The Basic Income Guarantee

Karl Widerquist, Staff Economist

The Educational Priorities Panel

225 Broadway, Suite 3101

New York, NY 10007

 

Synthesis/Regeneration, No. 26, Fall, 2001

 

                  The Basic Income Guarantee (BIG) is a government ensured guarantee that no one’s income will fall below the level necessary to meet their most basic needs. As Bertrand Russell put it in 1918, “A certain small income, sufficient for necessities, should be secured for all, whether they work or not, and that a larger income ... should be given to those who are willing to engage in some work which the community recognizes as useful. On this basis we may build further.” Thus, with BIG no one is destitute but everyone has the positive incentive to work. Supporters of BIG see it as an effective and equitable solution to poverty that promotes individual freedom. Many see it as a market-based, efficient solution to poverty, others see at as part of a Green strategy to improve the functioning for the market economy. BIG is also affordable; Charles Clark estimates that a flat tax of 38% would be enough to support all existing government spending (aside from that which would be replaced by BIG) and a BIG large enough to eliminate poverty (as defined in the United States).

                  The term BIG is a generic name for many similar programs aimed at providing universal income support. This term was chosen by USBIG (the U.S. Basic Income Guarantee Network—see below) because it is similar to both “basic income” (as the best-known version of BIG is known in Europe today) and “guaranteed income” (as the idea was known in the United States when it was seriously considered in the 1960s and 70s). The term “Basic Income Guarantee” is broader than terms like “basic income” or “negative income tax” (both of which are forms of BIG), and is more specific than terms like “income maintenance” or “income support,” which refer to any kind of program designed to aid those with lower incomes. These programs have work requirements or other eligibility requirements, and do not ensure that everyone reaches a certain minimum.

                  There are many specific proposals for a Basic Income Guarantee; most of them fall into one of two broad categories: the Basic Income (BI) and the Negative Income Tax (NIT). The Basic Income gives every citizen a check for the full basic income every month, and taxes all of her earned income, so that nearly everyone both pays income tax and receives a basic income. Those with low incomes receive more in basic income than they pay in taxes and those with relatively high income pay more than they receive. The Negative Income Tax pays the full benefit only to those with no private income and phases out the benefit as people earn more private income, but private income is not taxed until the benefit is fully phased out. Thus, the Negative Income Tax avoids giving people checks and asking them to send checks back, but the Basic Income gives people the assurance that their check will be there every month without having to apply for it if they have a sudden loss of income. Despite their differences, both of these plans guarantee some basic minimum level of income and ensure that people who make more private income will be financial better off than those who make less, and therefore both are forms of BIG. Mathematically either of the two could produce very similar effects on the distribution of income if the guaranteed minimum level of income is the same.

                  Thomas Paine proposed something very much like BIG in 1798, and it has been endorsed by a wide variety of thinkers throughout the years, but it became a prominent idea in the U.S. only in the 1960s and 70s. At that time a very strange event occurred. Some left-wing thinkers (such as Robert Theobald, John Kenneth Galbraith, and leaders of the welfare rights movement) and some extremely right-wing economists (such as Milton Friedman and F. A. Van Hayak) came to advocate the same policy at the same time. This was able to happen because BIG has an appeal across the political spectrum. The left saw BIG as a way to give the poor greater freedom, security, and autonomy, and the right saw it as a simplification of what was then a very large and complex welfare system. The popularity of BIG reached a high point in 1970, when a (scaled down) version of it called the Family Assistance Plan was endorsed by President Nixon, passed the House of Representatives, and was defeated in the Senate by only 10 votes.

                  The two major parties have largely forgotten BIG since the 1970s, possibly for two reasons. First, over the last 25 years conservatives have been extremely successful at chipping away at the welfare state and replacing it with nothing. In the 60s, BIG looked like a simplified alternative to a large and complex welfare system; today it looks like a major expansion of the small and complex welfare system. Many on the right of the political spectrum prefer the smaller welfare state even if complex to a larger more efficient welfare state. Second, although BIG has some aspects that give it across-the-political-spectrum support it also has one aspect that gives it across-the-spectrum opposition: Many see it as an affront to the work ethic. After all, BIG makes it possible for a person to live without working.

                  Even some progressives argue that, because the work ethic is so strong in America, progressive policies should be made consistent with the work ethic concentrating on full employment policies, policies to increase wages, or policies to aid those who are unable to work. One central problem with this strategy is that those are the exact kinds of policies that were tried in the New Deal of the 1930s and tried again in the Great Society of the 1960s. Although these policies greatly reduced poverty they proved to be so expensive, inefficient, and humiliating to their recipients that they became easy targets for cuts and have been extremely scaled back over the last 30 years. Both Roosevelt and Johnson were afraid to confront the work ethic and created very cumbersome policies instead: Unemployment for those who can work but can’t find work, Social Security for those who are too old to work, SSI for those who can’t work because they are disabled, AFDC for those who can’t work because they have children, etc. All of these policies require the expensive proposition of separating the “deserving” from the “undeserving,” and most of them do so in a sexist and racist manner. A strategy of work-based progressive policies means a return to the old strategy that has failed in the past.

                  When the time is right for renewed attention to poverty—and that time will come again—we need to be ready with new and untried alternatives like BIG. To do this we need to confront the radical version of the work ethic head on. There are many ways to do this, and not nearly enough room in this article to list them all, but I will mention a few. It is only a very radical version of the work ethic that says that people who do not work deserve to starve or to be homeless. Isn’t just getting by off the guarantee, enough of a punishment for laziness? Can’t we encourage work by positive incentives, by offering people good jobs at decent wages that are clearly better than bare subsistence, instead of the sub-poverty wages we offer lower-status workers today? If our society can’t afford to use positive incentives to get people to work and must instead rely on fear of poverty and homelessness to get people to accept the least-desirable jobs, then what good has 400 years of building an economic infrastructure done for us? Doesn’t a basic fairness dictate that workers should have the right to say “no” to unacceptably low wages and poor working conditions? Only BIG gives the worker the right to say no.

                  Will these kinds of arguments resonate with Americans? I believe they can if they are presented properly because the work ethic is only one of many American values. Other American values, like a basic notion of fairness, are more consistent with BIG than they are with the radical version of the work ethic.

 

The Green Movement and BIG

                  Many Green parties in Europe, along with the U.S. Green Party, have endorsed BIG, because it fits well with an economic method of discouraging pollution and the depletion of our natural resources. One of the most effective ways to discourage pollution and the depletion of natural resources is to tax them. If firms pay a heavy tax for pollution, it pays them to avoid it. If frims pay a heavy tax for the ore they mine or the forests they deplete, it pays them to use less of these resources and to recycle what is already in use. If landowners pay a heavy tax on the value of land, they have an incentive to build more compact and manageable cities rather than sprawling suburbs. These Green taxes would raise a lot of revenue, which could be redistributed in the form of a Basic Income Guarantee. After all, if we recognize that all people are equally owners of our natural resources then how can one become the legitimate owner of a natural resource without paying everyone else for it?

                  Estimates vary greatly as to how much revenue can be raised from such taxes, from as little as 2 percent to as much as 30 percent of GDP. That is from far less than would be needed to support BIG to far more than enough. Good statistics do not exist but encouraging evidence exists from the Alaska Permanent Fund. The State of Alaska actually has a small BIG that comes from a fund created out of the states oil revenues. Each Alaskan resident receives nearly $2,000 a year from this fund to spend however she chooses. This is not enough to live on, but $8,000 a year makes a big difference to a family of four living on the margin. In 1999, a ballot initiative proposed getting rid of this program, and was defeated by more than a 4 to 1 margin (so much for the argument that BIG is not politically feasible). If the oil revenues alone are enough to create a BIG of $2,000 a year, it seems likely that a substantial BIG could be funded if land, the broadcast spectrum, and all other natural resources were taxed in a similar manner.

 

The Political Movement for BIG

                  After being dormant for some time, interest in BIG has been picking up around the world. A growing movement for BIG exists in Europe. In addition to Green Parties, even some ruling parties in Europe have flirted with the idea, especially in Ireland and Finland. To my knowledge there are 14 national networks (some large some small) and one international network promoting BIG around the world. BIEN (the Basic Income European Network) organizing a conference on basic income every two years, and has received growing attention from scholars, politicians, and grass roots organizations. Most of the national networks promoting BIG and in industrialized countries, but BIG networks also exist in both South Africa (SANE) and Brazil (BIEN-Brazil), and their networks tend to be closer to the centers of power. Some prominent members of the ruling ANC party in South Africa have endorsed BIG, and in Brazil a member of the national Senate heads the BIG network. The prospects for BIG in the less industrialized nations are hopeful. Although they have a lot less money to go around, even a small guarantee would be make an enormous difference to the living standards of people at the bottom of the income distribution.

                  The prospects for a full Basic Income Guarantee remain far off in most countries, but the movement continues to grow. As dissatisfaction mounts against a world in which the gains from economic growth seem only to go to those who are already well off, the prospects for a new poverty policies will grow. Even in the United States, discussion of BIG is slowly beginning to pick up. Several books have been writing on the idea and articles have appeared in major publications in the U.S. and Canada. The U.S. Basic Income Guarantee Network (USBIG) was founded in January of 2000 to promote discussion of the basic income Guarantee. USBIG publishes an email newsletter every two months. Subscriptions are free and can be obtained by sending an email to the coordinator of USBIG, Karl Widerquist at Karl@widerquist.com. USBIG will hold its first National Congress “Fundamental Insecurity or Basic Income Guarantee,” in New York City on March 8-9, 2002. The Congress will bring together a wide group of academics, policy analysts, students, activists, and others interested in exploring the merits of BIG. It will consist of a series of panels, discussion groups, and speakers and it will include an organizational meeting for USBIG. Those interested in submitting a paper or organizing a session should contact the conference coordinator, Michael Lewis (mlewis@ssw.hsc.sunysb.edu) and submit an abstract by December 15th. Details on the conference are available on the USBIG website (http://www.USBIG.net). The website also includes more information about the Basic Income Guarantee and links to the national and international networks around the world. I would like to invite anyone with an interest in this topic to attend or submit a paper to the Congress.