Universal Basic Income
Universal basic income inspires with it's enormous potential to transform how we think of social security in the United States.
Social security may trigger thoughts of old-age and retirement. But in the broader context of society, it encompasses not just every American, but also the very structure of society. If we can agree that the security of our citizenry is important, then we must ask what type of security do humans need?
Obviously, we need to be safe from harm and physical danger. Which is why national defense is a priority. We take great strides to ensure that America's military is second to none. So it baffles me that we don't ensure Americans have access to the most basic necessities to function normally. I believe these two bare minimums are food and shelter.
If you do not have reliable access to food or shelter then you do not have any security. Lacking either one of these items means that you are living in extreme poverty.
Now I don't know why we haven't agreed yet that poverty should be abolished but this is one of the many benefits of providing a basic income to every American of $1,000 a month. This would be $120 more annually than the U.S. Health and Human Services 2016 poverty level for a single individual.
As we will explore shortly, the argument that a basic income would severely impact the labor participation rate is unfounded. I don't know about you, but I certainly wouldn't stop working for $12,000 a year. Let's keep this in perspective when we talk about how much money a basic income would provide. We are talking about providing what is already established as the absolute minimum an individual would be able to live on in the United States.
It's estimated that within the next 20 years 47% of jobs could be automated. That is a frightening reality that must be planned for. This is almost half the work force being deemed obsolete. Now this is the whole purpose of technology. To free humans from rote tasks that take up valuable time. This should be the goal of mankind. But it's true that we would need a new type of economy and individuals would need to find healthy outlets for the pursuit of achievement.
One of the first objections to a basic income is that everyone would stop working. Experiments in both the United States and Canada provide evidence that this fear is overblown. Yes, there was a general contraction of hours worked but in studies based in Seattle and Denver this amount was about 17% for women and 7% for men.
Young people offset labor force reduction almost entirely by continuing their education. This is not the type of decrease in labor that causes concern. It's also important to note that assuming automation successfully upends the economy, many of these individuals would be without work anyway.
In addition to having a minimal impact on the labor participation rate, studies in India provide evidence that entrepreneurship and small business benefit from a basic income. This seems more than plausible. American entrepreneurs would take more risks and create more new businesses if their own basic living expenses were guaranteed. The universal nature of a basic income means that all work pays. Additional income only enhances your livelihood because existing benefits are not reduced or taken away due to additional earnings. It's the opposite of the current means tested system which we all know discourages work.
Another concern with basic income is inflation. First, realize that a basic income would not involve the printing of new money. Second, the Federal Reserve has pumped trillions of dollars into the economy in the name of liquidity. These were new dollars that didn't exist prior to being received by financial institutions. The result was considered to be not even a healthy level of inflation by the Federal Reserve's own guidelines.
Without an increase in money supply, where would inflation come from? One place could be if the balance between supply and demand was disrupted. However, studies in the United States show only a modest increase in consumption.
Additionally, the velocity of money (the number of times a dollar is reused throughout the economy) has reached it's lowest point. Economists suggest this means there is a lack of confidence by businesses and consumers in the overall health of the economy. I prefer to ask what consumers are we speaking about? Are we referring to the ones who would gladly spend money on necessities and other big ticket items but can't? I find this hard to believe.
The real question is why do our current corporate and economic policies promote the accumulation of money by those who have much smaller needs? By redirecting money to the top of the income distribution, we are preventing it's return to the economy and thus stifling growth. Basic Income advocate and expert Scott Santens illustrates perfectly here how this low velocity of money impacts economic growth.
The third argument against a basic income is affordability. The first thing to know about a basic income is that while it would cost roughly $3 trillion a year by most calculations, it would eliminate current costs of $1.5 trillion in existing welfare programs.
A universal basic income could be funded in a number of ways. One method that wealthier and more conservative individuals may be able to get on board with is a flat tax. While regressive, it could still accomplish the goal of ending poverty in the United States and would be attractive to libertarians and conservatives who believe this is the fairest way of paying taxes.
We could also institute a natural resource tax on items such as cellphone spectrum, oil and gas reserves, land, etc. The bottom line is there are vast combinations of tax reforms that could be implemented to fund a basic income. This is simply a matter of deciding that economic rights are a necessity in a truly free nation.
The first country to implement a universal basic income will be considered revolutionary. It's not for those blinded by the false narrative that ensuring the livelihood and cohesion of society goes against American values. Founding father Thomas Paine proposed a similar idea in 1795.
It's not only detrimental to the economy for so much wealth to be hoarded by so few, it's an affront to those members of the working poor who risk their health, safety, and dignity to ensure that a system that no longer provides them with true opportunity continues to function. It's time for the U.S. to take risks and tackle the challenges that put us in a position of leadership. It's time we lead not just with military might or economic power, but instead with morals and respect for basic human dignities.