Can Basic Income Come to America?

Medium, June 9, 2016

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.

4798232The 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) dread that our taxes will soar.

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 hugely popular 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 side­steps 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 it’s not means-tested, you don’t lose dividends when you work; because the dividends aren’t large enough to live on; 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 called upon 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 fare worse econo­mically than their parents), low-wage and on-demand work­ers, retired and near-retired work­ers, women, African-Ameri­cans, 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 not 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 a base income would come, as in Alaska, not from taxes but from fees for using common assets — for ex­ample, for dumping harmful wastes into our atmosphere or using our finan­cial infra­struc­ture for speculative betting. The 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 leap — to a universal, monthly distribution of a modest amount of cash — can’t be foreseen, though fifteen years seems a reason­able time­table. Expanding from there to a basic income could then take place in incre­ments, as robots really do take our jobs.