by Sara Bizarro | Sep 10, 2017 | News
On August 29, 2017, the Roosevelt Institute released a report where researchers Michalis Nikiforos, Marshall Steinbaum, Gennaro Zezza model the macroeconomic effects of implementing Basic Income. (Marshall Steinbaum is a Research Director and a Fellow at the Roosevelt Institute. Michalis Nikiforos and Gennaro Zezza are both associated with the Levy Institute.)
The Roosevelt Institute, following the legacy of Franklin and Eleanor Roosevelt, presents itself as re-imagining “America as it should be: a place where hard work is rewarded, everyone participates, and everyone enjoys a fair share of our collective prosperity”, and as building a “new economic and political system: one built by the many for the good of all”.
The report presented by the Roosevelt Institute evaluates three different variations of Basic Income, $1000 a month to all adults, $500 a month to all adults, and a $250 a month child allowance. The researchers also analyzed two different types of funding, increasing the federal debt and increasing taxes on households. The model is designed considering an eight year time period and Basic Income is progressively introduced throughout that period.
From their models of the three scenarios, the researchers conclude that, if funded by increasing the federal debt, each Basic Income policy would have a result of economic growth, the $250 child allowance would increase the GDP by 0.79%, while the $1,000 per adult would increase the GDP by 12.56%. When the Basic Income is financed by household taxes, the model forecasts no effect on the economy if the program was simply giving “ with one hand what it takes away with the other”. However, if the model is adapted using what the researchers call a “distributional model”, it forecasts a beneficial effect on economic growth. As the researchers describe it, “the distributional model incorporates the idea that an extra dollar in the hands of lower income households leads to higher spending. In other words, the households that pay more in taxes than they receive in cash assistance have a low propensity to consume, and those that receive more in assistance than they pay in taxes have a high propensity to consume.” The general idea is that lower income brackets tend to spend everything they earn, therefore consuming more, and higher income brackets tend to save part of their earnings, therefore, consuming less in relation to their potential as consumers. Therefore, if you take from the rich to give to the poor, the money will be flowing more than when it is simply accumulated by the few, and in this way, the economy will grow. The researchers (and this is the official position of the Roosevelt Institute as well) assume that our economy is “not currently operating near potential output” and this is so partly because of current gaping inequality, which is “one of the main reasons why the US economy faces the prospect of secular stagnation”.
Besides assuming that the economy could be preforming better, the model used also incorporates two microeconomic assumptions: “(1) unconditional cash transfers do not reduce household labor supply; and (2) increasing government revenue by increasing taxes levied on households does not change household behavior.” These assumptions have been promptly criticized in the media. However, the researchers themselves are aware that the assumptions are contentious, and have thus sought to establish them with evidence. They base assumption (1) on a survey of experiments done by Ionana Marinescu in a paper entitled “No Strings Attached: The Behavioral Effects of U.S. Unconditional Tax Transfer Programs” that estimates the microeconomic behavioral impact, using several experimental designs, results in labor supply remaining unchanged. Regarding assumption (2), the idea that increasing taxes does not change household behavior, the researchers assume that since the tax increase is progressive, the most affected households are the higher income brackets who tend to save and “hoard” money, so to speak, so they would save less but not change their consuming behavior in a drastic way. In order to justify this assumption, they use data from the Congressional Budget Office.
The report concludes that the researchers’ aim is not to have the final word on how to model the macroeconomic impacts of Basic Income but, instead, simply to have applied a valid model, which has done a reasonably good job of explaining macroeconomic effects so far, and used it to predict the effects of three Basic Income variations; on this model, the introduction of a Basic Income with a distributional component would mostly result in economic growth.
More Information:
Michalis Nikiforos, Marshall Steinbaum, Gennaro Zezza, “Modeling the Macroeconomic Effects of a Universal Basic Income”, The Roosevelt Institute, August 29th, 2017
Rakeen Mabud, Felicia Wong, “Starting the Conversation: The Economics of a Universal Basic Income”, The Roosevelt Institute, August 31st, 2017
“The Distribution of Household Income and Federal Taxes, 2013”, Congressional Budget Office, 2016
Ioana Marinescu, “No Strings Attached The Behavioral Effects of U.S. Unconditional Cash Transfer Programs”, The Roosevelt Institute, May 11th, 2017
by Ashley | Jun 7, 2017 | News
Ioana Marinescu. Credit to: Harris School of Pubic Policy.
The Roosevelt Institute finds positive overall quality of life outcomes from giving cash directly to individuals. By studying three programs that share different components of a universal basic income, University of Chicago Professor Ioana Marinescu is able to shed light on empirical evidence showing improvements in consumption, health, education, among other areas of life that runs counter to fears about what may happen when people are given cash directly.
What would happen if cash was provided directly to people with no strings attached? The Roosevelt Institute recently published a report authored by University of Chicago Professor Ioana Marinescu that explores this question. The report is published as part of the Roosevelt Institute’s Reimagine the Rules effort to reorient policy at all levels toward a new economic and political system that is good for all. Marinescu reviews the empirical results from unconditional cash transfer programs that share different components of a universal basic income (UBI).
The programs evaluated include the U.S. and Canadian negative income tax experiments, the Alaska Permanent Fund Dividend, and the Eastern Band of Cherokees’ casino dividend program, in addition to other supplemental studies. In the 1970s, the U.S. and Canadian negative income tax experiments were developed where a random group of people in six U.S. states were provided enough money to live on through tax credits equivalent to the poverty line. Since 1982, every Alaskan resident has received an annual dividend between $800 and $2,000 as a share of invested oil profits from state lands through the Alaska Permanent Fund Dividend. The Eastern Band of Cherokees’ casino dividend program began in 1996 and provides a portion of the profits from a casino on the reservation to all tribal members through annual dividends of $4,000 per person per year.
Across these programs, the report analyzes behavioral effects of providing unconditional cash transfers to individuals in categories including labor participation, consumption, education, health, among other social factors. One concern about providing cash directly to people is that it would decrease the amount of people working and contributing to society. Marinescu’s research challenges these concerns with findings that show significant improvements in the overall quality of life of people who receive unconditional cash transfers. For example, the Alaska Permanent Fund provides universal payments directly to residents and shows no effect on employment and an increase in part-time work. People have been shown to increase their buying and spending when receiving unconditional cash transfers. In terms of education, “school attendance, grades, and test scores” improve for children and educational attainment is increased. Even for health outcomes, there was almost a 10 percent decrease in hospitalizations and improved mental health with a lower likelihood of experiencing alcohol or cannabis use or dependence in the case of the Eastern Band of Cherokee’s casino dividend program. Whether cannabis and alcohol consumption would still decrease in this day in age due to basic income or the giving off money, is anybody’s guess. Especially when you are to consider that the majority of the US has now decriminalized marijuana as well as cbd cartridge derivatives for medical uses. There are many forms of CBD too these days, the chemicals have been made into ointments, creams, capsules, gummies, the list goes on. Each type is best for different types of illness too. For example white label cbd is popular type of CBD product that is widely wholesaled over the world. People are said to be looking to use them to treat inflammatory conditions and anxiety, and there are many states that allow recreational consumption too. Due to the increase in the use of the likes of a vaporisateur and other methods for cannabis smoking, cannabis use will more than likely stay the same, or even rise more as it’s now seen legally as a medicine. Due to more and more states, as well as other countries decriminalizing or legalizing cannabis use and cultivation, it’s more than likely we’ll see raised levels of cannabis consumption across all age ranges, especially when people have the help of online resources to help them grow their cannabis personally. Cannabis users could now look online for tips for growing bigger buds that wouldn’t have been scientifically or genetically possible a number of years ago. Such advancements can even help people save money for the future too.
These findings are a critical step in providing a picture of what future possible outcomes and considerations should be taken into account as the debate on universal basic income continues to gain international prominence. By countering fears and assumptions about how providing unconditional cash directly to people may affect people’s contributions to society with empirical evidence on outcomes, the narrative about universal basic income can be repositioned to be grounded in facts rather than fears.
More information at:
Kate McFarland, “Survey of 11,000 Europeans finds 68% would vote for basic income,” Basic Income News, May 1st 2017
Kate McFarland, “Alaska, US: Judge Upholds Governor’s Veto of Part of State’s Social Dividend,” Basic Income News, December 3rd 2016
Ioana Marinescu, “No Strings Attached: The Behavioral Effects of U.S. Unconditional CASH Transfer Programs,” Roosevelt Institute, May 16th 2017
by Kate McFarland | Nov 7, 2016 | News
David Thigpen, Research Affiliate at Institute for the Future, has written a short report on basic income for the progressive American think tank Roosevelt Institute.
The report considers universal basic income primarily as a response to the rise of the gig economy, increase in precarious work arrangements, and decline in full-time permanent employment. In Thigpen’s words, these changes in the economy leave the country “on the verge of a critical dilemma”:
If the traditional form of work—full-time employment paying middle class wages with benefits—is no longer a realistic expectation, how will we sustain a large middle class in the future? And if the spending power of millions of middle-class families is sharply reduced, what will be the effect on economic growth? These are the big questions universal income addresses (p. 5).
In the remainder of the report, Thigpen outlines different types of basic income proposals, looking especially at two general ways in which a basic income might be funded: taxation and revenues derived from common assets (as in the Alaska Permanent Fund Dividend).
Thigpen recommends a combination of both funding models, taxes and co-ownership, to finance a basic income. He also advises that a basic income “should not reduce the amount of money allocated to the poor” and that “for tactical reasons” the initial level of the basic income should be modest (p. 8).
Read the report here:
David E. Thigpen (October 2016) “Universal Income: What Is It, and Is It Right for the U.S.?” Roosevelt Institute.
Reviewed by Robert Gordon.
“Uber” photo CC BY-NC 2.0 Melies The Bunny.
