Op-Ed; Opinion

Towards a Basic Income: A Targeted Universal Framework for Shared Prosperity and Enduring Progress

Towards a Basic Income

A Targeted Universal Framework for Shared Prosperity and Enduring Progress

 

By Mark Gomez

May 30, 2017

 

There is more than enough in the American economy, not merely to end poverty, but for everyone to prosper. And in the next 40 years, the economy will double again. Now is the time to construct a framework of bold policies to tackle extreme inequality and finally end racial economic exclusion.

Unfortunately up to quite recently, progress-minded activists have been proposing a familiar set of policies from a bygone era that represent little more than baby steps forward. These policies neither excite voters to go to the polls in droves, nor embolden candidates to risk their office to ensure the policies become law.

In this essay, we propose a strategic reform framework that adopts familiar set of policies for a new era of possibilities, with an eye towards how they can each uniquely contribute to economic prosperity and stability for all. In so doing, we believe we can inspire a new vibrant brand of politics and rekindle a belief in progress.

 

Excessive Power Creates Extreme Inequality

A few corporations and people enjoy remarkable prosperity. The rest of us are stuck. Without enough in our pockets to drive the economy forward, our prosperity is not just inequitably shared, it is fleeting.

Across product chains, prosperous firms know how to ensure their contractors produce high quality products. And prosperous firms have generated ample jobs across their regions. However, these firms have yet to ensure that the workers they rely on also prosper.

Extreme inequality is born of excessive power wielded by a few firms and people. This power is built on stabilizing advantages inherent in our economy (e.g. natural monopolies, industry clusters) or granted through policies (e.g. patents, occupational licenses).

The stabilizing advantages (e.g. unions, free college, cheap homes) that once built the white middle class have been severely weakened. Of course these advantages also were often designed to exclude people deemed less worthy–women, African Americans, immigrants and others.

The dominant players’ extreme power slows economic progress and corrupts our democracy. We need to create effective countervailing power mechanisms and supporting institutions. And we need to recreate stabilizing advantages not just for the white middle-class, but also for African-Americans, immigrants and others who have yet to fully prosper.

 

Driving the Economy Forward from the Back

Our framework puts money back into people’s pockets enabling them to drive enduring prosperity. Those at the back of the income and wealth distribution, those who heretofore have been held back will now lead the economy forward benefiting all of us.

Income and wealth created socially needs to be distributed socially rather than by the few. To revive the economy and protect our democracy, we must strategically break up perilous concentrations of income and wealth. This tames dominant economic players, rewards the work of the rest, and ends racial economic exclusion.

This framework is built on three pillars: a decent stable income, a sturdy foundation of assets, and a share in our economy’s prosperity. Here is an initial take at what this could practically look like in dollars and cents.

1. A Decent Living EITC with the maximum credit set so that a single earner full time minimum wage worker’s household earned income reaches 250% of federal poverty. Childless workers will receive proportionate credits. The credit will be distributed monthly. To break up perilous concentrations of income, the program will be paid for by a tax on the top 20% of earners.  

2. A Social Inheritance Trust of $60,000 made available at 21 years of age. The initial annual contribution to the trust will be $2,857 per child. To break up perilous concentrations of wealth, the program will be paid for by a new tax on all forms of property. To ensure benefits for those now under 21, a one-time wealth tax will be imposed.

3. Prosperity Shares with monthly dividends to everyone over 18 years of age. The initial annual dividend would be $6,000 per household. To break up the perilous concentration of corporate income, the program will be paid for by a tax on the most prosperous of firms.  

 

A Targeted Universal Framework

Our universal goal is to ensure everyone prospers. Each policy is targeted to address the structure of industries and of households. Our strategy is built upon how business firms are connected through value chains and regional economies. And our strategy recognizes how hourly wages, annual income, and assets each contribute to households getting by.  

The “Decent Living EITC and Prosperity Shares” together reflect our ideal of the good life. We believe hard work should be rewarded and we believe in financial independence. The “Decent Living EITC” ensures dominant firms contribute to the prosperity of workers at less advantaged firms. And the “Prosperity Shares” ensure that we all, not just the upper middle class with stocks, enjoy our nation’s prosperity.

Over time, “Prosperity Shares” may be increased faster than the “Decent Living EITC”, eventually moving towards a more traditional UBI. The framework gives us the flexibility to adjust the distribution of income if, indeed, robots reduce the number of hours humans need to work.

The “Social Inheritance” breaks up racial economic barriers driving the political transformation needed to pass these policies. Those groups who heretofore have been held back from sharing in our prosperity are in many cases the most active politically in critical regions of the country.

This policy framework is predicated on reforming our antiquated national, state and city minimum wages laws. There is a legitimate fear that, with a decent living, EITC firms will in time not grant raises to their lesser paid workers. To ensure firms do not cheat in this manner, we need robust living wage standards with premiums for more prosperous regions.

None of this framework is possible without immigration reform. The dominant economic players, the people and firms, in the most prosperous regions rely on the hard work of undocumented immigrants. Their work is underpaid precisely because these workers and their firms lack power, in no small part, because they work in the shadows of our political economy.

For each policy we did not ask “how are we going to pay for this?” Instead we asked this: “At whose expense was the extreme income or wealth created?” Too many analysts critique extreme inequality only to then put forward policies that leave ill gotten gains intact. At the very least, moving forward, we need to discontinue the radical redistribution of income and wealth of the last two generations.

Over time, the income and asset standards need to increase with the economy. If they are indexed merely to the cost of living, within 40 years, we will the recreate extreme inequality we have worked so hard to undo. The income standard should be indexed to the U.S. GDP per capita. The asset standard is indexed to U.S. wealth per capita.

 

Shared Prosperity and Enduring Progress

Over the next generation, if we follow the historical trend, we will add to our economy $7 trillion in income and $27 trillion in wealth. Because each of us, and those who came before us, have contributed to that prosperity, we should share in it. In short order, we can ensure everyone enjoys a ‘middle-class’ standard of living. And, in the years to come, we should be able to ensure people do still better.


Mark Gomez, a long time community activist and labor union strategist, now leads the Leap Forward Project at the Haas Institute for a Fair and Inclusive Society.

 

About Guest Contributor

Guest has written 88 articles.

Share Button
The views expressed in this Op-Ed piece are solely those of the author and do not necessarily represent the view of Basic Income News or BIEN. BIEN and Basic Income News do not endorse any particular policy, but Basic Income News welcomes discussion from all points of view in its Op-Ed section.

2 comments

  • Mike van Wyk

    Dear Mark
    I have sympathy for migrants that migrate because they just cannot find enough work to feed their families and governments refuse to apply monetary policies that are available to them to create jobs – i.e. MMT job guarantee. Although I do not feel MMT job guarantee as a good fix of what is broken globally – at best it is a temporary fix but very weak and I would say exploitive.
    However, although there is merit in the model you’ve proposed to alleviate poverty and unemployment, I feel you missing the point. Unwanted migration places undue pressure and strain on nations that are flood with illegal immigrants and which perpetuates the cheapening of labour in the receiving economy. Whereas implementation of UBI as envisioned by the founders of BIEN will in fact set a stable survival floor, as well as promote better wages. Why? – because people receiving UBI have the power to refuse underpaid or exploitative work. On the other hand UBI will provide scope for labour to work shorter hours and job sharing schemes can be implemented to give many more people an opportunity to enter the labour market. The health benefits of working shorter hours will also be beneficial to society.
    Should UBI be adopted worldwide, there would be no need for unwanted or illegal migration. People naturally want to live within their own culture and practise their own native customs, UBI will make that possible. You mention immigration reform (?), I guess you meant throwing open borders for the free flow of immigration? Hopefully not…
    That sounds great and may work in favour of much poorer labour seeking migrants in the short term, but it is pointless migrating one countries problems to another – both will eventually drown. For this reason I feel adoption of UBI globally is critical. The G20, World Bank, IMF, UN and EU should with urgency adopt a new economic model that creates an ‘universal monetary policy’ which incorporates an agreed monetary construct that supports funding adoption of a global UBI. The only solution to achieving the funding of a global UBI, I feel is creating a global “sovereign wealth fund” into which valuable assets, such as existing gold reserves are registered and put to work. Once such assets are registered, that ‘pool’ of “common wealth” is then by decree escalated in value; i.e gold reserves current dollar value is increased from its current value to say e.g. USD 1 million an ounce (or more). Gold reserves held by private wealth funds or individuals can also be registered into the fund. So doing, a “central common reserve” is assembled which is periodically increased in value by an agreed percentage by the central fund. (I suggest that this value is possible not expressed in USD – but possibly a neutral currency of exchange can be created – thereby de-coupling value created from all standing sovereign currencies so that exchange rates are not skewed in favour of one particular nation; e.g USA). Governor-ship of the central fund would circulate amongst member states. Bonds are raised by the sovereign reserve fund governor and sold on the open market, similar to government bonds – but far more stable. The investments made into these bonds are absolutely guaranteed and can never fail. Because they based on a model that works similar to the old gold standard but does not operate like a gold standard. Rather it utilises what what best about the gold standard – which was certainty of measure – something which is missing from the world economy at the moment. This will create a super stable core for all member nations economies. The value is created firstly by the decreed escalation of the collective sovereign assets, secondly by investments driven by “common wealth bonds” sold, would raise a large portion of the funds that are needed to underpin a global UBI. The common currency which is centrally held would have a fixed exchange rate of value against all existing currencies, further stabilising the core fund and its action of support to each member nation.
    The commonly held “sovereign wealth fund” will be further supported by marginal, but not excessive, raising of taxes on property, certain assets classes and capital gains. I do not support the idea that taxes should be the only means of supporting UBI. Neither do I support excessive extractive taxation of raw materials as is proposed by BIG in SADC member states. The reason I do not support excessive taxation is that such taxes always impact eventually directly on the consumers, in the way of inflation of prices of goods and services. Which is negative, unnecessary and must be avoided. However, I do support taxation on pollution (carbon tax) and luxury goods (‘sin’ taxes on e.g. cigarettes and alcohol) – such taxes force change and are necessary in society.
    The central “sovereign wealth fund” will work towards four outcomes:
    1) it will underpin adoption of UBI globally, thereby reducing abject poverty and consolidation social spend; As much funding as it takes to launch a global UBI can be eventually generated via escalation of value and input investments over time. The fund follows MMT, there are no real limits or budgets that constrain funding. However the outflow of the wealth effect would have to be managed. Simple global rules would apply to how the generated wealth can be reinvested – much of it can be re-invested into the central fund. What is certain is that it will generate a perpetual stream of wealth that is reliable and predictable – something that is absent from the global economy at the moment. Secondly, a decent level of UBI could be afforded to guarantee that abject poverty is removed from the face of the earth. Which is our moral duty as rational thinking beings. This would improve health and security globally and hopefully bring about lasting peace.
    2) it will provide a safe haven for those that wish to invest into a “guaranteed global sovereign fund” which is not impacted by currency fluctuations neither market volatility and risk free – so great for i.e. pension fund investments, private wealth trusts or investments by member states. The central theme – certainty and stability.
    The investments grow along a predetermined trajectory, providing rock solid returns, which ordinary markets cannot guarantee and which are often subject to the whims of sentiment. The key is stability and safety.
    3) it will create a massive pool of “centrally held sovereign global assets” that are guaranteed by decree to escalate in value annually by a centrally agreed percentage (what is important, is that the increase is gradual and steady). All privately held stores of tangible assets – not paper assets such as stocks and shares – registered with the central fund will escalate at the same rate. All similar assets not registered will not escalate until registered and will only start escalating from date of register – this creates an incentive to register hard asset stores of wealth. This creates a unique wealth construct, from which those with excesses wealth can participate in the central fund and by so doing, “share” the bounty of their wealth with others less fortunate in a safe, fair and equitable manner. Which provides a sharing construct that does not require owners of wealth to dissipate their wealth by sharing. To the contrary their action of sharing advances central stability and adds wealth to the central pool. So for example, a wealthy individual that owns a rare painting can still enjoy the painting in his private dwelling or keep it in a vault, but through action of registration of that asset to the asset pool, the embedded value is leveraged as a means of security. Once an asset is registered it remains an central asset perpetually, gaining value according to the asset class it belongs. When that asset changes ownership the embedded asset value is released in a controlled manner according to rules governing that asset class. So each asset class will allow a certain portion of the embedded wealth be realised on ownership transfer but the balance will be realised over a predetermined period. This will prevent over inflation or asset bubbles forming. Should the owner require emergency liquidation of an asset then asset rules will follow and a large percentage of tax will be applied to that asset, which returns to the pool. Keep in mind that a dividend is realised annually by each participant who invested either an tangible asset class or who invest cash. Therefore the wealth generated is spread not only to the poor but also to the wealthy.
    4) a massive wealth effect can be created which can be used to invest safely into the economy. So doing unlock wealth so that money continuously moves through the economy without the possibility of ‘Minsky Moments’ threatening world stability. Parallel to the central “sovereign wealth fund” the markets operate as they always have – with their usual fluctuations, but what will have fundamentally changed, is that their will be a rock-solid, steady, “sovereign fiduciary fund” at the centre of all future commerce, that consists of tangible, auditable, hard assets that escalate steadily in value along a known, certain trajectory, that can be guaranteed.
    This new global monetary construct will not force states to be members, but rather attract states, because it offers certainty and stability. Furthermore, supports the up-liftment of its ordinary less affluent people by a guaranteed UBI, thereby moving aside abject poverty and instilling certainty and stability in each member states economy. As the central “sovereign wealth fund” grows in size and asset classes complexity, it creates sufficient wealth to share the bounty amongst all of humanity on an equitable basis.
    For such a system to work, will require global co-operation from the member nations to fight inflation. There will be no need for owners of capital and wealth to extract more than their fair share from the economy, because they can rely on a “central sovereign fund” that allows their wealth to be invested with certainty and safely. Those that enjoy or prefer to invest in the stock market, continue to do so – so that there will always be a speculative option open to those that want to speculate, but for those that prefer a fix guaranteed return – there is a rock solid avenue of investment open to them. Thereby creating not only a safety net for the poor, but also for the wealthy – something unique, achievable and that does not require excess punitive taxation to achieve. Lastly it will provide a reason to be proud to be wealthy not shameful. By harnessing natural greed that exists in all humans to good use. After all natural greed is what makes humans the most successful creature on the plant – lets make that success and natural drive to survive, a positive force for global prosperity.
    The above description is a rough summary of a economic model I feel may work for all – not just some.
    In time I will be writing in more detail about this model – focussing each part of the model. My hope is that someone may find sense in the idea (in part or whole) and utilise the ideas for the betterment of all mankind and to the promotion of peace, harmony and prosperity of all mankind and the protection of earth that supports mankind and all living creates it supports. I wholeheartedly support Basic Income Earth Network and encourage other supporters to possibly add to this idea, to improve the model in whatever way possible.
    Mike van Wyk – Western Cape, South Africa

  • james lum

    I have not followed UBI in any depth, but have an almost instinctive nervousness about it. This may be due to being very poor when young (4 yr old when dad died, no family support, food, clothes, money, etc from “neighbors”, etc) I felt that in return for receiving “things”, I traded my pride in myself for those “things”. “You poor thing, can’t make it on your own, so sorry for you, here is some scraps ….”
    I believe that many entitlement programs are BAD. The good entitlement programs REQUIRE that the recipient produce something in return (i.e. work), thus allowing the person to keep their pride and respect in themselves.
    UBI without a requirement from the recipient is a guaranteed way to create a larger and larger underclass with uncontrolled migration that will eventually create massive civil unrest.
    Stand back and really look at UBI. What do you really want? If you want to do away with an underclass, then that would make a better world. If you want an underclass so that you can lord it over those poor people and get them to worship you, then you are asking for class warfare. … this is not a mythological game.
    I recommend doing away with any underclass by attrition.
    Then couple it with a trade. Receive a UBI payment and get a shot that prevents pregnancy for 2-3 years for both men and women. If you want kids, then plan for it and get a job and save for it. UBI starts at puberty, ends at death, and also stops at pregnancy for both man and woman….and starts again, for the parents, once the kid is 4+ years old. The objective is to reduce the population and minimize the size the of the under class. Also, no limits on how UBI is spent. It is up to the individual to pay for food, shelter, clothes, drugs, health care, etc. If some people are concerned about the “poor” druggies, people, then they can pay to help them out of their own UBI, NOT from any collected taxes, or from my UBI..

Leave a Reply

Your email address will not be published. Required fields are marked *