by Tyler Prochazka | Feb 21, 2018 | Opinion
As income inequality continues to soar in the US and around the world, progressives are in a heated debate as to what the most effective policy may be to address growing precariousness.
My recent article reflected a left-leaning criticism from Philip Harvey of Universal Basic Income (UBI) as unaffordable from a political standpoint, and counterproductive in advancing politically feasible solutions such as a job guarantee.
There has been much research done on the subject of basic income’s cost. Karl Widerquist has become a prominent voice on this subject, arguing that the net cost is the true cost that should be considered.
In reaction to my interview with Harvey, Widerquist said the arguments about UBI’s cost were misleading, and in reality UBI is far more inexpensive than simplistic calculations let on.
“If the government gives a dollar and takes a dollar from the same people at the same time, it doesn’t cost anyone anything. According to my analysis, UBI can eliminate poverty by putting $539 billion in the pockets of low-income people after they’d paid their taxes and received their UBI. The only meaningful cost of that UBI is higher-income people have to make do with $539 billion less in their pockets after they’ve paid their taxes and received their UBI,” Widerquist said.
In “Financing Basic Income: Addressing the Cost Objection,” a book edited by Richard Pereira, also argues that the actual cost of basic income is largely overstated. Pereira told me that basic income can create a surplus to lower taxation burdens elsewhere.
“The demogrant is similar, with a seemingly much larger cost upfront. I say ‘seemingly’ because as some major studies that I reference explain, the demogrant can be “calibrated” to achieve the same result/cost as the NIT,” Pereira said.
The book persuasively addresses the critics that say UBI is too expensive. Other savings noted by Pereira’s book, such as those from reduced crime and improved health due to UBI, are important in the calculation of basic income’s net surplus. However, these topics deserve a separate consideration.
One area basic income advocates need to emphasize more is this clawback of basic income. As basic income pushes up an individual’s income, it subjects a person to paying back a portion of their UBI under the current income tax system, as Pereira’s book notes. Moreover, many individuals relieved from poverty due to UBI will no longer qualify for other welfare benefits.
As such, the actual long-term tax rates needed in a world with UBI is probably substantially lower than what the gross cost would suggest, because the government will start receiving a portion of everyone’s basic income back to use for the following year’s UBI.
A benefit of the Negative Income Tax (NIT) is that the gross cost and net cost are the same, because they immediately clawback the NIT credit in one’s taxes. This tax is politically superior to UBI’s indirect clawback through other taxes. However, a monthly UBI paid upfront to all in the same amount is still desirable to NIT because it ensures that everyone receives the funds, especially in the event an individual experiences a financial emergency and does not have the time or ability to apply for assistance.
Basic income advocates can learn from the payback scheme in the Affordable Care Act and combine the UBI proposal with a phase-out in the Negative Income Tax (NIT).
A helpful analogue is the ACA’s clawback of insurance subsidies. An individual can receive healthcare subsidies based on the previous year’s income tax, but pay back some or all of the subsidy through their income tax if they make more the following year. This lowers the amount that the government has to tax for the following year to pay for new subsidies.
The basic income could be paid upfront in the same amount to each individual on a monthly basis. However, the clawback from high-income earners should be more explicit, with a NIT type phase-out based on annual income taxes for high earners.
Perhaps 50 cents could be paid back on each dollar earned above $50,000. The rest of the clawback (and net funding for low-income basic incomes) can occur in indirect ways, such as through carbon taxes or financial transaction taxes.
Having high-income earners pay back their UBI through the income tax means that other taxes will not have to be raised as significantly. It may be helpful in the political realm to with this built in clawback because it is easier to understand.
At the end of the day, a UBI is likely the most effective way to end global precariousness. It’s time to get down to the specifics of how we make a UBI above the poverty line politically possible.
“There is no benefit to working people to being under the constant threat of poverty, homelessness, and destitution, if they have refuse or find themselves unable to take orders given to them by more privileged people. We need to build an economy based on positive incentives, not threats. A generous UBI can do that. A job guarantee cannot,” Widerquist said.
by Faun Rice | Feb 19, 2018 | News
Image by MaxPixel: Trakai Castle Lithuania
On December 6, 2017, Swedbank published a report on the Baltic Sea Region entitled “Heart-warming growth is a poor excuse to postpone reforms.” The report includes a chapter on Universal Basic Income, wherein the bank models the current economic feasibility of UBI in the Baltics.
Swedbank is a bank based in Stolkholm, Sweden. Its research arm publishes annual economic assessments of Baltic Sea region countries, which include Germany, Denmark, Norway, Sweden, Finland, Russia, Estonia, Latvia, Lithuania, and Poland. The December 2017 report and executive summary focus primarily on Swedbank’s four main markets: Sweden, Estonia, Latvia, and Lithuania.
The report highlights a time when global economic growth has helped Baltic Sea region countries reach cyclical economic peaks. However, it states that geopolitics, and populism in particular, remain risks to further growth.
Swedbank suggests that rising income inequality, combined with fears about unemployment driven by automation and globalization, contribute to populism and need to be combatted in order to ensure sustainable economic growth. The report proposes that populism can be circumvented by socioeconomic policy that ensures that growth is inclusive (i.e., where prosperity is distributed equitably across all of a country’s economic classes).
As such, Swedbank’s report argues that this period of prosperity in the Baltic Region has created an ideal context for reform and investment in long-term economic wellbeing. The report delivers an in-depth analysis of the economies of Sweden, Estonia, Latvia, and Lithuania, commenting on GDP growth and the potential to create new socioeconomic policies. It also targets specific needs in each country, referencing indicators based partially on the UN’s sustainable development goals.
Sweden scores higher than the Baltics on most of Swedbank’s UN SDG-based indicators. However, the report comments on the need for all identified countries to take the opportunity to enact policy reform.
Swedbank addresses Universal Basic Income as one potential option for reform that will reduce income inequality and encourage sustainable growth. The report concludes that UBI is currently unaffordable for the Baltics, but that elements of a basic or guaranteed income, introduced carefully, could come with numerous social benefits.
Swedbank in Lithuania. Credit to: Delfi
UBI: Current feasibility for the Baltic Region
Swedbank identifies several arguments for UBI, including the idea that it will increase income security and thus reduce fears around unemployment and job loss, along with suggestion that UBI solves or mitigates problems with existing social security systems. The argument that UBI will minimize bureaucratic costs associated with social security systems is less relevant in the Baltics, where only 1.2 to 2.1% of total “social protection” expenditure is administrative.
The report provides a summary overview of some of the questions associated with UBI implementation, such as its impact on employment and the economy, or the concern that it would negatively impact assistance given to the disabled or elderly.
Using 2015 data on government spending on social protections in Estonia, Latvia, and Lithuania, Swedbank evaluates the feasibility of a budget-neutral UBI in these countries. The report tries two different models, one in which old-age pensions are retained by the elderly, and the other in which pensions are included in the money redirected towards UBI. For each of these two scenarios, the report presents two further options: one wherein all residents of a country receive UBI, and another wherein children up to the age of 16 receive only 50% of adult UBI payments. Swedbank does not make any changes to tax revenue in these examples.
The report finds that, given existing budgets, UBI monthly payments to individuals would only reach 48-55% of the at-risk-of-poverty threshold for each Baltic country, less if old-age pensions were retained for the elderly. A UBI at the poverty line, distributed to all residents equally, would require doubling social security budgets in Latvia and Estonia, or an 82% increase in Lithuania, becoming 20-25% of each country’s GDP.
While Swedbank concludes that a UBI is currently unaffordable in the Baltics, the report comments that some components of a “basic income model” might simplify and improve existing social security programs. The authors suggest that governments could improve their systems’ accessibility by eliminating means testing and other conditions currently in place for those trying to get support. They also propose that a gradual decrease in benefits, rather than a sharp removal once a person becomes employed, might help incentivize recipients to stay in the labour market.
Another alternative discussed is a “partial” guaranteed income delivered only to particular cohorts of people. For example, Lithuania has an existing program that provides lump-sum cash benefits to every child born, with no conditions placed upon family income.
More information at:
“Baltic Sea Report: Heart-warming growth is a poor excuse to postpone reforms,” Swedbank, December 6th 2017
“Sustainable Development Goals,” United Nations
“Swedbank Macro Research: Baltic Archive,” Swedbank, February 2018
Vlada Stankūnienė and Aušra Maslauskaitė, “Family Policies: Lithuania (2015),” Population Europe Resource Finder & Archive, 2015
by Karl Widerquist | Feb 7, 2018 | Opinion, The Indepentarian
This essay was originally published in the USBIG NewsFlash in June 2008.
What does the Stone Age have to do with modern justice? According to property rights advocates: everything; their arguments rely on two factual claims that can be enlightened by a look at prehistoric anthropology. (1) Property begins as individual property and then governments come along and impose taxes that interfere with the rights of owners. (2) A market economy with no restrictions on inequality makes everyone better off than they were befor the private property was created (i.e. when our ancestors were hunter-gatherers).
I have heard private property advocates make these claims many times, but I’ve never seen them support those claims by referring to anthropological studies of prehistory. How do we know that property began as private property? Are we sure that every single modern worker is better off than our hunter-gatherer ancestors? Recently I’ve taken a look at some anthropological studies including Stone Age Economics by Marshall Sahlins, Bronze Age Economics and How Chiefs Come to Power by Timothy Earle, and The Evolution of Political Society by Morton Fried. I found out that the claims of property rights advocates don’t hold up very well.
To examine the first claim, we need to go back to the creation of fixed property rights in the Bronze Age. Property rights advocates like to imagine land being first appropriated by individualistic pioneers who tamed the wilderness by their own efforts. But that’s not what actually happened. The transformation from hunting and gathering to a settled agricultural life took the joint act of entire bands not simply one person. The rights of land tenure in primitive settled communities were extremely varied, but it seldom if ever looked anything like the neoliberal systems that property rights advocates suppose. In the earliest agricultural societies, every individual had a right of direct access to the land, which was usually owned (if at all) by villages or large extended families. In slightly more economically advanced societies where property rights have become exclusive, the original owners are not private businessmen, but chiefs. Ownership of resources was synonymous with ownership of the government.
The reason chiefs doubled as owners is obvious: the earliest societies were too economically simple to have separate spheres of power—such as government, religion, and business. All of these powers were vested in one person. The Hawaiian Islands were first settled by human beings around the year 600 and so they provide a very recent example of the first creation of property rights. For the most part by the 1400s, each island was run by a chief who owned the land and the irrigation systems that made everyone’s efforts to farm the land viable. Local lords were employees of the chief. They doled out land to peasants only if the peasants promised the interests of the chief. In short, the chief ran his island as a wholly-owned, for-profit business.
Property rights advocates sometimes claim that only recent history matters, but taxation and regulation of property are not new. Modern governments inherited their regulatory powers from medieval kings, who owned the right to regulate their domain in any way they saw fit. Modern landlords hold titles that derive from the medieval vassals of the king. Government taxation is simply the exercise of property rights that are as old as or older than private holdings of property. Some countries went through a brief laissez faire period in the Nineteenth Century, when governments chose to tax and regulate less than before. But I know of no government that signed an enforceable contract to alienate its rights over its domain. So-called property rights advocates simply want to interfere with the property rights of kings to promote opportunities for his vassals, which has about as much to do with “freedom of property rights against interference” as redistribution from condo associations to condo owners, from landlords to tenants, or from stock holders to middle management. If the property rights system the king set up is unjust, his rights should go to the people, not his lords. If the property rights system the king set up is just, we must respect his rights and not force him to cede power to his lords.
To examine the second claim, we need to go back all the way to the Stone Age. Studies of hunter-gatherer communities that survived into the Twentieth Century show that people worked an average of three to four hours per day (including time spent preparing food and commuting). They worked at their own pace and slept more than people do today. Researchers reported that they appeared to feel extremely secure about their ability to find food and other necessities, and they never had to answer to a boss. When a hunter-gatherer is in the mood to forage for food, she sees if anyone else feels like joining her. If not, she waits or goes out alone.
Modern capitalism is a very productive system with great potential to produce goods that could benefit everyone, but as we practice it, it has extreme inequalities. People live on the street and eat out of garbage cans. Others work long hours in sweatshops at the edge of their physical ability and still face the possibility of hunger and malnutrition. Most modern workers have more access to luxuries and better medical care than hunter-gatherers, and on the whole they live longer. But many work longer and harder; they have to follow the orders of a boss; they have less economic security; and do not forget the some individuals die young (and younger than many hunter-gatherers) because of malnutrition and other complications of poverty. In short, the transition from hunter-gatherer society to modern capitalism has not been an unequivocal gain for the working class. It has been a tradeoff. But a tradeoff is not good enough to meet the standards that property rights advocates set for themselves.
I am not the one who put forward the standard that the poor must be at least as well off as their Stone Age ancestors. Property rights advocates chose that standard because they thought it was easy to meet. It is. A society, as productive as ours, can easily make everyone far better off than they would be as hunter-gatherers, but we have failed to do so. The minimum we can do to justify our property rights is to make sure that every single human being has more freedom and economic security our Stone Age ancestors. To make sure the standard it met, we only need to make sure that everyone can have some minimal level basic necessities without having to submit to a boss.
We don’t, I believe, largely because we, the better off, have convinced ourselves that we have the right to boss around the poor. We have property and they don’t; and therefore, supposedly, we have the right to make them do what we say 40 hours per week. Yet, studies of societies without property rights show that our property rights are the only thing coming between the poor and their ability to meet their own needs with less effort and without following anyone’s orders. It is we who owe them, not they who owe us. Perhaps we can make the poor work for us if they want to share in the luxuries of capitalism, but we have no right—even by the standards set by property rights advocates—to force them to work for us just to meet their basic needs.
-Karl Widerquist, New Orleans, LA, May 2008
by Andre Coelho | Feb 7, 2018 | News
A new book has just been released by Policy Press, an imprint of Bristol University Press. Titled It’s Basic Income: The global debate, it binds the contributions of many different authors, activists and researchers dwelling in the basic income global debate. Among these, one can read the input of Bruna Augusto, Sarath Davala, Brian Eno, Louise Haagh, Otto Lehto, Francine Mestrum, Annie Miller, Elisabeth Rhodes, Malcolm Torry, Jenna van Draanen, Jonathan Reynolds and Karl Widerquist.
The book discusses the basic income policy from many different perspectives, whether greater financial freedom for women, value unpaid work, reduced poverty or an enhancer of freedom for all. Critical views are also present, confronting the idea as utopian when other policies may be more effective and practical at the moment.
Original book (title information):
Amy Downes and Stewart Lansley, eds., “It’s Basic Income: The global debate”, Policy Press, March 2018
“It’s Basic Income” Tweet page
by Guest Contributor | Feb 7, 2018 | Opinion
Looking back to the past, looking forward to the way ahead
The 6th General Assembly (GA) of Basic Income Korea Network (BIKN) was held in Seoul last Saturday. The GA, the highest decision-making body, is held every January, in which we examine the activities of last year and decide what activities we should carry out in the following year.
2017 was a watershed year for BIKN as well as for the politics in Korea. Popular resistance to the abuse of power and corruption of the former president and her coterie led to a snap presidential election in which Mr. Moon from the Democratic Party won. We have the most democratic government in a decade.
Grievances about social and economic inequality and insecurity have flowed under the popular resistance, although it was certainly an expression of the aspiration for democracy. Under these circumstances, interest and support for the basic income idea could be strengthened and become more prolific prolific. One of the more influential candidates presented basic income policy as an electoral promise.
BIKN had two main achievements in the turbulent year of 2017. Above all, the basic income agenda entered into the center of the public sphere. During this period, BIKN has been recognized as a prestigious institution around the discussion of BI. Secondly, we saw the quantitative growth of our organization, including an increase in individual and group membership, as well as the growth of local networks (chapter of BIKN). Now we have around 500 individual members, seven group members and six local networks.
Upon the those self-assessments, BIKN decided the following activities for the next year: we will spread understanding of the basic income concept through online basic income courses; we will make efforts to form basic income coalitions during the local elections this June in order to implement basic income policy; we will participate in the project to design experimental models for basic income which the government will commission this year (see another article); we will change BIKN into a corporation in order to secure institutional status.
We expect this year will be another watershed to realize the basic income idea.
Hyosang Ahn Executive Director of BIKN
