Universal Basic Income: The Abolition of Poverty

by John Grisham

Agenda

What would you do if you had your basic financial needs met? For most of us, we tend to think about welfare in terms of how other people us it. Some of us may take advantage of welfare programs and know what it would mean if we lost them. Others might not and become upset at the very thought of their hard-earned dollar going to another who didn’t earn it. 

During the later years of the civil rights movement, Martin Luther King Jr realized that poverty was not a strictly black or white issue. He advocated for something that he believed would aid equality for not just poor black people, but poor white people as well. He understood that civil rights issues weren’t just culture issues, but that they are tied to economics. For MLK the solution to poverty was a simple one. He advocated for a Universal Basic Income for every person in the nation, and he desired that the civil rights movement carry it out. As one of his last acts he fought for a ‘Poor People’s Campaign’. In more recent years, the idea of a guaranteed income has gained traction from supporters on both the left and the right. The idea is that you give everyone, regardless of income, an amount of money equal to the poverty line. The goal is to abolish poverty at its source.

In America today, the wealth gap is at epic proportions. MLK would roll over in his grave if he knew the extent. According to Forbes magazine list of the nation’s richest 400 to be listed in 2016 you had to have a net worth of $1.7 billion. Compare that total wealth with the income of minorities and, the fact is, that those on the Forbes 400, list of richest Americans now have as much combined wealth as all African-American households, plus one-third of America’s Latino population.

One potential cause of the wealth gap between middle and upper America is the introduction of technology in the workforce. In general, employment tends to increase in correlation with business productivity. That is why those who believe in trickledown economics think that giving corporations tax cuts, in turn, leads to better employment for workers. However, a chart used by Professor Erik Brynjolfsson at MIT Sloan school of management shows that in the year 2000 this correlation diverges. He argues that around this time technology improved enough in the workplace that businesses saw a continued increase in production from technology which allowed them to decrease overall employment. In fact, many supporters of UBI will assert that it is necessary to have a guaranteed income to combat unemployment due to automation.


Policy

To abolish poverty through UBI, a basic income amount must be agreed upon and set. This amount must be at or above the poverty line according to state and region. The federal government will set the baseline for national poverty standards. If states require higher standards for poverty aid, they will need to contribute those funds independently. In addition, if individual counties still require further aid, they may also contribute to that aid. In other words, the federal government will dictate and contribute funds equal to the average baseline for poverty. Then, the states and independent counties may contribute more based on local poverty rates. The federal income for adults will be guaranteed to every legal citizen of the United States above the age of 18 regardless of income or social status, the only exception being those who are in the prison system. Any citizen in the prison system will stop receiving UBI until such point that they are released; they then must provide proof of release to continue receiving aid. All those under the age of 18 will be separated into age brackets.

0-5 year(s) old

6-10 years old

11-14 years old

15-17 years old

Each bracket will have an adjusted minimum income based on age requirements. The responsibility for dictating and managing the basic income for those under 18 will be a combination of the federal, state, and local governments. Each should contribute a third of the calculated cost per person under 18. The adjusted funds for those under 18 will then be given to the legal guardians of those recipients to be used for the basic costs of living. Additionally, each state may choose to regulate and enforce that UBI recipients under 18 are receiving proper care by legal guardians receiving their UBI. Once a UBI recipient under 18 becomes a legal adult they are then entitled to the full federal, state and local UBI for those over 18. Each state and local government may also impose a tax on UBI recipients under 18 which will be used to help fund such programs as food assistance, proper care enforcement, clothing assistance, or any other service aid program or public utility other than healthcare.

Fraud prevention for UBI recipients will be a state and federal responsibility. Persons caught in fraudulent acts will be punished at the state and federal levels appropriately. Each UBI recipient will be required to provide proof of ID both photo and social security identification. This proof must be provided yearly before the tax filing deadline for each member of a household receiving UBI. Those who are old enough to have a driver permit or license may use that ID as photo proof. Everyone else must receive and provide a UBI photo ID from a local UBI ID provider. Any recipient who has valid permit or license is encouraged, but not required, to have a UBI photo ID.

Implementation

Paying for a Universal Basic Income will be the greatest challenge. However, it is not an impossible task. The poverty line as defined by the U.S. Census Bureau is $12,752 a year for a single adult in 2017. If another adult is added to that household, you would expect that amount to go up considerably, but it only brings that annual income up to $16,414. Furthermore, adding a child to that household only increases that amount to $16,895. In other words, the expected cost for a single adult per month is $1063 and for two adults and a child, it is $1408. This means that past the initial cost of $12, 752 adding each other adult only increases the annual cost by $3662 and the monthly cost by $305. Adding a child only increases this amount by $481 annually or $40 monthly. The only point that this figure goes up significantly for adding members is when you reach 8 in the household. At this point, the cost is $4,320 annually or $360 monthly per additional person.

One critique of current welfare programs is that aid is increased per child which encourages those in poverty to have more children thus increasing their aid. This effect could be mitigated by taxing the amount given per child to pay for nutritional and child care services. This would benefit households with fewer children while discouraging rampant aid for those having more children. In 2017, there were 126.22 million households in the U.S. with a rounded-up average of 3 people per household. Based on the average of households and members it would cost over 2 trillion dollars to pay for a yearly Universal basic income. A recent New York Post article puts the figure at around 3.8 trillion a year on the high end. So how would such a high cost be met? One idea is to cut most existing antipoverty programs which cost roughly $1 trillion a year. Additionally, cutting tax breaks especially those given to the wealthy could provide another $1.2 trillion. Applying a federal sales tax and financial transaction tax could provide even greater funds to the UBI cost. Taxing Wall Street stock exchanges as well as cutting military spending by just a few percentage points could cover the rest.

So, if cutting tax breaks on the wealthy could provide $1.2 trillion what if we increased taxes on the wealthy through a progressive tax? An article on Time.com made the claim this year that “Billionaires Made So Much Money Last Year They Could End Extreme Poverty Seven Times.” In 2014 according to AmericansForTaxFairness.org, “1% of Americans own 35% of the nation’s wealth.” That was a little over 22 trillion at the time and a 17% tax on that could pay for a UBI of 3.8 trillion almost by itself. These are just a few of the ideas being put forward to pay for the projected cost of such an ambitious social welfare program.

After the exact amount of UBI has been estimated per region based on poverty need each state and local region will be expected to contribute any additional funds if required. For those states requiring more than the national average, they will receive half the average until they provide funds. After they have provided the additional funds they will receive the rest of the federal grant. Funds will also be given to each state to provide DMV facilities with the capabilities to provide UBI photo ID cards. This cost can be added to the projected cost of the entire UBI budget and be paid for by any combination of the stated methods previously. The federal government will pay for ¾ of this expected cost with the states covering the rest. Additionally, any facility that can provide passports to citizens will be included in this program and will be expanded according to need.

Evaluation

The U.S. Census Bureau will reevaluate the percentage of people in poverty every year after the UBI has been implemented to discover if it has been effective. Also, the Bureau of Labor Statistics will continue to track employment levels to determine if levels rise or fall and for how long they fall. Critics of UBI state that employment will fall drastically if people have cash handouts. Traditional welfare assistance is reduced or withheld after a level of income is met which discourages employment. Because a UBI is not contingent on income it would not be affected in this way and so would not discourage employment. Since aid would not be discontinued based upon income UBI is intended as a floor and not a ceiling. It is also worth noting that UBI is not intended to guarantee a comfortable quality of life but to cover basic costs of living and alleviate poverty. Those on UBI will still be benefited by employment as a UBI would not cover all expenditures. In addition, economic growth can be tracked to determine how this money is being spent and to what degree is it helping or hurting the economy.

Another critique of UBI is that it could lead to price increases or inflation. Inflation tends to occur when new money is introduced into the money supply which then devalues the total purchasing power of the whole supply. UBI would not be inherently inflationary because it would be paid for with existing money and not newly printed money. In other words, no expanse of the current money supply would be required to pay for a UBI. Prices should also be largely unaffected if monopolies are prevented. The classic argument is that if people have more money to spend on something then the price of that something will increase. This is however not usually the case since businesses that raise prices could be countered by businesses choosing not to raise prices or even lowering prices. Certain areas where markets are less fair may experience some price increase but most of the country where markets are competitive should not see increases.

Conclusion

There are many arguments for a Basic Income in 2018. A few small studies are being conducted across the globe to determine the effect that it may have on poverty and employment. Some argue that it is a necessity due to the automation of jobs in the future. Oxford University scholars estimate “…that no less than 47% of all American jobs and 54% of those in Europe are at a high risk of being usurped by machines.” Others just simply want a better distribution of wealth in our economy. MLK believed that the simplest way to treat poverty was to give money directly to those in need. I believe a combination of these factors needs to be taken into consideration if we are to ensure equality and promote the general welfare of our citizens. A Universal Basic Income may be the best answer we have to address these issues and abolish poverty at its source.

Leave a Reply

Your email address will not be published. Required fields are marked *