unique policy that was enacted by the government of the province of British Columbia (B.C.) of Canada to study the effects over time of a revenue-neutral-designed environmental tax on the province’s GDP. This carbon tax was applied to a broad range of greenhouse gas (GHG) emissions originating from fossil fuel use in the province, and its coming into effect in mid-2008, and the subsequent rate hikes and their timings over the next five years, were all pre-announced. We also study the extent of tax pass-through over time into energy prices. We apply time series methods to suitably-constructed aggregate energy price and aggregate carbon tax series, taking into account possible pre-announcements and tax saliency effects. Results from estimated impulse response functions, and from statistical comparisons of GDP changes over time in the presence and (counterfactual) absence of carbon taxes, lead to the same result: globally, revenue-neutral carbon taxation has no negative impacts on GDP. We thus conclude that implementing a pre-announced policy of revenue-neutral carbon taxation by a jurisdiction contributes to lowering harmful greenhouse gases into the atmosphere without hurting the overall economy of the associated region. We also conclude that our data span is currently too limited to inform us on whether there have been any long run positive effects on GDP. Finally, we find that pass-through of carbon tax changes into energy prices has been complete, with consumers incurring the full extent of the tax increase.

We study the impact over time of revenue-neutral-designed carbon taxes on GDP in the Canadian province of British Columbia (B.C.). The tax is broad-based, and all rate hikes and their timings were pre-announced. Our time series approach accounts for these pre-announcement effects, as well as for the possible saliency of the tax. Estimated impulse response functions and statistical comparisons of GDP dynamics in the presence and (counterfactual) absence of carbon taxes lead to the same result. Overall, revenue-neutral carbon taxation has no significant negative impacts on GDP. Our setup also allows us to examine the extent of the carbon tax pass-through into energy prices. We find that pass-through is complete. We conclude that implementing revenue-neutral carbon taxation contributes to lowering harmful greenhouse gases into the atmosphere without hurting the economy.

One key component of the federal carbon tax is that it’s revenue-neutral, similar to the policy proposal from Citizens’ Climate Lobby. All the taxed money will be distributed back to the provinces from which they were generated. The provinces will in turn rebate about 90% the revenues back to individual taxpayers. The rebates are anticipated to exceed the increased energy costs for about 70% of Canadian households. For example, a Manitoba family will receive a $336 rebate in 2019 compared to its increased costs of $232. A similar family in Saskatchewan will receive $598 compared to its higher costs of $403. In Ontario, families will receive $300 to offset its $244 in carbon taxes. And in New Brunswick a $248 rebate more than offsets the average household cost of $202. The rebates will more than double by 2022 as the carbon tax rises, and the net financial benefit to households will grow over time. (Link Omited) The remaining 10% of the tax revenue will provide support to particularly affected sectors like schools, hospitals, small businesses, colleges, and indigenous communities. Diesel-fired electricity generation in remote communities and aviation fuel in the territories will receive full exemption from the carbon tax. The Canadian government recognizes that climate change impacts are expensive: Climate change has already had financial impacts on Canada, and these costs will only continue to grow. In 2016, it was estimated that larger and more intense weather events will cost the federal Disaster Financial Assistance Arrangements program around $902 million each year. The health costs of extreme weather are estimated to be over $1.6 billion a year. The cost of property damages from climate change averaged $405 million per year between 1983 and 2008, but have risen dramatically to $1.8 billion a year since 2009. That number is expected to grow as high as $43 billion by 2050. It would be cheaper to reduce those costs by slowing global warming than to pay for increasingly extreme weather damages. With this carbon tax, Canada is recognizing that reality, and in fact is offsetting the financial impact on its taxpayers by returning the revenue to households. This is an approach that studies have shown can boost the economy because disposable income rises due to the rebate exceeding increased energy costs for 70% of Canadians.

Climate change and economic inequality are inextricably linked. Despite widespread agreement among researchers and policymakers that a carbon tax is the most efficient mechanism to curb greenhouse gas emissions, such a tax exacerbates inequality since low-income households spend a greater share of their income on carbon-intensive goods. Using Input-Output tables and detailed expenditure data for the United States, we estimate households' carbon footprints and examine the impact of a revenue-neutral tax of $50 per ton of CO2 on multiple forms of inequality. Devoting carbon tax revenue to fund a carbon dividend makes the policy progressive, minimizes redistribution among households of similar means, mitigates group-based inequalities, and benefits 56% of people, including 84% in the bottom half of the distribution. While some researchers have dismissed dividends on efficiency grounds, we show that the double dividend typically associated with labor tax cuts is insufficient to protect the purchasing power of a majority of Americans.

Metcalf’s writing is clear and compelling: “Putting a price on pollution is a clean, market-based approach that incentivizes homeowners, factory owners, investors, and millions of people across the country to make informed decisions that align the benefits of our fossil fuel use with its full costs.” Like many other economists, as well as groups such as the Climate Leadership Council and Citizens’ Climate Lobby, he argues for a revenue-neutral carbon tax, and in particular for carbon tax revenues to be returned to Americans as a per-capita “dividend”. His estimates are that a U.S. carbon tax starting at $50 (roughly $0.50 per gallon of gasoline and 5 cents per kilowatt-hour of coal-fired power) would reduce emissions by perhaps 50% by 2050, and would generate about $200 billion a year, enough for a dividend of $2500 for a family of four. Relative prices of products would change based on their carbon intensity, household budgets would be cushioned from the financial impact of carbon taxes, and a border tax adjustment would maintain international competitiveness for energy-intensive trade-exposed sectors like agriculture and manufacturing.

Metcalf argues that a carbon tax is superior to cap-and-trade (the other way to put a price on carbon) and to non-price approaches like fuel economy standards. Especially thought-provoking in the context of ongoing discussions in the U.S. about race and inequality is his discussion of how SUVs and other light trucks ended up on the receiving end of a loophole in fuel-economy standards in the 1970s:

How to Tax Capital There are two basic things people do with their earnings: consume and save. Saving is abstaining from current consumption. Savings are channeled back into the economy and used to support investments by business enterprises. To grow, economies need pools of savings—that is, pools of capital or wealth. Senator Warren and other policymakers are concerned that wealth is “concentrated.” But the wealth of the wealthy is mainly dispersed across the economy in productive business assets. Looking at the top 0.1 percent of the wealthiest Americans, 73 percent of their wealth is equity in private or public companies, while just 5 percent is the value of their homes.78 Looking just at billionaires, only 2 percent of their wealth is accounted for by their homes and personal assets, such as yachts, airplanes, cars, jewelry, and artwork.79 The great majority of their wealth is in productive business assets, which generate output for the broader economy. Nonetheless, many policymakers and pundits believe that people with substantial wealth should be targets of heavy taxation. They think that raising taxes on people owning capital would lighten the burden on labor and that taxing wealth would benefit the nonwealthy. However, imposing heavy taxes on wealth would reduce living standards for everyone because it would reduce the overall size of the economy. Under certain assumptions, a basic finding from economic theory is that everybody should want taxes on capital to be low or even zero—including wage earners, who have no capital income.80 Economist Greg Mankiw describes a simple economy with two groups: workers and capitalists.81 The capitalists save and earn capital income, while the workers earn wages and do not save. The workers are in the democratic majority and can set tax policy anyway they want. Should they tax wages, capital income, or both? It turns out that—acting in their own interest—the workers should tax wages only, not capital income. The reason is that the supply of capital is elastic or responsive to taxation, and so setting the tax rate to zero would generate increased saving and investment. In turn, that would create rising worker productivity and wages—worker efforts are more valuable when they have more and better machines to work with. In the long run, the after‐​tax wages of workers would be higher under this policy than under a policy of imposing taxes on capital. This result assumes that the supply of capital is perfectly elastic or responsive. While that is not fully realistic, capital has become more responsive in today’s global economy. In another paper, Mankiw and coauthors noted that the zero capital tax prescription “is strengthened in the modern economy by the increasing globalization of capital markets, which can lead to highly elastic responses of capital flows to tax changes even in the short run.”82 They conclude that the “logic for low capital taxes is powerful: the supply of capital is highly elastic, capital taxes yield large distortions to intertemporal consumption plans and discourage saving, and capital accumulation is central to the aggregate output of the economy.”83 From an average worker’s point of view, it is beneficial for the wealthy to maximize their savings and reduce consumption. Capital and labor are complements in the economy—workers are more productive and better paid when they are supported by more capital generated by savers. The Council of Economic Advisers has summarized the empirical evidence in support of low taxes on capital.84 The basic idea goes back at least to Adam Smith, writing in The Wealth of Nations. He described how heavy taxes on mobile “stock” or capital would cause losses to workers: Stock cultivates land; stock employs labour. A tax which tended to drive away stock from any particular country, would so far tend to dry up every source of revenue, both to the sovereign and to the society. Not only the profits of stock, but the rent of land and the wages of labour, would necessarily be more or less diminished by its removal.85 This insight on the importance of savings also underlays opposition to the federal estate tax, which is a wealth tax imposed at death. From a liberal perspective, law professor Edward McCaffery has long made the case for abolishing the estate tax, arguing, “The rich person who passes on wealth is doing good things for society—continuing to work and save, keeping money in the capital stock.”86 McCaffery notes that a weird thing about the estate tax is that it is a “virtue tax,” or the opposite of a sin tax.87 Sin taxes discourage vices, but estate taxes and other wealth taxes discourage the virtuous behavior of saving. Greg Mankiw has made similar points: When a family saves for future generations, it provides resources to finance capital investments, like the start‐​up of new businesses and the expansion of old ones. Greater capital, in turn, affects the earnings of both existing capital and workers. Because capital is subject to diminishing returns, an increase in its supply causes each unit of capital to earn less. And because increased capital raises labor productivity, workers enjoy higher wages. In other words, by saving rather than spending, those who leave an estate to their heirs induce an unintended redistribution of income from other owners of capital toward workers. The bottom line is that inherited wealth is not an economic threat. Those who have earned extraordinary incomes naturally want to share their good fortune with their descendants. Those of us not lucky enough to be born into one of these families benefit as well, as their accumulation of capital raises our productivity, wages and living standards.88 All of this raises what appears to be a policy dilemma. How can we have a tax system that does not penalize beneficial wealth accumulation but also distributes the tax burden equitably? How do we ensure that the rich pay a fair share of taxes while not discouraging saving? The answer is consumption‐​based taxation. Consumption‐​based taxes can be taxes on transactions, such as retail sales taxes and value‐​added taxes. Or they can be taxes assessed on individuals and businesses, such as the “flat tax” designed by economists Robert Hall and Alvin Rabushka and the “X‑Tax” designed by economist David Bradford.89 Both income and consumption‐​based taxes tax income from labor and capital. But unlike income taxes, consumption‐​based taxes exempt the “normal” return to capital, which removes the bias against saving and investment. The normal return is usually thought of as the yield on a riskless investment, which represents the time value of money. Both income and consumption‐​based taxes tax the “above‐​normal” returns to capital. Those include the returns, or profits, attributable to market power, innovations, windfalls, and various rents available to certain businesses and investors.90 Economist Glenn Hubbard notes that wealthier households receive a larger portion of their capital income from these items, so consumption‐​based systems can be quite progressive.91 Bradford agrees that “sources of great wealth,” such as monopolies and highly profitable technology firms, are taxed under both income and consumption‐​based systems.92 However, by exempting the normal returns, the latter system is more conducive to growth. Bradford also long argued that consumption‐​based tax systems allow for much simpler administration and compliance.93 Consumption‐​based systems are also better at equalizing taxes on capital across activities and industries, and they capture some activities that escape taxation under the income tax. As one example, the “buy‐​borrow‐​die” strategy in real estate investment can allow individuals to go years without paying income tax if they borrow against appreciating properties to fund their consumption.94 That is the sort of loophole that angers the public about wealthy people, and it would be closed under a consumption‐​based system. Theoretical models suggest that consumption‐​based taxes are superior to income taxes on both efficiency and distributional grounds.95 The key is that income taxes distort both work effort and savings, but consumption‐​based taxes just distort work effort. Consumption‐​based taxes are superior on efficiency because you can raise a given amount of revenue with fewer distortions than under income taxation. Regarding distribution, you can design a consumption‐​based tax to match the progressivity of an income tax, but which collects revenue with fewer distortions. Tax law professors Joseph Bankman and David Weisbach conclude that “everyone is equally well off or better off under a properly designed consumption tax,” as compared to an income tax.96 They note that consumption‐​based taxes would tax the “idle rich,” which is often the motivation for taxes on the wealthy.97 Economists Kevin Hassett and Alan Auerbach agree that consumption taxes would target wealth, noting that “consumption taxes reduce the value of wealth, just as wealth taxes do” and “if the disproportionate political power of the wealthy is the concern, a consumption tax is potentially a more powerful tool.”98 Wealth taxes are an inefficient method for taxing the rich because they treat profits in the opposite way as consumption‐​based taxes. Wealth taxes exempt some above‐​normal returns to savings and tax the normal returns, which would distort savings and investment.99 In its report on wealth taxes, the OECD pointed to this problem: “The taxation of normal returns is likely to distort the timing of consumption and ultimately the decision to save, as the normal return is what compensates for delays in consumption.”100 Auerbach and Hassett come to similar conclusions: a consumption tax differs from a capital income tax in its treatment of capital income only by its exemption of the safe rate of return on investment. Thus, consumption taxes hit wealth without interfering with the incentive to save associated with the intertemporal terms of trade. Wealth taxes, on the other hand, effectively tax the safe rate of return on investment because they do not depend on actual rates of return, thereby incurring the intertemporal distortion but forgoing tax on other components of the rate of return.101 Bill Gates sort of captured the idea of consumption‐​based taxation when he said: “Think about the three wealthy people I described earlier: One investing in companies, one in philanthropy, and one in a lavish lifestyle. There’s nothing wrong with the last guy, but I think he should pay more taxes than the others.”102 A better framing would be to say that the last guy, who spends lavishly, is favored under income and wealth taxes, while the first guy, who saves, is penalized. Consumption‐​based taxation would fix that problem by taxing income and wealth only if consumed. Because wealth taxes suppress savings and investment, they undermine economic growth. A 2010 study by Asa Hansson examined the relationship between wealth taxes and economic growth across 20 OECD countries from 1980 to 1999. She found “fairly robust support for the popular contention that wealth taxes dampen economic growth,” although the magnitude of the measured effect was modest.103 The Tax Foundation simulated an annual net wealth tax of 1 percent above $1.3 million and 2 percent above $6.5 million.104 They estimated that such a tax would reduce the U.S. capital stock in the long run by 13 percent, which in turn would reduce GDP by 4.9 percent and reduce wages by 4.2 percent. The government would raise about $20 billion a year from such a wealth tax, but in the long run GDP would be reduced by hundreds of billions of dollars a year. Germany’s Ifo Institute recently simulated a wealth tax for that nation.105 The study assumed a tax rate of 0.8 percent on individual net wealth above 1 million euros. Such a wealth tax would reduce employment by 2 percent and GDP by 5 percent in the long run. The government would raise about 15 billion euros a year from the tax, but because growth was undermined the government would lose 46 billion euros in other revenues, resulting in a net revenue loss of 31 billion euros. The study concluded, “the burden of the wealth tax is practically borne by every citizen, even if the wealth tax is designed to target only the wealthiest individuals in society.”106

Complex Administration Proponents of an annual wealth tax may imagine a system that is simple, broad‐​based, easy to administer, and lucrative for the government. But wealth taxes did not work that way in practice in Europe. Wealth taxes were complex and costly to collect, and they induced substantial avoidance while raising little revenue. One problem is valuing assets. A wealth tax may require taxpayers to report valuations, not just of financial securities and homes, but also of such items as household furnishings, artwork, jewelry, vehicles, boats, life insurance policies, pensions, family businesses, and farm assets.37 Many of these assets have no ready market valuation. Accounting for wealth held in trusts would also be difficult, and for people with nontraded ownership in family businesses, book and market valuations can differ substantially.38 Furthermore, valuations of assets change over time, so a large industry of accountants would be needed to prepare regular valuations for tax returns. Tax law professor Miranda Perry Fleischer finds that an annual wealth tax would be “hobbled by valuation issues.”39 She discusses, for example, the unknown values of closely held businesses, especially those held jointly with multiple sorts of ownership rights. She notes that valuation disputes already bedevil estate tax returns, but wealth tax disputes would be even more contentious because they would come back year after year. And consider that while the IRS handled 12,700 estate tax returns in 2017, Elizabeth Warren’s proposed wealth tax would require annual filing by at least 75,000 taxpayers.40 In a recent survey of economists, 73 percent agreed and only 7 percent disagreed that Senator Warren’s wealth tax would be “much more difficult to enforce than existing federal taxes because of difficulties of valuation.”41 The difficulty of wealth valuation can be seen in an Internal Revenue Service study that compared valuations on estate tax returns to valuations of the same estates on the Forbes 400 list of wealthiest Americans.42 The study found that estate tax valuations were, on average, only 50 percent of the valuations on the Forbes list: This research highlights the inherent difficulties of valuing assets which are not highly liquid. The portfolios of very wealthy individuals are made up of highly unique assets and often the value of assets, such as businesses, are very closely tied to the personality and skills of the owner. Determining a precise value for these assets can involve more art than science.43 The United Kingdom undertook a major examination of its tax system in 2001 called the Mirrlees Review. It studied a possible UK wealth tax and concluded: Levying a tax on the stock of wealth is not appealing. To limit avoidance and distortions to the way that wealth is held, as well as for reasons of fairness, the base for such a tax would have to be as comprehensive a measure of wealth as possible. But many forms of wealth are difficult or impractical to value, from personal effects and durable goods to future pension rights—not to mention “human capital.” These are very serious practical difficulties. And where attempts have been made to levy a tax on a measure of current wealth—in France, Greece, Norway, and Switzerland, for example—practical experience has not been encouraging.44 Another problem with wealth taxes would be tracking wealth held abroad. A wealth tax could be imposed on just domestic assets, but that would create a large incentive for the wealthy to hold their assets abroad. So, Congress would likely impose the tax on worldwide assets, yet that would create a large incentive for evasion. The Internal Revenue Service would be charged with the impossible task of auditing everything affected U.S. residents owned on a global basis and judging whether the valuations on all those foreign assets were fair. Taxpayer liquidity would be another issue. Wealth tax payment would be difficult for people who mainly held assets that are illiquid and do not generate regular cashflows, such as homes, artwork, and ownership shares of some family businesses. The need to pay wealth taxes each year would force inefficient sales of assets to raise cash or require taxpayers to borrow money. The OECD found that liquidity issues have been a major problem with wealth taxes in Europe.45 In the 1970s, the British Labour Party campaigned on imposing an annual wealth tax, and it tried to follow through after being elected. However, party leaders eventually dropped the idea when they realized how complex the administration would be. The Chancellor of the Exchequer at the time, Denis Healey, said in his memoirs, “We had committed ourselves to a wealth tax; but in five years I found it impossible to draft one which would yield enough revenue to be worth the administrative cost and political hassle.”46 India enacted an annual wealth tax in 1957 and repealed it in 2015. Indian finance minister Arun Jaitely described reasons for his government’s scrapping of the tax at an event in New York: “The practical experience has been it’s a high cost and a low yield tax.”47 The Indian wealth tax became riddled with exemptions, it was evaded, and it raised little revenue.48 An expert study for the Mirrlees Review concluded that the wealth tax in Europe “has been a particularly inefficient tax to collect,” and that for the UK it would be “costly to administer, might raise little revenue, and could operate unfairly and inefficiently.”49 An International Monetary Fund (IMF) study concluded that “taxing income from wealth, rather than taxing wealth itself, is more equitable and efficient.”50 For the United States, a wealth tax would not achieve the fairness that supporters are seeking. It would generate tax avoidance and lobbying by the wealthy for exemptions. In turn, that would increase public cynicism about the tax system. In countries that have had wealth taxes, the public has not perceived the actual operation to be fair. In its study, the OECD concluded, “A major concern with net wealth taxes is the ability of wealthier taxpayers to avoid or evade the tax. This has limited the potential of net wealth taxes to achieve their redistributive objectives and has contributed to perceptions of unfairness.”51 Economist Asa Hansson studied European wealth taxes and found that they often resulted in “poisoning general tax morale” because of the exemptions provided and the widespread avoidance.52 The OECD reports that “wealth taxes were unpopular in a number of countries, which contributed to their repeal.”53

In a recent letter, Timothy Roscoe Carter correctly notes that a universal basic income (UBI) financed by increasing progressive income tax rates would not subsidize the wealthy.1 Unfortunately, Carter incorrectly asserts that the “claim that UBI subsidizes the wealthy is valid” if the UBI is financed by a VAT, “at least for those wealthy enough to save a significant fraction of their incomes.”

In reality, a UBI is a highly progressive policy, even if funded by a regressive tax such as a VAT. A VAT-financed UBI would still impose net burdens on the wealthy (and would still provide net benefits to low-income households), although not to the same extent as an income-tax-financed UBI. Carter’s error reflects common misperceptions about the progressivity of taxes and spending.