Can Basic Income Save Us?

It’s estimated that automation will claim 50% of our jobs by 2030. So we ask the question — can basic income save us?

Photo by JJ Thompson on Unsplash

In a time when robots are replacing delivery drivers, algorithms drive our cars through 5pm traffic and the fiercest competitor for your next job is artificial intelligence, there’s little doubt our economic landscape is entering unprecedented times.

In this uncertainty, company sizes are shrinking yet their valuations continue to rise while 43.1 million people in the United States alone live below the poverty line.

We’ve concentrated our wealth in the top 1% and we’re still waiting for the trickle down.

“What do we do about [AI] and what do we do about robotics and automation?”
 — Kara Swisher
Kara Swisher

Kara Swisher, on a CNBC segment pointed out “politicians are discussing coal mining when the issue is real jobs. You know coal mining is a real job, obviously, but it is a lost job. These are jobs that are currently being held by millions and millions of citizens across this country and across the world. And so the question is. How many more could be lost through AI, what do we do about it and what do we do about robotics and automation?”

So what can we do to help the most exposed in our society? How can we ensure that every citizen has their basic needs of food, water and shelter met? Could we, through these efforts, actually foster more entrepreneurial innovations?

There’s a lot of talk in the tech world about Basic Income with even Mark Zuckerburg calling for a Basic Income program. This isn’t, however, a new idea. It’s an idea that dates about to the 1700’s and a version of it almost passed in the United States in the 1970’s under Nixon.

So why does this seem like such a foreign topic to us today?

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What is Basic Income?

Basic income is the idea that we provide all citizens with a base level of support that would help to provide food, shelter, health care through a monthly check or tax rebate.

With this one check, we’re pulling everyone in our society above the poverty line with no strings attached. And what about Welfare, WIC and many of the other government programs aimed at reducing poverty? Its generally thought that a Basic Income takes their place. With a Basic Income program, you get rid of all of them.

A lot of people doubt that this could ever actually work. Others have an aversion to giving people money with no strings attached. This was one of the major points of contention when Richard Nixon tried to pass a Basic Income program in the United States.

Basic Income in the United States

The heyday of the idea in the US was in the 1960s and 70s. This was after the Great Society had started. There was a broad interests among American political elites in an anti-poverty policy. There was a sense especially by late 1960's and early 1970s that some of Lyndon B Johnson’s initiatives might not have gone far enough.

And this administration, Here and Now, declare unconditional war on poverty in America…
- Lyndon B Johnson

In this time there’s a lot of interest across the political spectrum around the idea of a Basic Income. At the time it was referred to as a Demogrant or guaranteed minimum income. People like Kennith Galbraith & James Tobin, who would win a Nobel Prize in Economics, were backers of this. On the right Milton Friedman was a huge advocate for a basic income program.

Economist Milton Friedman
The proposal for a negative income tax. Is a proposal to help poor people by giving them money which is what they need rather than is now by requiring them to come before a governmental official detail all their assets and their liabilities and be told that you may spend X dollars on rent Y dollars on food et cetera and then be given a handout. The idea of a negative income taxes to treat people who are poor in the same way as we treat people who are rich. Both groups would have to file income tax returns and both groups would be treated the same.
 — Milton Friedman
Richard Nixon (Left)

The 1972 election was between two candidates, Richard Nixon and George McGovern, who both had Basic Income plans. Richard Nixon’s family assistance plan was the closest to passing.

A basic federal minimum would be provided the same in every state. What I am proposing is that the federal government build a foundation under the income of every American family with dependent children and cannot care. And wherever in America that we may live For a family of four now on welfare with no outside in the basic sixteen hundred dollars a year. States could add to that. Most states would have no place would any one present level of benefits be lowered. At the same time this foundation would be one on which the family itself could build. Outside earning would be encouraged not discouraged. 
 — Richard Nixon

Unfortunately, It got watered down in the legislative process. It actually passed the U.S. House of Representatives with a work requirement added to it with the basic idea being that it was a negative tax that would top of people’s income and help them get out of poverty. It then died in the Senate for a variety of reasons but mainly, Russell Long, who led the Senate Finance Committee, was very skeptical of giving cash no strings attached for people.

Guaranteed Jobs Scheme

While a Basic Income plan wasn’t passed, it did lead to interest in a guaranteed jobs scheme known as the Humphrey–Hawkins Full Employment Act which would have mandated 3% unemployment at all times. Coretta Scott King and the Unions were very active in promoting this idea, but it diminished the degree of favor in which economists held the idea of Basic Income and ultimately killed its appeal for a generation.

Basic Income Today

Today the interest in Basic Income is largely driven by a frustration around jobs and our workforce. Innovations in AI, robotics and machine learning that could eliminate even more jobs, leaving us to wonder — what do we do to take care of the poor and the unemployed.

Dylan Matthews of Vox.com

“There’s a movement that’s referred to as fully automated luxury communism” Dylan Matthews of Vox described as “The idea that everything is fully automated and then none of the income goes to wages because there’s no wage labor that hasn’t been automated out of existence. So the only thing income is capital income and so you just spread the capital across the population and you have pure quality, which sounds awesome but, I have no idea if it will ever actually happen.”

Scott Santens, a journalist and basic income advocate, became interested in Basic Income because of “the angle of automation and where that’s leading us. The more I looked into this the more I got concerned about this forked path that we’re headed towards. Where everything could get really bad or everything can get much much better than it is now. It’s kind of like another climate change that’s ahead of us that people are ignoring on the one hand or just not really talking about on the other.”

Mark Zuckerberg has been a recent advocate for basic income stating at a recent Harvard commencement address that “we should explore ideas like universal basic income to make sure that everyone has a cushion to try new ideas.”

Rutger Bregman, a Dutch historian and basic income advocate, gave a TED talk on basic income recently on Why do the poor make such poor decisions? His famous line “Poverty is not a lack of character. Poverty is a lack of cash,” echoed the sentiment of Milton Friedman before him. The 1,000 person TED audience gave him a stand ovation, once again legitimizing that the idea of a basic income for all citizens is again being given legitimate consideration amongst pundits and influencers.

“It’s really a mindset change to enable society to flourish.” — Scott Santens, Journalist

Basic Income and the poverty line

Priya Kothari, an economist in San Francisco, writes that “the freedom to choose is a privilege of the wealthy” in her article “Free to choose (unless you’re poor of course).” In my discussion with her, she laid out the argument that poverty acts as a mental tax on the poor, preventing them from living out their full potential in life. Sendhil Mullainathan and Eldar Shafir in their book “Scarcity,” cite research that shows the effect poverty has on the mind.

In their research they took two groups of people at different income levels and they gave them each a bill that was well within their means to pay and they measured their IQ. There was really no difference.

They then took the same two groups of people and gave them a bill that would have been very difficult for them to pay. What they found was under that stress their IQ level in that moment dropped 14 points.

We have millions of people in this country living under this amount of debilitating stress and thus we’re preventing them from ever reaching their full potential.

By lifting people above the poverty line, we’re opening up the opportunity for them to live, and contribute, to society in a more meaningful way.

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The Mincome Experiment

Betty Wallace, participant in Manitoba’s Mincome experiment

The Mincome experiment was a Canadian guaranteed annual income project that was held in Manitoba, during the 1970s. The project was funded jointly by the Manitoba provincial government and the Canadian federal government under Prime Minister Pierre Trudeau.

Everyone there got their income stepped up to the poverty line creating a town with no poverty for over a five year period.

One of the notable effects that was seen was that hospitalization rates decreased 8.5 percent which immediately points to how much money can we could save on our health care system by introducing a basic income.

Kenyan Basic Income experiment

Photo Credit: Business Insider

The nonprofit GiveDirectly is providing a basic income set at the Kenyan poverty line to dozens of impoverished villages for 12 whole years. It’s the largest study of it’s kind to date.

Dylan Matthews travelled there to cover it and reported some incredibly promising stories.

Here’s Dylan speaking on This New Economy’s episode covering Basic Income. “The richest person in the town I went to with this guy named Samson was a retired police officer for the region and had a good government pension. But he was still making like $9000 a year US. So it’s a lot better than his neighbors, but still like US level poverty. And the interesting thing is that he has wife, they didn’t use the cash they got for subsistence needs they used it to invest in side hustles they had like he has a fish fry business and he used it to buy some fish feed. She has a greenhouse and used to hire some people. And so it’s both serving as a means of buying food and surviving and sort of start up capital in areas that are not well served by banks and other traditional sources of investment.

So it was it was interesting to see how people use it in multiple ways. It was also sort of a big eye opener that.”

People in poverty will make decisions that might seem baffling to you but are based on their their predicament.
— Dylan Matthews, Vox.com

Funding a Basic Income program

There is no doubt that a basic income program would cost the government a hefty chunk of change. According to the 2010 United States Census there are 209,128,094 people over the age of 18. At $12,000 a year, a basic income program would cost over 2.5 Trillion dollars. So how could we potentially fund such a program?

Natural Resource Dividend

Did you know, that there is a state in the United States that has the pre-cursor to a basic income program.

That’s right. Alaska.

The Permanent Fund Dividend is a dividend paid to Alaska residents that have lived within the state for a full calendar year.

It is a small, yearly dividend, financed indirectly from oil revenues, paid by the state government to every citizen who lives in Alaska — including all men, women, and children.

The goal is to ensure that every Alaskan citizen would benefit from their decision to use and sell its oil resources.

Patent Dividend

Scott Santens discussed a dividend on Technology patents, here’s how he described it, “Essentially the government is giving a monopoly to certain companies to use and profit from that technology for a certain amount of time, and so we we all together are paying taxes to make that happen. Since that same technology is unemploying everybody, we take a cut just like we do in Alaska. So like in Alaska where it’s a 25 percent of the revenue from the oil goes into this fund, we would say — sure we’ll give you a patent but we’re going to take 10 percent. You apply a fee to it and you’re able to actually use that money to put into a national dividend.”

Big Data Dividend

This was another idea that was again presented to us by Scott Santens and is largely based on the value of big data and how it’s collected. Scott described it this way, “big data is something that’s going to be getting bigger and bigger over time especially with the Internet of Things. Facebook is this multibillion dollar corporation. It’s worth so much money with relatively few employees and it’s worth so much because all of this way all the value all the labor is being done in microwork by the Facebook users. The people creating it aren’t getting anything for it.”

So how might we collect a dividend payment from these companies? Yanis Varoufakis, a Greek economist, suggests that upon IPO 10 percent of a big data companies stock would be set aside in a national fund. That way everyone is the country becomes shareholders in these companies as recognition of the fact that they’re creating the value.

Taxes

In a recent report from the Cato Institute, it’s argued that the federal government spends $1 Trillion per year on 126 different welfare programs.

The advantage of a Basic Income program is that the government could essentially eliminate Welfare, Eitc, Snap, Housing Assistance, Ssi, Pell Grants, Tanf, Wic, Liheap and many more by simply offering a basic income for all citizens and allowing them to decide how and what to spend their income on.

With our current budget, taxes alone won’t get us there, but taxes combined with national dividend programs could be enough to generate a meaningful basic income program for all citizens.

The future of Basic Income

Elon Musk was recently quoted as saying “It’s going to be necessary.” This was in response to the effects automation is expected to have on our labor force.

Dylan Matthews of Vox had a different take. “Humans seem pretty good at developing things they want. I’m skeptical of the notion that 10 to 20 years in the future we are going to need basic income as a solution to automation. Say you’re a truck driver and your job is threatened by self driving trucks that are going to come on the market pretty soon. You’re making $70,000. You’ve been doing this for 10 years. It’s a good Union job. It’s honestly is terrible that you’re going to lose your job but it also doesn’t solve the problem for the government to come in and say you are currently making $70000, let’s give you $10,000 as a basic income.”

Scott Santens see’s it as a way to unlock societies potential by redistributing some of the wealth that is currently locked up at the top.

“We need to get away from the system of self-imposed scarcity because we certainly have the technology for a much greater abundance. And we actually have abundance except it’s locked up at the top. If you look at the distribution of the of the income and the wealth, it’s ridiculous to look at it in a non-normalized kind of graph. It’s just skyrocketing on one side. If we distribute this in a less extreme way we would have an orientation of abundance and that would have a profound effect. It’s not just giving people money it’s not just shrinking the size of government, or reducing crime. It’s really a mindset change to enable society to flourish.”

While basic income may be necessary to curb the effects of automation and the impending job losses, it can immediately help to end poverty and give those earning amongst the lowest incomes in our country a chance to live with a little more opportunity, security and dignity than we allow today.


This piece was based on the podcast episode, “Can Basic Income Save Us?” — available on iTunes or where ever you listen to podcasts.

You can find out more about the show at ThisNewEconomy.com.

This New Economy, available on iTunes

Feel free to drop me a line on twitter Michael Sacca.