"The most efficient way to spend money on the homeless might be to give it to them"
Economist Magazine, November 6, 2010 edition
There is an idea on the horizon that aims to offer what to most of us would be a revolutionary partial solution to the wealth and income inequality crisis in the United States. It warrants your serious consideration and, as a concerned and thoughtful citizen-reader, you are invited, indeed urged, to express your opinion about this idea in the comments section below (you must subscribe to comment). Your opinion would not be merely a curiosity for others. It would become a valuable contribution to the current dialogue about the idea’s viability and scope.
The idea is to provide a basic income to every adult in the country in an amount of $1,000 per month. Among those thoughtfully studying the possibilities, such a basic income would be paid *in cash, *monthly, *universally (not just to the poor), *to all adults (not just per family), and *unconditionally (no strings attached). The idea is typically referred to as a Universal Basic Income (UBI). It confronts the inequality crisis by focusing on a revolutionary benefit to ordinary citizens (via a direct increase in basic income (it can be viewed as a tax refund)), instead of a tax increase aimed primarily at the wealthy.
Before delving into the nature of the UBI, it is fair to ask, is there in fact a crisis?
The chart that my colleague, John Denvir, included at the beginning of his last post to this newsletter is revealing—fully 70% of the nation’s total wealth is owned by only 10% of wealthiest people (with only 1% owning about half the wealth), while the share of wealth owned by the bottom 50% is less than 2% of the total wealth. Annual income of the wealthiest reaches what to most of us is an astronomical level, yet they fail to pay a fair share of taxes.
This skewed distribution of wealth exists while numerous homeless encampments can be found on the streets of every major city. Enormous numbers of people are struggling to get by on below poverty-line wages—many, working two jobs, sometimes three. Too many young people are paying off oppressive debt from the cost of a college education (while their European counterparts often move, debt free, from university to the job market). Affordable medical care is non-existent for many and crushingly expensive for others who forego it to pay for other family necessities. An unsustainable 16.66% of the children in this country live in poverty. All this, while the wealthy and very wealthy continue to prosper and amass wealth at almost unseemly levels.
The crisis lies not in the fact that a few are wealthy, but that many ordinary citizens are left with so little amidst the plenty. The status quo is one which is patently unfair and likely unsustainable, not to mention an immediate and existential threat to the health and well-being of a significant majority of the country’s citizens.
For many readers of this newsletter, the mention of a Universal Basic Income might well conjure up a host of concerned objections: “it would promote sloth and encourage people not to work;” “it would be spent unwisely—on booze, drugs, gambling, etc;” “it would be politically impossible, there’s no free lunch;” “the country cannot afford it;” “it would cause inflation.”
How valid are these objections? A host of arguments, both pro and con, can be found throughout the literature. Here are my conclusions:
First, some facts. Our current tax system is already providing various forms of a basic income, and doing so successfully with few of the above objections. They include: unemployment insurance benefits; the earned income tax credit; the child tax credit; the pandemic stimulus payments; the Alaska Permanent Fund and even Social Security payments, which are distinguishable only by their funding source.
Nor is the U.S. experience unique. The idea of a broader application of a universal basic income is currently under serious consideration in this country and throughout the world by a wide range of non-profit groups, governmental entities and research organizations. At Stanford University, for example, the Stanford Basic Income Lab is engaged in ongoing academic study of the benefits and detriments of a universal basic income. It has already collected a number of papers on the subject and has compiled a map of similar experimental efforts around the world. Such experiments exist, for example, in over 40 locations in the United States and in over 20 countries, including Spain, Scotland, Germany, Namibia, Togo, Iran, Kenya, Uganda, Finland, India, China, Mongolia, Korea and multiple provinces of Canada. Both the cities of Oakland and Los Angeles are currently running large scale UBI experiments.
Objection: “it would promote sloth and encourages people not to work.” On the contrary, numerous real world studies confirm that far from shirking work, recipients of a basic income are more likely to seek and retain better paying jobs, get better trained and educated, and, importantly, develop an enhanced sense of satisfaction and emotional well-being. For example, the conclusion of a recent study of a two-year $500/month guaranteed income in Stockton California is typical. It concluded: “. . . full-time employment rose and . . . financial, physical and emotional health improved. . . . [The guaranteed income] gave people the dignity to make their own choices, the ability to live up to their potential and improved economic stability . . ."
Objection: “it would be spent unwisely: on booze, drugs, gambling . . .” Again, multiple studies have disproved this objection. One unique example occurred in London where a “no-strings-attached” payment accomplished wonders among the most needy. Thirteen homeless vagrants were given a lump sum of £3000. As one account reported, “A year and a half after the experiment began, seven of the 13 rough sleepers had a roof over their heads. Two more were about to move into their own apartments. All 13 had taken critical steps toward solvency and personal growth. They were enrolled in classes, learning to cook, going through rehab, visiting their families, and making plans for the future. . . . Even the Economist [magazine] had to conclude that the ‘most efficient way to spend money on the homeless might be to give it to them.’”
Objection: “it would be politically impossible, ‘there is no free lunch.’” Not so. In addition to those referenced above, there are well known historical and current examples of successfully initiated, bi-partisan “free money” programs in the United States. Surprisingly, one of these occurred in the 1960’s and 70’s, with a Republican supported UBI program initiated by the Nixon administration. More than 8500 residents of New Jersey, Pennsylvania, Iowa, North Carolina, Indiana, Seattle, and Colorado were given a basic income of $1,600/year over two years (equivalent to $12,000/year or $1,000/month in today’s dollars). Its success caused Nixon to advance UBI legislation on a national scale. Although the effort ultimately failed to pass Congress, the practice of government issued unrestricted cash payments to citizens was validated. In Alaska, residents have received unrestricted “dividends” each year from the Alaska Permanent Fund. . . . And, the “no-strings-attached” stimulus payments following the COVID pandemic was a non-partisan effort that successfully kept many out of poverty and averted a nation-wide economic disaster. Of course, whether a more permanent national or statewide UBI is politically feasible will be unknown until it is seriously proposed and debated.
Objection: “the country cannot afford it.” We can start with the admonition of my colleague Rob Waring who, in his recent post on this newsletter, “Let’s Mortgage Our Future,” argued that, in spite of Republican deception surrounding its use by Democrats, deficit spending is a perfectly acceptable way to meet society’s needs. Nevertheless, perhaps the most common objection to a UBI is that it is simply too expensive. Indeed, many oppose it for this reason alone. However, I find persuasive this response by Ellen Brown, president of the Public Banking Institute, a nonpartisan economic think tank: “’Where will the government find the money?’ is no longer a valid objection to providing an economic safety net for the people. The government can find the money in the same place it just found more than $5 trillion for Wall Street and Corporate America: the central bank can print it.” Or, stated less argumentatively, the math is clear. It would cost far less than the amount claimed by its detractors who often simply total the monthly cash payment times the number of recipients. Such objections make little or no effort to acknowledge either the healthy effect of a UBI on economic activity nor the reduced demand on social services and related expenses that would flow from its implementation.
Objection: “it would cause inflation.” Not so. In her recent article, “How and Why a Fed-Financed UBI Would Not Lead to Inflation,” Ellen Brown distinguishes the hyperinflations of history and notes, insightfully, “. . . [t]hese disasters, however, were not caused by government money-printing to stimulate the economy. . . . ‘Every hyperinflation in history has been caused by foreign debt service collapsing the exchange rate. The problem almost always has resulted from wartime foreign currency strains, not domestic spending.’”
So what is the answer? Of course, implementing any Universal Basic Income legislation would be complex and, as one might expect in this polarized political world, controversial in any form. This brief discussion cannot even attempt to cover more than a tiny portion of all that has been written on the subject. Perhaps, however, it will lead you, the conscientious reader, to dig more deeply into the subject and form an educated opinion about the worth and feasibility of a Universal Basic Income. It is a topic worth our consideration.
And then, if your curiosity has been sufficiently whetted, I cannot recommend highly enough the book by economics journalist, Annie Lowery Give People Money, how a Universal Basic Income would End Poverty, Revolutionize Work and Remake the World. It is an exciting and eloquent treatment of the UBI. Or, for a less extensive, but excellent overview, see the “Basic Question,” an article in the September, 2021 issue of Stanford Magazine by Deni Ellis Béchardan. You may also appreciate a visit to the website of the Stanford Basic Income Lab.
And then, don’t let your enlightened perspective on the UBI go to waste, please participate in the dialogue by subscribing to this newsletter and giving your opinion below.
Update as of 1-19-22: Please see this Winter Quarter Newsletter 2022 of the Stanford Basic Income Lab.
This work is licensed under CC BY-SA 4.0
Comment from Wendy:
This was an excellent, well-researched article. It was a pleasure to read. That the Joe Manchins of the world fail to recognize the multiplier effect of giving a UBI to the poor is no surprise. But I do have a couple of questions.
Why should everyone receive the UBI, even the very wealthy? Is that simply a political decision? Is it designed to make the UBI more palatable to the very rich? If so, I doubt it will work.
How does the UBI solve the huge problem of inequality of wealth in our modern society? I understand that just during the Covid Pandemic, the wealth share of of the 1% has increased mightily. The UBI may assuage some of the problems of the poor, especially the homeless, but it is very hard to see it making a dent in the inequality problem which is so intrinsically linked to injustice in our system and the climate emergency.
I support the UBI, but I don't quite see it as the panacea this article would seem to suggest. I will follow up with the suggested articles and authorities. Thank you, David Fielding.
I support the drive for a universal basic income, and think it is both sensible and affordable. But I don't think it's a panacea for the problem of homelessness.
Here in Los Angeles, some unhoused people have either declined offers of free housing or have moved back to the streets after a period of time. They are dealing with issues of mental health and addiction that housing (or an income) alone will not address.
As for income distribution, pointing the finger at the taxes paid by the ultra-wealthy is easy, but incomplete. Some posts here confuse wealth -- assets -- with income. If you own a home in the Bay Area or Los Angeles, you are likely a millionaire in terms of assets. That doesn't mean you are likely to go shopping for a yacht.
Moreover, our income is now more equitably distributed overall than it was half a century ago.
In 1970, 62% of families were categorized as “middle income,” according to Pew Research. Their median income was about $58,000. In 2018, their percentage was down to 43%, while income was up 49%, to $86,600. (All income figures are in constant 2018 dollars.)
Upper-income families, only 29% of the total in 1970, were 48% in 2018. Their income had risen by 64%, from about $126,000 to over $207,000. Remember, this is household income, meaning it would include two earners at around $100,000 each – comfortable, but hardly yacht buyers.
Low-income families, 10% of the total in 1970, were 9% in 2018, while their incomes had risen 43%, from $20,000 to $28,700.
In short, a big chunk of our population moved from middle-income to upper-income in the past 50 years, while the lower-income portion shrank slightly.