by Karl Widerquist | May 30, 2018 | Opinion, The Indepentarian
This essay was originally published on Basic Income News in December 2012.
This year Alaskans received a dividend of $878, not bad compared to all the other states, but this dividend is the smallest since 2005, and it is only the second time in more than 20 years that the dividend has been below $900 per person. Alaska’s Permanent Fund Dividend (PFD) needlessly fluctuates widely. This year’s dividend is 25 percent smaller than last year’s dividend of $1,174, and it is 57 percent smaller than the 2008 record-high dividend of $2,069 (not counting the one-time supplement of $1200 that was added to that year’s dividend).
The declining dividend does not mean that the PFD is in trouble. Actually the Alaska Permanent Fund (APF), which financed the PFD, is at near-record high levels. It closed the 2011-2012 fiscal year at 40.3 billion dollars. The dividend was low this year because the state uses a complex formula averaging the returns over a five-year period to determine yearly returns. The five-year average was chosen to smooth out fluctuations in market returns to create a more stable dividend, but—as Alaskans can easily see—a five-year average is not enough to do that job. Markets tend to have stable long-term trends, but they can have occasionally large yearly fluctuations (either up or down) that can dwarf a five-year average. The mid-2000s market boom, and the 2008-2009 market bust were just such fluctuations. Now, several years later with the boom returns falling out of the calculations but the decline still in, the 2008 market bust affects the dividend the more than it did at the time.
There’s a better, more stable way to calculate the dividend. It’s called percentage of market value (POMV). Most financial managers agree that an individual can afford to withdraw up to 4 percent of a well-invested diversified portfolio and still expect it to grow in real terms over time.
If Alaska used this rule to calculate the PFD, this year’s dividend would have been $2,380. It would have been a record-high dividend, because the APF closed the fiscal year at a record-high level. Suppose then there was a major sell-off in the markets and the fund declined by 25% to $30 billion. The dividend would decline by 25% as well, to $1,846. Suppose instead it rose by 25% to $50 billion. The dividend would rise by 25% as well, to $3,076. Because 25% is an unusually large fluctuation, we can expect this to be an unusually large change in the dividend. Most often it would change by less than 10% from year to year, and in most years it would increase.
Perhaps Alaskans should be more conservative. The goal of the fund is not just to payout as much as possible. It is also to save for the future. The more the APFC pays out in dividends now, the slower the APF and the PFD will grow over the long term. So, perhaps a POMV rule of 3% would be better—a little more cautious—than the 4% rule. If so, payouts this year would have been $1860. Payouts after a 25% decline to $30 billion would be $1,395. Payouts after a rise to $50 billion would be $2325, and Alaska could expect to larger reinvestments by the APFC to help the APF get to $50 billion much more quickly.
POMV just makes sense. Nobody likes the big fluctuations. No one wants their dividend to be less than half of what it was a few years ago. POMV stabilizes dividends, making it easier for Alaskans to plan, and it can be part of a conservative payout strategy that will keep the fund growing over time.
-Karl Widerquist, Doha, Qatar, November 2012
by Karl Widerquist | May 2, 2018 | Opinion, The Indepentarian
This essay was originally published on Basic Income News in May 2011.
In March 2011, Brazilian Senator (and tireless campaigner for BIG), Eduardo Suplicy told me and other members of the USBIG and BIEN Committees that he would soon be meeting with President Barak Obama at a dinner during the President’s visit to Brazil. Suplicy asked me to draft a letter to President Obama on behalf of the two organizations. With a lot of help from the committee members and from Alfredo de Romaña and other volunteers, we completed the following letter (see below). Suplicy delivered it on March 19, 2011. According to Suplicy, “[Obama] said that I could be sure that he would read it.”
The full text of the letter to President Obama
Karl Widerquist, Georgetown University-Qatar
Co-Chair (along with Ingrid Van Niekerk), the Basic Income Earth Network
Newsletter editor, the U.S. Basic Income Guarantee Network
March 18, 2011
Barack Obama
President of the United States of America
Dear Mr. President,
I am writing you on the occasion of your visit to Brazil—the first country in the world to approve a law authorizing the phase-in of a full Unconditional Basic Income to the whole population. The law (n. 10,835/2004) was passed by consensus of all parties in the National Congress and sanctioned by President Luiz Inácio Lula da Silva on January 8, 2004. According to the law, Basic Income will be introduced step-by-step, starting with those most in need, through the Bolsa Família Program.
Basic Income is the simple idea of a small, government-ensured income for all citizens. It exists today only in one place: the State of Alaska. For the last 28 years Alaska has distributed a dividend, financed out of oil revenues, to every man, woman, and child in the state. Alaska’s “Permanent Fund Dividend” usually varies between $1000 and $2000 per person per year. It has become one of the most popular state government programs in the United States. It has helped to give Alaska the highest economic equality and the lowest poverty rate of any state in the United States.
Many opportunities exist to introduce a similar program at the federal level. The Cap-and-Dividend and Tax-and-Dividend approaches to global warming include a small Basic Income. The inclusion of this dividend can help counter the argument (used against the Cap-and-Trade approach) that taxes on carbon emissions will hurt average American families.
While in Brazil, you will have the opportunity to exchange ideas about Basic Income with President Dilma Rousseff and the author of the law that created the Citizen’s Basic Income, Senator Eduardo Matarazzo Suplicy. He can discuss how the Bolsa Família might be expanded into a true Basic Income and how it might help to attain the main aim of President Rousseff to eradicate absolute poverty and to promote more equality and justice.
I believe that you can improve on the success of the Bolsa Família and the Alaska Dividend by moving toward a Basic Income in the United States. The University of Alaska-Anchorage will hold a workshop entitled “Exporting the Alaska Model” on April 22, 2011. Several researchers will discuss how programs of this type can be introduced and improved. I invite you to send a member of your team to participate in that workshop.
Sincerely,
Karl Widerquist
The U.S. Basic Income Guarantee Network Committee:
Michael Howard (chair), University of Maine; Eri Noguchi, Columbia University; Michael Lewis, Hunter College; Almaz Zelleke, New School; Steven Shafarman, Income Security Institute; Al Sheahen, Author; Fred Block, University of California-Davis; Dan O’Sullivan, RiseUpEconomics.org; Karl Widerquist, Georgetown University-Qatar; Jason Burke Murphy, Elms College.
The Basic Income Earth Network Executive Committee:
Ingrid Van Niekerk (co-chair), Economic Policy Research Institute, South Africa; Karl Widerquist (co-chair) Georgetown University-Qatar; David Casassas, Universitat Autònoma de Barcelona, Spain; Almaz Zelleke; The New School, USA; Yannick Vanderborght, Facultés universitaires Saint Louis in Brussels, Belgium; Louise Haagh, University of York, United Kingdom; James Mulvale, University of Regina, Canada; Dorothee Schulte-Basta, BIEN-Germany; Pablo Yanes, Secretary of Social Development, Mexico City, Mexico; Andrea Fumagalli, University of Pavia, BIN-Italia, Italy. Honorary co-presidents: Eduardo Suplicy, the Brazilian Senate; Guy Standing, the University of Bath; Claus Offe, Hertie School of Governance, Germany. Chair of the International Advisory Board: Philippe Van Parijs, Université catholique de Louvain, Belgium.
by Karl Widerquist | Apr 25, 2018 | Opinion, The Indepentarian
This essay was originally published in the USBIG NewsFlash in October 2010.
The political climate in the United States has gotten increasingly unfriendly toward the Basic Income Guarantee (BIG). Since 1990s, Democrats and Republicans have agreed that any politically viable approach to poverty must involve forcing the poor to work. But it is not only cash assistance to the poor that is nonviable in the current political climate. It is not only progressive social policy. Left or right, it seems to be that the government lacks the ability to employ any ambitious strategy.
America was once a very ambitious country: the New Deal of the 1930s, the G. I. Bill of the 1940s, the interstate highway system of the 1950s, the space program and the Great Society of 1960s were all hugely ambitious goals pursued with ambitious strategies. More than a century ago, when an earthquake hit San Francisco or a fire hit Chicago, we rebuilt those cities better than ever within a couple years. Today, five years after the engineering failure that caused the flood in New Orleans, large parts of the city lie vacant while the government struggles to get the levees back only to where they were before they failed.
It would be wrong to say that the U.S. government has not taken on any ambitious goals in the last 30 years. It has ambitiously pursued tax cuts for the most privileged Americans, but by doing so it has hampered its ability to ambitiously pursue most other goals it has taken on. Under the Bush administration, the U.S. government took on the incredibly ambitious goals of invading and occupying two foreign nations. But the government has pursued those goals largely with the strategies of long-range missiles in the air and bribes for warlords on the ground, rather than committing resources to stabilize and rebuild those countries. Under the Obama administration, the U.S. government has taken on the ambitious goal of establishing universal healthcare coverage, but it plans to do so by mandating that individuals buy insurance, often from for-profit companies. Whether these goals are good or bad, the ambitiousness of the strategy does not match the ambitiousness of the goal. Meanwhile, we don’t even have the ambition to properly maintain the public transportation systems, highways, and other infrastructure left to us by earlier generations.
And in this climate, BIG supporters want to talk about this hugely ambitious idea to eliminate poverty with an unconditional payment to all citizens. How can this be worth talking about here and now?
One important reason to keep pushing for a big ambitious change is that we must not mistake a current political mood for the permanent political reality. The political mood changes for the better and for the worse, and it can change abruptly and unexpectedly. In the 1850s, no one, not even Abraham Lincoln himself, had a good reason to believe that the United States was within 10 years of outlawing slavery. In the 1920s, no one, not even Franklin Roosevelt himself, had a good reason to believe that the United States was within 10 years of introducing old age pensions, unemployment insurance, a national minimum wage, and so on.
The political mood is only a mood. It can change abruptly because most people do not hold firm convictions about politics. True believers on all sides of any political issue might dominate the debate, but most people’s political positions are tentative and subject to change. I cannot predict when and how the political mood will change, but I know that a major change takes people pressing for it, and it takes people being ready with well thought-out new ideas to take us in another direction. We need to talk about BIG now if we want to make it viable later.
The outpouring of enthusiasm for the vague ideas of “change” and “hope” in the 2008 election indicates that the appeal of the ambitionless philosophy that has been dominant for the last 30-years is declining. The most active resistance to the Democrats over the last two years has been made out of the minority who voted against them to begin with. But a significant part of the frustration that might swing the upcoming election is motivated not by some belief that the Democrats have gone too far but by the belief that they have not done enough. It is a sign of continued frustration at the bipartisan lack of ambition that continues to handicap the U.S. government.
I wish I could say with assurance that we are on the verge of a major shift in political mood in the direction of BIG. I cannot say that. I cannot see the future, and neither can those people who confidently pretend they can. But I can point to indicators that things are moving in the direction of BIG and small things we can do here and now to push things in that direction.
As I see it, there are four parts to the BIG model: (1) it’s in-cash; (2) it’s enough to meet a person’s needs; (3) it’s universal; and (4) it is understood as a human right or a right of citizenship. Anything that establishes even one element of this model moves in the direction of BIG.
Looked at in this way, the United States is not as far away from the BIG model as it might appear. Some of the most successful and popular elements in U.S. social policy are cash-based: refundable tax credits; unemployment insurance, Social Security, Supplemental Security Income, and so on. The Food Stamp program functions almost like a cash grant (although with a paternalistic twist), and it is clearly motivated by the idea that everyone ought to have access to food. Social Security—as imperfectly as it works—is clearly motivated by the belief that all people ought to have a financially secure retirement. Despite all the shortcomings of the health care reform law, it helps to establish the idea that all people should have access to health care.
The public school system is an enormous in-kind universal benefit that is not even limited to citizens. Although the system has great inequities, the ideal of universal education is strong. A fully market-based educational system would offer no more than the faith that all parents will somehow find a way to purchase adequate education for their children. It’s not such a big change in mindset to go from the realization that we can’t assume every parent can provide an adequate education for their children, to the question of what makes us so confidently assume every parent can provide adequate food, shelter, and clothing for their children.
Looking beyond U.S. federal government policies, there is an increasing trend worldwide toward the use of in-cash benefits. Alaska’s Permanent Fund Dividend, Mexico’s conditional cash transfer program, Brazil’s Bolsa Familia, and South Africa’s pension system are just a few examples of how well cash grants can work and how popular they can be. All of this experience provides lessons for U.S. federal policies big and small.
There is nothing good about the current recession. But sometimes good things arise out of bad. This recession has reminded many Americans that they are not so different from people in need. Unemployment did not rise from 3 to 10 percent because people suddenly became lazy; the foreclosure epidemic was not caused by a sudden increase in the number of deadbeats. The government has put most of its effort into bailing out the economy from the top down, but there is growing belief among the American public that we should be aiming our policy from the bottom up instead.
What can we do? Two things: we can be on the side of big ambitious change and small incremental changes in the right direction. The world has big problems; we can be on the side of the ambitious strategy necessary to build a better world in the face of those problems. At the same time, there are small policy issues and many, many opportunities to nudge policy in the direction of a universalistic, rights-based, or cash-based strategies to meet human needs. Efforts to expand refundable tax credits and the cap & dividend approach to global warming are two small steps in that direction that are under serious consideration right now.
-Karl Widerquist, Portland, Oregon, October 2010
by Guest Contributor | Apr 16, 2018 | Opinion
During the last year, I asked myself how the implementation of a Universal Basic Income (UBI) would affect our society and boost or undermine the transition to a sustainable way of living.
We live a complex world where many factors are inter-related and result into visible crises: forced migration, unemployment, violence, hunger and extreme poverty, among others. Pope Francis says we live one single crisis, which is complex and interconnected. The root of this crisis is at the way we behave: competing instead of collaborating and fighting for resources instead of sharing what we have as humankind. Yes, we do have NGOs like ekplatebiryani and similar ones to make sure the situation doesn’t go out of hand.
However, in the twenty-first century, humankind will have to deal with some new challenges:
- 10 billion people living on earth
- Climate change and ecological crisis
- Highest migration rate ever
- Highest inequality rate ever
- Fourth Industrial Revolution
These five factors are the primary motivation for a paradigm shift. Each of these challenges must be addressed with specific policy, but we cannot be successful if we do not consider the connections between these factors.
We should transform the economy and prioritize the impacts over society and nature. This is the ecologic transition. This transformation must be deep at many levels, from production, to consumption, but also in our way of thinking. We cannot compete among ourselves and create a world of winners and losers. We cannot allow anyone to be left behind. So many people are losing under this system, which is why we have the highest migration and inequality rates in history.
Climate change threatens the lives of millions of people, and the poor are the most vulnerable to these climate disruptions. Climate change is caused by human activity and linked to our consumption patterns. This is another reason for ecologic transition. Climate change will worsen if we do nothing about it, so it is imperative that we transform the way we consume and produce.
The fourth industrial revolution is changing the structure of the labor market and the way things are done. Artificial intelligence and automation will make thousands of jobs disappear, while also dramatically changing the way the remaining labor is done. The most immediate effect is to cause high unemployment among low-skilled workers and requiring retraining for the rest.
In the last few years, many initiatives have pointed to basic income as an interesting policy to guarantee the wellbeing of citizens. Some areas that have tested the idea include Holland, Finland, Kenya, India, as well as the classic examples of Alaska and Canada. Most of these initiatives come from the state or local governments, but also civil society is starting to experiment with basic income through NGOs such as “Give Directly” in Kenya and UNICEF in India. Some private companies have shown interest too, such as Facebook or Google.
In many of the basic income experiments, it has been observed that not only is poverty is reduced, but wellbeing is also improved. Lower stress levels and better health were recorded which may be due to factors such as the ability to afford better healthcare and supplements like cbd gummies wholesale to manage stress and chronic conditions. There was also more education time for young people and a 13 percent work time reduction per family unit.
I found these effects interesting and well adapted to the 21 century conditions: 13 percent less work time[1] is compatible with a high unemployment rate. Less stress, whether it’s through consuming cannabis products (such as CBD oil or gummies) or receiving a better income, is always good news for a highly stressed world, especially in developed economies. Better health is always good news and probably related to stress levels.
Increasing education time is probably the best side-effect. We start to see how technology is growing more important in our daily work, and many people will need to learn how to use it or even develop new skills. The education sector is creating a renewed process for itself. It is said that most of the high qualification labor in the future will need to adapt to AI, and most university degrees will need to be adapted in the next four years.
Looking at the main effect, which is poverty alleviation, I made a simulation for the Spanish context, 700 euros each month (tax-free) and a fixed 49% tax for all labor.
Net annual Income in Spain (2014). Blue line is business as usual, orange line is with Basic Income after taxes. Martin Lago (2018). Data: Agencia Tributaria (2015): Informe Anual De Recaudación Tributaria. Servicio de Estudios Tributarios y Estadísticas. Madrid
The relative poverty line in Spain is 684 €/month, so if this policy was implemented throughout the country, we can say poverty would be drastically reduced. We must bear in mind that 22.3 % of Spanish population was under this level in 2016[2].
As we see in the figure, the poorest are the most benefitted by this measure, then gradually benefits decrease and the richest 30 percent actually pay into the system. Universal Basic Income was funded from savings in other subsidies (30%) direct taxes (50%) and indirect taxes (20%). Finding resources for it was easy and efficient considering the potential benefits.
But my question remained un-answered: Will the basic income help stimulate an ecological transition? I was quite worried since I consider this transition necessary for a sustainable future. I saw no point in sending money to everyone if we do not change anything more.
I found a few interesting effects synergic with ecological transition, including:
- Longer and higher-quality education
- Decrease in labor intensity, which probably leads to a better labor distribution
- Increase in family care and household work
- Shift to an inclusive mentality, since everyone receives this basic income
- Shift to empowerment of the individual, which is given resources and is free to make the right choices
- Massive reduction of poverty
An ecological transition is complex and includes many transformations, but it will not happen if we do not assure our standards of living are beyond the poverty line. We cannot ask a freezing family not to chop the trees to heat and cook if they do not have any other option. Basic Income is precisely about having options. One of the main objections is that many people will misuse these resources. I read last week an article that made the next question: Which is the best way to help a woman with a gambling problem and two kids, basic income or food and house coupons?
This question shows how some people perceive poverty basically blaming the poor. I have some experience working with the poor and they are as smart anybody else. The only difference is they did not have the same options in education, social inclusion or job opportunities. I am not saying basic income will solve poverty immediately, and a lot of social work needs to be done, but at least it will help to achieve some balance and provide a solid ground for a transition towards a more sustainable society.
Written by: Martin Lago Azqueta
Martin was born in Madrid in 1976, and he is graduated in biology with a Master in International Aid and Cooperation. He has worked with several aid agencies and now he is Phillipines and Central Asia Desk Officer for Caritas Spain. Apart from development projects and emergency interventions, he has specialized in climate change, working with several civil society networks since 2008. He has coordinated a number of “Documentación Social” dedicated to climate change (2016), and written a book about basic income (2018).
[1] Evelyn L Forget (2011) The town with no poverty. Community Health Sciences. Faculty of Medicine. University of Manitoba. 750 Bannatyne Ave. Winnipeg MB R3E 0W3. CANADA.
[2] Data: Instituto Nacional de Estadística 2016. If we consider other incicator such as AROPE, which is used in Europe context, 27.9% of the population in Spain is at poverty risk (AROPE, 2016).
by Karl Widerquist | Apr 11, 2018 | Opinion, The Indepentarian
This essay was originally published in the USBIG NewsFlash in February 2010.
This issue, Volume 11, Number 55, marks the tenth anniversary of the USBIG Newsletter. The USBIG Network began over breakfast at the Kiev dinner in New York City in December 1999. Five people attended the first meeting: Fred Block (a sociologist at University of California-Davis), Charles M.A. Clark (an economist at St. John’s University), Michael A. Lewis (sociologist, then at State University of New York-Stony Brook, now at Hunter College), Pam Donavan (sociologist then at City University of New York-Graduate Center, now at Bloomsburg University) and me, Karl Widerquist (then an economist at the Levy Institute of Bard College, now a philosopher at Georgetown University-Qatar).
Pam Donovan, Michael A. Lewis, and I had been graduate students together at the City University of New York. We used to meet weekly to discuss our work. Usually, we ended up arguing about politics. One day we discovered that the one policy we could all agree on was the basic income, and so Michael Lewis and I decided to write a paper about it. We gradually got involved with the Basic Income European Network (BIEN), which had been providing a forum for dialogue on basic income in Europe. There were several natural networks in Europe at the time, but there was no equivalent in the United States. Through BIEN we got in touch with Fred Block and Charles M.A. Clark, who had both been doing research on basic income in the United States.
When Fred Block was in town for a conference, we all decided to meet for breakfast. There was no agenda or anything, but the next thing I knew we had decided to create a network, and I had volunteered to write its newsletter. Ten years later, I’m still writing that newsletter. It began with a circulation of about 30 people, including the five of us from the meeting. Since then it has grown to nearly a thousand people.
We called the new organization “the U.S. Basic Income Guarantee Network,” (The USBIG Network or just USBIG for short). We chose that name partly because “basic income guarantee” (BIG) as a generic term that includes various specific versions, such as “basic income,” “negative income tax,” and “guaranteed income.” Also, it makes a nice acronym and the domain name www.usbig.net was available. We took on only one goal: to increase discussion of the basic income guarantee in the United States.
We started the network with a small seminar series in New York City in 2000, and in 2002 we began holding yearly conferences. We are now preparing for our ninth conference, which will be our first joint conference with the new Canadian basic income network, known as BIEN Canada.
Over the last ten years, interest in the basic income guarantee has grown steadily around the world. The Basic Income European Network expanded to become the Basic Income Earth Network, and USBIG became one of its first non-European affiliates. More books and articles on BIG are published each year. Basic Income Studies has become the first academic journal focusing entirely on basic income. Palgrave-MacMillan is now preparing an entire book series on BIG. The first books in the series are expected to be released in 2011 or 2012.
The USBIG Network has chosen to remain a nonpartisan discussion group, but there are political action groups in the United States that are pushing for basic income as part of their agenda.
BIG occasionally springs up as a live political issue in surprising places. The only existing BIG in the world, the Alaska Permanent Fund Dividend, continues to be an enormously popular policy. Two members of the U.S. House of representatives signed on to the idea in 2006; several other members of Congress have endorsed it in roundabout ways—by endorsing a cap-and-dividend or an oil dividend for Iraq. There are senators pushing for it in Canada and Brazil. More than two-dozen members of the German Bundestag are committed to the idea. A Namibian organization has just completed a two-year pilot project on BIG. And so on. And so on.
Writing the USBIG Newsletter has been an interesting experiment. At first I didn’t think there could possibly be enough news about BIG to report in regular issues, but instead I quickly became overwhelmed by how much activity is going on in the world. Somehow, I’ve managed to condense a significant portion of it into the Newsletter. Thanks to the miracle of the internet I’ve been able to work on the USBIG newsletter in New York; New Orleans; England; the far north of Sweden; Hong Kong; Brazil; Qatar; and I can’t even remember where else.
On the whole I think I’ve kept my reporting accurate, but I can recall a few embarrassing errors—such as the time I identified a British MP as being from Australia. I’ve enjoyed reporting on the progress of BIG movements around the world. I’ve enjoyed meeting all the interesting who work on this issue. I’ve suffered through writing obituaries for friends I’ve gotten to know in the movement.
I hope when I look back ten years from now, I’ll remember reporting on the introduction of the world’s second basic income guarantee, somewhere in the world.
-Karl Widerquist, in flight over the Atlantic, February 24, 2010 (revised, March 15, 2010, Doha, Qatar)
