In the 1970s, the Canadian Government gave a lot of money to several families living in a small town in Manitoba. The goal of the experiment, which cost $17 million and lasted for four years, was to see if the community’s overall health and well-being would benefit from many of its members receiving a guaranteed minimal annual income.
It worked, apparently. Life in that small pocket of the province improved. Researchers noted a decline in accidents, injuries, and visits to doctors and hospitals for mental health reasons—most likely due to the town’s new-found financial security.
This past June, a group of academics and advocates gathered in Montreal to discuss and debate the advantages of governments providing citizens with basic income—an idea somewhat similar to what occurred in Manitoba a number of decades ago, except on a much larger scale. Presently, Switzerland is taking steps toward making this a reality.
Almaz Zelleke, a visiting scholar at New York University’s Robert F. Wagner Graduate School of Public Service, believes the notion of basic income has rarely had this much attention in the U.S. since President Nixon tried to introduce a comparable program in the 1960s. To get a better sense of what basic income is and how it works, we spoke with Zelleke, who is currently writing a book about the subject. Working title: Money for Nothing.
What is basic income and how would it work?
The idea behind basic income is to provide a floor of income upon which people can build other sources of revenue. Each month, every man, woman, and child would receive a check for a certain amount that should cover their basic needs. This amount would be non-taxable, but any income earned in addition to it would [be taxed].
So the government sends an identical monthly check to every U.S. citizen regardless of whether they earn $100,000 or $20,000 per year?
Exactly. It goes to everybody. It’s universal, unconditional, and paid individually. These are the three core tenets of basic income.
Now, the amount of a basic income is something that different advocates have different opinions about. My position is that basic income should be tied to basic needs. While people’s needs differ depending on whether they are disabled or unable to earn another income, the amount should, in a broad sense, cover the essentials. In the U.S., for example, you could tie basic income to the poverty threshold, which is about $12,000 per person. It could be a bit lower or a bit higher, but that’s a good ballpark figure.
Would the amount take into account that some parts of the country are more expensive to live in than others?
“The left can agree because basic income provides economic security for all Americans. The right can get behind it because it’s a form of economic security that doesn’t interfere with market forces as much as other forms of social security, such as raising the minimum wage.”
Basic income would need to be a federal benefit. It would need to be uniform across the United States; otherwise we might have the problem of people wanting to move to higher basic income areas.
What’s distinct about basic income compared to other forms of income support is that most other forms are very clearly tied to residence in a particular area. TANF (Temporary Assistance for Needy Families), the program that best fits the description of what we think about when we think about conventional welfare, provides money for poor families with very little income. It is locally administered, which means there is a great deal of variation across the United States in terms of how much money the program provides and the conditions families have to meet to fulfill eligibility requirements.
Having a national benefit that everyone is entitled to regardless of location can actually help even out economic activity across the country. With basic income, people don’t have to crowd around the same big, expensive cities where most of the present-day jobs are. They can use this benefit to start new economies someplace else.
How do incentives to find work factor into all of this?
With basic income, there is no loss of benefits when you start earning an income. Once you start earning an income, you’re subject to taxes, but you don’t pay any tax on the basic income.
If everyone received a monthly check for $1,000, isn’t some form of inflation inevitable? Wouldn’t the price of goods and services rise accordingly, therefore diminishing the purchasing power of basic income?
If we’re changing the distribution of the money that’s already circulating in our economy, there’s no reason the overall inflation rate should change. Might prices for housing or food increase in poor neighborhoods that faced a sudden increase in income? Possibly. But the poor often face higher prices anyway because of a lack of options in poor neighborhoods.
An influx of money should bring in more competition, which should in turn lower prices. But again, the portable nature of a basic income compared to other benefits for the poor allows people to move to places where expenses are lower. We should be more concerned about the inflationary effect of tax incentives for owner-occupied housing on housing prices in the U.S. than on a comparatively meager cash benefit.
If the U.S. decides to implement basic income, what would prevent families from having more children to receive more checks?
There is no evidence that child benefits induce families to have more children. On the contrary, families have fewer children when their economic security increases.
But this concern really masks hostility to the poor. We have so many other perverse incentives in our tax system that have much larger budgetary effects, yet we harp on this one because it would improve the lives of poor people, who are often minorities.
Children cost a lot more in terms of time, money, and foregone earnings potential than basic income would ever pay. With basic income, people will continue to have children for the same mix of reasons—good and bad—that they do now. No benefit program will change that.
If implemented, would other forms of social assistance become obsolete, or would basic income just get inserted into the current web of welfare programs?
One of the advantages of basic income over the income support programs we have now is that it’s one-stop shopping. You get one benefit that meets your basic needs, or close to it. You don’t have to apply to one office for TANF, another office for food stamps, another office for housing benefits, and so on. You get one benefit all rolled into one.
As to the question of whether we could immediately eliminate all of the other programs, I think we need to wait and see. I mean, if everyone in the United States gets basic income, TANF will go away very quickly, because TANF is much lower than the poverty threshold in most states.
I think the first step is to give everybody basic economic security. The second step will be to see what other forms of economic security or income supplementation people need. My guess is that most of the other programs would eventually fall away. The expectation is that not only can people use basic income to replace our more complicated and obstacle-ridden forms of income supplementation, but also that they can use it as a multiplier to earn more income.
If basic income could replace all other forms of social welfare and the cost of running them, is there a chance the government would end up paying no more than it already does?
When thinking about this question, I think it’s important not to fall into the trap that when people on the left want to do anything with money it has to balance the budget, but when people on the right want to do anything with money we just do it because it’s the right thing to do. Our war in Iraq, for example, was not paid for through an increase in taxes. It drove up deficits. That’s why we have a larger debt now than we did before President George W. Bush came along.
My priority is this: Let’s get basic income in there, figure out how much it’s going to cost, see which programs are no longer necessary, and then raise taxes in order to fund it. We need to address our nation’s growing inequality, and that doesn’t happen through an invisible hand.
Is basic income something both Democrats and Republicans might agree on?
That’s the interesting thing; it is.
Here’s why: The left can agree because basic income provides economic security for all Americans. The right can get behind it because it’s a form of economic security that doesn’t interfere with market forces as much as other forms of social security, such as raising the minimum wage. Do you implement a lot of labor market regulations that require companies to pay employees a certain amount, or do you just give everybody a base of economic security and then let them negotiate their wages in the marketplace?
I also think Republicans could support basic income because right now we have a very, very complicated tax code. It’s complicated because we have multiple deductions for housing, education, families, and so on. Basic income could be part of an overhaul of the tax code that sheds all of those exemptions, deductions, credits, etc. People could use their basic income to invest as they choose, whether that’s in education or the stock market.
At the end of the day, though, it seems that basic income involves some degree of wealth distribution from the rich to the poor.
I don’t shy away from the term “redistribution.” Basic income involves redistribution. But there’s no pure form of distribution just out there in the world. Every regulation we have, whether it’s minimum wage or the way capital gains are taxed or bankruptcy laws, involves redistributing our collective economic resources. Basic income as a redistributive measure is democratic in nature, as opposed to those that are actually plutocratic. Basic income gives every citizen a share in economic power, just as a vote gives every citizen a share in political power.-
Do any countries use a form of basic income? Other than Switzerland, is anyone else getting serious about it?
There are no countries that have the kind of universal basic income I’ve described, but many nations have basic pensions that go to all seniors and child allowances that go to all children, along with universal health care. So they have more universalism in their benefits than the U.S., but even in the more socially democratic nations of Western Europe and Scandinavia, benefits for working-aged adults are generally conditioned on employment. But “good” employment—the kind that is full-time, secure, and pays well—is less available in those countries as well, which is why there is a growing European movement for a basic income.
Why should we be hopeful that basic income will ever come to America?
One reason to be hopeful is that because of the significant amount of activity in Europe—Switzerland, in particular—regarding basic income, there’s a lot of discussion about it in American blogs and magazines and newspapers and journals—much more than anytime since the 1960s.
Another reason—and it’s a sad reason—is that economic hardship has lingered for a long time since the Great Recession. Unemployment and financial insecurity are climbing up the economic ladder into the middle-class. I think it’s an untenable situation. At a certain point, we have to look beyond what we’ve always done.
