The Basic Income Guarantee Becomes a Rorschach Test in the U.S. Media

The Basic Income Guarantee (BIG) recently became a part of a flurry of discussion on the internet and in the media, when Jesse A. Myerson, of Rolling Stone Magazine, included it in a list of “Five Economic Reforms Millennials Should Be Fighting For.” This ensuing discussion reveals a lot about the many different ways people see BIG.

The other reforms on the list were a guaranteed job, a land value tax, a sovereign wealth fund, and a public bank. Myerson framed the reforms as liberal, progressive ideas that should be especially appealing to the more-free-thinking millennial generation.

Soon after, Dylan Matthews, of the Washington Post, had the brilliant idea of reframing all five reforms as conservative proposals. Although his introduction clearly spelled out what he was doing, the reaction in comments and elsewhere was telling. Democrats tended to oppose the ideas, and Republicans tended to support them, even thought Democrats and Republicans who read Myerson’s piece had opposite reactions.

Ezra Klein, also of the Washington Post, wrote an article discussing the inconsistent reactions attributing it to framing (people react differently to a questions depending on how it was asked) and to trust (as a shortcut for paying closer attention, people often react differently to ideas depending on who supports or opposes those ideas).

A good example of framing came out between two other authors writing in response to Myerson. Before the two articles about framing were published, Matt Breuenig brought up Alaska’s Permanent Fund Dividend and made a favorable comparison between it and communism. John Aronno, of Alaska Commons, writing after but apparently without knowledge of the two articles about framing, responded to Breunig by arguing that the Alaska Dividend was not communism, but “the owner state.” That’s an excellent frame.

Emily Swanson, of the Huffington Post, got into the discussion by conduction a poll, purported to show, “What People Really Think Of Rolling Stone’s 5 Reforms For Millennials.” The poll could do nothing of the kind, but I’ll get to that. First, let’s see what it could do.

Swanson asked, “Would you favor or oppose expanding Social Security to every American, regardless of age, to guarantee a basic income to every American?” She found, among Americans as a whole, opposition beat support by a margin of 54 to 35 percent. Among people under 30, the margin was narrower, 44 to 40 percent. BIG was favored by 53 percent of black Americans, 54 percent of Democrats, and 19 percent of Republicans.”

What does all this say about BIG and its political prospects?

Start with Klein’s framing issue. Klein would be mistaken to attribute the difference in reactions solely to irrationality and intellectual laziness on the part of the readers of the two pieces. The two proposals were not identical. Matthews’s conservative version of the proposal stressed scrapping the welfare system and replacing it with BIG. Myerson said nothing about scrapping anything. Furthermore, Myerson stressed that the BIG should be enough for people to live on, while Matthews did not mention anything about how large it could or should be. It’s true that some BIGists—if I may use that term for supporters of BIG—propose replacing most or all of the welfare system with a BIG, and probably all BIGists agree that at least some welfare state programs can be replaced if the BIG is large enough. However, if a conservative stresses scarping just about everything the government is currently doing to help the poor to replace it with a BIG—of undetermined size—liberals have good reason to be skeptical. Similarly, if a liberal proposes an enormous new program without mentioning any disliked programs it could replace, people who believe in a smaller government sector have good reason to be skeptical.

Even if the Matthews’s conservative version of Myerson’s reforms isn’t quite as telling as Klien makes it out to be, the framing and trust issues are real, and they certainly explain part of discrepancy Klein recognizes. This issue poses a challenge for BIGists. It has something to offend everyone. People to the left-of-center might see it as great help to the poor, but they might see it as an underhanded strategy to undermine what we are already doing for the poor. People to the right-of-center might see it as a more cost-effective alternative to the welfare state, but they might see it as a major expansion of it, and they might think it is an affront to the work ethic. In America, people to the left-of-center might think that too, and even if they don’t, they might think that they should back some other program not vulnerable to the anti-work ethic allegation.

If both sides frame it in the way most favorable to them, perhaps a large coalition behind it is possible. If both sides frame it the way most negative to them, perhaps an equally large coalition against it is possible. Either way you present it, you risk one side tagging it as a proposal from that other untrusted side.

Now turn to Swanson’s poll. The results are actually good news for U.S. BIGists. The idea has been so far off the political radar for so long, just the fact that somebody is asking the question shows progress. The 19-point margin of 54 to 35 is a large deficit to overcome, but it is not insurmountable. It puts BIG at about the same place same-sex marriage was in 2002 (according to Nate Silver). Given the current early-stage of activism for BIG, we should expect a deficit to overcome.

However, Swanson’s poll cannot tell us what people really think about BIG or any of the other reforms she asked about. Swanson was reacting to Myerson’s piece only. She was not reacting to the articles that revealed the enormous framing problem, and she made no attempt to address the framing issue. It would be interesting to see the results of polls framing the question differently. But even this couldn’t tell us what people really think. As Swanson admits, people tend to react negatively to proposals of an enormous change from the status quo. There is some reason why democratic governments have the programs they do at any given time, and hopefully this has something to do with their popularity. People, using caution, tend to be skeptical of major unfamiliar proposed changes to the political system. As people learn more about BIG—which hopefully they will—they’re beliefs will likely change and solidify. What happens then depends on many factors including the framing and trust issues that Klein discussed and hopefully also good argument and well researched evidence.

All this discussion shows many options about how to promote BIG, but it doesn’t give any easy answer for what strategy will be most effective.

-Karl Widerquist, Doha, Qatar, January 27, 2014

Below are links to the articles related to the recent media discussion over this issue:

Jesse Myerson, “Five Economic Reforms Millennials Should Be Fighting For: Guaranteed Jobs, Universal Basic Incomes, Public Finance and More,” Rolling Stone, January 3, 2014.

Matt Bruenig, “A Spectre Is Haunting Alaska—the Spectre of Communism,” Policy Shop: Demos, January 5, 2014.

Matthew Bruenig, “Conservatives are losing their minds over economic reforms that already exist,” Salon, January 6, 2014.

Dylan Matthews, “Five conservative reforms millennials should be fighting for,” the Washington Post, January 7, 2014.

Ezra Klein, “The depressing psychological theory that explains Washington,” the Washington Post, January 10, 2014.

John Aronno, “Alaska’s Permanent Fund Isn’t Communism, It’s the Owner State,” the Huffington Post, 01/13/2014.

Emily Swanson, “Here’s What People Really Think Of Rolling Stone’s 5 Reforms For Millennials,” the Huffington Post, 01/13/2014.

-Patrick T. Fallon/Bloomberg via Getty Images via Rolling Stone Magazine

CYPRUS: “Guaranteed minimum income” is not a guaranteed minimum income

In July 2013, Cypriot President Nicos Anastasiades announced the implementation of a “guaranteed minimum income,” but the president’s language was self-contradictory. The program was supposed to be a “guaranteed minimum income,” assuring “a dignified living, irrespective of age, class or professional situation.” But he also said, “The single but absolutely necessary precondition is that they don’t refuse to accept offers for employment and to participate in the policies of continuous employment that are determined by the state.”

Anastasiades: reform of social policy -Cyprus Mail

Anastasiades: reform of social policy -Cyprus Mail

The name of the program and the first quote imply that the program would be a negative income tax—a form of basic income guarantee with some features in common with an unconditional basic income. However, the second quote demonstrates that it is neither a negative income tax nor an income guarantee of any kind. If recipients are held to a work requirement they are not guaranteed to have an income. Those who refuse employment or who are unable to take employment but unable to prove that inability cannot receive the income that is supposedly guarantee.

Whether the program (which will take effect in 2014) involves a practical step in the direction of a basic income guarantee at all is questionable. However, it does represent a rhetorical step toward a basic income guaranteed. It seems to show that politicians are finding it necessary to use the language of guaranteed incomes or of universality. This development might be an indication that universality is becoming more politically acceptable. Some politicians want to have it both ways to say that support is guaranteed for all but to restrict it for only those who fulfill conditions.

Several articles about the Cypriot program are online include two on Basic Income News:

Cyprus, Basic Income UK

Cyprus, Basic Income UK

Angela Mitropoulos, “Basic Income, Workfare & affirmations of productivity,” S0metim3s.com, August 16, 2013.

Stanislas Jourdan, “Cyprus to implement a ‘guaranteed minimum income,’” Basic Income UK, August 8, 2013.

Basic Income Initiative in Europe, “Cyprus’ Guaranteed Minimum Income plan and the basic income,” Basic Income Initiative in Europe, August 1, 2013.

BIEN, “CYPRUS: ‘President announces ‘Guaranteed Minimum Income’ program,” Basic Income News, August 5, 2013.

Malcolm Torry, “OPINION: Means-testing in Cyprus,” Basic Income News, November 4, 2013.

UNITED STATES: Occupy Strategy Group includes BIG in its top 10 recommended strategic objectives

The Occupy Strategy Group has included the Basic Income Guarantee (BIG) on its top 10 list of recommended strategic objectives. The group is an email list of over 100 people who have met to craft strategy for the Occupy Movement. The group reviewed surveys, research, emails, articles, and other sources. After intense deliberations—and with the desire to be as inclusive as possible—the group chose 10 recommendations based on urgency, doability, and degree of impact.

InterOccupy
InterOccupy

BIG is included not once but twice on the list. Item 5 is “Replace all entitlements with a Basic Income Guarantee.” Item 10 is “Institute a carbon and other natural resource use tax based on ‘full resource use accounting’ and allocate the revenue derived from it for a Basic Income Guarantee.” The group quotes the USBIG network for a definition of BIG, “‘The Basic Income Guarantee (BIG) is a government ensured guarantee that no one’s income will fall below the level necessary to meet their most basic needs for any reason.’ – The U.S. Basic Income Guarantee Network, https://www.usbig.net/whatisbig.php

Other items on the list include the following: Abolish Corporate Personhood. Nationalize health care. Establish a strong “commons” to protect the Earth and nourish community. Enact a sustainable large scale energy, jobs, and environmental recovery program. Stop the Trans-Pacific Partnership. Discontinue the practice of using federal reserve notes to back US currency and replace them with U.S. notes. Dismantle the CIA; end private military forces and prohibit private intelligence agencies. Stop the Patriot Act, NDAA and Drones.

The group invites individuals to join their ongoing conversation about current and future studies of strategic objectives by going to the following website: https://lists.mayfirst.org/mailman/listinfo/occupy-strategy

For more information see the following web page: “Occupy Strategy Group’s Top 10 Recommended Strategic Objectives,” InterOccupy, first published October 11, 2013: https://interoccupy.net/occupystrategy/2013/10/occupy-strategy-groups-top-10-recommended-strategic-objectives/

Or contact the Occupy Strategy Group at: OccupyStrategy@interoccupy.net

SWITZERLAND: National Referendum will be held on Basic Income

SWITZERLAND: National Referendum will be held on Basic Income

Following a successful campaign aiming at collecting more than 100,000 signatures, Switzerland will hold national referendum to vote on basic income.

On October 4, 2013 activists delivered more than the necessary 100,000 to call for the vote. The organizing committee for the initiative has been collecting signatures for months in preparation for this event. The proposal is for a substantial basic income of 2,500 francs ($2,756US) per month for every adult legal resident of Switzerland.

Along with the signatures, supporters held a large demonstration outside the Federal Palace in Bern. At the demonstration they dropped a dump truck load of 8 million five-rappen coins, one for each person living in Switzerland (see video below). Assuming the signatures are valid, the government is now obliged to schedule a vote in the near future.

YouTube player

For more on the initiative see:

Alice Baghdjian (author) Denis Balibouse (reporter), and Gareth Jones (editor), “Swiss to vote on 2,500 franc basic income for every adult,” Reuters, October 4, 2013. Reposted by MSN: https://news.msn.com/world/swiss-to-vote-on-dollar2800-monthly-income-for-all-adults?stay=1

VIDEO: “Switzerland: Parliament forced to debate basic income for nationals Ruptly TV, Oct 3, 2013: Enno Schmidt, founder of Generation Basic Income Initiative, talks through the aims of the unconditional basic income initiative.

Max Rivlin-Nadler, “Swiss to Vote on Guaranteed $2800 Monthly Income for All Adults,” Gawker, October 5, 2013.

Common Dreams staff, “Swiss Showing the World How to Take on Pay Inequality Common Dreams, Saturday, October 5, 2013. This story includes photos and embedded video.

Ivan Botoucharov, “The Abolition of Poverty in Switzerland: A Template for Europe?One-Europe, 04 Oct 2013

Anna Edwards, “Streets of Basel paved with gold: 15 TONS of five cent coins are dumped on city’s streets as protesters demand a basic minimum income for every Swiss household,” The Mail Online, 4 October 2013. This story includes pictures of how the coins were assembled to be dropped during the demonstration in Bern.

If you know of other stories on this issue, please leave the full info and link in the comments section. Please note what language the story is in.

Important study finds that giving money without conditions to the poor increases both employment and wages

A randomized field study recently conducted in Uganda found that giving money to people without conditions actually increases both how much they work and how much they earn per hour. The study gave a $400 one-time grant to 20 young people, chosen randomly out of a group of rural Ugandans who applied to be a part of the study. Essentially, this grant amount is a one-time basic income, sometimes called a basic capital grant.

Perhaps, $400 doesn’t sound like much, but because poverty is so high in rural Kenya, the $400 grant is equivalent to an entire year’s income for the people in the study. Researchers then followed the recipients for two and a half years to see how they behaved relative to rural Ugandans who did not receive the grant. What they found might surprise some readers.

Two-and-a-half years later, receipts of the grant worked 17% more hours than similar Ugandans who did not receive the grant, and they earned higher wages and salaries, so that their incomes increased by even more than the hours the worked for a total increase of 50%. If those who did not receive the grant were making $400 per year, recipients were making $600 per year. No one knows yet how long the differential will last, but it is likely to accumulate for at least several years, perhaps many years.

The reasons for the increase in wages and hours worked are not yet certain, but possible explanations stem back to the extreme poverty experienced by so many people in developing nations. People who face such low wages have very little time to spend either improving their skills or looking for better work. They simply must spend their time focusing on getting enough food for the next day. A basic income gives them the opportunity to step back, improve their skills and/or look for a better job.

The theoretical possibility that basic income could have a positive affect on wages and hours worked (especially among the poorest people) has been understood for a long time. But this study provides an extremely important piece of empirical confirmation.

The basic income debate should take these results seriously. These results challenge the widely-held (yet rarely-empirically-investigated) belief that poor people are poor because they are too lazy either to work hard or to learn better skills. There are billions of people around the world living on less than two dollars per day. Perhaps unconditional cash is what they need most.
-Karl Widerquist, begun in Lerwick, Shetland, Scotland, completed in Beaufort, North Carolina, USA

See earlier posts on BI News about this study.

For more on this study see this blog post by one of the authors of the study: Blattman, Chris, “Dear governments: Want to help the poor and transform your economy? Give people cash,” Chris Blattman: International development, politics, economics, and policy, 23 May 2013

See also the original study: Blattman, Christopher, Nathan Fiala, and Sebastian Martinez “Credit Constraints, Occupational Choice, and the Process of Development: Long Run Evidence from Cash Transfers in Uganda,” the Social Science Research Network, May 20, 2013

And the following editorial: Yglesias, Matthew, “Good News About Unconditional Transfers to the Global Poor,” Slate May 29, 2013

Permanent Fund Hits New High and its Dividend Hits New Low

The Alaska Permanent Fund (APF) has reached an all-time in a year in which Alaska’s Permanent Fund Dividend (PFD) will probably reach its lowest level since 1987. The PDF is Alaska’s small, variable, yearly basic income. It’s financed by the returns of the APF. You’d think, then, that the fund and the dividend financed by it would move up and down together. And they do-on average, over the long-run, with a time-lag. But they don’t necessarily move together in any particular year, and this year the difference is extreme. The fund has risen to an all-time high of $45.5 billion, while the dividend is likely to reach a 25-year low of barely more than $700.

One reason the fund and dividend don’t always move together is that new oil revenues deposited into the fund increase its size every year without directly affecting the dividend. Another is that the size of the dividend depends on how many Alaskans apply for it that year. But the main reason the fund and dividend often move in opposite directions has to do with the formula translating the returns of the fund into dividends.

The legislators who created the dividend choose a rather simplistic way to try to protect the fund from inflation and to smooth out returns to make the dividend less volatile than the fund’s returns. The fund is invested in stocks, bonds, real estate and other assets around the world. A fund like that can rise by 20% one year and decline by 20% the next- but this is part of the risk when it comes to stocks and bonds. Everyone knows that when you get into stock trading uk, you’re likely to see the market fluctuate and funds like this are no different. It did nearly that in 2007-2009. Nobody wants to have a negative dividend, and so the state decided to smooth out the dividend by basing it on a 5-year average of returns to the fund. This strategy does make the dividend more stable than it would be if it was calculated solely on the returns in any one particular year, but it also makes the dividend a lagging indicator of the fund’s performance over the previous 5 years.

This year’s dividend calculation is the first one in five years that doesn’t include the big returns of 2008 and last one that will include the negative returns of 2009-experienced as the world stock market bottomed out following the 2008 financial melt-down. As long as this year’s returns are better than they were in 2009, next year’s dividend will be substantially higher than this year’s. Some (very) preliminary estimates indicate that the dividend could nearly double to about $1400 next year.

The state could make the dividend much less volatile by dropping the current formula based on 5-year-average returns and adopting a new formula based on percentage of market value (POMV). Under a POMV strategy, if the fund increases by 10 percent (say from $45 billion to $49.5 billion), the dividend increases by 10% (say from $1500 to $1650, and when the fund decreases by 10% (say from $45 billion to $40.5 billion), the dividend decreases by 10% (say from $1500 to $1350). Most investment managers agree that a well-managed fund can pay out at least 4% of market value each year and still expect the fund to grow on average in real terms over time. Such a formula would be much simpler and more stable than the current system in which the dividend can double while the fund increases by only 10%.
-Karl Widerquist, Lowfield, Morehead City, North Carolina, May 23, 2013

For more on the recent ups and downs of the fund and dividend, see the following three articles:
Jerzy Shedlock, “Alaskans’ Permanent Fund dividend may shrink to less than $800 this year,” The Alaska Dispatch, March 30, 2013
Jerzy Shedlock, “Booming stock market helps Permanent Fund hit $45.5 billion,” Alaska Dispatch, March 31, 2013
Anchorage Daily News, “Alaska Permanent Fund his all-time high,” Anchorage Daily News, February 20, 2013