Carlos Rodríguez-Castelán, a senior economist for Poverty and Equity Global Practice at the World Bank Group, has written a policy research working paper analysing conditional cash transfer programmes. Such conditional policies provide cash transfers to households only if they meet requirements – such as school attendance or health checkups – thought to be beneficial in terms of poverty alleviation. The intention is that poverty is addressed in two ways: through the cash payment in the short term, and through the “human capital formation” realised through the conditions in the longer term.
A worry, however, is that the poorest households are excluded from such programmes, as they are the least likely to be able to meet the conditions of the transfer:
“Because targeted transfers are usually conditioned on the consumption of normal goods, richer eligible households are more likely to consume more educational and health care opportunities than poorer ones. Thus, the eligible poorest households may benefit least from conditional cash transfers even to the extent that they may not participate at all.”
Of particular relevance to the question of basic income (defined as universal, individual, and unconditional) is the finding that, for governments that care about how poor the poorest are, rather than merely the proportion of residents who are classed as poor, “unconditional cash transfers may be preferable over conditional cash transfers”.
The views expressed below and in the UBI Podcast do not necessarily express those of Basic Income Earth Network, or BI News.
While school choice and basic income advocates may not always see eye to eye, they may have more in common than they realize.
In my new UBI Podcast series, I interviewed Emily Runge, an education policy researcher for the Show-Me Institute. Runge advocates that the government provide parents more choice in how their children is educated, including providing families cash grants for education.
UBI Podcast tinyurl.com/UBIpodcast
The way Runge described her advocacy for school choice parallels much of the rhetoric that basic income advocates use.
“The overlap that I see, is there’s a recognition that there are vulnerable populations and the status quo is working against them. And the way the government treats them, for example the public school system, is not always the best.”
The intention of school choice, Runge said, is to allow individuals to decide what is best for their families and children.
“With the school choice movement, and the Universal Basic Income movement, is we are empowering individuals, giving them more agency, and this is a more innovative way to deal with problems that we see,” she said.
Arizona recently signed into law America’s first ever universal education savings account (ESA) program. This system will eventually allow any student to apply for a state-funded savings account that can be spent on education services, including tuition, online services, tutoring, and education materials. In theory, this will unlock a host of degree paths and careers for low-income families.
High school students can receive up to $5,000 per year in their ESA, and $4,600 is available for K-8.
For now, the number of students that can enroll in an ESA is capped at 5,500. Children with disabilities can receive a higher cash grant, depending on the services needed.
Runge said a universal ESA may be the ultimate goal, and other school choice offerings should also be pursued. In the meantime, Runge said that there are many good public schools that should be allowed to continue to operate.
The choice, she said, should be given to the parents not the government.
“Instead of children being assigned to a particular school, we advocate that money should follow the child,” she said.
As it stands, Runge said those with a lot of wealth can afford school choice, it is vulnerable and low-income populations that do not have the choice.
The intersection between poverty and education disparities is well known. And children of wealthy parents certainly have more opportunities for a superior education, simply because they have the cash to pay for these services.
Like basic income, an ESA has the potential to shift power from bureaucrats to individuals. There would still be conditions on the money, as ESA cash would necessarily be ear-marked for education, although the choices would be infinitely more for poor families in the status quo.
However, there are likely many basic income advocates that are skeptical of a cash-grant system when it comes to education. And there are likely many school choice advocates that are skeptical of no-strings attached cash grants to families.
Nonetheless, there should be more discussions between movements, such as basic income and school choice, on the areas that they overlap and how both can achieve their goal of empowering all families regardless of their background and situation.
This opinion solely represents the view of the author and is not necessarily the view of Basic Income News or BIEN. BI News does not endorse any particular petition or policy.
A Problem
One of the difficulties in talking about universal income is that the arguments lack punch because we discuss them in the abstract. The “People’s Dividend” (PD) petition on Change.org tries to correct that problem by asking people to sign a petition and call Congress to take action. The PD petition is different because it uses real numbers:
$27 trillion, the personal net worth of the one percent wealthiest (PNW1). Naturally, high net worth individuals have very different needs to low-income individuals which is why insurers like Jeff Bernard might be better equipped to assist them when it comes to insurance.
$1.5 trillion per year, the annual growth of the personal net worth of that same one percent
$4,500 per person, if the $1.5 trillion was re-distributed to all 333 million people in the U.S.
The PD petition proposes that the IRS annually harvest the growth of the wealth of the one percent and distribute it every year to every adult and child in the U.S. without conditions. It also urges people to take two specific actions to make that happen: 1) sign the petition and 2) call Congress.
Please Sign the Petition
If you read the petition first, or watch the video that introduces it, you will have a sufficient background for this article. Here is a link for the People’s Dividend Petition. Feel free to sign the petition while you are there.
Fun with Numbers
Before we go into the details of the proposal, it may be enlightening to compare some of the numbers given above to other things.
$27 trillion (PNW1) is:
about 686 percent of the Federal Budget ($3.9 trillion)
about 136 percent of the federal debt ($19.8 trillion)
about 143 percent of GDP ($18.9 trillion)
$81,000 per person in the U.S.
$1.5 trillion (the annual growth of PNW1) is:
38 percent of the Federal Budget ($3.9 trillion)
256 percent of the U.S. Defense budget ($585 billion)
253 percent of the annual Federal deficit ($592 billion)
$4,500 per person in the U.S.
$4,500 per person is:
one-third of the poverty level for 1 person, which is $11,880
$18,000 or three-fourths of the poverty level for a family of 4 persons, which is $24,300
one-seventh of the median wage for workers in the U.S.
$450 million of added income for the population of Flint, MI, a city of 100,000 people
$3 billion of added income for the population of Washington, DC, a city of 675,000 people
$36 million of added income to the 8,000 homeless people in Washington, D.C., which is equal to one-third of Washington, D.C.’s 2017 affordable housing budget of $100 million
Are These Numbers Reliable?
The Forbes list of U.S. billionaires, as of March 21, 2017, identified 565 U.S. billionaires with a combined net worth of $2.8 trillion. This contradicts the established fact that “the personal net worth of the one percent wealthiest (PNW1) is actually $27 trillion. A lot of what is written in the popular press about wealth and income grossly understates PNW1. Fortunately, the World Wealth and Income database (located here) is pulling back the covers on this issue. WID.world has authoritative statistics on wealth and income going back 100 years. That is where the data that supports the People’s Dividend came from. Online access to the WID.world database has been available since 2011. However, economists have been laboring on it for thirty years or more and they deserve great credit for their results. This resource makes it possible for a non-economist like me to grasp wealth inequality trends.
With WID.world data, we can avoid erroneously limiting the wealthiest one percent of U.S. citizens to those found on the Forbes billionaires list. For example, an extrapolation of WID.world data from 2013 to 2017, indicates that the one percent includes all households with over $5 million in net worth. There are about 1,670,000 such households. I estimate that their total wealth in 2017 is $27 trillion, with an annual increase of $1.5 trillion projected. The important result that follows from getting the numbers right is that the size of the People’s Dividend payment gets large enough for people to notice. $4,500 per person is significant. That is the result when you divide the growth of $1.5 trillion by the entire U.S. population. The proposal takes data seriously and the petition includes a link, also given here, to all of my calculations and sources here.
Making It Real
Because the People’s Dividend idea is formulated as an actionable petition with known dollar results for individuals, it makes the numbers behind the universal income/wealth inequality discussion more real. For example, a person knows that their payment would be $4,500, with 99 percent paying no wealth tax. They also know whether their household net worth is above $5 million and, therefore, they know if they are in the 99%.
It is also immediately apparent to many that $27 trillion is simply too much money for one percent of the population to have when 50 percent of the population has so little. For those less easily convinced that that is too much inequity, consider the fact that the one percent’s share of total U.S. wealth has grown from 25 percent in 1982 to 40 percent in 2017. If the one percent’s share keeps growing one point every 2.3 years, then in 23 years it will grow 10 more points to 50 percent of total U.S. wealth. By 2040, the one percent would have as much wealth, 50 percent, as everyone else in the U.S. put together. I think, at that amount, almost everyone would agree that would be much too much.
The purpose of asking people to sign the petition and contact their one Congressional Representative and their two Senators is to encourage them to think about this data, and, in the process, have it become more real for them.
High Points of the People’s Dividend
The $4,500 PD Payment
The $4,500 per person goes to everyone in the U.S., but only households with PNW greater than $5 million pay the tax. A household of 2 people worth $5.1 million would pay $7,800 and receive $9,000. This means that slightly more than 99 percent of the people would be better off financially. This should make it easier to get a majority of voters in favor of PD.
The PD goes on year after year.
The $4,500 is tax-free, so a dollar of the People’s Dividend is worth more to people who pay income taxes than a dollar of ordinary income.
$4,500 is equal to about one-third of the poverty level for 1 person, which is $11,880. However, for a family of 4, $18,000 in PD payments is about three-quarters of the poverty level for a family of 4 persons, which is $24,300. Therefore, it would be a significant poverty fighter.
The PD potentially adds a big boost to local economies. In Washington, DC, for example, a city of 675,000, the total PD payments to the population would equal $3 billion per year. This is equal to about 24 percent of the city’s 2017 budget of $13.8 billion.
The PD is paid to everyone, including the one percent. Therefore, no apparatus for measuring need is needed, and virtually all the $1.5 trillion collected can go to the people.
The PD would be paid out monthly like a social security check to provide a steady flow of income year around.
The PD amount would vary up or down, depending on how fast the PNW1 is growing or decreasing, as it might if stock markets decline. Therefore, the PD amount is not guaranteed to be the same from year to year. This feature helps avoid deficit spending because the PD is always equal to the amount of wealth tax collected. To smooth the change in the PD amounts from year to year a moving average of collections might be used.
Alaska’s permanent fund dividend in 2016 was $1,022 per person. The PD would be more than four times that. Seehere.
The Wealth Tax
The wealth tax is calculated so that it is equal to the year to year growth in the PNW1, estimated to be $1.5 trillion. Therefore, it represents the increase in PNW1 after the one percent has spent all they want to and paid all their taxes.
The intention is to keep the wealth tax equal to the growth so that the amount of wealth does not decrease and kill the goose (PNW1) that lays the golden egg (PD).
A good part of PNW1 is composed of stocks and bonds whose value can decrease in a market slump. If that happens, then the wealth tax rate would be reduced for a few years, but not eliminated, in order to allow the wealth to recover. You can see from the green and orange chart in the video that the 2008 recession caused everyone’s PNW to decrease. However, by 2013, everyone except the 50 percent least wealthy had recovered.
The wealth tax applies only to every dollar over the household wealth threshold necessary to be part of the one percent. This is $5 million in 2017. A household with PNW of $5,000,001 would pay 7.8 cents in wealth tax. A household with PNW of $6,000,000 would pay $78,000 tax on the $1,000,000 of wealth over and above $5,000,000.
The $5 million threshold amounts to about $500 billion leaving only $1 trillion to tax. The $1 trillion is taxed at 7.8 percent but the overall tax is 5.5 percent of PNW1. PNW1 grows on average 5.5 percent a year so the tax is equal to the growth.
The Amount of PNW1
It is better to tax wealth than income because only “realized” income counts for income taxes, but increase in asset values results in increased wealth tax revenues whether the gain is “realized” through a sale or not.
Capital gains are taxed at a lower rate when it comes to income taxes. Consequently, a lot of big earners take their compensation in the form of shares of stock. In this way, they reduce their income taxes, but a wealth tax would neutralize this tax avoidance strategy.
The PNW1 amount is a comprehensive measure of the wealth inequality and considers: the effects of all other tax laws; economic forces, such as automation and globalization that reduce the share of profits going to labor; changes in government expenditures for health care and other social programs; right to work laws that weaken labor’s position; and all of the other factors that increase or reduce the concentration of wealth in the one percent. As such, it is an easy litmus test for inequality and a measure we should all watch carefully.
Because the WID.world data only went until 2013, I estimated the 2017 amounts using the historical compounded growth rate of 5.5 percent.
But it should not be necessary to estimate wealth amounts. Therefore, an important feature of the PD petition is that it would direct the U.S. Treasury to collect wealth data promptly and directly from banks, brokerage services and other wealth depositories, so that the public could see the PNW1 amount and other wealth distribution amounts shortly after the end of the calendar year.
The petition requests Congress to appropriate extra money to the Treasury to create a wealth reporting system and a reliable means to track down wealth hidden in various tax havens.
Not mentioned in the petition, but a necessary addition, would be for Congress to provide funds to Treasury to negotiate tax treaties with other countries to prevent other countries from giving our one percent a better tax deal than the U.S. This is necessary to prevent all of our “one percenters” from fleeing to other countries to avoid the wealth tax.
By taxing personal wealth, the PD proposal avoids interfering in the taxation of corporations. If they become more profitable, then the shares owned by the one percent increase in value and the wealth tax harvests more.
Obstacles
There are several possible obstacles that might undermine a campaign for getting this petition signed. First, the ideas of universal income and the magnitude of wealth inequality are not well-known by the general public. Second, it might seem too “pie in the sky”, at least initially. Third, many might buy into the common belief that any “giveaway” will ruin the moral fiber of the country and encourage laziness. I am convinced, however, that with enough support, especially from individuals widely admired and trusted such as the Pope, Oprah or Bono, momentum could be achieved. Anyone reading this article with good ideas for getting people on board, please contact me at toclarkson@gmail.com.
Please Sign the Petition
Meanwhile, be sure to sign the petition, if you agree with it, and get one or two others to do the same – People’s Dividend Petition. Once people realize that they have skin in this game and that change is possible we may see some of these proposals become a reality.
The MIT Tech Conference, an annual event hosted by the MIT Sloan Tech Club at the MIT Media Lab, took place on Saturday, February 18th this year. TechTarget reports an impassioned exchange regarding basic income that occurred at the conclusion of a panel on the current state of robot technologies. Universal basic income was “largely seen as the best answer to taking care of a displaced workforce,” though the challenges of such proposals were also addressed.
This discussion of basic income arose from points made regarding the rise of automation and the associated predicted loss of jobs:
“To be sure, embracing and adopting technology has always been a competitive advantage. Horses, for example, used to be a major force by which work got done; they labored alongside humans to plow fields and deliver goods, but they were sidelined by advances from the second industrial revolution.
“Liam Paull, research scientist in the distributed robotics lab at MIT’s CSAIL and the panel moderator, asked panelists if robotics will present a scenario where humans are the horses? The comparison was crude, but the point was clear: When robots perform factory jobs or drive trucks better than humans, those careers disappear forever.”
Points raised over the course of this discussion, reported by TechTarget, include the following: that new, unforeseen jobs may emerge when existing jobs become obsolete; that automation risks exacerbating inequality both within the US and around the world; and that more evidence is necessary before solid policy recommendations can be made.
A new documentary on basic income — Free Lunch Societyby Austrian director Christian Tod — premiered in Copenhagen’s Bremen Theatre on March 20, 2017, to a crowd numbering in the hundreds.
The 90-minute film covers a range of “highlights” of the basic income movement, such as (for example) Alaska’s Permanent Fund Dividend, Manitoba’s “Mincome” experiment, campaigns for guaranteed minimum income in the 1960s US, the 2008 basic income pilot in Namibia, Switzerland’s 2016 basic income referendum, and current concerns about automation. Along the way, it features interviews with prominent basic income proponents — including, among others, billionaire businessman Götz Werner (founder of the German drugstore chain dm-drogerie markt), libertarian political scientist Charles Murray (American Enterprise Institute), venture capitalist Albert Wenger (Union Square Ventures), Mein Grundeinkommenfounder Michael Bohmeyer, Swiss referendum co-founder Daniel Häni, economist Evelyn Forget, and writer and entrepreneur Peter Barnes.
In an interview about the film (“Curiosity and the desire to improve the world”), Tod explains, “The film takes as its point of departure an ethical justification of basic income founded on the premise that natural resources belong to us all.” Tod’s musical selection — centered around the song “This Land is Your Land” — reflects this orientation toward the subject, as do his cinematographic decisions to include clips of natural scenery interspersed between the vintage footage and talking expert heads. (As he says in the same interview, “What might not come across quite so clearly in the completed film are elements which strike me as extremely important such as the countryside, the Earth, natural resources. I had wanted these aspects to be more prominent, but then the narrative would have suffered.”)
Tod has also acknowledged the influence of the science fiction series Star Trek: The Next Generation on his thinking about basic income and, eventually, the film: “It presents a society where there’s no money, where people only work because they really want to, and where they are driven by human curiosity.” Correspondingly, Free Lunch Society begins and ends with scenes from Star Trek.
About the interview subjects in his film, who were chosen in part to emphasize the political diversity behind support for basic income, Tod notes, “It’s interesting that they are almost all business people: owners of technology companies, CEOs of large or small companies, people who can afford to think about making the world a better place.”
Asked about the most surprising thing he learned while making the film — in an interview following the film’s premiere (see below) — Tod mentioned the discovery that “basic income was such a big thing in the United States in the 1960s,” tested in experiments and nearly voted upon.
Watch the Trailer
World Premiere Event
Most of Copenhagen’s Bremen Theatre 648 were filled at the world premiere of Free Lunch Society on Monday, March 20, 2017.
Director Tod states, “It was a fabulous evening in a tremendous location. It was very special to have the world premiere of Free Lunch Society in Copenhagen, because my film career started in this beautiful city 10 years ago, when I studied at Copenhagen university’s film department. The premiere on Monday was, so far, the peak of my career in filmmaking. Almost 650 people watching my vision and applauding, laughing and apparently liking it, is hard to top.”
The film’s world premiere was followed by short interviews with Tod and Bohmeyer, as well as a panel discussion with Uffe Elbæk (Leader of the Danish green political party The Alternative; Danish: Alternativet), Steen Jakobsen (Chief Economist at Saxo Bank), and Dorte Kolding (Chair of BIEN-Danmark). All three panelists were sympathetic to the idea basic income, although Elbæk explained that The Alternative was not prepared to endorse it — though they would be willing to pursue pilot studies, and though the party’s political agenda includes the provision of benefits to the poor “without specific control measures” (that is, without conditionalities like work requirements, similar in spirit to a basic income). Jakobsen advocates a negative income tax, as proposed by Milton Friedman, as a way to increase the purchasing power of the lower and middle classes and produce a more equitable distribution of wealth. Watch below (panel discussion and debate in Danish).
The world premiere was followed by several other showings in Copenhagen, including one which was held as part of BIEN-Danmark’s Annual Meeting (March 25, 2017), with showings in Austria scheduled in late March and early April.
