OPINION: Why Jay Hammond favored a larger dividend, higher taxes, and smaller government

It might be an exaggeration to say that former Alaksa Governor Jay Hammond, the person responsible more than any other for the Permanent Fund Dividend, was a republican thinker in the tradition of Rousseau or Jefferson. I certainly don’t know enough about his history to make this claim. But his reflections on the Alaska Permanent Fund (APF) and the Permanent Fund Dividend (PFD) do echo some important themes from that nearly abandoned republican tradition, and may partly explain why Hammond was often at odds with others in the Republican Party over the dividend, taxes, and economic development. The success of the Fund and Dividend may suggest a model for leaders in any party who want to promote republican ideals of citizen participation, equality, personal independence, and government that serves the common good rather than special interests.

At a workshop in which I participated in Anchorage on the PFD in April 2011, the Alaskans who had for decades studied the Fund and Dividend, and participated in their creation, all agreed that distributive justice played no part in the debate, and thought that had the Dividend been framed as a way to reduce inequality or end poverty, it never would have passed. The primary case for the Dividend was that it would create popular support for the Fund, and thus prevent the legislature from wasting money. Nevertheless, it is clear that distributive justice informed Hammond’s thinking about the Dividend, and partly explains why he favored dividends over competing policy proposals.

This is most obvious in the proposal, which passed despite Hammond’s opposition, to abolish the income tax and fund Alaska’s government with oil revenue. Hammond would have preferred the continuation of income taxes while paying larger dividends from larger investments of oil revenue in the Fund. One reason is that by repealing the income tax, “you’ll cut the one string connecting the citizen’s pocketbook to the government purse, and see state spending soar….[By [e]liminating the income tax…[n]ot only will we reduce our means, we’ll cut the one prime restraint on government spending” (265). Paying taxes makes us vigilant about what is being done with our tax dollars. It helps to keep us engaged as citizens. If we stop paying attention, we also get robbed.

This is clear in the second reason Hammond gave for continuing income taxes, that has to do with distributive justice: Eliminating, capping, or reducing the possible dividends paid out to citizens, in order to abolish income taxes, has a regressive effect on income distribution. “The most regrettable aspect of income tax repeal is that it exerts pressure to invade the Permanent Fund to replace the money lost by income tax repeal [pressure that will grow as oil revenue declines—MH]. This, of course, will shift the burden for state spending entirely from those who can best afford to pay taxes—including the non-residents who make up about a quarter of our workforce—to the shoulders of each and every Alaskan, regardless of income. None would feel the burden more than the low and middle income groups” (266). In contrast, funding government from income taxes and permitting a higher dividend would give a bigger proportionate boost to the incomes of low and middle income groups.

Hammond points out that the abolition of income taxes in effect created hidden taxes. Proposals to cap dividends in order to allow more APF money to be used for government spending “equates with imposing a head tax on every Alaskan and only Alaskans—regardless of income…. it never makes more sense to cap dividends than to simply ratchet up taxes to raise the same amount. In effect, capping dividends taxes only—and all—Alaskans. Increasing most taxes spreads the burden to those best able to pay—and also includes transient workers who currently remove so much wealth from our state ” (320–22).

The dividend, according to Hammond’s estimate, “is but one half of the earnings derived from investments of roughly only one-tenth of their oil wealth.” If all the wealth were distributed in dividends, each Alaskan would receive an additional $6,000 per person per year (in 1993). By funding government with this oil revenue instead of from taxes, Alaskans are in effect paying a regressive head tax, falling heaviest on those who can least afford to relinquish this wealth. But because it is not taken out of their paychecks, the tax remains hidden. A large dividend would contribute to personal independence. Hammond speculates that “were every Alaskan annually granted his full per capita share of the wealth we could eliminate or vastly curtail all welfare programs, unemployment insurance and subsidies” (319).

The supporters of income tax abolition, he notes, are first of all the wealthy who stand to benefit from lower taxes more than they would gain from larger equal per capita dividends. Secondly, a legislature flush with money that no one is watching becomes a tool of special interests. Hammond says to proponents of income tax repeal,” “though you seem perfectly willing to cut down on the little guy’s ‘living’ by slicing social programs like welfare, you seem unconcerned about boosting ‘living’ for select interests through subsidies such as lower than market rate loans and other ‘hidden dividends’ not based on need. Some might call that ‘corporate welfare’” (265).

Thus we find another classic republican theme, promotion of the general good over particular interests, alongside Hammond’s concerns for personal independence, progressive taxation, and more engaged citizens. All of these ends are well served by a large dividend and funding of government through income taxes.

There are some blind spots in his thinking. While he recognizes the legitimacy of government spending on the basis of need or “constitutional obligation”, he seems not very sensitive to the case to be made for government spending for public goods. There are some goods we all benefit from that the market will not deliver efficiently, no matter how much income we have. And his outlook is narrowly nationalistic, aiming for what is good for all Alaskans (not even all Americans), as is evident in the above quotations referring to non-Alaskans. (In his original dividend proposal, found unconstitutional by the Supreme Court, Hammond wanted those who had lived in Alaska longer to receive larger dividends.) Why, one might ask, should Alaskans enjoy a large dividend because of Alaska’s oil, while Vermonters, say, with fewer resources, could only give themselves a much smaller dividend? Shouldn’t the unearned natural wealth of the United States be shared equally by all Americans? Or, to go a step further, shouldn’t the natural resources of the earth be shared equally by all of its inhabitants, not just those fortunate to be born on top of rich deposits of oil or other wealth? This of course is not a blind spot peculiar to Hammond or political thinkers in the republican tradition, and getting beyond it in practical politics will require the strengthening of institutions and an ethos of solidarity at the federal and global levels. As these emerge, the global community may have something to learn from the example of the Permanent Fund Dividend, including the thinking of its strongest advocate.

All references are to Jay Hammond, Tales of a Bush Rat Governor (Fairbanks/Seattle: Epicenter Press, 1994).

Philippe Van Parijs gets prestigious award

The Belgian Ark Award for Free Speech (in Dutch: “Ark Prijs van het vrije woord”) was created in 1951 by Flemish intellectuals who were opposing restrictions to freedom of expression. In the past decades, it was awarded to several prominent intellectuals, mainly Flemish writers and artists. On May 25, the 2011 Prize was awarded to Philippe Van Parijs (UCLouvain), one of the most prominent advocates of basic income, and a founder of BIEN. In his “Laudatio”, Professor Rik Coolsaet (Ghent University) mentioned Van Parijs’s defence of basic income as one of the best examples of his lifelong commitment to social justice.

A short version of Coolsaet’s “Laudatio” was published in the Flemish daily ‘De Standaard’:
https://www.standaard.be/artikel/detail.aspx?artikelid=GP3AI60C

Van Parijs’s speech (in Dutch) is available at: https://www.uclouvain.be/8611.html

The list of past laureates is at: https://en.wikipedia.org/wiki/Ark_Prize_of_the_Free_Word

UNITED STATES: American Political Science Association Task Force Will Discuss BIG

USBIG reports that the American Political Science Association (APSA) has created a “Task Force on Democracy, Economic Security, and Social Justice in a Volatile World.” This task force is charged to rethink some of the familiar assumptions about democracy, economic security, and social justice in light of recent social and economic trends. In particular, the Task Force will assess recent policy innovations in three broad, related areas: Basic Income, participatory budgeting and planning, and rights-based models of welfare and development. According to the task force’s statement of purpose, Basic Income will fit into the study in the following way. “The task force will focus on the democracy-enhancing elements of the program and assess its potential as a tool for stimulating economic and democratic development [including as a model for foreign aid]. It will also address concerns about cost and implementation.” On completion, the task force will produce a 20-30 page summary report (written for a broad audience,) op-ed pieces, press releases, other public outreach and an interactive web-site featuring in-depth research, working papers, discussion forums, wikis, relevant links, and other resources that will allow for meaningful public input from around the world. Thus the initial findings of the Task Force will mark the beginning rather than the end of its deliberations.

For more information about the task force, go to: https://www.apsanet.org/content_74160.cfm

For questions & comments about the task force, contact: Robert Hauck <rhauck@apsanet.org>, APSA deputy director and liaison to this task force.

BASIC INCOME STUDIES: NEW ISSUE

Basic Income Studies (BIS) has announced the recent publication of one issue of the journal. The contents of the issue is below. BIS issues are available for free sampling at https://www.bepress.com/bis. Click the required article and follow the instructions to get free guest access to all BIS publications.

CONTENTS OF VOLUME 5, ISSUE 2 (2010)

‘Behavioral Economics and the Basic Income Guarantee’ by Wesley J. Pech

Abstract: This article provides a critical discussion of the potential contributions behavioral economics makes to the idea of a Basic Income Guarantee (BIG). Behavioral economics suggests that the consequences of a basic income may be significantly different from the ones predicted by the Standard Economic Model. Three topics from this literature are analyzed and linked to the BIG idea: Prospect Theory, Motivation Crowding Theory, and Conspicuous Consumption. The article argues that a basic income may be efficiency enhancing under some conditions, but at the same time incentives related to positional concerns may increase wasteful expenditure following its implementation.

‘Working Through the Work Disincentive’ by Chandra Pasma

Abstract: The work disincentive appears to be one of the biggest obstacles to basic income. There are concerns about paying people for doing nothing and fears of people withdrawing from the labor market because they have income security. It is important therefore for basic income advocates to understand the arguments and assumptions underlying the work disincentive concerns in order to successfully counter them. This article considers the primary assumptions, including those about what motivates people to work, what activities count as good, job availability, the distinction between the disabled and those able to work, and whether it is wrong to pay people for doing nothing; this article also provides a critical assessment.

‘Basic Income and Social Value’ by Bill Jordan.

Abstract: This article suggests that the justification of basic income should take account of the evidence of a divergence between growing incomes and stagnating subjective well-being (SWB) in the affluent countries. It argues that this implies taking the debate outside the orthodox model of economic development and the strict methodological individualism adopted by Van Parijs and others. This demands more attention to social relations and an analysis in terms of the production of social value rather than utility and culture rather than contract.

Research Note: ‘Seigniorage as a Source for a Basic Income Guarantee’ by Nicolaus Tideman and Kwok Ping Tsang

Abstract: A basic income guarantee should be financed from a source to which all persons have equal rights. One such source is seigniorage, the profit from printing paper money. This article reports real seigniorage, measured in 2009 dollars, for the U.S. for the past 50 years. It averaged about $175 per year per person over the age of 20. Thus seigniorage would not have been a major source for a basic income guarantee. But three caveats are in order. First, a practice of giving every adult an equal share of money would have meant a lifetime, interest-free loan of about $4,000 per adult. Second, the Federal Reserve’s response to the crisis at the end of 2008 would have meant an additional loan of about $3,400 per adult for the duration of the crisis. Third, a monetary system without fractional reserve banking would probably entail much greater seigniorage.

‘Review of Robert F. Clark, Giving Credit Where Due: A Path to Global Poverty Reduction’ by Edward Laws

‘Review of Loek Groot, Basic Income, Unemployment and Compensatory Justice’ by David J. Marjoribanks

MURRA, Emanuele, ‘Basic income e modelli di giustizia sociale. Un confronto’

MURRA, Emanuele, ‘Basic income e modelli di giustizia sociale. Un confronto’, RdT 51 (2010), pp. 607-628.

Basic Income and Social Justice models. A comparison. The proposal of basic income questioned established opinions regarding social justice and the dues of society to its members. In the article, the Author has tried to clarify how Basic Income could be considered a just policy, comparing it with the criteria of social justice elaborated by some of the most important philosophical traditions of the last century.  The contents and the Italian abstracts of all the articles of the issue can be found at: www.rassegnaditeologia.it