Can Basic Income Come to America?
By Peter Barnes
Last Sunday, Swiss voters defeated a ballot initiative that would have required their government to pay every Swiss citizen $2,500 a month, no questions asked. That electoral setback is far from a death knell for basic income in Europe, however. In Finland, the center-right government is testing a plan that could pay all Finns about $870 a month. In Britain, the Netherlands and elsewhere, politicians are discussing similar schemes, and popular interest is spreading.
But America isn’t Europe, and whatever the odds of basic income taking hold there, they’re a lot lower here. Most European countries already have generous welfare states, with no shame or stigma attached to them. There, basic income is viewed as a way to simplify, not expand, the existing welfare state. Cut out the bureaucrats and the qualifying tests, and just give everyone cash to use as they wish.
The situation is quite different in the United States. Here, efforts over the years to build a welfare state have consistently been thwarted by America’s preference for individual self-reliance, distaste for government, and racism. The result is a safety net so stingy and hard to navigate that many who are eligible don’t even bother. To shift from that to a basic income for everyone would be an extraordinary leap, the mere thought of which pushes two potent American hot buttons: (1) fear that our work ethic will be undermined, and (2) antipathy to high taxes and big government.
This is a pity, because America’s economy is changing in ways that make an income base, if not a basic income, increasingly necessary. The two most significant changes are the impoverishment of our middle class, which began in the 1980s and shows no sign of stopping, and the looming deployment of driverless vehicles, 3D printers and intelligent machines, which bode to eliminate millions of traditional jobs. These fundamental changes will unravel America unless we find a way to sustain a large middle class through a combination of labor and non-labor income.
But just because our economy needs a way to share non-labor income doesn’t mean our political system will create one. At the moment, most of the talk about basic income in the United States comes from a coterie of tech leaders and intellectuals. This chatter won’t rattle Congress by itself. For basic income to actually make it in America, two things must happen: first, any proposed system must sidestep the two hot buttons noted earlier, and second, a popular movement must demand it for many years.
Fortunately, America has two successful precedents for basic income: Social Security, created in 1935, and the Alaska Permanent Fund, founded in 1978. Social Security is essentially basic income for the elderly. It avoids both American hot buttons in two ways. First, it doesn’t undermine the work ethic because its beneficiaries aren’t expected to work. And second, it looks and feels not like welfare but like insurance: you pay your premiums and you get your benefits. Who can quarrel with that?
The Alaska Permanent Fund follows a different model. It is a giant mutual fund that pays equal yearly dividends to every Alaskan regardless of age or income. The fund is capitalized by earnings from Alaska’s oil, a commonly owned asset. This arrangement doesn’t undermine the work ethic for several reasons: because the dividends aren’t large enough to live on; because they’re not means-tested, you don’t lose dividends when you work; and because the dividends are perceived as legitimate property income. Nor does the Permanent Fund raise taxes; its revenue derives from charging corporations for using an asset that Alaskans jointly own.
That brings us to the second requirement for basic income in America, a popular movement demanding it. It’s worth remembering that Social Security didn’t emerge from a think tank: it came into being thanks to an explosion of grassroots movements in the 1930s. These included the Townsend Plan movement, which called for paying $200 a month ($3,500 today) to every retired citizen over age 60; Huey Long’s Share Our Wealth clubs, which urged the federal government to guarantee every family an annual income of $2,000 ($35,000 today) while limiting private fortunes; and in California, a group called Ham & Eggs, which urged the state to pay $30 every Thursday ($535 today) to all unemployed residents over 50, and nearly passed a ballot initiative to do just that. At their peak, these movements had millions of members.
Today, there are six large demographic groups (with some overlap) that could form the core of a movement for basic income: millennials (the first generation of Americans destined to earn less than their parents), low-wage and on-demand workers (the so-called precariat), women (who still earn less than men and aren’t paid at all for much of the work they do), African-Americans (who suffer from past and present injustices), retired and near-retired workers (who can’t live on Social Security alone,) and poor people of all colors. Environmentalists might also link arms if one of the revenue sources is a price on pollution. It is, of course, no simple feat to persuade these diverse groups that what they can’t achieve separately they may be able to achieve together. But it has happened before and, in the post-Sanders era, it could happen again.
So can basic income come to America? I think it’s possible, though in stages rather than all at once. What needs to come first is a base income — what former SEIU president Andy Stern calls an income floor — that lifts the poor and middle class without a huge increase in taxes or a reduction in means-tested benefits for the poor. Ideally, a sizeable chunk of the revenue for the first stage would come, as in Alaska, not from taxes but from fees for using common assets — for example, for dumping harmful wastes into our atmo-sphere or using our financial infrastructure for speculative betting. This revenue would emerge stigma-free as dividends rather than welfare. And distributions could be taxed as ordinary income, thereby adding to, rather than depleting, the federal treasury.
There’s little doubt that economic changes occurring now, especially the decline of the middle class and the rise of smart machines, make basic income a rational goal for the 21st century. How long it takes to make the first step — to a universal, monthly distribution of a modest amount of cash — can’t be foreseen, though fifteen years seems a reasonable timetable. (An economic crisis would speed things up.) Expanding from there to a basic income could then take place in increments, as robots really do take our jobs.
Peter Barnes, a co-founder of Credo Mobile, is an advisor to the Universal Income Project at the Roosevelt Institute and the author of With Liberty And Dividends For All: How To Save Our Middle Class When Jobs Don’t Pay Enough.