Guaranteed income programs are popping up everywhere in the US. It is time to expand beyond local pilot programs and embrace a nationwide Citizen Dividend, an annual distribution of a share of business profits to every American, to beat back against rising economic inequality and hold true to our deepest American values.
Three years ago, perhaps the only widely known American guaranteed income program was the Alaska Permanent Fund which doles out annual payments to every Alaskan funded from state oil and gas revenue. In recent years, pilot programs giving $500 – $1,000 a month to low-income residents have been implemented or proposed in Stockton, California; Jackson, Mississippi; Phoenix; Pittsburgh; and Chicago.
Perhaps the simplest, widest-reaching, and easiest to implement form of guaranteed income we could adopt would be the Citizen Dividend. The debate around guaranteed income often boils down to two fundamental questions: Who deserves the income and how can we pay for them? With a national Citizen Dividend, we answer both of those questions clearly and compellingly.
First, who deserves this income? We all do. No business in this country turns a profit without using wealth we all own together – our natural resources; our societal resources like our roads, our public safety, and our education system; and our inherited systems like our Constitution and our courts. Every citizen has an equal ownership stake in these forms of collective wealth. Therefore, each American deserves some slice of the profits realized by their use. Sure, individual hard work, talent, and good strategy help bring about business success. Imagine though trying to create value without energy, roads, courts, and an educated workforce. It would be downright impossible.
Second, how do pay for this income? A Citizen Dividend is funded through one form of our collective prosperity – business profits. Businesses should retain 95% of their profits to invest in growth, return wealth to private shareholders, and pay the government for the services our society needs (e.g. taxes). But 5% of those profits should be returned to each American in recognition of the collective wealth that was used to create those profits.
Easy to understand and clear in its funding, a Citizen Dividend would have a meaningful positive impact on the lives of Americans and on the fabric of our economy. Using 2015 estimates on business net income, a Citizen Dividend could return $570 to each American every year – or over $2,200 for a family of four. This payment – which amounts to nearly two months of rent or food for the median American family – could stave off some of the harshest impacts of rising inequality. But perhaps more importantly, it would challenge the false narrative that profit is created merely through individual action and that wealth should be hoarded by those who have the opportunity to do so. Instead, it would reinforce a deeper American story, that we are our best as a nation when we come together across all our differences to blaze a trail toward a common future.
A Citizen Dividend breathes life into the spirit of our nation’s first motto – E Pluribus Unum – out of many, one. It is time we recognize what truly belongs to every American and be bold in our willingness to build an economy that reflects our best values. It is time for a Citizen Dividend.
Brian C. Johnson is the CEO of Equality Illinois and the author of Our Fair Share: How One Small Change Can Create a More EquiBrian C. Johnson has served in education and advocacy, community organizing, and political activism at local and national levels for two decades, dedicated to the American promise of fairness for all. He’s been featured on CNN and in The Washington Post, USA Today, and TheNew York Times. Johnson currently serves as the CEO of Equality Illinois, one of the nation’s most successful LGBTQ civil rights organizations. He lives with his husband and their daughter in the Lincoln Square neighborhood of Chicago, Illinois.
A new guaranteed income program has just been announced in the US, this time in the country’s second largest city, Los Angeles. In his proposed budget for the fiscal year 2021-2022, L.A. Mayor Eric Garcetti included a $24-million guaranteed basic income project that would see 2,000 families in the city receive an unconditional $1,000 per month for one year. Dubbed “BIG: LEAP” (Basic Income Guaranteed: L.A. Economic Assistance Pilot), the program is one of the biggest of its kind in the US. The announcement was made at the end of April when the city budget proposed for the financial year starting 1 July 2021 was unveiled, the budget is usually approved by the beginning of June.
The details of the plan are being finalised, but the Mayor has confirmed that the payment would be truly unconditional with participants in the program able to use the money however they please. There will be eligibility criteria however such as being at or below the federal poverty line (annual income of $12,880 for a single individual / $17,420 for two persons) and, most likely, supporting a child under the age of 18 and demonstrating financial or medical hardship connected to COVID-19. Immigration status, on the other hand, will not constitute a selection criteria. It also seems that the income will go to households and not individuals.
If approved, BIG: LEAP will be the latest in a series of city-led guaranteed income programs in the country. Jackson, Mississippi in 2018 and Stockton, California in 2019 with the launch of “SEED” (Stockton Economic Empowerment Demonstration) paved the way and over the past two years, cities as diverse as Oakland (CA), Patterson (NJ), Denver (CO), Chicago (IL), Gary (IN) and many more across the country have announced or implemented some form of guaranteed income programs.
And these efforts do not occur only at a city level. In Southern California alone, in addition to BIG: LEAP or the pilot implemented in Compton (Compton Pledge), the L.A. County Board of Supervisors has just passed two separate motions asking relevant staff in the administration to design a guaranteed income program for targeted county residents. These first designs are due within 60 days of the motions, i.e. by the third week of July (motion 1; motion 2). Within the city of Los Angeles there are also specific guaranteed income pilots in the South LA and Downtown districts.
Map: main city-led guaranteed income pilots in the US and network of “Mayors for a Guaranteed Income”
Note: programs vary from one city to the next (eligibility criteria, payment amount, duration). Some of the programs that have been announced are yet to be formally approved and started. The map also does not include other initiatives such as, for instance, the payment under the Alaska Permanent Fund which has sometimes been compared to a basic income. (Map by the author, sources: Mashable.com and Mayors for a Guaranteed Income)
Eligibility criteria vary in each city as do the amount of the cash payment or the duration of the experiment but at any rate, the multiplication of the number of programs in progress is indicative of the growing interest for basic income in the US. The COVID crisis is certainly a factor behind this growing momentum. One of the potential eligibility criteria outlined by Mayor Garcetti in his proposal for the experiment in L.A. directly relates to the pandemic. San Francisco has designed a program targeted at artists hit by the crisis and other cities have referenced the impacts of COVID-19 on the economic situation as one of the factors behind their interest for basic income.
Many of these city-led efforts are being supported by Mayors for a Guaranteed Income (MGI), a nation-wide network of mayors founded by former Stockton Mayor and initiator of the SEED program, Michael D. Tubbs. It is supported by various foundations and non-profit organisations such as the Economic Security Project (involved in the Stockton experiment) or the Jain Family Institute (involved in Compton or in a proposed scheme in Newark, NJ). Indeed, whilst these various programs are first a way to alleviate poverty in specific communities and are only local in nature, they are also seen as experiments that will add to the debate around basic income at the federal level.
A Pew survey conducted in August 2020 concluded that 54% of Americans oppose or strongly oppose a federal universal basic income.* Proponents of these programs are hoping that the experiments they are conducting will add to the growing body of evidence that unconditional cash transfers not only help to alleviate poverty, but also improve physical and mental wellbeing and, importantly, that they do not remove incentives for people to work. More generally they are hoping that they will contribute to changing the narrative around poverty and economic insecurity.
*Online survey of 11,001 US adults conducted between July 27 and August 2, 2020, results vary across age groups, ethnicity, political affiliations, and income groups.
The news is written by Chen Xixi and modified by Furui cheng
The Screenshot of Our WeChat Group
In the ‘International Basic Income Week’, we three sophomores in CUPL (China University of Political Science and Law) organized an online feature academic report about basic income with Furui Cheng, our academic tutor, on September 13, 2020. The participants included some juniors and seniors, and we are all from financial department of the Business School.
The seminar has two main agendas: the first is a presentation of one very good chapter about Social Dividend of Alaska ‘How Alaska helped Staunch be fouling by mismanaged oil wealth: a lesson for other oil rich nations’ in Jay Hammond’s autobiography by Yu Yang, Huang Xinyi, and Chen Xixi; the second is free comments and discussion of the social dividend governance mechanism. Here are the details of the seminar.
Chen Xixi:
Our report has mainly three aspects: the first part is the background, the second part is the operating mechanism, and the third part is some enlightenment for other countries.
Background 1: Alaska is a state rich in natural resources. In the beginning, oil producers mainly focused on some infrastructure projects, which had greatly expanded domestic spending and so caused inflation to soar and left a mountain of debt. So even though Alaska was rich in resources, the life of the poor did not improve at that time.
Background 2: Alaskan fishermen were dissatisfied with the monopoly that the Seattle tycoons actually enjoyed. When they used fishing gear, because this fishing monopoly benefited a few beneficiaries but sacrificed the interests of many people. Therefore, at that time, many fishermen had a very bad life and lacked services. So, there was a proposal to ban fishing nets, but it was overturned because of various unconstitutionality.
A report slide about several failed practices before the permanent fund
Background 3: The bumpy process of the permanent fund project. The first was that a tax system with the Bristol Bay Company as the main concept was proposed at that time. The main content of such a tax system was to deposit taxes in a relatively conservatively managed investment account, and then distributed a new dividend stock to residents every year. But in the end this tax system ended in failure.
Immediately after, two new regulations were proposed for use tax and the abolition of residential business tax. This was considered a transitional measure to compensate fishermen for their losses. Then such a new regulation was approved because it met the expectations of the people. Then, once again proposed to the legislature a tax system with the Bristol Bay Company as the main concept. But it still ended in failure.
And the country did not follow the concept of fair share distribution proposed by Bristol Bay Company to form a single investment portfolio, but formed companies in more than 200 villages and about 14 regions. Besides, the board of directors was composed of local leaders. This made many lawyers and people who made high salaries in the company happy. In the end, many companies were also on the verge of bankruptcy due to the lack of large capital investment, nepotism and rural policies. This model eventually collapsed. In fact, the failure of this model was mainly because his politics was not separated from the economy and so an independent financial operation system was not formed.
Then they further proposed a fair tax system. Its content was to first determine the state’s per capital property value, and then in this community, if there are some people whose revenue generated by the tax are less than they should be, the state will provide funds for the difference. Conversely, if the income generated by the resident’s 3% tax exceeds the excess income, the excess income will be owned by the state. According to such a fair tax system, all places would be levied the same tax, which meant that the impact on everyone is the same, whether it was the poor or the rich. However, such a fair taxation system eventually met with opposition.
Then, they passed the so-called Alaska permanent fund. It just cut the proposed 50% of the oil lease bonus, royalties and severance payment to 25%, and the severance payment, which accounted for about half of the oil wealth income, was canceled and flowed into the general fund instead. In this way, there was no way to form permanent financial assets. This was also the initial establishment of an Alaska permanent fund. Then they proposed dividend plan and annuity account. The main content of these two proposals was to pay dividends according to the length of residence of the residents. They were approved.
Finally, in 1980, the national government allocated funds to establish the Alaska State Permanent Fund. The bill also proposed that the board of directors is independently responsible for the operation of the permanent fund. In 1982, the Alaska State Legislature also passed a resource fund dividend plan, and then such a permanent fund was formally established.
Yu Yang:
Next, I will talk about the main ideas and governance mechanisms of the Alaska Permanent Fund.
Its main idea is to avoid excessive waste of resources by establishing a permanent fund. Extract a portion of the income from oil proceeds to the descendants of Alaskans, and convert some of the oil income into permanent and sustainable financial assets.
Then keep resource revenue away from politicians to prevent politicians from wasting resource revenue on government operations and investment projects.
Beginning in 1976, Alaska’s referendum decided to set up a permanent fund to allocate at least 25% of the state’s oil resources and related income to the permanent fund, stipulating that the legislative department has full power to dispose of the income of the permanent fund, but the capital of the permanent fund, the legal department must keep it intact.
Then, in 1978, the legislature decided to establish two corporate entities, the Alaska Enterprise Investment Corporation and the Alaska Permanent Fund Corporation. The Alaska Enterprise Investment Corporation mainly creates short-term benefits for Alaskan citizens and provides financing support for small and medium-sized production-oriented private enterprises and community development projects. Alaska permanent fund company has a large amount of income into the account, but the type of investment it can be given strict restrictions, that is, the prudent investment rules of the common law are used to guide investment. Then it was stipulated in the 1980 bill that 50% of the income from the leasing of mineral resources should be invested in the fund.
The establishment of a permanent constitutional amendment stipulates that at least 25% of the royalties from all natural resource income owned by the state shall be placed in the fund, and the fund shall only be used for investments that can bring asset returns. The implementation of the withdrawal rules means approximately 10% of oil revenue is placed in the fund, and other insignificant mineral revenues are also included. In addition to the royalty savings provided by the constitutional amendments, the size of the fund also increases with legal appropriations. The annual savings make up for the depreciation of the true value of the fund due to the effect of inflation.
Finally, the management of the fund belongs to an independent company, led by a carefully calculated board of directors, and is focused on maximizing the financial returns of the fund. The company’s operations are independent of state revenues and have not been involved in any disputes involving the optimal use of funds. The decision is controlled by the legislature.
The then Governor of Alaska, Jay Hammond, suggested that the annual income of the fund should be distributed according to the requirements of an Alaska Corporate Plan. Citizens of Alaska can enjoy the income of the fund every year. The distribution standard depends on the residence period of Alaska up to 25 years. Residents who live for one year can enjoy a share, and residents who live for two years can Get two shares, and so on. Half of the income of the Alaska Fund is equally distributed to each resident each year. In order to make the program sustainable, the Alaska permanent fund dividend is paid in the form of ordinary income rather than fund income. Citizens of Alaska can get a corresponding share from the permanent fund dividend distribution every year. This fund is composed of public oil revenues. As the fund appreciates, the scale of annual dividends also increases.
Huang Xinyi:
If other countries want to apply this model of Alaska, the government should consider the following three questions according to its own situation. One is whether the government has to decide whether to collect rents on privatized resources, and the second is whether the government has to decide whether to create a permanent fund. Third, the government has to decide whether to distribute dividends and what proportion of the proceeds will be used for dividends.
Next, I will take Iraq as an example to talk about how to extend the permanent fund to other countries. Historically, every revolution in Russia, China, France, and the United States was triggered by the gap between the rich and the poor. Take Iraq as an example Under Saddam’s rule, the upper-class lives are rich, the bottom lives are dirty, oil wealth makes a few people fat, but most people are still starving. Transferring part of the country’s oil wealth to citizens and reducing the gap between rich and poor may help prevent further chaos.
What should Iraq do? Alaska’s permanent fund has some major shortcomings, and Iraq should avoid repeating the same mistakes. For example, the dividend plan of Alaska failed to deposit all the state government income that Alaskans received from oil wealth into the people’s account, and did not use their income for other purposes than dividends. Instead, most of it went to the state government. When oil prices rose, the state government succumbed to the interim bill to abolish income taxes and squandered oil revenues. Therefore, the Alaska government today is facing a serious crisis and deficit gap. Iraq should handle this income more appropriately and deposit it in the people’s account or other purposes, instead of spending it lavishly by the government.
How should China learn from the Alaska permanent fund model? China’s resource-abundant regions can establish a distribution model similar to fund management to effectively manage resource returns, so that they can continue to increase in value. Fund income can be managed through investment companies for investment management, which can increase the value of the fund and turn the fund into a sustainable financial asset. The supervisory body of the fund can be supervised by another financial institution or such as the central bank. The account of fund income is open to residents of resource-based areas by investment companies on a regular basis.
The proceeds of this resource fund can be used for the following investments. The first is the investment in human capital, through fund income to increase the level of human capital investment, promote the accumulation of human capital, increase the investment in education funds in resource-based areas, and cultivate technical and professional talents. Increase the supply of human capital and attract and retain senior talents through preferential conditions. The second is investment in technological innovation. Resource-based regions have a single industrial structure, are highly dependent on resources, and have relatively weak technological innovation capabilities. Fund proceeds are used to support technological innovation in resource-based regions. The third is the investment in urban infrastructure, using fund proceeds to invest in infrastructure in resource-based areas, especially urban infrastructure. The last is to support the development of private enterprises. Fund proceeds are used for investment in private enterprises in resource-based areas, encourage and support the establishment of private enterprises, and implement preferential policies for private enterprises.
In fact, the Alaska dividend model has many applications in various countries. I think the social dividend practice in Alaska has a general enlightening significance for the management of public resources. In fact, Venezuela, Brazil, South Africa, Israel and New Mexico in the United States have all advocated the establishment of social dividend like Alaska. Europe has a stronger movement to promote social dividends, which they like to call “basic income.”. The British government has officially run the children’s trust fund in 2004 to establish a capital account for every child born after January 1, 2004. In fact, many rural areas in China have implemented the community stock cooperation system for many years, which is the “local social dividend” based on the value-added income of collective land. In fact, the system conditions for implementing social dividend in China are more favorable than those in many countries, because we have a large proportion of public assets, and we do not need to make many complicated tax designs like other countries.
Furui Cheng:
Alaska’s social dividend practice is very important, not only because it is so far the only real human social policy on the way, not just as an experiment, but has been implemented for almost 40 years! Its implication to future public policy and the use of public resources may have similar importance to land revolution.
Why establish a social dividend fund? And how? What is the difference between this kind of funds and others in the aspect of governance mechanism? How to ensure the sustainability of the funds? How to decide the priority between Dividend and public services? How to avoid the expropriation of the capital and its revenue by different interest groups? And so on. In the process of answering these questions, we are doing this work in the context of reforms in the political, economic, legal, social and cultural spheres.
As undergraduates, I hope you are aware of the frontier issues, reflect on the classics, and foster the ability to change the status quo.
150 économistes américains ont signé une lettre ouverte qui revendique entre autres les points suivants :
Le versement de revenus directs est un outil essentiel pour stimuler la sécurité économique, inciter les consommateurs à dépenser, accélérer la reprise et promouvoir la réassurance à tous niveaux, politiques et économiques, pour aussi longtemps que cela sera nécessaire.
La souffrance économique s’est largement répandue et la nécessité d’une action forte et immédiate s’impose clairement
Des paiements de relance directs réguliers et durables stimuleront les dépenses de consommation et la reprise économique tout en coupant court à la récession.
Ces stabilisateurs automatiques apporteront un soulagement aussi longtemps que nécessaire. Ils favoriseront une reprise solide et montreront l’efficacité gouvernementale.
Etant données les inconnues qui persistent, il est essentiel de promulguer des politiques qui aideront à promouvoir une reprise robuste, durable et racialement équitable et qui resteront en place jusqu’à ce que les Américains se remettent sur pied…
Michael W. Howard est professeur de Philosophie à l’Université de Maine, Etats Unis. Il coordonne le Réseau pour le Revenu de Base Garanti aux Etats Unis, il est co-éditeur des Etudes sur le Revenu de Base et co-éditeur, avec Karl Wilderquist de deux ouvrages sur le Fond Permanant de Dividendes en Alaska.
This Review was originally published in the Review of Political Economy, December 6, 2009. It’s reproduced here as originally published.
In Our Hands: A Plan to Replace the Welfare State, by Charles Murray, Washington, DC, AEI Press, 2006, 230 pp., $20.00 hardcover ISBN 0-8447-4223-6
Charles Murray is not known as a friend of the poor. His 1984 book, Losing Ground argued that the government should ‘zero-out’ all programs designed to help the poor. His 1994 book, The Bell Curve (co-authored with Richard Herrnstein) used questionable methodology purporting to show that people are poor because they are less intelligent than average and that blacks are disproportionately poor because they are genetically less intelligent than whites. If racism is the belief that your race is mentally or physically superior to others, The Bell Curve is a racist book. Yet, his new book, In Our Hands: A Plan to Replace the Welfare State, Murray puts forth a plan to provide more healthcare, more retirement security and more actual income to the poor with no supervision or conditions attached.
For those familiar with universal basic income, Murray’s proposal sounds very familiar. Murray calls it ‘the Plan,’ saying, ‘I have not been able to contrive a better name,’ but it is essentially a version of the program known as ‘basic income,’ which has been widely discussed by political philosophers in the last twenty years. Basic income is a regular government-ensured grant provided to every citizen on an individual basis without a means test or work requirement. People with middle or higher incomes pay more in taxes than they receive in the grant, but everyone receives the grant in cash every month. A great deal of literature has appeared on basic income in the last twenty-five years. Basic income is similar to, but not quite the same as, the negative income tax, which was widely discussed in the United States in the 1960s and ‘70s. The major difference between the two is that the negative income tax is given only to net recipients and phased out for people who earn above a certain amount, so that no one both receives a grant and pays income taxes. Both programs are ‘guaranteed incomes’ in the sense that they are designed to ensure that everyone has a small but reliable income, and both programs eliminate ‘the poverty trap’ in which some people find that they can attain a higher income by not working than by working.
Murray cites some of the literature on the negative income tax, but he appears completely unaware of the basic income literature, giving the impression that he reinvented the idea independently. When he discusses people who might drop out of the labor market, his example of what they might do is surf. This example is well-known in the basic income literature from an exchange between John Rawls and Philippe Van Parijs, neither of whom is cited by Murray. Is it a coincidence or is he merely neglecting to connect himself with that movement?
The Plan is most similar to a little-known basic income proposal by Leonard Greene, and elaborated by Irwin Garfinkel, although this connection is probably coincidental. Both Murray and Greene propose canceling everything the US government is currently doing to support individual incomes and use all of that money to finance a basic income for every citizen. The Plan is not quite a universal basic income. Only people age 21 and over are eligible, but it is a basic income in the sense that it has no means test and it is given to everyone who reaches the age of eligibility regardless of income.
Murray promoted the book and the Plan with several lectures in 2006. When questioned whether a guaranteed income is an affront to the work ethic, he responded, ‘You’re a conservative. I’m a libertarian.’ But make no mistake, Murray is profoundly conservative. His books have blamed the welfare state for everything that a conservative might find wrong with modern society, from welfare dependency though unwed motherhood to a decline in ‘man’s’ ability to craft a meaningful life. Many of the benefits he expects from the Plan align with conservative goals. He believes it will lead more people to attend church, more people to support private charities, and more of the poor to adopt the superior values of middle- and upper-class people.
Many people were shocked that a man who wrote a book arguing to zero-out the welfare state would put forward a plan for a basic income and universal health care. But it should not be completely surprising. Murray was sympathetic to the negative income tax in his contribution to Lessons from the Income Maintenance Experiments; and in What it Means to Be a Libertarian, he wrote that some form of income guarantee was the next best thing to the complete elimination of redistribution.
There is in fact a long history of free-market conservatives who have seen an income guarantee as a streamlined, conservative alternative to the complex, conditional welfare system. F. A. Hayek and Milton Friedman promoted the negative income tax on those grounds, and it seems to have been part of the motivation behind Richard Nixon’s watered-down negative income tax proposal in 1970. Most recently, Governor Sarah Palin pushed through a bill for a one-time increase in Alaska’s regular basic income (the Alaska Permanent Fund) from $2000 to $3200 per person per year. The free market appeal of an income guarantee is twofold. From the point of view of taxpayers, conditional welfare programs waste a large percentage of their budgets in overhead cost that could be saved under an income guarantee. From the point of view of the recipients, the rules and constant oversight of a conditional welfare system can be humiliating and oppressive.
Murray’s earlier books give the impression he believes that the poor are unproductive, genetically unintelligent people with bad values who have babies just to get welfare checks. One might therefore wonder why he cares about freeing the poor from oppressive government supervision. The answer is that while Murray seems to believe capitalism is a near-perfect meritocracy and that the poor are genetically inferior, he honestly believes that the poor should be free and that humiliating supervision by government bureaucrats cannot make the lives of the poor better. This kind of thinking led Murray to reinvent basic income.
This book—typical of Murray’s research—seems designed to give laypersons the impression of broad knowledge while having little concern with giving that impression to people who know the field. It is a thin volume with lots of numbers and footnotes but without a deep understanding of the research he cites. His discussion of the negative income tax is a case in point. He is aware that Milton Friedman supported the idea and that experiments were conducted on it, but he misstates what a negative income tax is and what the experimental results were. He gives the impression that a negative income tax has a 100% take-back rate, meaning that for each dollar earned privately recipients lose one dollar of their grant. If so, recipients who make money in the private labor market are no better off financially unless they get a job that pays more than the entire grant (pp. 8–9; 74). Almost no one who supports the negative income tax supports this draconian variant. Friedman supported the negative income tax largely because it could be designed to eliminate the work-incentive problems of conditional welfare programs, and none of the experiments tested a 100% take-back rate. Murray also implies that the experiments found evidence that large number of recipients dropped out the labor market. In fact, none of the experiments found evidence that anyone dropped out of the labor market. The relative decline in hours for the experimental group was 2–9% among primary wage earners and up to 20% for mothers of young children, but none of this relative decline represented anyone ‘dropping out’ of the labor market. It was instead attributable to people who happened to become unemployed taking longer to find their next job. Perhaps most importantly, the relative decline of work hours was not always an absolute decline. The largest predictor of whether recipients worked was not whether they were in the experimental or control group but the health of the economy. The people who conducted the experiments concluded that the work disincentive effects were small and did not put the viability of the program at risk.
Murray has not been careful with the facts, but is his plan a good one? Is the Plan a good workable idea that people who actually have sympathy for the poor could support? The answer is mixed. It is small; $10,000 per year minus $3,000 for mandatory private health insurance minus $2,000 for possibly mandatory retirement savings with no additional provision for children’s healthcare. That is, $5,000 per year ($416.67 per month) if retirement savings is mandatory and $7,000 per year ($583.33 per month) if it is not mandatory—for each adult whether she lives alone or with children. A single parent will be able to sue for child support out of the grant to the noncustodial parent, and so might have access to something in the neighborhood of $833.33 per month for herself and her children. But even an adult with no dependents is well below the official poverty line of $9,359 if she tries to live on $5,000 a year. (Following Murray, I’m using 2002 figures.)
Murray’s typically conservative response is that they can double-up with friends and relatives and they can all go out and get jobs at minimum wage. He calculates that when you add $583.33 to the income from a minimum wage job it would get most people—even single mothers with one dependent—out of poverty. He neglects to mention that this strategy involves mortgaging their retirement savings so that they will be more than $4,000 below the poverty line in retirement if they do this every year. He also neglects to mention that he is an opponent of the minimum wage. Since the whole idea of getting rid of the minimum wage is to enable employers to pay their workers less, we can assume that all of his calculations about how well off the recipients will be after they get these jobs are overestimates. He also neglects the very possibility that unemployment might exist, that the market may not be able to absorb the millions of new entrants to the labor market he hopes to see, and that most single mothers cannot work full time or in many cases even part time.
Consider a single mother with three dependent children at ages that make it difficult if not impossible for the parent to work outside the home. Her poverty threshold is $18,307. If she’s on her own and retirement contributions are mandatory, her income ($5000) is less than a third of the poverty threshold. If she can effectively sue the father for his entire grant (an optimistic assumption), she can increase her income to $10,000. If she and the father both mortgage their retirement savings, she can get up to $14,000. That is probably enough to keep her family off the street, but it is still more than $4000 below the meager US poverty line. Murray suggests combining incomes is as a solution. If she cohabitates with another mother in exactly the same situation, their combined income is $28,000—still $1,600 below the poverty threshold for a two parent family with six children of $29,601.
The grant is too small to give a dignified life to the poor without at least the addition of a child grant, but is it better than the current system? I have to admit that on this point, I am inclined to agree with Murray. As horrible as it sounds, in most states, TANF recipients work for less than they would get unconditionally under the Plan. Many people who aren’t eligible for TANF, SSI, or Unemployment Insurance get far less or nothing at all. Even the small grant of $416.67 a month can help many people get by if it is unconditional and tax free. The Plan would save many people from the utter destitution and homelessness that they experience in the United States today. On top of that, a retirement fund of $2000 a year put into a protected savings system would make for a better retirement than many Social Security recipients experience today, and $3,000 per capita could buy basic universal health coverage, solving one of the most important problems in American society today. If the Plan were put in place now, maybe we could eventually get the benefit increased to a decent level. Therefore, despite all of its faults, the Plan would be an improvement for many people living at or near the margins in the United States.
