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Frank Bernheisel: The View From Here
Frank Bernheisel
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Frank Bernheisel
Posted 5.30.20
Just Outside Washington

FRANK BERNHEISEL

UNIVERSAL BASIC INCOME: TIME FOR A SERIOUS LOOK

Lock-down due to covid-19 continues, and one way I have been using my time is to watch interesting videos via the internet. CSPAN has a program, After Words, where authors of books are interviewed. I noticed that Representative Don Beyer, my Congressman, had an interview with Chris Hughes (1) about his book, Fair Shot: Rethinking Inequality and How We Earn, which I watched. (See link.) The book advocates a universal basic income, which I favor.

During the Democratic primary debates, candidate Andrew Yang advocated a universal basic income (UBI) of $1000 per month for all U.S. citizens.He pointed out that this was not a new idea.He mentioned that in 1795 Thomas Paine wrote a pamphlet, Agrarian Justice, in which he advocated a citizen"s dividend to all U.S. citizens as compensation for "loss of his or her natural inheritance, by the introduction of the system of landed property"

Yang noted that UBI was also advocated by Martin Luther King in his book, Where Do We Go from Here: Chaos or Community? (1967), in which he wrote: "I am now convinced that the simplest approach will prove to be the most effective — the solution to poverty is to abolish it directly by a now widely discussed measure: the guaranteed income."

Not only is UBI not a new idea, it has been successfully in operation since 1976 in Alaska.

That year the Constitution of Alaska was amended to create the Alaska Permanent Fund managed by a state-owned corporation.Since 1980 that has been the independent Alaska Permanent Fund Corporation.The Fund pays a dividend to all Alaska residents that have lived within the state for a full calendar, except for those convicted of crimes. In 2018, the dividend was $1600. According to a 2018 study by the Economic Policy Institute, Alaska had the least inequality, as measured by the ratio of top 1 percent to bottom 99 percent income of any state, 12.7 (New York is the highest with 44.4 and the U.S. average is 26.3).

I have advocated a UBI for years, because I think it has some very clear advantages, which include:

  • It lowers inequality, as the Alaska example shows
  • It is easy to administer and should have an administrative cost similar to Medicare, which is 1.3 percent
  • The U.S. can afford it; a payment of $500 per month for the estimated 240 million adults would cost about $1.4 trillion per year, repealing the 2017 tax cut would generate about $1.1 trillion per year, and Elizabeth Warren’s wealth tax would easily make up the difference, which the Tax Foundation’s wealth tax model predicted will result in $2.2 trillion in revenue
  • It would boost the economy; since 40 percent of the money would go to individuals who cannot raise $400 to meet an emergency (Federal Reserve 2017 study), and who would probably spend it on goods and services, boosting the economy
  • It would eliminate the need for minimum wage legislation
  • It could serve as the basis for simplifying the current complex welfare system
  • It would boost well-being; economic insecurity is a major contributor to depression and other mental health problems, and was a factor in the 64 million drug overdose deaths in 2016
  • It would eliminate fiascos, such as the CARES legislation passed to help those hurt by Covid-19 in the event of another economic crisis.

    The universal basic income is not just a liberal idea because it has been proposed by Andrew Yang, Elizabeth Warren, and Bernie Sanders.

    UBI has been proposed by a number of conservatives; let’s start with Friedrich Hayek (2).In his 1994 "autobiographical dialog." Friedrich Hayek stated: "I have always said that I am in favor of a minimum income for every person in the country".During his time at the University of Chicago, Hayek acquired many conservative acolytes who also advocated UBI, including Milton Friedman who proposed UBI as a negative income tax.

    James A. Baker, George P. Shultz and Ted Halstead (3) are currently advocating a UBI, which they term a "dividend."This would consist of a $2000 per year dividend for a family of four.That amount would increase over time.This UBI is a key pillar it their proposal to fight climate change by imposing a "carbon fee" of $40 per ton on carbon emissions, which would increase annually at 5 percent above the inflation rate.Their carbon fee would also be applied as a tariff to level the playing field against high-carbon imports.Their plan would be budget neutral.

    "The devil is in the details" applies to UBI and would need to be worked out. Key details include:

  • The amount of money per person,
  • Restrictions, for example, Alaska’s one-year residency and no payment to convicted felons,
  • Distribution method,
  • Source of funding,
  • Programs and regulations that can be eliminated or reduced, and
  • How it is administrated.

    UBI has not been adopted by any country but has been considered by many who have conducted experiments including New Zealand, Canada, Finland, and India.While no country has adopted an Universal Basic Income as law, Switzerland held a referendum to amend their constitution to include UBI.There was little support among Swiss politicians and not a single parliamentary party came out in favor.

    However, the supporters gathered more than 100,000 signatures, which forced the referendum under the Swiss popular initiative system.The national referendum on UBI was held there in 2016. It was rejected by a vote of 76.9 percent to 23.1 percent.Critics of UBI claimed that disconnecting the link between work done and money earned would have been bad for society.

    To adopt UBI in the U.S. will be an uphill battle.Most of the Members of Congress support the wealthy classes in the U.S. as evidenced by the 2017 tax cut.Also, the country has a large number of people who agree with the Swiss critics of UBI.However, the fact that the effort will be difficult does not mean that it is not worth doing.I say, let’s rise to the challenge.

    1. Chris Hughes is a multi-millionaire and American entrepreneur who co-founded the networking site Facebook, with Harvard roommates Mark Zuckerberg, Dustin Moskovitz, Eduardo Saverin, and Andrew McCollum. He was the publisher and editor-in-chief of The New Republic from 2012 to 2016. As of 2019 Hughes is a co-chair of the Economic Security Project.

    2. Friedrich August von Hayek was an economist and philosopher born in Vienna in 1899 to a wealthy family. He served in the Austro-Hungarian army during WWI, emigrated to England, and became a British citizen in 1938. He is best known for his defence of a political/economic ideology and philosophy, which advocates civil liberties under the rule of law with an emphasis on economic freedom. Hayek argued that the business cycle resulted from the central bank’s inflationary credit expansion and its transmission over time, leading to a capital misallocation caused by the artificially low interest rates.Hayek claimed that "the past instability of the market economy is the consequence of the exclusion of the most important regulator of the market mechanism, money, from itself being regulated by the market process." His popular book, The Road to Serfdom (1944) reached a much larger audience than the academic community and was/is widely popular among those advocating individualism and classical liberalism.

    3. The Strategic Case For U.S. Climate Leadership, By James A. Baker III, George P. Shultz and Ted Halstead" Foreign Affairs, May/June 2020

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