Daniel Araya sits down with Scott Santens, writer and advocate of universal basic income (UBI) for all, what it is and how it could work for the United States. The conversation centres around public perception as an obstacle for UBI and the opposing and ongoing pressure on the job market caused by increased automation. Read the full article here.
Despite the large amount of the annual dividend for 2015, the future of Alaska’s small basic income is under political threats as the state suffers from a large deficit gap.
Confirming earlier forecasts, the amount of Alaska’s citizens’ dividend paid this year will be the highest ever paid (without inflation) since the first payment made in 1982.
Yet, perspectives for what is the closest policy to a universal basic income in the world today are not so shining. Because the Alaskan government is currently trying to cope with an historical budget deficit, various suggestions have been made on how to reduce the state’s deficit, some involving changes in the dividend mechanism, to make it less generous.
The citizens’ dividend is administered by the Alaska Permanent Fund Corporation which was established in 1976 by constitutional amendment.
The fund collects at least 25 percent of all the state’s mineral royalties and lease payments and invests its accumulated reserves in financial markets. The financial earnings are then distributed equally among all Alaskans as a citizens’ dividend.
The amount of the dividend however is based on a five-year rolling average of the financial earnings of the fund, which therefore no longer includes the recession years post-crisis. For this reason, low oil prices have plunged Alaska into a crippling budget deficit, but it hasn’t yet affected the size of the payout.
Thus, more than 644,000 Alaskan residents registered or born before December 31st 2014 will receive their dividend checks beginning on October 1st.
Despite what seems to be good news, Alaska is now in a paradoxical situation where the earnings from the Permanent Fund have exceeded the earnings from Alaska oil. This paradox has recently provoked a wave of attacks against the dividend, including from Alaska’s current governor, Bill Walker (Republican).
For the ceremonial announcement of the amount of the annual dividend, Walker deliberately chose to let a 12-year-old girl named Shania make the public announcement in order to send a signal that, according to him, the future of Alaska’s children are endangered by the unsustainability of the Fund.
https://vimeo.com/139986120
“We are paying out more in PFD checks than we are for the education of young Alaskans like Shania—at a time when we are struggling with a $3.5 billion deficit,” the Governor stressed in a statement to the press. “Alaskans need to know this is unsustainable. I’m confident Alaskans will pull together to find a solution, as we always do when times are tough.”
“It is time to have an open and honest conversation about our finances, and how resources like the Permanent Fund can be used as an asset. The vision of the Permanent Fund was to turn a nonrenewable resource into a renewable one, and it is our job to determine how to best use and protect that gift for the benefit of all Alaskans.”
A message that was also stressed by Lt. Governor Mallott (D), and Eric Wohlforth, both former members of the Fund’s Board of Trustees, in advance of upcoming debates on how to reform the Fund.
“The original purpose of the Permanent Fund was to save wealth for future generations of Alaskans. This is the people’s fund. In the months before the legislative session, groups will meet to talk about how we should manage our wealth. I urge all Alaskans to become informed investors, for their sake and for the sake of the next generation.” Eric Wohlforth said, thus making the threats against the Fund more precise than ever.
An emerging proposal for a carbon fee and dividend would yield a substantial dividend payment, eventually exceeding the amount of Alaska’s Permanent Fund Dividend, to American households. Citizens’ Climate Lobby (CCL) is proposing a revenue-neutral carbon fee. This would be collected from the companies operating hydrocarbon mines and wellheads, wherever carbon is first introduced into the economy, from which 100% of the revenue would be returned to the citizens as dividends. CCL’s proposal starts with a fee of $15 per metric ton of carbon, then would raise the fee by at least $10 per year (higher if faster carbon reduction is warranted) until environmental target reductions are met.
Using a carbon tax and dividend calculator at the Carbon Tax Center, I calculated what the individual and household annual dividends would be for selected years from 2016 (the hypothetical initial year) to 2039 (the last year available in the calculator). Households are assumed to contain an average of 2.6 people.
| Individual | Household | Carbon Emissions, % below 2005 Levels | |
| 2016 | $264 | $686 | 13 |
| 2017 | 433 | 1185 | 15.2 |
| 2025 | 1,613 | 4,194 | 30.7 |
| 2030 | 2,247 | 5,843 | 38 |
| 2039 | $3,325 | $8,646 | 48 |
Although not a full basic income by any means, a carbon dividend promises to be a significant addition to individual and household incomes, surpassing the average amount of the Permanent Fund Dividend in less than a decade. By 2039, it is estimated the proposed carbon fee would reduce CO2 emissions 48% from 2005 levels, substantially more than the reductions projected for the EPA’s Clean Power Plan.
That sounds impressive, but is it enough? Citing experts at the Tyndall Center for Climate Change Research in her compelling vision for remaking the economy to combat global warming, This Changes Everything, Naomi Klein claims that “our only hope” of keeping global warming below 2°C, “is for wealthy countries to cut their emissions by somewhere between 8-10 percent a year….This level of emissions reduction has happened only in the context of economic collapse or deep depressions” (21).
Kevin Anderson of the Tyndall Center maintains that there needs to be an 80% cut in emissions in the Annex 1 (wealthier) countries by 2030, if we are to meet the 2°C target, and also allow developing countries’ emissions to peak somewhat later. This, he argues further, requires a “de-growth strategy,” a planned period of reduced economic activity. He does not think that carbon pricing will suffice to reduce carbon emissions at the rate required, for the following reasons:
To summarise, if:
James Hansen et al., making somewhat different assumptions, also call for steep carbon emission reductions of around 6% per year.
Suppose that we need to reduce our emissions 80% by 2039. How much of a carbon fee would be needed, and how much would it yield in dividends? Starting at $20/ton, and beginning in 2016, with increments of $40/ton/year, these are the results from the Carbon Tax calculator:
| Tax/ton | Revenue, $ billions | Carbon Emissions, % below 2005 Levels | Individual Dividend (100% return) | Household Dividend (average of 2.6 people) | |
| 2016 | $20 | $110 | 14.7 | $345 | $896 |
| 2018 | 100 | 451 | 32.4 | 1,394 | 3,624 |
| 2020 | 180 | 708 | 43.2 | 2,153 | 5,599 |
| 2025 | 380 | 1,130 | 60.7 | 3,309 | 8,603 |
| 2030 | 580 | 1,419 | 70.4 | 4,010 | 10,427 |
| 2035 | 780 | 1,635 | 76.8 | 4,476 | 11,637 |
| 2039 | $940 | $1,785 | 80.4 | $4,802 | $12,485 |
Note that emissions in the US rose around 17% from 1990 to 2005, so to get emissions down to 80% below 1990 levels, the annual increase would need to be at least $45. This would, by 2039, produce emissions 82.7% below 2005 levels, with a fee of $1,055 per ton, yielding revenue of $1,770 billion and an individual dividend of $4,761 ($12,380 for a household). Presumably the lower revenue and dividends compared to the scenario with a $40 increment is the consequence of declining fossil fuel use and a lower tax base. (To reach 82.4% reductions from 2005 by 2030, Anderson’s target date, the fee increment would need to be $70/year. The maximum individual dividend in 2039 would be $4,268).
The carbon fee would constitute a steadily rising percentage of gross domestic product (GDP) in terms of revenue. If GDP were held constant at $19 trillion, the fee would rise from 0.5% of GDP in 2016 to over 9% in 2039. Even if, as is more likely, GDP rises, the fee will still rise at a faster rate than GDP. Estimates for the 2030 US GDP range from $25.5 to $38.2 trillion. The percent of GDP of the carbon fee in 2030 would thus fall between 5.6 and 1.4, respectively.
At first glance, this suggests that the carbon fee would bring a halt to growth, as it would equal or exceed the normal growth rate of the economy (around 2%). However, accounting for the fact that the revenue is being returned as dividends, the effect may be to steer growth in another direction, away from carbon energy, which will quickly become unaffordable.
Of course, all this depends on the soundness of the projections for emissions reductions at various levels of carbon fee. We have no experience with carbon fees accelerating so rapidly. One case study suggests that carbon taxes may not be as effective as one would hope: the Norwegian carbon tax, one of the highest in Europe, resulted in relatively modest reductions of carbon emissions compared to business as usual, and over the 1990s, carbon emissions rose 15%. One problem was exempting industries on account of competitiveness, and another more telling issue was the inelasticity of demand for some forms of carbon use, such as transportation. The record of British Columbia’s revenue-neutral carbon tax is more encouraging, but since it topped out at $30 per ton in 2012, it is hard to extrapolate from that case to the more ambitious targets discussed here.
In the model discussed above, there are no exemptions. But with the more ambitious fee, it may not be possible for demand to shift rapidly enough from carbon fuel to renewables, and the effect of the fee could be mainly to depress demand, and with it economic activity, as has happened in the past when energy prices rise. Then it would appear that rapid carbon emissions reductions would not be compatible with economic growth.
For basic income researchers, I will conclude by noting the tension between analyses such as this, which envision basic income as part of equitable environmental policy and at least a transition period of de-growth, and those analyses that see basic income as an economic stimulus for growth.
Robert Reich, former U.S. Secretary of Labor, publicly endorsed basic income at least as early as March 2014. Has been increasingly talking about it lately. In a blog on the upsurge in uncertain employment, published on August 24, 2015, Reich concluded, “Ultimately, we’ll need a guaranteed minimum basic income. But I’ll save this for another column.”
Robert Reich
It turns out that that other column was his Labor Day message. The entire post is reproduced below in full:
Labor Day 2028
In 1928, famed British economist John Maynard Keynes predicted that technology would advance so far in a hundred years – by 2028 – that it will replace all work, and no one will need to worry about making money.
“For the first time since his creation man will be faced with his real, his permanent problem – how to use his freedom from pressing economic cares, how to occupy the leisure, which science and compound interest will have won for him, to live wisely and agreeably and well.”
We still have thirteen years to go before we reach Keynes’ prophetic year, but we’re not exactly on the way to it. Americans are working harder than ever.
Keynes may be proven right about technological progress. We’re on the verge of 3-D printing, driverless cars, delivery drones, and robots that can serve us coffee in the morning and make our beds.
But he overlooked one big question: How to redistribute the profits from these marvelous labor-saving inventions, so we’ll have the money to buy the free time they provide?
Without such a mechanism, most of us are condemned to work ever harder in order to compensate for lost earnings due to the labor-replacing technologies.
Such technologies are even replacing knowledge workers – a big reason why college degrees no longer deliver steadily higher wages and larger shares of the economic pie.
Since 2000, the vast majority of college graduates have seen little or no income gains.
The economic model that predominated through most of the twentieth century was mass production by many, for mass consumption by many.
But the model we’re rushing toward is unlimited production by a handful, for consumption by the few able to afford it.
The ratio of employees to customers is already dropping to mind-boggling lows.
When Facebook purchased the messaging company WhatsApp for $19 billion last year, WhatsApp had fifty-five employees serving 450 million customers.
When more and more can be done by fewer and fewer people, profits go to an ever-smaller circle of executives and owner-investors. WhatsApp’s young co-founder and CEO, Jan Koum, got $6.8 billion in the deal.
This in turn will leave the rest of us with fewer well-paying jobs and less money to buy what can be produced, as we’re pushed into the low-paying personal service sector of the economy.
Which will also mean fewer profits for the handful of billionaire executives and owner-investors, because potential consumers won’t be able to afford what they’re selling.
What to do? We might try to levy a gigantic tax on the incomes of the billionaire winners and redistribute their winnings to everyone else. But even if politically feasible, the winners will be tempted to store their winnings abroad – or expatriate.
Suppose we look instead at the patents and trademarks by which government protects all these new inventions.
Such government protections determine what these inventions are worth. If patents lasted only three years instead of the current twenty, for example, What’sApp would be worth a small fraction of $19 billion – because after three years anybody could reproduce its messaging technology for free.
Instead of shortening the patent period, how about giving every citizen a share of the profits from all patents and trademarks government protects? Patent owners would want to contact a patent lawyer to discuss the change in profit before anything is edited. It would be a condition for receiving such protection.
Say, for example, 20 percent of all such profits were split equally among all citizens, starting the month they turn eighteen.
In effect, this would be a basic minimum income for everyone.
The sum would be enough to ensure everyone a minimally decent standard of living – including money to buy the technologies that would free them up from the necessity of working.
Anyone wishing to supplement their basic minimum could of course choose to work – even though, as noted, most jobs will pay modestly.
This outcome would also be good for the handful of billionaire executives and owner-investors, because it would ensure they have customers with enough money to buy their labor-saving gadgets.
Such a basic minimum would allow people to pursue whatever arts or avocations provide them with meaning, thereby enabling society to enjoy the fruits of such artistry or voluntary efforts.
We would thereby create the kind of society John Maynard Keynes predicted we’d achieve by 2028 – an age of technological abundance in which no one will need to work.
Happy Labor Day.
Reich’s focus on Basic Income is important for U.S. politics, because, although a significant grassroots movement for it is growing in the United States, and public support for the idea is increasing, it is still far outside the centers of power. Reich is the first major U.S. politician in decades to make such a strong endorsement of Basic Income. He has linked basic income to labor market uncertainty, to climate change strategy, and to automation. His choice to make it the focus of his Labor Day column indicates that he believes this policy is a central strategy to supporting workers in a difficult labor market.
The column quoted in full is taken from:
Robert Reich, “Labor Day 2028,” Robert Reich.org, August 31, 2015
He’s earlier column previewing his comments on basic income is:
Robert Reich, “The Upsurge in Uncertain Work,” Robert Reich.org, August 23, 2015
For additional info about Reich and the basic income see these two articles:
Basic Income News, “Former Labor Secretary Endorses BIG, calling it “almost inevitable,” Basic Income News, March 14, 2014
Basic Income News, “Former Secretary of Labor endores introducing a carbon tax and using the revenue to support BIG,” Basic Income News, June 17, 2014
Basic Income Massachusetts (from BIMA webpage)
Welfare rights and anti-poverty activists Ann Withorn, Jason Murphy, and Diane Dujon have just started a Basic Income (BI) organization in Massachusetts, the immediate goal of which is to build a Basic Income Movement in Massachusetts. Using the acronym BIMA, the organization started functioning in July and is already present online with a website and Facebook page. A formal Founding Meeting is planned for this November, in the Dorchester/Roxbury area, Massachusetts.
Starting out with a small group of activists, including but not limited to the founders mentioned above, the organization intends to initiate its activity by creating a database of supporters, who may or may not be directly involved in the group’s work. This reach-out effort aims to speak about Basic Income to other community or movement groups, and producing BI-related literature for local newsletters and events, including how BI can be implemented in Massachusetts.
BIMA also plans to host a workshop at the Center for Popular Economics this summer, speak at the and at the . Joining in with Survivors Inc. to revive local newspaper Survival News is also part of BIMA’s further actions to spread the word about BI. BIMA will also develop efforts to push for a BI for Massachusetts, starting by creating a strategy for a Massachusetts Legislative Initiative.
According to its founders, BIMA defends BI as a full blown anti-poverty proposal, not only aimed at those currently poor but also at removing fear of poverty from all. In their view, the only way to actually achieve that is for a significant number of poor people to get involved from the beginning, joining efforts with activist groups dedicated to anti-poverty, labor, and community work. For BIMA, including those who have actually suffered socioeconomic insecurity in their lives is the only way to keep the movement going, keeping up the push for a Basic Income.
More information at:
BIMA website at https://basicincomema.wordpress.com/
BIMA Facebook page at https://www.facebook.com/pages/Basic-Income-MA-BIMA/729327107177594?fref=ts
