If you want a working example of universal basic income, look no further than Alaska. The Alaska Permanent Fund provides every resident with no-strings-attached money using the state’s oil revenues.
Not included: The cost of climate change from extracting and burning fossil fuels.
It’s also not a perfect comparison because it isn’t funded by new taxes or carved out of the state budget.
But as an idea to lower poverty, popularized by Andrew Yang in his presidential and New York mayoral campaigns, universal basic income has been field-tested up north with good results. For example, contrary to a concern of critics, it hasn’t caused fewer people to seek work.
It’s being tried elsewhere in the world and the United States, including Stockton, California, and Durham, North Carolina. These are mostly small sample groups of recipients.
Fabian Wendt, a political-science professor at Virginia Tech, studied the experiments while at the University of North Carolina at Chapel Hill. He described the income “as a floor to stand on, not as a safety net.”
Maybe the biggest field test was the massive government response to the pandemic. By 2021, the number of poor Americans was expected to drop by 20 million people, down a record 45% in a year. This mainly happened through direct stimulus payments, food stamps and expanded unemployment insurance. But it’s likely to be short-lived as the aid, costing more than $1 trillion, tapers off.
This might seem like a strange time to be writing about universal basic income. Jobs are abundant and wages are rising, although facing an inflation headwind.
But the Federal Reserve always risks causing a recession when it raises rates like it did recently. The same is true with rising oil prices. And Yang was thinking long-term, about potential job losses from increasing automation. All undercut incomes and risk raising poverty.
Also, income inequality has been grown dramatically since the late 1970s, when the highest earners began to pull away from the rest. According to Fed research, by 2019 the top 10% accounted for 76% of the nation’s wealth. The bottom 50% owned just 1% of the wealth.
The reasons include tax cuts benefiting the wealthiest, skyrocketing CEO compensation, loss of progressive taxation, and the hollowing out of middle-wage jobs, leaving big gaps in the ladder up.
Even with the loss of late 1940s-1970s convergence of income increases for all Americans, dissatisfaction with inequality has a long history.
“Coxey’s Army” was made up of people hard hit by the Panic of 1894 — a depression — marching on Washington, D.C., demanding jobs, more money in circulation (the United States was on the gold standard) and other relief. It gained nothing, although the Progressive Era enacted an income tax under President Woodrow Wilson in 1913. A constitutional amendment was required.
The 43,000-member Bonus Army descended on Washington in 1932, in the depths of the Great Depression. It included veterans of World War I, demanding early payment of a promised bonus for their service. They were violently dispersed by the Army.
But after Franklin Roosevelt’s inauguration the next year, the New Deal provided a variety of aid — including Social Security — and inequality eased.
The Rev. Dr. Martin Luther King Jr.’s Poor People’s Campaign was a march on Washington set for 1968 but diminished by his assassination earlier in the year. One goal was a guaranteed income.
King wrote, “The President and the Congress have a primary responsibility for low minimum wages, for a degrading system of inadequate welfare, for subsidies of the rich and unemployment and underemployment of the poor, for a war mentality, for slums and starvation, and racism. The survival of a free society depends upon the guarantee and survival of freedom and equality.”
President Lyndon Johnson gave it a try with his War on Poverty, which was more of a success than history credits it. Among the programs were Medicare, Medicaid and food stamps (Social Security Disability dates to the Eisenhower administration).
The federal poverty rate went from 22.4% in 1960 to about 11% by the early 1970s. It was about 12% as of 2020.
The “war” also made missteps, especially the poorly constructed Aid to Families with Dependent Children program. Critics argued that it discouraged work, led to family breakup and having children, thus getting more welfare money. Among the most prominent was Sen. Daniel Patrick Moynihan, Democrat of New York.
“A program that was designed for poor widows will not be supported in a world where mothers are poor because they are unsupported by their divorced husbands or because they are unwed,” he told The New York Times in 1987. ”A program that was designed to pay mothers to stay at home with their children cannot succeed when we now observe most mothers going out to work.”
Others countered that AFDC was too stingy to lift people out of poverty.
This program was a big target when Bill Clinton campaigned for the White House to “end welfare as we know it.” Clinton and the Republican Congress did so in 1996.
Unfortunately, the much smaller, often temporary, programs that replaced it reduced the income of the poor, especially those in so-called deep poverty (a household with cash income 50% the poverty level).
Hence, for supporters of a universal basic income, even more ammunition.
But if Republicans gain control of Congress next year, as appears likely, and the White House in 2024, the idea would be dead or corrupted. Most conservatives are convinced aid to the poor discourages work, although the evidence is lacking.
Robert Greenstein at the Center for Budget and Policy Priorities think tank argued against universal basic income in 2019, writing that providing all Americans with a basic $10,000 a year would cost $3 trillion a year. That would be three-quarters of the federal budget.
Paying for it, along with Social Security, Medicare, defense and infrastructure, would require higher taxes than any point in American history.
He added, “And if we want to create more opportunity and reduce racial and other barriers and inequities, we’ll also need to raise new revenues to invest more in areas like preschool education, child care, college affordability, and revitalizing segregated inner-city communities.”
This outcome is particularly possible under Republican governance. Then, the “opportunity” of a universal basic income might come at the cost of eliminating or reducing the existing safety net, leaving the poor even worse off.
No net and not enough floor.